The 10k number was me trying to put the holding into the category of "investment", but not life altering amount. It's an investment and I want to know if people think the market is accurately assessing risk.
I.e is 10% an accurate assessment of the risk of MtGox insolvency?

If you have something to say about that I'd like to hear it.

Yes I'm verified.

My main concern is liquidity because MtGox is giving inconsistent stories and there is serious concern that they will go under. They are destroying their reputation by giving inconsistent, distracting and unconvincing excuses so the problem with withdrawals must be caused by something that would destroy their reputation even more severely (they were hacked, they lost/spent customer funds). It's seriously worrying.

I'm leaning towards buying BTC since I think their behaviour indicates better than 10% chance they will go under. I've never seen a situation where a business was behaving like MtGox is that has ended well.

Maybe others know more about the situation or have inside connections at MtGox. Anyway look forward to see what poll says.

OK. Can you please explain?  Do you mean selling on localbitcoins?

Thanks
-B

Hi All,

I am currently holding $10k in MtGox and need to get it out.

I have to decide to take a 11% loss by buying and withdrawing BTC or alternatively to withdraw by international wire and wait a very long time according to multiple users.

What do other MtGox customers in a similar situation think is the best strategy?

Thanks

It seems that it is very important to establish the reliability of Japanese withdrawals as it is a critical indicator of liquidity.

It would be great if more people who are withdrawing via domestic transfers to Japanese bank accounts could comment here on the amounts (approx) and delays on their withdrawals.

That is a very interesting point.

If MtGox is paying japanese withdrawals via domestic wire promptly it would support their claim that the problem with international wire withdrawals is a banking/technical rather they than a liquidity problem.

Does anyone know if MtGox is paying Japanese domestic withdrawals without delay?

If they are then this would be a profitable arbitrage.

I'm doubtful but I would love to hear from any Japanese account holders who have first hand experience with domestic withdrawals in the last 3 months.

Sure. My bank charges me $25 for outbound wire and $0 for inbound but different levels of accounts have different charges so this will vary from account to account.

Thus in my case transaction fees would be $165 instead of $140, i.e. 1.6%

Also above where i say 7% for 12 weeks it would be more correct to say 5-6% taking into account fees
--> 21-25% per year.
This is still a very good return if you believe MtGox will make it through their liquidity/cashflow problem. But people new to bitcoin business should be careful. Anyone who thinks MtGox just have a labour shortage, amount of work i.e. "backlog", or financial system lag based problem is living in a fantasy world.

--B

$110. For sure.

Iceland.

Most people under 30 speak English. Power is 4 cents / kwh, and cooling free year round by ambient air.
Plus society is stable with minimal corruption theft risk and women are good looking.

Case closed!

--B

assume we buy 100BTC as you say.


Cost on BitStamp = 9800.
Deposit cost to Bitstamp
  = Minimum(0.1%*$9800=$9.8,  $15)  = $15
Bitcoin Buy fee at Bitstamp: 0.5% = $49
Bitcoin transfer fee to MtGox =~ $0
Bitcoin Sell fee at MtGox: 0.55% = $56
Withdrawal cost at Mtgox: 2000yen= $20.
Total costs: $15 + $49 + $0 + $56 + $20 = $35 (fixed) + $105(trx size dependent) = $140
$140 / $9800 =~ 1.4%

7% - 1.4% = 5.6% profit.

Where do you get 10% transaction fees from?



For numbers
https://en.bitcoin.it/wiki/Bitstamp
https://www.bitstamp.net/faq/
https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits

Hi,

First thanks to everyone on bitcointalk. I have learned many things here.

I have a company to mine bitcoins, and look forward into the future to use bitcoin to create loyalty currencies for businesses.

-B

This will work with large enough transactions if the exchange you sell bitcoins on doesn't run away with your cash.  If you only do small transactions as the previous user mentioned you may lose the profits in fees.

In many cases of arbitrage with bitcoins the more important issue is counterparty risk. (counterparty = exchange goes bankrupt / disappears)
Often if there is an obvious arbitrage opportunity it is there because of counterparty risk.

