Once thought the currency of the future, the digital money system Bitcoin is losing its worth rapidly since a major hack occurred in early January.
According to the Hill, the price of a single Bitcoin fell to $185 on Wednesday, the lowest it had been in years. The price hadn’t dropped below $200 since late 2013. Since $5 million was stolen via a massive hacking attack, Bitcoin has lost approximately 42 percent of its value.
According to SMH, economic analysts have determined that the $5 million hack is likely the cause of this year’s major decline in Bitcoin value. Knowing that Bitcoin has the potential to lose so much so quickly can easily scare traders from exchanging in the market.
“We are seeing some huge orders sitting waiting at the $US200 mark and a lot of volume… That could be the next resistance point but we don’t really know where Bitcoin is heading at the moment. I think it might hover around where it is for a while.”
Shortly after the hacking attack, the Bitcoin exchange Bitstamp was offline for four whole days. Since then, the price has been dropping steadily. However, it wasn’t the hack alone that caused Bitcoin to lose value. The price has been decreasing gradually since the beginning of 2014. This could be the result of another major hacking attack, which caused the biggest Bitcoin exchange in the world, Mt. Gox, to go bankrupt. Over $475 million worth of the digital currency was stolen in the hack.
The decrease in Bitcoin cost has sent a ripple through the economic system of cyber currency. Some of the most heavily affected Bitcoin users are those who mine the currency for a living, which is done through the process of computers solving algorithms. Every solved problem produces 25 Bitcoins to be distributed into the online economy. Bitcoins can then be used to make real purchases online at a number of retailers. Bitcoins can also be traded in exchange for physical money.
According to Tech Crunch, despite the decrease in value, the Bitcoin network is more active than ever before. This could be the result of miners scrambling to sell as many of their Bitcoins as possible to cover the cost of their work. This frequent selling without any extra buying could be contributing to the dropping prices. Meanwhile, Bitcoin traders are persevering as best they can, and it’s likely the currency will survive the crisis.