World’s Largest Bitcoin Exchange Victim of Cyber-Attack

Michael Teague  |

There was much frenzy that accompanied the digital, algorithmically produced currency Bitcoin on Wednesday as a single unit reached a record high dollar value of $142.

Some of that excitement was greatly deflated overnight, however, as the currency’s main exchange site in Tokyo, where 70 percent of all worldwide trading in Bitcoins takes place, was the target of a successful cyber-attack.

The Mt. Gox exchange fingered a distributed denial of service attack for the disturbance of its activities that caused a small panic among some Bitcoin “investors”, triggering a sell-off that saw the currency’s value drop to under $115, before making its way back up to about $128.  A DDoS attack is a rather basic maneuver used by hackers the world over to a variety of ends, involving the flooding of a network or a server in order to cause a disruptive overload.

The purpose of the attack, in this case, was explained by Mt. Gox themselves as follows:

“Abuse the system for profit.
Attackers wait until the price of Bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their Bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can. Repeat this two or three times like we saw over the past few days and they profit.”

The exchange also readily admits that “Believe it or not, there is pretty much nothing that can be done”, noting that large companies as well as major stock exchanges like NASDAQ and the NYSE are also vulnerable to the effects of time-lag.

With recent uncertainties arising primarily from the Cyprus bailout situation and the long-term implications of this for the stability of the Euro and other currencies, Bitcoin has become a minor stand-in for the move to gold that usually accompanies such crises.  The incident demonstrates that it may not be the foolproof guarantee against economic volatility that many seemed to be hoping for.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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