The value of the bitcoin has been swinging up and down. Mt. Gox froze withdrawals due to technical problems. The popular bitcoin exchange deleted all of its tweets and displayed a blank website. All these spell doom for the cryptocurrency.
On Friday, the once dominant bitcoin exchange delcared bankruptcy in Japan. With the announcement, about $470 million worth of the virtual currency was gone. Mt. Gox stored in its digital vault roughly 750,000 bitcoins, 100,000 of which belongs to the firm and the rest to about a million customers customers who might be bit by bit losing faith on bitcoin. The company also disclosed that it has around $64 million in liabilities while its assets are pegged at around $37 million.
Mt. Gox chief executive Mark Karpeles has pointed to "weaknesses in our system" as the reason for the collapse of the bitcoin exchange. That is what Karpeles told the media during a conference in Tokyo, bowing low as a sign of respect and contrition.
"First of all, I'm very sorry. The bitcoin industry is healthy and it is growing. It will continue, and reducing the impact is the most important point," said Karpeles.
It is not yet clear what will happen to the customers of Mt. Gox since bitcoin is not a regulated or accepted form of currency. Authorities cannot just step in and there is no insurance covering the virtual money.
How the missing bitcoins will be recovered is another puzzle. While real money stolen and dispersed in the market can be very difficult to trace, a ray of hope is seen by cryptocurrency holders since every bitcoin trade is said to be tracked using embedded markers. However, if the thieves were clever enough to loot Mt. Gox without the company able to plug the hole, it seems nothing will stop them from covering their tracks. They seem to be good enough.
Another question is who will do the digging when bitcoin is unregulated and there are no existing laws that will dictate how things should be done. Being an alternative currency outside the existing banking system, the money has no real value in society except between people who hold bitcoins in their digital wallets.
U.S. authorities have sent subpoenas to bitcoin exchange firms and have launched an investigation to properly understand how the virtual currency works. In Illinois, a bitcoin customer filed a lawsuit against Mt. Gox and called for other customers to join him in a class-action case to pin Karpeles and the bitcoin exchange for fraud.
In Japan, authorities are also facing a blank wall on how they can help victims.
The Bitcoin Foundation has not issued a statement after Mt. Gox resigned its seat on its board of directors. The foundation has been the body promoting the benefits of the virtual currency. The situation might be too nightmarish for the group that in an earlier statement said that the industry is just being weeded out of the bad ones.
Mt. Gox fall is like the combined flurry of punches of boxing great Muhammad Ali, the killer punch of Mike Tyson, and the lightning combinations of Manny Pacquiao. Bam. Bam. Bam. It's all over. Not just for Mt. Gox but may be for the bitcoin and its users.
RIP bitcoin. Just another bad memory. Which unfortunately won't just go away with the press of 'Delete' button.
