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Rather than enjoying some shadenfreude (directed at MtGox and its users, not Bitcoin itself), I'm bewildered by the users and upset that their stupidity has all

by corford 13y ago

Rather than enjoying some shadenfreude (directed at MtGox and its users, not Bitcoin itself), I'm bewildered by the users and upset that their stupidity has allowed this predictable fiasco to happen. Leaving the entirety of your BTC savings on an exchange provided and managed wallet is utterly insane at the best of times but to have done so with MtGox was just asking for it. There are countless examples stretching back years that reveal MtGox was nothing more than a badly run website put together by a bunch of amateurs who took an early bet on Bitcoin and got lucky. It's been obvious to anyone who performed even the most basic of research that MtGox would one day blow up spectacularly and there have been vastly better options available for a _long_ time now: http://www.bitstamp.net http://www.bitstamp.net, http://www.kraken.com http://www.kraken.com and http://www.coinbase.com http://www.coinbase.com It's sad people have lost money but MtGox users largely have only themselves to blame. The writing's been on the wall since almost forever, better alternatives have been available for a long time now and, regardless of the exchange, they should never, ever have left significant chunks of their BTC net worth on a wallet not under their exclusive control. If you leave all your money on an exchange controlled wallet, you'll eventually end up like the poor chumps who bought penny stocks from the Wolf of Wall street: robbed. I just hope the entire BTC ecosystem doesn't come crashing down in the fallout.

