4 Comments

Summary:

Will this be the week that ended Bitcoin? It’s too early to know, but the market is recovering even in the shadow of the MtGox mess.

In this week’s Bitcoin review,  we look at the fallout from the collapse of MtGox and what it means for Bitcoin as a currency.

Is this the end of MtGox?

MtGox has officially filed for bankruptcy after losing around 850,000 bitcoins — the majority belonging to customers — and amassing $63.6 million in debt. The news that broke Friday morning is just the capstone on the tumultuous week for the exchange.

On Monday, the Bitcoin Foundation Board announced that MtGox was leaving its seat. As David Meyer noted, the move was probably a good one since the exchange’s CEO Mark Karpeles and MtGox hadn’t been the best brand ambassadors. But this turned out to be just a harbinger of what was to come.

Soon thereafter, leaked documents surfaced that revealed the troubled exchange had allegedly lost more than 750,000 bitcoins. The exchange halted all transactions to “protect its users and the site”, according to a statement it posted on its site. (It was since updated on Wednesday to ask everyone to stop asking questions of its staff).

And the shoes have already started falling in the aftermath. Manhattan U.S. Attorney Preet Bharara has issued subpoenas to MtGox and other exchanges to try to figure out what happened. In Japan, where MtGox is headquartered, financial regulators are starting to look into the matter. Hold on to your popcorn folks, it’ll be an interesting couple of weeks coming ahead.

This chart shows the price of Mt. Gox as it tumbled in February. It started the month at a price of $942 for 1 BTC and then halted all trading at about $131 on February 25.

This chart shows the price of MtGox as it tumbled in February. It started the month at a price of $942 for 1 BTC and then halted all trading at about $131 on February 25.

While the leaked papers claimed that this could have been the end of Bitcoin, the market seems to have bounced back on the whole. You can see the dip in the price below when MtGox announced that it was halting all transactions, but since then the market has returned to $561.13 as of  10am PT Friday.

What does this mean for the currency? It could signal that it’s a real market, capable of fluctuations and able to recover from them. For now it just shows that Bitcoin is stronger than just one exchange.

The dip when Mt. Gox halted all transactions on Tuesday is clear, but the market has recovered and it still on the rise.

The dip when MtGox halted all transactions on Tuesday is clear, but the market has recovered and it still on the rise.

For background on why we’re using Coindesk’s Bitcoin Price Index, see note at bottom of the post. 

In other news we covered this week:

Here are some of the best reads from around the web this week:

Bitcoin in 2014

Even with the fall of MtGox, Bitcoin prices seem to have an uptick although its nowhere near the level of where it started this year.

Bitcoin’s weekly closing price since 2013

A note on our data: We use Coindesk’s Bitcoin Price Index to obtain both a historical and current reflection of the Bitcoin market. The BPI is an average of the two Bitcoin exchanges which meet their criteria, Bitstamp and BTC-e. To see the criteria for inclusion or for price updates by the minute, visit Coindesk.  Since the market never closes, the “closing price” as noted in the graphics is based on end of day Greenwich Mean Time (GMT) or British Summer Time (BST). 

Featured image from Pond5/StevanoVicigor

You’re subscribed! If you like, you can update your settings

  1. This is difficult to say. There are people out there with a lot of money in Bitcoin.

    This recovery could be as simple as a stock buy-back. By doing so, and showing that Bitcoin has strength it would bolster confidence. False confidence. So I am not sure your analysis is correct, it can be looked at in other ways too. Such requires more indepth analysis and not simple “reporting”.

    My point is that Bitcoin needs more transparency. It is shrouded in mystery. You can go ahead and put you money is some shady exchange, but learn from this lesson.

    1. Bitcoin can be saved with more Bitcoin ATMs.

      Do you know what a Bitcoin ATM is? A Bitcoin ATM is any stupid American who walks into the exchange with cash. More Bitcoin ATMs will make the currency more stable.

  2. Wow, people just lost hundreds of millions of dollars worth of Bitcoins, and this signals it might be a real currency? Not to me it doesn’t. Especially since nobody is sure that this was a one-of incident and won’t be repeated on other exchanges.

    Without more regulation, I think of Bitcoin as a Ponzi scheme – good for the people who get in and out early, headed for disaster for the rest. e-Money might be the future, but it will be a long time coming and I doubt it will be in the form of Bitcoin.

    I could be wrong. It’s rare, but it happens.

  3. Neal Palmquist Monday, March 3, 2014

    Mt. Gox almost proved that Bitcoin is a real currency, but somebody on that exchange stepped in front of the bus and bought over $300,000 of coins at $110 apiece. This slowed the crash and after all that cash was gone the price only dropped to $91.50.

    So now we need to wait for storefronts to have signs “We trade gold and silver for your Bitcoins” to prove that Bitcoin is real money.

Comments have been disabled for this post