Trading in bitcoin today (times in GMT)
This is just a taste of what’s to come.
The largest market for trading bitcoins, Tokyo-based startup Mt. Gox, went down for about an hour today, after the alternative currency’s value swung more than 20% this morning. It’s clear as day in the charts above, and Mt. Gox confirmed its downtime in a statement: “Due to high volume trading at the moment, there is a lag in trading and order cancellation.”
It appears that normal trading has just resumed, according to several bitcoin investors contacted by Quartz and others who use Reddit to follow the currency, but it remains to be seen whether trades during the downtime will be honored.
Disruptions in bitcoin trading are fairly common—I wrote about how a software glitch caused a market crash just a few weeks ago—but this is a bigger deal for several reasons:
- Mt. Gox processes about 76% of all bitcoin trades.
- Bitcoin recently surpassed $1 billion in total value, a symbolic barrier that has brought with it a lot of new attention.
- Indeed, this is the week that the mainstream media decided to write about bitcoin—from Businessweek to the New Yorker to Reuters.
- There is intense debate about whether bitcoin is in an asset bubble or just finally discovering its real value.
All that attention is messing with the market for bitcoins, which is what I and many others predicted would happen. More attention brings more demand, which inclines people who already have bitcoins to hold onto them, expecting their value to rise, which reduces the available supply of bitcoins in the market, driving the price higher, increasing attention, pushing up demand, encouraging still more hoarding…
That’s sometimes referred to as a “deflationary spiral,” but I prefer the term “demand crisis.” Whatever you call it, this is what it looks like.
If you need a crash course in bitcoin, watch this video: