By Ben Carsley, Writer/Editor (@BC_PYMNTS)
Taking a ride on the bitcoin roller coaster is not for the feint of heart.
That was made clear yesterday, when the world’s most popular virtual currency suffered a staggering loss in value, dropping over $100 from its high of $266 to regress nearly back to the two-digit mark, then rebounding back towards the mid-$100s.
In many ways, yesterday’s fluctuation served as a perfect microcosm for bitcoin’s last 10 days.
On April 1, the bitcoin reached a major milestone by surpassing $100 for the first time. Bitcoin peaked at a new all-time high of $104.50 on Mt. Gox, the world’s largest bitcoin exchange.
But since then, keeping track of the virtual currency’s wild fluctuations has been no easy task. On April 3, we saw bitcoin wallet service Instawallet shut down “indefinitely” after a hacking incident: an occurrence that would prove to be common in the following days. Bitcoin began that day at a value of $135, but ended below $117.
The next day, Mt. Gox suffered a Distributed Denial of Service attack that sent the bitcoin world into frenzy, causing its value to drop by around 30 percent. Mt. Gox handles around 80 percent of all bitcoin trades in the world, making a serious breach of its security potentially devastating to bitcoin miners everywhere.
On Friday, April 5, Coinbase suffered the third major bitcoin-based attack of the week, warning of phishing emails that asked for user information via a third-party website.
Finally, on Monday, April 8, Kaspersky Labs announced that a new Skype-based malware program turned victims’ computers into bitcoin mines, with most victims coming from Europe and Costa Rica.
Incredibly, despite the barrage of bitcoin-based security breaches, the value of a single bitcoin broke the $200 mark for the first time on April 9, reaching an aforementioned high of $266 just yesterday before the bottom fell out.
That bitcoin looks to end the day Wednesday trading back around the $160 mark is still a major accomplishment. The currency traded for $15 as recently as January, but its wild speculation bubble was bound to burst sooner or later. Mt. Gox insists that’s what happened yesterday, and that the fall in price was due to natural market correction, and not additional security concerns.
As just about every media outlet has covered this week, bitcoin is prone to massive market corrections like this by its very nature as a decentralized, self-regulated entity.
We won’t spill more proverbial ink here explaining bitcoin’s intricacies, but the basic gist is that since there are is a finite number of bitcoins that will ever come into existence, it can be “mined” and treated more akin to a precious metal, rather than adjusted like the standard currencies most of us use today.
In a nutshell, bitcoins are worth whatever the market is willing to pay for them at that instant. That means the price can skyrocket or plummet at almost a moments notice, and that many are invested in controlling those rises and falls through illegal means.
PYMNTS.com took a crack at explaining the bitcoin boom earlier this week, and there are no shortage of additional quick-guides online that can get you caught up to speed on the virtual currency in no-time or less.
So what do you make of bitcoin’s recent turbulence? Does the virtual currency interest you, or are you leery of such a decentralized system? Could you see yourself investing in bitcoins in the future? Let us know in the comments below.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More