- - Wednesday, December 20, 2017



As more and more people pile into Bitcoin and other cryptocurrencies, which seem to be springing up like weeds on a warm spring day, many a savvy market participant have wondered what the real risks are regarding this new phenomenon to investors.

Many believe the transformative effects of removing central bank control of the money supply will propel Bitcoin and copycats to stratospheric heights as the old financial system is razed to the ground in a blaze of creative destruction. They may well be right. However, there will for sure be fits and starts along the way and the risk wolves lurk in the shadows.

One of the questions asked by perceptive analysts since Bitcoin exploded on the scene a few years ago has been the hacking issue. The currency exists only in the cyberspace so can’t some intelligent FSB agent hack it? The answer has always been no because the currency uses shared distribution to value the blockchain. However, the weak link seems to have been found—the electronic wallet themselves that store the units and the exchanges that convert the currency.

None other than Kim Jong-un himself has been named as the probable thief who recently hacked a South Korean exchange and backed the truck up to steal Bitcoin. The North Koreans need currency after facing Western and U.N. sanctions over their nuclear weapons program.

“The investigation into the hack, led by South Korean law enforcement and a state cybersecurity agency, is still in its infancy and a review of the malware code could take weeks, the people said. But the people said there were telltale signs and historical evidence that North Korea, which has turned in recent years to increasingly sophisticated financial warfare, was behind the hack of Seoul-based exchange Youbit,” writes MarketWatch.

This event is the canary in the coal mine for cryptocurrencies, possibly leading to more regulation and government control as they are now seen as a vehicle for organized crime to launder money and avoid international financial restrictions.

This is the black swan for Bitcoin many have warned about.

Although blockchain technology is here to stay and will be used in other ways besides for currency, such as record keeping, etc., it is a good bet that in 10 years the cryptocurrency environment will look much different than it does today. The trick for investors is to navigate this minefield.

The trick for intelligence agencies is to find ways to counter North Korea’s use of the blockchain for illicit gain and to threaten the world.

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