Marginalizing Mt. Gox: "Bitcoin Is Becoming Serious; And Serious Means Accountability"

Tyler Durden's picture

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

I was going to start this article by stating: “Mt. Gox needs to get its shit together.”

But its too late for that. Much too late.

Mt.Gox has been the dominant Bitcoin exchange pretty much since the beginning. In its brief history, it has suffered several bad setbacks, with the one last spring an incident I am intimately familiar with. There were plenty of reasons to give them a pass in the past, and many of us did. It was early. It was a complete and total Wild West and all of us interested were learning this thing together. There were bound to be some major growing pains. Gox made some changes, came back up and a great deal was forgiven. Not this time.

Bitcoin is no longer in Phase 1 of its evolutionary cycle. I believe Phase 2 for Bitcoin began in earnest back in November 2013, when the Senate Committee on Homeland Security and Governmental Affairs held its first hearings on the topic. Those hearings made it clear that, at least for the moment, no significant roadblocks would be put in place to prevent people from transacting with one another using the crypto-currency. Phase 2 also saw the largest Bitcoin investment to-date, a $25 million infusion led by Silicon Valley VC firm Andreessen Horowitz, as well as acceptance by major U.S. retailers, with Overstock being the most significant. Bitcoin is becoming serious, and serious means serious accountability.

As a free market currency, the market will decide the products required to keep the Bitcoin protocol open and functioning to its highest potential. The disruption of Mt. Gox will be another test for Bitcoin. A test which certainly represents a psychological challenge, but probably not much more than that. Bitcoin will survive and come out of this stronger than it was before, just as it has done so many times in the past. However, I do not believe Mt. Gox will be so fortunate.

Mt. Gox is likely to continue to lose customers on its way to ultimately becoming marginalized as an exchange. In fact, Bitstamp is already trading more volume than Mt. Gox and I’d expect this lead to grow going forward. It also provides opportunities for more market players, although the various government rules and regulations out there have definitely stalled such growth, particularly in the U.S., which is not host to any exchange of significance.

Personally, I do not see how anyone is going to feel comfortable trading or holding sizable BTC balances on Mt. Gox after this fiasco. After all, being able to move your bitcoins from one place to another is the most fundamentally important part of the protocol. If people begin to question the ability to do this, they may start to question the usefulness of Bitcoin itself, which is not something any of us want to see.

That said, Mt. Gox’s decline is nothing new, as it had already begun following the serious issues early last year. Coindesk reports that:

For example, on 16 April, the number of bitcoins traded on Mt. Gox alone equaled 572,186 BTC (90% of the total of the three exchanges).

 

In contrast, on 18 December there was a roughly equal dispersion across BTC China, Mt. Gox and Bitstamp, with a volume of 93,934, 109,723, and 137,070 BTC respectively.

Now here’s a really powerful graph showing the volume traded on the top three exchanges that demonstrates what I am talking about:

BTCvolumechart

Graph courtesy of Coindesk.

As you can see, Mt. Gox has already been in decline, and I expect that to accelerate going forward. In fact, the price on Mt. Gox usually trades at a significant premium to Bitstamp, but is right at this moment trading at a $40 discount. This is not good.

Screen Shot 2014-02-08 at 2.30.48 PM

Graph courtesy of Coindesk.

What I really want to see is Mt. Gox resolve this issue as soon as possible so that the Bitcoins tied down with them are released and can be freely moved around by their owners. If this happens soon, Bitcoin will rapidly emerge from this difficult moment much stronger and hopefully with some more important lessons learned.

For Mt. Gox though, I think it’s pretty much game over.

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Yen Cross's picture

  Paging "Phone Clown"

 

Dear Infinity's picture

It's 2014 and all markets are a joke

wintermute's picture

Multiple, professional, exchanges is the next step in the growth phase.

DoChenRollingBearing's picture

Let a thousand exchanges bloom!

THX 1178's picture

New title, "Mt Gox and Bitcoin grasp at straws."

Stackers's picture

I thought MtGox's terms and conditions for money withdraw were shit the first time I read them in 2012. Never understood why it was so widely used, other than it was first. It's always had crappy customer service and service terms.

fonestar's picture

Mt.Gox needs to just go away now.  It was an important place in the first chapter of Bitcoin's history but at this point it's more of an embarassment (and one that has no business impacting the price of BTC).

Soul Glow's picture

It's a free country....er, I mean internet.

fonestar's picture

Yes, that much is true.  Actually the more money that goes into BTC, LTC, etc I believe helps fortify the internet and net neutrality.  If Bitcoin can grow to a large enough size no politicians will dare mess with a free and open internet.

