The bitcoin business is risky.

 

Mt. Gox, one of the largest markets for trading the bitcoins, shut down Tuesday morning. The company later announced that they had closed off transactions “in order to protect the site and our users.” Users who had bitcoins in the Mt. Gox exchange were (and still are) unable to access their currency. The day before, all tweets posted by Mt. Gox had been removed from their Twitter account.

 

The shut down has devalued the bitcoin digital currency and its operations. CNBC reported on Tuesday that:

 

The price of bitcoin fell to $425 by 6 a.m. London time, according to CoinDesk which tracks the price on a selection of major exchanges, after starting the day at $545, but rebounded shortly afterward. The price of the currency on Mt.Gox had fallen to around $100 before the exchange’s website became inaccessible.

 

The same article also states that an unverified document circulating the web claims that the Mt. Gox exchange lost 744,408 bitcoins (around $350 million) due to fraudulent activity and a glitch in the exchange’s system.

 

Skeptics have seen this as an essential flaw and the inevitable downfall of the bitcoin. Angry customers have expressed their discontent with bitcoin across social media platforms. Others have come to bitcoin’s defense, such as the industry leaders that released a joint statement defending the currency and asking users to see that the problem was Mt. Gox, not the currency. Some customers and bitcoin traders see it this way as well, recognizing the failure of Mt. Gox as an inevitability on the way towards the creation of a legitimate currency.

 

bitcoin exchange

Bitcoin-U.S. dollar trading exchange. (bitcoincharts.com)

Other exchanges have already accounted for the lost market share held by Mt. Gox. Bitstamp and BTC-e have benefited tremendously from the closure of Mt. Gox. However, these sites also provide reason to remain skeptical. For instance, less than two weeks ago, Bitstamp suspended withdrawals from exchange due to an alleged cyber attack, and BTC-e is operated anonymously from an unknown location, with no clear understanding of which country’s laws preside over it.

 

Where there is massive profit potential there is almost always massive risk, and bitcoin is no different. As of now, the currency remains unpredictable and exciting, and may continue to exist in such a manner in the future.
Don’t understand bitcoins? Read this CNN article if you want to learn more.

 

 

 

Feel free to comment in the comments section or tweet me @dannystevens91 with anything you have to say.