Mt Gox exchange shutdown sparks Chinese bitcoin gold rush

PUBLISHED : Wednesday, 26 February, 2014, 11:32pm
UPDATED : Thursday, 27 February, 2014, 1:50am

Chinese investors rushed to buy bitcoin, seeing it as potentially undervalued, after the value of the virtual currency fell following the shutdown of the Mt Gox bitcoin exchange this week.

Since Tuesday, more than 30,000 bitcoins have changed hands in China. That's four times the usual trade volume, and compares with just 300 exchanged in the United States.

Bobby Lee, chief executive of one of mainland China's biggest exchanges, BTC China, said: "Much more bitcoin is flowing around the system in China."

Hao Hong, managing director and chief China strategist at Bank of Communications, said: "I think people are trying to trade the market, but with one of the largest exchanges closed, it will be a little difficult to cash in even if there's a technical rebound."

It marks a strong return to the market for Chinese investors after the People's Bank of China moved to cool interest in bitcoin, the value of which peaked at US$1,120 last year.

Watch:Buyer protests in front of a Japanese bitcoin trading company

Japanese authorities announced a probe into the shutdown of Mt Gox. On Tuesday a leaked company document said its customers' 625,000 bitcoins and its own 120,000 holding, together worth US$350 million at current prices, had been stolen.

Art adviser Jehan Chu is increasingly pessimistic about recovering the HK$100,000 he has invested but said he is still bullish about bitcoin: "With bitcoin we're not even at the tip of the iceberg - we're merely a snowflake about to land on a glacier."

Last night a statement on Mt Gox's website said: "A decision was taken to close all transactions for the time being in order to protect the site and our users."

Watch:What's Bitcoin and how does it work?

The Tokyo-based trading platform went offline, preventing customers contacting it.

However, in an online chat yesterday obtained by Fox Business, chief executive Mark Karpeles said of the leaked report, which suggested Mt Gox rebrand itself, relocate to Singapore and replace him: "… It's a bunch of proposals to deal with the issue at hand, not things that are actually planned and/or done."

Karpeles said the report was "more or less" legitimate.

Bitcoin was trading at an average of US$563.51 last night.