The Great Bitcoin Crash

Yesterday my prediction based on the utmost scientific research came true. Bitcoin, which has seen a remarkable increase in value compared to dollars, began to crash. Supposedly the cause of this crash was a Distributed Denial of Service (DDoS) attack:

We’ve reached out to one of the biggest exchanges, Mt. Gox, to see what happened. But another San Francisco-based exchange called TradeHill is saying that the crypto-currency is falling because of apparent distributed denial of service attacks on Mt. Gox and Bitstamp. A denial of service attack happens when an attacker overwhelms a target with external requests, so that it can’t honor regular requests from legitimate users.

All commodities are vulnerable to some amount of manipulation and Bitcoin is no different. The sudden drop in value demonstrates a potential exploit that can be used to make a great deal of money off of Bitcoin. Let’s hypothesize that the DDoS attack was planned some months back. Planning to execute a DDoS attack against several prominent Bitcoin trading sites individuals decided to first buy a large number of Bitcoin as the then current price and then move to manipulate the price by bringing the currency to the media’s attention. After generating a good deal of interest those same individuals begin to trade some Bitcoin for larger amounts of dollars, which raises the high point trade value. Seeing an increase in the high point trade value people uninvolved with the plan begin trading at higher prices. Eventually the system becomes a sort of Ouroboros, a self-feeding cycle that causes the price of Bitcoin to continuously rise. Once the value of Bitcoin has been manipulated high enough the manipulators sell off all of their Bitcoin and begin their DDoS attack. With the most prominent Bitcoin trading sites down the perceived value of Bitcoin tumbles along with it. After that the cycle can begin again. Buy low, manipulate the price higher, instigate a DDoS attack to drop the price, buy low, and so on.

The scenario I just explained is hypothetical, I’m not implying that it is fact. But the scenario is a possibility.

It will be interesting to see what the price of Bitcoin does over the next several days. Will is drop in price? Will it return to the pre-DDoS high? Will it climb even higher?