14 DAY TRIAL // Bitcoins are having a rollercoaster ride. After exploding in value, blowing past the $100, (€76.7) mark, then the $200, (€153) mark and hitting highs of $260 (€198), the value of a bitcoin plummeted in a few hours.
It went as low as $105 (€80), it picked up again reaching $170 (€130) and is now down again to $120 (€91). This erratic behavior is strange, but explainable.
There are several reasons behind it, the biggest though are technical. First up, increasing confidence in bitcoins led to a fast rise in price, from $15 (€11.7) at the beginning of the year to $35 (€27.27) at the beginning of March.
It's around that time that speculators started entering the market, sending the price ever upwards towards a record $100 in just one month.
That was surprising enough. But a week later, the price doubled hitting $200. A few days later it was at $260, before it all came crashing down.
The huge growth can mostly be explained by speculators if only because there's no other explanation for it.
But there is proof as well, Mt. Gox, the largest bitcoin exchange has been flooded by new users, 20,000 registrations a day, 60,000 in three days, as many as the whole of last month.
Mt. Gox's servers couldn't handle the load, leading to huge lag in transactions and even outages. It's this lag that led people to panic and start selling.
There have been talks of DDoS attacks on Mt. Gox, to bring down the price, benefiting speculators, but the company has said that it's just having trouble coping with the natural surge in traffic.
DDoS attacks have been leveraged against smaller exchanges, so this wouldn't have been a first.
Once Mt. Gox buys more servers, it should at least be able to offer a problem free service, which should help with the volatility. That's no guarantee that the price of bitcoins is going to stabilize any time soon.