Mt Gox’s withdrawal problems cause some confusion as to the true current value of Bitcoin.
LeapRate has learned that several of the leading forex brokers offering leveraged Bitcoin (BTCUSD) trading are switching away from using the Mt Gox Bitcoin exchange as their Bitcoin price reference source.
The first change has been made by Ireland-based forex broker AvaTrade. AvaTrade sent out a note to clients today stating that as of 22:00 GMT tonight AvaTrade will be changing the exchange feed for Bitcoin pricing from Mt Gox to BTCe. AvaTrade also offers Litecoin trading from the BTCe exchange. Based in Bulgaria, BTCe is actually the third largest Bitcoin exchange after Mt Gox and Bitstamp, but rising fast as Mt Gox’s market share is dropping (see Bitcoin exchange market share chart below).
We understand that another CFD broker, Plus500, is ‘checking the situation’ with Mt Gox and might soon make a similar move as well.
Bitcoin exchange market share, February 2014. Source: Bitcoincharts.com.
So what was the problem with Mt Gox?
The past week’s very strange activity in the Bitcoin world has created a never-before-seen phenomenon — a very large and sustained difference in the value of Bitcoins across the different major Bitcoin exchanges.
Both leading Bitcoin exchanges, Mt Gox and Bitstamp, have had their troubles. Bitstamp had a four day stoppage in customer withdrawals following a hacking attack last week, but apparently has restarted full and normal operations including all-important customer withdrawals.
At Mt Gox the problems have lasted longer and seem more serious. Bitcoin withdrawals have been halted for more than a week now at Mt Gox, with no indication that they’ll be restarted soon. (Although a Mt Gox press release states that we’ll be given an update no later than Thursday.)
And when traders fear they won’t be able to get their money (or Bitcoins) out at Mt Gox, they sell. With very few Mt Gox buyers, the illiquidity at Mt Gox has caused Bitcoin prices to drop dramatically by more than 50% over the past few days, to a low of around $220 on the weekend before recovering Monday to the $350 range, sitting at $330 as at the time of writing.
However the ‘real’, liquid, Bitcoin price is actually much higher, evidenced by the $630-$650 or so price at which Bitcoins are trading hands at Bitstamp and BTCe during virtually the entire time period.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.