300bps 13y ago
BTC ecosystem won't come crashing down because BTC has real-world utility. As for MtGox users who lost money, I would think this counts as a capital loss that can be written off on their taxes. It can be used to offset capital gains or to reduce their AGI by $3,000 per year with carryover of losses into future years. It will be interesting to see the stance that the IRS takes of people who bought BTC for $1,000 each and then it turned worthless due to Mt Gox. The money is either gone due to capital loss (in which case it's deductible) or theft (in which case it's deductible, but better get a police report). More discussion from a few months ago: http://online.wsj.com/news/articles/SB10001424052702304773104579268322915488180 http://online.wsj.com/news/articles/SB1000142405270230477310...
- mcosta 13y ago
  How can the IRS check the truth of your BC loss statement?
bunderbunder 13y ago
The problem is, we're not all equally engaged in the issue. Nor can we be - I can't simultaneously be an expert on every single thing that touches on my life. For better or for worse, we all cut corners - we all need to cut corners on the caveat emptor thing; there's only so much time in the day - and some of us will be more successful at it than others. So I'm not interested in blaming the victims here. What happened to them was perhaps predictable and certainly tragic, but like with the recent housing crisis it's important to distinguish between people who we wish had known better, and people who actually did have a moral or professional responsibility to know better. If anything, I'm way more interested in blaming the relevant regulatory agencies for not being quicker to do their jobs by ensuring that Mt. Gox was behaving responsibly. Perhaps this whole crisis could have been averted if, 3 or 4 years ago when BTC first got big, someone had thought to knock on their doors and said, "Hey, I'd like to meet your accounting team."
- corford 13y ago
  I agree with what you're saying in the abstract but in this particular case, I don't think it holds. Everyone knows Bitcoin is still in its infancy and effectively a modern day wild west. You don't need to be fully engaged on the issue to know that, you just need a little common sense. Just like you don't go on holiday somewhere far flung and a bit edgy and decide to walk down the street with all your money, passport, jewellery and documents on you.
- defen 13y ago
  > The problem is, we're not all equally engaged in the issue. Nor can we be - I can't simultaneously be an expert on every single thing that touches on my life. That's understandable if someone just bought a couple bitcoins on a lark when they were under $100. But there are people who have lost a significant fraction of their net worth - those are the ones who really should have taken the time to know better.
  - PakG1 13y ago
    I'd say anyone who bought a house at the peak of the housing market also lost a significant fraction of their net worth. Should we say those are the ones who really should have taken the time to know better? Consider just how many people lost a significant fraction of their wealth and now have underwater mortgages. Do you see where I'm going here? Caveat emptor really does only go so far. That's why at the end of the day, there's supposed to be regulation, to ensure a safe place as possible for people to conduct their economic activity, realizing that risk is still unavoidable. There's acceptable risk, and then there's, oh-no-those-bankers-were-pulling-some-nasty-tricks-and-the-public-suffers risks.
the_watcher 13y ago
I lost a bit of money to Mt. Gox (<$100, not enough to matter) because I'd moved a little money in there to sell at the highest rate I could get. The key for me was that I didn't trust the exchange, especially given that I am an American and it's across the Pacific and has had problems in the past. I just moved a small amount in to see if I could sell and get it out right away. Found out that they have a really cumbersome verification process to get your money out, which I hadn't finished by the time this all went down. The key here is that I didn't just go in and move all my holdings before I was confident in what was going on. I'm honestly not sure why anyone would have kept a substantial amount of BTC on Mt. Gox. If you are holding BTC, why not move it somewhere like Coinbase, where there may actually be some level of oversight and technical competence? You could always have moved it back to Mt. Gox to sell, and the transaction fees are trivial.
- corford 13y ago
  >why not move it somewhere like Coinbase Frankly, that's not much better. Just move your BTC off the exchange in to your own private wallet. There's no excuse or good reason not to. Make sure your private wallet is encrypted with a strong (16 char+) password, keep it on a USB stick and, every time you send coins from it, back it up again to a few places (spideroak, a second usb stick, CD-ROM, whatever).
dmm 13y ago
Failures are always obvious in retrospect. That being said I can't believe people left hundreds of thousands of USD worth of bitcoin in gox. I'm reading stories of people putting lots of money they could not afford to lose in something they obviously did not understand. I guess I just don't understand why people would do that. > MtGox users largely have themselves to blame. I agree but there is plenty of blame to go around. Right up until gox suspended bitcoin withdrawals almost everyone was quoting the gox price for over-the-counter transactions. Every time the gox price was used it gave mtgox.com legitimacy.
- corford 13y ago
  >Right up until gox suspended bitcoin withdrawals almost everyone was quoting the gox price for over-the-counter transactions. Every time the gox price was used it gave mtgox.com legitimacy. You are absolutely right about this and it certainly didn't help. I guess inertia and the fact that up until withdrawals were suspended MtGox were the second largest exchange by daily trading volume.
- beat 13y ago
  In investment, there's a basic triangle of risk, liquidity, and return. Choose two. But people are greedy and stupid. They see high return with high liquidity, and deliberately ignore the risk. Bitcoins look like a great way to get high returns with high liquidity, and the promise of "security" based on the non-involvement of evil oppressive governments. That's a fool's game, because government is not usually the threat to your wealth. Step out of the law-backed guarantees and rich ecosystem of fiat currency, and there's basically no one to protect you from theft.
killerpopiller 13y ago
well, Captn. Hindsight I had 3.6BTC and 3700€ in it and I didn't realized the sad state of Mt.Gox until it was to late. Funny enough, I had contact with their support desk on friday and one of my fiat withdrawals reached my banking account on friday as well. All those countless examples with their wrintings on some wall since forever must have escaped me. Good for you wise man. I actually thought that the biggest exchange is also the one with the best reputation and capable of handling those transactions.
- corford 13y ago
  I'm truly sorry you've taken a hit but hopefully you can take this opportunity to learn from the mistake and in the future avoid investing large sums of money in something you don't fully understand. I know what I've just said makes me sound like a smug c*nt but it really is the truth. If you don't understand something inside out don't directly invest in it - it's that simple. This is why I personally stay away from stocks and shares as I don't know enough about them to be sure I wont get fleeced. Even if MtGox had been the best run exchange in the world and was still going strong today, you should not have left 3BTC sitting in a wallet under their control. None of the exchanges have been going long enough nor is the BTC ecosystem itself mature enough to be granted that level of trust. If you need to trade a large BTC amount always do it in a hit and run fashion, making sure the coins or cash are only on the exchange for the absolute minimum amount of time needed to make the trade. An exchange should be viewed as just that, an exchange. Not a bank or savings account.
  - wpietri 13y ago
    This is wrong: "If you don't understand something inside out don't directly invest in it - it's that simple." It's a great thing to say when you want to be, as you say, a smug cunt. But it's not how investment works. Risk and reward are strongly correlated. Some of the best investments ever have been in things that nobody understands very well. I think there are great lessons that people can draw from this. And as somebody who hasn't put any money into BTC, I can certainly suggest a few. But "wait for perfect understanding" is not one of them. For the smart, that means, "wait forever". The less smart will just wait until they've run out of known unknowns. But there are always unknown unknowns waiting in the weeds to ambush you. Life is risk.