Soul Glow's picture

Please don't start sentences with "actually".  It makes you sound like a know it all.  Thank you for visiting Fight Club.  Come again.

fonestar's picture

Come again? 

fonestar has never met a door he has not been forceably shoved through.

Soul Glow's picture

Actually you have walked through all the doors at your own valition.  

If you question this, I will remind you, you currently have the choice to become a monk - or a salesman.  

Which have you chosen?

fonestar's picture

fonestar is a virtual Shaolin monk in Satoshi's name.

Soul Glow's picture

Actually the more money that goes into BTC, LTC, etc I believe helps fortify the internet and net neutrality.

Fortify?  And how is that?  You stated an opinion without giving a reason.  Care to give a reason how bitcoin is going to help people sit on their ass, accumulate wealth, and create a better tomorrow?

silverserfer's picture

Ottowa obituarty-  April 14, 2014 Gary Furgason  age 41 was found dead in his mother's attic of apartent suicide. His obituary mentions  he was fond of bitcoins, virtual pussy, and peanut butter m&m's. It goes on to mention he was known online as "Zorlog in the world of warcraft forum and "fonestar" in the pokemon and digicoin forums. Police specualte the suicide was a result of a massive $2450 loss in biticoin investment scam. He wes aparetly lured to a prop bitcoin exchange where he lost his 3.2 biticoins that were "vapoirized" as those in the internet community woud say.

 

may God have mercy on his soul. And may God have mercy on whatever poor chap had to haul around that 400 lb corpse at the Ottowa morgue.

 

fonestar's picture

It looks like Bitcoin is headed down into the $600s on BTC-E and fonestar couldn't care less.  Just another buying oppertunity for the strongest currency on planet Earth.

silverserfer's picture

no thats dogecoin fonestar. You are so pas se.

wallstreetaposteriori's picture

All I hear when you speak is slurp... slurp...  satoshi.... slurp slurp.  

fonestar's picture

You stick to your FUD and I will keep my hyperdeflationary currency.  We will see which is worth more in three years time.

Basilian's picture

Fonestar I know you are very invested in the rhetoric surrounding bitcoin. I enjoyed your perspective as well as those from some from your nemesis on here. The thing I cannot understand is that surrounding all this rhetoric is the reality that "Law" is created by governements and enforced by tax payer funded goons. So when you say 'no politician would dare...." I am not sure we are all reading the same headlines and seeing the same movie. There is no Dept of Justice -- simply look at HSBC --- so seeing as this is the world we live in what power do you think Bitcooin wields over any goverment anywhere? When users of bitcoin are criminalized and hunted down and put to death and labeled insurrectionist, anarchist and terrorist I am almost certain its popularity will plummet. "Adapt of die" can also be "Use it and Die."

 

fonestar's picture

What type of global police force is going to work together to enforce a Bitcoin ban?  Are the Chinese, Americans, Koreans, Slovenians, etc, etc all going to work together?  That's not a very plausible scenario.  At the end of the day, technology, progress and mathematics are much, much more powerful than these governments and their "laws".  In fact, if governments and laws want to stay the least bit relevant and retain credibility they will be forced to adapt to Bitcoin.

Basilian's picture

Governments wield the power to control or give over control of currency decree, currency production, and essentially the sovereignty of a nation and people to central banks. I am not sure the big governments will want this new age of transparency and will fight a very ugly fight. I am not trying to be "right" or "win" this discussion I value your insight and logic. I am also not trying to be a pessimist and hope we forge forward. I think we all know you cannot kill human frailty of character with a gun---if only it could be so easy. I think everyone here was almost happy that Krugman had the hubris to say on national TV that "the US dollar is backed by men with guns" --- something that this community has always known and never had to say. The UN and the " world" opinion has really meant nothing -- look at every UN vote and you all know only the big 5 decide anything. There have been overwhelming votes on issues that merely get steam rolled and go unreported in the media. Look at the magnitude of killing to preserve the federal reserve currency and the petro dollar and you think seriously that bitcoin will bring these forces down by reaching some hundredth monkey tipping point? The financial system and stock market have allowed the monopolization of the means of production into the hands of the government/corporate partnerships that exist. The legal world enforces no law and constantly downgrades criminal acts to civil ones with a fine of the cost of doing business with billions being made and millions being paid in fines. Legal defenses these days are based on deniability or on individual ignorance even though that same individual walks with the profit of his ignorance. Why would any government that gets to print endless money ever allow that power to be taken away? In this world if you cannot buy a person with your endless power to give them fake money you can kill them with that same power to print endless fake money that you force people to use. Our financial industry is hooked on a velocity of money profiteering and the rest of us are along for the ride. Exactly how does bitcoin ever become more than a fringe percentage and gain this leverage you allude to--you and so many others? Take any place Bitcooin is currently being used to success and go in there and kill everyone using it---what happens? If the shadow banking industry is really almost as big or bigger than the global banking industry why would that be easily surrendered? I hope you or others can explain. The readers here represent a insignificant knowledge pool of how the world even really works -- the rest of the population is asleep and ignorant to these mechnisms.

Basilian's picture

Fonestar your logic on math and science is great ---your knowledge on the definition of power and human nature needs to be revisited. A trip to Syria maybe and look into the face of the heart of darkness and not be allowed to turn your gaze away from it for a while. I like the world you describe.

fonestar's picture

Look, the biggest and best weapon TPTB have against Bitcoin is their floundering media empire which they will use to try and scare people into remaining in their inflationary schemes.  When discussing Bitcoin vs. dollars I can't think of a time in history where one product was so vastly superior to the other in every conceivable way.

Basilian's picture

The monetary logic is sound I am just not seeing the leverage for this to push past fringe ---and this is not an attack on your position. Do you think those governments and corporations that control these monetary systemic mechanisms globally want transparency so there can be true meritocracy?How does that benefit the kleptocracy?

I think that bitcoin will be a great fringe area that will be allowed to flourish until its not allowed to flourish. Historically we saw that gold in the past had a fair market value placed on it in by the US governement and a forced sale under the guise of national security --- what's changed? Couldn't bitcoin be blamed for funding the next 9/11 and be criminalized that easily? Will people use it under penalty of death--NDAA? You asked earlier what" world police"---have you not seen the Iraq war and Afghanistan and Libya and so many others---that "world police" is the one. Do other cultures resist western culture--absolutelly not--they resist Western banking and a loss of soveriegnty that goes with it. Couldn't Bitcoin even if it was adopted be just as easily subjected to the price control of products if the prices are being set by the current monopoly that exist? I guess the only thing you do not get there is a secret ledger that currently exist for the shadow sector.

I agree with you in so many areas except your dismissal of true power and human nature that daily exhibits itself in global slaughter. I think you have to pay governement law enforcers like wall street rock stars along with the judges and regulators and they could never be bought off. Insulate your control over the creation and use of capital like a cult and educate your population on the pure evil of "white collar victimless crime" and why it most assuredly and agreed upon universally must be punishalbe by death. Until you have a population with that level of resolve and mantra like understanding that "central bank" is BAD then I am not sure it ultimately offers an alternative.

I hope the trajectory is not boring you.

TheHound73's picture

If they want to start a war against a decentralized currency, you and I can't stop them.  Which side are you on?

Basilian's picture

The monetary logic is sound I am just not seeing the leverage for this to push past fringe ---and this is not an attack on your position. Do you think those governments and corporations that control these monetary systemic mechanisms globally want transparency so there can be true meritocracy?How does that benefit the kleptocracy?

I think that bitcoin will be a great fringe area that will be allowed to flourish until its not allowed to flourish. Historically we saw that gold in the past had a fair market value placed on it in by the US governement and a forced sale under the guise of national security --- what's changed? Couldn't bitcoin be blamed for funding the next 9/11 and be criminalized that easily? Will people use it under penalty of death--NDAA? You asked earlier what" world police"---have you not seen the Iraq war and Afghanistan and Libya and so many others---that "world police" is the one. Do other cultures resist western culture--absolutelly not--they resist Western banking and a loss of soveriegnty that goes with it. Couldn't Bitcoin even if it was adopted be just as easily subjected to the price control of products if the prices are being set by the current monopoly that exist? I guess the only thing you do not get there is a secret ledger that currently exist for the shadow sector.

I agree with you in so many areas except your dismissal of true power and human nature that daily exhibits itself in global slaughter. I think you have to pay governement law enforcers like wall street rock stars along with the judges and regulators and they could never be bought off. Insulate your control over the creation and use of capital like a cult and educate your population on the pure evil of "white collar victimless crime" and why it most assuredly and agreed upon universally must be punishalbe by death. Until you have a population with that level of resolve and mantra like understanding that "central bank" is BAD then I am not sure it ultimately offers an alternative.

I hope the trajectory is not boring you.

