Bitcoin and most of the cryptocurrency market has fallen again due to mass panic selling. The crash was triggered by rumors of cryptocurrency exchange Binance being hacked which led to withdrawals being frozen on the website. According to many users, their Binance accounts made transactions that they didn’t make and many VIA tokens were also purchased at high prices.
Cryptocurrency related hacks are becoming more and more common nowadays. Millions of dollars worth of cryptocurrency have been stolen in the past. Binance is one of the world’s biggest cryptocurrency exchanges, which means it has a large number of registered users. When rumors of a hack surfaced which in turn stopped people withdrawing their cryptocurrency from the website, the resulting panic caused a lot of cryptocurrencies to fall in value.
Bitcoin was mainly the one affected the most because of its likeliness to get stolen by hackers. Since Bitcoin is the most expensive currency in the world, it would make sense for hackers to steal Bitcoin and not other currencies. However, during this time period, the price of Viacoin also saw a sharp increase to above $6. Viacoin has since seen a correction in its price, but for a brief period, its price had gone up by more than 100%.
However, the exchange itself might not have been hacked since only a few accounts were affected. The “hack” was found to be linked to the use of API keys which one usually gives out to trading bots. These trading bots may have been hacked which also explains why there was a sharp increase in purchases for Viacoin. The accounts using bots may have been compromised with the bot now reprogrammed to purchase Viacoin thanks to the hackers. A user on Twitter had this to say regarding the whole incident:
Someone hacked the trading bot used by majority of people. #Binance is not hacked
People trading on bots got compromised bots have the api keys.
— Crypto Archer (@Crypto_Archer) March 7, 2018
So far, no official statement has been made by Binance regarding any hack. Therefore, the explanation regarding bots may be true but users did not hesitate to sell off their cryptocurrency in case of a potential hack. As a result, the market cap of the crypto market as of this writing has gone down to $367 million.
Many people would describe the community response to the situation as an overreaction. However, for an exchange as big as Binance, the reaction is justified. The prices on Binance usually set the pace for many currencies and assets and thus, seeing people sell their cryptocurrencies on the exchange would obviously cause chaos. Moreover, if an exchange that prides itself on being secure backed up by its history of never being hacked does eventually get hacked, will raise eyebrows and will cause panic.
The only word from Binance regarding the whole situation has been through the Binance moderator on Reddit who said:
“We are investigating reports of some users having issues with their funds. Our team is aware and investigating the issue as we speak. Please remain patient and we will provide an update as quickly as possible.”
Many users who have been affected have filed complaints, Binance hasn’t responded yet. Withdrawals being suspended may have been a precautionary step on the part of Binance as hackers could have withdrawn all the cryptocurrency to their own personal wallets.
The takeaway from this whole fiasco should, however, be that giving your API keys to bots and other third-party applications is highly risky as proven in this case. Bots with your API keys can also bypass Two-Factor Authentication which is the highest level of security Binance has to offer.
For those using bots, it’s best to revoke access to the generated API keys. Also, it is recommended to never keep your cryptocurrency on an online exchange. It’s best to use the exchange to purchase cryptocurrency and then transfer it to your own personal wallet which will ensure your token’s safety.