Bitcoin Exchange Bitstamp Halts Withdrawals After Cyber Attack

Bitcoin exchange Bitstamp temporarily halted withdrawals and deposits on Tuesday due to a cyber attack that caps off a rocky stretch for the crypto currency.

The troubles experienced by Bitstamp and similar issues at rival exchange Mt. Gox highlight the technical problems still faced by the relatively young and increasingly-popular currency.

Slovenia-based Bitstamp said it stopped processing Bitcoin withdrawals due to “inconsistent results” reported by its "bitcoind" wallet that were caused by a denial-of-service attack. DDoS attacks are increasingly popular cyber intrusions that flood servers with unreasonable amounts of traffic.

Bitstamp said the DDoS attack used transaction malleability to temporarily disrupt balance checking. The exchange said all withdrawals and deposit processing will be suspended temporarily until a software fix is issued.

“No funds have been lost and no funds are at risk,” Bitstamp said in a statement posted on its website.

Bitstamp said solutions are being implemented and it is “confident” the system will be operating normally again “shortly.”

Bitcoins recently traded at $654.43 on Bitstamp, down 9% from the 24-hour high of $720.00 and 13% below their 30-day average of $752.47.

The troubles are likely to increase skepticism in some corners over the future of Bitcoin.

"Bitcoin looks like an innovation worth limiting exposure to. As a medium of exchange, unit of account and store of value, it is vastly inferior to fiat currencies," JPMorgan Chase (NYSE:JPM) wrote in a research note on Tuesday.

It’s not clear who may have been behind the apparent attack on the Bitstamp. Last year, Mt. Gox was slammed by powerful cyber attacks that impacted the Bitcoin exchange’s ability to function. Mt. Gox blamed hackers who aimed to destabilize the digital currency to “abuse the system for profit.”

Mt. Gox halted withdrawals on Friday due to technical problems it originally said were caused by increased withdrawal requests.

This week Mt. Gox blamed its difficulties on “a bug in the Bitcoin software” that allows people to alter transaction details to make it seem like money was never received.

But the Bitcoin Foundation, which promotes and sets standards for the crypto currency, later said the problem was the fault of Mt. Gox and not an underlying problem of Bitcoin.