The records will show that Mt. Gox officially halted all withdrawals on the morning of 7th February 2014. But for those who held Bitcoin in the early years, everyone was aware that things were going terribly wrong in Mt. Gox.
I write this to open a window into the past for many of the newcomers, and also to provide interesting content for those who want to know the history of the wild west of crypto.
Bitcoin had surged in the previous year, 2013, from a low of $13 in January to $1100 by the end of the year. This was driven primarily by, you could have guessed it, China. At the time China's government had been cracking down on capital outflows, and Bitcoin was still relatively new and untouched by Chinese law.
"The demand out of China has been pretty staggering," said Barry Silbert, founder and CEO of SecondMarket, the parent company of Bitcoin Investment Trust, which was recently launched as the first U.S.-based investment fund dedicated just to Bitcoin.
"We're seeing the early signs of money coming into Bitcoin as an asset class," Silbert said.
- CNN Article, 12th November 2013
Although China's volume had overtaken Mt. Gox in the dramatic run up to $1100, the Western world, including Reddit at the time, were trading almost the entirety of volume on Bitstamp and the ill-fated Mt. Gox exchange.
It wasn't all bad decisions that gave Mt. Gox its reputation, they did have a number of excuses that they tried to fall back on: in the same month of May 2013, U.S. Feds seized Mt. Gox's primary bank account and CoinLabs filed a lawsuit for $75 million.
Mark Karpeles, the infamous owner of Mt. Gox, was forced to suspend fiat withdrawals to all U.S. bank accounts. In fact, the Bitcoin volume chart clearly shows that it was this moment, not February 2014, that marked the beginning of the end for Mt. Gox. Rumors circulated for the entire year of the exchange's solvency, and for several months statements were regularly made reassuring the public that withdrawals would be working soon.
Few users of the exchange ever got their withdrawals completed.
Around this time, Roger Ver had also come rushing to Mt. Gox's defence. In July 2013, he recorded the infamous "hostage" video where he defends Mark Karpeles while reading from a script as if he were forced to do so. This did not help the situation at all, as many felt emboldened to keep using the exchange due to Roger's testimony. Keep in mind, deposits in both crypto and fiat were kept open throughout this entire saga.
If this wasn't bad enough for Bitcoin's price action, the following came completely out of left field:
5th December 2013 - China bans banks from handling Bitcoin trade.
The first, and definitely not last, China FUD. All the momentum Bitcoin had running up to $1100 had come to a screeching halt.
Over the next 3 days, Bitcoin dropped by a staggering 40%.
Many of you know what happened next.
7th February 2014 - Mt. Gox halts all withdrawals.
23rd February 2014 - Mark Karpeles resigns from the Bitcoin Foundation.
24th February 2014 - Mt. Gox goes completely offline. An internal document is leaked stating:
At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.
The cold storage has been wiped out due to a leak in the hot wallet. The reality is that Mt Gox can go bankrupt at any moment, and certainly deserves to as a company.
A black swan event is bad enough.
Two of them?
That set in motion a 3 year bear market... Until 2017.
P.S. Mark Karpeles ended up spending only 12 months in jail in Japan. He was later found guilty of falsifying important data, but was given a suspended sentence.
P.P.S. Japanese bankruptcy court is still dealing with the fallout of the company's collapse, 7 years later.
End log.
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