What is going on with MtGox and why MtGox could reduce BTC value dramatically

[Jeronimus]

Since we get little to no info from Karpeles, one can only guess what is going on behind the scenes..

Here is what I think is going on. I could be wrong, but the signs seem to point this way. I will explain why if i am right, this could get bitcoin back to $100 or even less.


MtGox shut down both USD/BTC withdrawals, followed by a sharp decline in BTC price which however made no sense at all.
Since USD withdrawals were not possible either, why would someone turn his BTC into USD, when getting out BTC if and when they open up again, would be way easier than getting out USD and having to wait who knows how many months IF they would get any USD out at all. With BTC it would be a quick transaction to another wallet within an hour.


While a small drop in BTC price on MtGox would have been justified, a drop to $91.5 at the lowest point made no sense to me, so here is what i think happened.


Karpeles created goxBTC out of thin air(entered a few numbers in the server database not backed by real BTC), and went with it through all the buy orders. This allowed him to drop the BTC price dramatically, resulting in many panicking and selling their BTC in the process.

Now one might think he did this to cause others to panic and sell their real BTC, but i believe the real BTC he already keeps dumping on the other major exchanges like bitstamp and btc-e.


So why did he drop the price of BTC on gox deliberately when he already ate up the real BTC? The answer is simple. He knew that this would get people to try to interchange their real BTC for very cheap goxBTC created out of thin air, them thinking they would eventually get their BTC out with some luck (a calculated gamble).

Each time karpeles sees no new real BTC coming in, he creates a few more goxBTC out of thin air, and lowers the price with that, which results in greed taking over many, trying to get the cheap goxBTC, they believe the odds are in their favor to make a profit out of it.

There are also people which believe that buying that goxBTC will eventually allow them to multiply it and sell to others, which might have the same plan.
The real problem is that this actually WORKS. It's a ponzi where the last few that buy in too late might not be able to sell to the next...

...while karpeles keeps creating the fake goxBTC, he keeps dumping the real BTC he got on the exchanges.

A process which can go forever until people stop buying fake goxBTC. But why should they if it makes them profit through the sharp up and downs we have seen in the last few days, the price going bananas from 91.5 to 300 in just a few hours, while there are people willing to buy the fake coins off of them for real BTC?

This is a self perpetuating process that will continue while the price of BTC will keep going down, supposed my theory is correct. It will stop when the price is far too low on the other major exchanges, making it impossible to lure more people into buying goxBTC at prices which would be worth anyone's time.


Someone will have to shut down MtGox with a court order and put the whole gang into jail should it turn out that i am right, or we are looking at veeeery cheap BTC in the future.

Note that this is just my opinion of what MIGHT be going on with Gox. It might seem far fetched to some, but this is what the signs point to as i see it.

[pinkmonkey]

we are all doomed

[st4nl3y]

very good and extensive theory of yours but bitcoin can't be created "from thin air"

"How are new bitcoins created?
New bitcoins are generated by the network through the process of "mining". In a process that is similar to a continuous raffle draw, mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem (and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of the network. The reward for solving a block is automatically adjusted so that, ideally, every four years of operation of the Bitcoin network, half the amount of bitcoins created in the prior 4 years are created. A maximum of 10,499,889.80231183 bitcoins were created in the first 4 (approx.) years from January 2009 to November 2012. Every four years thereafter this amount halves, so it should be 5,250,000 over years 4-8, 2,625,000 over years 8-12, and so on. Thus the total number of bitcoins in existence can never exceed 20,999,839.77085749 and counting. See Controlled Currency Supply.
Blocks are mined every 10 minutes, on average and for the first four years (210,000 blocks) each block included 50 new bitcoins. As the amount of processing power directed at mining changes, the difficulty of creating new bitcoins changes. This difficulty factor is calculated every 2016 blocks and is based upon the time taken to generate the previous 2016 blocks."

[Jeronimus]

very good and extensive theory of yours but bitcoin can't be created "from thin air"

"How are new bitcoins created?
New bitcoins are generated by the network through the process of "mining". In a process that is similar to a continuous raffle draw, mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem (and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of the network. The reward for solving a block is automatically adjusted so that, ideally, every four years of operation of the Bitcoin network, half the amount of bitcoins created in the prior 4 years are created. A maximum of 10,499,889.80231183 bitcoins were created in the first 4 (approx.) years from January 2009 to November 2012. Every four years thereafter this amount halves, so it should be 5,250,000 over years 4-8, 2,625,000 over years 8-12, and so on. Thus the total number of bitcoins in existence can never exceed 20,999,839.77085749 and counting. See Controlled Currency Supply.
Blocks are mined every 10 minutes, on average and for the first four years (210,000 blocks) each block included 50 new bitcoins. As the amount of processing power directed at mining changes, the difficulty of creating new bitcoins changes. This difficulty factor is calculated every 2016 blocks and is based upon the time taken to generate the previous 2016 blocks."

That's nonsense, because i said he created goxBTC out of thin air, by entering numbers into the MtGox database. You have no means to know if the BTC you are trading on Gox are backed by real BTC or not. Same goes for the USD. It's just numbers in their server database.

The real BTC and real USD might be long gone.

please take a minute to think before posting such nonsense

[Jeronimus]

I don't think karpeles is out for your money. If money was his motive, he could have made fortunes just of the fees when he had 80%+ of the market.

If he was just corrupt, there were plenty of chances for him to make fortunes by abusing the exchange powers. Just a simple example. He could have made millions through arbitrage, as there was a huge price difference because of USD withdrawal delays caused artificially most likely.
Karpeles being the owner of the exchange certainly did not have such withdrawal delays himself, or any of his insider friends he could have cooperated with.


No really, money is not his motive, because he could have made enough for several lifetimes and then some.

What is more likely, seeing the way he acts, is him being a paid assassin to harm/kill BTC. Guess by who.

just to complete the picture of what i am thinking, i quote myself from another thread

[Jeronimus]

Karpeles says that any Bitcoin he personally owns was on Mt. Gox, meaning he will lose money if the exchange fails. In response to a question about how much he personally stands to lose, Karpeles writes, “well, technically speaking it's not 'lost' just yet, just temporarily unavailable.”

Do you see what this means? At first it seems to make no sense...

How can Karpeles have his personal bitcoin stored in the exchange, YET it is temporarily unavailable?

If he has bitcoin stored in the exchange which he owns, he surely has the private keys to it, right? right! But then it would be AVAILABLE to him.

So we conclude he does not have private keys to that bitcoin on the exchange. So that bitcoin is NOT real. It's fake bitcoin he created simply by entering numbers into the database, which would explain the sharp decline to 91.5 USD as pointed out above.

Noone sane would have sold at 91.5 USD when other exchanges were at 500-650.

He created BTC out of thin air and pushed the price down, in order to get more fools to buy that low priced goxBTC via the builder for real BTC he would then keep dumping.
edit: Also to get more fools to deposit more funds into MtGox for him to grab more real USD

Those buying the fake BTC were trying to multiply it with the sharp up and downs in that period and resell to others trying to do the same in this ponzi which just ended when MtGox shut down and the last one to hold those fake goxBTC got burned.