NEM (XEM) Exchange Hack Costs Coincheck Over $400 Million
NEM/Coincheck News and Talking Points
- Coincheck will repay customers whose digital coins were stolen last Friday in one of the world’s largest cyber heists.
- Japanese regulators order the exchange to tighten strengthen management systems.
Coincheck to compensate customers after the loss of 523 million NEM coins
Coincheck has said that it will refund customers who had their NEM (XEM) stolen last Friday, an action that will cost the exchange around $400 million from its reserves. The price is based on the weighted average price from NEM’s suspension of trading at the exchange and will be refunded in Japanese Yen. According to reports the exchange kept its customers coins in ‘hot wallets’ which are connected to external servers rather than the safer ‘cold wallets’ which are not connected to the outside world and are less susceptible to hacks.
The company also did not use multi-signature safeguards that would have made the digital theft harder. Multi-signature protocols add an extra layer of customer protection and security by requiring more than one digital signature before coins can be moved.
Coincheck also tweeted that it had received an order from the Japanese Financial Services Agency in connection with the hack, demanding that the exchange tighten its risk management system and come up with new measures to prevent any reoccurrence of the theft.
The announcement over the weekend helped to stabilize the whole cryptocurrency market after nervous trading on Friday rolling into the weekend. Overall the market has found it difficult to make any headway after the recent heavy sell-off that pushed the market capitalization below $500 billion after it had touched a high of $830 billion in early January. The latest theft will make any significant upside in the market difficult with investors becoming increasingly wary of the marketplace’s security and whether digital coins are a trustworthy asset class.
Top 10 Cryptocurrencies by Market Capitalization – January 29, 2018
NEM tokens recovered after the exchange announcement this weekend but may find it hard to push further ahead with technical resistance kicking in around $1.11. The coin is also caught in a descending triangle formation that if broken to the downside could see most of the coins gains made since December 7 given back.
NEM Daily Price Chart (November, 2017 – January 29, 2018)
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--- Written by Nick Cawley, Analyst.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.