by corford 13y ago

300bps 13y ago

BTC ecosystem won't come crashing down because BTC has real-world utility. As for MtGox users who lost money, I would think this counts as a capital loss that can be written off on their taxes. It can be used to offset capital gains or to reduce their AGI by $3,000 per year with carryover of losses into future years. It will be interesting to see the stance that the IRS takes of people who bought BTC for $1,000 each and then it turned worthless due to Mt Gox. The money is either gone due to capital loss (in which case it's deductible) or theft (in which case it's deductible, but better get a police report). More discussion from a few months ago: http://online.wsj.com/news/articles/SB10001424052702304773104579268322915488180 http://online.wsj.com/news/articles/SB1000142405270230477310...

mcosta 13y ago
How can the IRS check the truth of your BC loss statement?

bunderbunder 13y ago

The problem is, we're not all equally engaged in the issue. Nor can we be - I can't simultaneously be an expert on every single thing that touches on my life. For better or for worse, we all cut corners - we all need to cut corners on the caveat emptor thing; there's only so much time in the day - and some of us will be more successful at it than others. So I'm not interested in blaming the victims here. What happened to them was perhaps predictable and certainly tragic, but like with the recent housing crisis it's important to distinguish between people who we wish had known better, and people who actually did have a moral or professional responsibility to know better. If anything, I'm way more interested in blaming the relevant regulatory agencies for not being quicker to do their jobs by ensuring that Mt. Gox was behaving responsibly. Perhaps this whole crisis could have been averted if, 3 or 4 years ago when BTC first got big, someone had thought to knock on their doors and said, "Hey, I'd like to meet your accounting team."

corford 13y ago
I agree with what you're saying in the abstract but in this particular case, I don't think it holds. Everyone knows Bitcoin is still in its infancy and effectively a modern day wild west. You don't need to be fully engaged on the issue to know that, you just need a little common sense. Just like you don't go on holiday somewhere far flung and a bit edgy and decide to walk down the street with all your money, passport, jewellery and documents on you.
defen 13y ago
> The problem is, we're not all equally engaged in the issue. Nor can we be - I can't simultaneously be an expert on every single thing that touches on my life. That's understandable if someone just bought a couple bitcoins on a lark when they were under $100. But there are people who have lost a significant fraction of their net worth - those are the ones who really should have taken the time to know better.
- PakG1 13y ago
  I'd say anyone who bought a house at the peak of the housing market also lost a significant fraction of their net worth. Should we say those are the ones who really should have taken the time to know better? Consider just how many people lost a significant fraction of their wealth and now have underwater mortgages. Do you see where I'm going here? Caveat emptor really does only go so far. That's why at the end of the day, there's supposed to be regulation, to ensure a safe place as possible for people to conduct their economic activity, realizing that risk is still unavoidable. There's acceptable risk, and then there's, oh-no-those-bankers-were-pulling-some-nasty-tricks-and-the-public-suffers risks.

