Bitcoin Values Plunge, But Recover, Following Silk Road Shutdown

Bitcoins the common currency for the online black market site

Bitcoin, world's most popular digital currency, had a roller coaster ride today after the federal government shut down the Silk Road, an online marketplace where millions of bitcoins were swapped for drugs and black market products over the past two years.

As news of the Silk Road shutdown spread, bitcoin values took a tumble, initially dropping by about 20 percent, or close to $500 million by mid-morning, Pacific time. But values soon crawled back. On the Bitstamp exchange, for example, bitcoins dropped from about $125 to $90, before climbing back to $115 at midday. On the slightly inflated Mt. Gox exchange, values went from $140 to 109, before jumping back to $128.

In addition to taking down the Silk Road, The Federal Bureau of Investigation arrested Ross William Ulbricht, 29, the San Francisco man who allegedly ran the site under the alias "Dread Pirate Roberts." He's facing drug trafficking, money laundering, and hacking charges. In in an affidavit filed in the case, the FBI specifically addressed Bitcoin, saying that although the digital currency isn't just for the black market, it can be used for nefarious purposes.

Comments

[Knarf Yenrab (prev. An0nB0t)]

In in an affidavit filed in the case, the FBI specifically addressed Bitcoin, saying that although the digital currency isn't just for the black market, it can be used for nefarious purposes.

As can a telephone, a screwdriver, or a penis.

[Jimbo]

Sexist! What about those dangerous vaginas?

[Gene]

I see the shutdown didn't stop the feds in this instance.

[neoteny]

It is essential government service to protect the people from engaging in free, voluntary and mutually satisfactory exchanges of goods.

[OneOut]

Is avoiding taxes by using a , so far, untaxed medium of exchange nefarious ?

Then I guess Bitcoin is next.

Anyone know why one site sets a high value of 140ish and another 129ish ?

What keeps the traders from the one buying and selling to the other ?

[Acosmist]

How is that untaxed? There is an exchange for value. You get taxed on that.

[OneOut]

So transactions using Bitcoin are taxed ?

No ? Then I guess that by using Bitcoin for transactions you are avoiding taxes.

[neoteny]

They mentioned sale prices; no one said that either exchanges would buy. An arbitrager could buy from Bitstamp and try to sell to someone on Mt. Gox -- if that's a possibility.

[OneOut]

An "exchange" that posts hi/lo values that only sells but won't buy isn't an exchange. It is an outlet.

"An arbitrager could buy from Bitstamp and try to sell to someone on Mt. Gox -- if that's a possibility."

Was repeating my question in a different way supposed to be knowledge you are sharing ?

[neoteny]

An "exchange" that posts hi/lo values

The article here talked about the swing in prices, not "hi/lo value".

"if that's a possibility" -- do you know for a fact that it is a possibility?

[neoteny]

I went to both sites.

Bitstamp says: Trading Fee as low as 0.20%. I couldn't find info about under what conditions are the trading fee this low; without that, it is impossible to see what the cost of an actual transaction is. I'm sure this info is available if one opens an account, but I wouldn't do that just to see this.

Bitstamp's website says: SEPA deposits FREE. This doesn't say what are the costs involved with dollar deposits.

Let's assume that once one buys bitcoins on Bitstamp, one can transfer it to a Mt. Gox account without any other cost or fee.

I couldn't get info on Mt. Gox about any transaction or withdrawal fees; without those, it is impossible to see what kind of costs are involved in selling the bitcoins at a higher exchange rate, then getting hold of the proceeds in dollars (or euros or pounds).

Mt. Cox's site says that they had some 'problems' with withdrawals in the past. It isn't clear if such 'problems' involved any costs for the account owners making those withdrawals.

So there's no simple way to answer your question: why there's a significant price difference on the two exchanges which isn't exploited -- which would bring the prices closer on the two exchanges.