Bitcoins Down MTGOX temporarily stopped all withdrawing requests

Bitcoin's value was hammered following a pause in withdrawals by one major exchange.
After trading at around $850 this past week, the virtual currency fell both Thursday night and Friday morning and is now hovering at around $732, according to the CoinDesk Bitcoin Price Index. So what triggered the freefall?

Bitcoins down

MtGox, a major Bitcoin exchange, had announced that it was temporarily stopping all Bitcoin withdrawal requests in light of a technical issue in the withdrawal process. The process needed to be frozen for MtGox to fix the problem, according to a statement on its Web site:

In our efforts to resolve the issue being encountered by various bitcoin withdrawals, it was determined that the increase in the flow of withdrawal requests has hindered our efforts on a technical level. To understand the issue thoroughly, the system needs to be in a static state.
In order for our team to resolve the withdrawal issue it is necessary for a temporarily pause on all withdrawal requests to obtain a clear technical view of the current processes.
We apologize for the sudden short notice. All bitcoin withdrawal requests will be on pause, and the withdrawals in the system will be returned to your MtGox wallet and can be reinitiated once the issue is resolved. The trading platform will perform as usual for the needs of our customers.

Our team will resolve this problem as soon as possible and will provide an update on Monday, February 10, 2014 (JST).

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China Bans Payment Companies From Clearing Bitcoin -- BitcoinNewsPortal

China Bans Payment Companies From Clearing Bitcoin

Chinese central bank officials told third-party payment service providers to stop offering clearing services to online Bitcoin exchanges, according to China Business News, which is affiliated with the Shanghai government.

Companies currently offering services must end services by the Chinese New Year, a weeklong holiday that begins on Jan. 31, the newspaper cited Zhou Jinhuang, deputy director of payment clearance at the People’s Bank of China, as saying at a meeting with more than 10 third-party payment service providers.

China’s central bank regulated the virtual currency for the first time on Dec. 5 by banning financial institutions and payment providers from conducting transactions in the virtual currency. Zhou was cited as saying by China Business News that the rules would be “strictly enforced.”

“The PBOC statement on Dec. 5 was somewhat vague and there is more clarity now,” Zennon Kapron, managing director of financial consultancy Kapronasia, said in an interview in Shanghai. “The way it’s reading now is that after the Chinese New Year, you won’t be able to get your money off the platforms.”

The PBOC’s news department didn’t immediately comment on the Bitcoin report when contacted by Bloomberg News. Two calls to Li Yue, director general of the central bank’s payment and settlement department, were unanswered.

Bank Ban

Bitcoin prices on BTC China, China’s largest exchange, plunged to as low as 3,251 yuan ($535) Dec.17,2013 before rebounding to 4,155 yuan at 4:16 p.m. local time. The drop in prices was triggered by concern that PBOC officials may visit lenders next to enforce the ban against Bitcoin settlement, Kapron said. The number of banks and payment providers that can transact Bitcoin has shrunk since the ban was announced, he said.

Bitcoin prices on the CoinDesk index jumped as much as 11 times since October, prompting former Federal Reserve Chairman Alan Greenspan to call the market a “bubble.”

Speculation that authorities in China may halt trading in Bitcoin surfaced after police arrested three people on suspicion of stealing money from investors through a fake online exchange.

GBL, a Bitcoin trading platform in China that began operating in May and had 4,493 registered users at the end of September, abruptly closed on Oct. 26, the official Xinhua News Agency reported Dec. 3., citing police in eastern Zhejiang privince’s Dongyang city.

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Bitcoins hits 1 billions of US Dollars

Bitcoin, the world’s first open-source cryptographic currency, which has been on a tear since the beginning of this year, set a new record on 28 March, when the price listed on the largest online exchange rose past US $95. With nearly 11 million bitcoins in circulation, this sets the total worth of the currency at just over $1 billion.

