The price of Bitcoin slipped again on Tuesday amid a sharp sell-off among digital currencies.
The reason for the move was unclear, but it may be related to concerns over cryptocurrency security after US officials managed to recoup most of the ransom paid to hackers who targeted Colonial Pipeline.
Court documents say investigators were able to access the password to one of the hackers’ bitcoin wallets. The money was recovered by a recently launched working group in Washington created as part of the government’s response to an increase in cyberattacks.
Bitcoin accelerated its slide to fall below the $32,000 level on Tuesday morning. The world’s largest cryptocurrency then rallied slightly, trading down 9% at $32,854.99 as of 4:01 p.m. ET.
Smaller digital coins also fell, with Ether dropping around 8% to $2,499.28 and XRP more than 7%.
In April, 2021 was shaping up to be a banner year for digital assets, with bitcoin surging above $60,000 for the very first time. But a recent fall in crypto prices has shaken confidence in the market. Bitcoin dropped to nearly $30,000 last month and is currently down around 50% from its all-time high.
The digital currency is only up about 12% year-to-date, even though its price has more than tripled from a year ago.
The United States recovers most of the colonial ransom
On Monday, US law enforcement officials said they had seized $2.3 million in bitcoins 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, to one of the hackers’ bitcoin wallets. Bitcoin has often been the currency of choice for hackers demanding payment of a ransom to decrypt data locked by malicious software known as “ransomware”.
Decrypt crypto media 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, in which hackers develop and market ransomware tools and sell them to affiliates who then carry out attacks.
According to blockchain analytics company Ellipticalthe funds seized represented the bulk of the DarkSide subsidiary’s share of the ransom paid by Colonial.
John Hultquist, vice president of analytics at Mandiant Threat Intelligence, called the move a “welcome development.”
“It has become clear that we need to use multiple tools to stem the tide of this serious problem, and even law enforcement needs to broaden their approach beyond building cases against criminals who may be beyond the reach of the law,” Hultquist said.
“In addition to the immediate benefits of this approach, a greater focus on disturbances can discourage this behavior, which develops in a vicious circle,” he added.
A number of issues are hanging over cryptocurrencies, including fears of a regulatory crackdown and recent tweets from Tesla CEO Elon Musk.
Last month, Chinese authorities 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 shutting down local exchanges.
Meanwhile, Elon Musk went from being a bitcoin supporter to seemingly falling in love with it in a matter of months. Musk’s electric car company stopped accepting bitcoin as a form of payment last month due to concerns about its impact on the environment, leading to a sell-off in the crypto market.
“Bitcoin bulls have been chastised by the market pullback and are feeling perhaps once bitten, twice timid,” Charles Hayter, CEO of digital currency data firm CryptoCompare, told CNBC.
“The euphoria has dissipated to some extent in the retail frenzy as regulators have moved on to temperamental fads,” he added. “The data shows that institutional investors continue to corner the market.”
Last week, thousands of Bitcoin investors descended on Miami for an event billed as the biggest Bitcoin event in history.
The conference had some bizarre highlights, including Salvadoran President Nayib Bukele announcing plans for the country to accept bitcoin as legal tender.