Mtgox: Question for those who sold BTC at the end

[virtualfaqs]

My condolences to everyone who lost money on Mtgox. But I'm still curious as to why the price went from $1000 to $100. For those of you who sold in that range, what was your reasoning for doing that? Was it because you felt it was a safer bet if Mtgox went insolvent or panic selling? It appeared the majority of users here still believed Mtgox was solvent at the time. Again sorry for your loss if you lost any money.

Right now after Mtgox declared bankruptcy, you'd think Mtgox price would be worthless, but it's still selling at around $20 USD.

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[dandirk]

I had about 0.00065 cents in Gox... but here are the reasons...

1. Legally speaking it is easier to get USD/fiat back out of any legal proceedings like Bankruptcy then bitcoins.  Many were trying to get fiat, when everyone is selling the price goes down.

2. The moment gox shut down both fiat and btc with drawls everyone KNEW it was dead, anyone buying Goxbtc were basically betting it wouldn't fail.  The bet was long odds so in order to temp people to make the bet the price had to be very tempting and worth the risk.  Basically people were giving Gox a 15-20% change for not going bust.  Now they think you have a 3% chance ($20 per coin) of getting real BTC/cash out of Gox.

[virtualfaqs]

I had about 0.00065 cents in Gox... but here are the reasons...

1. Legally speaking it is easier to get USD/fiat back out of any legal proceedings like Bankruptcy then bitcoins.  Many were trying to get fiat, when everyone is selling the price goes down.

2. The moment gox shut down both fiat and btc with drawls everyone KNEW it was dead, anyone buying Goxbtc were basically betting it wouldn't fail.  The bet was long odds so in order to temp people to make the bet the price had to be very tempting and worth the risk.  Basically people were giving Gox a 15-20% change for not going bust.  Now they think you have a 3% chance ($20 per coin) of getting real BTC/cash out of Gox.

I don't think everyone knew it was dead. Pretty sure everyone who had money in the exchange weren't thinking that.Some may have thought that, but there were many people here still preparing for the deluge of BTC when Gox was coming back. I was one of them. I was trying to figure out to hedge my risk. Also you could have still got decent return on Bitcoin Builder when BTC was $300 and gotten 0.60 back. Of course that's hindsight thinking.

[UnDerDoG81]

I had about 0.1 BTC there and it was just speculating for me if I can make those 0.1 BTC to 0.3 BTC. At the end, I sold @110 and then the price went up to 400 and never came back to 110.

I´m really sorry for everybody who lost their coins @gox. Very sad.

[Peter R]

My condolences to everyone who lost money on Mtgox. But I'm still curious as to why the price went from $1000 to $100. For those of you who sold in that range, what was your reasoning for doing that?

This is the one piece of the puzzle that took me the longest to come up with a logical explanation for.  After MtGox disabled BTC withdrawals, I expected the premium over BitStamp to disappear PLUS a bit more to reflect the fact that limited fiat withdrawals in yen and euros were still possible.  But if I had fiat on Gox, I would have deployed all of it when the price premium was 20-30% below BitStamp.  I simply don't buy the "it's easier to sue in USD" to explain the price dropping under $100!  

My explanation for the dumping down below $100 follows from my theory (see links below) that Gox had been running a fractional reserve in bitcoin since 500,000 - 1,000,000 BTC were stollen in 2011:

https://bitcointalk.org/index.php?topic=488058.msg5397869#msg5397869
https://bitcointalk.org/index.php?topic=492393.msg5438572#msg5438572

The theory states that Gox was using client fiat funds to purchase bitcoins from other exchanges and individuals in order to keep up with bitcoin withdrawals.  Prior to disabling bitcoin withdrawals, they had, say, $150,000,000 in client funds sitting in USD IOUs but only $30,000,000 in actual cash.  If this fact was revealed during bankruptcy, it would have been clear-cut fraud and Mark would be doing jail time: how could you explain $120,000,000 in missing cash??

