Things are wild in the Bitcoin market these days. As quoted on the Mt. Gox exchange in Tokyo, the price of a Bitcoin has soared to $194 from $36 in the space of 30 days. Volume has soared and so have Mt. Gox’s problems in keeping order in this new and exotic form of currency.

Bitcoins are a global cyber-currency, invented only in 2009. They are complex algorithms that can only be created through use of massive computer power. Although they exist only in cyberspace, they are said to have intrinsic value because they are so hard to produce (or “mine” in the terminology of the trade.)

There is a limited supply, roughly 11 million in circulation. They are privately created, privately traded and owned in cyber accounts called “wallets.” They can be traded for a wide range of national currencies. Bitcoin account holders can exchange them with each other for tangible goods. 

In other words, they are not subject to direct manipulation by the central banks that create the national fiat currencies of common usage, a practice dominated by Ben Bernanke’s Federal Reserve. There could be a correlation between the growing loss of confidence in the dollar, the euro and the yen and the sharply rising interest in money alternatives, of which the Bitcoin is an intriguing new choice. Demand seemed to get a particular boost last month from the Cypriot government’s seizure of a portion of large deposit accounts in two Cypriot banks to facilitate their bail-outs. 

Success has been accompanied by headaches for the Mt. Gox team. They posted a letter to account holders Thursday saying they had experienced an “epic few days.”  In 2012, Mt. Gox was handling an average of only 9,000 to 10,000 new accounts a month. “This number doubled in January, tripled in February and sextupled in March,” when over 57, 000 new accounts were created. The exchange has had to expand its staff for handling new accounts to 22 from four and the expansion is continuing.

Mt. Gox is not only trying to cope with sharply increased volume, the increased activity has resulted in trading lags, errors and occasional lost access to accounts. Mt. Gox said that there also has been a sharp increase in what it calls DdoS attacks. It doesn’t know where they are coming from but the exchange theorizes that raiders may be trying to create panic selling to break the price, so that they can snap up Bitcoins at lower values.

The letter sympathized with account holders. “We hate this situation as well. Since we took over Mt. Gox we have been through hell and back and we are still here. We are still the largest exchange with over 420,000 trades per month and USD $121 million monthly trade volume. We have worked our way through all the requirements needed to run our exchange legally.” The exchange is developing a new trading engine that it hopes will solve some of its problems.

These are the problems of success in an infant industry. Who knows what factors driving demand? Thin markets are subject to volatility. But there is a certain attraction to a currency that cannot be created by fiat by a central bank whose sole mission is to finance government profligacy and irresponsibility. Bitcoins will likely thrive until governments come up with money that is more trustworthy in terms of future value than what they are issuing today.