7 ms·

World’s Largest Bitcoin Exchange Out $10 Million

76 points by sk2code 13y ago

deleted 13y ago
[deleted]
fvrghl 13y ago
I keep reading about how the banking of bitcoins is unstable. It's bad for the image of bitcoin because it seems like it can't be trusted, and lawsuits like these damage the credibility of the currency and the companies.
- TwoFactor 13y ago
  Except these issues are with companies that are using the currency not properly understanding local regulations. This had nothing to do with bitcoin as a currency or protocol.
  - ihsw 13y ago
    Measuring the stability of BTC requires more consideration than simply the technological merits.
    - unclebucknasty 13y ago
      Unfortunately, this is true.
      - cube13 13y ago
        This is true of currency as a whole. Money only has value if people are willing to exchange things for it.
        unclebucknasty 13y ago
        >Money only has value if people are willing to exchange things for it. True, but, here we are talking about something different. That is, the value of BTC is not simply defined by its technical merits, but can be devalued if the ecosystem for managing/utilizing/exchanging it is unhealthy. In other words, the value of money is also affected by whether people are able to exchange things for it.
  - wmf 13y ago
    Once you understand the regulations you uncover another issue: the cost of compliance may be more than your company's revenue for the first few years. How do you ever get started in that situation?
  - kylebrown 13y ago
    Relatedly, Mt. Gox is now counter-suing CoinLab. CoinLab wanted to cut corners on meeting their contractual obligation to obtain the necessary licenses, and argue that they did meet the regulations under the "prepaid access" FinCen exception. http://www.coindesk.com/mt-gox-countersues-bitcoin-incubator-coinlab-5-5m/ http://www.coindesk.com/mt-gox-countersues-bitcoin-incubator...
crazypyro 13y ago
Sidenote on the writing: Its obnoxious to end sentences with "U.S.", especially twice in two back-to-back sentences that don't clearly end. What I'm talking about: "For months now, it’s been next to impossible for Mt. Gox to get money into the U.S. Bitcoin discussion forums are filled with complaints by Mt. Got customers, who have been unable to get their money into the U.S. Banks don’t want to do business with the Japanese exchange —or bitcoin companies in general — because they fear the glare of regulatory scrutiny."
- kbenson 13y ago
  That caught me too. Made me think of the discussion regarding singe vs double spaces over the weekend... (this was a case put forward where double spacing would make the end of the sentence less ambiguous).
1053r 13y ago
I had no idea that they were sitting on such a large stash of bitcoins (from the article, 250K). This leads me to believe that they have been trading on their own exchange to keep the USD / BTC price depressed. For example, if the "market" decided that there was a 50% chance Mt. Gox was never going to solve their banking problems and allow unlimited fiat withdrawals, then you would expect there to be a 100% price premium for BTC on Mt. Gox. However, that would send a VERY scary message in terms of their viability, which would quickly become a self fulfilling prophecy, so Gox could sell some of their stash to keep the price premium to say, 10%. If they tried to push it all the way down to a 0% premium, though, they would quickly run through all their BTC. Since the price premium has been stable at almost exactly 10% for months, that suggests SOMEONE is manipulating it, probably to keep it low. Does anyone care to look in the blockchain and do the deobfuscation to see if my theory is correct?
- ihsw 13y ago
  There is value to BTC price stability, and it definitely isn't surprising considering a stable BTC price supports MtGox's bottom line.
  - ISL 13y ago
    One could argue that efficient price discovery supports MtGox's bottom line. If bitcoin ends as a currency, it looks like MtGox would be left holding the bag. Healthy exchanges should make money by facilitating transactions, not price support. Of course, if MtGox wanted to underwrite a bitcoin community and then reap the future benefits as a major exchange, this is an efficient way to do it.
    - drcross 13y ago
