Bitcoin Drama

The Bitcoin Bubble Is Going Crazy, Part Deux

The insanity continues.
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Last week we covered the crazy increase in the price of Bitcoins. The biggest problem, we noted, was the same one that’s always worried Bitcoin users: the online currency’s vulnerability to hacker-induced fluctuations. Well, guess what happened today? Many of the major Bitcoin exchange services, including the popular Mt. Gox, went down for hours, and the cause appears to be–surprise, surprise!–DDoS attacks.

The disruptions caused the price of a single coin to go on the most absurd roller coaster ride in the currency’s short history. Seriously, the graph of today’s prices could easily pass for a kid’s drawing. After climbing to record high of $266 earlier today, the price of Bitcoins fell $161 to a low of $105, before leveling out at $164 at last update when the company restored service.

Members of the Bitcoin subreddit rallied behind an image of Spartans holding Bitcoin-emblazoned shields from the movie 300 with the word “HOLD!” across the top, while another user attempted to justify the currency’s craziness with some business-tech know-how.

But hack attacks seem like the most like explanation. A similar, albeit much smaller attack, took place last week, shutting down exchange services shortly after the currency hit a then-record high of $145.

In a strategy that would impress even Gordon Gecko, the Tokyo-based Mt. Gox last week said that “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.”

Must have been a really fun day at the first Manhattan bar to sell drinks for Bitcoins.

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