It looks like the buyers on Mt. Gox just put in limit orders and took the day off. The market depth is slowly being eaten up as Bitcoins are sold and buy orders are used up.

Not when the "exchange" holds your funds and can stall on releasing them. You can't pick any exchange for your next transaction.

Mt. Gox and Tradehill are performing the functions of an exchange, a broker, a non-bank depository institution, a clearing house, and a stock custodian. In the real world, those functions are usually separated.  (Sometimes they're not. See Bernard Madoff. That didn't end well.)

A completely distributed exchange is quite possible. You first need some way to do an atomic transaction in two commodities between two untrusted parties. One approach is to split transactions into tiny ones, each one being done separately and completed before the next one starts. That way, any rip-off is limited to the size of one transaction.

Once you can do that, you just need a way to broadcast "buy" orders. Only one side needs to be broadcast, although it's useful to broadcast both. Orders can't be anonymous, since you have to know who the other party is to deal with them.  If you see a buy order you like, your client contacts their client and does a deal. First client to get through wins.

There are some problems. Transactions cannot be undone, except by mutual consent of the parties. There can be no "rollbacks". Any gains from market manipulation stand. (So you had better have enough cash reserves to handle a mistake now and then.)

A party can broadcast buy orders but not respond to matching sell offers.  Since orders are not anonymous, this behavior is detectable. You need a reputation system to kick out traders who do that. (Which is exactly how live commodity trading floors dealt with it.)

Lag is a problem. Network transit time and local processing delay affects your trading profitability. (This is a problem in real-world trading. Look into "high frequency trading" and the efforts made to cut lag to microseconds.)

It's not as orderly a market as a system with centralized processing of limit orders, but that's the price of a distributed, mutually mistrustful system. 

Not if their business strategy turns out to be "take the money and run".

Contact the Japan Financial Services Agency.

    Financial Services Agency
    The Central Common Government Offices No. 7,
    3-2-1 Kasumigaseki, Chiyoda-ku, Tokyo, 100-8967 Japan


    foreignpr@fsa.go.jp

Whether they like it or not, Mt. Gox is in a regulated industry, and they have some responsibilities they can't escape.  Like paying out depositors' money on demand.

A useful place to start might be a local "Invest Japan" office. 

http://www.jetro.go.jp/en/invest/

The Japanese government's Japan External Trade Organization has offices in most major countries devoted to encouraging people to invest in Japan. Their job is to guide people through Japanese government bureaucracy.  They might be helpful for finding out who to talk to at the FSA.

Up until the last sentence, yes. That should have been instructions on how to use some other means of money transfer, and a statement that Mt. Gox was absorbing the fees for the alternative method, since their failure to make proper banking arrangements was causing others not to receive payment.

In the last few weeks, Mt. Gox has blamed Liberty Reserve, some unnamed bank in France, Dwolla, and their previous owner for delays in transferring money out. That's why I suspect they don't really have the cash.

Look at the market depth on Mt. Gox and Tradehill on the "bid" side. A few days ago, Mt. Gox had 6x the market depth of Tradehill. Today, it only has 3x. That number reflects how much real cash people have in the exchange. Buyers are bailing out of Mt. Gox. Sellers of Bitcoins, not so much.

Mt. Gox is more volatile than Tradehill, which, as I pointed out before, is backwards.  The bigger market should be less volatile. Some of the volatility on Mt. Gox may simply be because the exchange system is buggy and is mismatching orders.  Their "queuing delays" don't help, either. They're either inept or manipulating the market. Not sure which.

(I'm not recommending Tradehill; we still don't know if, long term, they can be trusted not to lose or steal deposits. But they seem to have the mechanics of their market working better.)

That doesn't require a new currency. Just easier and lower-cost methods of transferring an existing one. Like DoCoMo, Vodafone, Dwolla, Square, Google, etc. are doing.

As I've pointed out before, difficulty getting money out of a broker/dealer/exchange/pool is a classic big red flag of trouble. If Mt. Gox is legit, and really has every dollar of customer money that's on deposit with them, withdrawals should never be a problem. They should, at all times, be able to pay everyone off.

If the exchange accepts orders that result in a crossed market, (which Mt. Gox does), someone can briefly manipulate the market by putting in a small buy order far below the market price. That seems to be what happened here.

This situation is called a "crossed market", and it happens all the time in the real world.  But in the real world, it happens because there are multiple interconnected markets, and one market can lock or cross another.  Each individual market has rules to deal with the problem.

Island (a system used by big traders to trade US stocks)  like Mt. Gox, runs entirely on limit orders. Island's solution to this problem is to reject orders which will result in a locked or crossed market. That's probably what Mt. Gox should be doing. 

There are other potential solutions, but just rejecting the limit order is probably the simplest.

Mt. Gox needs to publish their market rules.

Yes.

However, many people are already doing mobile payment solutions.  DoCoMo, Vodafone. Google, Apple, etc. Bitcoin missed the window for
that.

The market depth on the bid side at Mt. Gox is dropping.   Mt. Gox now has about 3x the market depth of Tradehill; it was 6x or higher yesterday. People are pulling their cash out of Mt. Gox.

The "order queuing delays" are very suspicious. Especially when they seem to vary depending on the bid price. There's no reason the transaction part of Mt. Gox should be heavily loaded at all. There are only a few transactions per minute.  Order delays allow front-running, where the house puts in their orders
ahead of the customer orders, after looking at the queue.  That gives the house a huge edge.

On top of this, Mt. Gox is making excuses for delays in paying out funds. Again. They're blaming Liberty Reserve this time.  (Dwolla is supposedly still working).  That's a red flag.

Get your funds out of Mt. Gox now. If you insist on trading there, keep the minimum amounts necessary there. But don't use them as a bank.

At the current price and difficulty level, mining no longer really pays. Many complaints on the mining forums. Those with sunk costs in hardware may still be making some money, but it no longer pays to buy new hardware for mining. Most of the "miners" don't count the cost of floor space and staffing, but now, even as a marginal cost business, it's not that attractive. Miners are dropping out. In this situation, the difficulty should creep back down, but that happens slowly. Right now, Bitcoins seem to be priced near the cost of producing them.  That's the closest thing to a fundamental this market has.

The buy-side market depth on Mt. Gox is shrinking. They had around 40,000BTC of buy orders a few days ago, but now there are only 20,000.  This may simply reflect people pulling cash out of Mt. Gox. Probably a wise move.  Now that things have quieted down, the price is creeping back down into the $15 range on very thin trading.

Of course, there's no rational market for pricing Bitcoins. It's a pure speculation.

If people aren't buying goods and services with it, it's not a currency. It's only a pyramid scheme.

Some "gift cards" have fees assessed monthly to make them gradually go to zero.  The US and some states regulate this; in the US gift cards can't have periodic fees for the first year.

Then, of course, there's inflation.

Something isn't right about that.  Tradehill has a reasonable level of activity. Mt. Gox has about 10x more volume and 6x more market depth, but Mt. Gox is more volatile. The bigger exchange should be less volatile.

The Mt. Gox depth table has some asks below some bids. Something has gone wrong over there.

Everything I've written on Downside is still there. It's all in the Internet Archive.  I have a verifiable track record. Do you?