      |if MtGox wanted to underwrite a bitcoin community and then reap the future benefits as a major exchange, this is an efficient way to do it. wrong, the most efficient way would have been to offer discounts on their rates. That's the main clue that MtGox are not partaking in price manipulation.
ashray 13y ago
MtGox has put a lot of bitcoin users at huge risk. I've had a huge USD withdrawal from Mtgox pending for over 7+ weeks now (8 weeks on 21st September). Every single time I email them asking how much longer it's going to take they just get back to me saying "We don't know, a few more weeks." It's incredibly frustrating! They always offer to cancel my withdrawal and credit the funds back to my Gox account (so I can buy BTC at their inflated rates ? Nu-uh!). Another offer they made me after a lot of back and forth was a 5% fee on my withdrawal (for a 7 day turn around time). That is ABSOLUTELY insane. Imagine a $100k withdrawal - you'd be paying $5,000 as fees on that. OUCH! So here I am (along with possibly tons of other bitcoin users) with my money stuck in Gox. I already started using other trading platforms but I have to somehow retrieve this cash... Maybe I'll just take a hit and convert back to bitcoin and move my BTC out ? I don't know.. there's about a 10% price difference between Gox and other exchanges. So I'd lose 10% if I were to convert back to Bitcoin now, sell them on another exchange and cash out there. Gox has lost a LOT of customers because of their behavior so far.. it's only a matter of time before they lose all of them.
- arbitrage 13y ago
  almost sounds like a ponzi scheme.
  - ameoba 13y ago
    ...or PayPal.
  - kilroy123 13y ago
    This most definitely sounds like a ponzi scheme. If so, it's probably falling apart right now. Scary.
    - dragontamer 13y ago
      Its only an exchange. A weakness in Mt.Gox does not create a weakness in the greater BTC network. It just means it is that much harder to find a BTC Exchange that you can trust. Its like history unfolding again. Eventually, people will (re)learn that giving large sums of money to people you don't know requires major amounts of trust. Ex: What guarantees do I have that Mt.Gox isn't trading with my money? I mean after all... Mt. Gox money is virtual currency. Maybe you can't withdraw your money from Mt. Gox because they're playing with it themselves. You see? Its a trust issue. SEC is in charge of investigating this sort of behavior.
luscious 13y ago
Oh man. I just got my employer to pay me in bitcoins instead of dollars. I'm sure this will blow over and the good times will roll again. Just everyone be cool and stuff.
- mahyarm 13y ago
  Mt.Gox is not the one true exchange(tm).
- greenyoda 13y ago
  I'm curious about how you and your employer would report your income for tax purposes. As far as I know, an employer can't write "50 bitcoins" on your W-2 or 1099 form.
drivebyacct2 13y ago
Leaving your money in Gox is dumb. Please don't do it.
alexanderRohde 13y ago
How exactly did the US feds "Seize" 5 million in bitcoin? I thought the whole point was that it wasn't seizable unless you got the encryption keys, which would be weird since MTGOX is based in Japan, no?
- dragonwriter 13y ago
  > How exactly did the US feds "Seize" 5 million in bitcoin? Presumably, if they wanted to seize bitcoin, they'd produce a demand to turn the bitcoin over along with stating the legal authority for the demand and the legal consequences of failing to comply with it; lots of actual seizures work that way. But if you read the article, the $5+ million seized from Mt.Gox by the US government was US dollars (not bitcoins) ($2.9 million from Mt.Gox's account with Dwolla, and $2.1+ million from two Wells Fargo accounts), so "how can you seize bitcoins" is irrelevant.
chstrcheeto4prz 13y ago
I think most people are unaware that MtGOX is an acronym for "Magic the Gathering Online Exchange."
warcode 13y ago
I always thought of the bitcoin's purpose as being an independent currency. All the problems started when people started wanting to exchange it for "real" money instead of other services accepting bitcoins.
Tichy 13y ago
Running a business costs money? I am very disappointed.
kalms 13y ago
I have zero trust in Bitcoin, and I can't really figure out why, except that it seems so utterly fragile. Like it's built on hopes and dreams - almost like a ponzi scheme, like someone else suggested. Sure, if you're feeling lucky, go right ahead. But color me conservative.

