February 23, 2014 | Posted in:Cryptocurrecy trading

Mt.gox is a Bitcoin exchange seated in Tokyo, Japan. In the past, it was a major exchange site for Magic the Gathering, a card game. Hence the name mtgox (Magic the Gathering Online Exchange, in short: mtgox. After the site was reworked to enable Bitcoin trading, it was the major site for the exchange to fiat money. This resulted in 80-90% traded volume, meaning that 9 out of 10 Bitcoin were traded solely on mt.gox. This can be visualized:

volumegox

Around march 2013, some events seemed to inflict financial damage to mtgox:

  • Licences problems for processiong fiat money in USA
  • CoinLab sues mtgox

This led inevitably to the fact that USD and EUR withdrawals from mt.gox suddenly stopped and were sporadically proccessed after 4-6 months.

mt.gox customers that still had funds on the exchange site and wanted to transfer their money out had only one way: buy Bitcoin and transfer those to another exchange site, sell them and withdraw the money. This created a higher demand for Bitcoin and created a price deviation where the price for a Bitcoin on mtgox was 100-150$ higher compared to Bitstamp or BTC-e. A chart shows this deviation:

 

preisgox

 

 

After some months of this deviation, the Bitcoin withdrawals on mt.gox were stopped aswell. mt.gox officials argumented that a weak spot in the Bitcoin protocol architecture (Transaction Malleability, in short: trying to manipulate the transaction IDs by changing them when farming the current block) – this was denied by the Bitcoin Counsel.

Now, people started to panik and sell Bitcoins, driving the price down relentlessly. This might be fueled by single rumors that USD withdrawals, however, were processed sporadically after all, giving mt.gox users the opportunity to escape the supposedly dieing Bitcoin exchange.

preisgoxafter

Currently the price on mt.gox is 308 USD/BTC.  This could mean that:

  • mt.gox will die slowly, grasping all current fundholders on their site with them into the financial grave. Everybody that had funds on gox will be “goxxed”, resulting in a permanent loss.
  • mt.gox will need some months to come back, eventually enabling Bitcoin and Fiatmoney withdrawals. Everybody that took that risk and sent money to gox and bought cheap Bitcoin made a solid 500-200% earning.

Update (24.04.2014): It seems as if mtgox already deleted all their feeds from their twitter channel. Some users suggested that this is due to a failure in the twitter protocol.

Also, Coindesk reports that Mark Karpeles, the CEO from mt.gox resigned from the Bitcoin foundation board.

 

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