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As Record Rally Makes Them A Target, Major Bitcoin Exchanges Hit By Cyber Attacks

As Record Rally Makes Them A Target, Major Bitcoin Exchanges Hit By Cyber Attacks
The many challenges for the young digital currency world was highlighted by multiple cyberattacks on major bitcoin exchanges this week.
While worries that the largely unregulated cryptocurrency industry will be unable to manage the hype are being added to by record-breaking levels of fundraising for new digital currencies, a surge in investor interest also overwhelmed major bitcoin websites.
"Investors with assets on centralized cryptocurrency exchanges should be careful. The track records of these organizations are not good, and as the assets on the exchanges grow, so does the bounty for attacking or hacking them," said Benjamin Roberts, co-founder and CEO of Citizen Hex, a digital currency trading start-up backed by three Canadian venture funds.

Its platform was under distributed denial-of-service attacks, or DDoS, that attempts to paralyze a system with a flood of information, Bitfinex, the largest U.S. dollar-based bitcoin exchange, said on its status website Wednesday morning.
A similar attack reported Tuesday morning preceded Wednesday’s attack. Despite the "ongoing attack," "Most users will be able to use the platform normally though", the exchange said on Wednesday and added that the problem was resolved within an hour.
When its website also temporarily went down, smaller BTC-e exchange tweeted on Monday of a similar attack on its systems that afternoon. BTC-e had deleted the tweet and its website showed trades going through by Wednesday morning.
The attacks are "not surprising" given the bull market in cryptoassets, said Chris Burniske, blockchain products lead at ARK Investments.
"There's a big difference between a denial of service attack, and a hack that causes clients to lose funds," he said. "As of yet, we're fortunately not seeing any of the latter."

The cyberattacks could allow the attackers to manipulate the bitcoin market, said Roberts and other digital currency analysts. Shutting off an exchange temporarily could allow a trader to take advantage of price differences since the price of bitcoin is set by several exchanges around the world.
After topping $3,000 for the first time Sunday, more than tripling in value for 2017, bitcoin did briefly fall about $400 Monday amid some of the exchange issues. Down about 6 percent on the day, bitcoin traded near $2,571 Wednesday afternoon.
And surging several thousand percent in that time is Ethereum, another digital currency or token growing in popularity.

"A speculative frenzy is never a good thing. I don't think we're there right yet," Adam White, Coinbase vice president and general manager of its GDAX exchange, said.  But "I do think the ICO or token generation events have … maybe a bit too much enthusiasm for them."

And flooding them with millions of dollars this week was a rush of funding for new digital currencies. Before IOTA smashed that record with a $1.5 billion fund raise on Tuesday, Bancor raised $153 million on Monday.

"We feel that the market reaction to IOTA's listing is quite in line with our expectations in the current zeitgeist," IOTA founder and CEO David Sonstebo told CNBC in an emailed statement. Lack of targeted marketing ahead of the launch and more than 18 months of development were cited by him.

Christopher J. Mitchell

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