76 points by sk2code 13y ago

deleted 13y ago

[deleted]

I keep reading about how the banking of bitcoins is unstable. It's bad for the image of bitcoin because it seems like it can't be trusted, and lawsuits like these damage the credibility of the currency and the companies.

TwoFactor 13y ago
Except these issues are with companies that are using the currency not properly understanding local regulations. This had nothing to do with bitcoin as a currency or protocol.
- ihsw 13y ago
  Measuring the stability of BTC requires more consideration than simply the technological merits.
  - unclebucknasty 13y ago
    Unfortunately, this is true.
    - cube13 13y ago
      This is true of currency as a whole. Money only has value if people are willing to exchange things for it.
      - unclebucknasty 13y ago
        >Money only has value if people are willing to exchange things for it. True, but, here we are talking about something different. That is, the value of BTC is not simply defined by its technical merits, but can be devalued if the ecosystem for managing/utilizing/exchanging it is unhealthy. In other words, the value of money is also affected by whether people are able to exchange things for it.
- wmf 13y ago
  Once you understand the regulations you uncover another issue: the cost of compliance may be more than your company's revenue for the first few years. How do you ever get started in that situation?
- kylebrown 13y ago
  Relatedly, Mt. Gox is now counter-suing CoinLab. CoinLab wanted to cut corners on meeting their contractual obligation to obtain the necessary licenses, and argue that they did meet the regulations under the "prepaid access" FinCen exception. http://www.coindesk.com/mt-gox-countersues-bitcoin-incubator-coinlab-5-5m/ http://www.coindesk.com/mt-gox-countersues-bitcoin-incubator...

crazypyro 13y ago

Sidenote on the writing: Its obnoxious to end sentences with "U.S.", especially twice in two back-to-back sentences that don't clearly end. What I'm talking about: "For months now, it’s been next to impossible for Mt. Gox to get money into the U.S. Bitcoin discussion forums are filled with complaints by Mt. Got customers, who have been unable to get their money into the U.S. Banks don’t want to do business with the Japanese exchange —or bitcoin companies in general — because they fear the glare of regulatory scrutiny."

kbenson 13y ago
That caught me too. Made me think of the discussion regarding singe vs double spaces over the weekend... (this was a case put forward where double spacing would make the end of the sentence less ambiguous).

1053r 13y ago

I had no idea that they were sitting on such a large stash of bitcoins (from the article, 250K). This leads me to believe that they have been trading on their own exchange to keep the USD / BTC price depressed. For example, if the "market" decided that there was a 50% chance Mt. Gox was never going to solve their banking problems and allow unlimited fiat withdrawals, then you would expect there to be a 100% price premium for BTC on Mt. Gox. However, that would send a VERY scary message in terms of their viability, which would quickly become a self fulfilling prophecy, so Gox could sell some of their stash to keep the price premium to say, 10%. If they tried to push it all the way down to a 0% premium, though, they would quickly run through all their BTC. Since the price premium has been stable at almost exactly 10% for months, that suggests SOMEONE is manipulating it, probably to keep it low. Does anyone care to look in the blockchain and do the deobfuscation to see if my theory is correct?

ihsw 13y ago
There is value to BTC price stability, and it definitely isn't surprising considering a stable BTC price supports MtGox's bottom line.
- ISL 13y ago
  One could argue that efficient price discovery supports MtGox's bottom line. If bitcoin ends as a currency, it looks like MtGox would be left holding the bag. Healthy exchanges should make money by facilitating transactions, not price support. Of course, if MtGox wanted to underwrite a bitcoin community and then reap the future benefits as a major exchange, this is an efficient way to do it.
  - drcross 13y ago
    |if MtGox wanted to underwrite a bitcoin community and then reap the future benefits as a major exchange, this is an efficient way to do it. wrong, the most efficient way would have been to offer discounts on their rates. That's the main clue that MtGox are not partaking in price manipulation.