So, when Mark knew it was over, he began selling fractional reserve GoxBTC from multiple alias accounts (to make it look like real customers were selling).  He drove the price so low, that most people converted their USD funds into GoxBTC.  He kept driving the price lower and lower hoping that enough people would convert into GoxBTC so that he could rebalance the USD funds owed to customers with what was actually in the Gox corporate bank account.  He drove the price so low that people actually wired additional funds to Gox further reducing his USD solvency gap.  

But it looks like it wasn't enough.  I think the bankruptcy filling declares $50,000,000 in fiat liabilities and $30,000,000 in cash.  But my point is that if he had gone bankrupt prior to dumping all those bitcoins (that didn't really exist), the fiat deposits owed to real customers would have looked ridiculous and screamed "fraud."

In conclusion, the price was driven low by Mark dumping GoxBTC to entice GoxUSD holders to transfer from USD into GoxBTC, in an attempt to close the USD solvency gap between what Gox had in its bank with what it owed to its clients.  

[virtualfaqs]

My condolences to everyone who lost money on Mtgox. But I'm still curious as to why the price went from $1000 to $100. For those of you who sold in that range, what was your reasoning for doing that?

This is the one piece of the puzzle that took me the longest to come up with a logical explanation for.  After MtGox disabled BTC withdrawals, I expected the premium over BitStamp to disappear PLUS a bit more to reflect the fact that limited fiat withdrawals in yen and euros were still possible.  But if I had fiat on Gox, I would have deployed all of it when the price premium was 20-30% below BitStamp.  I simply don't buy the "it's easier to sue in USD" to explain the price dropping under $100!  

My explanation for the dumping down below $100 follows from my theory (see links below) that Gox had been running a fractional reserve in bitcoin since 500,000 - 1,000,000 BTC were stollen in 2011:

https://bitcointalk.org/index.php?topic=488058.msg5397869#msg5397869
https://bitcointalk.org/index.php?topic=492393.msg5438572#msg5438572

The theory states that Gox was using client fiat funds to purchase bitcoins from other exchanges and individuals in order to keep up with bitcoin withdrawals.  Prior to disabling bitcoin withdrawals, they had, say, $150,000,000 in client funds sitting in USD IOUs but only $30,000,000 in actual cash.  If this fact was revealed during bankruptcy, it would have been clear-cut fraud and Mark would be doing jail time: how could you explain $120,000,000 in missing cash??

So, when Mark knew it was over, he began selling fractional reserve GoxBTC from multiple alias accounts (to make it look like real customers were selling).  He drove the price so low, that most people converted their USD funds into GoxBTC.  He kept driving the price lower and lower hoping that enough people would convert into GoxBTC so that he could rebalance the USD funds owed to customers with what was actually in the Gox corporate bank account.  He drove the price so low that people actually wired additional funds to Gox further reducing his USD solvency gap.  

But it looks like it wasn't enough.  I think the bankruptcy filling declares $50,000,000 in fiat liabilities and $30,000,000 in cash.  But my point is that if he had gone bankrupt prior to dumping all those bitcoins (that didn't really exist), the fiat deposits owed to real customers would have looked ridiculous and screamed "fraud."

In conclusion, the price was driven low by Mark dumping GoxBTC to entice GoxUSD holders to transfer from USD into GoxBTC, in an attempt to close the USD solvency gap between what Gox had in its bank with what it owed to its clients.  

I think we just need to wait and see. Subpoenas will be very interesting.

[HairyMaclairy]

If this is correct then all price points since 2011 are invalid data.

I think you all appreciate the enormity of this.

[MatTheCat]

If this is correct then all price points since 2011 are invalid data.

I think you all appreciate the enormity of this.

Perhaps.

But there is still what people have grown accustomed to paying, and what people think that Bitcoin is actually worth.

Once upon a time it would have been unthinkable to have a world reserve currency not backed by some precious commodity, but.....

[HairyMaclairy]

I am not suggesting a return to price stability in the $8 - $12 range. But goddamn the market is going to take a shit kicking if comes out that both the April bubble and December bubble were driven by fiat stolen by Mt Gox.

[donjoe]

Right now after Mtgox declared bankruptcy, you'd think Mtgox price would be worthless, but it's still selling at around $20 USD.

