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Another Bitcoin Flash Crash Imminent? Second Major Exchange Follows MtGox In Suspending Withdrawals
Bitcoin plunged another 15% or so from its bounce highs this morning as volatility has picked up dramatically in the virtual currency. The reasons are numerous: JPMorgan has come out with a scathing attack - "bitcoin looks like an innovation worth limiting exposure to;" CoinDesk reports that major exchanges are under a "massive and concerted attack" by a bot system - creating a "fog of confusion" over the system; and perhaps most critically, BitStamp has followed Mt.Gox and halted withdrawals "due to inconsistent results from their bitcoin wallet" - due to the DDoS attacks...
Basically the main reason why BTC crashed in the past few days was the realization that MtGox had finally halted withdrawals, leading to an escalating blame game in which the finger pointing between the exchanges and the actual bitcoin source code (here and here) meant that something is wrong within the system. This lead to the previously noted flash crash in Bitcoin yesterday:
Alas, that may have been just the beginning when a few hours later, we just learned that the next major Bitcoin exchange, Bitstamp, has just halted Bitcoin withdrwawls, blaming a major DDoS for the suspension.
First, here is JPM's latest hit piece:
Unlike other asset markets, FX rarely welcomes newcomers for the simple reason that launching a widely-used currency traditionally required creating a sovereign or supra-sovereign entity with a central bank to issue the unit and manage its supply over time.
Hence the audacity of bitcoin: it is a stateless, virtual and peer-to-peer currency, so exists only digitally and is associated with no sovereign, central bank or bank payments system. It is also incredibly illiquid extremely volatile and often caricatured.
After a brief Economics 101 refresher on the required functions of money, this research note addresses various frequently-asked questions around this virtual currency: what is it; how is it created and transferred; what are its advantages and disadvantages for corporates and investors compared to fiat currencies; is it a serious contender for a global payments system; and can it prove more durable long-term than other somewhat fixed-supply currencies like gold.
At the risk of sounding like a luddite, bitcoin looks like an innovation worth limiting exposure to. As a medium of exchange, unit of account and store of value, it is vastly inferior to fiat currencies. Since governments are quite unlikely to accord it the status of legal tender, bitcoin or other virtual currencies would not reach the scale and scope to render them worthwhile for widespread commerce, payments or investment.
Bitcoin’s greatest appeal is the apparent cheapness of peer-to-peer fund transfers, though it is unclear how economical these transactions truly are when the virtual world interacts with the real world. As provocative as its underlying technology may be, bitcoin’s practical role may be no larger than that of an emerging markets currency subject to exchange controls.
For corporates, bitcoin’s appeal is two-fold: no or low transaction costs from a peer-to-peer payments system, and the potential brand recognition from trialing a new technology. These advantages must be weighed against extreme illiquidity and volatility, both of which impede risk management. All-in transaction costs may also be higher once the fees from transferring bitcoins to fiat currencies are included.
Investors normally avoid an instrument with bitcoin's trading properties. The unit's main investment appeal is the potential long-term price rise due to limited supply, much like some commodities when the market balance tightens.
But more importantly, the scapegoating begins - DDoS attacks (via CoinDesk):
A “massive and concerted attack” has been launched by a bot system on numerous bitcoin exchanges, Andreas Antonopoulos has revealed.
The chief security officer of Blockchain.info said a DDoS attack is taking Bitcoin’s transaction malleability problem and applying it to many transactions in the network, simultaneously.
“So as transactions are being created, malformed/parallel transactions are also being created so as to create a fog of confusion over the entire network, which then affects almost every single implementation out there,” he added.
And the culmination: BitStamp has halted withdrawals:
Dear Bitstamp users
Bitstamp’s exchange software is extremely cautious concerning Bitcoin transactions. Currently it has suspended processing Bitcoin withdrawals due to inconsistent results reported by our bitcoind wallet, caused by a denial-of-service attack using transaction malleability to temporarily disrupt balance checking. As such, Bitcoin withdrawal processing will be suspended temporarily until a software fix is issued.No funds have been lost and no funds are at risk.
This is a denial-of-service attack made possible by some misunderstandings in the Bitcoin wallet implementation. These misunderstandings have simple solutions that are being implemented as we speak, and we’re confident everything will be back to normal shortly.
