The History between Bitcoin & Mt. Gox

Ten years ago, with BTC trading around $600 (incredible, right?), the largest exchange of the moment was shut down overnight. What happened, and how does it affect us today?

Let’s go back to 2010, when Jed McCaleb created Mt. Gox (Magic: The Gathering Online Exchange), a Bitcoin exchange that he later sold to Mark Karpelès. 

Mt. Gox became the world’s leading exchange of that time, concentrating 70% of total BTC transactions; everything revolved around this platform.

Despite its visible success, Mt. Gox concealed security and management issues, which are crucial pillars for any exchange.

The first warning came in 2011 when a hack on the site caused a significant drop in the BTC price. But it was in February 2014 that the situation became critical and unsustainable, leading to the suspension of withdrawals.

More precisely, on February 24, 2014, the website simply disappeared, and on February 28, the crypto exchange declared bankruptcy, revealing the loss of 850,000 BTC (approx. $450M at that time) due to years of undetected irregularities.

Since then, creditors have been demanding the return of their crypto assets, but it wasn’t until 2023 that they began to see some success.

Recently, it was announced that on July 5, nearly $9B worth of bitcoin will begin to be distributed to the victims, creating selling pressure and driving the price down.

This event is a historic reparation and, on one hand, closes one of the most scandalous episodes in the ecosystem, while on the other, sets a precedent for a recovery rarely seen in other financial industries.

But, which lessons can we learn from this whole saga?

• Digital Security: success does not guarantee survival if the necessary security measures are not taken.
• Excessive Centralization: if a large part of the market is concentrated in a single platform, any problem with it will have a systemic impact on the entire ecosystem, increasing the risk of a collapse.
• Self-Custody: as everyone knows, “not your keys, not your coins.” This phrase seems like a cliché until events like the one described occur, and everyone realizes it’s true.
• Too Big to Fail: this phrase does not apply in crypto as it might in Wall Street, where in any situation, there are banks that can come to the rescue or even the Federal Reserve, as happened in 2009.

As a final reflection, I would like to highlight that the crypto world may have many flaws as it is an emerging industry (it is less than 20 years old), but there is a constant effort to improve and clean the system of harmful players, which will inevitably make it one of the largest industries in the world.