Martin Tillier, a financial advisor who writes for Nasdaq, says the recent DAO hack shows there is a vulnerability in Ethereum and that while some might have thought it would reflect negatively on bitcoin, bitcoin's price activity demonstrates the reverse. While bitcoin does not offer the development capabilities of Ethereum, it has demonstrated better reliability.

Martin Tillier

In an opinion piece titled "What Does Ethereum's Massive Hack Mean For Bitcoin?" Tillier noted that some have touted Ethereum as the cryptocurrency most likely to emerge as the "winner" currency, "a VHS to Bitcoin's Betamax" for those old enough to remember that rivalry.

Confidence In Ethereum Falls

While the full implications of the $60-million-plus hack on Ethereum are not yet known, Tillier thinks confidence in the currency has suffered a setback that it won't be recovering from anytime soon.

The attack was against DAO, whose name stands for exactly what it is: a distributed autonomous organization, meaning it is a leaderless group. The hacker was able to penetrate the system and transfer funds from the DAO to a dummy version of the organization to which only the hacker possessed the key.

The fact that a loose group of Ethereum developers could counterattack against the hacker to recover the funds and in turn be attacked once again indicates a serious flaw in Ethereum that will not be easily rectified.

Funding Relies On Confidence

Only a small number of people fully understand Ethereum. But to fund Ethereum projects, people outside that group must be confident in its value. Digital currency, like the paper version it may eventually displace, relies on confidence and faith for its value.

That there are millions of dollars of Ethereum moving between different accounts does not inspire the confidence level a currency requires. The price hit that Ether suffered after the attack was followed by a rebound only to fall again.

Price, according to Tillier, is only an indicator of Ethereum's trust problems.

Why Hasn't It Hurt Bitcoin?

It would be logical to assume Ethereum's problems would impact bitcoin in a negative manner, seeing there are similarities between the currencies. But as the DAO hack unleashed itself, bitcoin's price continued its acceleration.
Bitcoin's positive pricing trend results in part from a sense that a major bitcoin competitor was in trouble. It also results from a recognition of bitcoin not being vulnerable in the same manner.