The fall of MtGox: MtGox down for hours may herald the end of an era

bitcoin-cracked-smokeReports are flooding in that MtGox has been down for several hours. This comes on the heels of an announcement by the Bitcoin exchange that bitcoin transfers out of the exchange had been frozen. As this news hit the market, BTC market price began to plummet, falling from $810 and down to $684. People unable to move BTC off MtGox and unable to easily turn it into local currency means that the service itself is non-functional.

Now it looks as it MtGox has gone dark.

UPDATE: MtGox has officially announced via a press release the reasons for the recent downtime and bitcoin withdrawal freeze.

A rocky history with a great start, but a slow decline

MtGox rose to fame as the first fully functional Bitcoin exchange and helped make a living-breathing commodity market out of the cryptocurrency. In 2011, MtGox suffered a massive hack and nearly went down in flames—not long after, the exchange’s administrators worked hard to make a functional platform with stronger security and better infrastructure. Even with those changes, and many promised to come with a totally revamped system, MtGox maintained itself as the preeminent exchange; but slowly but surely that veneer began to crack.

Mid 2013, MtGox’s Dwolla was seized by the Department of Homeland security and suddenly it became much more difficult to exchange bitcoins for dollars.  Soon, it became difficult to get local currency off the exchange at all resulting in MtGox’s BTC price always being almost 10% higher than the rest of the market.

With the recent bad news from the exchange this has changed to the opposite, with the market average at $685 and MtGox at $655. (At least when the site was responding to customers.)

The fall of MtGox

The cracks in the façade that made MtGox such an amazing exchange and a flashpoint for bitcoin adoption have slowly worn thin with losing the ability to exchange dollars, the cessations of withdrawals, and now the site going dark. Little to no communication from administrators of the site also do not bode well for the future of what began as the first platform to trade BTC for local money.

On a normal day MtGox represents 30% to 40% of exchange volume across the market, with BTC-e and Bitstamp taking up much of the slack. Changes are good if MtGox becomes non-operational the market will shift to them.

Already speculation and concern is beginning to generate on Reddit and BitcoinTalk about what’s happened.

By not heading directly to Twitter and other outlets, MtGox is essentially hanging their customers out to dry without much recourse.

The ever-increasing difficulty with trading on the exchange and now this downtime has been leading to one obvious inevitable conclusion: MtGox is dying.

We will update with comment from MtGox management and as new news comes to light. Monday morning MtGox made an official press release blaming the Bitcoin protocol for their woes.

About Kyt Dotson

Technology and civilization walk hand in hand and civilization is nothing without the skin of society, brushing up against itself, speaking strange nothings across dimly lit avenues and computer screens. If we're going to understand ourselves in this digital era, it will be through watching the adoption of technology by people to express themselves as people. I am an anthropologist and an author of science fiction and fantasy--and with my technology, I hope to open up new and exciting worlds that will not just enlighten the humanity of my friends and fans but also educate and enhance the expression of their own personhood. Find more of my work on Google+; send tips to @kytsune.