Bitcoin value stumbles amid DDoS attacks, Instawallet breach

Bitcoin value stumbles amid DDoS attacks, Instawallet breach

Summary: After seeing its value increase exponentially during the first quarter of 2013, Bitcoin's growth spurt appears to be stumbling amid news of denial-of-service attacks and a breach at Instawallet.

TOPICS: E-Commerce, Security

The value of the virtual currency Bitcoin has seen massive growth in the first quarter of the year, increasing in value from around US$13 on January 1 to its current price of about US$134. However, amid outages and distributed denial-of-service attacks on arguably the most popular Bitcoin exchange Mt Gox, and attacks on Bitcoin wallet site Instawallet, Bitcoin's growth spike has stumbled.

Throughout 2012, Bitcoin's value, known as BTC, slowly grew from around US$5 to about US$13 in January 2013. But by February the same year, its value had already doubled, a phenomenon that would occur again the following month, and yet again just over a week after that.

BTC value on Mt Gox for the past six months. (Image: Bitcoin Charts, CC BY-SA 3.0)

Bitcoin's growth in the first quarter of the year has been significant, with many days of trading attracting double-digit percentile growth figures. Interest in Bitcoin similarly increased during this period, with Google Trends noting record numbers of searches for the term "Bitcoin".

Interactive version available at Google Trends. (Image: Screenshot by Michael Lee/ZDNet)

But on April 3, BTC value peaked at about US$147, before stabilising around US$127, representing the second biggest loss in value for the BTC for at least the past two years.

The loss in value corresponds to outages on what is arguably the largest Bitcoin exchange market, Mt Gox. It officially announced that due to high trading, there is a lag in trading and order cancellation, leading many to speculate that the outage was not due to any form of online attack. But the exchange's official Twitter account told users that it was "eating DDOS right now".

At the same time, after temporarily suspending its services earlier this week due to a security breach, Bitcoin wallet service Instawallet announced that the cessation in operations are now indefinite as it would need to develop an "alternative architecture" in order to resolve its issues, and that it would be "impossible to reopen the service as is".

It is currently refunding customers their balance if it is under 50 BTC, and processing claims on a case-by-case basis for those with more than that in their accounts.

The largest hit to Bitcoin's value, however, currently continues to be a 23 percent drop last August, shortly after the Bitcoin Savings and Trust closed. Its head absconded with 500,000 BTC valued at over US$5.6 million at the time. Today, it would be worth about US$63.9 million. This lead many to accuse the entire operation as a ponzi scheme.

Topics: E-Commerce, Security

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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  • Security Lesson

    How anyone could have over 50btc or even over 5btc in Instawallet is crazy. There are lessons to be learned. I'm a btc noob and I wouldn't touch Instawallet. btc will be on the rise again soon. So cool it dropped a bit, I just snapped up some more :-)
  • BTC under attack.

    I can confirm that this attack is state-sponsored. I've been analyzing the DDoS trafick and it's coming from big backbones while operators do nothing to stop it.Earlier tonight several million $ were exchanged at a hight price and then sold at a low price in order to create a bubble and then make the BTC value into a freefall, following with a global DDoS attack. I've been in contact with several Anonymous members who denies any involvment, and they also point out the fact that they don't have millions to spend on crashing BTC, nor do they have the resources for the DDoS attack - it would take weeks to infect enough computers to create a bot-net with such a strength.
    • Rules 1-2

      God damn internet scrub
      Sea Wright