the_watcher 13y ago

I lost a bit of money to Mt. Gox (<$100, not enough to matter) because I'd moved a little money in there to sell at the highest rate I could get. The key for me was that I didn't trust the exchange, especially given that I am an American and it's across the Pacific and has had problems in the past. I just moved a small amount in to see if I could sell and get it out right away. Found out that they have a really cumbersome verification process to get your money out, which I hadn't finished by the time this all went down. The key here is that I didn't just go in and move all my holdings before I was confident in what was going on. I'm honestly not sure why anyone would have kept a substantial amount of BTC on Mt. Gox. If you are holding BTC, why not move it somewhere like Coinbase, where there may actually be some level of oversight and technical competence? You could always have moved it back to Mt. Gox to sell, and the transaction fees are trivial.

corford 13y ago
>why not move it somewhere like Coinbase Frankly, that's not much better. Just move your BTC off the exchange in to your own private wallet. There's no excuse or good reason not to. Make sure your private wallet is encrypted with a strong (16 char+) password, keep it on a USB stick and, every time you send coins from it, back it up again to a few places (spideroak, a second usb stick, CD-ROM, whatever).

dmm 13y ago

Failures are always obvious in retrospect. That being said I can't believe people left hundreds of thousands of USD worth of bitcoin in gox. I'm reading stories of people putting lots of money they could not afford to lose in something they obviously did not understand. I guess I just don't understand why people would do that. > MtGox users largely have themselves to blame. I agree but there is plenty of blame to go around. Right up until gox suspended bitcoin withdrawals almost everyone was quoting the gox price for over-the-counter transactions. Every time the gox price was used it gave mtgox.com legitimacy.

corford 13y ago
>Right up until gox suspended bitcoin withdrawals almost everyone was quoting the gox price for over-the-counter transactions. Every time the gox price was used it gave mtgox.com legitimacy. You are absolutely right about this and it certainly didn't help. I guess inertia and the fact that up until withdrawals were suspended MtGox were the second largest exchange by daily trading volume.
beat 13y ago
In investment, there's a basic triangle of risk, liquidity, and return. Choose two. But people are greedy and stupid. They see high return with high liquidity, and deliberately ignore the risk. Bitcoins look like a great way to get high returns with high liquidity, and the promise of "security" based on the non-involvement of evil oppressive governments. That's a fool's game, because government is not usually the threat to your wealth. Step out of the law-backed guarantees and rich ecosystem of fiat currency, and there's basically no one to protect you from theft.

killerpopiller 13y ago

well, Captn. Hindsight I had 3.6BTC and 3700€ in it and I didn't realized the sad state of Mt.Gox until it was to late. Funny enough, I had contact with their support desk on friday and one of my fiat withdrawals reached my banking account on friday as well. All those countless examples with their wrintings on some wall since forever must have escaped me. Good for you wise man. I actually thought that the biggest exchange is also the one with the best reputation and capable of handling those transactions.

corford 13y ago
I'm truly sorry you've taken a hit but hopefully you can take this opportunity to learn from the mistake and in the future avoid investing large sums of money in something you don't fully understand. I know what I've just said makes me sound like a smug c*nt but it really is the truth. If you don't understand something inside out don't directly invest in it - it's that simple. This is why I personally stay away from stocks and shares as I don't know enough about them to be sure I wont get fleeced. Even if MtGox had been the best run exchange in the world and was still going strong today, you should not have left 3BTC sitting in a wallet under their control. None of the exchanges have been going long enough nor is the BTC ecosystem itself mature enough to be granted that level of trust. If you need to trade a large BTC amount always do it in a hit and run fashion, making sure the coins or cash are only on the exchange for the absolute minimum amount of time needed to make the trade. An exchange should be viewed as just that, an exchange. Not a bank or savings account.
- wpietri 13y ago
  This is wrong: "If you don't understand something inside out don't directly invest in it - it's that simple." It's a great thing to say when you want to be, as you say, a smug cunt. But it's not how investment works. Risk and reward are strongly correlated. Some of the best investments ever have been in things that nobody understands very well. I think there are great lessons that people can draw from this. And as somebody who hasn't put any money into BTC, I can certainly suggest a few. But "wait for perfect understanding" is not one of them. For the smart, that means, "wait forever". The less smart will just wait until they've run out of known unknowns. But there are always unknown unknowns waiting in the weeds to ambush you. Life is risk.