Did a huge surge in ransomware fuel this year’s Bitcoin price rise?

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Did a massive surge in ransomware attacks this year help fuel the Bitcoin price rise? And will increasing attacks push the price even higher?

Although it’s been a bit of a gloomy start to the fourth quarter, Bitcoin is still more than double the price it began the year. It peaked around $13,400 in June.

Cybersecurity firm Emsisoft believes this year’s Bitcoin price increase is at least partly linked to a 365% surge in Ransomware attacks in the first half of the year, compared with the same period in 2018.

The correlation has been seen in the past. Before the Wannacry ransomware was released in 2017 Bitcoin was worth $1846.

Two weeks later, after more than 200,000 computers in 150 countries were affected, the price had increased to $2446.

Ransom attacks and payouts have only increased since

Emsisoft figures suggest the average ransom increased by 89% to $12,762 in the first quarter of this year, with Bitcoin requested in almost all cases.

Figues from another cybersecurity firm called Coveware suggest it then increased even further to $36,295 the following quarter.

The criminals behind the GandCrab ransomware alone claim to have generated more than $2 billion in BTC so far.

How ransom payments affect the BTC price

While Bitcoin ransoms are likely to only make up a small part of the $16 billion of BTC reportedly traded over the past 24 hours, they could have an outsize impact on price.

To begin with, much of the reported volume is fake wash trading, and the volume on the Real 10 exchanges was just $614 million.

That obviously makes Bitcoin ransoms a higher percentage of the total, given ransom volume is definitely real.

In addition, as Edward Cartwright, Professor of Economics at De Montfort University in the UK said, even a small increase in demand from BTC ransoms can fuel higher prices.

“It is entirely plausible that an increase in price, however slight, could generate a self-fulfilling prophecy of higher prices.

“This can happen in any asset market but seems particularly likely in Bitcoin where speculation and volatility are that much higher.”

Ransomware publicity causes CSO hoarding

However a much bigger contribution could be played by the publicity around these attacks causing hoarding.

A 2018 study that year found that around three quarters of company Chief Security Officers hoard Bitcoin to pay ransoms as an insurance policy so they can unlock their systems in the event of critical need.

With ransoms rising, the theory is they’re increasing their Bitcoin holdings commensurately.

So far this year, in the US alone there have been 621 attacks on hospitals, educational institutions and government entities that some back of the envelope calculations suggest could have around $5 billion in total.

It’s happening in Australia too, with huge publicity recently around attacks that shut down vital systems in Victorian hospitals.

Attacks against sympathetic targets that affect the public that affect the public gather the most press coverage and Emsisoft’s charts suggest the Bitcoin price has risen along with media reporting around notorious attacks.

“It would seem to make sense that the bigger the demands come and the more high-profile cases there are, the more companies will start to buy,” Emisoft spokesman Brett Callow said.

“We suspect that that is what is driving the increase in prices, rather than the actual ransom demands themselves.”

Worryingly, one potential outcome if this is correct, is that algorithmic traders may begin building in news reports about Ransomware attacks as a buy signal in future, further amplifying the effect.

[Incidentally, Emsisoft has just released a free decryption tool to enable the estimated half a million victims of the STOP (Djvu) ransomware to decrypt their files. You can find it here.]