Bitcoin, a virtual currency, was supposed to change the face of the monetary system as we know it. However, today the Bitcoin sits of the edge of collapse due to its largest exchange company closing its doors on Tuesday. Now, investors and financiers are uncertain about the future of the virtual currency.
Mt. Gox, located in Tokyo, was Bitcoin’s largest exchange for trading and its shut down on Tuesday has triggered a massive sell-off that’s chased prospective investors far away and most likely for good. A risk-management expert, Mark Williams, told the LA Times that the shutdown is “extremely destructive” and said that Bitcoin is “fragile as eggshells.”
The shutdown began with Mt. Gox telling users that they could no longer withdraw from their funds and then, out of nowhere, they ceased operations entirely, even their website went dark. Those that used Mt. Gox may have lost a total of $300 million worth of the virtual currency which is now by far the biggest setback and failure for the digital currency. The shutdown appears to be some what of a mystery with no one really knowing the details of why the exchange as gone dark.
Bitcoin is a currency that only exists online and the value of the currency is based on algorithm. Bitcoin investors use real dollars to buy the digital currency and then shop online with it. The buyer can pay from their “digital wallet” to the seller’s wallet online. Its popularity grew since it is not controlled by any government or corporate interference.
Mt. Gox has been having problems since early February when the company stopped withdrawals from its trading accounts. One of the company’s computer programmers had not accounted for a flaw in the way the Bitcoin works, which cyber criminals took full advantage of and tricked Mt. Gox with a design that resembled receipt fraud. After the company realized it had been virtually assaulted, it immediately halted any investor from attempting to remove their money from the trading platform; however, the company has still not let investors access their money.
When trading came to a close on Monday at Mt. Gox the price of a Bitcoin there had gone down to $130, even though it was trading for four times that amount at other exchanges. Late Monday other Bitcoin exchanges started putting out the fires and began to reassure investors. They also isolated Mt. Gox and took a hard-line towards the exchange.
The exchange group released a statement calling the incident a “tragic violation of the trust” of the customers and investors of Mt. Gox. They also said that the actions of one company should not reflect on all the exchange companies and does not “reflect the resilience or value” of the Bitcoin.
The president of Genesis, Even Rose, the Bitcoin ATM company, stated that the problems at Mt. Gox and other exchange companies just shows that the Bitcoin is in flux. He also said that the people running Bitcoin are “not necessarily business men” and for the most part, they are people who came into this project without “grasping the value or risk of it.”
By Adam Stier