Crypto market takes a step back
The crypto market took a hit last week putting its recovery to the test. After a period of growing optimism, the question is how robust the recovery truly is. In the same week, there were fresh reports of funds being stolen from hardware wallets, this time with the help of a hidden spy chip. You can learn more in this week's edition of Bitvavo Market News.
Market update
Last week, the crypto market took a step back. Between Monday, 5 October and Thursday, 8 October, Bitcoin's price dropped by 7% from €77,500 to €71,600, then recovered to around €74,000 in the days that followed.
Ether's price dropped by 12% in the same period, from €2,450 to €2,150. This is notable because in recent months, Ether has often outperformed Bitcoin, showing larger gains, more stable consolidations, and less severe corrections.
Looking at the chart, it makes sense that the market would revisit the €2,180 level. This price level acted as resistance for 28 days in August and September. Last week's movement can easily be explained as a test of this area as a support zone. If it holds, this would be a positive signal. For other coins, such as Bitcoin and Solana, key price levels were also tested during last week's decline.
This week, eyes are once again turning to other financial markets. Energy prices, interest rates, and inflation continue to create uncertainty. Last week, AI stocks caused turbulence amid doubts about the revenue prospects of major AI companies. Greater stability would also provide a boost for the crypto market.
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Crypto stolen from hardware wallets with the help of spy chip
When you buy a hardware wallet, you assume your crypto is safely stored. But what if someone installed a hidden surveillance chip before the device was delivered to you? That appears to be what happened to customers of Ledger, by far the best-selling hardware wallet brand.
On Friday, 9 October, reports emerged of missing crypto. The affected users had bought their devices through CryptoBilis, an authorised reseller in Southeast Asia. Ledger immediately launched an investigation and halted sales. The manufacturer has since confirmed that at least one device had been tampered with.
Spy chip hidden behind screen
Mark Karpelès, former CEO of the now-defunct crypto exchange Mt. Gox, demonstrated on social media how the attack is believed to work. He bought a Ledger device in Malaysia, which arrived shrink-wrapped. After opening the device's casing, he discovered an extra circuit board behind the screen, containing a microcontroller, antenna, and a mobile internet connection.
According to Karpelès, the chip can intercept information displayed on the screen. When the user's recovery phrase appears during setup, it is also sent to the attacker who can then use it to recreate the wallet and secretly transfer crypto out of it, without ever having to physically access the device.
Blockchain researcher Specter estimates the losses at 86 million dollars, while data firm Bitquery puts the figure at over 93 million, spread across 315 wallets. Ledger has not confirmed these figures.
How can you protect yourself?
While a hardware wallet protects your assets against many types of digital attacks, it offers no guarantee against physical manipulation. There are a few precautions you can take to reduce this risk however.
Whenever possible, buy direct from the manufacturer. Check the packaging and verify that the device is genuine. Never use a device that comes with a pre-generated recovery phrase, and never enter your recovery phrase on a website or computer.
Use additional security measures. A good example is adding a passphrase to your recovery phrase. Even if an attacker obtains the words of your recovery phrase, they still won't be able to access the crypto assets protected by the additional passphrase.
Start with small amounts. Transfer a small amount of crypto to a new device first, then wait a few weeks before transferring more. Funds are often stolen from tampered wallets in waves, so reports from the first victims can serve as an early warning.
In other news
Ethereum's next major upgrade, Glamsterdam, live on Sepolia testnet since last week. The rollout on the testnet proceeded smoothly, with no major issues. Glamsterdam aims to speed up transaction processing and make it cheaper. Validators will also gain more time to check block content, allowing the network's computing capacity to be increased up to three times the current limit. The question is how much of that capacity will actually be used. For now, supply is outpacing demand.
‘Crypto Mom’ Hester Peirce leaving the SEC regulator after eight years. For years, she was one of the dissenting voices under former SEC chairman Gary Gensler. Through speeches and publications, she was a vocal advocate for clearer crypto regulations and innovation. Under the new chairman, appointed by Trump, she took charge of the Crypto Task Force. From November, she will teach law at Regent University. Following her departure, the SEC will have just two commissioners remaining.
Russian banks have been given the green light to offer Bitcoin to their customers. The central bank has authorized five financial institutions to provide crypto services. Sberbank is the largest with 110 million customers, and VTB is second with 31 million. Sberbank aims to launch products linked to Bitcoin, Ether, and USDT on 1 December. Russia is cautiously catching up with other countries in crypto adoption. For now, however, domestic crypto payments remain prohibited.
China aims to build national blockchain network. The plans are outlined in new policy guidelines from the Communist Party and the government. Blockchain and a “nationwide computing power network” have been identified as building blocks of the digital economy. The plans focus on industrial applications, smarter data collection and publication, and the digitalization of the manufacturing industry. AI, robotics, and quantum technology are also highlighted as priorities, though a new stance on cryptocurrency trading has not been announced.
Satoshi Radio: Does AI pose a threat to bitcoin's security? That's the topic of the newest episode of Satoshi Radio. The hosts also cover a major data breach in Denmark and the unequal treatment of crypto under the proposed Box 3 tax system. The key question of the market update: does the four-year cycle still exist?
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.