Bitcoin price slumping again; ‘51% hash power’ threshold reached

Bitcoin price slumping again; ‘51% hash power’ threshold reached

Jun 16, 2014


After hitting a peak of exchange prices around $670 in recent weeks, Bitcoin value has begun to decline again. Experts and analysts are citing two primary reasons:

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In January, there was worry in the bitcoin community regarding GHash, a mining pool. It controlled a rising share of the total bitcoin computational power used to mine the cryptocurrency — it’s share was creeping towards the 50% mark.

Here’s a sample of what was written in January, when GHash was at a still-distant 42%: “[That percentage puts] uncomfortably close to the 51% hash power mark, which some argue is the Achilles heel of bitcoin and similar cryptocurrencies.”

Why? Because of the potential of what the bitcoin community calls a ’51% attack.’ In short, once you control more than 50% of the total hashing power of the bitcoin network, you can do nasty things, like spend bitcoins twice, and reverse and block transactions.

GHash went over the 50% mark recently, and held that rate for a period of more than 12 hours, it became generally known on Friday.

This was not well received. A well known bitcoin developer publicly sold 50% of his holdings in the cryptocurrency, and the price of bitcoin fell to the $550 mark. It was trading recently around $670.

Previously, GHash said that it would not break the 51% mark. “Reaching 51% of all hashing power,” the company said in a release, “is a serious threat to the bitcoin community.”

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On the other hand, some experts are pointing to the upcoming auction of nearly 30,000 Bitcoins seized by the U.S. government in the Silk Road shutdown:

US Marshal will auction off 29,656.51306529 bitcoins and they are accepting offers based on these terms:

  • A copy of a Government-issued photo ID for the Bidder (or Control Person(s) of Bidder)
  • $200,000 USD deposit sent by wire transfer originating from a bank located within the United States (please provide receipt of transfer)

So if you have the funds for buying 29,656.51306529 at a discounted price (most likely), then go for it. It might be worth the hassle.

What is interesting about the move from US Marshal is that by doing a legal auction of bitcoins, they do legalize the use and trading of Bitcoin. Not in a formal way, but why would the US Marshal sell bitcoins if other authorities in the US would prohibit the use of Bitcoin? US Marshal do not auction of drugs or guns, but they auction of bitcoins. This could be a pointer of where the authorities in the US are heading when it comes to Bitcoin legalization (regulation).

Or, the different departments could all be non-communicating, meaning that the US Marshal move has not been influenced by any other party. If this is the case, there is no way to tell what other institutions might do regarding Bitcoin. It can go both ways.

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We have stated time after time that news seems to be the primary motivator of people to sell Bitcoins, and this week is no exception. It’s important to remember that even with wave after wave of news that would have obliterated other startup entities, Bitcoin remains viable, and in fact, an asset to companies as large as, which announced last week it will begin accepting Bitcoin.

Smart investors are holding, while skiddish investors are selling.