The Fall Of Mt. Gox


Mt. Gox, the Japan-based Bitcoin exchange, was forced to halt all currency withdrawals this morning amid an "increase in withdrawal traffic."


According to a memo on Mt. Gox's website, "In order for our team to resolve the withdrawal issue it is necessary for a temporarily pause on all withdrawal requests to obtain a clear technical view of the current processes. We apologize for the sudden short notice."

While the issue is now believed to have been pinpointed, this is not the first time Mt. Gox customers have had trouble accessing their accounts.

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And Bitcoin traders have taken notice. According to Max Pelham, a German physics student who was one of the first to spot the withdrawals on his blog CoinWatch, the Bitcoin community may now be ready to give up once and for all on the exchange.

"People will be leaving Mt. Gox either way, the trust isn't already very high, and with this now people are going to trust them even less," he said. "I think Mt. Gox is going to lose relevance even more now, they're not very forthcoming in their public relations, their technical problems and their withdrawal problems aren't going away. Even if they fix it now, the withdrawal problem still remains with USD and Euro withdrawals."


Once the world's largest Bitcoin trading forum, Mt. Gox was processing more than 1 million trades at its peak. But before today, volumes had not broken through 30,000 since January.

Mt. Gox (which actually stands for Magic: The Gathering Online Exchange - site founder Jed McCaleb originally used the site to trade Magic cards), has long been the subject of the Bitcoin community's ire, even at the height of its powers - the first thread for "MtGox withdrawal delays" on dates from April 2013.

The situation was complicated last fall after federal authorities seized most of the exchange's U.S.-based accounts, accusing it of violating wire transmission laws. Roger Ver, known as Bitcoin Jesus, told Wired Magazine's Robert McMillan and Cade Metz in their November profile of Mt. Gox that despite being friends with Mt. Gox head Mark Karpeles, he would not recommend using the exchange.

"Anybody who has enough information about what's going on in the bitcoin world, you would not buy your bitcoins on Mt. Gox," he said.

Bitcoin users say Karpeles and Mt. Gox have gained a reputation for being unresponsive to the various issues. Wired says Karpeles dropped off of in June, and was rumored to have limited his conversations to the obscure Internet Relay Chat forum.


Karpeles actually serves on the Board of the Bitcoin Foundation, and at least one Foundation member. In an email to BI, the Foundation itself declined to comment on Mt. Gox business issues.

Pelham says the fall of Mt. Gox is ultimately a good thing, as other exchanges will be able to learn from its mistakes. "Everyone now is forced to do a better job than them," he said.

The Bitcoin exchange crown now falls to Slovenia-based BitStamp, which processes nearly twice as much as Mt. Gox. Pelham says the site has proven much more reliable than Mt. Gox ever was. But he says it's concerning that the world's largest USD-traded exchange must be based in such an obscure country. While there's been talk within U.S. investment circles of setting up such a more rigorous exchange, regulatory uncertainty has slowed progress.

"People would definitely welcome this - there still is a major opportunity for trusted exchanges," he said.

We reached out to Mt. Gox for comment and did not receive a response.


The average Bitcoin price this morning is $732.