Venture capitalist Marc Andreessen has come to Bitcoin’s defense, comparing the collapse of its best known trading platform Mt. Gox to MF Global’s fraud and subsequent bankruptcy in 2011, report William Alden and Rachel Abrams for The New York Times, but the comparison highlights exactly why investors see Bitcoin as a high risk investment.
“This is like MF Global, not some huge breakdown of the underlying technology or other exchanges,” Andreessen said on CNBC. “Bitcoin protocol is unchanged and other Bitcoin exchanges and companies are doing fine.”
Andreessen compares Bitcoin to the early internet
Andreessen has been a Bitcoin bull for some time, arguing that the protocol Bitcoin is based on will eventually revolutionize the way many businesses operate, and that just like internet protocols which were the domain of IT departments and a handful of early adopters for decades, the potential of Bitcoin isn’t fully appreciated. More concretely, Andreessen led a round of financing for CoinBase Inc that pulled in $25 million for the popular Bitcoin service provider.
Bitcoin prices have stabilized at some other exchanges, but rates are hovering around $500, down from highs of $1200, as investors worry that the cryptocurrency isn’t as secure as previously advertised.
Mt. Gox broken and possibly outright crooked: Andreessen
Andreessen acknowledges that Mt. Gox has been “broken and possibly outright crooked for months,” before it completely went under, but just like MF Global’s meltdown didn’t turn people away from all futures trading, he doesn’t see why it should turn people off Bitcoin as an asset class.
But MF Global highlights the important of effective regulation. If the Commodity Futures Trading Commission (CFTC) had done a better job policing MF Global, it’s possible that disaster could have been averted. But even if they couldn’t have stopped the fraud beforehand, after two years of work it was able to restore $1.2 billion to MF Global’s customers.
There’s no easy way to determine how much was lost, but there are claims that more than 700,000 Bitcoins, well over $1 billion even after Bitcoin dropped in value, have been stolen from Mt. Gox but without the paper trail that made restitution possible in the MF Global case. Whatever was lost when Mt. Gox went under is simply gone, no one is getting their investments back.
Mt. Gox has claimed that its troubles are due to Bitcoin’s source code, and that other exchanges will eventually face the same problems. Andreessen is confident that this isn’t the case, but investors without the necessary background in cryptography and IT security to judge the matter for themselves may want to stay invested in more traditional assets.
