Bitcoin values dropped 20% in just 3 hours after the online drug enterprise, Silk Road was shut down and had its domain seized. Silk Road’s founder, Ross William Ulbricht was arrested on Tuesday and the site was seized by the FBI just hours later.
Silk Road used Bitcoin as its only form of currency so it is easy to see how the service could take such a big hit during the shutdown. Although the shutdown is the likely cause of the major drop, there could be other reasons behind it too. Bitcoin has seen its value drop before, once in October 2011 and as recent as April 2013.
Luckily for the company, the drop was only temporary. During the shutdown of Silk Road, the Bitcoin value dropped from $140 to $109 on the Mt. Gox exchange. As of Thursday morning it was back up to $128 and rising.
Patrick Muck, the Bitcoin Foundation lawyer said, “Over time the value of Bitcoin will be determined by its useful purposes. Day to day price fluctuations based on events in the news are not really an effective or accurate measure of the value of the system.”
The Silk Road was used to buy and sell a number of illegal items such as drugs and stolen credit card information. Over a million accounts were registered on the site and each one had a Bitcoin account that was used to fund their purchases or process payments. For the month of September, there were over 13,000 listings for “controlled substances”.
Image from Wikimedia Commons.