If you’re looking for a secure investment, you usually go with something like gold, not a four-year-old, hacker-created online currency. But when your country basically shuts down all methods of removing your money from banks, you have to start getting creative. And so that’s what the people of Cyprus and other struggling European countries did last week, after the Cypriot government announced that it might include portions of citizens’ bank deposits as part of a bailout package by the European Union.
Looking for a way to transfer their finances into something more stable, Cypriots have flooded the Bitcoin market, dumping millions of Euros into the fledgling online market. In the last week prices surged, more than doubling from just €60 to over €115 on Mt. Gox, the world’s largest Bitcoin exchange service. In the last 24 hours alone prices increased by nearly €30. Now everyone wants in on Bitcoins.
Jeff Berwick of the Dollar Vigilante said he plans to begin operating a Bitcoin ATM (with the most unoriginal name of all time, Bitcoin ATM) in Cyprus, allowing Cypriots to obtain Euros for the digital currency. Berwick denied that the crisis in Cyprus was creating a Bitcoin bubble,though he told Wired UK that Bitcoin ATM, “ now [has] orders for 300 plus machines in 30 plus countries and [is] moving quickly to handle the demand.”
The hacker community is also setting their sites on Bitcoin exchange services, targeting Mt. Gox with DDoS attacks last week, (the site has been up and down again today, although the company has yet to resolve today’s issues.) Bitcoins have also been the subject of significant phishing attacks in the past, and as Reuters financial blogger Felix Salmon noted today, the recent price increases could easily fall off a cliff with just one major attack.
A word of advice to Cypriots: tech bubbles have happened plenty of times before, and let us tell you, they are not too fun when they finally burst.