Yesterday the exchange halted withdrawals of the digital currency, citing a technical malfunction. It promises to reopen for business on February 10th. What many news sources are missing is that this is not a particularly new development – the exchange has been rejecting customer withdrawals on-and-off for about two months. What may be happening is a good old fashioned bank run. Like all banks, Mt. Gox is operating under a system of fractional reserves, loaning out or otherwise making use of bitcoin deposits entrusted to it. There are many more claims to the bitcoins depositors have with it than are actually in the digital “vault” at Mt. Gox. This is not unlike your bank, which has many more claims to each dollar deposited in it than it has dollars in the vault to honor. If too many people make a withdrawal at the same time, your bank has two options. bastiat.mises.org/2014/02/bitcoin-bank-run/
Posted on: Mon, 10 Feb 2014 21:13:28 +0000
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