# Lifestyles & Discussion > Bitcoin / Cryptocurrencies >  Bitcoin Market Compromised, Currency Value Crashes

## FrankRep

*Bitcoin Market Compromised, Currency Value Crashes*


Gather
June 20, 2011


It has been a wild few weeks for the Internet-based currency Bitcoin, culminating with problems at the currency's largest exchange which led to a massive selloff over the weekend. These foreseeable issues with a unregulated exchange system didn't deter some investors from buying the currency at its high, but they may be left holding a near-worthless currency, at least compared to the value a few days ago.
...
The Bitcoin has been an interesting experiment for the past year or so, but things got serious earlier this summer. A wave of interest in the currency, sparked largely by the currency's acceptance in online black markets, jumped the price from a few pennies to over $30 in a matter of weeks. While this jump seemed like good news and validation for the currency, those types of prices bring attention that an unregulated currency, being traded on unprotected exchanges, can't handle.

These problems led directly to exchange issues this weekend, as MTGOX, the largest of the Bitcoin exchanges, has an admin's account compromised and a list of their entire user base was circulated on the web. This caused a massive selloff of the currency, with the price dropping from $17 to pennies in a matter of hours.

This type of problem was neither surprising, nor unpredictable, and shows that while government-backed currency may have its problems, some regulation is required when dealing with financial matters. Unregulated markets are prone to selloffs and quick value changes as their is no way to stabilize the currency in the midst of the crisis.

*According to the MTGOX website, the problem has been located and fixed. All exchanges during the crash will be rolled back, meaning it is like they never happened, and the Bitcoin will magically be worth $17.50 again.* So much for an absence of currency manipulation. Don't expect it to stay at those levels for very long.

This incident only compounds on the problems the Bitcoin has had over the past few days, with a $500,000 theft deriving from the unsecure nature of how the currency is stored on computers, and a trojan that seeks to steal the currency right off your computer.


*SOURCE:*
http://technology.gather.com/viewArt...81474979477786


*More News:*

Compromised system blamed for Bitcoin collapse and data breach
http://www.thetechherald.com/article...nd-data-breach

Bitcoin collapses on malicious trade; Mt Gox scrambling to raise the Titanic
http://www.theregister.co.uk/2011/06...ollapse_again/

Bitcoin value plummets as main exchange is hacked
http://www.newscientist.com/blogs/on...s-as-main.html

The Bitcoin Trials Continue: Mt. Gox Exchange Collapses Due To Compromised Account
http://www.washingtonpost.com/busine...VcH_story.html

Bitcoin value crashes after exchange compromised
http://www.finextra.com/News/Fullsto...wsitemid=22676

So, That's the End of Bitcoin Then
http://blogs.forbes.com/timworstall/...-bitcoin-then/

After the Crash, What's Next for Bitcoin?
http://www.theatlantic.com/national/...itcoin/240696/

Symantec Uncovers Bitcoin-Stealing Trojan
http://www.techworld.com.au/article/...ealing_trojan/

Bitcoin Prices Plummet on Hacked Exchange
http://www.wired.com/threatlevel/2011/06/gox/

Everything Is Going Wrong At The Same Time For Controversial Virtual Currency Bitcoin
http://www.businessinsider.com/bitcoin-hack-2011-6

BitCoin HackCrash Raises Doubts About Viability of Virtual Currency 
http://www.cnbc.com/id/43464477



Bitcoin freefall: the market plummets as large amounts of bitcoins are sold off at rock-bottom prices - bigger circles correspond to larger transactions (Image: Mt. Gox)

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## hugolp

FrankrRep, this has been discussed since yesterday in its own thread: http://www.ronpaulforums.com/showthr...=1#post3350802

Please, people is still complaining about a flood of bitcoin thread. And you keep opening threads for each different article instead of using the Bitcoin thread, even opening two threads for the same news.

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## FrankRep

This is petty big news. It needed a new thread.

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## fatjohn

Big news if you have bitcoin or maybe even if you spent an hour or two researching what it is about. But for 99.9% of the population it is not big news.

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## hazek

http://consumerist.com/2011/06/how-h...erability.html

*How Hackers Stole 200,000+ Citi Accounts Just By Changing Numbers In The URL*
By Ben Popken on June 14, 2011 3:00 PM

(Sebastian Anthony)

Details have emerged has to how hackers were able to steal over 200,000 Citi customer accounts, including names, credit card numbers, mailing addresses and email addresses. It turns out quite easily, in fact. All they had to do was log in as a customer and change around a few numbers into the browser's URL bar, NYT reports. Facepalm.

Basically after you logged into your account as a Citi customer, the URL contained a code identifying your account. All you had to do was change around the numbers and boom, you were in someone else's account.

So if the URL was something like citibank.com/user/12345, all you had to do was change it to citibank.com/user/123456 and you had access to all of their account information.

The hackers then used a simple script that automatically scraped all the account information, saved it, and then changed the numbers in the URL and repeated the process. Hundreds of thousands of times.

As someone who has been on the internet for a few years, this is a dead simple and common hack and Citi should have seen it and prevented against it. Seriously, this is kindergarten level stuff. Really, really stupid.

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## hazek

At least mtgox had the passwords encrypted and it took an auditor having his personal PC compromised to get to the read only database.

Don't you get tired of constantly pasting news that's really irrelevant when it comes to Bitcoin itself?

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## hazek

> This is petty big news. It needed a new thread.


The funny thing is often I'm the one accused of being a shill for Bitcoin and trying to get poeple suckered into a pyramid scheme when only I post facts about Bitcoin, I even posted about the crash, the hack, everything in that one thread of Bitcoin.

On the other hand it's actually you, FrankRep, who is a shill against Bitcoin constantly posting anything you can possibly find that would propagate any negative opinions on Bitcoin. Congrats on failing btw, since the exchanges that didn't close yesterday still have trades going on and the price is stable although lower then it was yesterday.

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## Elwar

The $1000 max withdraw policy with MtGox resulted in the guy who's account was worth half a million only losing at most $1k before it was stopped.

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## specsaregood

> It has been a wild few weeks for the Internet-based currency Bitcoin, culminating with problems at the currency's largest exchange which led to a massive selloff over the weekend. These foreseeable issues with a unregulated exchange system didn't deter some investors from buying the currency at its high, but they may be left holding a near-worthless currency, at least compared to the value a few days ago.


Thanks for posting Frank, I too think this deserved its own thread.

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## falconplayer11

Bitcoin is an experiment...I fully expect new (and improved) systems like this to arise in the future.

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## hugolp

> Bitcoin is an experiment...I fully expect new (and improved) systems like this to arise in the future.


This has nothing to do with the Bitcoin protocol. Bitcoin has not failed or been hacked in any way. What has happened is that a page that used bitcoins and dollars has been hacked.

EDIT: The price of the currency did not crash as the title suggest. MtGox was unoperative with people unable to execute orders while the hackers were in control and they produced the graphic that the article is showing. In the rest of the exchanges there was convulsion but in non of them the price of bitcoins dropped under $10 (that I am aware). So its quite an stretch to say that the price of the currency crashed. It was a hacker playing with a computer. But hey! reality is only for good journalist.

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## brandon

This doesn't represent any type of flaw or problem with bitcoin. There was a problem with a privately run exchange, and it is being fixed. If the exchange can't get their $#@! together, then better ones will take over. You know, kinda like a free market.

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## Andrew-Austin

> Big news if you have bitcoin or maybe even if you spent an hour or two researching what it is about. But for 99.9% of the population it is not big news.


It is important to FrankRep that he posts every single Bitcoin FUD article or blog post he can find though. Why? Who knows, its pretty bizarre. I don't think I've seen the guy post a single thought or opinion of his own on the subject, he may well think Bitcoin was invented by Satan incarnate. He just doesn't want to stick his neck out, because when he does its about something crazy like Adam Kokesh being a Marxist agent. And in the case of Bitcoin he certainly could not compose a good argument against it himself. 

ZOMG the price is now 13 dollars! Oh wait, it was thirteen dollars thirty minutes ago, now its nearly fifteen.

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## specsaregood

I sense a whole lotta butthurt in this thread. And all Frank did was post an article.

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## low preference guy

> This is petty big news. It needed a new thread.


one exchange of a new currency was hacked. i don't know why i should care.

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## low preference guy

> I sense a whole lotta butthurt in this thread. And all Frank did was post an article.


we are used to hearing mindless statements from frank on this issue. consider the statement he highlights:




> According to the MTGOX website, the problem has been located and fixed. All exchanges during the crash will be rolled back, meaning it is like they never happened, *and the Bitcoin will magically be worth $17.50 again*.


bitcoins won't be worth $17.50. that's the price at which they'll open and in seconds the market will set a new price. there is nothing magical about it.

more laughs from the article:




> So much for an absence of currency manipulation.


i don't really need to explain why this statement is so full of fail. but i guess i will anyway: no sane person ever said bitcoin was free of manipulation by private individuals. people can buy a lot, then sell, for any reason they want. the only claim is that governments can't manipulate it in ways they manipulate dollars, such as increasing the supply of money. the sarcastic line is about a straw man, and it doesn't ridicule those whom the author intends to ridicule.

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## specsaregood

> we are used to hearing mindless statements from frank on this issue. consider the statement he highlights:
> 
> bitcoins won't be worth $17.50. that's the price at which they'll open and in seconds the market will set a new price. there is nothing magical about it.


That seems like a fairly innocuous part to become butthurt about.   Is it the word "magical" that offends you?  How should it have been phrased?
Personally, this sounds like a testament to the system and how they had procedures in place to rollback transactions/rectify errors without any needed government oversight/regulations.   It very well could be spun as a positive message.

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## Cowlesy

Is there a way to short Bitcoins?

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## hazek

Oh yeah, just look at how butthurt everyone using Bitcoin is right now: http://bitcoinity.org/markets?theme=light

We got decimated.

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## hazek

> Is there a way to short Bitcoins?


There is: https://bitoption.org/

Good luck.

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## hugolp

My bet is that FrankRep will be use bitcoins within two years. Bitcoin is just convenient.

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## hazek

> That seems like a fairly innocuous part to become butthurt about.   Is it the word "magical" that offends you?  How should it have been phrased?
> Personally, this sounds like a testament to the system and how they had procedures in place to rollback transactions/rectify errors without any needed government oversight/regulations.   It very well could be spun as a positive message.


If you read all of our posts about FrankRep's threads you'd know exactly why we are as you say "butthurt" about them.

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## low preference guy

> That seems like a fairly innocuous part to become butthurt about.   Is it the word "magical" that offends you?  How should it have been phrased?
> Personally, this sounds like a testament to the system and how they had procedures in place to rollback transactions/rectify errors without any needed government oversight/regulations.   It very well could be spun as a positive message.


it's not offensive, just facepalm inducing.




> It very well could be spun as a positive message.


if you read the next line, which i added to my previous post, you'll see purpose of the author and how he fails at it.

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## specsaregood

> it's not offensive, just facepalm inducing.


fair enough.   If the article is full of fail, then the best response would be to counter it with information, not get mad at the OP.  I don't think he wrote it.

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## low preference guy

> fair enough.   If the article is full of fail, then the best response would be to counter it with information, not get mad at the OP.  I don't think he wrote it.


probably the best is to just ignore it. i only responded to posts from others.

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## hugolp

> fair enough.   If the article is full of fail, then the best response would be to counter it with information, not get mad at the OP.  I don't think he wrote it.


I did here: http://www.ronpaulforums.com/showthr...=1#post3352103

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## cubical

I still don't really understand why bitcoins have value. Dollars are backed by a government and gold has 2000+ years worth of value as a currency. I just don't get it.

