Bitcoin sinks in value after FBI busts Silk Road drug market

SAN FRANCISCO Wed Oct 2, 2013 5:06pm EDT

Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, September 17, 2013. REUTERS/Jim Urquhart

Bitcoins created by enthusiast Mike Caldwell are seen in a photo illustration at his office in Sandy, Utah, September 17, 2013.

Credit: Reuters/Jim Urquhart

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SAN FRANCISCO (Reuters) - The price of the bitcoin digital currency dropped on Wednesday, after U.S. law enforcement authorities shut down Silk Road, an online marketplace used to buy and sell illegal drugs.

The bitcoin, valued by many for its anonymity, fell to $129 from over $140 a day before, according to a website for trading bitcoins, Mt.Gox. Earlier, the currency traded as low as $110.

Supporters say using bitcoins offers benefits including lower fraud risk and increased privacy, though critics argue the anonymity it offers makes the currency a magnet for drug transactions, money-laundering and other illegal activities.

The digital currency's drop came after the FBI arrested alleged Silk Road owner Ross William Ulbricht, 29, known as "Dread Pirate Roberts," on Tuesday in San Francisco.

Silk Road allowed tech-savvy sellers to post ads for drugs and other illegal products, which they sold for bitcoins and shipped to customers through the mail, according to the federal criminal charges filed against Ulbricht.

As well as Silk Road shoppers, drug traffickers who worried about the FBI tracking them down with data confiscated from Ulbricht may account for some of Wednesday's bitcoin selloff, said Garth Bruen, a security expert at Internet consumer group Digital Citizens Alliance.

"They're going to be pouring all over his records, getting subpoenas for every piece of data and account he has ever used and trying to figure out who all these different dealers are," said Bruen. "People are jumping ship."

While bitcoins, which are not backed by a government or central bank, have begun to gain a footing among some businesses and consumers, they have yet to become an accepted form of payment on the websites of major retailers such as Amazon.com.

The charges against Ulbricht said that Silk Road generated sales of more than 9.5 million bitcoins, roughly equivalent to $1.2 billion. There are currently about 11.8 million bitcoins in circulation.

With Ulbricht's arrest, authorities said they seized $3.6 million worth of bitcoins.

(Reporting by Noel Randewich; Editing by Leslie Adler)

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Comments (5)
AlkalineState wrote:
“Bitcoin sinks in value after FBI [takes over] Silk Road drug market. Pretends to Bust It.”

Oct 02, 2013 5:54pm EDT  --  Report as abuse
James117 wrote:
@watcher8: You’re wrong. There are 11.8 million bitcoins (not dollars worth of bitcoins, but bitcoins themselves). Authorities seized $3.5 million worth of bitcoins. Divide this by the price of bitcoins to get the number of bitcoints they got.

So there is over $1.5 billion worth of bitcoins, and authorities took $3.5 million worth, so they took basically nothing.

Oct 02, 2013 6:51pm EDT  --  Report as abuse
fknoops wrote:
This is great for Bitcoin, actually. It improves the reputability of it.
At the same time, a hundred new drug exchanges are going to spring up next week, and there’ll be no way to cut the head off the snake anymore.

If you think a completely shut-down Federal Government has bigger problems than some kids selling drugs online for bitcoins…guess what… they don’t. Because uncontrollable, untraceable currency represents the most significant threat to authority since the invention of the printing press (which they’ve abused into meaninglessness).

The next guy who starts one of these services won’t live in the US. And I guarantee it’ll be up by morning. This is the time to go long on Bitcoin, if there ever was one.

Oct 02, 2013 6:54pm EDT  --  Report as abuse
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