Bitcoin plunged another 15% or so from its bounce highs this morning as volatility has picked up dramatically in the virtual currency. The reasons are numerous: JPMorgan has come out with a scathing attack - "bitcoin looks like an innovation worth limiting exposure to;" CoinDesk reports that major exchanges are under a "massive and concerted attack" by a bot system - creating a "fog of confusion" over the system; and perhaps most critically, BitStamp has followed Mt.Gox and halted withdrawals "due to inconsistent results from their bitcoin wallet" - due to the DDoS attacks...

Basically the main reason why BTC crashed in the past few days was the realization that MtGox had finally halted withdrawals, leading to an escalating blame game in which the finger pointing between the exchanges and the actual bitcoin source code (here and here). Alas, that may have been just the beginning when a few days later, we just learned that the next major Bitcoin exchange, Bitstamp, has just halted Bitcoin withdrwawls, blaming a major DDoS for the suspension.

JPMorgan (via MoneyBeat)...

 

John Normand - head of FX strategy:

"At the risk of sounding like a luddite unable to recognize the transformative effects of evolving technologies –– bitcoin looks like an innovation worth limiting exposure to.”

“As a medium of exchange, unit of account and store of value, it is vastly inferior to fiat currencies. Since governments are quite unlikely to accord it the status of legal tender, bitcoin or other virtual currencies would not reach the scale and scope to render them worthwhile for widespread commerce, payments or investment.”

“With fixed supply, bitcoin’s deflationary bias should also be clear. That quality serves owners well when exchanging into foreign currency, but it would be onerous for any economy operating with it as legal tender. Indeed Weimar Germany was unpleasant, but so was the Great Depression.”

DDoS attacks (via CoinDesk):
 

A “massive and concerted attack” has been launched by a bot system on numerous bitcoin exchanges, Andreas Antonopoulos has revealed.

The chief security officer of Blockchain.info said a DDoS attack is taking Bitcoin’s transaction malleability problem and applying it to many transactions in the network, simultaneously.

“So as transactions are being created, malformed/parallel transactions are also being created so as to create a fog of confusion over the entire network, which then affects almost every single implementation out there,” he added.

and BitStamp has halted withdrawals...
 

Dear Bitstamp users

Bitstamp’s exchange software is extremely cautious concerning Bitcoin transactions. Currently it has suspended processing Bitcoin withdrawals due to inconsistent results reported by our bitcoind wallet, caused by a denial-of-service attack using transaction malleability to temporarily disrupt balance checking. As such, Bitcoin withdrawal processing will be suspended temporarily until a software fix is issued.No funds have been lost and no funds are at risk.

This is a denial-of-service attack made possible by some misunderstandings in the Bitcoin wallet implementation. These misunderstandings have simple solutions that are being implemented as we speak, and we’re confident everything will be back to normal shortly.

Withdrawals which failed on the 10th and 11th of February will be canceled and the amounts added back to the customer account balances.We will communicate any further developments regarding this issue.Thank you for your understanding!

Best regards

Bitstamp team

Best regards indeed...