Bitcoin security concerns push it near January low

Colonial pipeline

Bitcoin came within a whisker of its lowest levels since January amid intense speculation around how US investigators recovered much of the ransom paid to the Colonial Pipeline hackers.

The world’s largest cryptocurrency stumbled after the incident raised questions around its security.

The Justice Department announced on Monday that investigators had seized 63.7 bitcoins, worth around $2.3 million, which Colonial paid following the hack of its systems last month which caused petrol shortages across America’s east coast.

The majority of the payment is said to have been recovered after the FBI came to be in possession of a private key to unlock a bitcoin wallet that had received the lion’s share of the funds. How the agency gained access to the key remains unclear.

Bitcoin, which has been under pressure in recent weeks, was down a further 7.8 per cent to $32,824.21 last night.

Since riding a wave of optimism around its future potential earlier this year to top $60,000 for the first time in April, the digital asset — prone to volatile gyrations — has slumped by almost half.

Bitcoin’s most ardent believers argue it is a secure, decentralised currency which will change the world. Tentative signs of acceptance by Wall Street firms and some large companies signalled a shift from the fringes of global finance to the mainstream.

Its latest rapid rally ended abruptly, however, as Elon Musk — previously one of the cryptocurrency’s most prominent supporters — stepped back. Concerns over the environmental impact of mining for bitcoin prompted Musk to announce that Tesla, the electric carmaker, would stop accepting it as payment for vehicles just months after it started.

The currency was created by a secretive software developer using the name Satoshi Nakamoto in 2008 and has no physical form. While intended as an alternative currency to pay for goods and services, bitcoin’s main use so far has been speculative trading. Supporters argue that this is about to change, however, amid considerable interest among investors and consumers.

It was bolstered earlier this year by a series of high-profile corporate actions, from Tesla’s disclosure of a $1.5 billion investment to WeWork starting to take cryptocurrencies in exchange for office space.

But regulators and central bankers continue to express concern about bitcoin, which Janet Yellen, the US Treasury secretary, has branded an “extremely inefficient” means of conducting transactions.

Donald Trump, the former US president, this week joined its critics. “It just seems like a scam,” he told the Fox Business network. “I don’t like it because it’s another currency competing against the dollar.”

Tyler Winklevoss, the investor and crypto bull, insisted that bitcoin had not been hacked by investigators. “This FUD [fear, uncertainty and doubt] has created a great buying opportunity,” he tweeted.