Bitcoin 'Glitch' Sparks 23% Flash Crash

Tyler Durden's picture

While we are used to seeing insta-crashes in our highly-regulated and trustworthy equity markets, the unregulated digital world of Bitcoins suffered another flash-crash last night. According to Ars Technica, the 23% plungefest in the value of the digital currency (the second in a week) was due not to Waddel & Reed, not HFT algos, but 'forking' Cryptographic algos gone wild agreeing on different (legacy) keys as being correct  - akin to finding Tungsten in your Gold bars (and hence the drop in the value). This latest glitch is different from the problem that caused Bitcoin prices to briefly crash to zero in June of 2011. In that case, the sell-off was caused by the compromise of the exchange itself, whereas this time the glitch occurred in the core Bitcoin software. Obviously, the incident will be another important test of the cryptocurrency's decentralized governance structure - to say nothing of its reputation among the less technically-capable owners and miners (even though BTC rapidly recovered almost all its losses).

Last night's bitcoin software-related crash...


and last week's 'market' based crash


and the life of BTC...


From a high of more than $48 earlier Monday, the value of Bitcoins plummeted to less than $37 around 10 PM Central time on Monday evening, a 23 percent decline. The price has since recovered; one Bitcoin is now worth about $46 - which, one could argue reflects a rapid recoupling with value and confidence (especially given the recent run-up in price) but notably, flash-crashes in equities (as we noted above) never seemed to stop greed-stricken investors piling into them anyway.


(h/t BD)

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NoWayJose's picture

Stacks of Electronic bitcoins do not hold a shine to my other stacks. You know, the ones that computers cannot touch.

knukles's picture

Hah ha ha ha ha ha ha ha ha ha ahhhh
Toldja so....

nmewn's picture

Why...its almost as was never, there one minute, gone the next.

How odd ;-)

XenoFrog's picture

Yes, quite a shocking turn of events.

tsx500's picture

forking crazy if you ask me !

kaiserhoff's picture

I felt a disturbance in the force...

Or maybe it was one of Knuck's gefilte fish.

SafelyGraze's picture

"if you don't understand how the X market operates, get out of it"

X elementOf { equity, bond, foreignExchange, bitcoin }


disabledvet's picture

here's a hint: "allegedly worthless dollars are traded for them." now give those boyz some twinkies!

Half_A_Billion_Hollow_Points's picture



Still over 1.5 ounces of silver.  Not a single bitcoin was Corzined.  


Laugh it up, and forget about bitcoin.  Ponzi-scam inflitrated by the CIA, it won't survive after the sun explodes, or something.



Pool Shark's picture




"Aaaaaaaaand, it's gone."


flacon's picture


It's too bad this happened. One day it might be useful to transmit "money" from one location to another without SWIFT and without government's prying eyes. For example if one had to flee the United States to another country one could sell assets in USA, put them into bitcoin and then re-buy the assets in the other country - all done without a banking system and government reporting. 


I don't own bitcoin because I don't think it's stable, but I do see the value of it in some circumstances. 


whotookmyalias's picture

Yes, the concept is great but why should I trust anything about a virtual currency?  Then again why should I trust any currency, but that is not my point here.

fnord88's picture

As a general rule i would say you should trust a currency inversely proportional to the ability of man/government/idiot/krugman/bernanke  to fuck with it. Both gold and bitcoin are a threat to the powers that be, my gold is harder to hide, plus i can't encrypt it, copy it, and stash it in multiple locations. Thing is though, bitcoin is a CURRENCY, like the US dollar, not a STORE OF VALUE, like gold. Hence i would recommend bitcoin whenever you can use it just to fuck with .gov, but i would not recommend stashing it like gold, as, like most currencies, it's value is pretty goddamn subjective. 

gold-is-not-dead's picture

This forking is nothing, and has happend before.

Do you realize that BTC is trading in a spread of 30% everyday?!?!


CH1's picture

They don't care. They just want some disaster to gloat over. Froget them.

Havok's picture


However the one advantage of paper money over bitcoin is:

At least I can wipe my ass with it when it all goes down.

Long_Xau's picture

One advantage of bitcoins over paper money: you don't get sued for littering if you throw away bitcoins.

digitalhermit's picture

Yes, I'm actually kind of glad this happened. I hope this shook out some of the speculative froth in Bitcoin, leaving people who are more serious about actually using the currency and building new businesses around it.

I just tried out one of the recent newcomers today: - You can now spend bitcoins on Amazon, EBay and any number of other online stores. Super easy!

Lets_Eat_Ben's picture

Bitcoin is atm highly dependent upon The Silk Road. Shut that road down and Bitcoin plummets.


I like the idea of BT, but in the age of information manipulation, it's too easy to scare off investers and keep down a competing curreny.


Realize having control of the money is hugely advantageous for those who seek power; theyll kill this and any competing currency they can. Everything depends on controlling money.

12ToothAssassin's picture

And if it proves that it cant be killed? What will happen to BitCoin value then?

akak's picture


I felt a disturbance in the force...

" ... as if millions of bitcoin users suddenly cried out in terror and were suddenly silenced."

fonestar's picture

I actually love bitcoins, it's like I am in a love triangle between my two favorite currencies, physical silver and bitcoin.  One has tradition and scarcity going for it.  It looks nice, it has a lovely ring to it when I play with it.  The other has all the things going for it that banksters and government agencies hate, anonymity, no charge or holding fees, no middle men, no ability to print more.

