The Mt.Gox Bank Run Is Not the End of Bitcoin

Let me be perfectly clear about something: Mt.Gox is not bitcoin.

Mt.Gox is one of many bitcoin exchanges.

It happens to be one of the biggest, so what's happening there is troubling, for sure.

But it's not the end of Bitcoin.

Now, let's back up and talk about exactly what's occurred.

Mt.Gox, a bitcoin trading website, was taken offline late Monday. There's been no explanation as to why, but all trace of the exchange has been eradicated.

The belief — unconfirmed, but likely — is that the platform lost 744,408 of its users' bitcoins. That's about $367 million, and more than the bank can cover.

Tragically for those with accounts, their money seems to have been lost for good.

Still, that doesn't mean this is the end of bitcoin.

In fact, it means just the opposite. It means that other bitcoin exchanges will have to establish better safeguards to prove their trustworthiness. It means an increase in quality, confidence, and credibility.

For now, though, there's a bitter sting that's been exacerbated by the mainstream media and dollar-enthusiasts who have rooted against Bitcoin from its very inception.

Sadly, that grave-dancing has overshadowed the real lesson here, which is to do your due diligence.

Just as you shouldn't trust your dollars to a disreputable bank, no bitcoin holder should blindly entrust their holdings to an unproven entity. That task, of course, is difficult because Bitcoin itself is so new. But your holdings should always be diversified enough to handle a loss.

That's why it's a good idea to keep buying gold and silver — no matter how many U.S. dollars you own.

And let's be perfectly clear about something else, while we're at it...

If it weren't for the intervention of the Federal Reserve and U.S. government, the U.S. banking system itself would have imploded completely just five years ago. And the fact that it was rescued doesn't mean it's any better off, or any safer, today than it was back then.

The United States has seen bank runs before and it will see them again. And the U.S. banking system itself is still very much at risk.

So those laughing at bitcoin now won't be laughing in a few years.

Fight on,

Jason Simpkins

@OCSimpkins on Twitter

Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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