If this isn’t peak bitcoin, I’m not sure what is. This week saw a staggering price run ($17,000!!!) along with wall-to-wall media coverage, and was capped off by the CEO of Coinbase—whose core business is bitcoin—telling people to calm down and invest responsibly.
In the midst of the mania came a report that a bitcoin business had been hacked, and that crooks had emptied its digital wallets to the tune of over $60 million. The incident served to give more grist to a common criticism by bitcoin hackers—that the digital currency is somehow insecure and vulnerable to hacking.
But is it really? In a story titled “5 Ways Bitcoin is Stolen“, I took a closer look at various incidents of theft over the years and came to a simple conclusion: Bitcoin’s technology can be trusted so long as you know how it works, or if you rely on the right people. All of the thefts in recent years have been the result of carelessness on the part of bitcoin owners, or else incompetency or dishonesty from the companies they used.
All in all, bitcoin is more secure than most existing financial services, including legacy banking platforms like SWIFT, which has been compromised repeatedly by hackers.
But all of this speaks only to the technical security of bitcoin. Its financial security is another matter. As the boom—or if you prefer “bubble”—keeps growing, the prospect of a bitcoin collapse could do damage to many individuals, not least of those who are signing up for bitcoin-related IRA products (yes, it’s a thing—and yes, it’s probably a terrible idea). Even more worrying are the warnings about how the impending bitcoin futures market may not stabilize prices as promised, but could end up contaminating the larger financial system. More on that below. Have a nice weekend.