Basilian's picture

Fonestar your logic on math and science is great ---your knowledge on the definition of power and human nature needs to be revisited. A trip to Syria maybe and look into the face of the heart of darkness and not be allowed to turn your gaze away from it for a while. I like the world you describe.

MeelionDollerBogus's picture

enforcing every router manufacturer to hard-code it into their chips would do it.
The entire planet would be rid of bitcoin pretty much instantly even without the grid going down.

MeelionDollerBogus's picture

Completely agree. People who actually produce tangible goods & necessary services need to start charging for them in bitcoin & other cryptocurrencies.

I'll hold my gold & silver for when the grid goes down but IF the fiat exchanges are wiped out or vastly reduced AND prices are NOT IN DOLLARS, euros, yen, but in digital currencies, I will use them.

I would expect, of course, a spread to apply given volatility but in the last 90 days the bitcoin volatility is much better than it has been BEFORE that.

It's still down to 630 fiat USD from that big time high, a huge drop, but once people establish GOODS & services for digital currencies & ensure they avoid any which look compromised, this should all level off as barter-power & equal-value for X x good_A vs Y x good_B will force volatility down, as the tangible values will enforce a range of volatility on a currency used to price each such thing.

I still don't like the exponentially expanding blockchain for bitcoin but provided other digital currencies have no achillies heel each, that can take care of the problem by using another one.

 

Soul Glow's picture

So people who, "produce tangible goods & necessary services" need to charge for it in a currency that is not tangible nor a necassity?

acetinker's picture

Dunno what a necassity is, but will agree that MeelionDollarBogus is most likely a college professor.  In other words, he couldn't pour piss out of his boot if the instructions were on the heel.

 

FredFlintstone's picture

Awesome, can I use this? ..."he couldn't pour piss out of his boot if the instructions were on the heel"

acetinker's picture

You certainly can, Fred.  My father-in-law gave that one to me.  Now, it's yours.

acetinker's picture

Fred, It is incumbent on me to tell you that any knowledge you may impute to me, is not actually my own.  I may freak you out., or compel to look further. Rest assured, Armagedom is not imminent.

MeelionDollerBogus's picture

no: computer programmer first, then escort driver, now I run conferences for the big banks.

Genetic's picture

Hmm, I felt something was wrong with his statement. I have a very old way of looking at money. That it is a compression of time/work. So if I let say, am a plumper and I work all day, I should take a currency for payment that someone made on their computer with a program. Question: why am I the only human doing work? Another thing that hit me is, the fed and US-Govt seem to be find with bit coin. And that does not seem strange to anyone? Also wasn't it Rockefeller who was talking about digital currency to Arron Rosso long before bit-coin? There just seem to be to many things that make you go Hmmm! I did a short blog-post on a conspiratorial view of bit-coin with a very interesting fraudulent slip from Max Keiser on bit-coin tangibility

Bendromeda Strain's picture

It really is very simple - Jew bashers will always cry out "Judefetzen! What have they done to our money", lumping in the innocent with the guilty. But it is the Old Testament itself that had a very clear proscription on anything besides honest weights and measures. This is where it gets real in the midst of a billion metric tons of bovine excrement. When the Creator laid out this mandate, the honest weight and measurement started with the money itself. Metal has a weight and a purity - fiat and bits, what have they?

MeelionDollerBogus's picture

hm, I see what you're getting at. A great benefit comes from compression of time/work into a monetary unit but that benefit is 'additional' rather than necessary. So long as equal-value is possible money can be used as a proxy for work/time. Some values can't accurately represent work energy, or work-complexity, or time-consumed, based on the situation. A variable universe/nature/city-life / etc.  can change the translation-mapping of value from work-hours to paid-dollars to saved-time for a particular route or good, or perhaps you choose poorly, pay little but quality is so low you pay 3 times eventually for the one good or service.

The way I see it is if you are producing & someone else is producing, you are a plumber with tools, materials & skills, someone else perhaps is a carpenter, electrician, farmer, you each should be able to produce your own currency units & exchange with each other.

After all, not everyone needs your services right now but if you're a plumber I fuckin' guarantee the day will come and they will not be happy if you have no incentive to show.

Herein lies the problem you are in fact feeling: how can anyone produce a currency who does no work? Solution: those who do no work, have no value, shouldn't, but those as yourself who do, should be unrestricted in doing so except by demand of the markets you deal with, your customers, your suppliers, etc.

That being said I strongly prefer the idea of using PGP signatures / GPG.

