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Bitcoin downfall MT Gox shut down.


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I give it six months before Bitcoin is just a thing of the past. Several exchange nodes have been hit via cyberattacks. This is the most damaging attack on the currency system. I had predicted this to my friends, and looks like the prediction is coming true.

I had a feeling if the currency was to fail or encounter major problems, it is not with the currency itself but the infrastructure and systems on which it is built is vulnerable to cyber attacks.

If you understand fiat money is based on nothing, bitcoin is based on even less.

Now about 750,000 bitcoins could potentially be lost.

http://www.cbc.ca/news/technology/mt-gox-shutdown-a-major-blow-for-bitcoin-1.2550256

n yet another blow to virtual currency bitcoin, a major bitcoin exchange has gone bust after secretly racking up catastrophic losses, other virtual currency companies said Tuesday.

Tokyo-based Mt. Gox posted an update on its website on Tuesday, saying a "decision was taken to close all transactions for the time being."

Mt. Gox had imposed a withdrawal ban earlier this month after detecting what it called "unusual activity" and then on Tuesday, its website went dark. The new message posted later in the day said: "We will be closely monitoring the situation and will react accordingly."

This is the equivalent of a 'bank holiday'. A run on the exchanges would crash the value of the currency, so to prevent that, deny people access to their money.

On Sunday, Mt. Gox CEO Mark Karpeles resigned from the board of the Bitcoin Foundation, a group seeking legitimacy for the currency, which has been tainted by extreme volatility, dodgy exchanges and its association with criminal activities.

Prominent members of the bitcoin community including San Francisco-based wallet service Coinbase and Chinese exchange BTC China sought to shore up confidence in the currency by saying Mt. Gox's collapse was an isolated case of mismanagement. They said it had abused users' trust, but did not offer details on how.

The attack on bitcoin has been global. China shut down exchanges operating out of China associated with Bitcoin.

On bitcoin exchanges, the currency's value has fallen to about $470 from $550 in the past few hours, a figure already down more than 50 per cent on the price of $1,200 per bitcoin reached on Mt. Gox three months ago.

The disappearance of Mt. Gox could hurt bitcoin, which was started in 2009 as a currency free from government controls. Bitcoin's boosters say the currency's design make it impossible to counterfeit and difficult to manipulate, and the virtual money has won an eclectic mix of die-hard fans, including libertarians, tech enthusiasts and adventurous investors.

But the currency has struggled to shake off its associations with criminality, particularly its role in powering the now-defunct online drug marketplace Silk Road. Only last month another member of the Bitcoin Foundation, vice-chairman Charlie Shrem, was arrested at New York's Kennedy Airport on charges of money laundering.

Leaving the Silk Road aside, people flocked to Bitcoin because it circumnavigates all main stream banks. No or very small fees, anonymity in exchange, no tax. I see this as a systematic attack from the banks on the Bitcoin exchanges as they have the most to lose with people moving to cryptocurrencies. Governments hate it because they cannot control it or tax it. Once they do they have to start treating it like a legitimate form of currency. The banks do NOT want this kind of thing to happen.

So anyways, Bitcoin will die, but as a result I still consider it a success.

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Mt.Gox is only one exchange and had fallen in popularity relative to other exchanges well before its recent problems. Mt. Gox has been a sketcy exchange for a long time, and its disappearance and replacement by better exchanges will only strengthen bitcoin. I've traded on Mt.Gox in the past and the exchange has always been plagued by manipulation, front-running, exorbitant withdrawal fees, trading delays, lag.

Bitcoin may be down to 500 from 1000 a few months ago, but a few more months before that it was at 100.

One simply has to have the right attitude in dealing with bitcoin. Your funds are not secured or guaranteed by any government, but only by the reputation of whoever you have entrusted them to. You can keep them on your own personal computer, or even on paper, if you want to avoid these risks. And if you do want to keep them online with bitcoin exchanges, bitcoin securities, or bitcoin online wallets, then diversify so if one goes bad you don't lose everything.

