Bitcoin slumps to four-month low after currency exchange theft

LONDON — The price of bitcoin fell to a four-month low of $6,370 on Wednesday, days after South Korean virtual currency exchange Coinrail said hackers had stolen over $37 million, or almost a third of the virtual currency it had stored.

After Coinrail announced the theft, the price of bitcoin dropped $500 in an hour and it has continued to slide.

The decline also follows a Wall Street Journal report that U.S. regulators have asked virtual currency exchanges to provide trading data to aid an investigation into virtual currency manipulation. The reports raised concerns about the future of virtual currency markets.

Bitcoin is known for its volatility. Last year, the virtual currency increased sixfold in value and hit a record high of $19,783 per bitcoin in December. By February, its value had already fallen back to around $5,900.

Bitcoin is “a classic case of an economic bubble,” says David Jones, chief market strategist at Capital.com. As the market dropped back down, interest waned.

Jones says that confidence in bitcoin is slowly returning. The market had become somewhat more stable in recent months — the volatility in price was at a one-year low in May.

But the fact that the virtual currency is still so responsive to market events like the exchange theft suggests volatility will continue to define bitcoin for the time being.