What if MtGox makes good?

[Peter R]

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.

I agree (in "speculating mode") with most of your post, but I fail to understand the 750KBTC LOST COINS theory (you're not the first to come up with it). If they were stolen, what makes you think they are destroyed? I would believe the thieves have secured and/or resold them already, so they are still in circulation, not destroyed.

In the theory I just posted, the 750,000 coins aren't destroyed.  It's just that the market has been behaving as though there were 750,000 more coins than there actually were since 2011.  The "effective" monetary base of bitcoin would have just shrunken by 750,000 BTC.

[bitcoin50k]

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.

I agree (in "speculating mode") with most of your post, but I fail to understand the 750KBTC LOST COINS theory (you're not the first to come up with it). If they were stolen, what makes you think they are destroyed? I would believe the thieves have secured and/or resold them already, so they are still in circulation, not destroyed.

In the theory I just posted, the 750,000 coins aren't destroyed.  It's just that the market has been behaving as though there were 750,000 more coins than there actually were since 2011.  The "effective" monetary base of bitcoin would have just shrunken by 750,000 BTC.

I apologize, I'm lost! Where the f#$% do these 750k BTC go?

[derpinheimer]

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.

I agree (in "speculating mode") with most of your post, but I fail to understand the 750KBTC LOST COINS theory (you're not the first to come up with it). If they were stolen, what makes you think they are destroyed? I would believe the thieves have secured and/or resold them already, so they are still in circulation, not destroyed.

In the theory I just posted, the 750,000 coins aren't destroyed.  It's just that the market has been behaving as though there were 750,000 more coins than there actually were since 2011.  The "effective" monetary base of bitcoin would have just shrunken by 750,000 BTC.

I apologize, I'm lost! Where the f#$% do these 750k BTC go?

Lets say 750k coins were sent to gox over the years.

750k were hacked, so the exchange really had a 0 balance.

However, those who had coins on the site still showed balances in their accounts, because when trading you arent actually transacting BTC every time, just numbers in your account. So, the 750k coins that existed still show up in everyones accounts.

Now imagine the hackers coins make it back to gox, all 750k of them. Now there are 1.5m coins on the site, even though only 750k exist. Simple enough?

[anth0ny]

R U saying that the price of BTC should bounce because 750 k are gone?...

Already did, really. We're only talking about 6% or so.

[sgbett]

What would they gain from being a fractional reserve  

WARNING: PURE SPECULATION

I'm changing my tune.  Yesterday I thought the 750,000 BTC figure was FUD to get certain Gox creditors to voluntarily accept 10 cents on the dollar for their GoxBTC.  The theory I'm leaning towards now is that the 750,000 BTC figure is true and Gox has indeed been operating as a fraction reserve.    

The theory is that sometime in 2011--probably after the crash from $30 to $10--MtGox was lax with security and a group of thieves or hackers was able to steal about 500,000 to 1,000,000 BTC.  At the time, this only represented $10 million dollars.  

To avoid discrediting bitcoin and embarrassing himself, Mark pretended that nothing happened.  He knew that BTC withdrawals were roughly balanced by BTC deposits (typical fraction reserve banking) and he hoped to slowly earn back the bitcoins through trading fees.  

Meanwhile, the thieves worked to mix their coins with non-stolen coins and slowly sold them off, thereby driving the bitcoin price eventually to $2 later in the fall of 2011.  It was this extra selling pressure that continued through the remainder of 2011 and 2012 that kept the price of bitcoin artificially depressed.

Meanwhile MtGox was buying coins whenever it had spare cash.  But as the price of bitcoin exploded in the spring of 2013 they saw their liabilities in $ terms increase tremendously.  But at this point they had to keep going, even using customer deposit money to buy coins from other exchanges or individuals.

The problems at MtGox (probably due to extreme stress of MK) got worse, and MtGox lost market share, slowly dwindling down MtGox's small supply of coins.  

MtGox purposely mixed immature coins into withdrawal transactions, and later used the malleability excuses, all to buy time to somehow get more coins and make good on withdrawals.  

But eventually all hope was lost.  Their supply of coins dwindled down to 2,000 BTC while their bitcoin liability were a huge 750,000 BTC.  

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.  

Who's theory is this?  It makes no sense, with due respect!  R U saying that the price of BTC should bounce because 750 k are gone?...

