Bitcoin is facing significant growing pains as it struggles to move beyond a stormy adolescence.
After months of hype and hysteria that have driven up its price at a dizzying pace, Bitcoin recently encountered several hurdles that are likely to determine whether it makes it out of its early speculative phase to become a currency that people actually use, is supplanted by a rival or falls apart altogether.
The most fundamental threat was a bug in some basic software that determines how Bitcoins are moved between digital accounts. That forced several of the largest Bitcoin exchanges to shut down for most of last week and raised questions about the sturdiness of the programming underlying the currency.
At the same time, the system proved vulnerable to a hacking attack, creating doubts about the strength of the network's security. Regulators also indicated last week that they were moving ahead with new rules for virtual currencies, leading to some fears that burdensome laws could halt Bitcoin in its tracks.
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These worries sent the price of Bitcoin swinging between a high of about $700 last Monday and a low of $530 on Friday, with some expecting even bigger declines. The current prices are down from highs of about $1,200 in December.
"We are at this inflection point where the hard questions are being asked and will hopefully soon be answered," Benjamin M. Lawsky, New York State's top financial regulator, said in an interview.
(Read more: Bitcoin exchange to resume withdrawals after slump)