Robust Bitcoin survives first real test: 'Mt Goxalypse'

Mt. Gox CEO Mark Karpeles, sitting at second right, attends a press conference at the Justice Ministry in Tokyo

WHY does Bitcoin refuse to die? It's a question that many will ask after what seemed like a terminal blow last week: the collapse of the oldest and most famous Bitcoin trading exchange, Mt Gox.

t was a messy business, with €230m of Bitcoin owners' money lost (possibly stolen) when a glitch in the exchange's handling of Bitcoin was apparently exploited by persons unknown.

Howls of 'I told you so' emerged almost immediately, in the main from economists and pundits who have predicted the demise of the virtual currency for the last five years. TV stations from Bloomberg toCNBC to the BBC ran "Bitcoin Crisis" headlines.

One US senator even called for the crypto-currency to be banned. (A verdict from Irish Senator Fidelma 'Some Class Of A Microchip' Healy Eames on the crypto-currency is expected soon.) Yet not only did Bitcoin stabilise in the 48 hours after the Mt Gox meltdown, its price started to rise again. At the time of writing, it was nearing $600, (€434) well up on its post-crash level of $500 (though well down on its pre-crash $950 level).

Why is this? Why are investors and traders ignoring the advice of middle-aged institutional economists and banking middle-men?

There are three main reasons why Bitcoin refuses to die.

1. People that matter believe in it.

If you line up the flag-wavers against the naysayers, it's hard to ignore the comparative make-up of both.

Promoters of the crypto-currency are often doers and creators. They are people like Marc Andreessen or senior web industry business executives: engineers and entrepreneurs who are currently creating a lot more wealth than other industrial sectors. This indicates that when they believe passionately in something, they build things to support it.

By contrast, many of the most vocal sceptics fit the profile of institutionalised vice-presidents with personal and professional capital invested in the status quo. They work for banks, listed investment firms and other financial organisations with nothing to gain – and plenty to lose – if systems like Bitcoin continue to take root in the public consciousness.

A very common reason against Bitcoin given by besuited naysayers is: "I don't understand it." In a world dominated by vague derivatives and CFDs, is this really the clincher argument?

News Source: www.independent.ie