Bitcoin Prices Plunge as the "Amazon of Drugs" Shuts Down

On Tuesday, October 1st, at a San Francisco public library, Ross Ulbricht, creator of the world's largest online black market primarily for drugs, was arrested.

Ulbricht, 29, was charged with narcotics trafficking conspiracy, money laundering conspiracy, and computer hacking conspiracy, for creating “the Amazon of drugs.” His website, The Silk Road, mediated $1.3 billion worth of illicit transactions since opening in 2011, and it collected roughly $80 million in commissions. The FBI’s criminal complaint states that Ulbricht, along with a few accomplices, was responsible for creating the “most sophisticated and extensive criminal marketplace on the Internet today.”

The Silk Road rose to black market prominence as a place where people seeking drugs could buy them safely without their online purchases being traced. Through the use of the digital currency, Bitcoins, users could anonymously buy not only almost any drug, but they could buy counterfeit currency, firearms, sensitive personal information, like lists of names and social security numbers, and hits on other people. Ulbircht himself is accused by the FBI of paying a Silk Road solicitor to kill another user that attempted to extort money from him.

The Silk Road was one of the largest marketplaces where Bitcoins could be used, and between the beginning of 2011 and mid-2013 the Bitcoin had appreciated over 40,000% against the US dollar. As news broke that The Silk Road domain had been seized by the FBI and shut down, Bitcoin prices plunged more than 30% on the Mt. Gox exchange in Japan - the largest Bitcoin exchange.

The Bitcoin has consistently been a subject of speculation and criticism because of the complex ways in which supplies of Bitcoins are created and what real usable value they have. Some analysts say that now as one of the largest marketplaces in which they could be used is gone, Bitcoin demand might never resurge to previous levels, while others say that increased desire for online privacy amid news of government surveillance could continue to drive Bitcoin prices up.

Mitch Lagrasta