MtGox's Bitcoin price drops to $260 (others at $600+) | Hacker News Reader

MtGox's Bitcoin price drops to $260 (others at $600+)

mtgox.com

74 pointsaustenallred76 comments

This is pretty logical. MtGox halted BTC withdrawals because of the transaction malleability issue (which, due to MtGox's poorly made software, let people get their withdrawal payments more than once, leaving MtGox open to get its wallet emptied).

So now many people are stuck with MtGoxBTC, which is simply a balance in MtGox's database. MtGoxBTC is being traded for actual BTC (on exchanges like https://www.bitcoinbuilder.com/). It has a lower value since people are unsure whether or not MtGox will fix their system and let them take their money (IMO they probably will). Sellers are getting out to avoid the risk, and buyers are getting discounted (but potentially risky) BTC.

>they probably will

At this point it appears that MtGox could go either way.

I'd be fairly impressed if they survived - they seemed like they were already on the ropes in terms of solvency with it taking months to payout for BTC after the US government froze their accounts or fined them or whatever in May. I'm not really sure how many serious dick-punches like that a company can take.

Those funds were seized because of their relation to SR and other illicit activity. As such I don't think that has an effect on Gox's solvency.[1]

[1]http://thegenesisblock.com/mt-gox-seizures-linked-silk-road-...

If they were running a ponzi type operation then any missing cash on hand could greatly disrupt their payments depending on the withdrawls at the time.

This is what you would logically conclude by looking at the situation at a glance, but this is not true. Sure, Mt. Gox has the capability of operating just fine. Sure, they were vulnerable and needed to stop withdrawals temporarily, just like several other exchanges that had the same vulnerability. In fact, Mt. Gox did a service to some other companies by providing a warning that the risk of this vulnerability is becoming critical.

HOWEVER, this is NOT the reason Mt. Gox is not, and WON'T recover. The reason they won't recover is because they are taking a crap all over any sort of trust anybody could have had in them. They blamed bitcoin fundamentally and denied their own responsibility. A decision has already been made ever since Mt. Gox addressed the public about the withdrawal lockdown that they CANNOT be trusted, and it is not only based on this most recent folly, but many past mistakes and irresponsible public relations.

I just wish they would just give up and kill themselves off completely somehow.

they are taking a crap all over any sort of trust anybody could have had in them

MtGox's incompetence has caused at least 3 major price crashes over the last 3 years and somehow people keep coming back. Probably because there has historically been huge demand and very little competition, but that may finally be changing.

Or, people are realizing that there might not be enough actual BTC to back all those MtGoxBTC.

> MtGoxBTC is being traded for actual BTC (on exchanges like https://www.bitcoinbuilder.com/)

Without creating an account, nothing on this site reveals how this works. Is this made possible by using the MtGox API and voucher codes as a backchannel?

you deposit "Gox" BTC to the "Gox" address on your account (internal transfers of BTC within mtgox still work) and/or regular BTC to your "Real" BTC address

http://www.reddit.com/r/Bitcoin/comments/1xmf8u/i_just_launc...

Trade with confidence on the world's largest bitcoin exchange!

Someone should make:

http://canyouwithdrawfrommtgox.com ....and just have a giant font "YES" or "NO".

Well that didn't take long!

Love the DOGE donation address, already #2 in a lot of people's eyes.

Haha wow, that was awesome.

So I guess the market estimates a 50% chance that they disappear with the coins. 50% arbitrage upside if you can get money in and buy bitcoins at half price, 50% loss chance if they vanish.

The discount is more complex than that.

Most users also aren't able to withdraw fiat from Gox, so there isn't a liquidity advantage to selling your coins (which would raise the supply and lower the price). The 50% discount is probably because users believe that if Gox dies, they will have better odds of eventually recovering dollars rather than coins. These users believe the coins may have been lost, stolen, or end up unrecognized by the bankruptcy court.

