The typically volatile cryptocurrency market appeared quite calm in the past week, with Bitcoin slowly clawing its way back up from its February lows, when its price briefly went as far down as $6,150.
But that all came to a halt in the past two days, with Bitcoin plummeting from a high of $11,673 on Tuesday to $9,734 on Thursday.
The price drop can be attributed to news of increased SEC regulations for crypto-exchanges and a rumored hack of popular, China-based cryptocurrency exchange Binance after a number of users reported their accounts being drained.
On Thursday, Binance addressed the rumors with an official blog post. According to the exchange, there was no hack; instead, what happened was a coordinated phishing attack which was largely thwarted by Binance’s automatic risk management system.
It appears that the hackers used login credentials obtained earlier by luring users onto a fake version of the Binance site (see example below). Then, on Wednesday, they used hacked users’ accounts to drive up the price of a relatively illiquid coin called Viacoin (ticker: VIA) and syphoned the gains into a number of accounts under their control.
“However, as withdrawals were already automatically disabled by our risk management system, none of the withdrawals successfully went out. Additionally, the VIA coins deposited by the hackers were also frozen. Not only did the hacker not steal any coins out, their own coins have also been withheld,” Binance said.
While the bulk of the attack was unsuccessful, Binance claims that there are “some users whose accounts where phished by these hackers and their BTC were used to buy VIA or other coins,” but since “those trades did not execute against any of the hackers’ accounts,” the company will not be refunding those coins.
See that spike on March 7? That’s hackers driving the price of VIA up using coins obtained through phishing.
The volume of Viacoin trading against Bitcoin on Binance was in the hundreds of millions of dollars in the last two days, showing how impactful the attack was. Typically, VIA/BTC trading volume on Binance is in the low millions.
Binance is one of the world’s largest cryptocurrency exchanges; it’s currently ranked third in volume for Bitcoin trading by CoinMarketCap. In early February, a site outage prompted rumors that the exchange was hacked but the issue turned out to be a technical glitch that was soon repaired.
Bitcoin has recovered a little since the news broke and is currently trading at $10,013.