Bitcoin Values Fluctuate Amid Withdrawal Delay by Mt. Gox Exchange
NEWS ANALYSIS: Bitcoin is supposed to be decentralized, but problems at a major trading hub show the virtual currency's vulnerability.Although Bitcoin is decentralized from a technology perspective, time has shown that the cryptocurrency is susceptible to the same types of market fluctuations that would affect any commodity. The creation of Bitcoin—and the act of moving and transferring it—are highly distributed processes, yet there are a few lynchpins that look much like a central authority. On Feb. 7, Mt. Gox, a Bitcoin exchange site, publicly reported that it was having delays on its system for Bitcoin (BTC) withdrawals. "In our efforts to resolve the issue being encountered by various Bitcoin withdrawals, it was determined that the increase in the flow of withdrawal requests has hindered our efforts on a technical level," Mt. Gox stated. "To understand the issue thoroughly, the system needs to be in a static state. In order for our team to resolve the withdrawal issue, it is necessary for a temporarily pause on all withdrawal requests to obtain a clear technical view of the current processes." In a fully decentralized system, one would think that a technical glitch on a single node would not have a significant impact on an entire distributed cryptocurrency. Yet that is precisely what happened.
During the Mt. Gox shutdown, the value of Bitcoin as measured in U.S. dollars declined precipitously. Bitcoin's value dropped to just over $650 per BTC after averaging approximately $850 per BTC prior to the Mt. Gox glitch. As of 4 p.m. Eastern Standard Time on Friday, Feb. 7, some of that value had been restored, with Bitcoin trading at an average of $732 U.S.