Possible outcomes of the Mt. Gox fiasco - my speculation

[jmerme01]

As I see it, there are three ways the Mt. Gox fiasco could play out in the short term:

(1) Mt. Gox announces in a week or two that they have finally fixed all of their issues, and are completely reinstating BTC withdrawals. 
(2) It becomes clear that Mt. Gox is completely broke (e.g. it had a massive theft of BTC by insiders, was hacked, etc), and will never reinstate BTC withdrawals.
(3) Mt. Gox drags this out for another month, and then only reinstates very limited withdrawals with a small cap on daily withdrawals.

My predictions:
(1) If Gox actually fixes their issues and reinstates BTC withdrawals, the price on all exchanges will increase significantly.  My guess is that BTC would shoot up to the $700-800 range within a few days, because a true fix would provide a huge reassurance to the world at large on multiple different fronts.  First, it provides reassurance that the BTC protocol is not fatally flawed in some way (of course, anyone who knows something about BTC realizes that was never a real risk, but the distinction between transaction malleability and a core protocol issue is too subtle for most non-techies).  Second, a fix provides some reassurance that BTC isn't something that is just too complex and esoteric to gain wide acceptance (i.e. some people are probably thinking "well, if Gox can be brought to its knees because they overlooked some little technical detail, that kind of thing is probably going to happen many more times in the future, and crypto is just never going to be able to go mainstream). 

(2) If Gox is defunct, BTC will decrease significantly.  The market is already factoring in this possibility to some extent, but based on the exchange rates on bitcoinbuilder, it seems like the market consensus is putting that likelihood at less than 50%.  Plus, I am not sure that the market has yet fully factored in the potential snowball effect of lost confidence in cryptos generally that could result from the complete collapse of Gox. 

(3) If Gox keeps dragging this out, it puts some downward pressure on price, but not so great that it couldn't be overcome by other news (e.g. favorable announcement by a government or a very large retailer).

I hear a lot of people saying that if Gox reinstates withdrawals, the price is going to go down because of the huge number of current Gox users that will suddenly be able to sell their BTC on some other exchange for double the price.  However, I think that reasoning completely overlooks the massive upward pressure on price caused by increased confidence in BTC generally, and also wrongfully assumes that a large portion of GOX users will suddenly want to cash out to fiat (rather than simply holding on to their BTC in a wallet or on some other exchange).

[redhawk979]

If only there were some kind of laws or rules in place to prevent companies like Mt.Gox from doing this shit....

[Holliday]

Gox is done. Even if they fix their withdraw issue, it isn't the only issue plaguing them.

They handled the transaction malleability problem in the worst possible way. They thought it was better to blame known protocol issues instead of their custom implementation which if done correctly would have easily handled transaction malleability.

Gox has plagued Bitcoin for long enough. I expect them to fix this single problem and then be relegated to the dustbin of history.

Anyone who continues to use them after this most recent episode of Goxxing is a moron and deserves any future abuse they receive at the hands of Gox.

[FenixRD]

As I see it, there are three ways the Mt. Gox fiasco could play out in the short term:

(1) Mt. Gox announces in a week or two that they have finally fixed all of their issues, and are completely reinstating BTC withdrawals. 
(2) It becomes clear that Mt. Gox is completely broke (e.g. it had a massive theft of BTC by insiders, was hacked, etc), and will never reinstate BTC withdrawals.
(3) Mt. Gox drags this out for another month, and then only reinstates very limited withdrawals with a small cap on daily withdrawals.

My predictions:
(1) If Gox actually fixes their issues and reinstates BTC withdrawals, the price on all exchanges will increase significantly.  My guess is that BTC would shoot up to the $700-800 range within a few days, because a true fix would provide a huge reassurance to the world at large on multiple different fronts.  First, it provides reassurance that the BTC protocol is not fatally flawed in some way (of course, anyone who knows something about BTC realizes that was never a real risk, but the distinction between transaction malleability and a core protocol issue is too subtle for most non-techies).  Second, a fix provides some reassurance that BTC isn't something that is just too complex and esoteric to gain wide acceptance (i.e. some people are probably thinking "well, if Gox can be brought to its knees because they overlooked some little technical detail, that kind of thing is probably going to happen many more times in the future, and crypto is just never going to be able to go mainstream). 

