Watching the gyrations in the price of Bitcoin has been spectator sport the past several days. However, unlike with prior busts and races, the price of Bitcoin has diverged heavily across its several exchanges. This has led to the Bitcoin market itself becoming siloed.
Bitstamp, BTC-E, and Mt.Gox halted withdrawal of Bitcoin from their exchanges for varying amounts of time due to a potential exploit. Both Bitstamp and BTC-E have resumed withdrawals. Mt.Gox, the first to force users to stop removing Bitcoin from its exchange, remains closed in that regard.
This had led the cost of Bitcoin on Mt.Gox to fall dramatically. Sitting around $900 through most of January, following previous highs north of $1,200, Bitcoin is now worth under $300 on Mt.Gox, where it has traded in recent hours on the low end of the $200s. Those who own Bitcoin on the exchange are betting that Mt.Gox won’t be able to solve its problems, and that their deposits are not secure; they are willing to let their Bitcoin go for far below-market rates.
And that’s the most interesting part of this. Bitcoin, widely mocked as immature, starry-eyed, unstable, and far-fetched — often by myself, it must be said — is enjoying something akin to price stability on other exchanges. Even following two of its largest exchanges suffering from technical issues, and a once-important exchange implode publicly.
This shakes out in the following way: Those who believe in Bitcoin have continued to do so — just not on Mt.Gox, really — even in the face of public shaming through potential technological weakness, and the effective death of Mt.Gox itself, a once high-flying member of the larger Bitcoin fabric; who will trust it now?
So, we can take the above to mean that Bitcoin, despite painful setbacks, remains mostly stable in terms of its market price on exchanges that are fully open. Would that have been the case six or 12 months ago? I think not.