It makes perfect sense, and is one of the more compelling theories I have read.

Perhaps he should have used more words of one letter?

[matt4054]

I agree (in "speculating mode") with most of your post, but I fail to understand the 750KBTC LOST COINS theory (you're not the first to come up with it). If they were stolen, what makes you think they are destroyed? I would believe the thieves have secured and/or resold them already, so they are still in circulation, not destroyed.

In the theory I just posted, the 750,000 coins aren't destroyed.  It's just that the market has been behaving as though there were 750,000 more coins than there actually were since 2011.  The "effective" monetary base of bitcoin would have just shrunken by 750,000 BTC.

OK, now I got your point. Yes.

[derpinheimer]

These guys were trying til the end LOL

Was just checking my emails from them and though this was funny..

[ScrapOfCat]

It would be very easy for Gox to prove that they are solvent. Just put a reasonable amount of coins in some addresses and sign a message with the corresponding keys.

The fact alone that they aren't doing so at this stage of the drama tells everything.

This.

It would be child's play for Gox to prove they have a large # of coins.  I don't agree with what you think it would prove (that they are solvent), but it would definitely prove something.

[analytics]

sorry guys.  Gox is done.  

http://www.bloomberg.com/news/2014-02-26/bitcoin-exchange-mt-gox-shutdown-said-to-be-probed-by-u-s-.html

https://twitter.com/twobitidiot/status/438858500601831426



the full story is now circulating.  ppl are lawyering up.  the btc foundation went to the Feds to ask for a mtgox probe.  they would only do this for CRIMINAL matters.


wow!  (speculation) mtgox was a ponzi running a fractional reserve for years.

Timelines here don't agree.  Feds went after gox early in the month. maybe the foundation helped later

Also your statement gox is done is more FUD.

[notig]

Who's theory is this?  It makes no sense, with due respect!

I have no idea whether this is correct.  That's why I wrote "WARNING: PURE SPECULATION."

The bottom line is that there's no way MtGox didn't notice a slow theft of 750,000 BTC.  My three contending theories in current order of preference are:

#1.  What I posted above.
#2.  The 750,000 BTC figure is FUD designed to buy-out GoxBTC for cheap and close the (smaller) solvency gap.  
#3.  The "Mark messed-up the private key to deep cold storage" theory.

R U saying that the price of BTC should bounce because 750 k are gone?...

If there are 750k BTC less than what everyone thought, I'd say that was very bullish, at least over the medium and long term.  

Theory #2 is wrong because if that was the case they would not have stopped the trading engine. You can't get your bitcoins to the bitbuilder gox address without the trading engine so that would have severely limited things.

I thought they might have had a few thousand coins stolen but this magnitude of a situation surprised me.

[SpeculateThis]

https://i.imgur.com/ik0wWpT.png

[btc4ever]

Maybe they will make good, and are not such bad guys after all... at least in their intent.

There is an alternative theory that MtGox may have recently realized it cannot access their cold storage due to key mismanagement, technical glitch, or whatever.  In this scenario, they are probably frantically trying to guess passwords or otherwise fix the glitch.


more here:
http://letstalkbitcoin.com/somethings-not-right-at-gox/


To my mind, this theory matches up well with the known facts and statements.

[Teal Deer]

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.  

I don't understand why your theory would equate to there being less Bitcoins than we thought.

[matt4054]

I don't understand why your theory would equate to there being less Bitcoins than we thought.

Neither did I, but he clarified this.

[SpeculateThis]

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.  

I don't understand why your theory would equate to there being less Bitcoins than we thought.

There's also the possibility of the private keys to those coins being lost forever 

[Tzupy]

Latest rumors say that the potential investors who were contacted by Karpeles were frightened by
the size of the mess at MtGox and they notified the authorities. I would expect Karpeles to be arrested on fraud charges.

[mb300sd]

If they were lost that long ago, they should have been close to made up by trading feed by now.

750k / 0.6% = 125,000,000

Whats gox's total trade volume over the past couple years?

[ArticMine]

What would they gain from being a fractional reserve  

WARNING: PURE SPECULATION

I'm changing my tune.  Yesterday I thought the 750,000 BTC figure was FUD to get certain Gox creditors to voluntarily accept 10 cents on the dollar for their GoxBTC.  The theory I'm leaning towards now is that the 750,000 BTC figure is true and Gox has indeed been operating as a fraction reserve.    

