This news is big when it comes to Bitcoin and you probably already know about it, but we’re going to take a look at how the media is portraying the trouble MtGox is currently having – i.e. filing for bankruptcy. Meanwhile, over at The Daily Beast, they’re calling it Japan’s Bitcoin Heist in an article written by Jake Adelstein.
He doesn’t give a source, writing:
The Daily Beast was able to speak with a former employee of Mt. Gox, on the condition of anonymity, due to a nondisclosure agreement with the company. According to the former employee’s testimony and other expert analysis, it seems very likely that the collapse of Mt. Gox was not a criminal fraud but the result of poor management, faulty accounting, and system bugs that went unfixed many months after being recognized by the CEO himself. The final nail in the coffin was the unauthorized release of an internal document that was supposed to serve as the groundwork for saving the company. It is unclear who leaked the document—which was an unfinished draft of a plan of action.
The piece at ABC News says that not much is known (yet) about what caused the demise of MtGox – whether it was theft, mismanagement or something else. ABC News wrote:
“I am sorry for the troubles I have caused all the people,” Karpeles, a Frenchman, said in Japanese at a Tokyo court.
You can be sure that a lot of people (and governments) are going to be watching how this one plays out in the courts. On the one hand, if Karpeles committed a crime (theft or fraud), this could help bolster confidence in Bitcoin. At the same time, there’s a chance he’s innocent and that may hurt Bitcoin’s image in the media. Only time will tell. Be sure to follow our blog for updates on this major Bitcoin story.
If you watch the ABC News video piece about the Bitcoin Exchange bankruptcy facing MtGox, the federal reserve can do nothing about Bitcoin. This is both one of its strengths and one of its weaknesses. Having said that, some are calling for Congress to act to regulate Bitcoin usage – at least in the United States. However, as you know, Congress doesn’t move quickly – if at all sometimes as witnessed by the government shutdown last year.
There’s no signs that the government of the U.S. – or any other country – is going to step-up and attach themselves to Bitcoin, giving it even more legitimacy. Having said that, there’s still no way to accurately predict the future of Bitcoin. All those who are saying Bitcoin is now dead because of MtGox aren’t looking at the big picture. And when it comes to a paradigm shift like cryptocurrency, you need to be able to see the forest as well as the individual trees.
Rise and Fall of MtGox
For a really well done look at the brief rise and fall of MtGox as the leading Bitcoin exchange online, go take a look at this piece written by BRETT WOLF AND EMILY FLITTER for Reuters. They wrote:
“The first wave of entrepreneurs were evangelists for the technology, but low on quality,” said Nick Shalek, an investor at Ribbit Capital, which has backed bitcoin companies including digital-wallet Coinbase. Now, he said, a more serious group of entrepreneurs is trying to build more serious infrastructure around bitcoin.
They then go on to describe the rise of MtGox – after its brief life as a trading website for Magic the Gathering cards. They also delve into some of the problems that have plagued the company that was based in Japan. As you can see from the quote from Shalek above, this information does not necessarily mean that Bitcoin as a whole is in danger. In fact, it may be one of the best times to invest or at least think about investing.
Mt. Gox has said today that they’ve lost 850,000 bitcoins. At a current value of arpund $565, that would be just about $480 million. And that number is around seven percent of the total worth of bitcoins aroung the globe at this time. As mentioned, it’s going to be very interesting watching what happens next week with Karpeles, MtGox and Bitcoin in general.
If you read the bloggers, it’s easy to see that some think that Bitcoin is in it for the long haul. In fact, when you look at companies investing in the technology – like Ribbit, for example – you have to wonder if the doomsayers are wrong on this one. When it comes to the Bitcoin community, they’re known for being passionate. And sometimes passion is what it takes to really grow a new idea.
Have any thoughts about MtGox and their recent problems? Leave a comment and let us know! When it comes to the basics of Bitcoin, we’ve written a book – literally. Be sure to check out our Bitcoin Basics ebook to get caught up to speed on the wonderful world of virtual currency.