Last week, the Washington Post had a really good piece about what was the largest Bitcoin Exchange at one time – the infamous MtGox. If you don’t know the story behind the name, don’t worry. We have you covered with a look at where MtGox started as well as some ideas on why they might be losing their number one position and what might be done to save them in the months and years ahead. If you’ve been avoiding MtGox or have an account there right now with some bitcoins in limbo, you need to keep reading.
Brief History of MtGox
Believe it or not, MtGox was actually first started by Jed McCaleb, who set it up as a place to buy, sell and trade Magic the Gathering collectible cards – Magic the Gather Online Exchange. For one reason or another, he noticed Bitcoin and changed the site to a Bitcoin Exchange. It could’ve been due to the fact that the value of one BTC went from less than $1 USD to more than $30 USD in a brief period. There was money to be made and McCaleb got into the action.
In late 2011 – when it was starting to really take off – he sold to Mark Karpeles. He was then able to keep growing MtGox until it represented around 70% of Bitcoin transactions by April of 2013. This made it the largest Bitcoin Exchange in the world at the time. For quite a while, they were able to maintain this dominant position and came to be known as the gold standard when it came to the real value of a Bitcoin. As you know, each Bitcoin exchange values one BTC a bit differently.
The Rise of MtGox
During its meteoric rise to the top, MtGox had a lot of hiccups and problems along the way, of course, but they were always able to weather the storm and ride it out until a solution could be implemented. Back in 2011 they had to actually freeze withdrawals and other activities saying they needed a cool down period when the price of a single Bitcoin was fluctuating wildly, causing a large number of transactions to happen on a daily basis.
Over the years, they would again cease withdrawals or freeze the exchange temporarily. By the end of 2013, however, a lot of people were really upset. This spurred Wired magazine to write an article about the problems. Some people are still struggling to withdraw Bitcoin funds from MtGox to a US bank account. And as recently as a week ago, they again officially suspended withdrawals while a bug with the Bitcoin code is being worked on.
The Fall of MtGox?
Now, in early 2014, many are wondering if the heydays of MtGox being on top are over. And if so, who will replace them as King of the Bitcoin Hill? Even before the most recent suspension of US withdrawals, many people were moving from MtGox and moving to other exchanges. One of these is the Coinbase Exchange, which some people are saying is ripe to be a successor to MtGox as the gold standard for Bitcoin value – which is still fluctuating wildly.
The value of 1 BTC was over $1,000 USD in late 2013, but it’s now trading at around $650 per BTC, which is quite a big difference. Some are predicting more losses, with the value of a Bitcoin settling at a couple hundred dollars each, while others are betting that it’s going to once again rise dramatically – perhaps going over $1,000 USD per BTC once again. The problem is that no one knows for sure, and there’s not a lot of history to go on.
Of course, this uncertainty means a lot of people are going to be able to generate a lot of money – at least virtually – in the near future. However, it’s not looking like MtGox will be the Exchange to bring everyone together. Whether Coinbase takes over that spot or some other Exchange like Bitstamp or another takes it remains to be seen, but one thing is for certain – a lot more people are going to be interested in Bitcoin and the ability to make a little extra money or even a lot of extra cash.
This all goes to show that Bitcoin is still in a “Wild West” phase when it comes to development and use around the world. This has some definite pros as well as cons, so it’s important to always keep up to date on the latest news and information that’s available – even opinion pieces about the future of Bitcoin. The good news is that we have you covered. Here at Bitcoin Basics 101, we’re constantly on the lookout for new and interesting facts (and rumors) about Bitcoin so that you can stay on top of everything.
If you think MtGox will recover and stick around for years to come or think it’s going to die soon, leave a comment and explain your position. When it comes to Bitcoin, everyone and their grandmother has an opinion, which is another reason it’s so exciting to be involved in the Bitcoin universe right now. Agree or disagree, let us know what you’re thinking.