Has The Bubble Burst For The Bitcoin?
redOrbit Staff & Wire Reports – Your Universe Online
The largest Bitcoin exchange halted trading on two separate occasions last week and the value of the digital currency experienced a massive decline, leading to speculation that the online commodity could be in trouble.
According to Dominic Rushe of The Guardian, Tokyo-based exchange MTGox said Thursday that a massive surge in the number of new accounts after the Bitcoin hit a new all-time high value of $266 led to a need for a “cool down” period. After peaking, its value fell by over $160 on MTGox, and was valued below $100 on exchanges that allowed trading of the four-year-old digital currency to continue, he added.
In a statement reprinted by The Guardian, the exchange said that “as expected“¦ people started to panic” as a result of the plummeting Bitcoin value. The number of trades executed tripled during the hours leading up to the suspension of activity, and 75,000 new accounts had been created in the first few days of April (versus 60,000 for the entire month of March). They also reported that they had been gaining about 20,000 new users each day.
Trading was resumed 12 hours later, after MTGox officials installed new hardware capable of handling the activity, BBC News reported Friday. However, that did not mark the end of their problems, as the British news agency noted that shortly after trading resumed, the website became the target of a “a sustained hack attack which saw it bombarded with data.” It was forced to go offline again, and shortly after it re-opened for the second time, the value of the currency had fallen to approximately $90.
And the Bitcoin´s value continues to fluctuate, according to Matthew Sparkes of the Telegraph.
“The currency has seen a huge bubble in recent weeks, rising from around $10 at the start of the year to a peak above $260 on April 10,” he said. “The rise has been put down to the economic troubles in Cyprus, online retailers beginning to accept Bitcoin as payment and a general increase in public awareness. But in the last two days there has been a dramatic correction, with prices slumping to around $77.”
The incidents have led to some speculation that the bubble may have burst for the Bitcoin.
“There have been all sorts of explanations of what caused [last week´s] — from a problem at the main exchange to a strange incident in which someone called Bitcoinbillionaire apparently started giving away large sums on the social news site Reddit,” said BBC technology correspondent Rory Cellan-Jones. “A likelier reason is our old friends Greed and Fear combining to inflate and then depress prices as all those new arrivals crowded into the market.”
“All this talk of a Bitcoin bubble has annoyed the true believers — an interesting mixture of libertarians and cryptographic specialists charmed by the idea of a currency that embodies many of the open and virtually ungoverned principles of the internet itself,” he added. “What is true is that we are seeing a fascinating experiment in what a currency of the future might look like. But unless and until Bitcoin can be used to buy a sandwich, or be accepted by your friends when you pay them back for a restaurant meal, then it is likely to remain just a playground for geeks and gamblers.”