Buying With Bitcoin? Virtual Currency Isn't Going so Far After Widespread Theft

Were you thinking of accepting some Bitcoin for your home like this guy or this guy? Maybe it’s time to reconsider. The New York Times reported that Mt. Gox, one of the largest bitcoin currency exchanges, was on the verge of collapse and filing for bankruptcy yesterday.

Uh oh.

On Monday night, a number of leading Bitcoin companies jointly announced that Mt. Gox, the largest exchange for most of Bitcoin’s existence, was planning to file for bankruptcy after months of technological problems and what appeared to have been a major theft. A document circulating widely in the Bitcoin world said the company had lost 744,000 Bitcoins in a theft that had gone unnoticed for years. That would be about 6 percent of the 12.4 million Bitcoins in circulation.

Yikes! The news about Mt. Gox, a Japanese firm, pushed the value of Bitcoins below $500, said the NYT piece, the lowest it’s been since spiking at more than $1,200.

Still, some people have faith in virtual currency:

But at the same time that the news about Mt. Gox was emerging, a New York firm announced plans to create an exchange that could draw the world’s largest banks into the virtual currency market for the first time.

The new exchange is being put together by SecondMarket, which rose to fame a few years ago after creating a platform for buying and selling shares of companies like Twitter and Facebook before they went public.

Without the trouble at Mt. Gox, the SecondMarket plans would have been seen as a major boon for virtual currencies, providing a potential entry point into the Bitcoin market for large banks, which have so far avoided virtual currencies as their price has skyrocketed.

It still stands to be proven whether major banks will accept Bitcoin, which would then perhaps make the virtual currency more feasible in real estate transactions. Right now, with as unstable as it is and as susceptible Bitcoins are to security issues and hackers, it’s more a marketing ploy for Realtors than a real substitute for greenbacks.