The theory is that sometime in 2011--probably after the crash from $30 to $10--MtGox was lax with security and a group of thieves or hackers was able to steal about 500,000 to 1,000,000 BTC.  At the time, this only represented $10 million dollars.  

To avoid discrediting bitcoin and embarrassing himself, Mark pretended that nothing happened.  He knew that BTC withdrawals were roughly balanced by BTC deposits (typical fraction reserve banking) and he hoped to slowly earn back the bitcoins through trading fees.  

Meanwhile, the thieves worked to mix their coins with non-stolen coins and slowly sold them off, thereby driving the bitcoin price eventually to $2 later in the fall of 2011.  It was this extra selling pressure that continued through the remainder of 2011 and 2012 that kept the price of bitcoin artificially depressed.

Meanwhile MtGox was buying coins whenever it had spare cash.  But as the price of bitcoin exploded in the spring of 2013 they saw their liabilities in $ terms increase tremendously.  But at this point they had to keep going, even using customer deposit money to buy coins from other exchanges or individuals.

The problems at MtGox (probably due to extreme stress of MK) got worse, and MtGox lost market share, slowly dwindling down MtGox's small supply of coins.  

MtGox purposely mixed immature coins into withdrawal transactions, and later used the malleability excuses, all to buy time to somehow get more coins and make good on withdrawals.  

But eventually all hope was lost.  Their supply of coins dwindled down to 2,000 BTC while their bitcoin liability were a huge 750,000 BTC.  

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.  

It actually makes a lot of sense. It also explains why a lot of the problems with MTGox happened shortly after major increases in the BTC/USD rate as the "short squeeze" started to bite. The seizure of funds by the US Government, also provided the perfect cover by making the US Government the scapegoat for what was a BTC fractional reserve that was at the time blowing up due to an increase in the BTC/USD rate. 

[CrashX]

What would they gain from being a fractional reserve  

WARNING: PURE SPECULATION

I'm changing my tune.  Yesterday I thought the 750,000 BTC figure was FUD to get certain Gox creditors to voluntarily accept 10 cents on the dollar for their GoxBTC.  The theory I'm leaning towards now is that the 750,000 BTC figure is true and Gox has indeed been operating as a fraction reserve.    

The theory is that sometime in 2011--probably after the crash from $30 to $10--MtGox was lax with security and a group of thieves or hackers was able to steal about 500,000 to 1,000,000 BTC.  At the time, this only represented $10 million dollars.  

To avoid discrediting bitcoin and embarrassing himself, Mark pretended that nothing happened.  He knew that BTC withdrawals were roughly balanced by BTC deposits (typical fraction reserve banking) and he hoped to slowly earn back the bitcoins through trading fees.  

Meanwhile, the thieves worked to mix their coins with non-stolen coins and slowly sold them off, thereby driving the bitcoin price eventually to $2 later in the fall of 2011.  It was this extra selling pressure that continued through the remainder of 2011 and 2012 that kept the price of bitcoin artificially depressed.

Meanwhile MtGox was buying coins whenever it had spare cash.  But as the price of bitcoin exploded in the spring of 2013 they saw their liabilities in $ terms increase tremendously.  But at this point they had to keep going, even using customer deposit money to buy coins from other exchanges or individuals.

The problems at MtGox (probably due to extreme stress of MK) got worse, and MtGox lost market share, slowly dwindling down MtGox's small supply of coins.  

MtGox purposely mixed immature coins into withdrawal transactions, and later used the malleability excuses, all to buy time to somehow get more coins and make good on withdrawals.  

But eventually all hope was lost.  Their supply of coins dwindled down to 2,000 BTC while their bitcoin liability were a huge 750,000 BTC.  

And here we are today.  If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.  

Very good theory,  But if that's the case that will defiantly be consider a Ponzi Scheme, in which Mark, will be setting in prison for 15-25 Yrs, if process here in the US.

[anth0ny]

Very good theory,  But if that's the case that will defiantly be consider a Ponzi Scheme, in which Mark, will be setting in prison for 15-25 Yrs, if process here in the US.

Yeah, if it's the case then it was a Ponzi scheme.

Oh shit, prepare for the headlines: "Jury to Determine if Bitcoin is a Ponzi Scheme". This is just the misinformation that the enemies of Bitcoin need.