Bitcoin 'panic sale' caused by worried traders, not attacks

Bitcoin 'panic sale' caused by worried traders, not attacks

Summary: Despite initial reports claiming that Bitcoin exchange Mt Gox had been hit by a second denial-of-service attack, the exchange has come forth stating that recent performance issues are actually a result of its own success.

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Recent delays in transactions on the Mt Gox Bitcoin exchange has seen the virtual currency's value drop as investors feared that an attack on the market was occurring, however the exchange has now revealed that no attack took place.

Although the exchange was hit by a distributed denial-of-service attack last week, this week's dip in value was the result of speculator panic, according to Mt Gox.

In a statement released by the exchange, it wrote that a large number of accounts being created has had an impact on the performance of its systems.

"As expected in such a situation, people started to panic, started to sell Bitcoin in mass (panic sale), resulting in an increase of trade that ultimately froze the trade engine," the exchange wrote.

bitcoin
USD/Bitcoin value on Mt Gox. (Image: Bitcoin Charts, CC BY-SA 3.0)

In the past 48 hours, Bitcoin peaked at US$266, falling to US$105 at its lowest point. As at the time of writing, the value of the Bitcoin continues to vary roughly between US$190 and US$150, with today's weighted average floating around US$180.

In the past 24 hours, Mt Gox has tripled the number of trades it usually executes and is seeing about 20,000 accounts being created each day.

To handle the increased demand, it is now introducing several new servers to its systems and issuing further updates to increase performance. In the next 12 to 24 hours, it expects to close the exchange for two hours to add the new servers.

Topics: Security, Banking, E-Commerce

Michael Lee

About Michael Lee

A Sydney, Australia-based journalist, Michael Lee covers a gamut of news in the technology space including information security, state Government initiatives, and local startups.

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3 comments
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  • The amazing, crazy world of bitcoin

    I was very impressed that the Bitcoin technology handled the panic without even a blip. That was a real stress test for the platform. Hundreds of millions of dollars worth of bitcoins were being moved around the world in a hurry, and it all kept working perfectly smoothly. Quite amazing, for a free, open source platform that has never really been tested like this before.

    But this crisis showed that the services, especially the exchanges, which various people have set up around the bitcoin technology, are not ready for primetime. Bitcoin has grown so crazy fast this year, that they are scrambling to keep up, and yesterday, they completely failed to keep up

    Mtgox was making millions of dollars from the transaction volume yesterday, but they failed to provide the fast service that the market needed, and the result was panic selling, followed by panic buying.

    Surely this is a great opportunity for a more experienced exchange? There's some recent news about VCs bringing in several million in funding for a more professional currency exchange, and this is something that bitcoin sorely needs to get through these growing pains.
    JohnathanStone
  • MtGox is NOT telling the whole story!

    Sure, some traders got panicky... AFTER MtGox's websockets trading API (via which many trading bots provide liquidity and were pursuing "slow accumulate" strategies) decided to take a dirt nap. Then, either nobody in Tokyo was alerted (negligence) or nobody was able to fix the problem (at the very least by simply restarting the service or shutting down the exchange, incompetence).

    More at http://www.nostate.com/4275/bitcoin-exchange-rate-drops-50-mtgox-fail-and-more/
    Mike Gogulski
    • more...

      MtGox says: "the overall system that started to lag. As expected in such situation people started to panic, started to sell Bitcoin in mass (Panic Sale) resulting in an increase of trade that ultimately froze the trade engine!"

      FALSE. The trading engine was NOT frozen during the "panic selling". It could not have been, by definition, since if it had been frozen there would have been no trading at all!
      Mike Gogulski