Bitcoin bubble could burst as investors rush to withdraw cash

Bitcoin bubble could burst as investors rush to withdraw cash

Summary: Investors have been left high and dry holding on to plummeting bitcoin as a bug in the software has prevented them trading in the currency.

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The bitcoin bubble seems about to burst. The price of the online cryptocurrency has dropped significantly as investors try to get money out of the online trading exchange. 

mt gox
Image: Mt Gox

Last week Mt.Gox, the oldest venue for trading in bitcoin blamed a bug in its software for an “issue with the way that bitcoin withdrawals are processed”. It had noticed a set of spikes in transactions after months of steady trading and looked to investigate.

When bitcoin is traded, the bitcoin wallet is accessed and currency is transferred to another account. Mt.Gox said last week that the issues only refer to transactions from a Mt.Gox bitcoin wallet to an external bitcoin address and not to transactions to another Mt.Gox address.

Furthermore Mt.Gox said that the issue occurs to all bitcoin transactions sent to a third party. The company took the decision to suspend bitcoin withdrawals until the issue had been resolved.

“A bug in the bitcoin software makes it possible for someone to use the bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur” the company said.

Mt.Gox believes that the issue this can be addressed “by using a different hash for transaction tracking purposes”. It goes on to say that the “new hash's purpose will be to track a given transaction and can be computed and indexed by hashing the exact signed string via SHA256”. This is the same way transactions are currently hashed.

Today the company issued an apology and told its customers that it has now implemented a “solution that should enable withdrawals and mitigate any issues caused by transaction malleability”.

The workaround now uses a “unique identifier created by Blockchain to show whether transactions have been modified or not”. Mt.Gox hopes that the workaround will “prevent any fraudulent use of the malleability issue and protect the assets of customers”.

The workaround included re-indexing approximately 32 million entries in the Blockchain, fully deploying the new NTX ID and implementing a new bitcoin withdrawal queue to be tested”.

The current price of bitcoin on Mt.Gox is $360 but this does not actually matter if you cannot get to your currency or trade in it. There are concerns over the online currency, which was created in 2009.

There is no regulation for customers and the currency is subject to hacking attempts. The anonymous way that the currency is transacted leaves it open to illicit transaction attempts. 

Mt.Gox said that it will update everyone again by Thursday on its progress. Its investors might find that when they finally get access to bitcoin, its value has fallen to nothing.

All they will have left of their fast-growing investment is a screenshot of a now defunct — and empty .CSV file.

Topic: Social Enterprise

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43 comments
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  • BWAHAHAHAHAHA!

    Suckers! You've been had!
    thetwonkey
    • Actually, you've been had.

      You could've purchased 10,000 of them a little over a year ago at $10 and be sitting on nearly $7,000,000 right now.

      Remind me, who's the sucker?
      ZDBurger
      • At $350USD/BTC...

        I'm currently looking at a 8,750% return over the 3 years I've been holding Bitcoins.

        At the more mainstream price (from exchanges that people still trust) of $650USD/BTC, I'm looking at a 16,250% return.

        This "author" is part of the problem. So many bloggers, who clearly had no idea what Bitcoin was in 2011, nor felt the need to INVESTIGATE Bitcoins past, feel entitled to spout whatever criticism they can muster, based only on their experience of the last 12 months since they first heard about Bitcoin. The rest of us, who care about Bitcoins origins and what went on in 2009-2013, just sit back and chuckle.

        The fact is that Bitcoin (the technology, the idea) isn't going anywhere, anytime soon. It's a completely new paradigm for working with "trust among distributed parties." The benefits of such a paradigm go far beyond an "agreed-upon ledger of payment transactions" which Bitcoin represents.

        There have been bubbles and corrections in price every year without fail--it does NOT in any way indicate that "its value has fallen to nothing." Like I said, despite all of these issues happening so closely together, I am still sitting on 10,000%+ gains. For that, you can call me a lucky investor, but you should really see it for what it is--a great new technology that is continually gaining more and more usage.
        Michael Heier
      • Anyone who's bought into bitcoin is a sucker

        1. $7,000,000 "worth" of bitcoins is worth $0 if there's no way to exchange them.

