Chaos, mayhem, panic in the streets! Sell, sell, sell! The end is near! Get out while you can!
OK, so we’re talking about virtual streets, and the only two things that ended are submissions for Devtome round 32 and Mt. Gox’ credibility as an exchange.
Still, there is nothing more inconvenient than planning to sell off some Bitcoin on a Monday and to have your Monday preceded by a weekend like this. No panic on my part; this was premeditated since this past Wednesday. Not only that, I have plans to sell again a week from today (so now you have eight days to engineer the next Bitcoin crisis just to make my life… er, interesting).
So what happened exactly? Mt. Gox decided that the reason it is unable to send people their Bitcoin is some arcane issue with the Bitcoin code that might make it possible for some nimble fingered computer geek to make a Bitcoin withdrawal look like it didn’t send when it actually did, and then request that same transaction be resent. The people on the Bitcoin core development team readily admit that this issue exists–the Bitcoin code isn’t perfect. Not only that, this little bug has been known since 2011. The security fixes and workarounds for that bug have also been known for almost as long. But for some reason Mt. Gox got too busy to make the necessary upgrades on their end to deal with it. For some unknown reason they have suddenly decided that now is the time to finally address this issue and no Bitcoin will leave their wallet until they do.
But fiat withdrawals are still working fine, they say. They must mean in national currencies other than the Dollar, because American users have had all kinds of hassle trying to get Mt. Gox to send them their Dollars for at least as long as I’ve known about the exchange.
So what do people do when they need the money but can only get it out in fiat? They sell the Bitcoins, of course. You might also be inclined to sell off Bitcoins if you didn’t know much about it and got news from your exchange that there is a problem with the Bitcoin code. Last I checked Mt. Gox users are still unable to withdraw any of their Bitcoins.
Even before Mt. Gox made this announcement, its demise as a trading platform was being discussed on the Internet. Mt. Gox was the first ever Bitcoin trading platform, and it was probably set up on someone’s personal website because who knew that anyone but a handful of computer nerds would ever want to trade Bitcoin? As the site grew, their coders applied patches and band aids when what they really needed to do was professionally build it from the ground up while phasing out use of the original. In a nutshell, Mt. Gox as it stands now is not scalable, and never was. But they pretended it was. And now they are blaming Bitcoin for their problems.
This recent announcement must have been the last straw for the Cryptocoincharts website, because after one of the many times I hit the refresh button I noticed Mt. Gox was no longer listed among the Bitcoin/Dollar exchanges. I know it was there early this morning; it’s gone now.
Back during the summer UnthinkingBit refused to use Mt. Gox’s last trade as the indicator of Bitcoin’s fiat equivalent value in calculating Devcoin’s value, citing the issues with withdrawing fiat as the reason for the price being overinflated. I believe he references the BitStamp price instead, and plenty of other people I know consider BitStamp to have the official Bitcoin value. Why anyone willing to trade on a platform outside of their own country would trade on Mt. Gox rather than BitStamp is anyone’s guess. Perhaps loyalty to the site that first made Bitcoin trading possible?
Mt. Gox’ announcement this morning caused another round of panic selling and Bitcoin value plummeting and I had to deal with it because I have some bills to pay.
Fortunately for me, there are two other factors at work. First, Devcoin experienced a little rally over the weekend. I’m not sure if that had to do with the Bitcoin price dropping so suddenly or if it was for a completely different reason. Nonetheless, this morning I managed to sell Devcoins for between 88 and 93 sat rather than the 60 or so I’ve come to expect at this time. This at least gave me more Bitcoin to sell.
Second, Bitcoin investors and speculators view this price drop as a buying opportunity. Some are buying now, and others are waiting to see if the price will drop some more. One commenter on The Verge website put it succinctly: “I’m glad people at mtGox aren’t very intelligent because it means I can buy in nice and low at another exchange in preparation for the next ascent.”
No kidding! I wish I could be one of those investors. I would love to buy Bitcoin now because I know that in a couple weeks its price will be back at $800, and possibly higher, because publicity, even bad press, generally does good things for Bitcoin. But precisely because in this moment in time I cannot be an investor, I am very thankful that other people are investors.
I’m grateful to all those out there who are scooping up Bitcoin at these bargain basement prices, and I hope that they realize an amazing return on their investment. I hope that they sell at just the right time, right at the top and then manage to scoop up some more during the next correction. I hope all their other investments perform phenomenally. I hope they experience many blessings in all aspects of their lives.
It is these investors and speculators who have kept the Bitcoin price from dropping any further. Although the number of Bitcoin adopters is growing, we’re still a relatively small crowd. Small enough that one exchange’s gross incompetence can drop Bitcoin’s value by $200 in one weekend. It is a very good thing that there are people who understand Bitcoin’s value enough to not be phased by a major sell off, who understand that Mt. Gox’ problem does not have to be their problem, but rather their opportunity.
It is these investors and speculators who will fuel Bitcoin’s full recovery. It is these investors and speculators whose willingness to buy when others are selling keep people like me afloat and able to pay bills. Thanks to them one of these days I may be the one who buys low, saving someone who desperately needs to sell from losing everything.