Today’s news cycle is dominated by the market value of Bitcoin falling below $200, along with a smattering of other related news. Notably the trial of Ross Ulbricht, the alleged operator of The Silk Road named the Dread Pirate Roberts has begun. Russia appears to be on the verge of banning cryptocurrency starting with an Internet block on Bitcoin-related sites. And, CEX.IO, cloud mining concern, is temporarily suspending operations because it cannot keep the lights on with the falling Bitcoin values.
Welcome to this “the sky is falling?” edition of Bitcoin Weekly and more news to follow.
Bitcoin market value falls below $200
At time of publication the Bitcoin market value has dropped to $184.88 (via BitcoinAverage.com) and saw a noticeable plummet overnight of approximately 20 percent fallen from $238. The sudden drop comes with an increase in total trade volume having brought on almost 400,000 BTC traded in the last 24 hours or approximately $7.3 million at the current market price.
The global price flirted with $175 placing the value back near a price seen before the October 2013 spike.
Speculation as to the sudden drop in price is rampant across the Bitcoin community, with leaders chiming in to note reasons or to remind Bitcoiners that volatility is expected.
Roger Ver, Bitcoin entrepreneur well known for early investments and the BitcoinStore, went to Twitter to cite the recent “Silk Road Trial” or trial of Ross Ulbricht (owner/operator of the Silk Road anonymous marketplace, see below) as a potential cause of the sudden value decline.
I suspect the Bitcoin price has been dropping in anticipation of the Feds selling 100K more bitcoins in light of the #SilkRoadTrial news.
— Roger Ver (@rogerkver) January 14, 2015
“I suspect the Bitcoin price has been dropping in anticipation of the Feds selling 100K more bitcoins in light of the #SilkRoadTrial news,” Ver posted in a tweet. The Reddit forum dedicated to Bitcoin, /r/Bitcoin, is now filled with threads about the price drop that note the sudden influx of users and discussion: “You know, the price crash is making the sub fun again,” “Wow, volume trading 1,250,000 and 2,000 current “users here now” in r/bitcoin. Haven’t seen those numbers in a long time,” and no small amount of humor “If Bitcoin Falls Below $120 I Will Eat a Cheeseburger.”
The most interesting chart in bitcoin right now, and for the next 2 weeks is the hashrate and difficulty chart — AndreasMAntonopoulos (@aantonop) January 14, 2015
Andreas Antonopoulos, Bitcoin luminary and host of the Let’s Talk Bitcoin podcast, appeared on Twitter to tweet that bitcoin market price isn’t the only chart to follow: “The most interesting chart in bitcoin right now, and for the next 2 weeks is the hashrate and difficulty chart.”
Volatility tends to bring out discussion and attention, potentially leading to further price volatility. Kraken Bitcoin exchange CEO Jesse Powell has told SiliconAngle in the past that volatile Bitcoin prices often leads to increased trade volume on exchanges and an increase in user account sign ups during that period as well.
The trial of Ross Ulbricht begins
On Tuesday, January 13 the trial of Ross Ulbricht began its proceedings. Accused of founding and operating black-market site The Silk Road from 2011 to 2013, Ulbricht has earned the moniker Dread Pirate Roberts, or DPR, after the owner and operator of the anonymous site.
The Silk Road was shut down in 2013 following raids by the FBI, Ulbricht arrested, and his assets (including Bitcoin assets) seized by the U.S. government. The rest is a sordid, but interesting, history.
Ulbricht is currently on trial in New York State and has pled not guilty to charges including Ulbricht faces four narcotics charges and one charge each of computer hacking, trafficking in fraudulent documents, and money laundering conspiracy. Ulbricht has also previously been accused of murder for hire, the original charge paraded in the media, however the New York Trial will not deal with this accusation.
Here’s a roundup of news coverage related to the trial, which affects the Bitcoin community because Silk Road traded in anonymity using the cryptocurrency as a medium of exchange to protect the identities of customers. As a result, the news media uses Silk Road and the fallout from the trial as a cultural sticking point.
“U.S. trial of alleged Silk Road creator begins” in BBC opens coverage on Tuesday.
Shortly, a quote from Ulbricht’s defense surfaces as a headline—“Ross Ulbricht trial Day One: ‘I DID invent Silk Road … but I’m innocent’” in The Register—acknowledging for the first time that Ulbricht is in fact connected to the Silk Road website.
