Binance, the largest cryptocurrency exchange, began accepting deposits and withdrawals after a security breach on May 7th. During the security breach, 7000 BTC were withdrawn from the Binance hot wallet by unknown hackers. At current prices (as of May 16th), this hack resulted in the loss of $55 million. Binance clarified that the hack only resulted in lost funds from its hot wallet and that this represented only 2% of its total BTC holdings. The loss of funds will not affect user funds and will be covered by Binance’s SAFU fund, an insurance fund set up precisely for unexpected events. One user
Binance took a number of steps to upgrade their own security measures while deposits and withdrawal were closed. All user API keys were reset and a number of backend measures were put in place to ensure that the exchange will not be hacked in the future. Binance also provided advice to users on how to better secure their accounts. The list of 14 steps that users should take is below:
- Always use Two-Factor Authentication (2FA), preferably Google Authenticator.
- Check the list of devices that have been authorized to access your Binance account.
- Use a strong password for your Binance account and change it regularly.
- Allow withdrawals only to addresses you trust and check the whitelist regularly.
- If possible, complete Level 2 Verification for your Binance account.
- Consider managing some funds in your own wallet (e.g. Trust Wallet)
- Take the necessary steps to secure your account when using API.
Binance also provides an additional seven steps which are not exclusive to Binance, but should be used by all users trading crypto on any exchange.
- Make sure that your Internet connection is secure.
- Install antivirus software and trust only secure apps/programs. 10. Put a lock on your phone.
- Use a secure password manager.
- As much as possible, use unique emails for each of your accounts, including your Binance account.
- Invest in Universal 2nd Factor (U2F) authenticators.
- Identify and avoid phishing attempts.
As a way to thank its customers for their support during the period of disruption, Binance has pledged a pool 50000 BNB (worth $1.23 million) for traders that trade at least 1 BTC worth of cryptocurrencies during a promotional period from May 15th to May 18th.
Despite the hack, the price of Bitcoin went up from $5800 to over $8000 during the period when deposits and withdrawals were suspended. Some users on Twitter argued that this increase meant that the bear market was over – if a serious hack on the largest exchange could not change market sentiment – what could?
– The hack barely affected the price of BTC. Price is virtually the same as before the hack. If this was two years ago, price would probably drop by 10%+. I think this is very positive
– More interestingly, the hack didn't even affect price of BNB as much. Only 6% drop
— Larry Cermak (@lawmaster) May 8, 2019
Observers also pointed out that this amount was a drop in the bucket for Binance. Because it is so profitable, it is likely to make up the lost funds in less than 50 days. In the past, serious exchange hacks caused huge corrections in the market, with the most significant being the Mt. Gox hack which sent the market into a deep winter in early 2014 that lasted for two years.