Today, all the Bitcoin in circulation — some 10.9 million of them — have collectively crossed the billion-dollar mark. As happens from time to time, the value of Bitcoin (and its exchange rate) fluctuated wildly yesterday. Volatility is to be expected, but yesterday it got crazy. I just spend my whole paycheck on 3 bitcoins (at the going rate 90+) and then watched my investment drop to $78 in seconds.
I quickly did a search on-line and found a website the reported “Bitcoins crash from $94 to under $80 in the last hour with no sign of slowing down….it’s going down, down, down really goddamn fast…this is some serious shit.” Needless to say this was not reassuring. I spent my entire paycheck believing Bitcoin would break 100 over the weekend… was I wrong?
Since we reported on Bitcoin’s rapid rise last week, the virtual currency is now trading at up to $94 on Mt. Gox, although the Dutch website Webwereld reports that this briefly slipped to $77 yesterday before quickly regaining its lost value. We cannot be sure however, if this hiccup was linked to Cyprus’s decision to reopen its banks yesterday or the DDoS attack on Dwolla and Mt. Gox.
What DDoS attack?
Mt. Gox reportedly suffered a DDoS attack last night, according to the IDG News Service. The Japanese company, which is one of the world’s largest Bitcoin exchanges, said that the attack began on Thursday night and was “stronger than average”, although the site itself doesn’t appear to have been taken offline.
That was right when I placed my order for three coins. At the same time, but also unknown to me, the online payments provider Dwolla was under DDoS attack which did bring its website down for a brief period of time. Dwolla’s problem is that it provides one of the easiest methods of purchasing Bitcoin, but the DDoS attack prevented many from taking advantage of this. People on message boards were freaking out:
“My favorite medium by which to fund my Mt. Gox account being down is in no way helping to curb my insane desire to buy bitcoins. I think I may just very well have myself a panic attack,” complains a poster named “Itchy”.
“i think this is why dwolla is down. Everyone wants to fund mTgox to buy BTC. Did they consider that?” replies “utuxia”.
Naturally there will be speculation that the two attacks are linked.
According to this report on eSecurityPlanet, in a DDoS attack, the incoming traffic flooding the victim originates from many different sources – potentially hundreds of thousands or more. This effectively makes it impossible to stop the attack simply by blocking a single IP address; plus, it is very difficult to distinguish legitimate user traffic from attack traffic when spread across so many points of origin.
Bitcoin crossing the $1 billion threshold may not seem like much, but if anything, it seems to be a sign to anyone listening that the crypto-currency is ready to be taken seriously. What’s more, the government has finally realized that it needs to start taking virtual currency seriously and develop a strategy for dealing with these types of currencies. FinCEN recently put out a series of“Guidelines,” which will inform future regulation, but also works to establish trust and credibility for virtual currency, particularly Bitcoin.
There’s also the climate of the global financial markets, particularly the panic in Cyprus, after the government froze its citizens’ bank accounts following its bailout. Many believe that the tenuous financial markets in Europe and beyond create an atmosphere that’s ripe for a digital panacea like Bitcoin.
Of course, the other side of the Bitcoin argument is that the perfect storm of unsteady financial markets, and skyrocketing growth of virtual currency (plus hype), is creating a perfect storm that equates to Bitcoin just being one giant bubble waiting to pop.
Bitcoin itself is still in a tenuous place, policy-wise. There’s a good chance that a decentralized, unregulated market is going to scare the pants off the government once it’s fully cognizant that Bitcoin is a billion-dollar market — and growing. You can expect scare arguments from the government, like ‘this funds terrorism’ and other such nonsense. This is nonsense because the CIA is the number one funder of terrorism (you know, the ‘enemy of my enemy’ and all that) so if anyone is using Bitcoin for this purpose it would would be them.
Regardless of whether Bitcoin is a phenomenon or legitimate institution, it is definitely making a bid for the latter — and one to be taken seriously. Either way, feel free to marvel at how a virtual currency that appeared practically out of thin air (created by some phantom mathematician/economist) just became a billion-dollar market.