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.
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.
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:
- Nod twice and you can pay with Bitcoin. Eaze wants to make hands free payments a thing of the future using Google Glass.
- A Vegas startup is trying to takeover the tea world with Bitcoin. Tealet, which came through the 500 Startups accelerator, already has a strong base among Reddit users and fans of crypto-currencies.
Here are some of the best reads from around the web this week:
- Fortune reported that SecondMarket is opening the first New York-based Bitcoin exchange. The MtGox troubles will either mean trouble or opportunity for America’s first exchange.
- Will O’Brien, CEO and co-founder of BitGo, argued in a Medium post that Bitcoin is entering its third stage of evolution as a currency — and the MtGox drama doesn’t spell the end to it.
- A Coindesk “State of Bitcoin in 2014” report recapped the growth of the market in 2013. Its predictions for 2014 include a growing interest in other altcoin like Dogecoin or Litecoin and more adoption of Bitcoin by large companies like Overstock.
- West Virginia Senator Joe Manchin sent a letter to federal regulators demanding a ban on the currency. The letter has sparked controversy (and a twitter rant from Marc Andreessen) so the Bitcoin Foundation issued a response.
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