“Why the Silk Road Trial Matters” by Andy Greenberg in Wired contains an excellent run down of the trial and the perception of the proceedings.
“The Dread Pirate Roberts On Trial” by Sarah Jeong in Forbes provides further excellent background and outline of the charges and trial.
Russia bans Bitcoin-related websites
In a move that appears to signal Russia’s feelings on the matter of Bitcoin, Russian telecommunications regulator Roskomnadzor blocked access to seven known Bitcoin-related websites on Tuesday. The accompanying quote leading most stories on the subject has the claim that bitcoin “contributes to the growth of the shadow economy.”
This block is thought to be the spearhead of a much larger campaign says Crypto Currencies Foundation of Russia (CCFR) chairman Igor Chepkasov, who told CoinDesk: “We can safely say that this is a dress rehearsal for the prohibition of Bitcoin in Russia.”
Bitstamp recovers from hack
After an event last week involving the compromise of its hot wallet (also: Bitcoin Weekly), Bitstamp Ltd., European Union-based Bitcoin exchange operator, shut down operations while working on a fix to the problem. Meanwhile, the exchange promised to reimburse any customers who lost bitcoins due to the fault.
The shutdown occurred January 5th and Bitstamp resumed operations four days later on January 9th.
Bitstamp CEO Nejc Kodrič explains what happened and the nature of the upgrades in a blog post on Bitstamp’s website.
As part of upgrades and updates done during the down time, Bitstamp shored up its defenses and implemented BitGo Inc.’s Multisig technology and migrated itself into the Amazon Web Services cloud.
In compensation for the down time and loss of potential revenue by customers, Bitstamp will be offering commission free bitcoin trades for the next week until January 17th.
CEX.IO to suspend cloud mining service
CEX.IO Ltd., a Bitcoin cloud mining operation that sells mining shares, has announced that the company will be temporarily suspending mining operations.
The decision comes amidst dropping Bitcoin market value and increasing hash difficulty, according to a blog post on the company’s website posted Monday.
Taking into consideration our users’ interests, the recent Bitcoin price drop, as well as the upscaling of the mining difficulty, CEX.IO Bitcoin Exchange would like to announce a temporary suspension of cloud mining services provided by the platform at the time of the next difficulty increase.
“Suspension of CEX.IO cloud mining service is only a forced temporary measure, the result of cloud mining costs exceeding mining profit,” said Jeffrey Smith, Chief Information Officer of CEX.IO.
The company hopes to return to normal operations once upgrades to equipment can be made and more efficient terms with energy suppliers to reduce costs. Smith’s states that operations will “automatically resume” once these criteria are met.
CEX.IO is best known for being the owner and operator of the GHash.IO mining pool, best known for nearly reaching and exceeding 51 percent of mining power in 2014. The operation took responsibility and actively throttled back new mining contracts in order to prevent this from happening, although the pool did flirt with 51 percent again later that year.
Elliptic receives accreditation from KPMG
Bitcoin storage provider Elliptic Enterprises Ltd. recently obtained ISAE3402 accreditation from KPMG LLC, one of the “big four” accounting firms for financial reporting and certification. This accreditation is a standard applied to banks and other institutions that deal in large sums of money for customers.
This is a Bitcoin first, and shows a growing maturation of businesses in the Bitcoin ecology.
Elliptic is based in London, England and provides services to investment trading houses that cover Bitcoin and other cryptocurrency storage solutions.
Accreditation of a Bitcoin storage company is an excellent step in showing credibility in Bitcoin business. Another step, in 2014, Coinbase, Inc., a Bitcoin web-wallet service, announced a partnership with Aon, the world’s largest insurance broker, to insure bitcoins held by customers.
Coinsetter adds post-trade settlement
New York-based Bitcoin exchange Coinsetter Inc. is now offering new capabilities for select business customers. These additions include post-trade settlement—an option that permits customers to place a trade on Coinsetter’s books before making a deposit—buy and sell bitcoin on margin, and take short positions on bitcoin.
Jaron Lukasiewicz, CEO of Coinsetter, says, “We have been testing a post-trade settlement offering with select business customers since December, and its value is apparent.”
This settlement option, the company explains, is designed to align with the settlement method of exchanges in other markets on Wall Street.