The technical troubles owned up to this week by the Coinbase exchange are being interpreted by some cryptocurrency deniers as a sign that Bitcoin has achieved classic bubble status.
Every boom brings the seeds of its own bust embedded within it, much as night follows day. So say the doomsayers, who are routinely dismissed as Cassandras by cryptocurrency enthusiasts.
As referred to on this website earlier this week (surge-in-the-price-of-bitcoin-fuels-bubble-concerns) Bitcoin has been charging into new territory in terms of its highly public profile and its soaring valuation.
On 25 May it reached a high of almost US$2,790, according to Coindesk, which describes itself as the world leader in news and information on digital currencies. Bitcoin's valuation dropped to $2,375.50 today before rebounding to $2,639.91 (11.40 am UK time).
For the economic purists, such volatility undermines its claim to be a form of money. The traditional requirements for money are that it should act as a store of value, a medium of exchange and a unit of account. There is an argument that Bitcoin fails on all three counts.
Coinbase began to report problems on 22 May at 07.55 PDT (Pacific Daylight Time), using terms like slow load times, degraded performance and card verification failures. These continued through the course of business till 25 May.
The market cap of digital currencies has increased by 50% to $91 billion in the past week, Coinbase said in an official statement. As a result, Coinbase has seen a dramatic increase in traffic and trading volume.
The Coinbase engineering and support teams have been working round the clock to keep up with this unprecedented volume. However, Coinbase.com has suffered a few outages including degraded performance and deposit / withdrawal delays for some users.
We are actively working on resolving these issues and restoring our site to normal performance.
Cassandra was right
The company is currently saying that no incidents have been reported today and that the Coinbase website and digital currencies are operational. The Cassandras will, however, be well aware that the original of their number was in fact proven to be right...