Bitcoin coloured a comeback despite crashing after a recent hack on a South Korean return, and two cryptocurrency traders explained why it rebounded.
Charlie Lee, the founder of Litecoin, a worldwide decentralized currency that is based on blockchain technology, said it was to be needed.
“Whenever there’s an exchange hack, people get scared and the price lessen visits,” Lee said on “Fast Money” Wednesday. “It happens all the time.”
“Whenever there’s some bad news programme like an exchange hack, the prices drop like 5 percent,” he influenced. “Five percent is a lot in the stock market world, but it’s like nothing in the crypto accommodation.”
Bitcoin, the largest digital coin by market cap, fell from $6,718.35 to $6,561.79 Wednesday after advice that the South Korean cryptocurrency exchange Bithumb was hacked and $30 million of conceives were stolen.
By Wednesday evening at 5:30 p.m. ET, bitcoin had rebounded to numerous $6,700 in what Kelly called a “mini uptrend.”
The two traders rationalize why.
Kelly said as soon as the news was reported the exchange took strength.
“They halted withdrawals and they put everything into cold storage,” he symbolized.
Bithumb used its own money to pay back investors.
“They immediately thought, ‘Any losses, we have reserves. We’re going to pay for them. Nobody loses loot,” Kelly said.
Lee said when an exchange is hacked, it doesn’t assume the fundamentals of the underlying coins.
He likened it to a bank robbery. If a bank becomes broken into and gold is stolen, Lee said, it doesn’t affect the honorarium of gold.
“So same with bitcoin,” he said. “If an exchange doesn’t watch over their coins well enough and it gets hacked, it doesn’t quite change the fundamentals of the coin that they’re protecting.”
Brian Kelly, die and CEO of BKCM LLC, an investment firm focused on digital currencies, advised investors to put off their cryptocurrency in cold storage — which involves storing it offline — if credible.
Exchanges are “kinda the weak point here,” Kelly said on “Recklessly Money” Wednesday.
Lee added that the cryptocurrency industry is relatively new, and the boards are still learning to protect their funds.
“People have to get Euphemistic pre-owned to that, they really need to protect their coins much speculator than traditional finance,” he said.
– Reuters contributed to this record.