Bad Days for Bitcoin: Trading Around $14 After Epic Hack, and Shunned by the EFF

The main Bitcoin exchange, Mt. Gox, is still down after an epic hack that drove the currency’s price below a penny. You can now file a request to recover your account, Mt. Gox says, but they’re still working to repair the security breach that allowed a hacker to break in to their database via a third party who had access to it. But competing exchange TradeHill is back up, and there the currency has resumed its bumpy movements after having flatlined since Sunday. The currency is trading at about $14 right now.

The hack and ensuing market volatility are a blow to the new money’s credibility, but Mt. Gox is handling the situation in the same way the NYSE handled the disastrous flash crash last year. If they successfully undo the trades that were done during the hour or so that the system crashed and restore the price to $17, most of the harm done will be negated.

But possibly worse for Bitcoin’s credibility is this announcement from the Electronic Frontier Foundation–the primary organization lobbying for open systems and private data on the web–saying the foundation can no longer accept donations in Bitcoin.

We don’t fully understand the legal implications, EFF said, and we don’t want to mislead donors who think we can spend our BTC right away.

But the biggest reason EFF discontinued its Bitcoin experiment was because the organization doesn’t want to endorse the currency.

“People were misconstruing our acceptance of Bitcoins as an endorsement of Bitcoin. We were concerned that some people may have participated in the Bitcoin project specifically because EFF accepted Bitcoins, and perhaps they therefore believed the investment in Bitcoins was secure and risk-free. While we’ve been following the Bitcoin movement with a great degree of interest, EFF has never endorsed Bitcoin. In fact, we generally don’t endorse any type of product or service–and Bitcoin is no exception.”

Bruce Wagner, resident Bitcoin expert of Midtown, interviewed the owner of Mt. Gox yesterday about the price crash that happened after a hacker stole from an account with more than $500,000 worth of BTC and dumped them on the market:

Bad Days for Bitcoin: Trading Around $14 After Epic Hack, and Shunned by the EFF