Bitcoin has been trading at the depressed price of between $6 and $7 USD for the past few weeks, which seems bad for the once high-flying digital currency that had climbed to $33 USD at one point. Hardly a week has gone by without some extreme crisis. In addition, New Yorker finance columnist James Surowiecki, wrote a long treatment of Bitcoin for the MIT Technology Review in which he notes pessimistically that "the number of actual transactions conducted in bitcoins, and the value of those transactions, has been shrinking."

According to bitcoinwatch.com, the best source of Bitcoin data, more than a million dollars' worth of bitcoins were traded on June 13. By early August, less than half a million dollars in bitcoins were being used in transactions; even the currency's value had been cut in half. Successful network technologies do not tend to see usage plateau, let alone shrink, this early in their history.

Mr. Surowiecki's take on the hoarding of Bitcoin leading to its downfall was echoed by another respected mainstream writer, Paul Krugman, Nobel Prize winner in economics: "So to the extent that the experiment tells us anything about monetary regimes, it reinforces the case against anything like a new gold standard – because it shows just how vulnerable such a standard would be to money-hoarding, deflation, and depression."

Other sources of bad publicity include (from Bitcoin Economy):

– Sept 14, 2011. Bitcoin GPU mining trojan distributed over twitter retweets
– Sept 13, 2011. More Mt.Gox phishing
– Sept 12, 2011. User says Mt.Gox account hacked and funds sent to the Ukraine
– Sept 10, 2011. Bitcointalk.org forum hacked by Cosbycoin
– Sept 09, 2011. 35 trojans targeting Bitcoin detected by Kaspersky Labs
– Aug 30, 2011. Mt. Gox Phishing attacks

And also about a month ago came the discovery and publication of Bitcoin evangelist Bruce Wagner's involvement in a civil case for mortgage fraud in Illinois, in which he was fined $250,000 for misrepresentation to customers in violation of the Consumer Fraud Act and ordered to pay $115,858 in restitution to more than 60 customers. The revelation led to new speculation that perhaps Mr. Wagner was behind the MyBitcoin heist/hack, in which the popular wallet service disappeared with 154,000 Bitcoins. (Mr. Wagner denies wrongdoing.)

But despite the negative publicity, we're still receiving press releases announcing new Bitcoin exchanges, a Bitcoin mint, a new user-friendly wallet and transaction processing service, noticed the proliferation of Bitcoin-denominated online poker sites (another one here) and other Bitcoin casino games as well as the Bitcoin variations Namecoin and Solidcoin. There was a session on Bitcoin and alternative currencies during the Open Video Conference in New York last weekend. We have also been asked to fill out a survey for a graduate student thesis on Bitcoin.

All the trouble with Bitcoin, especially the loss of credibility for Mr. Wagner, who converted many non-techie users into Bitcoin enthusiasts, is driving casual users away and leaving the hardcore Bitcoiners behind.

#BITCOIN-RUMORS. The mystery of the epic MyBitcoin whodunnit continues, although energy is flagging among the Bitcoin community. Word on the street is, MyBitcoin.com may have some connection to that most underground of ecommerce, the website where you can OMG buy drugs known as the Silk Road, which would give the owners another motive to build the easy-to-use wallet service in order to make it easy to get Bitcoin to spend on weed and mushies. Betabeat called our local Federal Bureau of Investigation today to file a complaint and find out if there was an investigation ongoing. "I'm sorry, I can't help you on this," a press representative said, declining to either confirm or deny whether the FBI was looking into the matter.

THE TIME IS ALWAYS NOW. Is capital drying up? The companies out of DreamIt Ventures--which gave life to one of New York's favorite little revenue-generating ventures, SeatGeek--had a demo day a fraction of the size of TechStars's and the companies have had oh, less success? Raising money? In the wake of the TechStars demo day, Betabeat remembers stories of rounds so full the founders had to subscribe them twice. Only 14 of the 15 DreamIt start-ups presented. "Appbrick and Cognection, not doing so hot," a source says. "Prepfly didn't present." And Pictour found itself scooped by Foursquare's lists feature weeks after their pivot. Then again, some companies are doing well--1DocWay's got all the money they need, we hear. Remember, you can't spell "pivot" without "tip," er, whatever. Talk to us.

