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Earlier in the week I planned on writing a post about a major online retailer who had agreed to accept Bitcoin as payment. My plan was to ask whether this recognition would result in greater acceptance of the virtual currency, and whether regulation might be in the pipeline as a result of wider acceptance and, perhaps, wider use of the currency. That was my plan. Then, Tuesday happened.
On Tuesday, Mt. Gox, the Japan-based Bitcoin exchange announced that around 850,000 Bitcoins had disappeared from their exchange servers. All told, 750,000 privately owned Bitcons are gone, along with around 100,000 Bitcoins Mt. Gox owned. There are only 11 million Bitcoins in circulation. For those of you keeping track at home, this means that roughly 7.7% of the total Bitcoins in the world are now missing. Mt. Gox’s announcement confirmed the growing fears of many over the last few weeks that the exchange was suffering problems. Mt Gox suspended withdrawals earlier in February, and shutdown the entire exchange after announcing the theft.
It is unclear whether the missing coins were stolen or merely deleted by a technical glitch. In either event, Mt. Gox subsequently filed for bankruptcy protection, claiming more than $65 million in debts, which now far exceed its assets. While Mt. Gox was the largest Bitcoin exchange, it was not the only exchange. These exchanges have rushed to portray the collapse of Mt. Gox as an isolated incident, and they continue to insist that Bitcoin is a strong and viable currency. Traders have not been as kind to the currency, however, as the price of Bitcoin rapidly retreated below the $400 per-coin mark and have keep dropping.
The news is not all bad for Bitcoin. The good news from this week, which prompted my initial desire to write about Bitcoin, was an announcement last Monday by Overstock.com. The large online only retailer just announced that they would begin accepting Bitcoin as a payment method. This likely would have lent legitimacy to the currency, however, the subsiquent events at Mt. Gox undoubtedly hurt Bitcoin more than Overstock.com helps.
What do you think? Is Bitcoin finished? Will Mt. Gox’ collapse lead to regulation of virtual currencies? Does any of this matter at all? Comment below!
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