ashray 13y ago

MtGox has put a lot of bitcoin users at huge risk. I've had a huge USD withdrawal from Mtgox pending for over 7+ weeks now (8 weeks on 21st September). Every single time I email them asking how much longer it's going to take they just get back to me saying "We don't know, a few more weeks." It's incredibly frustrating! They always offer to cancel my withdrawal and credit the funds back to my Gox account (so I can buy BTC at their inflated rates ? Nu-uh!). Another offer they made me after a lot of back and forth was a 5% fee on my withdrawal (for a 7 day turn around time). That is ABSOLUTELY insane. Imagine a $100k withdrawal - you'd be paying $5,000 as fees on that. OUCH! So here I am (along with possibly tons of other bitcoin users) with my money stuck in Gox. I already started using other trading platforms but I have to somehow retrieve this cash... Maybe I'll just take a hit and convert back to bitcoin and move my BTC out ? I don't know.. there's about a 10% price difference between Gox and other exchanges. So I'd lose 10% if I were to convert back to Bitcoin now, sell them on another exchange and cash out there. Gox has lost a LOT of customers because of their behavior so far.. it's only a matter of time before they lose all of them.

arbitrage 13y ago
almost sounds like a ponzi scheme.
- ameoba 13y ago
  ...or PayPal.
- kilroy123 13y ago
  This most definitely sounds like a ponzi scheme. If so, it's probably falling apart right now. Scary.
  - dragontamer 13y ago
    Its only an exchange. A weakness in Mt.Gox does not create a weakness in the greater BTC network. It just means it is that much harder to find a BTC Exchange that you can trust. Its like history unfolding again. Eventually, people will (re)learn that giving large sums of money to people you don't know requires major amounts of trust. Ex: What guarantees do I have that Mt.Gox isn't trading with my money? I mean after all... Mt. Gox money is virtual currency. Maybe you can't withdraw your money from Mt. Gox because they're playing with it themselves. You see? Its a trust issue. SEC is in charge of investigating this sort of behavior.

luscious 13y ago

Oh man. I just got my employer to pay me in bitcoins instead of dollars. I'm sure this will blow over and the good times will roll again. Just everyone be cool and stuff.

mahyarm 13y ago
Mt.Gox is not the one true exchange(tm).
greenyoda 13y ago
I'm curious about how you and your employer would report your income for tax purposes. As far as I know, an employer can't write "50 bitcoins" on your W-2 or 1099 form.

drivebyacct2 13y ago

Leaving your money in Gox is dumb. Please don't do it.

alexanderRohde 13y ago

How exactly did the US feds "Seize" 5 million in bitcoin? I thought the whole point was that it wasn't seizable unless you got the encryption keys, which would be weird since MTGOX is based in Japan, no?

dragonwriter 13y ago
> How exactly did the US feds "Seize" 5 million in bitcoin? Presumably, if they wanted to seize bitcoin, they'd produce a demand to turn the bitcoin over along with stating the legal authority for the demand and the legal consequences of failing to comply with it; lots of actual seizures work that way. But if you read the article, the $5+ million seized from Mt.Gox by the US government was US dollars (not bitcoins) ($2.9 million from Mt.Gox's account with Dwolla, and $2.1+ million from two Wells Fargo accounts), so "how can you seize bitcoins" is irrelevant.

chstrcheeto4prz 13y ago

I think most people are unaware that MtGOX is an acronym for "Magic the Gathering Online Exchange."

warcode 13y ago

I always thought of the bitcoin's purpose as being an independent currency. All the problems started when people started wanting to exchange it for "real" money instead of other services accepting bitcoins.

Tichy 13y ago

Running a business costs money? I am very disappointed.

kalms 13y ago

I have zero trust in Bitcoin, and I can't really figure out why, except that it seems so utterly fragile. Like it's built on hopes and dreams - almost like a ponzi scheme, like someone else suggested. Sure, if you're feeling lucky, go right ahead. But color me conservative.