Mt.Gox which has been chugging along the downward spiral since 7th February 2014 finally shut shop today. Once hailed as the largest Bitcoin Exchange in the world, this Tokyo, Japan based exchange had been hit by a number of issues some technical and others administrative. On 7th February, 2014, it stopped its users from withdrawing Bitcoins when its engineers discovered “unusual activity”. This led to an ugly spat between Mt.Gox and the Bitcoin Foundation over the responsibility for plugging this loop hole which was called ‘Transaction Malleability’ at that time. It seems that this “unusual activity” itself became the undoing of this, once largest Bitcoin exchange.
All seemed well last Tuesday when Mt.Gox issued a presser claiming that the Exchange will be online by Thursday. It seems that the Mt.Gox management was giving false hopes to its customers and Bitcoin aficionados in general. Today it has shut down for business with the web URL returning a empty website.
Though all six major exchanges quickly got together to issue a joint statement, this move by Mt.Gox is going to hurt investor sentiment in the trading of Bitcoins. The statement which has been co-signed by all the six Bitcoin exchanges is reproduced below :
The purpose of this document is to summarize a joint statement to the Bitcoin community regarding Mt.Gox.This tragic violation of the trust of users of Mt.Gox was the result of one company’s actions and does not reflect the resilience or value of bitcoin and the digital currency industry. There are hundreds of trustworthy and responsible companies involved in bitcoin. These companies will continue to build the future of money by making bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. Mtgox has confirmed its issues in private discussions with other members of the bitcoin communityWe are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that bitcoin offers as the future of payment in the Internet age.In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds. As part of the effort to re-assure customers, the following services will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner: Coinbase, Kraken, BitStamp, Circle, and BTC China.We strongly believe in transparent, thoughtful, and comprehensive consumer protection measures. We pledge to lead the way.Bitcoin operators, whether they be exchanges, wallet services or payment providers, play a critical custodial role over the bitcoin they hold as assets for their customers. Acting as a custodian should require a high-bar, including appropriate security safeguards that are independently audited and tested on a regular basis, adequate balance sheets and reserves as commercial entities, transparent and accountable customer disclosures, and clear policies to not use customer assets for proprietary trading or for margin loans in leveraged trading.
All the other Exchanges seem to point out that Mt. Gox was at fault and had breached of investor and user trust. But like every coin, apparently there is another side to this coin as well. It seems Mt.Gox had to go offline because of the fact that it had lost approximately 744,408 Bitcoins which equals to a whopping $350 million at current rates, to hackers over the year due the same ‘Transaction Malleability’ issue which had brought Mt.Gox to a standstill on 7th Feb.
This was divulged by Mt.Gox itself through a report called “Crisis Strategy Draft” This report was apparently initiated by Gox and published Monday by Ryan Selkis, a bitcoin entrepreneur and blogger. The report can be read below :
The report paints a pretty bleak picture about the financial health of Mt.Gox. It is pretty plain that the hacked 744,408 Bitcoins are responsible failure of Mt.Gox more than anything else that is being expressed on various forums/websites.
“The reality is that Mt. Gox can go bankrupt at any moment, and certainly deserves to as a company.”
“The reality is that Mt. Gox can go bankrupt at any moment, and certainly deserves to as a company.”
Though this news may not hurt the other Bitcoin Exchanges much but it will shatter investor faith in the Exchanges and Bitcoins in general. The Bitcoins recovered a intraday drop and are now trading at $490.00 but still way below the $1500.00 price seen at the start of this year.
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