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If it's true that 167 top corporations hold more than one trillion DOLLARS in a fund, do you think that they would allow ANY legal tender to replace the DOLLAR??

Well they view Bitcoin and other crytopcurrencies as a threat to their way of life. I will say that the attacks on bitcoin exchanges are the work of inside shenanigans of large internationally reaching banks. The banks are calling the shots and getting entities like the FBI involved in shutting down markets and exchange service sites.

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Well they view Bitcoin and other crytopcurrencies as a threat to their way of life.

A silly idea. Banks deal in any currency they want. If the bitcoin became a widely established medium of exchange banks would happily take deposits in bitcoin and offer loans in bitcoin. Their business model is not threatened at all. The main issue is banking reserves which have to be held in assets recognized by the government that regulates the bank. It is unlikely that bitcoins will ever be approved for use as banking reserves. Edited by TimG
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A silly idea. Banks deal in any currency they want. If the bitcoin became a widely established medium of exchange banks would happily take deposits in bitcoin and offer loans in bitcoin. Their business model is not threatened at all.

This is such a school-boy howler its almost funny. You clearly dont know the first thing about commercial banking or their business model.

Banks make their money by creating brand new currency out of thin air. Every single loan they make is an act of monetary expansion. They dont just take deposits and lend them, in fact when you borrow money from a bank almost NONE of it was actually deposited by anyone else.

The wide-spread adoption of any fixed-pool currency would completely destroy the current commercial banking business model.

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The wide-spread adoption of any fixed-pool currency would completely destroy the current commercial banking business model.

It won't happen because it is economically stupid idea. The economy needs a flexible money supply. A money supply that cannot grow or shrink with the economy will result in economic stagnation. I was assuming that the people running bitcoin would eventually allow fractional reserve banking because they want it to be taken seriously but on second thought you are right that it probably would not make sense given the nature of bitcoin. But what that means is banks still don't need to worry because there is no chance that it will ever be anything more than a toy used by criminals, gamblers and hobbiests. Edited by TimG
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It won't happen because it is economically stupid idea. The economy needs a flexible money supply. A money supply that cannot grow or shrink with the economy will result in economic stagnation.

And the money supply has constantly grown, resulting in price inflation and devalued currency. It has provided huge booms, and also huge crashes.

I was assuming that the people running bitcoin would eventually allow fractional reserve banking because they want it to be taken seriously but on second thought you are right that it probably would not make sense given the nature of bitcoin.

You can divide bitcoins to the Nth degree. By design there will only be 21 million bitcoins produced, based on the algorithm it calculates. Also bitcoin is a direct answer to the horrific monetary practices of fractional reserve banking.

Take a tally of the last few years shall we?

How many major banks have fallen since the housing bubble in the USA?

How many received money from the Fed? QE1? QE2? QE3? QE Infinity?

How many major banks worldwide have fallen in the past few years?

How many bank mergers?

How many bail outs?

And how many countries have had issues because of failing central banks and corrupt leaders gaming the system for their advantage?

If the banks want to be taken seriously they need to get their act straight. The banks are only now taking notice because they see people really making a move to these new currencies.

But what that means is banks still don't need to worry because there is no chance that it will ever be anything more than a toy used by criminals, gamblers and hobbiests.

I know plenty of non criminals who have used bitcoin. Friend managed to buy solar panels for his house when he cashed in some of his coins. He also lost a bit recently with the large decline in its value.

When entities like Amazon accept Bitcoin, you know it's not just for criminals, gamblers and hobbyists.

The banks ARE worried, because it is not just Bitcoin. We are seeing Litecoin and a few other variations of cryptocurrencies. So yes the banks are worried. Bitcoin led the way, there will be more. And when you see the other exchanges for those currencies get attacked, you can be sure it is on direction of the current banking system.

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And the money supply has constantly grown, resulting in price inflation and devalued currency. It has provided huge booms, and also huge crashes.

And why exactly is something like bitcoin any better?

http://bitcoincharts.com/charts/bitstampUSD#rg1460ztgSzm1g10zm2g25zv

$1200 to $500 in six months. What is the equivalent inflation rate on that?

