Bitcoin ATM machines crash as price of cryptocurrency soars

Two of them stopped selling for three days due to 'congestion' amid buying frenzy

The bitcoin ATM machine at Tiong Bahru Plaza was one of the two that stopped dispensing the cryptocurrency as the network could not keep up with demand. The other one that crashed was at Hong Lim Complex.
The bitcoin ATM machine at Tiong Bahru Plaza was one of the two that stopped dispensing the cryptocurrency as the network could not keep up with demand. The other one that crashed was at Hong Lim Complex.ST PHOTO: DESMOND FOO

As bitcoin surged past US$16,000 last week, the network could not keep up with the breathless demand.

Two ATM machines selling the cryptocurrency in Singapore crashed last Friday.

The machines, at Hong Lim Complex and Tiong Bahru Plaza, could not sell bitcoin for three days due to "congestion in the bitcoin network", Bitcoin Exchange founder Zann Kwan told The Straits Times.

Meanwhile, potential investors like Mr W.S. Wen, 61, looking to get in on the action, watched in frustration as the price of bitcoin rose.

On Monday, when the machines were back up, the price of the cryptocurrency had touched a record US$17,148.

"I've never bought bitcoin before, but it is the talk of the town now," said Mr Wen, who was retrenched a month ago. "Buying bitcoin is like buying Toto. But Toto is so hard to hit, I might as well use the money to buy bitcoin, which is going higher every day."

Last week, the worry about missing out was global. Investors flocking to open new accounts or place orders last Thursday left Coinbase, the largest US bitcoin exchange, warning of outages and slow transactions, while Bitfinex, the largest global bitcoin exchange, said on Twitter that it has been under a denial-of-service attack for several days and that it recently got worse.

  • 1,600%

    Percentage jump in bitcoin's value since the start of the year, even while there are doubts over how long the party can go on.

In Singapore, the three bitcoin ATM machines, including one at Clarke Quay Central Mall, have been even more sought after following a move by several local banks to close the accounts of companies that provide cryptocurrency services.

CoinHako, which provides bitcoin wallet services, said in September that it will no longer be able to process deposits and withdrawals in Singapore dollars after its bank account was closed by DBS Group.

Ironically, the frenzy to buy bitcoin is peaking even as industry observers point out that such investments are a gamble.

At the start of the year, a bitcoin cost around US$1,000. It has now skyrocketed 1,600 per cent, with its market capitalisation of US$278 billion (S$376 billion) surpassing the gross domestic product of Finland and Greece.

The practical use of bitcoin is still quite limited, said Mr Nick Davies, a lawyer with Morrison & Foerster (Singapore). This surge has "all the hallmarks of a 'get-rich quick' scheme", he said.

Even Ms Kwan is startled by the frenzy. "The average purchase at my machines jumped from a few hundred dollars to around $1,000-$1,500.

"Four years ago, our bitcoin vending machine needed to be replenished three times a week. Now we are replenishing our machine three times a day," she said.

"My customers range from teenagers and young working professionals to those in their 70s. They see bitcoin becoming more mainstream and fear missing out.

"We have problems getting people to cash out because many think that prices can only go up, and not down, which is quite scary," she noted.

Prices broke major barriers in the two weeks ahead of the launch of the first bitcoin futures product on the Chicago Board Options Exchange (CBOE) last Sunday, and the Chicago Mercantile Exchange, which is planning to launch its bitcoin futures on Sunday. Bitcoin surged past the US$11,000 level on Nov 29, and then past the US$16,000 level last Thursday, according to Bloomberg data.

The relative ease of setting up a cryptocurrency wallet to acquire and trade bitcoin has pulled in the investors. But there are doubts over how long the party can go on.

Mr James Cheo, investment strategist, Bank of Singapore, noted that even if there is more usage of cryptocurrencies in the future, it is "inconceivable for governments to allow their widespread adoption".

"Governments will want to keep government-backed currencies as they do not want to give up their ability to control policy levers such as money supply and fiscal policy. At the same time, banks and financial institutions are creating their own private cryptocurrencies to rival bitcoin," he said.

He feels bitcoin is going through a bubble similar to that of the dot-com boom.

"See through the bubble and focus on the blockchain technology undergirding bitcoin. That is where the promise of the future lies," said Mr Cheo.

A version of this article appeared in the print edition of The Straits Times on December 13, 2017, with the headline 'Bitcoin ATM machines crash as price of cryptocurrency soars'. Subscribe