After all, if a person can barter, perhaps that person can arrange a deal for time, that perhaps food will be given in barter once it's grown but today it isn't finished growing, as payment for plumbing services, etc., a lot of possibilities exist so I picked just one there for brevity - and a debt in the mean time is formed only out of trust.

IN such a situation if that trust could have been established a signature could also establish repeats for time-lagged payment in both directions & what GPG / PGP does could permit it being remote rather than someone in the middle messing with both of you.

Face-to-face isn't so bad but if a lot of suppliers with their own delays & inventory capacity become an issue that's where a currency removes the time-lag problem by having a deliverable on the spot (IOU note = currency unit) or money serves (silver coin=actual value, paid in full). So rather than a compression of time-work it's more like a proxy for time-work.

By all means if I'm a lousy plumber & you're a great one and I need your services, for ME It's a multiplier of time-work to pay you: not for you, but for me, because the total magnified benefit isn't the currency or your skill, it's how lousy I AM at doing the same work yet I do have the money to pay you, so I will.

It's a bit tricky but think about. If I DO become much better at cooking, you think I'm going to enjoy so many restaurant meals? Maybe none. Maybe I do it all myself & even fancier than what I'd be served, perhaps not in presentation but perhaps in the flavours & quantities for the same time-unit of work. That means spending money at the fancy restaurant or even a decent-valued diner no longer is a compression of time-work, it's now a loss because I have the skills.

It's not the unit of currency alone that decides, it's the real value I have or lack compared to what I can purchase as a proxy.

MeelionDollerBogus's picture

close but the concept is actually inverted: that which is tangible & necessary, in a wide variety of goods & services, each establish relative value to each other. Once a currency is tied to them its own volatility can't deviate. When you are trading a financial asset on margin or tying it to other assets on margin that deviation becomes massive as it isn't goods & services being sought. Bitcoin is like this for being tied to fiat currencies on exchanges while THOSE currencies are tied to swaps, margin-leveraged carry trades, etc.

It's a subtle difference but it really matters.

Those who produce tangible goods & needed services do NOT have an obligation to use a currency that is not tangible or a necessity: it's up to them, but IF they do so, stability will be granted upon the currencies selected FROM the wide array of goods & services. It's important it's a diverse array of services & goods because if it was all the same thing the very large recombination of valuations of pairs (range 1 to n, n2 - n) would not exist, or would be very small (e.g. n should be over 1000, probably over 1000000 is good), to enforce this.

Also for various goods that last a fair while but do get a different valuation because of age you then can price in value of so many used goods vs so many new goods of the same time.

Seems silly but when T-Mobile is offering to pay your termination fees for transfering service WITH A TRADE-IN, or when GM is willing to reduce payment on a new car based on valuation of an older car, that valuation of used-vs-new still matters and that vastly increases the potential upper limit for N.

acetinker's picture

I'm sorry dude, but anyone who thought "Magic, The Game " was cool is deluded.  When it morphed into a bitcoin exchange, well that's just plain stupid.  BTW, where is that "I'm the King of the world" card I had stashed?  What's it worth?

john39's picture

but the central bankers are secretly playing the role of Mao this time around...   digital fiat is on their agenda...  we are now in the implementation stage...  and like the intellectuals of Mao's China in the 1950's...  people who should know better are falling for the trap because they so much want to believe that freedom has arrived.

DoChenRollingBearing's picture

 

 

That is a very interesting observation.

Clearly freedom in the USA and probably most of the world is down significantly in recent years.  Freedom has not arrived.  The grip by TPTB is strengthening by the day.

Not even going to Costa Rica would help much for most...

http://tinyurl.com/9hlvzdx

***

But, for the alert and nimble who maintain themselves well diversified, that is about the best that can be done.  

fonestar's picture

There is no reason to even so much as suspect that central bankers had or have anything to do with Bitcoin and its origins.  Having said that, there is reason to be concerned about Google's envolvement and the self-important "Bitcoin Foundation".

DoChenRollingBearing's picture

Yaah, it's all those Canadians and Americans getting in there and mucking things up...

fonestar's picture

In the end it doesn't matter.  The combined global hashing power and user base of Bitcoin is what matters.

Prisoners_dilemna's picture

Perhaps this short video (7 minutes) by Andreas Antonopoulos can shed some light on this small discussion.

He suggests that Bitcoin will defeat the kleptocracy and thereby save capitalism.

 

Necessity is the mother of invention?? or

"First they laugh, then the fight, then they accept you."

 

On a seperate note, as I watched the video above I couldnt help but ask myself...

"Why can bitcoin do this but gold can not?"

Serious question from a AU/BTC fan.