What will it take for you people to get it through your heads that Gox is not dead and that they have not filed for bankruptcy?

They have only filed for "civil rehabilitation", see:
http://www.mtgox.com
https://www.jurists.co.jp/en/publication/tractate/article_10073.html#03

[CryptKeeper]

Right now after Mtgox declared bankruptcy, you'd think Mtgox price would be worthless, but it's still selling at around $20 USD.

What will it take for you people to get it through your heads that Gox is not dead and that they have not filed for bankruptcy?

They have only filed for "civil rehabilitation", see:
http://www.mtgox.com
https://www.jurists.co.jp/en/publication/tractate/article_10073.html#03

So what is it exactly? Is it something like "chapter 11" in the us?

 

[boumalo]

Right now after Mtgox declared bankruptcy, you'd think Mtgox price would be worthless, but it's still selling at around $20 USD.

What will it take for you people to get it through your heads that Gox is not dead and that they have not filed for bankruptcy?

They have only filed for "civil rehabilitation", see:
http://www.mtgox.com
https://www.jurists.co.jp/en/publication/tractate/article_10073.html#03

Ok but bankruptcy is not out of question to say the least

I think that some people who were selling at low price were expecting the price to go lower so they were hoping to buy at a lower price, I know that because I asked why people were selling at those low prices and someone answered me that, it does make sense

[donjoe]

So what is it exactly?

What it is exactly is explained at the second link I gave you.

Is it something like "chapter 11" in the us?

I'm not familiar with US law, so I can't tell you if there's a direct equivalent for this, but from what I understand "chapter 11" seems to be the right approximation for the two types of proceedings that the Japanese call "civil rehabilitation" (what Gox filed for) and "corporate reorganization" (different procedure, still not bankruptcy proper).

The question now, of course, is if their petition is going to be accepted by the court.

[CryptKeeper]

You are right:

Mt.Gox isn't dead - not yet.

[virtualfaqs]

Thanks for the clarification about bankruptcy.

[galbros]

My condolences to everyone who lost money on Mtgox. But I'm still curious as to why the price went from $1000 to $100. For those of you who sold in that range, what was your reasoning for doing that?

This is the one piece of the puzzle that took me the longest to come up with a logical explanation for.  After MtGox disabled BTC withdrawals, I expected the premium over BitStamp to disappear PLUS a bit more to reflect the fact that limited fiat withdrawals in yen and euros were still possible.  But if I had fiat on Gox, I would have deployed all of it when the price premium was 20-30% below BitStamp.  I simply don't buy the "it's easier to sue in USD" to explain the price dropping under $100!  

My explanation for the dumping down below $100 follows from my theory (see links below) that Gox had been running a fractional reserve in bitcoin since 500,000 - 1,000,000 BTC were stollen in 2011:

https://bitcointalk.org/index.php?topic=488058.msg5397869#msg5397869
https://bitcointalk.org/index.php?topic=492393.msg5438572#msg5438572

The theory states that Gox was using client fiat funds to purchase bitcoins from other exchanges and individuals in order to keep up with bitcoin withdrawals.  Prior to disabling bitcoin withdrawals, they had, say, $150,000,000 in client funds sitting in USD IOUs but only $30,000,000 in actual cash.  If this fact was revealed during bankruptcy, it would have been clear-cut fraud and Mark would be doing jail time: how could you explain $120,000,000 in missing cash??

So, when Mark knew it was over, he began selling fractional reserve GoxBTC from multiple alias accounts (to make it look like real customers were selling).  He drove the price so low, that most people converted their USD funds into GoxBTC.  He kept driving the price lower and lower hoping that enough people would convert into GoxBTC so that he could rebalance the USD funds owed to customers with what was actually in the Gox corporate bank account.  He drove the price so low that people actually wired additional funds to Gox further reducing his USD solvency gap.  

But it looks like it wasn't enough.  I think the bankruptcy filling declares $50,000,000 in fiat liabilities and $30,000,000 in cash.  But my point is that if he had gone bankrupt prior to dumping all those bitcoins (that didn't really exist), the fiat deposits owed to real customers would have looked ridiculous and screamed "fraud."

