Bitcoin Mt. Gox Crash Raises Questions About Its Future

Bitcoin prices dived all the way down to $230 after Japanese exchange Mt. Gox said days ago that it was suspending withdrawals. Business Insider spoke with finance professor Mark Williams of Boston University last week, and he said it was becoming “increasingly dangerous” to subject the economy to such uncertainty in the market. Some are questioning whether bitcoin, which once traded at more than $1,200, has a future in the financial markets.

Bitcoin: Mt. Gox apologizes

According to The Wall Street Journal, Mt. Gox apologized for the delay in responding to the technical issues which have been affecting it for more than a week. However, the exchange did not provide any details on how it protects the funds of its customers. Many were becoming increasingly concerned about the future of Mt. Gox itself the longer it halted customer withdrawals.

Today the exchange posted an update on its website saying that it has “a workaround that will use a unique identifier created by Blockchain to show whether transactions have been modified or not.” It also said they will be resuming withdrawals “soon,” starting with a “moderated pace.” Mt. Gox also said it would put new daily and monthly limits in place to prevent future problems and also account for current conditions in the markets. It said it would provide another update “by Thursday at the latest.”

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Mt. Gox blames bitcoin

Mt. Gox originally halted withdrawals because it detected issues with how they were being processed. The company explained that there was some sort of bug in the bitcoin software which enabled people to use the network to change the details of transactions, giving false impressions that a specific bitcoin hadn’t been sent to a wallet—even though it had.

According to CNBC, users had been complaining for weeks that withdrawals were taking a long time through Mt. Gox. Customers have also reportedly been demanding that Mt. Gox disclose more information about its financial status. However, a spokesperson said via email to The Wall Street Journal that those matters are confidential. The exchange blamed its continuing technical problems on a flaw in the digital currency itself, which it claimed affected all exchanges.

Competing bitcoin exchanges going strong

However, in spite of the problems Mt. Gox is having and the resulting price crash, competitors are doing quite well, suggesting that bitcoin may have a future after all. U.S.-based exchange Coinbase, which has in the past typically recorded lower bitcoin prices than Mt. Gox, reported bitcoin trades through its exchange as being valued at around $635 today.

A spokesperson for the Bitcoin Foundation told CNBC last week that Mt. Gox caused members of the bitcoin community to become angry by blaming its technical problems on the currency. The person said the issue was actually related to the Japanese exchange’s “highly customized software, its customer support procedures, and its unpreparedness,” according to CNBC. However, according to The Wall Street Journal, hackers attacked competing bitcoin exchanges after those comments were made, crippling them and thus causing people to question the network’s security.

TechCrunch notes that bitcoin finally appears to be enjoying some stability across exchanges after a long period of volatility, although that stability is not happening on Mt. Gox yet.