Also, there is lots of speculation about price manipulation at Gox. Some users believe that Gox is artificially lowering the price to help fix their insolvency.

Mm, it's not quite that simple. If you were on an exchange where people were trading real!Bitcoins for MtGox!Bitcoins, then you could try to interpret the discount as equaling the market estimate (and the bitcoinbuilder.com prices seem to put the overall risk at something more like 40% if I'm understanding them right); but this is the price from an exchange which only has MtGox!fiat and MtGox!Bitcoins - so you're seeing something which is more like 'conditional on MtGox failing, are they more likely to pay out Bitcoin or fiat balances?'

Something more sinister seems to be going on. Looking at the chart, it is clear that someone (mtgox itself?) is trying very hard to keep it at or above 260.

http://bitcoinwisdom.com/markets/mtgox/btcusd

Another interesting interpretation is its a psuedo-future. The cost of having BTC tied up at mtgox isn't so much 50% its more like $300 of volatility. Something like "By the time these guys 'fix' everything and I regain access, I'll have lost $300 via volatility and/or inflation and/or some kind of net-present-value calculation". Now I have no idea if you interpret that delay as two weeks or two years. Just saying its yet another interpretation.

Before yields went to zero I had a treasury direct account and occasionally the .gov found it necessary to pay me $1000 next month (or whatever it was) in exchange for my giving them only $999.whatever today. That doesn't mean a "thousand dollar T bill" is worth less than a kilobuck, its just discounted by time. The feds discount isn't much. At least some owners of mtgoxbtc seem to think their discount is worth about three hundred bucks.

That is not correct. Issue at hand is that mtgox potentially lost a lot of bitcoins due to transaction malleability. Question is - are they solvent? Or to rephrase that, do they have enough bitcoins to payout when large fraction of people decide to withdraw at the same time.

Market seems to be betting at "unlikely".

Arbitrage generally assumes low or no risk.

This would be a bit closer to junk bounds or penny stocks.

http://en.wikipedia.org/wiki/Risk_arbitrage

Does this represent an arbitrage opportunity? (it appears not, since MtGox is limiting transactions due to a bug in their implementation of the protocol.) Also, I wonder if anyone has used bots to perform HFT using bitcoin in the same manner that was used on traditional stock exchanges.

The protocol component in BTC to firm confirm a trade is not at this time entirely amenable to buying and selling one million times per second or whatever. Maybe one transaction per minute?

Also there's no arbitrage opportunity where buying nine shares of a NYSE stock at 2.01 and one share at 2.00 means the "real" price is 2.009 but the NYSE stubbornly won't trade in fractional pennies (made up example numbers). The BTC transaction would just be one simple 2.009 transaction not some foolishness involving ten thousand trades or whatever.

You could have a BTC derivative market with somebody acting as the market maker just like NYSE, although thats kinda at cross purposes to the whole idea of a distributed currency.

There is no market maker so picking winners or losers by deciding who gets to front run vs who doesn't, is also kind of meaningless.

Or the TLDR short version is no it isn't gonna happen due to some inherent design issues.

There are some interesting issues. There's no particular technological reason GOOG couldn't say F the stock exchanges and issue a derived cryptocurrency and let people arbitrage between their new stock equivalent and the rest of the world. Well, there are a couple legal and accounting issues, but like I wrote, no technical issue.

Would not be totally surprised to see a BTC-like infrastructure replace existing monolithic market maker trading structures. Probably the same crooks owning the whole works, I'm talking about it as a deployed technology not a social phenomena or whatever. Much as running TCP/IP in 2014 doesn't mean anymore that you're part of DARPA.

MtGox is essentially doing what you are talking about, allowing people to trade bitcoin derivitives (that they supposedly back 1:1 with real bitcoins). Trades on MtGox don't hit the blockchain.

Yes, exactly, and as I wrote "although thats kinda at cross purposes to the whole idea of a distributed currency."

