So it turns out traditional markets aren’t as stable as everyone thought. The S&P 500 – an index of the 500 largest companies listed on the New York Stock Exchange – dropped 13 points in a matter of seconds earlier today as a result of a hacked AP twitter account. The tweet in question described an explosion that allegedly injured the president.
The hacked tweet |
The market’s response |
The flash crash was the equivalent of over $100 billion in market cap disappearing almost instantly. For all of the concerns with bitcoin’s price instability, this would have evaporated 100x the bitcoin market cap due to a vulnerability completely unrelated to financial transactions. Bitcoin is in it’s infancy, but this just goes to show that some of the criticism is unduly applied.
Just like we’ve seen with Mt. Gox DDoS attacks, someone likely stood to make a profit by the destabilization of broader financial markets. The formula is simple: post a shocking news bit from a trusted source, wait for the market to nose dive, buy securities, profit immediately on recovery. Keep in mind one key difference between this attack and a bitcoin attack: authorities will be actively hunting down the cause of this attack for a series of offenses, including public market manipulation. The same governments that regulate monetary supply also enforce market regulations. Everything comes with it’s trade-offs.
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