THE EVERY-HOUR BODY. Every hour, a bell goes off in the SinglePlatform office, indicating the time to drop and give CEO Wiley Cerelli 20. Well not really, says the start-up's rather buff Chief Fitness Officer, who used to be a division 1 wrestler at Syracuse, the push-ups are optional. Is there a push-up competition in the works between SinglePlatform and the muscle builders at Kohort? We're hearing yes! Fitocracy might want to get in on this.

Energy has flagged in the hunt for the people behind MyBitcoin.com, the popular e-wallet service that disappeared with, according to them, 154,406 Bitcoins back in early August. After days of silence, a spokesman emerged for the site and a claims process was initiated to refund users 49 percent of their deposits, which in today's prices shakes out to $861,755.

But that still leaves 78,747 BTC ($896,929 USD at today's prices), which MyBitcoin's spokesman says were taken by hackers, unaccounted for.

The community effort to find the people responsible for MyBitcoin--or the hackers who broke into it, if that explanation is true--seems to have lost verve due to the pacifying effect of MyBitcoin's 49 percent refund, which many users reported receiving quickly (although there are some who say they have not gotten it yet) and the lack of actionable information. The spokesman for MyBitcoin, "Tom Williams," has been missing in action since about two weeks ago when he appeared in the #bitcoin-police IRC channel.

#Bitcoin-police was a fast-moving information hub at the time of the MyBitcoin incident, but has been dead of late. "Police is quiet because there's no new info coming in. The internet side seems to have been 'mined out,'" a user told Betabeat, referring to the detective work--looking up hosting providers, examining server set-ups, hunting for personal information on the people suspected of being involved--performed by members of the community. "Now it remains for someone who lost enough BTC to spend effort to actually file a report with real actual authorities," he said.

Vocal Bitcoin evangelist Bruce Wagner, who lost 25,000 BTC in the incident, is a likely candidate. He's told Bitcoiners to file complaints with the FBI in the past, as he believes there was foul play involved, but could not confirm whether there is an active investigation. "They stole (denied access) to EVERYONE's money," Mr. Wagner said over Gchat. "They later--after MUCH COMMUNITY INVESTIGATION AND FBI INVOLVEMENT --- suddenly re-appeared. NO ONE who understands ANYTHING about bitcoin believes their lies about ... being hacked."

Mr. Wagner plans to produce four episodes of his Bitcoin web show today where he will talk about MyBitcoin.

In other BTC news, the exchange Mt. Gox took over Bitomat.pl, an exchange that lost 17,000 BTC in what the owner is claiming was a technical mistake, combining the users of the first-largest and third-largest Bitcoin exchanges to solidify Mt. Gox's position as the dominant exchange.

Right now, it's tough to buy Bitcoin with cash unless you're meeting someone face-to-face. But in the wake of the most recent Bitcoin crash, a few high-profile incidents that drove the price down to $5 or so from around $13, it's tough for any exchange, even a U.S.-based one with a phone number that goes to voicemail, to convince users of its trustworthines.

Although trust in Bitcoin is gaining again. MyBitcoin users report receiving the 49 percent refund they were promised after the popular service shut down, claiming it was hacked. The price of the e-currency has rebounded to $11 or so this morning.

ExchB, which bills itself as the first U.S.-based Bitcoin exchange, also announced a few new deposit methods and no fees on check withdrawals.

Some members of the Bitcoin community suspect foul play (more about that later). But as promised, there is now a claims form for users who lost Bitcoins in the debacle: "Claims are manually reviewed and will be processed within 48 hours of being filed. This claim form will remain online for 30 days."

And as of Saturday night, the historically-reticent MyBitcoin has a voice: "Tom Williams," who stepped forward to field questions from the Bitcoin community via the #bitcoin-police channel on IRC, where he verified his association with the site by moving Bitcoins from the MyBitoin IP to a pre-specified address and providing the same encrypted signature that was used to sign the official statements posted on MyBitcoin.

