1 Reason Investors Should Trust Bitcoin

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The news of crypto exchange FTX declaring bankruptcy and how it got to this point represents a low point for the crypto industry – but not for all cryptos, more specifically, Bitcoin ( BTC -0.20%). Bitcoin is the oldest cryptocurrency, and throughout its tenure it has been at the center of some of the most infamous events in crypto history. One of them is shaming the recent FTX crisis. Yet despite these events, Bitcoin continues to function as it has since its invention in 2009.

Unlike today, when there are seemingly dozens of crypto exchanges and thousands of cryptocurrencies in circulation, not too long ago there were only a few exchanges, and Bitcoin was just one of a dozen options for cryptocurrency investors. The exchange was known as Mt. Gox, and at one point in 2013 was responsible for handling over 70% of global Bitcoin exchanges.

The First Crypto Crash

For those who don’t remember, Mt. Gox’s history was littered with controversy and slippage before it finally declared bankruptcy in 2014. In the years leading up to 2014, Mt. Gox suffered a handful of lawsuits , hacks, security breaches and even lost Bitcoin from users. These events began to escalate and eventually pushed the exchange to the brink.

Similar to FTX and its CEO Sam Bankman-Fried, Mt. Gox operated in obscurity and was run by a CEO who later found himself mired in controversy. In early 2014, the exchange halted customer withdrawals “to get a clear technical view of the exchange process” after it allegedly found a bug in their software. From there, Mt. Gox’s problems only got worse.

Two days after the decision to halt withdrawals, Mt. Gox’s CEO resigned, all of the company’s Twitter posts were removed, the exchange suspended all trading, and its website was ultimately unreachable , returning only a blank website. page.

Through a leaked document, the company was revealed to be insolvent after realizing it had lost 744,408 client bitcoins and 100,000 of its own, collectively worth around $500 million and representing around 7% of all bitcoins in circulation at the time. Mt. Gox attributed the missing bitcoins to a hack that went on for three years without the company even realizing it. Eventually, around 200,000 of those lost bitcoins were recovered.

Mt. Gox CEO Mark Karpeles has been charged with fraud and embezzlement for manipulating Mt. Gox’s computer system to transfer funds from user accounts to augment his own personal account.

Throughout the spring of 2014, Bitcoin’s price rose from around $850 to $360 as these events unfolded. One could argue that the events related to Mt. Gox have triggered a crypto winter. For the remainder of 2014 and 2015, the price of Bitcoin fell as low as $177, a drastic drop of 80%.

Striking similarities today

Most of these elements sound familiar: a CEO without proper oversight, a centralized agency that mismanages client funds, price drops of more than 75%, bankruptcy, insolvency, and hacks. However, here we are again, eight years later, in a similar situation.

But the one takeaway from all of this is that although critics consider the Mt. Gox fiasco the end of Bitcoin in 2014, the cryptocurrency continued to rise in price. Since its low in 2015, Bitcoin has gained around 10,000%.

If history has taught us anything, it’s that no matter how many businesses and centralized exchanges fail during the crypto winter we’re going through, over the long term, Bitcoin should continue to rise in value. . If Bitcoin could survive the Mt. Gox disaster, the current FTX crash should prove to be a modest hurdle in Bitcoin’s path to price appreciation.

RJ Fulton has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.

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