        2. When someone makes money off a Ponzi scheme, that doesn't make it a legitimate investment.
        Astroturf_Consulting
        • do some homework

          I sell coins everyday for fiat. The sale clears a day earlier then securities and is in my checking account within 48hrs.
          Ponzi ? Its always the uninformed guy that throws this word around. The fact is many retailers are accepting btc for payment. As a business owner, im tired if paying 60k oer year to visa/Mastercard do they can hold my money for 4 days just to collect interest on it.
          waller46
          • be realistic

            At least with Visa and Mastercard, the end user gets some assurance that they are protected against fraudulent use. I for one can attest to the fact. Secondly, if MtGox only recently discovered this bug in their software, what other flaws are lurking beneath the surface? I ask this since "it's open source so you can trust it" is always cited as a defence by the various fanboys and shills who scour the Internet looking to counter any criticism of bitcoin.
            BartholomewRandles
  • Bitcoin bubble could burst as investors rush to withdraw cash ???

    Nonsense, seasoned investors are taking advantage of the current low as a buying opportunity. Anyway the price is not crashing after all the troubles with the exchanges this week, if anything prices are holding remarkably steady. I really think articles about bitcoin should be written by someone with a financial background, or at least by someone who understands the technology and closely follows the market.
    praguebob@...
    • That's the thing. Bitcoin's an investment, not a currency

      that is the difference, that's it's Achilles' heal.
      William.Farrel
      • Interesting point

        I don't disagree, but that means it's more like a coin collection (numismatics). You buy coins not for the face value or the value of the metal content but as a value-storage medium (e.g., gold coins) or investing hoping the value will increase.
        Rick_R
      • Not correct. You *could* apply the same thinking to the USD

        Note I am no bitcoin fan. I don't own any.

        That said, bitcoin IS a currency, no more no less - just like the US dollar. It is used as a currency.

        But like most currencies it can be used as an investment. Believe me people make/lose lots of money investing in currencies like the dollar, yen, ruble etc.

        An like nearly all global currencies it is fiat money (it isn't backed by anything tangible). its value is based on supply and demand. And its value can go up or down based on what people will pay for it. Now granted, there are a lot of controls put in place to regulate the price (by destroying or printing money, controlling treasuries, etc). This is why when people say the "Congress just prints money when they need it" is ridiculous. If you just print money the value goes down.

        Like art.
        MeMyselfAndI_z
        • Bitcoin is NOT a currency!! Stop giving people the wrong idea!

          ...Bitcoin is a "method of transferring value/currency!" It is not currency itself. Sure, I can mine Bitcoins and buy things with them, but the truth of that scenario is that my Bitcoins represent a vehicle for real currency (fiat currency like the USD). I can also grow flowers and trade them for things, but the flowers don't therefore become "currency."

          The same can be said for my Visa card, and my check book, and Western Union. None of these things is a currency! They provide "ACCESS to my currency" or a "means of transferring my currency." They are not currency in and of themselves. I can still invest in Visa and Western Union, or trade with someone my stake in Western Union for goods or services. I can do both of those things, but that does not imply that Western Union and Visa are currency.

          Just because something can be used like money doesn't mean it's money.

          More generally, the Bitcoin protocol is described, not as a "means of transferring value," but as a "means of establishing unanimous trust among separate, distributed parties." That is the true essence of the Bitcoin protocol. It describes a way for physically separated parties to unanimously agree upon a time-stamped ledger of transactions, without the need for a third party to coordinate such agreement. Look up the Byzantine Generals Problem--this is the conceptual problem which Bitcoin means to solve. It describes how I can broadcast my transaction to the network, and how several others can broadcast their transactions to other nodes in the network, and how all of those transactions can be agreed upon and stored without needing a third party to make those decisions.

          Traditional Banks and payment processors do similar things, but they ARE the third party that Bitcoin seeks to eliminate.

          Banks and Paypal are NOT CURRENCY though!
          Michael Heier
          • sorry. It IS currency. Just like a dollar. Go to Bitcoin.org

            It is by DEFINITION a currency, i.e. it is money. It was designed to be independent of any other currency and has value the same way the USD has value.

            Webster: something generally accepted as a medium of exchange, a measure of value, or a means of payment:
            MeMyselfAndI_z
          • @memyselfandi .. your unbelieveable

            As Mike rightly suggests: seems the ones spouting on the most, know bupkiss about the actual inner workings of Bitcoin [Disclaimer: i'm no expert or owner of Bit/Lite-coins, but have done enough of my own research to understand what they really represent and the basic principle behind Bitcoin].

            The narrow minded, like yourself, think Bitcoin is simply a black and white, vanilla alternative to traditional currencies, e.g., $, cents, pounds, Euros, etc, etc, which couldn't be further from the truth. I mean, frankly, if it were simply some 'nickel & dime' replacement for $, do ya really think so many highly intelligent folk would buy into (literally) an idea like that??

