MtGox on verge of collapse, Bitcoin plunges: Is this the end for the virtual currency?
Tuesday morning MtGox, the site of what was the largest bitcoin exchange at one point, was nothing more than a blank landing page. The site's contents unavailable, the exchange appeared to be on the verge of collapse -- a number of Bitcoin companies announced MtGox was planning to file for bankruptcy after technical problems and an apparent major theft. Customers have been unable to withdraw their money since Feb. 7.
(UPDATE: Later in the day, the site posted this message to customers: "In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.")
An alleged MtGox document circulating on the Internet that can't be confirmed said the company had lost more than 744,00 Bitcoins in a theft that had gone unnoticed for years.
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The news pushed the price of Bitcoin below $500 for the first time since November when the virtual currency began an ascent to above $1,100, according to CoinDesk.
A number of Bitcoin companies including digital walllet Coinbase issued a joint statement distancing themselves from MtGox, writing: "This tragic violation of the trust of users of MtGox 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."
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So is that really what we are seeing? The problems with one exchange? Or is this going to be a turning point for the unregulated cryptocurrency...the beginning of the end? Yahoo Finance Editor-in-Chief Aaron Task and I discuss those questions in the accompanying video.
Task raises the question of what happens when outspoken supporters desert Bitcoin. He points to Ryan Galt, a Bitcoin blogger who was one of the first to circulate the news about MtGox. Galt wrote on Monday, “I do believe that this is one of the existential threats to Bitcoin that many have feared and have personally sold all of my Bitcoin holdings.” He wrote that this could be the end of Bitcoin, at least for most of the public.
Meanwhile, New York firm SecondMarket announced plans to create an exchange that could bring the world’s biggest banks into the Bitcoin market for the first time, according to The New York Times. SecondMarket created a platform for buying and selling shares of companies like Twitter (TWTR) and Facebook (FB) before their IPOs.
Alex Daley, chief technology strategist for Casey Research and former software developer and IT executive, tells The Daily Ticker that he believes it's the "end of Bitcoin as the Wild West." Daley says the problems with Bitcoin will keep businesses and banks from getting involved in the virtual currency, while he sees regulators getting more involved. Daley says Bitcoin would need to reinvent itself with effective and enforceable oversight to stay alive. For now, he advises consumers to stay away.
Related: Bitcoin’s Price Swings Threaten Its Chance of Being a Real Currency
While Daley thinks this could be the beginning of the end of Bitcoin, he doesn't think it's the end for the technology, which he says helps solve the problem of peer-to-peer transactions without a middle man.
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