The Back Alley Archives

Mt. Gox, the largest exchange for buying and selling bitcoins, is temporarily shutting down following an uptick in activity on the site sparked by a massive drop in the digital currency’s price.

The Tokyo-based exchange is suspending trading until 10 p.m. Eastern Time as it allows the market to “cool down,” Mt. Gox announced Thursday morning. People may still cancel their pending and open orders, the site said.

Bitcoins were going for over $230 a pop on Tuesday, up from roughly $100 last week, but their price plummeted back into the lower $100-range yesterday following service lags on Mt. Gox, which handles more than 75 percent of all bitcoin trades. At the time of this article’s posting the price was $123.

Though some may have suspected that the lags were the result of a DDoS attack on the site, the slowdown was actually caused by a huge spike in trading volume due to bitcoins’ increasing popularity, said Gonzague Gay-Bouchery, who heads marketing for Mt. Gox.

Cameron and Tyler Winklevoss have been many things in a short time: Olympic rowers. Nemeses of Mark Zuckerberg. Characters on “The Simpsons.” Now they can add a new label: bitcoin moguls.

The 31-year-old identical twins have amassed since last summer what appears to be one of the single largest portfolios of the online currency that has caused such a stir in financial and technology circles.

An array of speculators have now bid up the price of the bitcoin to the point where the outstanding supply of the digital money was worth $1.3 billion at last count. The Winklevii — as they are popularly known — say they own nearly 1 percent of that, or some $11 million.

The decision by the brothers to go public with their position signals a new stage for what has been an experimental alternative to national currencies. Created in 2009 by a programmer or programmers known only by a pseudonym, the bitcoin world has been dominated by anonymous programmers and traders.

One of the best things that Bitcoin has going for it is that there are places online where it's used exclusively.

The infamous site SilkRoad is a marketplace for drugs and other illegal wares, where Bitcoin is the currency of choice.

Izabella Kaminska points to a report from Willard Foxton at The Telegraph, who says that the site is on the verge of collapse, under intentional outside threat, and also suffering from hyperdeflation.

We've written on the hyperdeflation problem before. Basically, with Bitcoin prices surging, nobody wants to buy anything, you just wnat to hold onto your Bitcoins. Conversely, when they collapse, nobody wants to sell. So volatility means nobody wants to transact in Bitcoins, because there's a good chance that the next day someone will feel like a fool.