Bitcoin (BTC) has fallen off its cliff on MtGox over the past 12 hours, plunging by as much as $130 to $800 before rebounding back to $850. This represents an 8.6% drop. At the peak of the selling, it was 14%. The bottom point of $800 is the lowest price since January 2 when BTC was still emerging from its December crash.
This is also the largest and sharpest drop since losing 21% on January 6-8 when TaoBao banned the sale of digital currency. In that case, BTC eventually recouped most of its losses.
Here, we are dealing with a crisis far more grave and fundamental in nature. Users of the exchange have been unable to withdraw their bitcoin funds for close to 48 hours. This is over and above the existing difficulties when it comes to withdrawing dollars. MtGox has been unresponsive to inquiries as the mounting queue of unfulfilled withdrawals is surpassing 50,000 BTC (equivalent to over $42M).
Q8 Trade Gains Recognition for ‘Most Trusted Trading Platform in MENA’Go to article >>
Bitcoin prices are also down on the other exchanges, trading at around $765. While their selling has been more toned down, representing a loss of only 5%, traders are fearing the worst for Bitcoin in general as they await the fate of MtGox and are hedging their bets accordingly.
Volume has gone through the roof, exceeding 3500 BTC ($3M) an hour but recently trailing off to 500 BTC/hr.
Clients are starting to run like a chicken without a head, not knowing where to turn. For starters, the premium value of a bitcoin on MtGox is vanishing rapidly, as it no longer offers any quicker or surer chance of withdrawal. The spread between exchanges narrowed to as low as $20. The spread has since returned to $70-90 during the volatile trade. Furthermore, if MtGox is insolvent, clients feel they have a better chance of salvaging dollars more than bitcoins, especially if the Bitcoin code and processing are indeed malfunctioning.
On the other hand, some clients may just be desperate to get out as soon as possible irregardless of what they can take with. Others still will just sell instinctively whatever they can get their hands on. Some will end up propping up BTC’s value with panic-driven buying of BTC in search of the nearest exit or to put their eggs in different baskets.