Bitcoin surges past $16,500 despite news of $60m heist

Digital currency Bitcoin continued its upwards trajectory, hitting a new record high above $16,500, despite a major hack which saw millions of dollars worth of the digital currency stolen on Thursday.

NiceHash, one of the largest online marketplaces for crypto-currencies, said it was suspending its operations for 24 hours due to the security breach.

Some reports suggested that as much as $60m-worth of Bitcoins were stolen in the heist, but the site said it was still working to establish just how much had been thieved.

"Unfortunately, there has been a security breach involving NiceHash website. We are currently investigating the nature of the incident and, as a result, we are stopping all operations for the next 24 hours," NiceHash said.

"Importantly, our payment system was compromised and the contents of the NiceHash Bitcoin wallet have been stolen. We are working to verify the precise number of BTC taken."

The site added it would refer the breach to the relevant authorities and that it was conducting its own inquiry into the hack.

Dear NiceHash users,
we are very sorry for the inconvenience caused. Our team is working hard to resolve the issues on the service, it might take longer than expected. We'll keep you updated!

— NiceHash (@NiceHashMining) December 6, 2017

"Clearly, this is a matter of deep concern and we are working hard to rectify the matter in the coming days. In addition to undertaking our own investigation, the incident has been reported to the relevant authorities and law enforcement and we are co-operating with them as a matter of urgency."

'UNSUSTAINABLE BUBBLE'

The hack took place as Bitcoin hit new record highs, despite many analysts having publicly dismissed the phenomenon as no more than a speculative bubble which was ready to burst at any time.

Indeed, a survey carried out by Natixis Investment Managers found that 82% of UK institutional investors believed that the crypto-currency was little more than an unsustainable bubble, ranking it ahead of market volatility and interest rate rises as the main concern of investors.

Think Markets analyst Naeem Aslam on the other hand believed that such a bust was not in the offing any time soon and suggested that Bitcoin might even rise as high as $25,000 in early 2018 as major markets start trading futures of the asset.

"I see Bitcoin as a low hanging fruit from two perspectives in a near-term trade setup. First, from my last article, I think it would be wise to revise the price projection to $18K and it could reach that by December 10th," Aslam said.

"I do see a potential dip just after the futures start trading, a correction of up to 20-30%, which may present a good medium to long-term opportunity to enter the market and/or build on long positions. I do see Bitcoin prices potentially reaching $25,000 by early next year."

“Maybe the mania is peaking, maybe it’s just getting going. Either way Bitcoin is still being bid up to the gunnels to hit a fresh record high at $16,000 ahead of the launch of futures trading from Sunday night. XBT spiked to $16,315 at one stage before slipping back below the $16k handle (see chart).

Neil Wilson at ETX Capital said he was running out of new things to say about bitcoin, only that the price action is exceptional and without any parallels. "It’s a bubble for sure in its dynamic, we just don’t know when or how it will collapse."

He highlighted a couple of factors that he felt could do with further expanding upon.

"Firstly, a regulatory crunch is coming. This is to be expected and the recent price action may in part be explained not just by the advent of regulated futures trading, but also bulls ramping up prices while the going is good.

"For example, in the US, Senate Bill 1241 would require anyone dealing in bitcoin, whether issuing, redeeming or cashing it in, to be classed as a financial institution. Once you start hammering not just the Bitcoin exchanges with AML, KYC and all the other regulation, but also every investor and user, the appeal of cryptos as an off-grid currency is destroyed. In this sense, mainstreaming Bitcoin makes it less valuable, not more."

Cryptocurrencies will not be regulated out of existence, as governments and central banks do not wish to stop blockchain technology, but Wilson said they can regulate "to a point where they destroy the value in any one version by taking control of it for themselves".

As a regulated market with futures it "ought to behave more normally than it has done" but is likely so some "pretty major spasms" on Sunday night and Monday morning as the contracts launch, Wilson said, and will be bearish for bitcoin overall as it will allow proper shorting and hedging strategies.

"At present the only way to short is to sell your bitcoin and exit the market, a bias that favours bulls. The ability to go short creates a new dynamic in the market and may result in a significant shock to prices. The problem is anyone shorting against this headwind of rapidly rising prices needs to be able to sweat out huge potential upside. As plenty before have noted, bitcoin might keep rising longer than shorts can stay solvent.”