Take for example the current MtGox/Bitstamp situation.

Right now delays on currency withdrawals from MtGox are between 6 and 12 weeks and many suspect withdrawals are coming from fee income and new deposits because they have used customer cash deposits for their own business.

In short liquidity problems... which means they don't have enough cash, and if there is a shock to the bitcoin economy they could go bankrupt.

That is why the price on MtGox is so much higher. It has restricted supply since customers are not selling unless they can get paid for the risk that they can't get their cash out. Meanwhile the demand comes predominately from customers that are buying to transfer out bitcoins to an exchange with no liquidity problems, e.g. BitStamp. Given BitStamp's growing reputation it's hard to see why anyone would buy bitcoins on MtGox if not in order to subsequently transfer them out.

Current time estimate for withdrawals on MtGox is 12 weeks. You can make 7% on arbitrage at the moment. 7% for 12 weeks --> 30% yearly income. This is a good return on investment but given that MtGox has no transparency it is impossible to tell if they are just about to go bankrupt or whether they are safe but just immorally using customer funds to develop their business quickly and are having temporary liquidity problems.

If you believe the market it seems there is only a 10% chance that MtGox will fail in the next 4 months. Another type of arbitrage would be if you knew if this was either too low or or too high. If you know the likelyhood is lower you should be selling bitcoins on MtGox.  If it is higher you should either be buying bitcoins to exit MtGox or creating private shorting arrangements where you can borrow the currency balance in a MtGox user's account and replace it later at the end of the short contract.

Example short contract  time #0 to time #1
1) I borrow $10000 in currency from MtGox user A at time #0
2) I buy bitcoins at 10% premium on MtGox, transfer to BitStamp
3) At end of short contract (time #1)
   a) if MtGox still alive I transfer enough bitcoins to User A at MtGox to sell for $10000
   b) if MtGox goes bankrupt I do nothing.

I might pay 10% fee ($1000) to user A to do this. There has to be something in it for A to let me do this. If MtGox goes under I make $9000 and if risk of failing rises then price on MtGox might be 1.5x price on Bitstamp (Then I make $3000).

Anyway good luck if you do choose to go ahead and arbitrage.

-B

In the article by Jonathan Stacke on the withdrawal delays he proposes that MtGox may be converting it's Bitcoin denominated transaction fees into fiat currency (from new deposits) and using that money to pay for withdrawals.

You can read his argument here.
http://thegenesisblock.com/mt-gox-withdrawal-freeze-driving-significant-liquidity-concerns/

The article also mentions that withdrawals could also be coming from new deposits but given that withdrawals are likely outnumbering deposits due to lost confidence it seems more likely funds for withdrawals would come from fiat due to selling bitcoin earnings. Either way it seems almost certain there is a liquidity issue and that customer funds have been mixed/commingled with company funds.

What he doesn't address is the 7-10% arbitrage opportunity for MtGox insiders. They can sell Bitcoins to MtGox account holders who want to transfer Bitcoins to Bitstamp to convert to fiat currency. Essentially this turns into a 7-10% withdrawal fee.

Thus it seems likely to me that either delayed withdrawals are a free loan to MtGox to develop their business and fix their liquidity issues or it's an underhanded way to have a huge withdrawal fee and rob their users, likely also to fix liquidity problems due to seized / frozen funds.

A point worth considering is that the withdraw freeze/delay occurred during a period of intense technical development to deploy to private colocation and build out a new trading platform. These would certainly have incurred very high costs for MtGox.

In either case MtGox may not be trying to outright rob users but they are likely behaving unethically. As an account holder with a pending withdrawal the problem I see is that with the increasing reputation of BitStamp the only transactions that can be occurring right now on MtGox are the following
1. Customers buying Bitcoins to transfer out via BitStamp/Coinbase
2. MtGox selling Bitcoins (to arbitrage)
3. Customers selling to arbitrage (hoping that mtgox won't go under. 7% arbitrage gain for 3 months delay still 28% annual return)

Is anyone here doing (1) or (3)?

Does anyone have any ideas how it would be possible to determine if MtGox is using the arbitrage strategy?

-B