Bitcoin, the digital currency wave of the future, has experienced a tumultuous week that saw a major exchange disappear, and Bitcoin prices crash on world markets and then bounce back the very next day. It’s enough to make a conservative investor queasy just reading about it.
On January 24th MtGox, formerly one of the world’s largest Bitcoin exchanges, went dark and the website disappeared. Even though MtGox had fallen out of favor with Bitcoin enthusiasts over the last year, there was more than one user with over a quarter-million dollars in Bitcoin on the site. The potential for them to get their money back seems distant at best.
Initially the news caused Bitcoin prices to slump, falling below $500 on many exchanges. Traditional media outlets rushed to proclaim that Bitcoin was on the verge of collapse. That was yesterday; today the picture doesn’t look nearly as bleak.
MtGox had fallen out of favor with Bitcoin traders, so its disappearance was only a surprise to those on the periphery of the industry.
Bitcoin prices have recovered and stabilized back near $560 on Bitstamp.net, one of the larger remaining Bitcoin exchanges. It’s been well known for some time that MtGox had fallen out of favor with Bitcoin traders, so its disappearance was only a surprise to those on the periphery of the industry.
MtGox did not start out life as a Bitcoin exchange. In 2009, the company first rose to prominence as a trading card exchange, and didn’t switch to the Bitcoin trade until 2010. The company’s name actually stands for Magic: the Gathering Online eXchange, and the transition to Bitcoin trading was not without incident. MtGox was dogged by persistent rumors, stemming from a widely-circulated alleged internal memo indicating MtGox had lost over 744,000 Bitcoins, a theft that went undetected for years. There were other hacking incidents, leaving many traders to question the security of the online exchange headquartered in Japan.
The six other Bitcoin exchanges around the globe put out statements distancing themselves from MtGox before the exchange went offline, indicating that the rest of the industry was clearly aware that the exchange was having difficulty.
The popular media, and policy wonks at big investment banks, were swift to pronounce Bitcoin’s demise, though the announcement may have been premature. It is true that Bitcoin is at somewhat of a crossroads in its development. It’s either going to recover, or be abandoned back to the techies and geeks that first developed and cultivated the digital currency. Bitcoin will never go completely to zero value; it will keep going with the same core of users who have been there from the beginning. Though it may lose commercial and broad public appeal, it seems very unlikely the project will ever be completely abandoned.
We’ll find out in the days ahead whether Bitcoin has commercial staying power, or whether traders can look forward to months of gradual declines and a fall from the headlines. There are several factors that will determine the future of Bitcoin, including whether a large, secure exchange can be developed in the US, and whether the volunteer developers at the core of the system can stay ahead of large teams of organized hackers.
Many in the Bitcoin world see the fall of MtGox as a positive development, that will pave the way for a new breed of commercial entrepreneurs. That scenario may too optimistic, just as the early pronouncements of doom were too dire. Considering that Bitcoin is not regulated, insured, or even centrally managed, it’s amazing the digital currency has gotten this far.
What’s for sure is we don’t know yet whether Bitcoin will hang on to become the currency of the future, or retreat back into the shadowy world of computer geeks and online gamers.
Sources:
http://redteanews.com/2014/02/26/bitcoin-the-obituaries-are-premature/#.Uw5GlvldXfI-RedteaConservative News for the Right-Minded Individual 
reedteanews.com