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## teacherone

> I still don't really understand why bitcoins have value. Dollars are backed by a government and gold has 2000+ years worth of value as a currency. I just don't get it.


you can exchange them for goods or services?

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## cubical

> you can exchange them for goods or services?


But why do people accept them? It seems like it is just a fad that will be gone next year. I don't see any difference between them and monopoly money. Will a super computer one day own all the wealth?

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## vita3

"It seems like it is just a fad that will be gone next year'

+1

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## teacherone

> But why do people accept them?


because they know other people will accept them in exchange for goods and services.

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## low preference guy

> But why do people accept them? It seems like it is just a fad that will be gone next year. I don't see any difference between them and monopoly money. Will a super computer one day own all the wealth?


I'll give you a puzzle. Imagine that you want to launder money. How could bitcoins be used to help you achieve that?

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## cubical

> I'll give you a puzzle. Imagine that you want to launder money. How could bitcoins be used to help you achieve that?


I guess there is a market for it that way.

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## cubical

> because they know other people will accept them in exchange for goods and services.


Without begging the questions, why do people accept it and not monopoly money.

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## hugolp

> Without begging the questions, why do people accept it and not monopoly money.


Why do people like gold and not monopolly money? Because gold has some characteristics that monopolly money does not have and people like those characteristics.

Exactly the same with Bitcoin. Bitcoin has some characteristics that monopolly money does not have and people appreciate those characteristics. Ill leave it to you to find what characteristics of Bitcoin people like over monopolly money.

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## cubical

> Why do people like gold and not monopolly money? Because gold has some characteristics that monopolly money does not have and people like those characteristics.
> 
> Exactly the same with Bitcoin. Bitcoin has some characteristics that monopolly money does not have and people appreciate those characteristics. Ill leave it to you to find what characteristics of Bitcoin people like over monopolly money.


That you can generate it with your computer with next to 0 effort? That the faster the computer you have the more goods you can buy? The first company to invent a trinary computer will own all the wealth.

Gold has thousands of years of being a currency, could people have used something else all this time, yes, but they chose not too. Any retailer accepting these things is foolish, but that is just my opinion. Good luck to everyone who buys them.

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## hugolp

> That you can generate it with your computer with next to 0 effort? That the faster the computer you have the more goods you can buy? The first company to invent a trinary computer will own all the wealth.


This is just false. You might want to check Bitcoin again.

I could say that gold is risky because when we find a very powerful energy source, gold can be synthesized. Or we could go mining asteroids, etc... You would laught at the person saying that and you would be right to do so. The situation is very similar to what you just did with Bitcoin.

Anyway, Bitcoin is a voluntary currency and you dont need to like it, but you are missing how Bitcoin can help to change the monetary situation we live in, because of its characteristics.

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## amonasro

> That you can generate it with your computer with next to 0 effort? That the faster the computer you have the more goods you can buy? The first company to invent a trinary computer will own all the wealth.


Next to zero effort? To build a competent bitcoin mining rig it takes considerable knowledge not only to choose the proper hardware, but to keep it maintained and cooled properly. 

The company that invents the "next best thing" will be obsolete in months once the bitcoin mining algorithm changes.

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## vita3

Hype & more Hype with this stuff. End it.

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## brandon

> That you can generate it with your computer with next to 0 effort? That the faster the computer you have the more goods you can buy? The first company to invent a trinary computer will own all the wealth.



Yea you definitely should look into bitcoin again, because this is completely wrong. Currently the cost of mining it exceeds its value on the open market.

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## hazek

> But why do people accept them? It seems like it is just a fad that will be gone next year. I don't see any difference between them and monopoly money. Will a super computer one day own all the wealth?


