Mt. Gox has been one of the biggest enigmas of the bitcoin community. Despite almost universal criticism, no competitors have been been able to unseat their position as the dominant bitcoin exchange. One of the latest pieces on Bitcoin news is a Reuters interview with CEO Mark Karpeles revealed some interesting insights into their operation and perspectives on bitcoin. The first question we can lay to rest is the correct pronunciation of their company – Mount Gox.
One of the first things most viewers will notice is their use of balls as chairs in the interview. Mark is clearly going for the start-up atmosphere, instead of the established banker. They have had their share of growing pains, with their inability to continue operations during DDoS attacks, and the 20,000 user queue to obtain a verified account. Clearly Mark agrees that they are not where they need to be yet, and hopefully this will benefit their users as they put more effort into expanding their infrastructure and customer service.
From the video, it’s a little concerning how unsophisticated their internal tools to monitor traffic seem to be. The first shot shows their internal tool – using a local IP address – that is little more than a ticker of the latest trade values, and clearly shows bitcoinity tabs open next to it. It’s surprising that after their acquisition of www.mtgoxlive.com they have not addapted it to work locally yet. Mark is clearly using bitcoin.clarkmoody.com to look at the latest bitcoin exchange rates. It’s no secret that we’re huge fans of Clark Moody’s interface, however it does raise flags to Mt. Gox’s market insight if those sites go down. What happens when someone DDoS’s all of the bitcoin charting sites? Does Mt. Gox only have that ticker to see how their system is doing?
One key insight Mark provided was the cash inflows vs outflows. He estimated $5-20 million cash going in every day, and $0.3-1 million going out. This is obviously very bullish for bitcoin, indicating a significant net inflow of cash. Even during the steep drop from $260 to $55, there was not a significant outflow of cash indicating that a lot of it has remained in the system ready to be reinvested.
The most concerning part of the interview was Mark’s quote, “there’s nothing behind bitcoin trade to keep the market value high.” He appears skeptical of the current exchange rate. I’m not certain how he’s determining what’s “behind bitcoin,” however I’m certain it’s more than “nothing.” Bitcoin has a global network of users conducting thousands of transactions on a daily basis. Just like any other currency, it’s backed by the trust of the issuer and the integrity of the systems that run it. You, me, and everyone else using Bitcoin are what backs it’s value.
Mt. Gox is still in the process of maturing into the exchange it needs to be. In the meantime, diversifying into and further developing alternative exchanges that can demonstrate a secure and stable platform will be essential to bitcoin’s long term success.