No happy new year for bitcoin as prices slump and Bitstamp suspends services

No happy new year for bitcoin as prices slump and Bitstamp suspends services

The Bitcoin ecosystem is picking up where it left off in 2014, with a further slump in volume and prices and fresh concerns over the fate of funds deposited with exchange operator Bitstamp, which has suspended services over a possible compromise of its 'hot wallet'.

With the price of bitcoin already in the doldrums - slumping to a new low of $263 at today's open - the problems at Bitstamp couldn't have come at a worse time.

The company, which initially took over the mantle of the world's biggest USD Bitcoin exchange following the scandal-ridden demise of Mt Gox, has ceased all withdrawals and warned customers not to make any fresh deposits while it investigates the problems.

The company has replaced its home page with the following holding statement:

We have reason to believe that one of Bitstamp’s operational wallets was compromised on January 4th, 2015.

As a security precaution against compromises Bitstamp only maintains a small fraction of customer bitcoins in online systems. Bitstamp maintains more than enough offline reserves to cover the compromised bitcoins.


Customer deposits made prior to January 5th, 2015 9:00 UTC are fully covered by Bitstamp’s reserves. Deposits made to newly issued addresses provided after January 5th, 2015 9:00 UTC can be honored.

Bitstamp takes our security and soundness very seriously. In an excess of caution, we are suspending service as we continue to investigate. We will return to service and amend our security measures as appropriate.

While the bitcoin price slump is nothing new, a sudden sharp decline in volumes for the new trading year is a bigger worry for crypto-currency enthusiasts, indicating a dwindling appetite among the buy-side community.

Update Bitstamp has released a new statement, admitting that it has lost "less than 19,000 BTC", or about $5.1m. It goes on: "This breach represents a small fraction of Bitstamp’s total bitcoin reserves, the overwhelming majority of which are are held in secure offline cold storage systems. We would like to reassure all Bitstamp customers that their balances held prior to our temporary suspension of services will not be affected and will be honored in full."

Comments: (3)

Zennon Kapron
Zennon Kapron - Kapronasia - Shanghai 06 January, 2015, 06:47Be the first to give this comment the thumbs up 0 likes

Whether or not you believe that Bitcoin will be around in a decade, slumping prices are a concern only for investors who look at the virtual currency from a pure investment. Volatility, exchange failures are a concern for enthusiasts, the price itself is not. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 January, 2015, 09:26Be the first to give this comment the thumbs up 0 likes

Falling prices lead to reducing purchasing power of BTC, as long as the prices of goods that can be bought with it are denominated primarily in real currencies. This must be a concern for enthusiasts as well.

A Finextra member
A Finextra member 06 January, 2015, 09:37Be the first to give this comment the thumbs up 0 likes

Bitcoins are for risk takers. Even if you buy Bitcoins only for immediate money transfers as a means of payment, you are at risk that those get misdirected by criminal hackers. Much more so if you keep Bitcoins in an electronic wallet, be it your own or at a Bitcoin exchange.

When keeping Bitcoins for whatever reason, you should be concerned about volatility (= price changes) and potential theft - regardless whether you are enthusiastic about the Bitcoin phenomenon or not.