Withdrawals which failed on the 10th and 11th of February will be canceled and the amounts added back to the customer account balances.We will communicate any further developments regarding this issue.Thank you for your understanding!
Best regards
Bitstamp team
Best regards indeed.
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NSA is busy today.
How does a virtual currency die? Is it a lack of trust? Does 2 of 3 major exchanges going down in a week promote trust?
FUD aside, regardless of how this turns out, the fascinating part is that there are thousands of very smart geeks who will be furiously searching for the answer/source or any attacks. Many of those guys are at least as talented as the hackers themselves and the NSA nerds. Hiding your tracks is not too difficult but people make mistakes. If it turns out to be hackers that's one thing, but if someone finds a trail that leads anywhere else, things will get very interesting. I saw one thread on Sunday that said there will be a huge crash this week. I mostly ignored it but the author seemed very adamant. Now I'm having second thoughts.
Where is that thread?!?!?!?!?
It was on bitcointalk. Usual type of scam message - "Mark my words, something significant is going down this week. Tip me for more info." I just ignored it.
Fucking hell some jackoff says that every single day on bitcointalk even a broken clock gives the right time twice a day.
Coincidence that this comes at the same time as the MaxCoin launch?
Get out of it!
Europe/Russia are going all out to bring it down.
Russia: http://www.reuters.com/article/2014/02/09/us-russia-bitcoin-idUSBREA1806...
EU:http://www.businessinsider.com.au/european-union-eba-bitcoin-warning-201...
Also the IMF who are French crony backed gangsters supported by US taxpayers do not want EU outflows going into Bitcoins.
The silver graph looks like that every other day.
The silver graph looks like that every other day.
The silver graph looks like that every other day.
Some points to clear up the fog in this thread.
BTC has not been compromised, however, exchanges that allow you to convert BTC to fiat have been.
No one forces anyone to use BTC.
Time is money no? Several years back I generated a few bitcoins with several weeks of CPU time. The same amount of coins would now takes years for me to generate. The value of the coin is in the fact that it can't be duplicated and generating a new ones quite a bit of CPU and *time*.
Currency is not the same as money. Many people would argue that gold is money, but BTC and the USD are just Fiat. USD also happens to be *legal tender*
Being legal tender is actually quite a bad thing, since it subjects you to their system ; the powers that be, it's their bat and their ball afterall.
The TPTB are pissed that BTC *allows people to trade value for value globally while disintermediating the banks*.
If you really hate BTC, just go to Argentina and try to get USD out of the country. BTC basically obviates capital controls. Sure it's volatile, but at leat you can move a portion of your wealth.
USD is also backed by nothing and is represented in binary format at your bank. Worse your bank statmenet is does not say how much money you have *in* the bank. Rather it is a statement of the banks *liability* to you. Most people should know that banks can't actually cover all their liabilites!
Thus your USD is not only binary, but it pretty much does not "exist" in the way you can access a BTC. With BTC there is no financial itermediary that can go "belly up" making your binary "worth" nothing; it was never actually there. Remember JOHN CORZINE?
All the hate on here is laughable. I made some 1000 in BTC now I put it in gold. The irony is that most people on here must be -I hate to say it - BINARY in their outlook.
BTC suck = gold good. Gold Bad = BTC Good? LOL?
Dollars and buttcoin=bad, Gold and Dogecoin=good
Hm ...
Maybe good relationship! Gold so pretty. But goldbugs not happy. Always hoping for terrible things! They need dogecoin. They need doge community.
And doge community like glittery gold. Buy ferrari with glittery gold. Then trade for dogecoin! And give to community.
Much happiness!
The Bitcoin protocol is working just fine. The issue is that some exchanges and wallet implementations were making improper assumptions about the protocol that they had already been warned not to make, and they are now paying dearly for taking shortcuts.
That's one of the reasons I don't keep bitcoins in care of a third party. You might say it's the Bitcoin version of "If you don't hold it, you don't own it!"
"The reasons are numerous: JPMorgan has come out with a scathing attack..."
Fuck, I thought the article was about silver until I sobered up.
Can we give dogecoin on Zero Hedge?
To the moon!
https://www.youtube.com/watch?v=XtMg4MMAkvw
So currency.
Damn, I was just getting ready to cash in my bitcoins and buy me ah...ah...ah..shit what can I buy?
Oh dear,
I hope this won't affect my Bulgarian teen age sex slave purchase.
And it's gone....