A great plan if you want to buy coins for $632.58 and end up getting $260 for them because of a centralized system failure in an inherently decentralized protocol.

There's an old saying about idiots, idiot proofing, and long term trends in idiot breeding under idiot proofing environmental conditions. So invent a decentralized massively redundant system, someone WILL find a way to centralize it, and SPOF it, yet still blame the designer when it blows up. Like a law of human psychological nature.

Why don't we just call Mt.Gox what it is, a bucket shop?

No because you can buy bitcoins but cant get them out of MtGox. At that point,it's just gambling.

If you're confident that MtGox will eventually get their shit together and that bitcoin will have at least that value when you can, then it's a gamble worth taking.

It's not a gamble that I'm taking, but I understand the motivation of those who would.

Greed is a powerful motivator, but I'm with you. If MtGox hasn't gotten their shit together in the year since they started having problems, I don't see why they would now.

I would claim that all sorts of money-making schemes that involve bitcoins are more or less still gambling.

There is an exchange that trades real fake money and mtgox fake money.

Also, I wonder if anyone has used bots to perform HFT using bitcoin in the same manner that was used on traditional stock exchanges.

There are certainly people out there with trading bots hooked up to the various exchanges. I know at least one guy who was trying something a few years ago. Because the volume is so low (~ few $M daily) I don't think there are any big players there. Also the market data and order entry protocols don't look like they would be suitable for the really high speed stuff.

That said, the market data and order entry protocols are really simple and I think most exchanges offer them for free. An automated bitcoin/dollar trading program would be a pretty easy thing to whip up. It would probably be a good introduction to automated trading for people that are interested in that sort of thing.

I'll just jump in here and cheekily plug my service: http://tradewave.net

There are a lot of people building trading bots for cryptocurrencies, and it's pretty easy to get started by yourself. But not everyone has the chops or patience to do it well; for example gathering, aggregating and storing data across the various exchanges is a huge pain. So my site abstracts away that stuff.

You can't do real HFT with Bitcoin (and others) as the infrastructure just isn't there yet. The lowest I've heard is 15-30 second trades and even that's rare. Most people go for 1-2 hours.

I would also add that a lot of venue arbitrage strategies are too cumbersome to implement in bitcoin because you need to store collateral with multiple exchanges unlike equities or other proper financial markets.

>Also, I wonder if anyone has used bots to perform HFT using bitcoin in the same manner that was used on traditional stock exchanges.

Kind of:

https://github.com/maxme/bitcoin-arbitrage

I'm not a Bitcoin expert but I believe the problem is that moving money between exchanges takes quite some time and that reduces the volume that can be traded.

I'm working on one that does low-frequency trading - it did it's first automated trade this afternoon! https://github.com/nfriedly/coin-allocator/

(Although mine is running in the cryptsy exchange, not gox)

Dumb question I genuinely don't know the answer to: what's to stop me from buying a hundred Bitcoins from MtGox for $26,000 and selling it elsewhere for $60,000?

It's not currently possible to withdraw your 26k worth of BTC from MtGox, and for a long time now it is very difficult to withdraw USD as well. You could buy 26k of MtGoxBTC right now and wait for them to start withdrawls back up, and that would indeed net you a nice bit (assuming the market doesn't fluctuate very much during that event). However, right now it seems most are betting against that ever happening.

You don't have $26K deposited in Gox and by the time you could do it the opportunity will be over.

MtGox have halted withdrawals, so you can't sell the coins elsewhere at the moment.

There is a sucker born every minute, and a rich one every 20 minute.

They won't let you withdraw in any currency afaik.

Mt.Gox is the only one who can withdraw whatever it wants from Mt.Gox. Its not a regulated field here.

Be Mt.Gox, sit at the bid and buy all the Bitcoin you want for $260ish. Get it over to hidden accounts \ people you took the time to set up in the last X months and sell at $600ish.

