Mt. Gox Co. Ltd. has announced its resignation from the Bitcoin Foundation’s board of directors, effective immediately, sending Bitcoin prices down yet again (h/t Jon Russell at The Next Web). Mt. Gox was one of the founding members of the Bitcoin Foundation and held one of three industry seats, which will be filled with an election though the details haven’t yet been announced.
Mt. Gox blames Bitcoin source code
Mt. Gox halted withdrawals earlier this month when the flow of withdrawal requests increased to more than they could handle and had to put a hold on everything until the problem was solved. The platform has continued to have technical problems and has recently faced threats from people who are angry that they can’t access their Bitcoins. Mt. Gox previously put a hold on withdrawals last summer when it was upgrading its platform to handle the cryptocurrency’s rising popularity. This time it’s blaming the source code behind Bitcoin. Shifting blame is never a good way to win friends, but if the allegation is correct other platforms will start to have similar problems as they pick up traffic from people leaving Mt. Gox.
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Now that Mt. Gox is leaving the Bitcoin Foundation, confidence in the platform is sinking lower, and Bitcoins on Mt. Gox trade for less USD than Bitcoins on other platforms since there is the additional risk of not being able to actually retrieve them.
Different values par for the course
Most of the time, deposits in a given currency have the same value no matter where the deposit is stored, but this isn’t always the case. The fact that a dollar at one bank trades on par with a dollar at another bank is usually taken for granted, but that’s a testament to the stability of the banking system (and government guarantees on depositer accounts), not something that’s inherently true.
Since the Bitcoin economy is almost completely unregulated, there’s no reason to expect Bitcoins to always trade at par. The price discrepancy between Mt. Gox and other platforms right now is yet another source of risk for anyone thinking about investing in Bitcoins – you’re not just betting that the currency itself will appreciate, but that any companies you choose to work with can be relied on for the long haul without any regulatory body present.
There have been some initial moves to create a regulatory framework for digital currencies. Law enforcement doesn’t like how difficult it is to monitor transactions, but financial regulators from India to New York are also trying to make sense of what could be a new, significant asset class.