Bitcoin News: Answers to Questions About the Mt. Gox Situation

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Problems at the Mt. Gox exchange have dominated Bitcoin news this past week, creating concern and confusion within the Bitcoin community and leaving everyone else wondering what in the world is going on.

Here's what's happened.

Japan-based Mt. Gox, the first and for a long time the largest Bitcoin exchange, suddenly announced Feb. 7 that it was halting all customer withdrawals of bitcoin from their accounts.

A few days later the exchange blamed a glitch in the Bitcoin software itself that allowed dishonest users to make multiple withdrawals. That angered many in the Bitcoin community, who charge that the glitch had been known for a long time and that Mt. Gox should have had a system in place to deal with the issue.

The story then took another twist, and the Bitcoin news got much worse…

Other Bitcoin exchanges, such as BitStamp and BTC-e, were also vulnerable to the glitch, which became apparent after a widespread attack on the digital currency in the days following the Mt. Gox announcement.

Slovenia-based BitStamp, now the largest Bitcoin exchange, and Bulgaria-based BTC-e, both halted withdrawals late Tuesday.

The disruptions caused Bitcoin prices to tumble from about $700 to about $600 on most Bitcoin exchanges.

But on Mt. Gox, where Bitcoin had been trading for more than $900 in the days before the halt in withdrawals, prices kept dropping. They hit a low of $220 on Sunday, a steep drop from their all-time high in early December of $1,242.

Some order returned to the world's Bitcoin exchanges when BitStamp and BTC-e both resumed allowing withdrawals of bitcoin on Friday. Bitcoin prices on those exchanges have stabilized in the low $600s.

But Mt. Gox remains in a state of crisis. The exchange said on Monday (yesterday) that it was working on a solution with bitcoin wallet site Blockchain.info, and that customer withdrawals of bitcoin would resume "soon."

But given the issues Mt. Gox has had moving fiat currencies to and from customer accounts, as well as its waning popularity, many believe the exchange's problems run much deeper.

And the entire sequence of events has given skeptics more reason to question whether the digital currency can endure.

And yet there are numerous signs that Bitcoin will survive this episode just as it has several previous crises…

Join the conversation. Click here to jump to comments…

  1. dennis | February 21, 2014

    "The answer lies not in what Bitcoin is today, but what it could become in the future – a new, better, and more secure form of payment, a leap akin to other digital leaps forward such as e-mail and the World Wide Web."
    Seriously?? All the Bitcoin lovers have been touting its safety as the biggest reason to dive in. You sound like a guy who owns a lot of bitcoins at a price over $600!!!

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