Laugh all the way to the bank........million and millions and let all you guys A. Believe in Mt.Gox or B. it goes out of biz, who the flying fuck cares, they just cleaned up.

I tell you one thing, if I was in control of MtGox I would be buying all these bitcoin's up and making a huge profit when I indeed did fix my problems. Insider Trading in Bitcoins is basically happening right now IMO. This seems like a brilliant scheme to not only fix your business public persona by restoring and refunding everyone their money, but also make leaps and bounds of cash.

Crash your own market, buy your coins back knowing your going to restore it. Restore your market, prices come back up, huge profits.

EDIT: unless I misunderstand how all this works. I am assuming public sales coins for lowered value, mtgox insider buys knowing they are going to fix problems, mtgox insider then sells later.

I tell you one thing, if I was in control of MtGox I would be buying all these bitcoin's up and making a huge profit when I indeed did fix my problems.

That mtgox is not in fact doing this (through a buyback program or proxies) tells you a lot about their confidence in their eventual recovery. If they were confident in recovery they could backstop prices and make a killing later by selling.

Yes, but it's destroying what's left of their reputation. It would be of questionable value in the end. I already wouldn't touch then with a stick after past experiences, and I think most everyone feels that way now. There are better options with real customer service. Coinbase, by comparison, has been a pleasure.

This sort of nonsense is why I will never touch bit-coin... Good luck..

Its not nonsense so much as system borders.

Look at the border between the Argentine financial system and ours. I suspect you want to be very careful right now... Or the Ukraine, where a shooting civil war has broken out today, I imagine forex market is going to get weird. Or the euro PIIGS recently or right now. Or Zimbabwe for the last decade or so. Or Germany in the 20s.

Anytime you cross financial system borders, especially if you don't understand them or even understand that there is a border, things can get a bit dicey.

I guess what I'm getting at is you're describing an emergent property of cross financial system transactions, nothing to do with BTC at all other being one particular example of a cross system border.

People really need to stop consulting mtgox for BTC prices. I still hear it's "the largest exchange" on the news from time to time, which is equally stupid, as it hasn't been that in a long time. It's a poorly-run, irrelevant exchange, and I feel sorry for the folks with money trapped there.

The question everyone should be asking is how are they funding operations with no more cash flow.

Their cashflow hasn't halted. There are still plenty of trades happening between current GOX customers and they still get trading fees on these trades. The problem is that their customer acquisition and retention will take a massive hit because customers can't withdraw their coins (or fiat in a timely fasion).

I feel bad for anyone that buys any of the MtGoxBTC right now.

The MtGox Bitcoin deserves to go to zero.

Can Mt.Gox buy at $260 at home and cash at $650 elsewhere and laugh all the way to the bankster?

Yes, if Mt. Gox is certain they can deliver on the locked-up account bitcoins, then it can use its cash reserves to buy bitcoins elsewhere, then trade with its own account holders, effectively letting them cash out a little early in return for Mt. Gox taking 50% of the value.

Alternately, if Mt. Gox is certain they canNOT or will not deliver on the locked-up bitcoins, they can trade some of the locked-up non-existent ones for real ones and recover 50% of the value.

Either way, Mt. Gox makes a killing because they know the state of their books and their future intentions and you do not. They can bet knowing the outcome of the bet.

This is why you want financial regulation.

(Incidentally, this is what Goldman Sachs is doing with aluminum and other commodity markets.)

If Mt. Gox has your money or fake money, you need to contact a good class action law firm and see if you can get them interested.

I do not want financial regulation of virtual currency. I want people to be able to decide for themselves if they understand and are willing to take on risk - if they are not, then don't. Only allowing winners and losers and warts and unicorns will allow virtual currencies to find their place.

I DO want fraud prosecution, but we already have that.

Currency shouldn't be risky. It's a means of transacting. People shouldn't have to assume risk just to transact; they'll simply choose a less risky vehicle. It's fundamentally why Bitcoin won't succeed unless and until it gets its volatility under control.

