Q: Is that what happened to Mt. Gox?
A: It's not entirely clear what happened to the Tokyo-based exchange, which has sometimes been criticized for poor security. It suffered a crippling theft in 2011, and several experts have since accused the exchange of ignoring warnings about a software glitch which could enable hackers to silently drain the business of its bitcoins. The glitch was recently fixed, but not before Mt. Gox imposed a ban on bitcoin withdrawals, feeding speculation that the exchange was out of money.
Those fears appear to have been confirmed late Monday when bitcoin enthusiast Ryan Selkis posted an 11-page-long "Crisis Strategy Draft" allegedly leaked by a Mt. Gox insider. The draft appeared to show the exchange secretly trying to grapple with the loss of more than 740,000 bitcoins over several years - a titanic sum several times the value of its assets.
Q: So does that means it's all over for bitcoin?
A: Some fear that a sudden loss of confidence in online exchanges' ability to protect their stored bitcoins could kill off the currency's appeal.
A coalition of bitcoin businesses sought to portray Mt. Gox, once the biggest and best known bitcoin exchange, as an isolated case of incompetence but the document published by Selkis speaks in apocalyptic terms about what would happen were the scale of its losses to become public.
"The likely damage in public perception to this class of technology could put it back 5-10 years, and cause governments to react swiftly and harshly," it says. "At the risk of appearing hyperbolic, this could be the end of bitcoin, at least for most of the public."
That may indeed be hyperbole. bitcoin's value fell sharply once the document started circulating but has stabilized around $500 per bitcoin, suggesting that many already assumed Mt. Gox was insolvent. And at $500, the cybercurrency's value is still 17 times what it was at this time last year, meaning some still see a bright future for bitcoin.
