Bitcoin seems to be heading for a virtual meltdown as hackers were blamed for the disappearance of another £362,000 of the online currency.
Bitcoin exchange Flexcoin closed after nearly 900 ‘coins’ held in an electronic vault were taken in an alleged theft.
A statement from the company was posted online explaining the company could not cover the loss and was shutting immediately.
“On March 2, 2014, Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 Bitcoins,” said the company.
“As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.”
Hacking havoc
Last month, another Bitcoin exchange MtGox closed in similar circumstances blaming hackers for the theft of 744,408 Bitcoins worth about £210 million.
On top of that, exchange Poloniex confessed that 12% of Bitcoin reserves had been stolen by hackers.
Bitstamp stopped trading for a while after a cyber-attack in February, while payment processor Inputs.io was hacked in October and lost Bitcoins worth around £600,000.
As hackers wreak havoc with the Bitcoin infrastructure, perversely, the value has risen from £321 to £399.
The founders of Bitcoin wanted the virtual currency to stand independent of regulators and central banks, but it seems that the perceived strength is also the currency’s main weakness.
Unless companies have the assets to compensate investors who have lost Bitcoin, investors have no independent recourse for complaint or compensation.
Wild West of investments
To many, Bitcoin is the Wild West frontier of investment, with no rules, no protection for investors and where outlaws can hack the system and getaway with their ill-gotten gains with impunity.
Although Bitcoin was created with tough in-built crypto-security to stop hackers, the sample truth is if someone designed the security code, another software expert can exploit errors or holes and enter the system through the back-door.
So what seems a development leading to more liberal economic ideals allowing investors to decouple from the world banking system is in fact shackled by the very issues the developers wanted to avoid.
The big question for investors is should they leave their money in Bitcoin and risk losing their online stash or pull out now while the price is right and take their profits.
Only time will tell which is the right course of action, but while hackers seem to strike when and where they want with impunity, the smart money looks like moving out of Bitcoin.
