*|MC:SUBJECT|* *|MC_PREVIEW_TEXT|* | It's time to rise and shine, my tasty comrades. This morning, we will discuss Mt Gox, a few Russians, a wedding in India, and the futility of most financial news.
But first, here's where we ended the week: - Bitcoin (BTC): -3%
- Ethereum (ETH): +1%
- Solana (SOL): +16%
- Days since Mt. Gox Heist: 3,777
| | | I promise this is relevant.
About twenty years ago, I attended a wedding in India as the date of a woman who barely knew the bride. She advised me to buy a dress-like Sherwani to fit in, so I got one. It was white and gold. I even got a pair of golden Juttis! | | | Over 2,000 people attended the wedding, and to my horror, aside from the immediate family, I was the only one in traditional garb.
I hid myself amongst a handful of other Americans, mostly drinking whiskey in the 100-degree heat.
We had questions about the many rituals: Why was this man walking in circles around a book? Why was that old woman smearing reddish paste on the bride's face? And why was the Indian military playing bagpipes?
Since there was no one to answer our questions, we spent the weekend creating our own ridiculous answers to satisfy our curiosity. | | Narrative Fallacy & The Media | | | Oddly, I think back on these conversations in India when I turn on CNBC or any other financial network to discover why the market is down. Who/what is responsible for my losing money?? | | | Every gyration in the market can't be accounted for. And I know this. But to satisfy my need for answers, reporters make them up.
On Monday, Bitcoin fell over 6%. Why? All risk-on assets fell that day. But I wanted to know why BTC specifically fell.
Conveniently, Mt. Gox announced that they would be repaying customers some 140k BTC on Monday, so the media narrative became that this new supply would crash the market. So that's why BTC was down.
This alone would not have merited the 6% drop in BTC we saw Monday, even if every one of those coins were to be sold at market prices upon release. | | | But Mt. Gox headlines did pique my curiosity - what actually happened there? What became of the Russians who walked away with $450m in BTC?
So I put on my Rust Cohle hate, grabbed a sixer of Lone Star, and a pack of camels, and went to work. Here's what I found out. 👇 | | Mt. Gox: Humble Beginnings | | | The year is 2006, and Jed McCaleb, nerd of all nerds, is staring at a domain registry. He wants to create a website where people can buy and sell "Magic: The Gathering Online" cards like we trade stocks today.
He settled on mtgox.com, short for "Magic: The Gathering Online eXchange" | | He worked on it for a few months, then forgot about it.
Fast forward 4 years, when Jed read an article in Slashdot about a new P2P digital currency called Bitcoin.
⚡ What about an exchange where you can buy and sell Bitcoin? And why pay another $10 for a new domain? | | The first trade on Mt. Gox occurred in July 2010. A customer exchanged 20 Bitcoins for $0.04951 each, less than a dollar. Within a year, Mt. Gox quickly became the go-to Bitcoin trading platform.
By 2013, it handled over 70% of all Bitcoin transactions worldwide. The platform's simplicity and early entry into the market attracted a massive user base.
At its peak, Mt. Gox was processing hundreds of thousands of trades per day, with daily trading volumes reaching millions. | | Mt. Gox was doomed to fail from the very beginning.
Unknown to McCaleb and the other Mt. Gox backers, Russians Alexander Verner and Alexey Bilyuchenko gained access to Mt. Gox's user data, transaction database, and exchange private keys way back in 2011.
Between 2011 and 2014, Verner, Bilyuchenko, and unnamed co-conspirators siphoned off no less than 647,000 Bitcoins from Mt. Gox wallets.
How did nobody know they were doing this?
They exploited security gaps, used advanced hacking techniques, manipulated records, and took advantage of the lack of oversight and regulation, remaining undetected for years.
It was a Ponzi scheme that the owners of Mt. Gox weren't privy to. | | How Did They Get Away With It? | | Alexey and Verner sent many of their stolen coins to another Bitcoin exchange called BTC-e. Further digging shows that Verner was the developer of BTC-e. And Bilyuchenko? He was the administrator!
The Russians used the American companies BitInstant and MemoryDealer to liquidate their funds. | | | The most interesting part is that neither of these hackers can be accounted for today. It is rumored Verner is a Russian spy living in Argentina and Bilyuchenko is rotting in a Russian prison. But nobody knows for sure.
But don't worry, I'll get to the bottom of it. Just gimme a few months.
In the meantime, check out this video yours truly and Ryan did on the subject. 👇 | | | See you next week, same tasty place, same tasty time.
- Mad Mike
PS - Hit me up on Twitter | | | | | |
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