The Bankwatch

Tracking the consumer evolution of financial services

The under appreciated problem is looming for Bitcoin

It appears the disappearance of Bitcoin exchange, Mt Gox, is not a problem, at least to those who did not keep their Bitcoins there.

Fate of Mt Gox questioned after Bitcoin trading suspended

One of the protesters, London-based developer Kolin Burges, said on Tuesday that his faith in Bitcoin as an alternative payment system had not been shaken.

“If Gox is finally disappearing, it is bad news for everyone with their money in there, but good news for the rest of the industry.”

I would have to disagree and say this is a huge problem for Bitcoin.  As I have said before its a smart software market but there is no reason to trust nor rely on Bitcoin as a medium of exchange or as a currency.  it is a speculative investment run by unregulated and frankly unknown people.

Its great that Kolin Burges makes the quote above, but when $40 million [Edit:  I missed a zero –  that should have read $400 million] worth of Bitcoins disappear and 20% of the value is wiped of the market, this is a Bitcoin equivalent of Greece, except at least Greece is still around to make amends.

A few weeks ago Mt Gox announced the freeze on withdrawals.  At the time it was blamed on a software bug, but it now appears it is plain old theft by one of the owners.

I maintain that at best Bitcoin is a speculative commodity market. No amount of software smarts can make up for country based trust in a currency.  I refer to my review of Alex Paynes piece and his quote:

Silicon Valley has a seemingly endless capacity to mistake social and political problems for technological ones, and Bitcoin is just the latest example of this selective blindness

Written by Colin Henderson

February 25, 2014 at 13:48

Posted in Uncategorized

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