Bitcoin took a dive in market value on Monday after news broke that another currency system, Tether, lost $31 million in a hack.
While Tether’s USDT is a cryptocurrency, it’s also pegged to the US dollar which means a Tether token is worth one US dollar.
The operators of the Tether network announced in a notice that $30,950,010 worth of tokens were “removed from the Tether Treasury wallet” on Sunday. The sum was reportedly “sent to an unauthorized bitcoin address”.
While the network said it blacklisted the address so the stolen tokens could not be converted into US dollars, there are many in the cryptocurrency community that criticized the service for dealing with the hack in such a low-key manner. The fact that Tether was able to disable that address with such ease did not help their business either.
Tether also said it will not honor redemptions of any token from the stolen funds as a safety precaution.
As a result, bitcoin’s value was reportedly lowered to 5.4 percent, making it the cryptocurrency’s worst fall in a week. However, bitcoin was able to recover by 5:30 a.m. EST, trading just north of $8.200. Besides bitcoin, computing platform, Ethereum, also took a small hit.
Tether is not considered a big fish in the cryptocurrency community, however, it does act as a proxy for national currencies such as the dollar, euro, and yen.
Another issue is Tether’s relationship with Bitfinex, a cryptocurrency exchange trading platform, who was also hacked last year. Tether tokens can be used on Bitfinex as a withdrawal and deposit method for those dealing in cryptocurrency. It essentially acts as a substitute for the traditional banking system.
The raid prompted Wall Street to keep a close eye on bitcoin as well as the other types of cryptocurrency currently making a play in the market. Coupled with the recent announcement of bitcoin futures, the digital currency is treading on thin ice.
Image Source: StaticFlickr