Bitcoin is undergoing a classic correction after quintupling in price over the past 30 days. The currency, which was trading as high as $266 earlier today on Mt. Gox, plummeted to low of $105 before it recovered and is now trading at around $176. That means the peer-to-peer currency suffered a one-day loss of 37 percent and despite this fact, Bitcoin is still up more than 1,000 percent in the past three months.
Mt. Gox, the top bitcoin exchange, is saying that the crypto-currency is falling due to an apparent distributed denial of service attack. A denial of service attack happens when an attacker overwhelms a target with external requests, so that it can’t honor regular requests from legitimate users. This also happened last week when Bitcoin reached $142 and hackers attacked the exchange. At that point, Mt. Gox said it had suffered ”its worst trading lag ever.”
The Tokyo-based exchange said last week that hackers are engaging in a strategy to manipulate the price of the currency: “Attackers wait until the price of Bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their Bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can. Repeat this two or three times like we saw over the past few days and they profit.”
The decentralized currency, which was established in 2009 to avoid the prying eyes of law enforcement officials, has grown in popularity in recent months thanks largely to financial uncertainty in Europe and nascent investor curiosity. But the platform also has been the frequent target of hackers who are allegedly trying to disrupt trade execution to manipulate the currency’s value.
Did Bitcoin bubble burst?
Even many people who supported the bitcoin technology, have been warning about the risks involved in the price discovery going on at the various exchanges. Just yesterday, Mike Adams wrote about his very thing, see: How the looming bitcoin crash will be exploited by globalists
And to all those who think they are going to “get rich” by buying bitcoin today and selling it off when bitcoin goes higher, let me offer you a piece of practical advice: After the bitcoin crash, when you are screaming bloody murder and selling your bitcoins at perhaps 1% of what you paid for them, it will be people like me who will buy them and thus receive a 99% discount on the bitcoins you once bought at a hundred times the price. That discount is called the “IQ discount.”
First, it should be stated that today’s events are completely irrelevant to the workings of bitcoin. The community who built and invested in bitcoin since before the recent rise in exchange rate will go on improving the software, the protocol and the services that are offered. Sooner or later people will figure out that the bitcoin network and the bitcoin exchanges are two separate things. Second, how can a bubble burst and still be larger than it was a few months ago? Can someone explain that to me?
It has been stated by experts in the industry (and anyone with a little common sense) that a bitcoin correction was coming. It looks like this just happened (dropping to a low of $60 per coin). What people are asking right now is whether or not this correction was market driven or a manipulation of the market. In the end, the answer to that question may not matter because any kind of 400 percent increase over 30 days is probably unsustainable from a technical point of view. A correction at this point would be healthy and natural.
There is an excellent article over at Laissez Faire Today, outlining some of the cultural and societal ramifications of Bitcoin: