The IOTA-U.S. dollar exchange rate (IOT/USD) has plummeted in the last 24 hours following revelations from Boston University and MIT researchers that cryptographic vulnerabilities had led to a patch in the widely touted cryptocurrency's code.

Heralded for its corporate partnerships and unique technology that enables fee-free micropayments, the project had long attracted grumblings from developers who questioned the strength of its design. Still, market sentiment has been bullish, with IOTA's market capitalization rising to more than $1 billion on its unprecedented debut in June.

While developers involved in the project have pushed back against the claims, and their impact, the high-profile assessment was nonetheless pointed in its critique.

Neha Nerula, director of MIT's Digital Currency Initiative, wrote:

The market, it seems, is now in the process of pricing in that critique – and IOTA has certainly taken one on the chin.

The cryptocurrency traded at the daily low of $0.5210 at press time. As per CoinMarketCap, IOTA has lost more than 20 percent in the last 24 hours and, week-on-week, is down 23 percent.

The news of IOTA's broken hash function is certainly bearish in the short run as it means investors will need to come to terms with the reality that the cryptocurrency space is still new and thus vulnerable to such errors.

However, on a monthly basis, it is still up 16 percent, thus the broader trend is still bullish.

The fact that the error was detected and reported by reputable researchers, and the flexibility and speed shown by the IOTA team in fixing the bug, could end up boosting confidence that, in the long run, robust and useful technologies will one day emerge from the sector.

Daily chart

Investopedia defines "falling channel" or "descending channel" as a price action contained between two downward sloping parallel lines: i.e. lower highs and lower lows.

The falling channel has been breached to the downside, in the case of IOTA. An end of the day close below the channel would signal the bears have regained control.

Broken light bulb image via Shutterstock