The sheer volume of panicked users attempting to sell off their bitcoins today brought the trading exchange MTGox to a standstill. As the value of the virtual currency, hailed as 'the internet currency of the future', plummeted to just $130, holders of the currency rushed to offload their bitcoins for fear of further devaluation. Rumours of a hack by cyber attackers Anonymous fuelled the panic.
Of course, for those who earned or bought their bitcoins before the volatility of the past fortnight, the $130 price tag is still a substantial windfall. As little as a fortnight ago, the bitcoin was trading for just $90 a pop, although those who traded in their bitcoins at their high of $260 might be having the last laugh...
So, what is causing the volatility? MTGox, on which around 80% of bitcoins are traded, attributes the peaks and troughs to a 'rather astonishing' number of new accounts that have been opened in the past few days. In one day, the number of trades in Bitcoins tripled, it said. Although insiders also point to the antics of one Bitcoinbillionaire, an anonymous Bitcoin owner who gave away around $13,000 in Bitcoins via the Reddit social news site. One lucky Redditor got a gift of about $5,000 (£3,250).
It's fair to surmise that the new users of MTGox are predominantly amateurs - speculative buyers that don't really know what they're doing - so it's little surprise that a sudden drop in bitcoins' price prompts a virtual stampede. The weight of users created a lag in trading, which caused yet more hysteria. 'As expected in such situation people started to panic, started to sell Bitcoin in mass (panic sale) resulting in an increase of trade that ultimately froze the trade engine,' said MTGox. The exchange shut down for a few hours while engineers rushed to fix the problem.
One of the final words of amusement on this sorry tale is that Facebook pretenders Tyler and Cameron Winklevoss claim to own 1% of all Bitcoins. Glad to see they've got a sound investment policy from their Facebook spoils.