If Bitcoin is a bubble, as its critics contend, it is showing signs of deflation.
A rapid succession of moves by governments around the world has cast doubts on the legitimacy of the virtual currency, and its price fell about 60 percent at one point on Wednesday morning from its high earlier this month. It later recovered some as the day went on.
The recent price volatility is underscoring Bitcoin’s sensitivity to decisions by government officials despite its promised status as the first global currency free of government intervention and oversight. Money, it turns out, is still a government prerogative.
“This tight regulation is really counter to what a lot of folks thought was going to happen,” said Mark T. Williams, a finance professor at Boston University who has been tracking Bitcoin. “Regulation is the future of e-currency, not decentralization as many had hoped.”
The most damaging news for the digital currency has come out of China, where the largest Bitcoin exchange, BTC China, said on Wednesday that it would no longer accept deposits in renminbi, the Chinese currency.
The development comes less than two weeks after the Chinese authorities barred mainstream financial institutions from dealing in the virtual currency and a series of moves that followed elsewhere.
Bitcoins are created and traded according to an open-source program released in 2009. The decentralized network of computers that runs the system is set to release only 21 million Bitcoins, but they are worth only what someone will pay for them.
source: nytimes.com