(2) If Gox is defunct, BTC will decrease significantly.  The market is already factoring in this possibility to some extent, but based on the exchange rates on bitcoinbuilder, it seems like the market consensus is putting that likelihood at less than 50%.  Plus, I am not sure that the market has yet fully factored in the potential snowball effect of lost confidence in cryptos generally that could result from the complete collapse of Gox. 

(3) If Gox keeps dragging this out, it puts some downward pressure on price, but not so great that it couldn't be overcome by other news (e.g. favorable announcement by a government or a very large retailer).

I hear a lot of people saying that if Gox reinstates withdrawals, the price is going to go down because of the huge number of current Gox users that will suddenly be able to sell their BTC on some other exchange for double the price.  However, I think that reasoning completely overlooks the massive upward pressure on price caused by increased confidence in BTC generally, and also wrongfully assumes that a large portion of GOX users will suddenly want to cash out to fiat (rather than simply holding on to their BTC in a wallet or on some other exchange).

Correct on all fronts, except I disagree with #2. I do not expect a significant decrease. The flash-crash price, I cannot predict, but I will be very surprised to find that there is not SIGNIFICANT resistance at passing $500 - $600 for very long, tbh.

Additionally, I do not expect them to die entirely. While perhaps a few weeks ago they were internally "dead in the water" as a result of extended arbitrage and imbalances, and bad decisions besides, this entire fiasco was an opportunity (if not outright a calculated move) to rebalance their BTC/fiat ratios. I think this is exactly what their point was, and to some degree I almost kind of sympathize with Karpeles; but no, I don't. It would have been simple to operate Gox in a way that never resulted in these issues; he has only greed to blame. He could have accepted a smaller rate of profit and created a stable exchange, by not permitting users to extend beyond the exchange's liquidity and then be silent on the matter for months on end while users waited.

Anyway. My targets:

1) Agree. Quick rebound to $800+. The notion that this could decrease the price is silly. There will be an obvious psychological increase in value, and once that occurs, and the rise begins, anyone considering selling will wait. The only real outcome of this is, that once we overshoot the new "true" value, the oscillation may be severe as profits are taken by those who have had enough. But oscillations are profitable, so the bulls and real traders will stay in. We could see $1k+, although I'm not confident that it will still be in the four figure after pullback and so on. Again, $800 - $850 is my fairly certain target.

2) As I said, not gonna happen that extreme (though I wish Gox would just die, already). Even if it did, again, $500 - $550 is more realistic, maybe even $600. There will be relief in a dead Gox, as well. The only thing that has ever killed the price in the last five years has been Gox, with the single exception of the PBOC announcements. Even that was accompanied by large-scale DDOSing and a downed Gox.

3) This is what I expect to happen, in which case there will be a less dynamic return to the $800 range.

[FenixRD]

By the way, this clearly belongs in the Speculation subforum. I don't do janitorial stuff, but just a heads up, in case it isn't moved by someone, please put it there next time. The use of the Bitcoin Discussion subforum for literally everything, is completely out of control.

[Holliday]

If only there were some kind of laws or rules in place to prevent companies like Mt.Gox from doing this shit....

First of all, these laws exist.

Second of all, laws don't prevent bad things from happening. They allow the victims (if they are still alive) to seek justice in the court of law.

A better solution is to protect yourself from the start.

If you aren't the sole controller of your private keys, you don't have any bitcoins. (That's a "law" I can live by.)

If one wants to speculate on the Bitcoin exchange rate, one has to understand the third party risks involved.

[Solarstorm75]

(1) If Gox actually fixes their issues and reinstates BTC withdrawals, the price on all exchanges will increase significantly. 

I agree, but only in very short term. It will be a fools race.

Most people will leave Gox and transfer the Coins to other exchanges like Stamp. But they will not deposit new fiat at these other exchanges. So the price will drop.

[quone17]

I don't know.  It seems like the price has already had it major drop.  I think Gox is pressuring the price on other exchanges because everyone sold on Gox to try to get money out, and it caused it to look like the "actual" price of BTC is lower than it actually is (on other exchanges.).  The sooner Gox dies the better, but I fear it will do all it can to not die, so it will keep the price low for a while. 

