Bitcoin’s Future May Be in Jeopardy

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The Bitcoin world is trying not to panic at the news popular Bitcoin exchange Mt.Gox has abruptly disappeared. Two weeks ago they halted withdrawals due to what they called “technical issues” regarding suspicious activity. Then on Sunday the company’s CEO Mark Karpeles quit the board of the Bitcoin foundation and all of Mt. Gox’s tweets were deleted.

Things got even more alarming when Mt.Gox itself disappeared. Then something truly chilling: According to leaked paperwork, the site had been hacked, and nearly 750,000 Bitcoins were stolen. To make matters worse, Mt. Gox took years to detect it, and the chances of anyone who had Bitcoins stored on the site getting them back is slim to none.

The site came back to life on the 25th with nothing but this statement posted:

Dear MtGox 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.

Best regards,
MtGox Team

And then another:

Dear MtGox Customers,

As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.

Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.

Mark Karpeles

Why they aren’t being very open about the issues, it’s not hard to read between the lines. This crisis illustrates the one possibly fatal flaw of virtual currency. Zero protection. The money in your bank account is protected by the FDIC. If someone steals your credit card and runs up charges, your CC company will protect you from liability. If someone steals your Bitcoins, well you’re just out of luck.

This realization seems to have hit many Bitcoin owners. The currency’s value has plummeted to $130, far from its peak of over $1K. Things look pretty bleak for the virtual currency indeed.


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