- By Thomas StackpoleThomas Stackpole is an assistant editor at Foreign Policy. A native of Martha's Vineyard, MA, he received his bachelors degree in Political Theory from Bates College, and studied at Al Akhawayn University in Morocco. Previously, he covered climate and energy for Mother Jones and politics for the New Republic and MSN News, and once sailed from Maine to the Panama Canal, where he spent at least one afternoon playing coconut bocce on a desert island.
Since peaking at more than $1,100 in late November, Bitcoin’s trading value has fallen by half. On Wednesday, a Japanese court delivered a death blow to Mt. Gox, once the world’s largest Bitcoin exchange, which had collapsed after hackers stole a huge trove of the cryptocurrency from the company’s servers. By denying the exchange’s application to rebuild under bankruptcy protection, the court sent the exchange hurtling toward liquidation.
But for the Bitcoin faithful, the death knell for Mt. Gox isn’t the end of Bitcoin — it’s just the end of amateur hour. "Mt. Gox was like a slow motion implosion," said Jerry Brito, a senior research fellow at the Mercatus Center at George Mason University. Mt. Gox had struggled with funding, in the run-up to its shuttering, and many were skeptical about the reliability of its software. "Anyone who was paying attention knew months in advance that the end was around the corner."
The currency’s survival since Mt. Gox’s demise serves as a testament to the rapidly growing cryptocurrency industry. "If this had happened to Gox two years ago, it would have been a much bigger setback," says Nicholas Colas, chief market strategist for ConvergEx, a brokerage firm in New York. While Mt. Gox is an embarrassing milestone for the currency, a sufficient number of other exchanges, such as Coinbase and CoinX, have emerged to preserve its future.
In fact, since news broke in February that Mt. Gox had been hacked and robbed of some $500 million in Bitcoin, the currency’s profile and availability has only continued to grow. Bitcoin ATMs are popping up in Australia, the United States, and even mainland China, where the government has threatened to crack down on banks that handle the currency. The online retailer Overstock.com began accepting Bitcoin in early January. Two months later the company reported that its customers had purchased $1 million worth of goods using the cryptocurrency. (Amazon, however, remains unconvinced.)
Meanwhile, additional investment is promising to move Bitcoin out of your mom’s basement and into the corridors of Wall Street. Firms like Perseus Telecom and Atlas launched a high-speed trading platform for the cryptocurrency, and New York is exploring a way to regulate virtual currency exchanges. For confirmation of the currency’s mainstream appeal look no further than the Winklevoss twins, who have reportedly made a big investment in Bitcoin.
Some of those initiatives may very well fail, but risk has been sufficiently spread among players in the industry that the collapse of one company won’t spell the currency’s end. "We worry a lot in the U.S. about ‘too big to fail.’ There is now no too-big-to-fail institution with Bitcoin," says Cola.
Many, like Cola, think that the next step for the currency’s rapid move toward mainstream acceptance will be increased transparency and regulation — an indication of how investors rather than activists have become the driving force behind the currency’s expansion. "I think the central bit of regulation needs to be consumer protection. It has to be robust." When hackers attacked Mt. Gox, users lost several hundred million of dollars worth of Bitcoin. It’s exactly that kind of scenario that makes many ordinary consumers hesitant to adopt cryptocurrencies.
But whatever comes next, there isn’t much in the way of nostalgia. "Mt. Gox is dead," says Brito. "Let it die."