After passing muster with the tech-savvy denizens of #bitcoin-police, a loosely-organized group of Bitcoin enthusiasts who investigate various issues in the Bitcoin community, Mr. Williams got down to tacks. "Listen: what did you think we did after the hack happened? We got shitfaced for many days. What would you do? Fuck."

MyBitcoin had half its deposits in "cold storage," he said, so it will be refunding all users 49 percent of their deposits. But he advised patience. "Cleaning up the mess takes time," he said. "We can't just start transmitting coins all over the bloody place."

MyBitcoin claims to have had 230,073 154,406 Bitcoins in its coffers at the time of the incident, which at the time translated to more than $2 million USD. The price has fluctuated considerably since then due to several high-profile incidents. At today's, or rather, this moment's prices, MyBitcoin's deposits would equate to $1.18 million USD.

MyBitcoin built its reputation by providing a free, user-friendly service targeted at newbie Bitcoin buyers. It collected scores of users, including Bitcoin evangelist and host of The Bitcoin Show Bruce Wagner, who says he had 25,000 Bitcoins--$192,500 at today's price of $7.70, but worth more than $250,000 at the time of MyBitcoin's disappearance. Mr. Wagner was also in the habit of recommending the service, especially to new users of Bitcoin. Betabeat also used the service to buy a few Bitcoins from a restaurant for the newsroom (and promptly lost all our co-workers' money).

MyBitcoin was simply the easiest and best-designed option available--and that's what has some Bitcoin users suspicious that perhaps the "hack" was an inside job. Mr. Wagner has spoken to the FBI's cyber crimes unit, which took enough interest in the case to give him a call back. He says the FBI has requested that affected users who suspect a crime report the incident online.

The counter-theory, as related by some users in the Bitcoin community--who are careful to hedge every word to avoid libel, retaliation and the chance that any action might discourage MyBitcoin's operators from refunding any Bitcoins at all--is that MyBitcoin was an elaborate hoax, designed to lure users into a false sense of security and then make off with their Bitcoins at just the right time.

Through the emerging science of Bitcoin forensics, some leads point to hacker aliases out of Canada. But clues are far from a smoking gun. For example, the #bitcoin-police hivemind concluded that the hacker collective Hack Canada registered its domain via PrivacyShark, the anonymized domain registrar that also registered MyBitcoin.com, among a long list of other domains including bitcoinreserve.com (empty), bitcoinia.com (expired), and pussyjuicegirls.com (active), which led them to name Edmonton programmer Dalin Owen as a person of interest along with five IRC handles and the owner of digital currency exchange nanaimogold.com.

"Dalin Owen is the one name that is linked to everything, and ppl have independently named him as the guy behind mbc," one Bitcoin user told Betabeat in a private message, but--"there is no hard proof yet." Dalinowen.com has been wiped and replaced with the message, "Yes, we sold a domain name to mybitcoin, but we have nothing to do with its operation. I also referred them to Morningstar Holdings as a professional courtesy as their corporate filing services have worked well for us in the past. All of the threats of bodily harm are being sent to the local authorities. I will not respond to any more threats or intimidation."

"Many of us think Tom Williams is TheMadhatter who used to sell prepaid credit cards bought in Canada," another said. Mr. Owen may well be TheMadhatter, he added.

On IRC, Mr. Williams denied that he was TheMadhatter or Dalin Owen. He also denied Betabeat an interview. "I'm not interested in the press. No offense implied," he said. HackCanada has not responded to an email inquiry.

The Bitcoin community has done some impressive sleuthing on the MyBitcoin incident. But whether collaborative auditing can keep Bitcoin crime in check is hard to say. Now that MyBitcoin is offering restitution, Bitcoiners are less vocal about their accusations. There also hasn't been much progress on another open investigation: the Polish Bitcoin exchange that shut down around the same time as MyBitcoin, claiming to have accidentally deleted users' 17,000 Bitcoins and declaring itself up for sale for that amount before resuming trading shortly thereafter.