For a bit of perspective, that’s how much Facebook spent on its acquisition of Instagram last April. But Bitcoin is not a company. It’s a digital currency that runs on a global peer-to-peer network without the backing of a nation or any other central authority. The recent ascent has traditional economists scratching their heads.

“It’s something of a mystery that Bitcoin has a positive value at all, since it wasn’t launched in the way a new currency is typically launched,” says Lawrence White, an economist who teaches the history of banking and money at George Mason University, in Fairfax, Va.

“Typically, if a country wants to introduce a new currency, they make it redeemable for the old currency at a fixed exchange rate, and then after a while they cut off the link and retire the old currency,” White says. “But they launch the new currency by giving people a sort of firm expectation of what it’s worth. Bitcoin didn’t do that. It just launched itself by its own bootstraps, and we don’t really understand how that worked, as economists.”

Recent events suggest that many of the people who are using Bitcoin don’t want to replicate these old models. Much of the recent interest in Bitcoin is coming from places like Cyprus, whose desperate proposals for economic reform threaten to plunder the savings of its people.

Take what happened on 19 March, for example. In its bargaining for a €10 billion bailout from its European lenders, the Cypriot government instituted a bank holiday as it considered economic reforms that would impose severe levies on many bank deposits. As the situation became more chaotic, Cypriots who found themselves suddenly cut off from their savings accounts began downloading Bitcoin iPhone apps. That day, there was a steep increase in downloads of Bitcoin Gold, an application that tracks the exchange rate of Bitcoin. In rankings of finance-related downloads by popularity, the app went from 1171 to 104.

Without access to their money, it’s unlikely that many Cypriots were able to buy bitcoins at that time. But interest in the currency peaked in other countries as well. Spain, which has kept a close eye on the developments in Cyprus, showed a similar spike on 17 March, and downloads in the United States jumped a few days later, indicating that when government currencies fray, Bitcoin begins to look a little more like a safe haven and a little less like a crazy techno-utopian experiment.

But if Bitcoin is to function as a proper currency, people will have to be able to spend it as well as save it. This month, Bitcoin recruited a couple of high-profile merchants. On 14 February, Reddit began accepting the currency from customers signed up for its Gold membership. Two days later, Kim Dotcom announced via his Twitter feed that people could start using bitcoins to buy access to his new file-sharing service, Mega.

Since then, transactions in the Bitcoin network have increased significantly. For most of 2012, before the price of Bitcoin began its dramatic upward surge, daily transactions totaled about 200 000 bitcoins. Now that number tends to be around 300 000, suggesting that more people are using the currency to make purchases.

BitPay, one of the most successful Bitcoin payment processors, reports a similar trend. In March alone it set a new record, processing more than $2 million worth of Bitcoin transactions for its clients—nearly two-thirds of what the company managed in all of 2012.

“We see somewhat of a wealth effect,” says Anthony Gallippi, the CEO and cofounder of BitPay. “As the price rises, people do tend to spend money. When the price falls is when they tend to spend less.”

All of this is a big deal for Bitcoin. But making it into the Billion Dollar Club is not enough to impress professional investors, it seems. When asked whether Bitcoin’s aggressive ascent was turning any heads, Michael Kagan, the senior portfolio manager at ClearBridge Investments, had this to say: “I just don’t feel comfortable getting involved with something vulnerable to being hacked or manipulated, and with no recompense if it is. If I wanted to invest in something as an abstract store of value, I would buy gold.”

Maybe someday Bitcoin will gain its Wall Street cred. Until then, early adopters can at least bask in the glory of bewildering a whole generation of economic theorists.

A billion dollars may be small on a global scale, but it’s certainly hard to ignore. Perhaps the movie version of Napster cofounder Sean Parker in The Social Network, as portrayed by Justin Timberlake, put it best: “A million dollars isn’t cool. You know what’s cool? A billion dollars.”

This article was previously published as a blog post on 29 March.

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