The one thing I fear the most would be some bankster saying that bitcoin is so great, they decided to open up an exchange for it and naked-short the shit out of the thing and then get Bit Chilton on the case!

Boondocker's picture

lol....its anonymous... 

Pseudo Anonym's picture

out of all the purported negatives btc detractors throw around, this is the only one that is real threat:

open up an exchange for it and naked-short the shit out of the thing

i can imagine this scenario: btc takes off and becomes a threat to the present day confetti that's been thrown around by central banks.  since all cb's print "money" at no cost and can purchase with it anything they want, they can print enough to drive btc to the moon; and then short sell it into the ground just as quickly.  and that'll be the end.  no one will have any confidence in the value of btc again if it can be manipulated that easily.  on the other hand, i cannot explain why so many still trust and buy paper gold/silver instead of bullion.

fonestar's picture

Yeah, that's a real tough one all right.  Would the fact that there are already established BTC exchanges help?  Or would "the boyz" and their media cronies and stooges just disregard that and give theirs all the press?  Or by that time would their press have any currency in the realm of public opinion anyway?  I can see how this could easily turn into the mother of all us vs them social interregnums.

Half_A_Billion_Hollow_Points's picture

If they drive the price to say $1, taking delivery kills them.  There are less than 11M btc out there.  As of today, a single bitcoin is more scarse than 10kgs of gold.  


They can't do it--and they know it.

digitalhermit's picture

Come on now, don't discourage them.

Please TPTB I know you can do it. In fact I'm begging you, please short the shit out of this market. Short it to $1.

Thank you (in advance)!

gold-is-not-dead's picture

No violence is strong enough to solve the math problem.

TPTB_r_TBTF's picture

They can always settle for cash. 


There is no [enforceable] requirement to deliver.  So who's gonna make them deliver?  The SEC?

Lets_Eat_Ben's picture

"it's like I am in a love triangle between my two favorite currencies, physical silver and bitcoin."

In any event your going toe-to-toe with the current champ. He's a large and ruthless cyborg that hits below the belt with weighted gloves and owns the venue. The ref and all three judges are in his corner (so it's gotta be a KO). Hell, he'd bite your fucking ear off if needbe.


So be careful.

DblAjent's picture




Shit coins is more like it.

Ignatius's picture

All those wantin' to hate on Bitcoin here's an anthem for ya:

I don't own any and do wonder what the potential is as store of value,


anonymity is something to consider in this 'check your socks and underwear' world.

Think about it.

fonestar's picture

I don't think some people appreciate the evil genius of Bitcoin.  Allow me to help:

CLUELESS BORDER GUARD - So do you have any firearms, bonds or currency over $10,000 you need to declare?

SOME YOUNG GUY - Well I got this flash drive sir, but it's encrypted using 3DES on a secret Truecrypt partition.  Honestly, I don't remember if I got naked pics of my ex gf, my college thesis or ten million dollars on here?  Sorry, I forgot the password....


Bitcoin is a crypto-tunneling currency.  Information wants to be free.  Now try do that with bullion.

fonzannoon's picture

what if the border guard keeps it so he can check out your ex or just drops it on the floor and stomps on it because he is a dick?

fonestar's picture

Which is exactly why you always backup and store your wallet.dat file somewhere else.

fonzannoon's picture

cool man, it does seem interesting.

digitalhermit's picture

Actually you don't even need the USB drive. If you can remember a random 12 word "seed" you can recover your funds by simply reinstalling the bitcoin client on a new computer wherever you decide to go and typing in the seed.

Brain wallet bitchez!

fonestar's picture

mnemonics is for 'terrists! 

hmmmstrange's picture

I can't wait to read the comments when ZH publishes the first "ripple" news.

RideTheWalrus's picture

CLUELESS BORDER GUARD: OK, well i'm going to have to run this high-powered magnet over your USB drive since Homeland Security has been informed drug gangs are smuggling digital currency out of the country via USB sticks. 


In the cloud, no one hears your bitcoins scream!


whotookmyalias's picture

Yeah, we've been over this before.  I then take my pretend money and buy a picture of a cup of coffee and a pictures of a croissant. Blah, blah, blah.  He who giveth taketh away.

Dave Thomas's picture

HAH! Flash memory is immune to bulk demagnitizing. You musta been one of those kids wandering through radio shack who thought that thing was a new Tandy Iron.

Bulk demagnitizers still can't demagnitize a stack of Carlton Sheets real estate videos however, so hide your bitcoins in there.


Acet's picture

Yupes - Flash Ram (the storage medium in USB Flash Disks) is not magnetic.

On the other hand 220V (or 110V if in the US) from a wall socket directly into the pins will fry it nicelly, thank you very much. Also microwaves will fry it (in more ways than one).

StychoKiller's picture

USB drives are not necessarily susceptible to magnetic fields, just sayin'.

Lets_Eat_Ben's picture

I've heard it said by MK and Naomi Wolfe that a developing paradigm is spying vs. privacy. I think there will be a market for both for a while yet to come.

Acet's picture

Almost a decade ago in the UK a law was passed that the police can demand the password from you and can jail you until you give it. Even better, not knowing it is no excuse.

The fight between freedom-loving techies and authoritarian authorities has been going on for decades now: far longer than Bitcoin has been around.

(I'm one of those that was on the Internet from when it was just a University and Military network, before AOL made it mainstream)