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Winklevoss twins claim to have enormo $11m Bitcoin stash

Zuck's arch-nemeses say they keep virtual coinage in, er, the bank

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The Winklevoss twins are claiming that they own one per cent of all the Bitcoins in circulation - which, if true, would be one of the largest portfolios of the e-currency.

Mark Zuckerberg's former arch-nemeses told the New York Times Dealbook that they hold nearly $11m worth of the digital money in the first publicly disclosed large stake.

The wildly fluctuating online currency appears to be taking off, albeit with a lurching gait, but it hasn't been clear so far who exactly is investing in it.

The Winklevii stake may be worth $11m now, but with the way Bitcoins rise and fall, the value of that stake could change in the space of a day. Trading in the currency had be be temporarily suspended yesterday after the latest flash crash took the price from $266 per Bitcoin at one point on Wednesday to a stunning $120/BTC when trading halted.

Although investors are certainly showing an interest in the market, uncertainty is high, which means investors are all piling in together but are equally quick to run out again if the price starts to fall. Critics of the whole digital currency point to this as evidence that Bitcoins are nothing more than a temporary insanity and the market will eventually pop like a pricked bubble. But the price fluctuations could also be attributed to the normal reaction of skittish investors to anything new, coupled with the problems that come with digital services, which will settle down into a more mature market in time.

“People say it’s a Ponzi scheme, it’s a bubble,” Cameron Winklevoss told the NYT. “People really don’t want to take it seriously. At some point that narrative will shift to 'virtual currencies are here to stay'. We’re in the early days.”

Fans of the e-currency like its independence from government or central bank influence, given that it's entirely created online by "mining" - where programmers solve maths riddles - and value is created by putting a limit on the number of Bitcoins that can ever be available.

“We have elected to put our money and faith in a mathematical framework that is free of politics and human error,” Tyler Winklevoss said.

After suing Mark Zuckerberg for allegedly stealing their idea, the settled case gave the Winklevii the startup funds needed - $20m in cash and Facebook shares now worth around $200m - to launch Winklevoss Capital, which has so far invested in shopping site Hukkster and SumZero, an online community for money managers.

The twins said they started buying Bitcoins last year when their cost was still in single digits and claimed to keep their digital cash safe from hackers by sticking it on small flash drives and putting the drives in safe deposit boxes at banks in three different cities.

Hackers have been an ongoing concern for the nascent Bitcoin market, which has had to be pulled offline a couple of times after hack attacks. Earlier this month the market went down after an apparent DDoS attack - and the latest shutdown yesterday also seemed to be a DDoS issue until Mt Gox, the largest Bitcoin exchange, said it was actually just down to how many people wanted the digital coins.

"We would like to reassure you but no we were not last night victim of a DDoS but instead victim of our own success!" Mt Gox said in a statement.

"Indeed the rather astonishing amount of new account[s] opened in the last few days added to the existing one[s] plus the number of trade made a huge impact on the overall system that started to lag. As expected in such situation people started to panic, started to sell Bitcoin in mass (Panic Sale) resulting in an increase of trade that ultimately froze the trade engine!"

The exchange added that it might have to stay closed for 12 to 24 hours "to add several new servers to our system". ®

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