Ah.

Is that the reason why so many people are so anxious to save MtGOX, even with a radical haircut on their balances, rather than liquidating it?

But any part of that revenue that is left over from expenses will be taken out by the owners as profits.

So you were thinking of the individuals investing in SaveMtGOXco, rather than their companies?

The links were truncated in the cut-and-paste.  (Is any of them about TelexFree?)

One reason to believe in the future of bitcoin is that their salesmen are very good at winning the hearts of potential customers and skeptics. 

If you think that only a sick mind could imagine such a scenario, read this, for example:

http://www.assetrecovery.org/kc/node/b7b13256-28f7-11de-900c-81c63910293a.0;jsessionid=9697605F2890DC6814DA990ADC28D28C

Technically that would not be fractional reserve banking, or even banking at all.  While the price remained constant, the exchange would still have on its hands enough capital to honor all the clients' account balances -- except that it would temporarily be in the form of stocks or other investments, rather than bitcoins. 

There is no law that requires an exchange to store clients' dollars as dollars and bitcoins as bitcoins, unless that is stated in the user agreement.   Converting coins to dollars would have been a terrible risk, but they may have thought that it was OK.
 

That is just a theory, of course (I still think that it is more likely than the stupid malleability hack.  Both theories depend on sheer stupidity, but mine also has a greed motive.

Frrom the charts, I see that there were long periods when the price was stable.  Perhaps MtGOX expected the price to remain stable for another couple of months, or that it would rise slowly so that they would have time to reverse the deal.

In my theory, the sale would probably have happened off-market, in large lots.  Suppose that a big investor contacted MtGOX and offered to buy 1,000,000 BTC from their cold storage at 15$ each, when the market price was 10$.  Would they let that opportunity pass?

Of course it is OK to buy coins on other exchanges from the exchange's customers and withdrawing them.

What is not OK is buying a big lump of those coins in private from the exchange without the clients' knowledge. 

Thanks.

I have one nit about your document: you suggest that the company that would rescue MtGOX could buy coins from the other exchanges.  But the coins in the exchanges' wallets do not belong to the exchanges, they belong to their clients.  

In fact, my preferred explanation at the moment for how MtGOX "lost" all those coins is that they sold them off-market in order to play with the cash, confident that they coudl re-purchse them if and when needed; but then the BTC price jumped from 100$ to 800$  in november-december, and they could no longer do that.

So, I think that it would be too risky (if not criminal) for the exchanges to sell those coins to the Save-MtGOX company.  Ditto for any bitcoin investment funds.

Does this make sense?

Didn't they replay a segment of the transaction log and price charts, several times, during the December crash --- so that their clients could not see the real depth of the plunge?  (I read that in a customer's blog at the time.)

If the customer base of MtGOX could generate enough money to cover its debts, they would not be insolvent.  They could get loans to pay those debts with pressing deadlines, and eventually get back into the black.

Being insolvent means that they have more debts than assets, and their expected revenues in the medium term (say, two years) are not enough to fill the gap.

A company that acquires MtGOX will inherit their debts, and cannot expect to make more money than they did a month or two ago.  That means net losses (and big losses, while the clients withdraw their balances), for years perhaps.  What is the point of the takeover then?

Thus, I would be very surprised if MtGOX gets rescued.

 

I wasn't paying attention to bitcoin then, but I would think that the Silk Road closeure was good news because it allowed bitcoin to free itself from the image of "coin of criminals and drug addicts", and therefore became acceptable to the vast majority of people who would rather not get involved with those things.

But the messages of the MtGOX headlines are "thousands of investors have lost their savings by investing in bitcoin" and "even the largest and oldest exchange may close without warning and disappear with your coins and money".  How can anyone possibly consider that "good news for bitcoin"?


Perhaps the Silk Road closure helped, but that rally was obviously due to the opening of the huge Chinese market.  Increased demand, fixed supply = higher price, isn't that obvious?

So much so, that the price crashed when China put restrictions on bitcoin, and partially recovered when Huobi and OKCoin found a partial workaround that kept that market alive.

To me it is obvious that arbitrage from the main Chinese exchanges has had a strong (mostly, but not entirely, stabilizing) effect on the price in western exchanges, all the time.  For example, it was probably the main contributor to the fast recovery after the damage done by that 10 kBTC whale on Bitstamp.  Huobi and OKCoin are large reservoirs that can absorb or supply coins to the (much smaller) western exchanges without much effect on their own price.

