Today CNN/Business notes some volatility in bitcoin:
After a hype-filled week for cryptocurrencies, Bitcoin experienced a flash crash over the weekend, plunging nearly 14% in less than an hour, from about $59,000 to $51,000, on Saturday night before rebounding. Other popular cryptocurrencies including etherium and Dogecoin also fell dramatically, before recouping some of their losses.
Bitcoin has skyrocketed in value this year as it gained more mainstream acceptance, but the sharp price fall this weekend seems to have been triggered by an unconfirmed Twitter rumor that the US Treasury was planning to crack down on money laundering schemes involving cryptocurrencies. The agency did not immediately respond to a request for comment on Sunday.
Bitcoin’s rapid overnight plunge is the latest indicator that the crypto market remains wildly volatile.
Last week crypto enthusiasm seemed to reach a peak as trading platform Coinbase went public at a valuation of $86 billion, followed by a wild 500% rally in Dogecoin — an asset that was created as a joke in 2013. Cryptocurrency backers have spent years insisting that bitcoin, ethereum and other digital coins could revolutionize the world of finance, and with the success of Coinbase’s Wall Street debut Wednesday, those backers are finally having their moment.
While 14% could be worse, it’s interesting. It makes me think one of two things is happening, if it’s not the rumor cited in the CNN/Business article.
- Someone’s compromised one of the bitcoin exchanges. While wealth is always being compromised in most liquid wealth systems, I worry more about bitcoin as it’s not backed by a central agency. If your ‘wallet’ is compromised, who guarantees its restoration?
- The currency is under stress. The Treasury Department rumor itself may be a primary symptom of a current that is under stress. Keep in mind that this is not a currency with hundreds of years of experience behind it, centuries of mistakes and corrections. It’s a new thing: a network computer process which is designed to become harder and harder to generate new fungible elements, whose philosophy was based on the arrogant concept that, while governments often mismanage currency, they will not; indeed, whose primary designer(s) and coder(s) lurk in the shadows of the Internet.
It’s becoming harder and harder to not conclude this is actually a scheme to make the founders rich.
But that’s just an idle observation by an outsider who’s never had a virtual wallet or possessed a bitcoin. It’ll be interesting to watch its evolution and how society uses it over the next few years.
