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THE WEBSITE OF Tokyo-based bitcoin exchange MtGox went down Tuesday amid reports of a theft of the virtual currency worth hundreds of millions of dollars, dealing a blow to its credibility.
The bitcoin community rallied round to defend the unit, with chief executives of several major operators pledging to work together to shore up public faith in the project.
Visitors to the www.mtgox.com domain on Tuesday got a blank page – consistent with contents having been removed – when they tried to log on, more than two weeks after the firm suspended cash withdrawals and claimed there was a bug in the software underpinning the crypto-currency.
A widely-shared document purporting to be a MtGox “crisis strategy” said the firm might have lost more than 744,400 bitcoins in a theft that had gone unnoticed for years.
That number of bitcoins would be worth more than $300 million, using rates at functioning exchanges Tuesday afternoon.
It was not immediately possible to verify the document, which was posted on a blog written by someone who describes himself as “an entrepreneur and former VC who makes the business case for #Bitcoin”.
Consternation has grown since MtGox stopped processing external transactions on 7th February, claiming there was a problem with the programme that powers the currency and allows it to be transferred between users or swapped for goods and services.
Freefall
The value of the unit on MtGox had gone into freefall since then. Around midday on Tuesday, shortly before the shutdown, a bitcoin was worth $135, compared with the $430 quoted by the CoinDesk bitcoin price index, which tracks the price of the currency on major exchanges.
Prices among exchanges are not always the same. In January, a bitcoin was worth more than $900 at MtGox, one of the world’s first exchanges for the unit.
A joint statement issued by CEOs of major platforms said the currency was sound and blamed MtGox for the fiasco.
“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,” said the statement from Coinbase, Kraken, Bitstamp.net, BTC China, Blockchain.info and Circle.
“As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. MtGox has confirmed its issues in private discussions with other members of the bitcoin community,” it said.
Wild volatility has long been a part of the experimental digital currency, which does not have backing of a central bank or government and falls outside of traditional financial regulatory frameworks.
Units are generated by a complex computer algorithm designed by one or more anonymous people in 2009, with a global cap on the eventual number of bitcoins set at 21 million units.
Proponents say the currency is an efficient and anonymous way to store and transfer monetary value, and to avoid the risks inherent in any currency dependent on the viability of a government for its value.
But some economists say the project is mired in difficulties, including large fluctuations in value caused by speculators and a supposed vulnerability to online thieves.
Others note that the anonymity it offers is attractive to underworld figures and cite its use to buy drugs and guns on the underground Silk Road website.
MtGox has not responded to repeated requests from AFP for comment, but in a statement last week said it was still working on “re-initiating bitcoin withdrawals”.
On the eve of service shutdown, MtGox CEO Mark Karpeles resigned from the board of the Bitcoin Foundation, which is an advocate for the virtual currency.
A handful of MtGox clients have staged small protests outside the firm’s headquarters, but say they have not received any reassurances over whether or not their money is safe.
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This whole Bitcoin currency is the joke that keeps on giving
The Bitcoin fanboys will be along to tell us real currency is doomed & bitcoin/dogecoin/PeterGriffinCoin is the future.
Bitcoin…..more like sh!tcoin!
Unless you bought and sold at the right time!
Cpm. What government backs Bitcoin? Is it even recognized by the World Bank? I know the Dollar is as is the Euro and the Pound the Yen and Swiss Franc.
Bit by bit…
All aboard the dogecoin train!
If bitcoin fails all altcoins will follow.
Anyone would be insane to give their real hard earned money to Virtual money which is exactly what it is.
So is so called real money. All backed by nothing.
Real money can be exchanged for goods & services.
Big difference.
So can ‘real’ bitcoins. ‘Real’ being the word
lump everything in to Tulips ….
I said it would all end in tears. I’m sure our government will cover everyone’s losses
Bitcoin isn’t broken mt gox is broken, it’s been on the cards for a long time. Will prob buy a little more in the next couple of days while the price is low. The currency and especially the block chain are genious. Watch bitcoin shoot up again when there’s another crash in the stock market later this year or a bail in. Bitcoin has a future defo and all the altcoins are fascinating. Check out auroracoin! No money is perfect including euros.
Having acquired a number of bitcoins with MTGOX over the past year this is not good. Regardless of the future of bitcoin as a legit currency in recent months it has been a good way of making profit – buying at a low price then selling at a higher – simple trading.
Like myself a lot of people had money tied up in either bitcoins or physical cash which was hosted on the MTGOX exchange – if this company has folded with no return in sight I doubt there is any way I will get either back.
This is not a good day.
