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Mt. Gox Files for Bankruptcy Protection

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Re: Mt. Gox Files for Bankruptcy Protection

#141

Post by Tenoke »

JumpCrisscross wrote: post #71

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure a…

>(1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure at any given time at a manageable level. The downside is it increases exposure to BTC/USD volatility.

This is an old anti-scamming solution and is very useful in some settings but this isn't really one of them. The main problem here isn't really losing your money immediately after making the transaction. Just making the transaction in one swoop and immediately withdrawing your money after is much more efficent (in terms of both time spent and fees).

Most people weren't screwed because they made one large transaction just before things went wrong - they were screwed because they kept money for long periods of time on gox. And yes, you can argue that some people just couldn't withdraw for months - but if they wanted to use gox and use your scheme it would've taken a year to execute all of those transactions.

Re: Mt. Gox Files for Bankruptcy Protection

#142

Post by aet »

steven2012 wrote: post #74
ck2 wrote: post #9

It's easy to be angry at them and/or see how stupid they were about accounting, security, etc. But I guess on the other hand we do have to realize they are victims of massive theft, as far as we know this massive loss was not due to their own profiteering or internal theft, it was an organized outside force targeting them. It occurs to me it is like blaming someone for getting mugged, although they were stupid enough…

Your analogy is terrible. They are actively in the financial services industry, and by default protection from criminals is one of their mandates. People put money into mtgox expecting them to be secure. They claimed to be secure. For them to turn around and lose 750,000 BTC is not analogous to being innocently mugged. It's more like a taxi driver guaranteeing a safe trip, actually driving drunk, then crashing and ki…

The point is that you should be prepared for this type of loss due to the speculative nature of Bitcoin. Here is a note from Morgan Stanley on alternative investments:

Investing in alternative investments is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include: -loss of all or a substantial portion of the investment due to leveraging, short-selling or other speculative investment practices; -lack of liquidity in that there may be no secondary market for the fund and none expected to develop; -volatility of returns; -restrictions on transferring interests in a fund; -potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; -absence of information regarding valuations and pricing; -delays in tax reporting; -less regulation and higher fees than mutual funds; -funds of hedge funds often have a higher fee structure than single manager funds as a result of the additional layers of fees; -risks associated with the operations, personnel, and processes of the manager.

Re: Mt. Gox Files for Bankruptcy Protection

#143

Post by JumpCrisscross »

jimktrains2 wrote: post #134
JumpCrisscross wrote: post #71

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure a…

Hello! fellow diæresis user:) The only problem with doing multiple transactions is the amount of time required to both withdraw and send. If I waited, the price could fall (or rise...) What's needed is a non-governmental/industry-driven method of showing solvency and competence. Blockchain-transfers and signed messages to show bitcoins solvency maybe? I'm not sure how to show solvency in a national currency. I'm also…

>The only problem with doing multiple transactions is the amount of time required to both withdraw and send. If I waited, the price could fall

There are two risks: the risk of the (1) price moving against you (delta risk) and (2) exchange defaulting (CP risk). The longer your funds spend waiting to transact, the greater your delta risk. The longer your funds spend at the exchange, the higher your CP risk.

Bitcoin is a volatile asset, making delta risk expensive. But the exchanges are opaque and operate in a legal grey area, amplifying CP risk. The risks are also correlated - if BTC/USD falls, the odds of the exchange collapsing increase. This makes the problem complicated. What I can say is this: the solution is far from either end. You should never have a significant fraction of your liquid net worth in any of these exchanges.

The most innocent excuse for taking weeks to process withdrawals is operational inefficiency. Even this increases your CP risk. Do not react to long wait times by increasing your transaction size. Instead, aggressively seek out alternatives.

Re: Mt. Gox Files for Bankruptcy Protection

#144

Post by gambiting »

betterunix wrote: post #131
gambiting wrote: post #29

Earlier quoted context omitted.

Just like everything, until we decide to give it value. Gold is completely and absolutely worthless to us humans, we don't need it to function and it serves no biological function in our organisms whatsoever. But because we like it and there is a scarcity of it, we will trade goods for it. Just like with bitcoins.

Who trades goods for gold?

Unless you interpret what I said literally,and are going to point out that no one trades apples for gold rings, then the answer is - literally everyone who buys gold. You might pay with a fiat currency,but then you obtained it by either selling something that you produced or work that you carried out - so "goods".

Re: Mt. Gox Files for Bankruptcy Protection

#145

Post by mbillie1 »

enscr wrote: post #115

I feel bad for Mark Karpeles but the way MtGox communicated & lied to its users makes me sad. It's those nameless individuals who believed in him, whose trust was betrayed - those are the ones that deserve the affection of the community. I've been following the news and I think MtGox was handling so much money that they should have focused on better security practices and audits. Few examples of their lackadaisical a…

> and some people stood to lose their entire savings.

