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Bitcoin (BTC) price slides as US seizes most of Colonial ransom

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A banner with the logo of Bitcoin is seen during the Bitcoin 2021 Convention at the Mana Convention Center in Miami, Florida on June 4, 2021.

Marco Bello | AFP | Getty Images

Bitcoin’s price slipped again on Tuesday amid a brutal sell-off among digital currencies.

The reason for the move was unclear, but it could be related to concerns about the security of the cryptocurrency after U.S. officials managed to recover most of the ransom paid to hackers targeting the Colonial Pipeline.

According to court documents, the investigators were able to access the password for one of the hackers’ Bitcoin wallets. The money was brought back by a recently launched Washington task force that was created as part of the government’s response to the rise in cyberattacks.

Bitcoin accelerated its slide, falling below the $ 32,000 mark late Tuesday morning. The world’s largest cryptocurrency then rebounded slightly, trading 9% lower at $ 32,854.99 at 4:01 p.m. ET.

Smaller digital coins also slumped, with Ether falling about 8% to $ 2,499.28 and XRP rising over 7%.

Read more about cryptocurrencies from CNBC Pro

April 2021 was set to be a stellar year for digital assets, with Bitcoin topping $ 60,000 for the first time. But a recent slump in crypto prices has shaken confidence in the market. Bitcoin fell to nearly $ 30,000 last month and is currently about 50% below its all-time high.

The digital currency has only risen by around 12% since the beginning of the year, but it has still more than tripled compared to the previous year.

US is bringing back most of the colonial ransom

On Monday, US law enforcement officials said they had seized $ 2.3 million worth of bitcoins paid to DarkSide, the cyber criminals behind a crippling cyberattack on the Colonial Pipeline.

According to a court document, the Federal Bureau of Investigation was able to access the “private key” or password for one of the hackers’ Bitcoin wallets. Bitcoin has often been the currency of choice for hackers demanding ransom payments to decrypt data locked by malware known as “ransomware”.

Crypto media company Decrypt reported that there were unsubstantiated rumors that the attackers’ Bitcoin wallet was “hacked”, an unlikely scenario.

DarkSide, which allegedly received $ 90 million in Bitcoin ransom payments before it was closed, operated a business model called “Ransomware as a Service” in which hackers develop and market ransomware tools and sell them to affiliates who then carry out attacks.

According to blockchain analytics firm Elliptic, the seized funds represented the majority of the DarkSide subsidiary’s share of the ransom paid by Colonial.

John Hultquist, Vice President of Analysis at Mandiant Threat Intelligence, said the move was a “welcome development”.

“It has become clear that we need to use a variety of tools to contain the tide of this serious problem, and even law enforcement agencies need to broaden their approach beyond building procedures against criminals who may be beyond the reach of the law,” said Hultquist .

“In addition to the immediate benefits of this approach, a greater focus on disruptions can discourage this behavior, which is growing in a vicious circle,” he added.

Crypto penetration

A number of issues weigh on cryptocurrencies, including fears of regulatory crackdowns and recent tweets from Tesla CEO Elon Musk.

Chinese authorities last month called for crackdown on crypto mining and trading. Once a major player in the market, China has since scrapped speculative investments in cryptocurrencies, banned a fundraising method known as Initial Coin Offerings, and closed local exchanges.

In the meantime, Elon Musk has gone from being a supporter of Bitcoin to an apparent infatuation within a few months. Musk’s electric car company stopped accepting Bitcoin as a payment method last month due to concerns about its environmental impact, resulting in a sell-off in the crypto market.

“Bitcoin bulls have been chastened by the market retreat and may feel bitten once, shy twice,” Charles Hayter, CEO of digital currency data company CryptoCompare, told CNBC.

“The euphoria has subsided to some extent in the retail frenzy as regulators have moved to soften manias,” he added. “The data shows that institutions continue to corner the market.”

Last week, thousands of bitcoin investors came to Miami for what is considered the largest bitcoin event in history.

The conference had some bizarre high points, including El Salvador’s President Nayib Bukele, who announced plans for the country to accept Bitcoin as legal tender.

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Robert Dunfee