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Currencies BitCoin Prices Plummet on MtGox after Exchange Blames Bitcoin Protocol for its Problems

Prices took another dive on MtGox today after the long awaited Monday statement from the exchange failed to deliver. Not only did the company say that bitcoin withdrawals will not be resumed, it went a step further by conditioning their return on a change in the bitcoin protocol itself. Here a part of the MtGox statement on the matter:

‘’A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur. Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent. MtGox is working with the Bitcoin core development team and others to mitigate this issue.’’

The bug MtGox is referring to is the well-known Transaction Malleability. Speaking to Cryptocoinsnews, Bitcoin core developer, Greg Maxwell had this to say about the statement:

’The Gox press release seems a little ‘spun’ to me. They portray characteristics of the Bitcoin system well known since at least 2011 (which even have their own wiki page ) as something new. These characteristics are annoying but don’t inhibit basic operation. They are slowly being fixed – but fixing them completely will likely take years as they require changing all wallet software. Correctly-written wallet software can cope with the consequences, and I cannot understand why they would gate their withdraws on external changes.’’

Several different bitcoin developers also responded by saying that they have to intention to change the bitcoin client in order to accommodate MtGox. Some went even further. Andreas Antonopoulos, a security expert for Blockchain.info took his frustration with the troubled exchange on Twitter: ‘’ Bitcoin Foundation should kick Karpeles (The CEO of MtGox) out. Not for the technical glitch, but for the press release and the damage to bitcoin.’’

The Gox statement stated that fiat currency withdrawals will be processed ‘’as normal’’. Not sure if the ‘’normal’’ the company is referring to are the multi-month long delays that the community has grown accustomed to during the past year. Prices crashed on MtGox after the release of the statement from 636 to a low of 504. Bitcoin has since rebounded to just above 600 where it’s trading at the moment.

mtgoxfev10

On BTC-E, prices took a more dramatic dive. As mainstream media picked up the Gox story and reported on a ‘’bitcoin bug’’, fear induced selling drove btc prices lower on all exchanges. The chart below shows the impressive fall from 662 to 104 in less than 1 minute as a 4,000 BTC (around 2.4 Million USD) order hit the market. Prices on BTC-E immediately rebounded and are currently trading at 674, slightly above the price seen before the MtGox statement.

btcefev10

 

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