Bitcoin’s roller-coaster price swings on Wednesday were caused by an influx of new buyers and software that couldn’t keep up, according to the largest exchange, Mt. Gox.
People trading bitcoin on the Tokyo-based exchange saw its price hit $266 at one point, then fall to as low as $105 with high lag times for trades. The surge in interest in bitcoin has overwhelmed Mt. Gox.
“We are running like crazy,” said Gonzague Gay-Bouchery, who heads marketing for Mt. Gox, on Thursday in an interview. “We are trying to do everything by the book and trying to make everything work smoothly.”
Mt. Gox and other exchanges that allow people to buy bitcoin all appeared to have varying degrees of problems on Wednesday, illustrating how small Internet companies often grapple with scaling their services amid rising interest.
Bitcoin, a virtual currency that is transferred by a peer-to-peer network, has been propelled in recent weeks by mainstream media coverage, although the number of transactions remains very small compared to traditional financial networks.
In just two days earlier this month, Mt. Gox gained 75,000 new users, and some 20,000 new ones in the last three days, Gay-Bouchery said. As soon as Mt. Gox credits their accounts with cash, those users jump into trading. Mt. Gox’s system has had trouble processing those trades quickly, which has lead to vast price swings as users try to quickly complete trades and anticipate price moves.
“Bitcoin will go up and down,” Gay-Bouchery said. “If there is a lag, don’t panic.”
Last week, Mt. Gox said it fought a massive distributed denial-of-service (DDoS) attack intended to manipulate the price of bitcoin. Although Mt. Gox’s exchange is nearly always under a DDoS attack, Gay-Bouchery said Wednesday’s issues were not related to DDoS.
Mt. Gox has spent an “enormous” amount of money on new servers for its bitcoin trading engine. Already, the exchange uses servers with 64GB of RAM each, but it hasn’t been enough to keep the site running perfectly. The new servers, which have solid-state drives for faster data input and output, are due to arrive from the U.S. soon, he said.
The exchange has also been recently contacted by major server manufacturers who supply technology to the largest banks in the world, Gay-Bouchery said. The companies said they can solve Mt. Gox’s trading woes.
The code for Mt. Gox’s trading platform would have to be changed to accommodate new hardware, but it would give the exchange a trading platform comparable to that of a bank, lending more stability, Gay-Bouchery said.
Other exchanges that sell bitcoin were also groaning under the strain. Bit Innovate in Australia wrote on Twitter that its website was under stress due to increased demand. On Wednesday, it appeared at one point to simply run out of bitcoins to sell.
“Due to extremely high demand, we have had to temporarily close our Buy Bitcoins service,” Bit Innovate wrote. “Sourcing more. It will be open as soon possible.”
Tristyan Lebrun, Bit Innovate’s CEO, said a natural spike in traffic caused issues for his exchange but it is increasing server capacity. Lebrun said they were also looking into other possible causes.
“The biggest problem that we face at present is being able to do all of this at the same time and look after things like… eating and sleeping,” Lebrun said in an email.
BitFloor, the largest U.S. bitcoin exchange based in New York, warned of delays and technical issues with its website. Roman Shtylman, the founder of BitFloor, said his exchange saw its highest trading volume and highest number of users ever.
Shtylman said he was working on some changes to ensure smooth trading following Wednesday’s frenzy.
“Everyone saw pain in a different way,” he said.