The digital “tulip mania” surrounding the virtual currency is ongoing
Following a record rise to highs around $750 on the Bitstamp exchange ($900 on Mt Gox), the virtual currency has dropped almost 40% to trade as of writing at $470. It is no wonder that Congress is holding hearings these days to gather more information about what Bitcoin actually is – a digital currency, or a whoever-knows-what. It certainly isn’t behaving as a currency these days, with huge daily moves and volatility reminding us of the infamous Tulip mania in the Netherlands during the 17th century.
If one looks at the crazy rise in Bitcoin prices that were trading close to $10 a year ago we can conclude that we had from 75 to 90 times rise at one point yesterday depending on the exchange. A notable statement will be remembered by Sen. Tom Carper, who chaired the Senate hearing on Monday. We will quote as he put it: “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others and confused the heck out of the rest of us, including me.”
As we can see on the chart above after the first hearing concluded on Monday, Bitcoin has marked its highs. The digital currency has been tanking ever since.
With the hot potato that Bitcoin is, it seems as if market participants are having a hard time to figure out themselves what is its real value. As we reported yesterday there were substantial price discrepancies between different exchanges on the way up. Furthermore Bitcoin exchange Bitstamp has experienced technical difficulties. Initially it issued a statement that it was experiencing problems with its banking software, yet later in the afternoon it experienced a DDoS attack.
As of writing Bitstamp’s website appears to be functioning normally. The question remains for how long the market for the digital currency will be functioning in such a volatile fashion. Long term investors don’t like volatility and a blessing from Congress might just be the pillar that contributes to some stabilization in this new type of market.
We will keep covering the latest news about the crypto-currency, stay tuned to LeapRate.