This week on Planet Bitcoin - 20 March 2015

Friday 20 March 2015

Weekly market report and news from Dynacoins, first community-supervised mutual bitcoin fund

 

After almost six weeks of fairly consistent gains, in which the market rose from a baseline of $220 to nearly $300, this week finally brought the inevitable slump. From its plateau of the previous few days, bitcoin saw the slight dip that is characteristic of weekends, before briefly recovering to its former position in the $290s. After that, it was a rapid fall, erasing around 50 percent of the gains seen in recent weeks. The low point was just below $250, with the price quickly rallying to $260, now oscillating a few dollars above and below that point.

Weekly chart

If there was an external reason for the drop, it would be the news that a large quantity of coins had been stolen from the Evolution dark market, along with the fears – founded or otherwise – that they could soon hit exchanges. The reality, though, is that the high $290s represent an almost doubling in price from the low of $155 in early January, and the increase has been surprisingly regular week on week since then. It is entirely normal for the market to fall somewhat after such a rally, and arguably healthy. From a psychological viewpoint, the drop can be seen as reflecting the collective sentiment that such rises must surely be too good to be true, and yet without a catalyst, an insufficient number of traders were willing to start selling for fear of missing out on further rises. The bad news of the Evolution theft merely gave the market an excuse to correct that it was some time overdue.

Whether $250 is far enough to neutralise concerns remains to be seen. For now, the market has calmed, and the coming days will show whether this year’s uptrend will continue or whether there are further falls to come.

Evolution

The major news this week was the collapse of Evolution: the dark web’s largest marketplace for drugs and other illegal goods. It started last weekend with delays on bitcoin withdrawals (blamed on ‘technical issues’), immediately raising the suspicions of many users. On Tuesday, the site went offline, with both buyers and sellers shut out of their accounts. Indications are that Verto and Kimble, Evo’s admins, simply took the money in escrow – which they controlled – and disappeared. (Evolution offered multi-sig transactions, but few customers used it.)

The loss has rocked both the dark market and the wider bitcoin community. Evolution was a large marketplace and the scale of the theft is substantial. It is still unclear how much money was stolen, but the sum of 43,000 BTC is being discussed on social media – over $11 million at current prices. For comparison, the FBI secured $3.6 million worth of coins when the Silk Road was raided in October 2013. The next largest and most popular drug marketplace, Agora, is likely to pick up Evolution’s custom – though many buyers and sellers are out of pocket, and the incident is a serious disruption to the online drug trade.

In other news, bitcoin received a welcome mention in the UK’s last Budget report before the General Election. Chancellor George Osborne acknowledged the risks and challenges posed by cryptocurrencies (not least those connected to money laundering), but also hailed the opportunities and pledged £10 million of investment in research around overcoming some of the key barriers to use and adoption. The measures make the UK one of the most crypto-friendly countries in the world.

 


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