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Here’s Why Bitcoin Is So Volatile Right Now

November 5, 2015, 1:18 PM UTC
Tibanne CEO Mark Karpeles At Mt.Gox Bitcoin Exchange And Bitcoin Images
A twenty-five bitcoin is arranged for a photograph in Tokyo, Japan, on Thursday, April 25, 2013. The digital currency, which carries the unofficial ticker symbol of BTC, was unveiled in 2009 by an unidentified programmer, or group of programmers, under the name of Satoshi Nakamoto. Supply is capped at 21 million Bitcoins and managed by a software algorithm embedded into the digital currency?s design, rather than a monetary authority such as a central bank. Photographer: Tomohiro Ohsumi/Bloomberg via Getty Images
Photograph by Tomohiro Ohsumi — Bloomberg/Getty Images

The price of the cryptocurrency Bitcoin has surged over the past month in part thanks to Chinese demand for what appears to be a Russian pyramid scheme. The Chinese have been posting testimonials about a “social financial network” called MMM, according to the Financial Times. Under the scheme, participants are required to buy bitcoins to join, then are promised a 30% return along with additional money for referrals.

The program was devised by Sergey Mavrodi, a former member of Russian parliament who was charged with fraud in Russia for allegedly running a pyramid scheme, the report says.

Bitcoin had been steadily gaining value over the last month, then saw its growth explode this week, spiking to a peak above $490 on Wednesday. By Thursday morning, the currency was back down below $400.

After a flurry of interest in 2013, bitcoin’s price collapsed following the failure of the MT Gox exchange in February 2014. The currency has yet to re-attain the highs reached in that period.