Ruh-roh:

Bitcoin experienced a rough night on Monday as TradeHill, the second-largest Bitcoin exchange, announced that it was closing its doors. In a statement, CEO Jered Kenna cited regulatory problems and the loss of $100,000 in a dispute with one of its payment processors as major factors in the decision. He has pledged to open a new site once these issues have been resolved.

Bitcoin's exchange rate is now around $4.50, compared to last summer's $30 high. Maybe that will drive the speculators out.

"In effect, Bitcoin has created its own private gold standard world, in which the money supply is fixed rather than subject to increase via the printing press."So how’s it going? The dollar value of that cybercurrency has fluctuated sharply, but overall it has soared. So buying into Bitcoin has, at least so far, been a good investment."But does that make the experiment a success? Um, no. What we want from a monetary system isn’t to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that’s not at all what is happening in Bitcoin."Bear in mind that dollar prices have been relatively stable over the past few years – yes, some deflation in 2008-2009, then some inflation as commodity prices rebounded, but overall consumer prices are only slightly higher than they were three years ago. What that means is that if you measure prices in Bitcoins, they have plunged; the Bitcoin economy has in effect experienced massive deflation."

The total BitCoin economy has a value of £39m. At current exchange rates, anyway. Unless someone finds the lost wallet.dat that someone left on an Amazon web instance which got restarted.

James Surowiecki, the New Yorker's financial writer, dissects the problem around the virtual currency in typically astute fashion: "many—probably most—Bitcoin users are acquiring bitcoins not in order to buy goods and services but to speculate. That's a bad investment decision, and it also hurts Bitcoin's prospects.<br />
"True believers in Bitcoin's usefulness prefer to deny that speculation is driving the action in bitcoins. But the evidence suggests otherwise.":<br />
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And if hoarding, instead of trading, takes over, then nobody uses it, so it becomes useless - trapped in a deflationary spiral where the velocity of the currency is zero.

"Looks like the admin stored the wallet.dat and backups on an ec2 instance, and then shut it down while doing a RAM upgrade without realizing he would lose everything on the disk."

"A developer who specializes in the Bitcoin digital currency says he was sent back to China last week after he arrived at Sea-Tac Airport with only $600 in cash and wasn’t able to convince U.S. Customs and Border Patrol agents that he would be able to fund his two-month visit using Bitcoin.<br />
"The developer, who goes by the alias “Doctor Nefario,” identifies himself as the founder of the Global Bitcoin Stock Exchange."<br />
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Would have loved to be a fly on the wall during that interview.

"Most of the activity around Bitcoin right now is pure speculation, however, due to the violent price fluctuations and limited adoption by merchants."

After the theft of 25,000 Bitcoins (possibly by Lulzsec, though unproven - both the theft and the thief), how to make sure it never happens again. Only involves Linux LiveCDs, encryption, fireproof safes and regular rebooting into that LiveCD.<br />
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Yup, Bitcoin is untraceable electronic money for the elite, all right.

"Hi everyone. I am totally devastated today. I just woke up to see a very large chunk of my bitcoin balance gone to the following address:<br />
"1KPTdMb6p7H3YCwsyFqrEmKGmsHqe1Q3jg<br />
"Transaction date: 6/13/2011 12:52 (EST)<br />
"I feel like killing myself now. This get me so f'ing pissed off. If only the wallet file was encrypted on the HD. I do feel like this is my fault somehow for now moving that money to a separate non windows computer. I backed up my wallet.dat file religiously and encrypted it but that does not do me much good when someone or some trojan or something has direct access to my computer somehow.<br />
"The transaction sent belongs rightfully to this address: 1J18yk7D353z3gRVcdbS7PV5Q8h5w6oWWG".<br />
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The allegedly lost (untraceable, encrypted) bitcoins would be worth about half a million dollars. We're worried, of course, that this is another male blogger posing as a lesbian.. well, something like that.