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Mt. Gox goes offline; bitcoin users scramble

By Allison Ross · Bankrate.com
Wednesday, February 26, 2014
Posted: 9 am ET

Major bitcoin trading exchange Mt. Gox has gone offline with little warning or information, leaving those with money in the exchange wondering if they'll ever get their bitcoins back.

The volatility at Mt. Gox has shaken the Bitcoin community, with some of the leading Bitcoin companies scrambling to restore faith and integrity in the cryptocurrency even as users on Bitcoin forums lament the loss of sometimes significant amounts of money.

The price of a bitcoin fell below $500 for a while Tuesday, according to Coindesk.com.

Mt. Gox goes offline

The offline move follows a day after Mt. Gox withdrew from the Bitcoin Foundation and erased all its tweets.

Mt. Gox's website is currently a blank white screen with this message for users:

Dear MtGox Customers,

In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

Best regards,
MtGox Team

Oh, and there's more. A document circulating widely among those in the Bitcoin community claims that hundreds of millions of dollars worth of bitcoins has been stolen from Mt. Gox over the years thanks to a problem with transaction malleability that went unnoticed for years.

Transaction malleability is where transaction IDs can be renamed before being confirmed in Bitcoin's ledger.

The document also says that 744,408 bitcoins are missing because of this theft. That equates to about 6 percent of the approximately 12.4 million bitcoins currently in existence and is worth more than $300 million at current prices.

The document, which purports to be a draft crisis strategy plan for Mt. Gox, says that Mt. Gox could "go bankrupt at any moment and certainly deserves to as a company."

What to do about Mt. Gox

Meanwhile, six major Bitcoin organizations released a joint statement deploring the "tragic violation of the trust of users of Mt. Gox" while pledging that the community will work together to restore trust in Bitcoin.

"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today," the statement says.

What this means

Information and updates are going to continue to come out as this situation evolves, but the big question is what all this turmoil means for consumers.

It certainly has been a harsh reminder of the largely unregulated nature of the cryptocurrency industry. Investors who used Mt. Gox have taken to protesting outside the company's headquarters in Japan in hopes of getting their money back. A Wall Street Journal article says that the Financial Services Agency, Japan's banking watchdog, has said it isn't its job to supervise cryptocurrency exchanges.

The future is also uncertain for Bitcoin investors who weren't tied into the Mt. Gox exchange, with some experts saying this heralds the beginning of the end for the Bitcoin movement.

Peter Leeds, author of "Penny Stocks for Dummies," says if the price keeps dropping, it will create a tipping point at which people will reconsider investing in bitcoins. He sets that tipping point at around $400, which he says will be "dramatically detrimental" to Bitcoin.

If nothing else, this serves as a reminder to be aware of the downsides of putting money into Bitcoin. Meanwhile, Bankrate will keep updating on relevant news that could affect bitcoin holders.

Share your stories and thoughts in the comments below, and follow me on Twitter: @allisonsross.

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