The world abandoned commodity based currencies a long time ago because commodities experience booms and busts which mess with the economy. For all of their faults, properly managed fiat currencies are a more stable foundation for an economy.

The banks ARE worried, because it is not just Bitcoin. We are seeing Litecoin and a few other variations of cryptocurrencies. So yes the banks are worried.

No they aren't worried. These currencies are toys that cannot meet the needs of a modern economy. They are nothing more and never will be anything more. Amazon accepts them because there are enough hobbiests to make it worth their while. Edited by TimG
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And why exactly is something like bitcoin any better?

http://bitcoincharts.com/charts/bitstampUSD#rg1460ztgSzm1g10zm2g25zv

$1200 to $500 in six months. What is the equivalent inflation rate on that?

It's not inflation, it is market speculation simply because the currency is highly volatile. Just like fiat currency, the value is what people put into it, or what people see in it. Both forms of currency are essentially worthless. It's a perceived value.

The world abandoned commodity based currencies a long time ago because commodities experience booms and busts which mess with the economy. For all of their faults, properly managed fiat currencies are a more stable foundation for an economy.

Commodities dry up because of over exploitation and bad management. If my money is tied to a natural resource, I would want to make sure that resource is there for the long run. But that is now how it is treated. Get in, get the money fast, and don't care if the resource collapses.

But you failed to address my points about failing banks and the current global currency/monetary situation. How is the current system really any better? You still have stock market swings, you still have currencies going up and then down in value.

More and more don't trust the banking system because of their deliberate manipulation of the markets. That has been the case in the USA, Canada and the UK. Bankers have been fined/jailed because of it. Insider trading, LIBOR.... need I go on?

No they aren't worried. These currencies are toys that cannot meet the needs of a modern economy. Nothing more and never will be anything more. Amazon accepts them because there are enough hobbiests to make it worth their while.

http://www.theguardian.com/technology/2013/apr/07/bitcoin-scares-banks-governments

"The root problem with conventional currency," wrote Nakamoto in 2009, "is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts." In contrast, everything in Nakamoto's system "is based on crypto proof rather than trust".

More and more companies are accepting Bitcoin as payment. Hobbyists? All that aside, I was never a supporter of Bitcoin. I don't trust it based on what it is. But that has not stopped a few million globally from getting on the cryptocurrency train.

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It's not inflation, it is market speculation simply because the currency is highly volatile. Just like fiat currency, the value is what people put into it, or what people see in it. Both forms of currency are essentially worthless. It's a perceived value.

Yet no fiat currency from a major economy has seen swings like BitCoin. It seems insane to connect an economy to something so volatile.

Commodities dry up because of over exploitation and bad management.

Gold, once it is extracted, can be used again and again. It has been subject to endless boom and bust cycles that are not unlike bitcoin. This is the basic reason why commodities like bitcoin are not something an economy can depend on for a universal medium of exchange.

More and more don't trust the banking system because of their deliberate manipulation of the markets.

People claim they don't trust politicians but that is no reason to get rid of democracy. Fiat currencies and fractional reserve banking are essential elements to the modern economy.

More and more companies are accepting Bitcoin as payment. Hobbyists? All that aside, I was never a supporter of Bitcoin. I don't trust it based on what it is. But that has not stopped a few million globally from getting on the cryptocurrency train.

Yep - the same people who you hate when they are involved in banking are all over bitcoin because it is a great way to make money on speculation and market manipulation. Edited by TimG
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People claim they don't trust politicians but that is no reason to get rid of democracy. Fiat currencies and fractional reserve banking are essential elements to the modern economy.

Care to explain how those particular monetary systems are a necessity for the existence of modern democracies and economies?

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Care to explain how those particular monetary systems are a necessity for the existence of modern democracies and economies?

Democracy is not a relevant issue. A modern capitalist economy depends on the availability of capital which can be invested to create new wealth. If the stock of capital available to an economy is arbitrarily limited by the amount of a commodity available then the price of capital inevitably rises and the economy stagnates. The supply of properly managed fiat currency can rise and fall as the economy needs. This creates a more stable environment for everyone.