Well we all told you so.
It isn’t a currency either, it’s a speculative asset. There isn’t really much to complain about here. Bitcoin was explicitly anti-regulation and loved by techno-utopian anarchists. You can’t pretend this is a surprise….
Hi Paul, was it purely for trading reasons you invested? I’ve been reading about bitcoin for quite a while now and I just don’t get it.
David aren’t you a warm shoulder to cry on..
Yes it was a speculative market and a very volatile one at that.
I have no issue buying shares in the hope they increase in value but only decrease – that is the known risk.
My issue is an entire exchange, arguably the most popular of it’s kind, just turning everything off and walking away.
The communication from the MTGOX team for the past number of weeks has been worse that shocking – I am sure theres many people who have lost more than myself.
Bitcoin as a technology / concept is still very interesting and 100% still worth a punt to make some profit – the question now is finding an exchange that is trust worthy and stable.
100% trading.
Buy at €500 a coin sell at €1000 a coin.
I have an interest in the application of bitcoin and if it will every become mainstream – nobody can answer that question with absolute certainty at this point so its nice to keep up to speed on things.
Paul , don’t worry too much. Why not invest in the KerryCoin. Doesn’t cost much, but in years to come , still won’t cost much,but it will be worth it .Is that right Ted.
Well yeah but the entire point of Bitcoin is that it wasn’t regulated. Why wouldn’t they turn the thing off and walk away when it all went to hell? If they were smart they would have taken the Bitcoin themselves earlier and just walked away.
Stealing Bitcoin isn’t illegal or anything, it’s just common sense, it’s mostly anonymous in theory. You were gambling on something you clearly didn’t understand, the fact you didn’t use a Bitwallet is hilarious.
Seriously this is why we have central banks, and financial regulators and governments and monetary committees. You can get rid of all that but don’t complain when the inevitable happens.
A lot of negative “I told you so” comments here from people who don’t exactly understand what they’re talking about. I’m pretty sure anybody who invested in bitcoin knew the risk they were taking. And anyone who invests more than they can afford to lose is a fool. Bitcoin isn’t virtual. It exists. It is digital, but not virtual. Big difference. Finally, the technology behind bitcoin, aka the blockchain, is the real genius behind the currency. It has wide reaching implications, worth a google if you’re interested.
Except for the whole malleability issue Ciaran which is why everyone just lost their Bitcoin. But other than that it’s fantastic.
Except it’s deflationary so if ever used would cause another great depression and WW2. But other than that it”s fantastic.
David you seem like a real begrudger – they kind of guy the could win the lotto then spend weeks giving out about having to spend it.
Some people are just happy in misery.
@paul Murphy
I’ve a lot of money tied up in pillows… I sleep soundly every night.
Thanks John – not the most valuable contribution ever noted on The Journal but thanks for getting involved.
A ‘bit’ of a tetchy response Paul…..
Not tetchy at all – what happened to mtgox is unfortunate and couldn’t really be planned for, the I told you so remarks on here are just systematic of the attitude in the country.
Somebody tries to be progressive and make a few quid in a new and exciting ‘technology’ – a temp bump in the road and the majority of nay Sayers jump on the negative side if the situation.
I wouldn’t expect any sympathy or well wishes but a small level of understanding goes along way.
Thankfully I personally haven’t suffered much of a loss that’s to using an off-line wallet but sympathise with those who may not have been as fortunate.
Damed if you do damed if you don’t I guess.
I do sympathise with you for your loss Paul.
Ahh stop crying Paul.
It isn’t a new progressive technology, it’s a fundamentally flawed idea that plays on some people ideological ideas. You can hardly expect sympathy for people who were gambling on something they didn’t understand in the hope of making a profit. I don’t exactly feel terrible for Anglo Irish speculators either. It’s nothing to do with begrudging a new technology. Sure I dabbled in it myself.
Not crying David just adding to the discussion.
I invested in bitcoin and will continue to do so – what I didn’t expect to fail was the exchange I used.
I accept the volatility of bitcoin and will continue to trade using them. What I have learnt is to use an exchange as that – a way to trade bitcoin & cash but keep all coins & physical funds off line.
A small lesson learnt in a growing market – nothing new there.
Can I recommend a slice of humble pie with your evening cup of tea.
I’m not the one who lost hundreds or thousands of euro gambling paul….
One could always put their money where there mouth is and make a bet on whether Bitcoin will be used as a currency in 10 years?
Betting being a tax on bullshit.
Dear david,
As I have said previously bitcoin in a volatile market and it’s that volatility I have profited and lost from.
