Australian bitcoin experts on the impact of the digital currency’s disastrous week

After months of rising value and hype, the world’s first digital only currency, bitcoin, has weathered a tumultuous week with a virus stealing thousands of coins and major exchange Mt Gox disappearing this week.

The Tokyo-based bitcoin exchange halted trading on Tuesday. Shortly afterwards the homepage was wiped.

In a statement emailed to Reuters, chief executive Mark Karpeles said: “We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can’t tell much more for now as this also involves other parties.”

Market strategist Evan Lucas from IG Markets told StartupSmart an estimated $US350-400 million had been stolen from the platform.

He says the emerging digital currency sector is living through a bit of an “I told you so moment”.

“What’s happened is very sad for those involved, but given how the system works, it was always open to getting hacked. It’s disappointing, but it’s not unexpected because of the situation,” Lucas says.

George Samman is the co-founder of Sydney-based bitcoin derivatives trading platform, which has managed over $42 million in broker transactions since launching in May 2013.

He says while no one knows what’s going on with Mt Gox, his team has been weaning themselves off the exchange for months.

“Getting rid of a big player that has been a detriment to the bitcoin industry is good. It’ll strengthen the exchanges and liquidity of the marketplace.” halted trading yesterday and expects to be out of action for about a week while it integrates with other exchanges.

“It’ll hit our bottom line. But we’re in a strong cash position and integrating with other exchanges was always the plan. We’ve just had to speed-up the timeline dramatically,” Samman says.

Despite this, Samman is bullish about the future of bitcoin.

“It’s not over. I think this is going to make it even stronger as this hasn’t taken us out. Prices are still pretty stable at around 500,” he says. “As an entrepreneur in a field like this, you’ve got to think the best and be prepared for the worst.”

There are over 140 bitcoin start-ups listed on leading investment aggregator AngelList. Local crowdsourced design marketplace 99designs hosted over 30 logo design competitions for new bitcoin companies in February alone.

Early stage investment fund Blackbird Ventures backed Melbourne-based bitcoin exchange and payment system Coinjar with $500,000 (their investment maximum) in December.

At the time, investment round leader Niki Scevak told StartupSmart he expected the industry would evolve to manage the ongoing threat.

“This is very, very early on in the life of bitcoin. The majority chances are that bitcoin start-up investments will amount to nothing. A lot of bitcoin companies that have achieved success have been hacked, so that’s a big risk because once you’re hacked you’re dead because the trust is eroded,” he said.

Both Scevak and CoinJar founder Asher Tan told StartupSmartthey would welcome regulation of the digital currency, a position with which Lucas agrees.

“In the future there will be a digital currency. I have little doubt about that. But the issue now is where it comes from, and who runs it,” Lucas says.

“All of the crackdowns from governments such as Russia will certainly hurt it, and now the question is really urgent about addressing how capable peer to peer digital currencies are of self-policing.”

He adds it’s likely to be a digital currency regulated by an organisation like the World Bank, with some fraud protection, which will be the one that takes off and reaches the mainstream.

This article first appeared on StartupSmart.


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