Mt. Gox was once the largest bitcoin exchange. The bitcoin community was dismayed when the company was shuttered earlier this week. Many people around the world are wondering what the news means for the future of the virtual currency.
The general consensus is that bitcoin is not going away anytime soon. However, bitcoin users have still raised a number of concerns.
Confidence in Bitcoin is Clearly Shaken
People with Mt. Gox accounts lost an estimated $350 million when the company shut down. This could cause many people to lose faith in the future of bitcoin.
Heny Young recently wrote a post on Twitter that tried to assuage many people’s fears. He pointed out that people would continue to use Gmail even if it shut down. However, his effort to reduce concerns may not have worked as well as he hoped.
A number of people felt that the news raises serious concerns about the future of bitcoin. A redditor going by the name of muyuu said that human factors play a key role in the success of the currency. History shows that he may be right. The human factor was the cause of the bank runs that shut down most of the banks during the Great Depression. Most of the banks were financially solvent. However, people became worried that their deposits were at risk after several banks did fail. The massive exodus to withdraw accounts inevitably crashed the banking system.
Will there be a similar run on bitcoin? It is too early to say. Mt. Gox holders are already rushing to withdraw their bitcoin. The value of bitcoin briefly plunged to 470 USD. The value has since increased to 581 USD at the time of this writing. However, that is still significantly lower than the peak of $1,200.
Future of Bitcoin
People all over the world are wondering what the future of bitcoin will be. Jose Pagliery of CNN Money said that the currency’s future is in doubt.
Claims that bitcoin may be in danger of failing are a bit premature. Everybody that was paying attention knows that Mt. Gox was having problems for a while. The problems there may not be indicative of the rest of the bitcoin servers. Unfortunately, concerns will remain until the problems at Mt. Gox are identified. Even if they were confined to that particular exchange, bitcoin holders may fear that they could occur elsewhere.
The problems at Mt. Gox are unknown and under investigation. Prosecutors from the United States Department of Justice have issued subpoenas to the company. However, it is unclear whether the Japanese authorities will cooperate.
This particular scandal is unlikely to destroy bitcoin by itself. However, it has shattered confidence in the sustainability of the virtual currency. The virtual currency’s future could come into doubt if it faces another crisis in the future.
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