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Bitcoin extends losses, falling below $32,000 after U.S. seizes most of Colonial ransom

Bitcoin extends losses, falling below $32,000 after U.S. seizes most of Colonial ransom

08 Jun 2021

A banner with the logo of bitcoin is seen during the crypto-currency conference Bitcoin 2021 Convention at the Mana Convention Center in Miami, Florida, on June 4, 2021.

Marco Bello | AFP | Getty Images

Bitcoin’s price plunged more than 10% Tuesday. The reason for the move was unclear, however it may be related to concerns over security of the cryptocurrency after U.S. officials managed to recover most of the ransom paid to hackers that targeted Colonial Pipeline.

Court documents said investigators were able to access the password for one of the hackers’ bitcoin wallets. The money was recovered by a recently launched task force in Washington created as part of the government’s response to a rise in cyberattacks.

The world’s largest cryptocurrency slid almost 11% at 11 a.m. ET to a price of $31,662, according to Coin Metrics data. Smaller digital coins also slumped, with ether falling nearly 13% to $2,368 and XRP tanking over 12%.

In April, 2021 was looking to be a banner year for digital assets, with bitcoin having topped $60,000 for the first time ever. But a recent plunge in crypto prices has shaken confidence in the market. Bitcoin sank to nearly $30,000 last month, and is currently down almost 50% from its all-time high.

The digital currency is now up only 13% since the start of the year, though it’s still more than tripled in price from a year ago.

U.S. recovers most of Colonial ransom

On Monday, U.S. law enforcement officials said they had seized $2.3 million in bitcoin paid to DarkSide, the cybercriminal gang behind a crippling cyberattack on Colonial Pipeline.

According to a court document, the Federal Bureau of Investigation was able to access the “private key,” or password, for one of the hackers’ bitcoin wallets. Bitcoin has often been the currency of choice for hackers demanding ransom payments to decrypt data locked by malware known as “ransomware.”

Crypto media outlet Decrypt reported there were unfounded rumors that the attackers’ bitcoin wallet had been “hacked,” an unlikely scenario.

DarkSide, which reportedly received $90 million in bitcoin ransom payments before shutting down, operated a so-called “ransomware as a service” business model, where hackers develop and market ransomware tools and sell them to affiliates who then carry out attacks.

According to blockchain analytics firm Elliptic, the seized funds represented the bulk of the DarkSide affiliate’s share of the ransom paid out by Colonial.

John Hultquist, vice president of analysis at Mandiant Threat Intelligence, called the move a “welcome development.”

“It has become clear that we need to use several tools to stem the tide of this serious problem, and even law enforcement agencies need to broaden their approach beyond building cases against criminals who may be beyond the grasp of the law,” said Hultquist.

“In addition to the immediate benefits of this approach, a stronger focus on disruption may disincentivize this behavior, which is growing in a vicious cycle,” he added.

Crypto crackdown

A number of issues are weighing on cryptocurrencies, including fears of a regulatory clampdown and recent tweets from Tesla CEO Elon Musk.

Chinese authorities last month called for a crackdown on crypto mining and trading. Once a major player in the market, China has since moved to stamp out speculative investment in cryptocurrencies, banning a fundraising method known as initial coin offerings and shuttering local exchanges.

Meanwhile, Elon Musk has gone from a supporter of bitcoin to seemingly falling out of love with it in a matter of months. Musk’s electric car firm stopped accepting bitcoin as a payment method last month due to concerns over its environmental impact, resulting in a crypto market sell-off.

“Bitcoin bulls have been chastened by the market pull back and perhaps are feeling once bitten, twice shy,” Charles Hayter, CEO of digital currency data firm CryptoCompare, told CNBC.

“The euphoria has worn off to some extent in the retail frenzy, as regulators have moved to temper manias,” he added. “Data is showing continued cornering of the market by institutionals.”

Last week, thousands of bitcoin investors descended on Miami for an event billed as the biggest bitcoin event in history.

The conference had a few bizarre highlights, including El Salvador President Nayib Bukele announcing plans for the country to accept bitcoin as legal tender.