Video sharing app TikTok has rolled out a new in-app-to image AI generator that lets users type in text and generate images that can…
Bitcoin’s price continues to drop as it cruises past the US$200 mark — US$180 less than one month ago and the lowest we’ve seen since January 2013.
This aggressive drop started at the beginning of this week, and comes around the same time major bitcoin exchanges got hacked, mining operations have shut down and legal actions have been taken to deter access to related services.
Whether these are all related is up to speculation. But then again, the bitcoin price is just that: speculation.
1. Russion clamp down
The major Russian telecommunications regulator, Roskomnadzor, has reportedly recently blocked access to five bitcoin-related sites which it found to “contribute to the growth of the shadow economy.”
As GigaOm reports, the following sites have been blocked: Bitcoin.org, Bitcoin.it (a freakin’ Wiki), BTCsec.com, Indacoin and Coinspot.ru. While it will be nearly impossible to ban bitcoin itself, court orders such as these pose as major obstacles for commercial adoption.
Chairman Igor Chepkasov of the Crypto Currencies Foundation of Russia (CCFR) told CoinDesk that this clamp down is part of a larger scheme to prohibit access to the digital currency in the country:
Given the remoteness of the region and the features of the ruling’s execution, a court decision issued on September 30th and in the register of blocked sites as of 13th January, we can safely say that this is a dress rehearsal for the prohibition of bitcoin in Russia.
2. Exchange hacks
Another more likely reason for the drop could be the recent hack of the UK-based bitcoin exchange, BitStamp. The company saw 19 000 bitcoins leak, carrying an estimated worth of around US$5-million.
At the beginning of last year, one of the world’s largest bitcoin exchanges, Mt. Gox, closed up shop after suffering alleged hacks and losing a reported US$460-million. This massive blow saw the digital currency go from a high of US$800 to US$360.
While these hacks are inside jobs or weak security systems is still unclear.
3. Mining shut-down
Another possible reason for the weak valuation is the economies of scale of bitcoin mining. As the price drops, operations are squeezed showing less returns on investment and people stop harvesting bitcoin.
While any individual with a GPU or a CPU can mine bitcoin, the return is incredibly low. For this reason, people join mining pools to become more powerful and work faster. A more common trend is that companies in-the-know start their own mining operations.
One of these companies is bitcoin exchange CEX.io which announced that because of the currency’s low-cost, it’s suspended its mining operations for the intern. It noted that in order for it to make a return on investment, the price of bitcoin has to be above US$320.
Jeffrey Smith, Chief Information Officer of CEX.io said the following in a statement:
Currently all cloud mining/maintenance costs are directed to the Hardware provider, hence, we are open for negotiations with additional mining hardware providers, who can offer favourable terms. And, as soon as we get an opportunity to upgrade mining hardware, or come to more efficient terms with energy suppliers, cloud mining process will be automatically resumed.
On a similar note US-based CoinTerra, which produces mining equipment, was recently sued for US$5.4-million by C7 Data Centers for allegedly breaching contract and withholding payments.
4. Lack of confidence
Put all these incidents together and you’ve got yourself a currency with very low self-esteem.
These incidents don’t bode well for the industry’s vote of confidence. At the same time, the price slump only makes matters worse, putting more companies and investors under pressure. It’s a vicious cycle that will take a while to recover.