[btcgolfing]

gox will blame anything they can but themselves, its pathetic. i hope they die off soon but they brought new light to bitcoin and although it was taken as negative, its still very good for the longevity of bitcoin, im rather new to the forums but long time bitcoin follower.

[Baitty]

You can say good bye to mt gox they have messed up for the last time.

[DanielVG]

If Gox opens again and the price is low, everyone will go back and do business.

[apulunas]

boicott gox no matter what, their irresposibilty costed us big time and they have to pay for their greed.

[DanielVG]

boicott gox no matter what, their irresposibilty costed us big time and they have to pay for their greed.

I completely agree but i think alot of people who are screaming about taking down gox will change their minds fast once greed takes hold of their minds.  It'll be interesting watching the whole story unfold though.

[hgamezoom]

You told us what everyone already know.

[halcyon]

(3) Mt. Gox drags this out for another month, and then only reinstates very limited withdrawals with a small cap on daily withdrawals.

all press releases and happenings make this the most probable outcome... time to buy @ gox and then slowly get the BTC out with capped withdrawals
every crisis is an opportunity! 

[fonzie]

In the email interview, Mr. Karpelès responded to questions about the company's solvency or protection for customers' funds by saying that the matter is confidential.

http://www.reddit.com/r/Bitcoin/comments/1y8ot2/we_are_very_surprised_anyone_could_blame_mtgox/

[flagel8]

[sgbett]

If Gox opens again and the price is low, everyone will go back and do business.

its as simple as this.

[krneki]

With Mtgox well known problem, why the hell with someone want to stay at them?

If I had btc on such lousy exchange, I would just wait the first moment I could make withdrawal. Surely wouldn't want to stay with them.

[knightcoin]

With Mtgox well known problem, why the hell with someone want to stay at them?

If I had btc on such lousy exchange, I would just wait the first moment I could make withdrawal. Surely wouldn't want to stay with them.

my analogy ..is. because they locked themselves inside or outside .. I 've been see this many times in networking ... layer 3 below ...

[sgbett]

With Mtgox well known problem, why the hell with someone want to stay at them?

If I had btc on such lousy exchange, I would just wait the first moment I could make withdrawal. Surely wouldn't want to stay with them.

So, all withdrawals were confirmed fixed, and BTC is 70% cheaper there... I think there will be plenty of others that fancy a bite at that.

[MAbtc]

I'll say this. As much as the Coindesk article regarding possible Gox insolvency stunk of unsubstantiated accusations, the situation does feel a lot to me like Full Tilt in 2011. I'm still waiting on a FTP payout far larger than my wallets and trading accounts combined -- royally fucked up my life for a really long time. Bitar and those fucking pigs.

Considering their massive visibility and position as the #2 room in the world, none of us regs ever would have thought that the April 2011 seizures would have made even a dent in FTP's capital reserves. Oh, how wrong we were.

Will never make that mistake again. The fact is, we can speculate forever about how much revenue Gox took in, its overhead (including legal costs and seizures -- I have no faith in the operational cost numbers floating around), how much was squandered through mismanagement, and how much was stolen. At the end of the day, we have no idea. The situation is entirely opaque.

Whatever the case, Karpeles answering "that's confidential" when questioned about Gox's solvency is about as pathetic as it gets. It really does seem that he wants to manipulate the market downwards.

[halcyon]

really like this comparison to Full Tilt!

At the moment it´s really speculation whether gox abused customer funds, got hacked or whatever.

[Torque]

Whatever the case, Karpeles answering "that's confidential" when questioned about Gox's solvency is about as pathetic as it gets. It really does seem that he wants to manipulate the market downwards.

Yep.  I mean if there was zero chance that they didn't have all the bitcoins accounted for for every wallet on Gox, don't you think he would of said immediately "That's not true.  We're completely solvent."  

Meaning that someone will eventually get the short end of the stick, when trying to withdrawal their coins.  They will just get blocked.  It'll be a roach motel.

[Money Raccoon]

So what's the consensus here regarding market reaction to another non-announcement? 

You mean more of the same? Jeez, I dunno..