Bitcoin value has seen a banner week with a remarked recovery from a sudden dip in value during the Silk Road raid to see value soar from $140 before to hover around $150 now with peaks near $160. With the SR takedown almost two weeks ago, it appears that the whole affair only had breif effect on the market and little impact on its current growth.

Meanwhile, MtGox looks to upgrades to make its trading engine tougher and stronger to encourage more trades than before and will finally be rolling out new trading capabilities with the project code named Midas. An economist quoted in MIT Technology Review sees a backlash coming for Bitcoin from governments in the form of regulatory powers–something everyone is on the lookout for. And Dwolla has withdrawn its horse from the virtual currency race by slowly suspending accounts related to virtual currency trading.

MtGox improves their infrastructure game with upgrades

As the biggest Bitcoin exchange on the market, MtGox faces down a great deal of traffic and stress. As an exchange, MtGox has been in the news since the beginning, growing from a space that exchanged Magic: the Gathering cards to a space that would find a powerful niche with the world’s most popular virtual currency. It’s had some troubles and growing pains, but MtGox has shown a lot of growth.

Recently, MtGox announced infrastructure upgrades to its system that would allow it to move into the next evolution of cryptocurrency trade.

Some highlights given:

• 70Gbps internet uplink
• Directly connected to Akamai, to ensure that DDOS attacks cannot take our site offline
• Up to 240Gbps internal bandwidth between our routers (meshed 40Gbps links)
• Fully redundant network
• Each server has two 10Gbps uplinks to two different routers
• Database stored on Violin Memory arrays (6000 series)
• All servers directly ordered from Dell, with redundant power supplies

The company is also big on describing that this will allow them to begin project Midas. A now long-expected expansion to services that would permit more than 500,000 trades per second. As well as opening up MtGox to trading in other digital currencies.

Economist Simon Johnson expects government backlash against Bitcoin

Bitcoin represents a very powerful disruptive technology when it comes to money systems and therefore it’s not hard to see that governments, banks, and similar institutions might not be too happy with that. This is what Simon Johnson has to say on the subject, cited in an article at MIT Technology Review.

“There is going to be a big political backlash,” Johnson said. “And the question is whether the people behind those currencies are ready for that and have their own political strategy.”

Except that most virtual currencies–even Bitcoin–don’t come with a political strategy. It’s just a technology and as a technology it fills a role as money that standard everyday hard-money cannot find much success within. The community that currently uses BTC certainly enjoys the peer-to-peer functionality and the fact that trading in BTC is as easy as running the software that supports it.

The disruptive quality of Bitcoin is entirely aside from the political communities forming around its use and regulation and that includes such projects as the Bitcoin Foundation.

The article even brings up the recent fall of Silk Road–an event that could have sent Bitcoin acceptance into upheaval…but it’s certainly not looking that way. Certainly when Silk Road was raided there was a response in the BTC markets causing a slip in value, but the yet-increased popularity for the coin from the publicity has only served to bolster the price on market to an even higher value.

While Silk Road provided a market of anonymity and criminality with the promise of anonymity–with the intersection of Tor and Bitcoin–it also showed how a dark market might work. Instead of associating Bitcoin closer with criminality, the loss of Silk Road showed how effective it is as a currency of trade. In the past SiliconANGLE has even posted how the dollar is more likely to be involved with drug crime than any other currency. Governments could argue for regulation based on Bitcoin being the new-kid-in-town, but rationally BTC as another form of money is just that.

Right now, it’s obvious that governments are feeling Bitcoin out, such as the subpoenas sent by New York to various BTC-related industry elements. The discussion about “is Bitcoin money?” and how it interacts with other money have been driving forces; but instead of showing that Bitcoin is criminal, they’ve tended to reveal that BTC is a powerful source for a valuable commodity that merchants can use to tap into new markets and reach new audiences.

Every week, SiliconANGLE sees more vendors testing out Bitcoin for products, such as Roger Ver’s Bitcoin Store, or even services, such as Bigpoint’s browser-based gaming franchise.

Bitcoin works. Even if banks and governments want to try to regulate it, it will be those who produce regulation that allow merchants to make good use of it will find a boost to their economy and profits whereas those who clampdown will most likely lose business to those who embrace it.

Dwolla unexpectedly shutters accounts related to virtual currencies

In a move for which little reasoning or purpose appears to be attached, the money transfer service Dwolla has announced to its customers that it will be stopping transactions related to virtual currencies such as Bitcoin. This means that those who originally used Dwolla to transfer money to CampBX and similar exchanges can no longer use their service.

Many customers may have already jumped ship from Dwolla since MtGox’s account was seized by the U.S. Department of Homeland Security. This decision comes almost directly after a US company, Mulligan Mint, had its business account with Capital One closed by the bank over “Bitcoin.” Even though the company only made purely commerative coins out of silver and copper and did not trade in bitcoins.

Dwolla’s e-mail to customers makes it clear that the money transfer company is ditching virtual currencies entirely:

Recent interest involving virtual currency and its exchanges has created uncertainty and confusion around virtual currency, and Dwolla’s relationship with a small number of its exchanges. This has forced Dwolla to reassign resources, funds, and services.

As Dwolla gears up for a new stage of growth, we recognize that we can no longer sustain this merchant base (0.1 percent of Dwolla merchants) and its unique needs, and that attempting to do so jeopardizes both of our communities’ starkly different, but similarly ambitious, vision for improving payments.

The withdrawal of accounts transacting with virtual currencies will be staged, starting with slowly restricting access on Oct 15th, until they are finally suspended on Oct 28th.

This could be a sign of the regulatory pall passing over banking and financial services by the United States and other countries as governments attempt to understand and potentially control Bitcoin. The loss of Dwolla won’t be much of a blow to the Bitcoin economy or market—and its closure announcement hasn’t dampened the value at all—similar to the withdrawal of Tradehill from BTC, Dwolla will probably not be missed.

Merchant services such as BitPay and Coinbase have taken the bulk of merchant services and do them better than Dwolla and TradeHill proved capable. Perhaps this has led to both of these money transfer services to withdraw due to a failure to enter the marketplace alongside the murky waters of regulation.

The result will only show an increased need for services that can assist the transfer of BTC into fiat currencies and open up new niches for potential startups to fill.