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The Mt. Gox DDoS May Be a Play to Manipulate the Bitcoin Market

But don't panic, because panic-selling will only yield more problems.

Earlier this week, Motherboard's Alec Liu detailed how bitcoin--the open-sourced, decentralized peer-to-peer cryptocurrency--could potentially crash and burn. One of Alec's more notable predictions centered on bitcoin terrorism. It didn't take long for that speculation to rear its head.

On Wednesday, Mt. Gox, the largest bitcoin exchange, saw severe service disruptions, which Mt. Gox attributed to DDoS attacks. In addition, Instawallet was also hit, and has since suspended service indefinitely.

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Mt. Gox, in an interview in Computer World, said the suspected attacks are a move to manipulate the marketplace in hopes of cashing in on the supposedly-safe currency form. The Tokyo-based cryptocurrency handler believes the attackers, themselves bitcoin owners, "waited until bitcoin's price" hit a high before selling off their bitcoins and waging a DDoS hit to destablize the exchange. "They hope bitcoin holders will panic and sell," a Mt. Gox representative explained, "causing the price to drop. The attackers can then buy the cheaper bitcoins and try the attack again when the price floats higher."

This was not the first time Mt. Gox has been targeted this week. Even the company's Twitter admitted that Mt. Gox has been dealing with a crush of traffic.

The attack led to delays in bitcoin trade confirmation, which inspired a bitcoin sell-off that dropped its value from $142 to $120 USD (the current rate his since risen to $136 USD). The network is still running slow, according to Mt. Gox, and all deposits are being held off at the moment.

As is common with DDoS attacks, it's unclear how long it will take for Mt. Gox to get things under control. In a Facebook statement, the exchange house noted that this is "its worst trading lag ever," and that "there is pretty much nothing that can be done."

The exchange also noted that, for the time being, bitcoin owners shouldn't freak out and start selling. Why? Panic selling will only yield more problems. Mt. Gox also added that it's considering disconnecting its backend from the Mt. Gox sites, which would allow trade servers to keep running while the site itself continues to be attacked.

Image via Flickr/Zach Copley