Bitcoin back years.
It didn’t seem like a
terribly attractive business
proposition to Cameron, but
he wanted to hear more—if
only to understand how bad
this was all going to be for his
Bitcoin holdings. He asked
Gonzague to send him some
sort of concrete plan for what
they had in mind.
The next day Gonzague
sent the twins a twelve-page
document, labeled “Crisis
Strategy Draft.” It had been
put together for Mark and
Gonzague by a small public
relations firm run by some
Americans living it Tokyo. It
was clearly a draft document,
with
typos
and
inconsistencies, but it pulled
no punches about what had
happened:
The reality is that
MtGox can go
bankrupt at any
moment, and certainly
deserves to as a
company. However,
with Bitcoin/crypto
just recently gaining
acceptance in the
public eye, the likely
damage in public
perception to this
class of technology
could put it back 5~10
years, and cause
governments to react
swiftly and harshly.
At the risk of
appearing hyperbolic,
this could be the end
of Bitcoin, at least for
most of the public.
After reading through the
document, and its four-part
plan for closing Mt. Gox
temporarily and reopening it
under new owners, the twins
still couldn’t figure out what
was being asked of them,
other than putting a lot of
money
into
a
failing
company.
“I understand the larger
points you raise, but it is
unclear to me what the exact
plan of action here is,”
Cameron wrote back.
The twins were not the
only people to whom Mark
and Gonzague were looking
for a lifeline. They also sent
the Crisis Strategy Draft to
Barry Silbert in New York,
who
had
his
Bitcoin
Investment Trust up and
running
with
tens
of
thousands
of
Bitcoins.
Essentially everyone told the
Mt. Gox team the same thing:
there was nothing to do but
admit the losses and declare
bankruptcy. When Roger Ver
met the Mt. Gox team at the
Tokyo American Club on
Monday morning, he told
them that no one in the world
had enough Bitcoins to bail
them out, except perhaps
Satoshi Nakamoto. Mark and
Gonzague didn’t believe it,
and wanted to keep the
information in a small circle
of people to give them more
time to find a savior. After
Mark refused to admit the
problem in a call with
members of the Bitcoin
Foundation, Roger angrily
called some of the foundation
members himself and let
them
know
what
was
happening.
Once the word spread
among
the
top
Bitcoin
companies on Monday, they
all
began
preparing
for
something
that
had
the
potential to take down the
whole Bitcoin experiment. In
a shared Google document,
they worked on a joint
statement that gave their best
argument for why people
should
not
lose
hope.
Ordinary Bitcoin users got
some
indication
that
something was wrong when
Mt. Gox’s Twitter account
suddenly
disappeared
on
Monday. But Gonzague and
Mark continued to hold out
hope that someone would
come in and bail them out.
When Cameron wrote on
Monday to ask what was
going on, Mark said he was
planning to begin talking with
a
bankruptcy
judge
on
Tuesday. But, he emphasized,
“Our current goal is to try to
save MtGox before filing for
bankruptcy—in which case
filing wouldn’t be required
anymore.”
The growing bubble of
uncertainty over how this
would all play out finally
burst on Monday night when
a popular Bitcoin blogger,
known as the Two Bit Idiot,
posted a leaked copy of the
Crisis Strategy Draft. As it
began to circulate and the
Bitcoin
masses
tried
to
determine if it was legitimate,
there
was
a
sense
of
suspended motion on the
forums and message boards,
with everyone waiting for the
bottom to fall out. The
companies putting together
the
joint
statement—
Coinbase,
Blockchain.info,
BTC China, Bitstamp, and
Jesse
Powell’s
exchange,
Kraken—were
caught
off
guard by the leak and rushed
to complete their statement,
which ultimately came out a
few hours after the leak. The
companies
urged
Bitcoin
owners to understand that the
losses were the result of
irresponsibility
and
bad
behavior, not of a deeper
flaw:
“This tragic violation of
the trust of users of Mt. Gox
was
the
result
of
one
company’s actions and does
not reflect the resilience or
value of Bitcoin and the
digital currency industry.”
The
price
did
begin
dropping on Bitstamp and
other exchanges. But the free
fall
unexpectedly
slowed
within a few hours, before the
price hit the low it had
reached back in December
when the Chinese exchanges
turned off deposits. Many
people seemed willing to
believe the idea that there was
nothing wrong with Bitcoin;
there was talk that the
disappearance of the most
disastrous company ever to
touch Bitcoin could end up
being a good thing for the
technology. If nothing else,
people had invested enough
time and money that they
couldn’t stomach selling out
of a trough. By Wednesday
morning, the price was back
up where it had been when
the Mt. Gox news came out.
Still, under the apparently
calm surface, there was
immense and largely unseen
damage. As the enormous
figures
from
Mt.
Gox
suggested, tens of thousands
of people had kept their
money with the exchange
despite all the warnings, and
those holdings, estimated at
over $400 million the week
before, had now disappeared
in a mysterious puff of
smoke. Roger had a Japanese
friend,
whom
he
had
convinced to buy Bitcoins
and who had left $12 million
worth of coins with the
exchange. The older man in
Argentina who had purchased
large numbers of coins from
Wences Casares, back in
2012, had also kept them with
Mt. Gox. The man had been
using Bitcoin to keep his
retirement savings out of the
unreliable peso—but now it
was Bitcoin that failed him.