Bitcoin price plunge sparks new crash fears

Companies that borrowed real money to buy servers for mining the cryptocurrency may be selling reserves to repay loans

The price of one bitcoin has plunged by more than a quarter in just two days, prompting fears that the currency is in the midst of its fourth major crash

On Tuesday morning, the currency was being traded at $267 a coin on Bitstamp, the largest individual exchange. However, by late Wednesday afternoon that had collapsed to just $195-a fall of 27%

The slide means that the currency has fallen by more than 80% from its record high of $1,150 reached in November 2013

Unlike that crash, and the two before it in the summer of 2011 and spring of 2013, this time the cryptocurrency has not been the victim of a speculative bubble that then popped. Rather, the price of bitcoin has been declining fairly consistently since June 2014, when it started falling after months of temporary stability at about $600 a coin

Greg Schvey, a partner at cryptocurrency data firm TradeBlock, told the New York Times that the new precipitous decline showed signs of a "squeeze" on bitcoin. "People have these very real fiat-based liabilities that they have to pony up for, and to do that, they're going to have to sell Bitcoins," he said

Hacks undermine confidence

The bitcoin network runs on the processing power of "miners" - computers put to work solving algorithmic puzzle in exchange for rewards in the millions of dollars into building specialised server farms have come to dominate the mining process, and received their share of the rewards

But Schvey suggests that the real money those companies borrowed to start operating were beginning to be called in, forcing them to sell some of their proceeds that they may otherwise have held on to in the hope of a recovery in the price of bitcoin

Further, the cryptocurrency has been shaken by yet another attack on the infrastructure that enables it to function as a working economy. Bitstamp reported a successful hacking attack in early January, which forced it to close its doors temporarily after $5.6m of bitcoin were stolen. While the attack was nowhere near as server as that which took down the once-leading exchange, MtGox, last year, it still alarmed many

In the face of the slump, many bitcoin proponents are turning their attention to a more fundamental technology called the blockchain. Sitting at the core of the bitcoin currency, the blockchain is the concept that allows money to be traded on a truly decentralised basis, but some argue that its capability goes far beyond that. The comparison most often drawn is that if bitcoin an application, such as email, the blockchain is more like the whole internet

That could prove to be merely wishful thinking in the face of an 80% collapse in the price of bitcoin

in the face of

could proce to be merely wishful thinking in the face of an 80% collapse in the price of bitcoin

the comparison most often drawn is that if bitcoin an application, the blockcahin is more like the whole internet

its capability goes far beyond that

is the concept that allows money to be traded on a truly decentralised basis

sitting at the core of the bitcoin currency

many bitcoin proponents are turning their attention to a more fundamental technology called the blockchain

in the face of the slump

it still alarmed many

while the attack was nowhere near as server as that which took down the once-leading exchange

which forced it to close its doors temporarily

reported a successful hacking attack in early January

that enables it to function as a working economy

has been shaken by yet another attack on the infrastructure

some of their proceeds that they may otherwise have held on to in the hope of a recovery

suggests that the real money those companies borrowed to start operating were beginning to be called in

received their share of the rewards

into building specialised server farms have come to dominate the mining process

put to work solving algorithmic puzzle in exchange for rewards

runs on the processing power of miners

undermine confidence

to pony up for

people have these very real fiat-based liabilities that they have to pony up for

the new precipitous decline showed signs of a squeeze on bitcoin

started falling after months of temporary stability

has been declining fairly consistently since June 2014

has not been the victim of a speculative bubble that then popped

unlike that crash

has fallen by more than 80% from its record high if $1,150 reached in November 2013

a fall of 27%

had collapsed to just $195

was being traded at $267

prompting that the currency is in the midst of its fourth major crash

has plunged by more than a quarter in just two days

may be selling reserves to repay loadns

plunge sparks new crash fears