Bitcoin value plunges after digital marketplace halts withdrawals
Published 10/02/2014 | 21:36
The price of the digital currency bitcoin slid to its lowest level in nearly two months after bitcoin digital marketplace Mt. Gox said a halt on withdrawals it announced on Friday would continue indefinitely after it detected "unusual activity."
The bitcoin price varied dramatically from one exchange to another, with Tokyo-based Mt. Gox, the best known operator of a bitcoin digital marketplace, recording one of the biggest drops for the day.
On the Mt. Gox platform the currency plunged to as low as $500 early on Monday, down more than 27 percent from Friday's final price of $692, according to the Mt. Gox website. It last traded at $597, off nearly 14 percent from Friday.
The price started falling fast on Friday when Mt. Gox said it was temporarily halting withdrawals due to unexplained technical issues.
In an updated statement on Monday, Mt. Gox said withdrawals were on hold indefinitely after it "has detected unusual activity on its bitcoin wallets and performed investigations during the past weeks. This confirmed the presence of transactions which need to be examined more closely."
Mt. Gox said a "bug in the bitcoin software" could allow transaction details to be altered.
In effect, someone on the network could alter transaction details to make it appear a transfer of bitcoins from one digital wallet to another had not occurred when in fact it had. This might cause the transfer to be repeated.
A bitcoin wallet is an application that stores bitcoins for the currency's users.
Mt. Gox said the issue was not limited to the exchange and "affects all transactions where bitcoins are being sent to a third party." It said the withdrawal suspension would be in effect until the issue has been resolved.
CoinDesk, which launched the CoinDesk Bitcoin Price Index in September, removed Mt. Gox from its index Monday, citing its "persistent failure to meet the index's standards for inclusion."
"These recent withdrawal restrictions are just the latest in a series of issues which have made Mt. Gox's inclusion in the BPI problematic," CoinDesk said.
On CoinDesk's bitcoin index, the bitcoin price was lower but not by nearly as much as on the Mt. Gox platform. The CoinDesk index showed bitcoin at $662.51 on Monday afternoon, only about 6 percent lower from Friday's close of $703.57. Its low for the day was around $540 versus $500 on Mt. Gox.
On both platforms, the price was still around the lowest since late December. The price had topped $1,000 as recently as late January.