Bitcoin Buzz

Panic selling grips Bitcoin markets after trading platform suspends withdrawals indefinitely

Japan-based Mt Gox suspends Bitcoin withdrawals over software flaw that could allow users to defraud exchanges

PUBLISHED : Monday, 10 February, 2014, 9:35pm
UPDATED : Monday, 10 February, 2014, 9:35pm

Panic selling gripped Bitcoin markets after one of the world’s top trading platforms suspended Bitcoin withdrawals indefinitely, citing a software flaw that could allow users to defraud exchanges.

The price per Bitcoin dropped some 20 per cent to US$535.55 on Monday immediately after the Japan-based exchange attempted to explain its temporary halt last Friday was related to problems at the core of the technical set-up that “affects all transactions where Bitcoins are being sent to a third party”.

“We believe that the changes required for addressing this issue will be positive over the long term for the whole community,” the company said in a statement. “As a result we took the necessary action of suspending Bitcoin withdrawals until this technical issue has been resolved.”

Cash withdrawals are unaffected by the halt.

The beleaguered Mt Gox company said it had detected unusual activity related to “transaction malleability” – or a technical flaw – in the Bitcoin network.

“Mt Gox has detected unusual activity on its Bitcoin wallets and performed investigations during the past weeks,” the company said. “This confirmed the presence of transactions which need to be examined more closely.”

Mt Gox said the issue was not isolated and claimed it boiled down to a “known” design issue that Bitcoin core developers were aware of, but had been largely ignored within the community.

Confidence in the trading platform dropped like a stone as customers rush to sell. More than 90 per cent of transactions on the Japanese-based exchange over the past five days – since fresh technical problems emerged – have been on the sell side.

A lack of confidence prompted one Bitcoin user to sell at just US$102 a coin.

The latest weighted price of a Bitcoin across major exchanges [BTC-e and Bitstamp] – including Mt Gox – is HK$4,722 at 9.07pm on Monday. The price per coin slid as low as HK$4,154 during intraday trading. (Source: Coindesk)