While I am not defending MtGox, having your entire life savings wrapped up in Bitcoin is hardly a sound, proven financial decision and evokes absolutely zero sympathy whatsoever. Losing it all in a get-rich-quick frenzy is sad - but it's sad in a "I can't believe people are willing to bet their lives on this" way, not a "this poor person lost his/her entire life savings due to the corruption of the financial industry" way.

Re: Mt. Gox Files for Bankruptcy Protection

#146

Post by miguelrochefort »

mtgoxloser wrote: post #37

In this incident I lost a bit more than $500,000 USD that was in my MtGox account. I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn. This was a massive fuck up by MtGox, but I really do feel sorry for Mark Karpeles. He seemed really enthusiastic about Bitcoin. Right by MtGox's offices in Japan was a Bitcoin Cafe being built. You can [see here]( http://si.wsj.ne…

Did you try to get your money out of MtGox? A friend of mine has been trying to get his money (CAD) out of MtGox for 2 months. He received his money yesterday.

Re: Mt. Gox Files for Bankruptcy Protection

#147

Post by bobowzki »

bifftannen wrote: post #125
mtgoxloser wrote: post #37

In this incident I lost a bit more than $500,000 USD that was in my MtGox account. I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn. This was a massive fuck up by MtGox, but I really do feel sorry for Mark Karpeles. He seemed really enthusiastic about Bitcoin. Right by MtGox's offices in Japan was a Bitcoin Cafe being built. You can [see here]( http://si.wsj.ne…

I got mugged last night, and gave the mugger a little extra because he was just so darn enthusiastic about mugging.

I chuckled

Re: Mt. Gox Files for Bankruptcy Protection

#148

Post by mbesto »

patio11 wrote: post #113
arethuza wrote: post #109

Earlier quoted context omitted.

Lets see if I understand this (I am not in the US) - the bitcoins count as an asset, you sell these bitcoins for dollars at MtGox and at this point the tax is due regardless of whether you actually get the dollars out of MtGox? So any time between you selling bitcoins and actually getting the cleared funds out of an exchange leaves you with the risk of a fairly serious tax liability if the exchange can't actually giv…

Bingo. Works the same way for shares. Unless you're investing in a tax-advantaged account, if you have a $10k basis in a stock/fund and liquidate it for $20k, you just realized a $10k gain regardless of what subsequently happens to that $20k. Park it at your brokerage, plow it into a new stock, withdraw it and buy a vat of chocolate to go skinny dipping in, the IRS doesn't care, but it will have its cut. Poorly timed…

> 83(b) election

Just a friendly reminder if someone is reading this - you have 30 days to claim 83(b) after you offer yourself shares in your business, otherwise you'll be in a heap of legal/tax issues that can be quite painful (i.e. cost a lot). Make sure you bring this up with your accountant/lawyer.

Re: Mt. Gox Files for Bankruptcy Protection

#149

Post by M4v3R »

JumpCrisscross wrote: post #71

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure a…

Mt. Gox and many other exchanges have put into people's minds that you HAVE to forfeit your rights to your Bitcoin when using online services. It doesn't have to be that way, though. You could just use a system like we use at Bitalo [1], where fractional reserves or funds misuse are impossible because of use of multi-signature Bitcoin addresses, which means funds are specifically tied to user wallets and exchange operators cannot use them, because the user has to sign all transactions by himself.

[1] https://www.bitalo.com/why_bitalo

Re: Mt. Gox Files for Bankruptcy Protection

#150

Post by theorique »

mbillie1 wrote: post #145
enscr wrote: post #115

I feel bad for Mark Karpeles but the way MtGox communicated & lied to its users makes me sad. It's those nameless individuals who believed in him, whose trust was betrayed - those are the ones that deserve the affection of the community. I've been following the news and I think MtGox was handling so much money that they should have focused on better security practices and audits. Few examples of their lackadaisical a…

> and some people stood to lose their entire savings. While I am not defending MtGox, having your entire life savings wrapped up in Bitcoin is hardly a sound, proven financial decision and evokes absolutely zero sympathy whatsoever. Losing it all in a get-rich-quick frenzy is sad - but it's sad in a "I can't believe people are willing to bet their lives on this" way, not a "this poor person lost his/her entire life s…

Absolutely right.

Putting 5-10% of your net worth in something like this is being innovative and forward thinking and taking a calculated risk.

Putting 90-95% of your net worth in something like this is serious, foolhardy gambling.

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