This wild price swing is being attributed to the closing of the Silk Road website. This website represents the dark side of the Bitcoin digital currency and promotes illegal drug sales.
Does this further legitimize the Bitcoin currency by closing a dark chapter of the first digitally distributed currency?
In a word, YES. The Silk Road was touted as one of the reason why Bitcoins rose in popularity and prosperity so quickly during the infancy period of Bitcoin existence. The closing of Silk Road (reported by Coindesk, Coindesk and Bitcoin Magazine) will now allow Bitcoin to find other means to grow its popularity.
Additionally, due to the closure of the Silk Road website, the FBI has seized over $3.2M worth of Bitcoins. Therefore, individuals with additional stashes of Bitcoins that were to be used for illicit reasons have further liquidated their shares of Bitcoin as well. This appears to be the primary driver behind the rapid sell off of Bitcoins today.
There have been reports that, in the arrest of Ulbricht, 26,000 bitcoins were seized, which equated to around $3.26m at the close of yesterday, but $2.47m at the time of writing.
From the chart below...Oct 2nd began with a high price of $124.60, a rapid drop to low price of $75 and rebound to around $100.00.