The BTC (bitcoin) price has tremendously surged to highs of $41k. This is considered a very volatile journey, with the price swings getting 17.6% daily. The most significant price changes coincided with troubling news from the custodians. These ranged from the suspension of withdrawals to security vulnerabilities that are exploited.
The market had warning signs before the volatility spikes, although very few responded to them. We will be looking at how traditional media proactive surveillance, social media, and tech blogs can offer a headstart of some hours or days.
Senior Executives Arrest in China
The arrest of senior crypto executives in China revealed the government’s determination to crack down on crypto exchanges in the country. This is because their Digital Yuan project is coming up fast. The projects’ full rollout is planned for the Winter Olympic Games in Beijing in 2022. Any potential competition is being eliminated methodically.
In November 2020, there were rumors concerning Zhu Jiawei, Huobi exchange COO, and Leon Li, the founder, and CEO. The Chinese police were investigating them. Their investigations led to a price drop in Huobi’s native token (HT).
Despite the exchange assuring its users on the Twitter account that rumors were not true and that the exchange was working as it should be, the exchange instability continued. There was a significant outflow of ETH and BTC on the same date Zhu tweeted. He has been unreachable since 2nd November 2020.
Two weeks before the arrest of Zhu, OKEx suspended all withdrawals. The reason behind the suspension was said to be about the detention of its founder Mr. Xu Mingxing.
According to the exchange, Xu was cooperating with the police on an investigation. However, the allegations concerning his arrest that lasted until the end of November were utterly different. The allegations were said to be on the backdoor listing of his firm OKCoin on the Hong Kong Stock Exchange and money laundering on OKEx in 2019. Since Xu was among the cold wallet key holders. Hence, the exchange could not validate any outgoing transactions.
Hijacking of Domain
Multiple domain hijacking experienced at the end of November was another volatility spike that surprised the market. A minimum of six cryptocurrency trading platforms had ownership of their domains transferred temporarily to malicious actors. Being victims of social engineering, the GoDaddy employees transferred accounts control and domains to malicious actors incorrectly. The actors were in control of internal email accounts and compromised the breached platforms infrastructure. The scheme was mainly used by hackers and is similar to the one used for the Twitter attack back in July 2020.
Ownership of the domain changes has not gone unnoticed by the security community in the IT department, who raised the alarm early. The security spikes tagged natural language events and served as an early warning for traders who proactively monitor the market. They can source out funds from the affected platforms ahead of the attacks’ final stages.
Being in a position for events that are coming up and mitigate the accompanying risks will make the difference between proactive monitoring and postmortem investigations. The crypto custodian troubles underline the benefits of market surveillance beyond compliance reports. Processing natural language and blockchain forensic and reliable market data can provide timely and unique intelligence. It will not only keep the funds safe but will help in giving early volatility warning to any person in the market.