The past week and half has been a roller-coaster ride for Bitcoin prices, climbing to as high as $250 before plummeting to $65, and now showing signs of stability at the $90-$100 levels. This latest erratic episode, which has happened intermittently in the past, has refueled debate on whether the emerging cryptocurrency is ready to transition into a mainstream alternative to real currency or that is just another bubble trap waiting to burst.
Fresh from breaking past the $100 mark, Bitcoin prices managed to more than double its trading value on the Mt. Gox exchange, hitting a record high of $266 on April 10. But then it went downhill fast. In the span of two days, Bitcoin prices crashed to $65 by noon of April 12.
Mt. Gox blamed the huge price decline on an "astonishing amount of new accounts opened in the last few days." To put it in perspective, the Mt. Gox said 60,000 new accounts were created on the exchange in the whole of March while 75,000 new accounts were opened in the first few days of April alone, now averaging at a pace of 20,000 new accounts created each day.
This influx of new accounts, the exchange added, proved too much for the system to handle resulting in lags, which in turn triggered a sell-off. "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."
Mt. Gox halted trading for half a day on April 12 to "cool down" the frightened and rapidly selling market.
Bitcoin has been gaining popularity lately precisely because of its soaring prices, increasing visibility, and widening acceptance as a valid payment currency. So it was ironic for Mt. Gox that it was Bitcoin's growing popularity that is biting its own tail.
Mt. Gox also categorically denied that it had suffered from a distributed-denial-of-service attack, or basically a concerted malicious effort to overload the system in order to cause service disruptions.
No matter what triggered the sell-off, critics of Bitcoin took the price crash as a prime example of its worryingly "bubble-like behavior." Some commentators have even gone as far as proclaim that "it's not real money."
Some Bitcoin observers though believe that prices should be stabilizing at the $90-$100 levels, and that the volatility is part of the growing pains for the cryptocurrency. Supporters also insist that despite the volatility, Bitcoin has recovered from the $65 trough quickly to $90-$100, and that this price level is comparable to the relative highs in March, suggesting some measure of resilience when taking the broader price trends into consideration.