Bitcoin, the cryptographic peer-to-peer digital currency, has reached a new price high since the market crash in April this year.
Over the two weeks to 21 October, the value of one bitcoin rose by almost $60, and on Tuesday hit a high of $197.40 at the largest exchange, Mt Gox. An estimate of the current price taking a broader spectrum of exchanges into account shows it at $182.74.
The price of one bitcoin peaked at $266 on 10 April, before tumbling rapidly to a low of $50 shortly after. Since then, the price has not risen above $170 until this week.
Some observers worried that the shutdown of the online drugs marketplace Silk Road would hit the Bitcoin economy. A paper from 2012 estimated that almost one bitcoin in 20 was spent on the site, and economist Jeffrey Cook of World’s First currency brokers warned that investors were “scrabbling for the exit”.
But others pointed out that the closure could provide a source of strength for the fledgling currency. “If anything, the fall of Silk Road has done Bitcoin a favour,” said Emily Spaven, editor of the digital currency news website CoinDesk. “Hopefully now that the website no longer exists, people will start to see Bitcoin in a more positive light and appreciate the numerous benefits it offers.”
That latter prediction seems to have stood up. The price drop caused by the closure of Silk Road was reversed in less than two weeks, and the value of a bitcoin has seen near-continuous growth since then.
The currency has not completely lost its association with the darker side of the internet, however. In a report from McAfee, Digital Laundry, authors Raj Samani, François Paget and Matthew Hart assess a number of different digital currencies for their potential criminal uses.
Bitcoin receives criticism for its “mining” mechanic, whereby users are given bitcoins for doing the complex calculations which enable the currency to operate.
“Once cybercriminals recognised the monetary opportunity in Bitcoin,” the authors write “it became a key focus of their activity.” They detail an occasion when a rogue employee of the E-Sports Entertainment Association updated the company’s software, used by serious gamers to play online competitively, to make its computers mine for him. In a few weeks, he earned 30 bitcoins, currently worth about $6,000, but damaged customers' computers in the process.
They also point to the ability to rent botnets, huge networks of computers taken over by hackers, and set them working at mining Bitcoins.
A new virus is also reinforcing the link between Bitcoin and criminality. CryptoLocker encrypts victim’s files, and then demands payment – currently either $300 or two bitcoins – within three days to unlock them. Unlike similar "ransomware" viruses, Cryptolocker makes good on its promise, leaving users with a tricky choice.
But the virus underscores another perennial problem with Bitcoin: when the prices were set, two bitcoins were worth slightly less than $300. Now they are worth almost $100 more, the currency’s notorious volatility having left the old prices out of sync with each other.
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image: © Zach Copley