Feeds

Bitcoin slump follows senators’ threats

Correlation or causation?

Top three mobile application threats

As any investment adviser will tell you, it’s a bad idea to put all your eggs in one basket. And if Rick Falkvinge was telling the truth when he said all his savings were now in Bitcoin, he’s been taken down by a third in a day.

Following last week’s call by US senators for an investigation into virtual crypto-currency Bitcoin, its value is slumping.

According to DailyTech, Bitcoins last Friday suffered more than 30 percent depreciation in value – a considerable fall given that the currency’s architecture is designed to inflate its value over time.

The slump could reflect a change in attitude among holders of Bitcoins: if the currency were to become less attractive to pay for illegal drugs, then dealers and their customers would dump their Bitcoins in favour of some other medium.

Being dumped by PayPal won’t have helped either. As DailyTech pointed out, PayPal has a policy against virtual currencies, so by enforcing the policy, PayPal has made it harder to trade Bitcoins.

The threat of regulation may also have sent shivers down Bitcoin-holders’ spines. The easiest regulatory action – although requiring international cooperation – would be to regulate, shut down or tax Bitcoin exchanges such as the now-famous Mt Gox. However, a sufficient slump may well have the same effect as a crackdown: whether Mt Gox is a single speculator or a group of traders, it’s unlikely to have the kind of backing (or even, perhaps, the hedging) that enables “real” currency traders to survive sharp swings in value.

The collapse does, however, highlight a weak point in a model to which some pundits have assigned messianic status. Its algorithm is designed to manage Bitcoin supply, causing a diminishing issuance of new Bitcoins over time (or, to be more precise, making it harder over time to "mine" new Bitcoins).

However, this only manages a self-contained system. If people want, at any time, to exchange Bitcoins for “real” dollars, then their value also depends on their relationship to those dollars – making Bitcoins hostage to market sentiment.

That sentiment seems to be collapsing at the moment. This may not mean the end for Bitcoin – but if its exchanges start falling over, then it will be the end of a carefree, idealistic life for the virtual currency. ®

Application security programs and practises

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
Microsoft: We're making ONE TRUE WINDOWS to rule us all
Enterprise, Windows still power firm's shaky money-maker
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.