            Shoe us, wiseguy, how you can use dollar bills as a legally binding contract - in and of themselves. Dollars / traditional currency is a legal tender used for local & foreign exchange. They cannot be used as a contract .. whereas Bitcoin can be used as a legally binding contract between any given, agreeing parties.

            Still not satisfied? Show us how dollars can be used a legal & contractually binding proof of ownership or legal proof of establishing a concept in Patent Law... No? Well, again, because of the wide, encompassing versatile nature of them, Bitcoin can - for all intents & purposes - be used as irrefutable proof of a patent lodgement being the first of its kind, or otherwise - as the case may well be.

            Now, I'm not going to get into the deeper, technical nature of exactly how these upshots of Bitcoin work: mostly because i know only the very fundamentals behind the tech'. But frankly.. you really oughta try reading up before spouting off next time, on something you clearly have little knowledge of.

            So to finish up, it essentially boils down to this: Bitcoin is more than simply a way of transacting value - as traditional currencies do / go. Bitcoin is a whole raft of currency, contractual and data storage capabilities tied to a global network of interconnected users (owners) of Bitcoin and all it represents.

            C'mon now.. use a bit of lateral thought - and get some perspective. Above all, do some research, next time - before opening your trap.

            Sincerely, you take care now.
            thx-1138_
          • @memyselfandi * you're * unbelieveable

            ;P
            thx-1138_
    • Do we really know what the value of a Bitcoin is?

      If people can't withdraw then we don't know what value it has. What happens when the accounts are released for withdrawal? Will there be a "run on the bank" as people flee the currency?
      ye
      • We don't know and there are no protections in place

        In principle I don't agree with William Farell regarding the nature of bitcoin. I think it is a currency pure and simple. There are many parallels to the US dollar or any global currency.

        But if there is a distinction (some say advantage) is that bitcoin is unregulated. And this could be bitcoins biggest weakness. If there is a run on the "bank" there is nothing to stop it. So it is more volatile.

        People think regulation is bad. Well I am glad my 60Hz 120VAC is well regulated. And my USD is too.
        MeMyselfAndI_z
        • Update your Information

          FinCEN and other regulatory agencies have already begun working closely with investors and financial service providers in the Bitcoin space to offer agreeable regulations that protect consumers, discourage lawbreaking, and still foster growth and innovation in a completely new financial realm such as this one.

          Last week Regulatory officials in NY held hearings to determine how they could *HELP* encourage Bitcoin innovation and draw it *TO* new york, by creating something called a "BitLicense" ( http://bit.ly/1grBezn ). I don't fault you and others here for being unaware of all this. Its the journalists fault. All they do is write sensationalist bullsh*t articles about Bitcoin market price falling apart, or going gangbusters, week after week.

          Meanwhile the first innovation in the financial services industry in 50 years is sprouting all around the world. Venture Capital firms are pouring money in ( http://bit.ly/1ftGQY2 ). Wall Street is about to pour hundreds of millions in. ( http://www.entrepreneur.com/article/230346 ) International throngs of people living under oppressed corrupt governments are adopting it en masse right now. ( http://bit.ly/1nHzC6W )

          Notice how I have had to link elsewhere for this information? None of this is written about, for some strange reason. Bitcoin and cryptocurrency financial systems are going to creep up on everyone because of this, and suddenly its going to be everywhere. Mark my words.
          ZDBurger
          • I really wouldn't sight the western financial sector moving in

            As a sign of stability!

            These are the guys that caused pretty much every economic recession by exploiting loopholes and oportunities. Any assumption that they would not find a way to exploit bitcoin is naive at best
            MarknWill
          • Bottom line, right now, it is unregulated

            What could happen is another thing entirely. People love Bitcoin because it is unregulated but the lack of regulation means it is also vulnerable to high volatility.
            MeMyselfAndI_z
      • It's A Dead End Concept/Market

        The one critical issue that concerns me as to whether I ever personally transact in Bitcoins is not the unsure/mysterious origins alone, the complexity of the calculations, the sharply increasing expense of what is yet be left mathematically to mine, but that there are theoretically only 21M Bitcoins ever to be available in the Currency. Which it decidedly and absolutely can function as such, despite semantics to the contrary.
        That alone kills it for me. Dead End. At 21M it all runs out of oomph. And just cycles and recycles the same fixed number of Bitcoins mined forever in a closed system.
        Give me please your best shot as to where I'm just not seeing the light. Cause I obviously think that I do already.
        PreachJohn