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IOTA takes a nosedive following Trinity wallet hack

A vulnerability in Trinity, IOTA’s official wallet, has been exploited resulting in the theft of millions of dollars worth of this cryptocurrency.

IOTA takes a nosedive following Trinity wallet hack

Cover art/illustration via CryptoSlate

Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.

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A vulnerability in Trinity, IOTA’s official wallet, has been exploited resulting in the theft of millions of dollars worth of this cryptocurrency. Although the IOTA Foundation has taken different steps to prevent a further attack, IOTA plunged over 12 percent following the hack.

Trinity wallet has been compromised

On Feb. 12, the IOTA Foundation released a statement indicating that it was investigating a “suspicious situation” with its official wallet, Trinity. The Foundation advised users not to open or use the wallet until further notice.

Later on, the Coordinator, a system that checkpoints valid transactions, was shut down after the exploit was confirmed.

The IOTA Foundation said:

“After initial investigation we decided to turn off the Coordinator to make sure no further theft can occur until we find out the root cause of these thefts.”

Following an in depth transaction analysis, the Foundation believes that the issue is related to “seed theft,” but the root cause has yet to be found. They also identified 10 victims with a total estimated loss of $1.6 million worth of IOTA.

Now, multiple cyber forensic experts have joined the investigation team to evaluate different possible root causes and perform a deep scan of all Trinity’s dependencies. Additionally, the IOTA Foundation said to be working with law enforcement to further investigate the coordinated attack.

While it is still unknown what could have caused the exploit in Trinity, investors did not wait to sell their holdings. The price of IOTA took a significant nosedive as the “suspicious situation” was first reported on Feb. 12. Now, it seems like this cryptocurrency could be preparing for a rebound.

IOTA technical analysis

The TD sequential indicator was able to predict that IOTA was bound for a correction on Feb. 12. This technical index presented a sell signal in the form of a green nine candlestick on the 4-hour chart. Following the bearish formation, this cryptocurrency plummeted 12 percent. It went from trading at a high of $0.353 to a low of $0.310.

Despite the major downturn and the importance of the Trinity wallet hack, IOTA seems to be preparing for an upswing. The TD sequential indicator recently presented a buy signal in the form of a red nine candlestick within the same time frame. A spike in the buying pressure behind this crypto could validate the bullish signal allowing it to surge to $0.336 or $0.344.

IOTA US dollar price chart
IOTA/USD by TradingView

Nevertheless, a further increase in sell orders could invalidate the buy signal presented by the TD sequential indicator. Breaking below the recent low of $0.310 could set the stage for a steeper correction. On its way down, IOTA could find support around $0.296 and $0.284.

Moving forward

As the IOTA Foundation continues investigating what could have led to the recent vulnerability exploit in Trinity, it is worth noting that this is not the first time that it faces security issues.

In late 2017, several users reported that IOTA’s official wallet was unstable allowing tokens to be lost or sent to wrong addresses. And, in early 2019, a British hacker was arrested for stealing over $11 million worth of IOTA.

According to Tone Vays, a former Wall Street trader and VP at JP Morgan Chase, this type of exploits would likely continue to happen due to the high levels of centralization in IOTA’s protocol. Time will tell whether the Foundation will be able to make strides towards improving the security of its network and wallets.