Bumpy times for bitcoin

August 19, 2014 3:17 PM

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Bumpy times for bitcoin

After an extended period of relative calm, bitcoin has experienced some considerable swings to the downside over the past couple of weeks, and even saw its own mini “flash crash” Monday. For a brief moment on the BTC-e exchange, the value of bitcoin plummeted to $309, although it quickly recovered from the drop some speculated had been linked to margin trading, which the exchange introduced in November. Meanwhile, the Coindesk Bitcoin Price Index tumbled $60 to a low of $435.60; it has since recovered to trade at around $480 on Tuesday afternoon. This was the first time since May that bitcoin saw its trading price go below $500. Lesser-known cryptocurrencies litecoin and darkcoin were also hit during Monday’s rout.

There was no one particular peg to Monday’s downward movement for bitcoin, although the price has seen declines since July, when New York became the first state to propose firm regulations for cryptocurrencies. Last week the Consumer Financial Protection Bureau also issued a warning on bitcoin, noting, “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions.”

This kind of volatility is not exactly new to bitcoin, which last year saw its prices hit a peak of around $1,150. Traders may be used to navigating such movements, but they may be more disconcerting to the average consumer looking to use bitcoin as currency to purchase items from the growing list of retailers who accept it.  Such purchases are also complicated by the recent IRS ruling that bitcoin is property, not currency, and therefore subject to the capital gains tax.

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