(Why do bitcoiners keep saying that the Chinese exchanges are all fake and irrelevant?  It is like saying that Apple sales are fake and therefore the company is irrelevant to Silicon Valley...)

Exactly.

Between Feb/6 and Feb/11 the price had a permanent drop by some 50--60, almost certainly due to news of MtGOX's troubles. (Feb/10 was the first disappointing press release IIRC.)  

I believe that the final demise of MtGOX did not have an immediate effect on price because speculators had been following the story and were expecting that event, so their reaction happened weeks ago (and it was negative).  

However, the headlines in mainstream media are going to scare away potential investors who might otherwise have joined the market.  As for the long-term investors (who own bitcoins but do not read the forums and may check the charts only now and then), some of them will decide to sell their coins and invest into something else.

I believe that yesterday's "crash" was caused by that 10 kBTC sale at Bitstamp, not by MtGOX directly, and the current "rally" is just the normal recovery. 

The real effect of MtGOX's closure I think, was a gradual decline spread over the last month, and I think that more damage will come gradually over the next months.

The closure of Silk Road had a positive effect since it removed the stigma of "crime coin" that kept many investors away.

On the other hand, I don't see anything positive in the closure of MtGOX.  It does not increase the confidence on other exchanges. (If it had been closed by the police, and Mark went to jail, it might have had that effect; but if it just closes and that is it, why shouldn't the other exchanges do the same?)   

The headlines that are coming out now say "The largest bitcoin exchange closes and disappears with all their clients' money".  There will be thousands of angry MtGOX clients putting up blogs and giving interviews about how they lost everything by investing in bitcoin. That can only scare potential investor again.

Many long-term investors who are not bitcoin enthusiasts probably have not heard of MtGOX's troubles until now.  As those news reach them through the media, some of them should sell their coins and leave.
 

Today Tuesday Feb/25 UTC, the total trade volume increased about +160% relative to yesterday (from ~363 kBTC to ~948 kBTC).

The increase was slighty greater outside China (from ~102 to ~291, or +185%) than in China (from ~261 to ~657, or + 152%).

As a result, China's slice of the total volume fell from 72% to 69%.

The increases in the main exchanges were: Huobi +117%, OKCoin +229%, Bitstamp  +123%, Bitfinex +252%, BTC-e +252%, BTC-China +115%.

Daily volumes of BTC trade to/from USD and other national currencies (in kBTC):


             !    Mon !    Tue !   Wed !    Thu !    Fri !    Sat !    Sun !    Mon !    Tue !
  EXCHANGE   !  02/17 !  02/18 ! 02/19 !  02/20 !  02/21 !  02/22 !  02/23 !  02/24 !  02/25 ! Currencies considered

  Bitstamp   |  19.90 |  14.83 | 20.76 |  34.97 |  29.61 |  18.08 |  20.87 |  51.84 | 115.76 | USD
  BitFinEx   |  15.69 |   8.47 |  4.71 |  25.27 |  28.46 |  14.73 |  15.80 |  27.16 |  94.55 | USD
  BTC-e      |  15.07 |   8.08 |  5.84 |  23.37 |  23.64 |  18.68 |  14.24 |  20.78 |  73.86 | USD,EUR,RUR
  Kraken     |   0.89 |   0.51 |  0.38 |   1.60 |   1.15 |   1.08 |   1.06 |   1.06 |   2.23 | EUR
  Bitcoin.DE |   0.57 |   0.38 |  0.54 |   0.70 |   0.76 |   0.61 |   0.50 |   0.73 |   2.23 | EUR
  CaVirtEx   |   0.15 |   0.21 |  0.11 |   0.75 |   0.60 |   0.20 |   0.23 |   0.30 |   2.15 | CAD
  CampBX     |   0.28 |   0.10 |  0.14 |   0.73 |   0.24 |   0.26 |   0.22 |   0.37 |   0.42 | USD

