Bitcoin bursts: Hacker currency gets wild ride
The Securities and Exchange Commission has sued a Texas man saying he created a $4.5 million Ponzi scheme using Bitcoin, a digital currency. (April 11, 2013) Credit: Getty Image
It's a promising form of electronic cash, free from central bankers and beloved by hackers.
It -- Bitcoin -- may also be in trouble, registering catastrophic losses that have sent speculators scrambling.
Although the cybercurrency has existed for years as a kind of Internet oddity, a perfect storm of developments have brought it to the cusp of mainstream use.
As currency crises in Europe piqued investors' interest, a growing number of businesses announced they were accepting bitcoins for an ever-wider range of goods and services. The value of a single bitcoin began racing upward amid growing media attention, smashing past the $100 mark last week before more than doubling again in just a few days.
Then came the crash.
The price of Bitcoin has imploded, falling from around $266 on Wednesday to just above $40 on Thursday, according to bitcoincharts.com, which tracks trades across the Internet. The best-known exchange, Tokyo-based Mt. Gox, has suspended trading for what it described as a 12-hour "market cooldown." By late Thursday, the currency was back up to just more than $100.
Nicholas Colas, chief market strategist for the ConvergEx Group, said it was a "great question" whether the currency could survive the wrenching ups and downs.
To its supporters -- tech-savvy libertarians, currency geeks, and online speculators -- Bitcoin has enormous promise.
However, Bitcoin's dramatic collapse -- from peak to trough, the currency shed more than 80 percent of its value -- has left many enthusiasts anxious.
Bitcoins are created, distributed, and authenticated independently of any bank or government. The currency's cryptographic features make it virtually immune from counterfeiting, and its relative anonymity holds out the promise of being able to spend money across the Internet without fear of censors, regulators or nosy officials.
Increasingly, Bitcoin is being used to buy things. From hard drugs to hard currency, songs to survival gear, cars to consumer goods, many retailers have welcomed the money, whose unofficial symbol is a dollar-like, double-barred B.
The hackers behind Lulz Security, whose campaign of online havoc drew worldwide attention back in 2011, received thousands of dollars' worth of bitcoins after promising followers that the money would go toward launching attacks against the FBI.
