What with the NSA and PRISM hogging the headlines lately, Bitcoin appears to have slipped off the radar somewhat. Yet the cryptocurrency has seen a fairly dramatic drop in its value since the spying allegations emerged, falling from a high of $118 on June 7 to just $89 on June 9, prompting some BTC watchers to suggest that it could be linked to last week’s revelations.
The geeks over at CoinDesk were the first to notice the correlation. In their report, they point out that Sundays are typically the quietest day of the week as far as Bitcoin trading goes, but this time around the volume of trades far surpassed recent highs, while the price dropped significantly. Admittedly, the link between PRISM and Bitcoin’s price is a bit tenuous, but at the same time it does look to be a fairly plausible explanation for its sudden decrease in value.
CoinDesk argues that the value of Bitcoin is largely dictated by public sentiment. While it’s possible for some players to have an impact on the market by carrying out large transactions, news related to attacks on Bitcoin exchanges, privacy and finance generally makes a much bigger splash – look no further than the rumors over the Cyprus bail out and Bitcoin’s subsequent roller-coaster ride for evidence of that.
But why did PRISM lead to a drop in BTC value? One might think that if anything, the cryptocurrency’s value would have increased given its reputation for anonymity – but CoinDesk argues that the opposite is actually true. If the NSA is spying on everything else, then could it not also be watching BTC transactions more closely than anyone realizes?
According to Wired’s Kadim Shubber, that might just be possible. Shubber points out that Bitcoin is almost certainly not invisible to PRISM, and that metadata created by each transaction could potentially be used to identify anyone trading in the currency. Hence, those who are aware of BTC’s lack of true anonymity might suddenly become cautious after hearing about PRISM, which in turn, could have caused the price drop.
Okay, but why would Bitcoin users be worried? Shubber argues that many people trading in BTC might be up to no good, engaging in illegal or political activities that they don’t want the government to know about, and so the sudden realization that the NSA can see their financial transactions might have been enough to impact the market.