Mt.Gox Blows, Fallout could be Catastrophic

The Mt. Gox exchange is offline, and no statements from the company have been released. In fact, the official Twitter account has had its tweets deleted.

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Mt.Gox Blows, Fallout could be Catastrophic

The Mt.Gox exchange is offline, and no statements from the company have been released. In fact, the official Twitter account has had its tweets deleted.

In response, the BTC-USD pair has fallen sharply to just above the $500 mark at the time of writing. All BTC still held in the Mt.Gox exchange appears unrecoverable for the moment.

Here is what we know for sure:

  • Mt.Gox is no longer part of the Bitcoin Foundation, according to a statement released Feb. 23 by Jon Matonis.
  • Representatives from Kraken, Bitstamp, BTC China, Coinbase, Circles and have issued a strong joint statement condemning the actions of Mt.Gox CEO Mark Karpeles. “As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today,” the statement reads. “Mtgox has confirmed its issues in private discussions with other members of the bitcoin community.”
  • Karpeles has since acquired the address
  • Bitcoin hit a low point this morning of about $420, from which it has since rebounded somewhat.

Then, there’s this: Someone from Mt.Gox leaked a document to blogger TwoBitIdiot that said Mt. Gox was insolvent, and that the exchange had over time lost 744,408 BTC.

From the leaked document, whose authenticity cannot be confirmed but which has nonetheless made news across the Internet today:

“The cold storage has been wiped out due to a leak in the hot wallet. The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly.

At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public. We believe in the value of Bitcoin, its potential to change the world, and its principles of transparency. Most importantly we care about the customers of Mt.Gox and other bitcoin-based businesses who will be affected. The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping Mt.Gox stable and running outweigh the risks. This isn’t about saving MtGox anymore.”

The accuracy of the information is secondary to the fear-mongering to which it plays, and that’s why we are publishing the above paragraphs. The fact that people believe Bitcoin is facing an existential crisis (again…) is newsworthy, and it is affecting the currency’s value.

We should also note that it’s likely withdrawals from Mt.Gox will be henceforth unlikely. Japan, where Mt.Gox is located, has said it will not intervene.

A lot of people have lost fortunes in Mt.Gox’s collapse. We must wait and see now what other fallout will come.


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