If MtGox halts trading, settles all pending BTC exchange transactions, return all fiat deposits, and then intentionally never returns any BTC, does one have any recourse?

I guess it would be some matter of Japanese law, international law (for claimants outside Japan), and the MtGox terms of service? What if these were virtual pets that people had traded?

> This is why you want financial regulation.

I believe we're in the beginning of a weird transitory period right now, but in the long term cryptography and cryptocurrencies have the potential to replace the need for certain types of regulation entirely.

For example, it's possible to build a decentralized exchange between different cryptocurrencies (or assets where ownership tracked on a crypto ledger) where no party needs to trust any other party at all (e.x. https://en.bitcoin.it/wiki/Contracts https://en.bitcoin.it/wiki/Atomic_cross-chain_trading)

Are you asking if they can buy from themselves...?

Or do you think that exchanges set a price and then are given leave by the council of BitCoin to just hand out an infinite number of BTC's at that price.

They have an inventory, yes they could sell coins but it would be view-able on the blockchain if they started moving lots of inventory through a major exchange.

They are an exchange, not a shop. They would be buying from their users, not themselves.

They are what they want to be. This is not regulated.

And you know this how exactly?

Oh right. You have no idea at all, and are completely talking out of your ass.

Oh yea , who is it regulated by? Yo xhbvtv

No, they just become the buyer at Mt.Gox for all those sellers, then turn around and sell either already funded accounts with all the Bitcoins they already have had, or they move the ones they just bought round about to the accounts at other exchanges. Who gives a flying fuck you can trace it. You wanted to sell at $260...not them.

Who do you think is buying over there for X sakes! All these new buyers coming in? blah

If they're insiders, why buy before selling? An insider could take the bitcoin from the vault without updating the seller's balance on the website, sell it on a different exchange for $600, then pay the $260 to the Gox seller to balance the books.

That way you're not limited to the number of $260 bitcoins you can afford.

If 1 MTGOX BTC is backed by 1 actual BTC, yes. The fact that they are not doing this is certainly interesting.

Okay, God. Because of course you would have to be God (that is, omniscient) in order to know what sort of positions Mt. Gox and its corporate executives are taking in the various bitcoin markets.

Wait. You're not omniscient? Then why would you write such a silly thing?

Well, you can tell that they haven't bought all the orders that are under $600 because there are still orders on the book to sell for under $600. In particular, using only orders currently on the books of various exchanges, you could currently buy ~1600 MTGOX BTC at ~$300 and sell an equal number at ~$600. If you were Mt. Gox, would you take the free $480,000 or would you leave it?

Do I also have to be God to know that the sky is blue?

Edit: I suppose, based on your other reply, that you are contending that the orders on the books are already from Mt. Gox. I'm not sure why you would believe this, but let's pretend it is so for a moment. This leads back to the same conclusion: either Mt. Gox wants to sell BTC worth $600 at $300 and lose money, or they want to sell MTGOX BTC worth $0 at $300 and make money. Which do you suppose is likely to be the case?

So, you made an assertion about what Mt. Gox is doing that is entirely unsupported by any knowledge on your part, I pointed out that you couldn't possibly know that, and your counter is that because Mt. Gox hasn't wiped out the entire order book in a particular direction, they must not be participating in the market at all.

Such brilliance.

Sorry, there has been a misunderstanding. My first comment to which you replied could be rephrased as "There is a big arb opportunity which they are not exploiting, and it is interesting that they are not doing it." The continued existence of the arb opportunity is a public fact, which is why I was a bit baffled that it would be questioned. It was not clear to me at first that you believed I had claimed that Mt. Gox was not participating in the market at all.

Only if they actually have any real BTCs left at home to cash elsewhere.

buy from where at 260? they ate the ones selling at that price. nobody else

its like a shady guy in the corner offering you gold for half the price. good luck with that.

Isn't it the account holders at gox who are selling at that price?

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