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Bitcoin believers unfazed by losses

Mt. Gox's collapse fails to dampen investors' interest in virtual currency

Reuters, JIJI

Like other bitcoin evangelists, Ken Shishido is ready to write off the money he lost in the bankruptcy of Tokyo-based virtual currency exchange Mt. Gox as the price of revolutionizing global finance.

“In the early days of the automobile, there were traffic accidents because you didn’t have traffic lights or pedestrian crossings,” he said Friday, hours after Mt. Gox said it had lost up to half a billion dollars of investor funds, including some of his. “But we didn’t ban automobiles.”

Shishido, who lives in Tokyo, was one of about 10,000 investors in Japan who became creditors in Mt. Gox’s bankruptcy when the company capped a tumultuous period of weeks by filing for bankruptcy on Friday.

He lost about a tenth of his investment in bitcoin in Mt. Gox, he said, and expected none of that money to come back.

Early enthusiasts for the 5-year-old crypto-currency were drawn to its revolutionary ideals of transparency and a lack of central or official control. There was also a heady mix of geek chic — the currency is “mined” through a process involving complex computer math — and laissez-faire Austrian economics.

Mt. Gox’s loss is eye-popping, but so, too, is the number of creditors — 127,000 — in what had been the world’s biggest exchange. That means the average trader lost the equivalent of $3,500 in the bankruptcy at current bitcoin prices, assuming no money is recovered in the court-supervised restructuring that is set to play out in Tokyo over the coming months.

Bitcoin’s value spiked in April 2013 as the crisis-racked Cyprus government clamped down on withdrawals and seized deposits, rattling faith in “fiat” currencies created by government declaration.

The crypto-currency soon crashed back. Late last year, as the number of exchanges and its name recognition grew, it took off again. It gained wider acceptance and attracted speculators and high-profile proponents such as the investor twins Cameron and Tyler Winklevoss of Facebook fame.

Investors interviewed after the exchange collapsed faulted Mt. Gox and its French CEO, Mark Karpeles, but they remained committed to the bitcoin idea.

Roger Ver, a big investor in Mt. Gox, said he does not know if he will ever get any of his lost bitcoins back. “But the important thing to realize is that Mt. Gox is just one company using bitcoin. The bitcoin technology itself is still absolutely amazing,” he said. “Even if one email service provider is having a problem, that doesn’t mean people are going to stop using email. It’s the same with bitcoin.”

Ver spoke of “all of the positive ways in which bitcoin is going to change the world. . . . If anything, it is kind of for the better of bitcoin that the irresponsible players are going out of business.”

Shishido said he does not expect to get his virtual money back, but that the rest of his bitcoin investments has soared tenfold in value.

Keiichi Hida, a bitcoin investor and member of the Japan Digital Money Association, lost ¥100,000 worth of bitcoins, which he got involved with as a form of “study.” But he was unfazed. “We should make it a national project to have bitcoin used nationwide at the time of the 2020 Tokyo Olympics,” he said. “I think then everyone would come to Tokyo in an instant.”

Still, there appeared to be trouble on the horizon, as an American customer filed a damages lawsuit against Mt. Gox — the first such case against the exchange.

The firm could face a slew of similar lawsuits in the U.S. and other countries. According to a complaint filed with a federal district court in Illinois on Thursday, Gregory Greene claimed that Mt. Gox “has engaged in unlawful, deceptive, and unfair conduct that is immoral, unscrupulous, and causes substantial injury to consumers.”

Despite this, Mt. Gox CEO Karpeles, even after bowing to apologize for the exchange’s bankruptcy, later said the currency would endure.

“The bitcoin industry is continuing, and the most important thing now is to limit the impact of (Mt. Gox’s collapse) on that,” he said.

  • Neal Palmquist

    When Bitcoiners cheer rising prices on the exchanges, do yourself a favor and see if gold is dropping because of a STRONGER USD at the same time. Why should Bitcoin cost you even more dollars when those dollars are gaining strength? A stronger Bitcoin makes it impossible to trade for gold and silver, by the way.

    Bitcoin is a suicide cult.

    I think the crash will happen at a time when gold trading is out of session and the escape from Bitcoin wallets to USD and then to gold will be shut off at the last step.