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Cryptocurrency Black Swans: A Brief History

A Quick Rememberance

Today marks the 1 year anniversary of the Ethereum hard fork and the creation of the two separate Ethereum blockchains that exist today: Ethereum (ETH) and Ethereum Classic (ETC). The split was the result of the hack of the DAO when the majority of Ethereum developers decided to hard fork Ethereum in such a way as to pay back those affected by the hack. The DAO hack and subsequent hard fork is just one of many hacks and Black Swan events in the cryptoworld over the last decade. To display the resilience of cryptocurrency to these events let’s review some of the more famous hacks, flubs, crashes, and Black Swan events in cryptocurrency history.

Before we begin let’s discuss what a Black Swan is. A Black Swan is an event that is random or unexpected, is highly disruptive, and can only be rationalized after its occurrence. Examples of Black Swans outside the Cryptoworld are the 2008 Housing Crash and the DotCom Bubble. Very few people predicted their coming and the events could only be “explained” in hindsight. Now a quick review:

MtGox Hacked, Recovers, Then Hacked Again...

In the early 2010’s MtGox was the largest Cryptocurrency trading site which allowed users to trade fiat for crypto. By 2013 they handled 70% of all Bitcoin transactions. MtGox would rapidly fall apart after a series of hacks and security exploits. In the weeks leading up to June 2011 Bitcoin had a tremendous price surge taking the cryptocurrency from $1/BTC to $30/BTC. Bitcoin’s price then dropped 50% as rumors of an MtGox hack circulated resulting in 25,000 Bitcoin lost, which at the time valued about $425,000. Tensions were eased when MtGox asserted the hacks were due to poor security on the users’ part with weak passwords and phishing scams.

However, a few weeks later an MtGox auditor’s account was compromised resulting in the theft of ~500,000 Bitcoins ($8.75million) from MtGox user accounts. The hacker then placed a massi...

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