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Bitcoin Currency Hits $219: Stress Placed on Processors

Written by:
Aaron Goldstein
Published on:
Apr/09/2013
Bitcoin Currency Hits $219:  Stress Placed on Processors

Bitcoin, the virtual currency that has many online gambling operators starting to take notice, hit a record high of $219 on Monday.

Just one year ago, a single Bitcoin was worth just $9.

The big question now:  Are we starting to see a bubble?

"You can think of Bitcoins like the suburbia of Toronto, with the crucial difference that the land isn’t real and the government steps in to limit the supply the more investors apply," Sébastien Galy of Société Générale told The Globe and Mail

"The difference is that instead of taking years for that boom-and-bust process to happen it is happening at an incredibly rapid pace," Mr. Galy added.

"Another way to look at it, is Germany post World War I where the absence of manufacturing supply and imported goods meant that lots of moneys helpfully supplied by the central bank was chasing a very limited supply."

With insane demand comes screwed up processors.

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Case in point, NY Mag’s Kevin Roose has fielded a number of complaints from those who have invested in Bitcoin concerned over where their money has ended up.

In the past week and a half, the infrastructure of Bitcoin-related services has become a mess. Like most of the major Bitcoin processors and exchanges, BitInstant — a start-up based in New York — has been struggling to keep up with an insane demand spike. I knew, from experience with them, that backlogs and delays were common. (I'd had to personally e-mail the CEO, Charlie Shrem, to get my payment processed.) But I wanted to see how things were looking from inside the bubble.

“I haven’t had any sleep,” Shrem told NY Mag.  “I’ve been going to the gym a lot, to keep my energy up. But, yeah, three or four hours of sleep a night. It’s so exciting, but it’s a lot of pressure and stress to keep things running.

“Our support is on an eight-to-twelve-hour delay. But a lot of these guys are entering incorrect account numbers,” Shrem added in regard to the customer complaints.

He also notes that additional support staff have been brought on to help keep up with the high demand.

"We went from doing a few hundred transactions a day to doing two or three thousand."

Shrem also noted that one of Bitcoin’s biggest exchanges, Mt. Gox’s API, “Fails 50 percent of the time”, thus adding to delays.

It appears Shrem and BitInstant are staying on top of things even if they were caught a bit off guard.

“We’re launching a new website this week, and moving our volume across all the exchanges — totally different payment flow, so that will help.”

Shrem attempted to calm fears of those worried over their monies whereabouts.

“We've been processing payments in the six figures every day. But when a customer pays us [through a service like Moneygram or a bank wire], we don’t get the money for a few days. But we pay them [by crediting their Bitcoin account] instantly. So we had to get more liquidity. 

“We have our support staff being trained on a higher level right now. But when people don’t get their orders, they freak out and think we’re scamming them.”

Shrem also admits that a Bitcoin adjustment is nearing and warned investment in the digital currency right now is especially risky.

- Aaron Goldstein, Gambling911.com

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