Tuesday, September 26, 2017

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Bitcoin's Biggest Burden - Mt. Gox is a Roach Motel for Dollars

on in Bitcoin Minute

World Bitcoin Network

When bitcoin was first born in 2009, the cyber-currency was expressly set up to avoid the pitfalls of a Federal Reserve or the pricey bailouts given to the failing banks.
Bitcoin's novelty was based on the fact that it was entirely decentralized.
But there's no question that an overarching, indeed, central player has emerged.
And Mt Gox, the first major exchange of bitcoins is that entity.
In fact it is near impossible to follow bitcoins without hearing about this Japanese based exchange.
And while the relationship has long been rosy, 2013 has seen trouble in paradise for Mt Gox.
Suddenly, the elephant in the room with respect to bitcoin success is the company's liquidity or possible shady dealings.
Originally set up to exchange magic cards that can sell for as much as bitcoins, Mt Gox now is accused of selling nothing more than magic vapors.
As Forbes' recent article suggests, bitcoin has become a Roach Motel for your dollars.
They check in, but they don't check out.
Online sources concur.
Revealing no record of Mt Gox paying out in dollars to anyone.
Some users have even posted rewards for any proof of US Dollar payouts without much success.
So while it is easy to buy bitcoins from the exchange, even easy to send the bitcoins outside their system Mt Gox seems unwilling to sell them.
Is it a question of liquidity, fraud or government regulation?
It is not clear.
But one thing is sure, Bitcoin has been the focus of a number of US Federal investigations in recent months, with nearly 5 million seized in perceived actions of money laundering.
So how does this Magic firm stay in business?
How does it still capture the majority of transactions?
Well, Mt Gox sells bitcoins at the highest prices, often TEN to FIFTEEN dollars more than Bitstamp.
Any amateur in arbitrage sees this difference as enormous potential, but when they are lured in, its over.
Their cash is stuck.
Today, most savvy investors avoid the Mt Gox entirely. And as questions swirl about their involvement in illegal arbitrage, potentially worth millions of dollars, the exchange has seen its numbers of transactions fall.
Sure US regulators have pushed them around, but the bigger issues with Mt Gox are now about transparency and trust.
Its high time the Roach Motel cleaned house.

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