CZ: Binance Has ‘Decided NOT to Pursue the Re-Org Approach’ to Recovering Stolen BTC

On Wednesday (May 8, 06:29 UTC), just hours after digital asset exchange Binance had announced that it had been hacked and suffered a loss of around 7000 bitcoins, its CEO, Changpeng Zhao (aka "CZ") said that, after consultation with several prominent members of the crypto community, Binance had decided not to attempt a rollback on the Bitcoin network in order to recover the stolen bitcoins.

The attack on Binance was detected at 17:15:24  UTC on May 7 when a single Bitcoin transaction (representing BTC withdrawals from multiple user accounts) moved approximately 7,074 BTC out of the exchange.

Amazingly, just hours after Binance had announced it had been hacked, CZ went ahead with a Periscope Ask Me Anything (AMA) session that had been scheduled for 03:00 UTC on Wednesday (May 8). During this AMA session, CZ said:

"We've been working with other exchanges to block deposits from those hacked addresses."

Much more surprisngly, he also said:

"[On] the other topic of 'do we want to issue a rollback on the Bitcoin network'... Because right now, the 7,000 BTC is far higher than if we distribute that to miners. It would be far higher that what they got paid for the last few blocks. To be honest, we can actually do this probably within the next few days. But there are concerns if we do a rollback on Bitcoin network at that scale. It may have some negative consequences in terms of destroying credibility for Bitcoin. So, again, the team is still deciding that, and we're running through the numbers and checking everything."

This comment, understandably, shocked and angered the crypto community on Twitter. Here were just a few of the responses:

One of the first people to suggest the idea of a rollback on the Bitcoin network was Jeremy Rubin, who had tweeted about this less than an hour after Binance's security breach announcement:

Well, to the huge relief of the crypto community, at 05:20 UTC on Wedneday (May 8), CZ tweeted that Binance had decided not to go ahead with the rollback idea, and talked about its pros and cons:

 

It is imporant to note that what CZ means by the most recent tweet shown above is that although it might be technically possible to do a rollback, practically, "it's not possible" since it would do immense harm to the credibility of Bitcoin, which has immutability as one of its key value propositions.

Bullish Bitcoin Investors Are Ignoring Institutional Bears

Neil Dennis

Bitcoin investors remained positive this week, despite data showing that bearish bets on the futures market had increased during the previous week.

Positioning data on CME Bitcoin futures showed that institutional managers held 14% more short positions in the seven days to Friday, June 21, than in the week before, according to the Commodity Futures Trading Commission (CFTC).

Futures trade allows investors to back an asset's losses as well as gains: short positioning means backing an asset to fall in price over a defined period.  The increase in the CFTC short position data on CME Bitcoin futures, therefore, would indicate growing bearishness by the larger institutional players.

Playing it by the Charts

They may have been playing it by the charts. The previous two tops occured in mid-May when the price of Bitcoin reached a high of $8,352 before falling back nearly $1,000, and then at the very end of May reaching $9,066 before falling back to $7,807.

Bitcoin's price performnace

The chart shows that in the week to June 21, when shorts on CME Bitcoin futures grew, Bitcoin pushed up above $10,000, in a chart pattern that might have led many to believe another pullback was imminent.

This drop, predicted by many institutional investors, never came, however, and private investors continued to back the Bitcoin rally. Indeed, the CFTC report showed that smaller investors continued to hold more long positions - backing the continued rally: investors with fewer than 25 Bitcoin futures contracts showed four times as many long positions than shorts.

Short Covering

This may help explain how the rally of the last couple of weeks gained momentum, as those on the institutional side joined the buying to cover their short positions.

Tanya Abrosimova, analyst for FXStreet, said:

Many experts believe that at this stage Bitcoin is driven by FOMO (fear of missing out), while the market repeats the situation of late 2017.

It is also likely that Facebook's announcement about the lauch of its Libra cryptocurrency caught the institutional shorts on the wrong side of the market. Since the Libra announcement on Tuesday, June 18, Bitcoin has gained more than 30%.

Abrosimova added:

Looking technically, Bitcoin has been growing strongly for eight days in succession, which is the longest period of uninterrupted growth since December 2017. As BTC/USD is trying to take out a new barrier at $12,500. Once it is out of the way, the next bullish target of $13,000 will quickly come into view.