  SUBTOTAL   |  52.55 |  32.58 | 32.48 |  87.39 |  84.46 |  53.64 |  52.92 | 102.24 | 291.20 |

  Huobi      | 130.41 |  74.04 | 34.12 | 131.14 | 187.12 | 154.12 | 185.15 | 163.47 | 352.76 | CNY
  OKCoin     |  63.05 |  51.46 | 26.29 |  53.49 | 140.75 |  87.71 | 141.90 |  84.03 | 275.68 | CNY
  BTC-China  |   7.86 |   3.86 |  2.04 |  10.97 |  15.23 |   9.29 |  10.42 |  13.12 |  27.72 | CNY
  Bter       |   0.48 |   0.35 |  0.37 |   0.77 |   0.63 |   0.48 |   0.62 |   0.53 |   1.10 | CNY

  SUBTOTAL   | 201.80 | 129.71 | 62.82 | 196.37 | 343.73 | 251.60 | 338.09 | 261.15 | 657.26 |

  TOTAL      | 254.35 | 162.29 | 95.30 | 283.76 | 428.19 | 305.24 | 391.01 | 363.39 | 948.46 |



All numbers were collected by hand from the site http://bitcoinwisdom.com. Beware of possible errors.

For each exchange, the numbers include only the trade volume to/from the currencies listed in the rightmost column. Trade between BTC and other cryptocoins, such as LiteCoin, is NOT included.

Dates on the header line are UTC. Specifically, "01/15" means "from 01/15 00:00:00 UTC to 01/15 23:59:59 UTC". (Beware that Bitcoinwisdom uses your local time, so the date may appear to be off by 1 day.  For example, if you are 2 hours west of Greenwich, it may show "01/14 22:00" when the UTC time is "01/15 00:00".)

NOTE: MtGOX is now closed.

Chinese Slumber Method prediction for Wednesday Feb/26

Today Feb/25, Huobi's volume for 19:00 -- 19:59 UTC was 853 BTC, which, by the criteria I have been using, makes it a False Slumber Point.

This was the sixth consecutive day in a period of hectic trading at Huobi, that started on Feb/20. It is as if the six days Feb/20--25 had been one single "trading session" during which the price veered off the trend line, like Feb/11--12, Feb/13--14, and Feb/16--17.

There is no clear trend yet, so for the next prediction I will stick to the "bullish" trendline defined by the True Slumber Points of Feb/18, Feb/19 and Feb/23, ignoring Feb/21.  That trend line has the equation p = 3871.10 - 2.57*d, where p is the price and d is the day number in February.   For Bitstamp, as usual, I will use Huobi's prediction divided by R = 6.12.

Therefore:

Prediction valid for: Wednesday 2014-02-26, 19:00--19:59 UTC (not before, not after)
Huobi's predicted price: 3804 CNY.
Bitstamp's predicted price: 622 USD.



NOTE: If you find these Chinese Slumber Method posts boring, I could change the name to Chinese Choo Choo Train to the Moon Slumber Method.

Checking the Chinese Slumber Method predictions for Feb/25

Prediction posted on: Monday 2014-02-24, 21:36 UTC
Prediction was valid for: Tuesday 2014-02-25, 19:00--19:59 UTC

Well, again, I was obviously way more optimistic than the market

Huobi's predicted price: 3807 CNY
Huobi's actual price (L+H)/2: 3284 CNY
Error: 523 CNY

Bitstamp's predicted price: 622 USD
Bitstamp's actual price (L+H)/2: 515 USD
Error: 107 USD

One interesting observation is that, like yesterday, Huobi's price followed Bitstamp only partially, refusing to go all the way down.  The price ratio deviated from the usual 6.12 CNY/USD, although not as much as yesterday.  It seems that arbitrage trading was not totally effective at those times.

The Huobi prediction in question is the rightmost blue rectangle on the chart below.  The light blue-gray rectangles are the previous predictions.  The orange and grey dots are the True and False Slumber Points, the mean prices at 19:00 UTC every day.  The orange line is the trend that was assumed for the prediction.


The following chart shows the Bitstamp prices and predictions. The orange and grey dots are Huobi's prices at 19:00 UTC every day, divided by R = 6.12.  The orange line is the trend used in the prediction, which is Huobi's trend divided by R.

It is the normal daily pattern. It is 11:00 am there.

Sounds like the sort of thing that should not happen but often does...

But what about those clients who complained publicly that they did NOT receive the withdrawals?  The hackers only "un-malleated" the transfer requests of their own withdrawals, leaving those alone?