Bitcoin Value Bounces Back After Silk Road Shutdown
The decentralized cryptocurrency, bitcoin — which is traded on an open-source, peer-to-peer network — has certainly seen its share of ups and downs, particularly in terms of value. In fact, the currency showed extreme volatility in one four-month period ending this past April, going from a low of $13 to a high of $230.
But it was an article in November of 2011 that was most relevant to its volatility. The article, titled "The Rise and Fall of Bitcoin," was featured on Wired Magazine's website, and in the true fashion of a prophecy, would turn out to not only foreshadow the fluctuation in value of the currency, perhaps more ironically, it would prove to be a precursor to the next two years' events surrounding a little known black market called Silk Road.
Ross Ulbricht and Silk Road
After more than two years of mystery, intrigue, and garnering a reputation as "The Amazon of Illegal Drugs," the online black marketplace, Silk Road, was shut down on Oct. 2. Ross Ulbricht, the mastermind of the marketplace, was subsequently arrested on a slew of charges, including drug trafficking, money laundering and even soliciting murder, which hardly seem befitting of a guy hiding behind a computer screen in a San Francisco coffee shop.
The Silk Road was first launched in February of 2011 carrying nearly three-quarters of its inventory as illegal drugs. In total, Silk Road had more than 300 different types of drugs, including heroin, LSD, and many prescription drugs.
The vendor-based marketplace was run as a Tor, which to large extent secured the anonymity of its users. For instance, throughout the entirety of its operation, there was a substantial cloud of ambiguity over Silk Road's creator, Ulbricht, who until his arrest was only known as "Dread Pirate Roberts," or "altoid," the name of one of his bitcoin wallets. These wallets are much like a normal person's wallet, or purse, as they are the virtual source of storing and transferring bitcoins.
Since his arrest, and the end of Silk Road, Ulbricht's wallets with massive stashes of bitcoins have been the source of an incredible amount of intrigue, including a feverish effort by authorities to seize the loot. Up to this point, the FBI has been able to pinpoint Ulbricht's "altoid" wallet as having 23,000 bitcoins, which, depending on the exchange, equates to roughly $4.4 million. Another wallet, considered the most voluminous of any bitcoin stash in the world, has been identified with over $17 million worth of the currency.
Knowing how many bitcoins a wallet has is one thing; knowing its address and password is something entirely different. These are pieces of information that only the owner is privy to, which presents an impossible situation for authorities trying to seize bitcoins. That is, unless they somehow come up with a way to retrieve the information from Ulbricht's mind, which is highly unlikely, especially now that he has hired Joshua Dratel, a former attorney for inmates of Guantanamo Bay.
Illegal drug sales and the impact on bitcoin
Supporters of the bitcoin believe it is going to continue to thrive despite the substantial hit it took after closure of Silk Road. Following the closure, and arrest of Ulbricht, the value of bitcoin undoubtedly took a plunge.
But in the past three weeks, the currency has made a rebound. Since the dramatic fluctuation of price back in April, the bitcoin has not exceeded $170 on any of the currency's exchanges, which tend to vary the value. That is, until last week when the priced jumped to a high of $197.40, leading many people to marginalize the true impact that the Silk Road seizure had on the future of bitcoin.
With the apparent rebound in value of the bitcoin after the fall of Ulbricht and Silk Road, the currency's fate may indeed turn out to be entirely separate from the online black market. Although, with similar marketplaces like Sheep Marketplace and Black Market Reloaded — the latter selling illegal firearms as well as drugs — picking up where Silk Road left off, the bitcoin may be unavoidably linked to illegal activity. This, however, is true of any currency. Still, the bitcoin will undoubtedly need to appeal to the law-abiding citizen if it is to become a widely used and stable currency.
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