Bitcoin Market Compromised, Currency Value Crashes
Gather
June 20, 2011
It has been a wild few weeks for the Internet-based currency Bitcoin, culminating with problems at the currency's largest exchange which led to a massive selloff over the weekend. These foreseeable issues with a unregulated exchange system didn't deter some investors from buying the currency at its high, but they may be left holding a near-worthless currency, at least compared to the value a few days ago.
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The Bitcoin has been an interesting experiment for the past year or so, but things got serious earlier this summer. A wave of interest in the currency, sparked largely by the currency's acceptance in online black markets, jumped the price from a few pennies to over $30 in a matter of weeks. While this jump seemed like good news and validation for the currency, those types of prices bring attention that an unregulated currency, being traded on unprotected exchanges, can't handle.
These problems led directly to exchange issues this weekend, as MTGOX, the largest of the Bitcoin exchanges, has an admin's account compromised and a list of their entire user base was circulated on the web. This caused a massive selloff of the currency, with the price dropping from $17 to pennies in a matter of hours.
This type of problem was neither surprising, nor unpredictable, and shows that while government-backed currency may have its problems, some regulation is required when dealing with financial matters. Unregulated markets are prone to selloffs and quick value changes as their is no way to stabilize the currency in the midst of the crisis.
According to the MTGOX website, the problem has been located and fixed. All exchanges during the crash will be rolled back, meaning it is like they never happened, and the Bitcoin will magically be worth $17.50 again. So much for an absence of currency manipulation. Don't expect it to stay at those levels for very long.
This incident only compounds on the problems the Bitcoin has had over the past few days, with a $500,000 theft deriving from the unsecure nature of how the currency is stored on computers, and a trojan that seeks to steal the currency right off your computer.
SOURCE:
http://technology.gather.com/viewArt...81474979477786
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http://www.newscientist.com/blogs/on...s-as-main.html
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http://www.washingtonpost.com/busine...VcH_story.html
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http://www.finextra.com/News/Fullsto...wsitemid=22676
So, That's the End of Bitcoin Then
http://blogs.forbes.com/timworstall/...-bitcoin-then/
After the Crash, What's Next for Bitcoin?
http://www.theatlantic.com/national/...itcoin/240696/
Symantec Uncovers Bitcoin-Stealing Trojan
http://www.techworld.com.au/article/...ealing_trojan/
Bitcoin Prices Plummet on Hacked Exchange
http://www.wired.com/threatlevel/2011/06/gox/
Everything Is Going Wrong At The Same Time For Controversial Virtual Currency Bitcoin
http://www.businessinsider.com/bitcoin-hack-2011-6
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http://www.cnbc.com/id/43464477
Bitcoin freefall: the market plummets as large amounts of bitcoins are sold off at rock-bottom prices - bigger circles correspond to larger transactions (Image: Mt. Gox)
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