In conclusion, the price was driven low by Mark dumping GoxBTC to entice GoxUSD holders to transfer from USD into GoxBTC, in an attempt to close the USD solvency gap between what Gox had in its bank with what it owed to its clients.  

Thanks for this thoughtful post.  I'd wondered about it too and never bought the USD recovery idea either.  However, how does your explanation account for the huge volumes on Gox?  If Gox was making .6% commission they made almost 180K coins their last month of operation according to bitcoin charts.

[T.Stuart]

The real selling was a fraction of the Gox bot (Willy) selling. Did you notice this machine at work? It was ridiculously obvious by the end.

Willy was buying for a couple of months and then selling for a couple of weeks. Mark was desperately trying to manipulate the market to patch the biggest hole (in fiat or in btc) at the time. But it had to end in tears.

[derpinheimer]

My condolences to everyone who lost money on Mtgox. But I'm still curious as to why the price went from $1000 to $100. For those of you who sold in that range, what was your reasoning for doing that?

This is the one piece of the puzzle that took me the longest to come up with a logical explanation for.  After MtGox disabled BTC withdrawals, I expected the premium over BitStamp to disappear PLUS a bit more to reflect the fact that limited fiat withdrawals in yen and euros were still possible.  But if I had fiat on Gox, I would have deployed all of it when the price premium was 20-30% below BitStamp.  I simply don't buy the "it's easier to sue in USD" to explain the price dropping under $100!  

My explanation for the dumping down below $100 follows from my theory (see links below) that Gox had been running a fractional reserve in bitcoin since 500,000 - 1,000,000 BTC were stollen in 2011:

https://bitcointalk.org/index.php?topic=488058.msg5397869#msg5397869
https://bitcointalk.org/index.php?topic=492393.msg5438572#msg5438572

The theory states that Gox was using client fiat funds to purchase bitcoins from other exchanges and individuals in order to keep up with bitcoin withdrawals.  Prior to disabling bitcoin withdrawals, they had, say, $150,000,000 in client funds sitting in USD IOUs but only $30,000,000 in actual cash.  If this fact was revealed during bankruptcy, it would have been clear-cut fraud and Mark would be doing jail time: how could you explain $120,000,000 in missing cash??

So, when Mark knew it was over, he began selling fractional reserve GoxBTC from multiple alias accounts (to make it look like real customers were selling).  He drove the price so low, that most people converted their USD funds into GoxBTC.  He kept driving the price lower and lower hoping that enough people would convert into GoxBTC so that he could rebalance the USD funds owed to customers with what was actually in the Gox corporate bank account.  He drove the price so low that people actually wired additional funds to Gox further reducing his USD solvency gap.  

But it looks like it wasn't enough.  I think the bankruptcy filling declares $50,000,000 in fiat liabilities and $30,000,000 in cash.  But my point is that if he had gone bankrupt prior to dumping all those bitcoins (that didn't really exist), the fiat deposits owed to real customers would have looked ridiculous and screamed "fraud."

In conclusion, the price was driven low by Mark dumping GoxBTC to entice GoxUSD holders to transfer from USD into GoxBTC, in an attempt to close the USD solvency gap between what Gox had in its bank with what it owed to its clients.  

Thanks for this thoughtful post.  I'd wondered about it too and never bought the USD recovery idea either.  However, how does your explanation account for the huge volumes on Gox?  If Gox was making .6% commission they made almost 180K coins their last month of operation according to bitcoin charts.

How are you calculating such a number? Even assuming the "most favorable conditions", its just 6000.
That being, 1 million exchanged * 0.006 = 6000

Really though, assume maybe a 0.004 fee average, due to tiered fee rates, and of course that is 4000.

In the 3 months before, They got about 2.3m volume. So another 9200.

Assume 50% fee fiat -> BTC, all at $136: Another 50,000BTC. However, we know this didnt happen(they didnt acquire 50kBTC @ 136). So, could we say.. in the last 4 months, they covered 65000/744000 of liabilities, assuming $136 exchange rate?

Otherwise... if we go by the BitStamp exchange rate, then they acquired 12,500 "real BTC" in fiat fees, and another 14,000 in BTC fees.

