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Home Blog News: Mt. Cox Bitcoin Exchange Collapse

Isolated Theft at Mt. Gox Shakes Bitcoin User’s Trust, While Rival Industry Exchanges Reassure Customers Their Bitcoin Investments are Safe and Secure

Bitcoin trader Kolin Burgess of London has been picketing the Tokyo office tower where Mt. Gox, has its offices since February 14, 2014 in an effort to get back his $320,000 investment in bitcoins with the Mt. Gox exchange. Mt. Gox, considered the world’s largest bitcoin exchange, went offline on February 25, 2014 after reports surfaced that it had suffered a major theft. The company had halted its withdrawals indefinitely during the month after finding “unusual activity. According to a security guard, no one from the company is inside the building. On Sunday, February 23, 2014, Mt. Gox’s CEO, Mark Karpeles, resigned from the board of Bitcoin Foundation. Mr. Karpeles said about the loss, “It hasn’t shaken my trust in Bitcoin, but it has shaken my trust in bitcoin exchanges.”

It is reported that information contained in a “crisis strategy” report released online, from an internal Mt. Gox document reflects that 740,000 bitcoins were missing from its exchange, causing the freezing of withdrawals during the month of February 2014. Apparently, the document reveals that the theft has gone unnoticed for several years. Rival companies claim that the company has been lax in its security monitoring. The loss equates to approximately $350 million in bitcoin prices, although due to fluctuations in prices and values, this amount is uncertain.

Bitcoin started in 2009 as an alternative to government controlled currencies. Bitcoin is used by investors and others for investment purposes and for making transactions. The uniqueness of bitcoin is that it is an easy way to purchase anytime and anywhere in the world. Bitcoin users rely on trust. There are no government restraints, financial, banking or credit laws for bitcoin giving it flexibility regarding the various types of transactions it can be used for by its customers. Although the Mt. Gox theft may have shaken up some of that trust amongst its customers, other bitcoin exchanges have announced jointly that they are working to re-establish any trust lost. Rival exchanges are reassuring customers/investors that their funds are secure and that Mt. Gox’s losses should not be considered as a reflection on the industry.

Bitcoin’s popularity has recently been moving towards broader acceptance with approximately 14.4 million bitcoins in circulation today. The maximum amount of bitcoins that are allowed to be circulated are 21 million. It is estimated that by the year 2032, 99% of those bitcoins will be in circulation.