Ok I'll explain my reasons and you can choose to accept them as rational and reasonable or you don't. But in any case here they are:

First Bitcoins have, although artificially set, but still they do have most of the important properties that gold does. You can argue about their success or viability or their future all you want but you can't dispute these facts:
- they are of limited supply meaning they are sufficiently rare, 
- they are fungible meaning one is the same as the other, 
- they are durable because you can back them up on disks, CDs, DVDs, USB sticks, online hosts, underground bunker servers , 
- they are divisible to 8 decimal places right now with the potential of even higher divisibility, 
 - and they are extremely portable because all you need is access to internet and you can access them from anywhere in the world and send them anywhere in the world within seconds.
- you have to sacrifice labor to produce some (electricity cost, buy a computer, internet subscription)
- the more people try to produce some the harder it is to get any

Aside from having these properties that make them similar to gold they also have a few other properties that I really like:
- their transactions are irreversible
- no one can stop you from sending them to anyone
- every transaction is completely public
- there is no central authority
- they allow to protect your identity when transacting by being potentially pseudonymous
- it's easy to keep them safe and hide them from anyone
- it's possible to easily and safely move them

*I like Bitcoin because of these properties.*

Now the reason I would accept Bitcoin as payment is because *I trust Bitcoin to keep these artificially set properties*. And the reason I trust it will keep these properties is because I understand the logic of the design behind the Bitcoin software. 

Bitcoin to me is not a currency, it's an invention. This invention allows me certain activities of which the primary one is to exchange digital tokens with other people. These digital tokens are much like monopoly money but with the big difference that they have a lot more appealing properties as a medium or store of value.

*As long as Bitcoin will retain it's properties I will consider it an invention that can make my life easier and will use it.* 

And that's pretty much why I value it.

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## low preference guy

> I guess there is a market for it that way.


And if that is so, then bitcoins can have initial value for that use. Once they have some value, they can be used for other purposes, which in turn increases their value. It's just like dollars. Dollars get their starting value because obtaining them is the price for not going to jail. Once they have value, you can use dollars for other things besides staying out of jail. The same with bitcoins. My guess is that the starting value of bitcoins is obtained from its ability to do anonymous transactions. We can discuss this point further if you want.

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## Austrian Econ Disciple

> But why do people accept them? It seems like it is just a fad that will be gone next year. I don't see any difference between them and monopoly money. Will a super computer one day own all the wealth?


Bitcoins have properties which make them valuable. Anonymity, ease of use, non-inflatable (fixed supply), etc. etc. If you don't want to use them, don't. Just like I wouldn't have a problem with FRN's if they had no force of law backing them.

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## Warrior_of_Freedom

Buying Bitcoins is like buying WoW gold.

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## brandon

> Buying Bitcoins is like buying WoW gold.


How so?

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## jmdrake

Sounds like a good time to buy bitcoins.    Seriously though, this OP article is full of fail.

1) If "regulation" is the answer to keep user data from getting hacked, then why at least once a month do I hear a story about some credit card company based on USD being hacked?

2) Do you even need to use MTGOX to use bitcoins?  It's my understanding that you can just trade bitcoins directly through email.  Am I missing something?

3) Yeah there was a massive selloff because punk buyers who were jumping in because bitcoins were "trendy" and seemed headed for the roof jumped off.  To me that's a *good* thing as these speculators were artificially driving up the price.  Am I missing something in my logic?

4) For me bitcoins aren't a potential investment.  They are a potential way to be able to buy/sell electronically without exposing my entire bank account.  Even PayPal can be hacked.  And worse the government can lean on people like PayPal to not "pay your pal" (just ask Julian Assange).  For my purposes I don't *want* the price going through the roof.

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## Kade

*yawn* Every time you post this, I go and buy more.

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## hugolp

> Buying Bitcoins is like buying WoW gold.


Can you pay for a room at a luxury hotel in Disneyland with WoW gold? : http://hojomaingate.com/blog/now-acc...for-your-stay/

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## PaleoForPaul

> Buying Bitcoins is like buying WoW gold.


It's not quite the same, since WoW gold is intentionally inflated with every expansion.  If the WoW gold supply increased by a small fixed value, then they might be more similar.

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## rawful

> Hype & more Hype with this stuff. End it.

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