Total in 4 months: 26,500 / 744,000 = 3.56%

--

Now, honestly, thats not too bad. But, even assuming just a 20% increase in BTC value per year, over the 10 years that it would take them to pay out "BTC:BTC", the BTC liabilities value in USD would average out to have quintupled.

[virtualfaqs]

My condolences to everyone who lost money on Mtgox. But I'm still curious as to why the price went from $1000 to $100. For those of you who sold in that range, what was your reasoning for doing that?

This is the one piece of the puzzle that took me the longest to come up with a logical explanation for.  After MtGox disabled BTC withdrawals, I expected the premium over BitStamp to disappear PLUS a bit more to reflect the fact that limited fiat withdrawals in yen and euros were still possible.  But if I had fiat on Gox, I would have deployed all of it when the price premium was 20-30% below BitStamp.  I simply don't buy the "it's easier to sue in USD" to explain the price dropping under $100!  

My explanation for the dumping down below $100 follows from my theory (see links below) that Gox had been running a fractional reserve in bitcoin since 500,000 - 1,000,000 BTC were stollen in 2011:

https://bitcointalk.org/index.php?topic=488058.msg5397869#msg5397869
https://bitcointalk.org/index.php?topic=492393.msg5438572#msg5438572

The theory states that Gox was using client fiat funds to purchase bitcoins from other exchanges and individuals in order to keep up with bitcoin withdrawals.  Prior to disabling bitcoin withdrawals, they had, say, $150,000,000 in client funds sitting in USD IOUs but only $30,000,000 in actual cash.  If this fact was revealed during bankruptcy, it would have been clear-cut fraud and Mark would be doing jail time: how could you explain $120,000,000 in missing cash??

So, when Mark knew it was over, he began selling fractional reserve GoxBTC from multiple alias accounts (to make it look like real customers were selling).  He drove the price so low, that most people converted their USD funds into GoxBTC.  He kept driving the price lower and lower hoping that enough people would convert into GoxBTC so that he could rebalance the USD funds owed to customers with what was actually in the Gox corporate bank account.  He drove the price so low that people actually wired additional funds to Gox further reducing his USD solvency gap.  

But it looks like it wasn't enough.  I think the bankruptcy filling declares $50,000,000 in fiat liabilities and $30,000,000 in cash.  But my point is that if he had gone bankrupt prior to dumping all those bitcoins (that didn't really exist), the fiat deposits owed to real customers would have looked ridiculous and screamed "fraud."

In conclusion, the price was driven low by Mark dumping GoxBTC to entice GoxUSD holders to transfer from USD into GoxBTC, in an attempt to close the USD solvency gap between what Gox had in its bank with what it owed to its clients.  

Thanks for this thoughtful post.  I'd wondered about it too and never bought the USD recovery idea either.  However, how does your explanation account for the huge volumes on Gox?  If Gox was making .6% commission they made almost 180K coins their last month of operation according to bitcoin charts.

How are you calculating such a number? Even assuming the "most favorable conditions", its just 6000.
That being, 1 million exchanged * 0.006 = 6000

Really though, assume maybe a 0.004 fee average, due to tiered fee rates, and of course that is 4000.

In the 3 months before, They got about 2.3m volume. So another 9200.

Assume 50% fee fiat -> BTC, all at $136: Another 50,000BTC. However, we know this didnt happen(they didnt acquire 50kBTC @ 136). So, could we say.. in the last 4 months, they covered 65000/744000 of liabilities, assuming $136 exchange rate?

Otherwise... if we go by the BitStamp exchange rate, then they acquired 12,500 "real BTC" in fiat fees, and another 14,000 in BTC fees.

Total in 4 months: 26,500 / 744,000 = 3.56%

--

Now, honestly, thats not too bad. But, even assuming just a 20% increase in BTC value per year, over the 10 years that it would take them to pay out "BTC:BTC", the BTC liabilities value in USD would average out to have quintupled.

What would be interesting is a real timeline of liabilities. I'm curious what the financial state of Mtgox was before this "hack" in early February. Were we still on a sinking ship or was Mtgox solvent?