Has the Bitcoin bubble burst already?
Philip Ellison 27 February, 2014 at 09:02
The name on everybody’s lips is Bitcoin once again, following an exceptionally tough week for MtGox, the once leading crypto-currency exchange. The exchange abruptly ceased trading on Tuesday this week, and seemingly vanished from the internet (along with customer deposits worth millions of dollars).
Rumours immediately began to circulate that MtGox had been hacked, prompting the release of a short explanatory statement: “In the event of recent news reports and the potential repercussions on MtGox’s operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.”
MtGox founder and CEO Mark Karpeles released a supplementary statement the following morning, informing concerned customers that he most certainly hasn’t done a moonlight flit with their digital cash: “As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.”
“Furthermore,” the statement continues, “I would like to kindly ask that people refrain from asking questions to our staff; they have been instructed not to give any response or information.” Karpeles is referring, of course, to the anxious investors who have taken to picketing MtGox headquarters in Tokyo in order to get answers.
Bitcoin’s status as a still largely unknown property has caused concern before, with the Taiwanese Financial Supervisory Commission previously ruling against the introduction of Bitcoin ATMs on the grounds that it is “a highly speculative virtual product”. BBC business correspondent Robert Pestoncharacterises Bitcoin as an “existential threat to conventional banks”, and compares it to Amazon in its potential to disrupt the financial status quo. That potential relies, however, on some kind of governance structure being put in place, to prevent disasters like MtGox-gate from becoming a regular occurrence.