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Mt. Gox Shuts Down: Collapse Should Come As No Surprise

Posted by ryuzaki0 on from the virtual-currency-actual-losses dept.

New submitter Dan541 writes in with word that Mt. Gox has halted all operations indefinitely. A statement from the CEO: "As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues. ... In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly." MrBingoBoingo writes that we should not be surprised Mt. Gox appears to have failed "The recent closure of the famous Bitcoin exchange Mt. Gox has grabbed a lot of media attention lately, but people involved heavily in bitcoin have been raising alarms about business practices at Mt. Gox for quite some time now. With the Mt. Gox failure being Bitcoin's biggest since the collapse of the ponzi run by Trendon Shavers, also known as Pirateat40, it might be time to revisit the idea of counterparty risk in the world of irreversible cryptocurrency."

4 of 232 comments (clear)

  1. Risk? by JoeMerchant · · Score: 5, Insightful

    Risk? In a commodity that has regular 2x and 0.5x value swings in a single day? Say it isn't so!

    1. Re:Risk? by Wrath0fb0b · · Score: 5, Insightful

      You are right to be sarcastic but you are dead wrong in conflating volatility risk with counterparty risk. The two are actually completely orthogonal -- you can have very little risk of volatility but high counterparty risk, or high/low (and high/high low/low for that matter).

      The key is to distinguish from the risk inherent in the fulfillment of the contract and the risk that the contract will not be carried out.

  2. Re:Is MtGox Bitcoin? by JoeMerchant · · Score: 5, Insightful

    MtGox is a large part of the Bitcoin "brand."

    Much of the value attributed to Bitcoin comes from the perception that it can be traded, easily, for traditional currency, and how do you do that? Well, the main place to do it is (was) MtGox.

    If you hold a stock that trades on the NYSE, part of its value is that NYSE market. When stocks fall off the major exchanges onto "the pink sheets," they almost invariably lose value just from the de-listing.

    The MtGox failure is worse, it's like a bank failure - your coins are in there, but can you get them out now?

    Regardless of history, it is true that Bitcoin is "just another cryptocurrency" and MtGox is "just another exchange" but, they are both significant brands in their space, and perception of them will weigh heavily on all similar cryptocurrencies and exchanges, regardless of "reality."

  3. Bitcoin is Nuts. by MarkvW · · Score: 5, Insightful

    To play Bitcoin, you have to trust your Bitcoin exchanges. Those are BANKS, people. UNREGULATED banks!!! Banks have a history of really screwing depositors over when they're unregulated. Bank panics?? Why we have the FDIC?? Think about this for half a fucking second.

    How do you know where "your" Bitcoins are right now?

    One of the benefits of money is that it's backed up by a social superstructure (police, judiciary, the army, etc.). Bitcoin has none of that. You are on your own.