I am unsure if bitcoin will be around in 5 years or not but I am sure that crypto currency is here to stay – the current tech trends and a need to simplify online payments can only bolster the support required.
I am a betting man so happy to listen to all sensible offers.
John , I’ve still got my holy communion money . It’s part of my mattress money portfolio.
@ Patrick Gormley.
Thanks Patrick…At least someone finally got my joke!!
I wouldnt trust anything that is ‘virtual’.
What about music games and movies
One failed exchange doesn’t mean bitcoin is crap just means one exchange has failed.. We are only at the birth of new global currency it’s not gonna be a smooth ride and yes bitcoin may fail in its current form..
But crypto currency is here to stay..to think otherwise is delusional
The real money masters want to keeo their monoploly. Simple as that. There is a vested interest in making sure bitcoin fails. Just like the liberty dollar, greenbacks etc etc. Read up on it. Interesting stuff, all this printing paper and forcing people to use it and nothing else.
Its all a conspiracy innit.
When two or more people work together to achieve a goal in secret they ‘conspire’. So eh by definition, I suppose you could call it that.
Nice try though, as lame as it was.
MTGox stands for Magic The Gathering Online Exchange. Really. That’s what it stands for.
Anyone with more than 100 quid in that thing needs their noodle examined.
Is there some form of virtual cigarette that can be used as currency now that virtual “money” appears worthless?
When it comes to getting involved in investing or engaging in activities like Bitcoin my philosophy is you’re either screwing people or you’re going to be the one who’s going to be screwed.
Like the old saying if you don’t know who the fool is at the poker table, it’s you. Don’t take a punt on something unless you know something inside because the people who are driving the whole thing at the top certainly do and when the general populace go one way, they go the other. Annnnnnd the money’s gone.
What Next? Will the poor Irish currency speculators be seeking a Bailout?
I have some magic beans if anybody is interested in buying……
Tried to play with the big boys and is getting taken out.
like all good pyramid schemes those in early make a killing while the latecomers and those grabbing on to the coat tails are getting burned.
a 70% drop in value in a couple of weeks …. that is some bubble to burst; all the while there are plenty waiting for this to ‘rocket’ back up when the latest news gets forgotten about ….
I have been on this planet for 64 years. In that time, I have seen “new” investment deals come and go by the dozens. I’ve seen pyramid schemes, gold bugs, silver bugs, beanie babies, “pre-ordering”, I’ve seen people line up at 2 in the morning to get the first version of Windows95. I’ve seen virtually every currency known go up and down and up and down. There is always the excitement and the hype.
I have learned that “If ya have to have it, you don’t need it.”
I remember something called the “Circle of Gold” in California in the 80s. People got together at parties and wrote each other checks. $1,000 minimum buy-in pyramid scheme. Lot of crying in their beer later on for that one.
There are a lot of “casinos” in Ireland. I notice you never see a Bentley in the casino parking lot, unless it’s the casino owner’s car. The people I see walking into places like Paddy Power don’t seem like they’re on all that grand of a financial footing either.
There is only one sure-fire investment scheme. It’s called “Pay Yourself”. It is really special. What you do is take 10% of every euro you make and put it in a biscuit tin. Keep doing that until the biscuit tin is full. Then go and get another biscuit tin. Keep getting biscuit tins and filling them up. When you have fifty or sixty full biscuit tins, Go buy a mattress. Cut the mattress open and take out all the stuffing and springs. Well, maybe you can leave the springs in. Depends on the mattress construction. Anyway, you take all the money from the biscuit tins and stuff it into the mattress and sew up the slices you took to get the stuffing out.
You will also have fifty or sixty empty biscuit tins. You can sell them to someone who was buying bitcoins while you were paying yourself. Tell them about the scheme that worked for you. Don’t tell them where your mattress is though. That wouldn’t be such a grand idea. But you’ll find you sleep really, really well from then on.
I learned this from my grandmother. She died a very wealthy woman at 89 years. Today, I don’t have to work. My time is pretty much all mine. If it rains, I just make a cup of tea. If it’s sunny, I go out for a nice long walk. When I get back I make a cup of tea. Then I play the fiddle. or maybe the pipes.
Bitcoins. The future market for biscuit tins, I think. But maybe not. But I think “maybe so”.
Anyway, just don’t forget to have a laugh once in awhile.
Bit coin … It’s a bit like believing in the Sky Fairy.
Can’t see this link anywhere on the page, apologies if I’m late to the party…..this site will check your device for the vulnerability.
whoa……too many browser tabs. Me idiota.
Still, helpful to check if you didn’t see the iOS news……
have your say