This is not to say fiat currencies don't have their own issues. Just that like democracy, their virtue is they are better than all other systems.

Edited by TimG
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Yet no fiat currency from a major economy has seen swings like BitCoin. It seems insane to connect an economy to something so volatile.

No major swing? Care for some Zimbabwean dollars??

Gold, once it is extracted, can be used again and again. It has been subject to endless boom and bust cycles that are not unlike bitcoin. This is the basic reason why commodities like bitcoin are not something an economy can depend on for a universal medium of exchange.

Bitcoin can be used again and again.

People claim they don't trust politicians but that is no reason to get rid of democracy. Fiat currencies and fractional reserve banking are essential elements to the modern economy.

The politicians have changed the rules over time, so that to me we no longer live in a democracy. But please explain how fractional reserve banking are essential? The governors were taking off the money train, which sped it up to an unsustainable level. Lets just hope it stays on the tracks that are in dire need of repair.

Libya before they were invaded had no central bank, had no fiat money system and had NO debt to anyone. They were on the brink of a new monetary revolution in Africa with the Gold Dinar. That was put to an end. And that to me was the real reason Libya was invaded. Money and to bring them back into the World Bank and IMF fold for perpetual debt.

When Thomas Barnett speaks of 'the non-integrated gap' , what he really means is bringing the countries with no central bank into the global central bank system on the country level with the World Bank and IMF loaning the money to the country. More integration is not the key. Less integration is.

Everyone a country joins the EU, they run into money problems. Easy to get into this situation when you have the whole of the EU parliament appointed and elected by other government officials. Democracy???????????????????????????????????

Yep - the same people who you hate when they are involved in banking are all over bitcoin because it is a great way to make money on speculation and market manipulation.

My beefs with the currency are technological in nature, and not in the speculation or market manipulation. But since other currencies have been speculated and directly manipulated, how is that any different?

I guess a positive is the amount of bankers that have mysteriously died in the past few weeks.

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No major swing? Care for some Zimbabwean dollars??

I was not aware that anyone considered Zimbabwe to be a "major economy".

Bitcoin can be used again and again.

Yep. Just like gold. All bitcoin is doing is attracting people who used to look to gold for their salvation.

But please explain how fractional reserve banking are essential?

See post above.

My beefs with the currency are technological in nature, and not in the speculation or market manipulation. But since other currencies have been speculated and directly manipulated, how is that any different?

Well you were one complaining about bankers manipulating things. I just pointed out that moving to something like bitcoin is not going get rid of speculators and manipulators. Edited by TimG
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I was not aware that anyone considered Zimbabwe to be a "major economy".

You had not made the indication of 'major economy', you did say 'modern economy'.

Yep. Just like gold. All bitcoin is doing is attracting people who used to look to gold for their salvation.

Actually like gold, it is being used to hedge against the volatility of the markets and the trust people no longer have in the current global monetary system.

Well you were one complaining about bankers manipulating things. I just pointed out that moving to something like bitcoin is not going get rid of speculators and manipulators.

Right, but RE-enacting laws like the US's Glass-Stegal act would prevent much of this abuse. But the people running the banks are the ones who get into government positions to game it for their friends and for themselves when they get back into the private sector.

You really think that Greece requires an ex JP Morgan exec as the head of its monetary policy?

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You had not made the indication of 'major economy', you did say 'modern economy'.

Re-read my post you quoted. I misread stuff from time to time as well. Just acknowledge it.

Please read my response to Bonam above. If you wish to continue discussion we should start with that.

Edited by TimG
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Re-read my post you quoted. I misread stuff from time to time as well. Just acknowledge it.

Please read my response to Bonam above. If you wish to continue discussion we should start with that.

Your initial comment was 'modern'. Then when I said major banks, your next reply was about major banks. But the discussion already started with me doing the OP. If you want to start with that.

My reading comprehension is just fine.

Edited by GostHacked
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