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Bitcoin/USD crashes to $102 as MtGox points to major bitcoin bug

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**, Monday 10 February:**

Following its indefinite suspension of withdrawals last Friday, the Tokyo-based MtGox bitcoin exchange has today issued a statement stressing that the bug which prompted the suspension affects all third-party transactions with the e-currency.
The revelation seemingly caused global panic selling of the crypto-currency, pushing the BTC/USD in a matter of minutes at around 10.55 UTC down to $102. But just as quickly, the price of bitcoin rebounded into the $600s as opportunists stepped up.

In its statement, MtGox – the most prominent of the bitcoin exchanges – says: “The problem we have identified is not limited to MtGox, and affects all transactions where Bitcoins are being sent to a third party.”
In the simplified, ‘non-technical’ explanation of the issue, MtGox writes as follows:
*“A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur. Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent.”*

The exchange says that bitcoin withdrawals will resume once the glitch “has been properly addressed in a manner that will best serve our customers”, stressing that the required changes will be “positive over the long-term for the whole community”.
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MtGox reports that its team is working round the clock with the Bitcoin core development staff to address a technical issue which has made it impossible for clients to effect transfers. The exchange is dismissive of claims, from disgruntled users, that it has become insolvent and is actually unable to meet its obligations.
Gregory Maxwell, one of Bitcoin’s core developers, told after the story broke that the way MtGox had portrayed the issue as if something new looked to him like spin, because the reported glitch had been well known since at least 2011.

While the defect allows third-party firms to change the transaction IDs of transfers, Maxwell believes that “for normal applications, not involving unconfirmed transactions, it shouldn’t cause any severe problems because wallets can handle it locally”.
In his view: “Correctly-written wallet software can cope with the consequences, and I cannot understand why they would gate their withdrawals on external changes.” Maxwell added that the bug “wouldn’t make [his] top ten list of dangers in the Bitcoin technology”.

MtGox accounted for over 70 percent of global trading volume in April 2013, when bitcoin reached historical highs to that point, attracting traders because the exchange’s prices had traditionally been the highest in the bitcoin universe. That pre-eminence continued until recently, apart from occasional times later in 2013 when BTC China held the record and when Bitstamp managed to overtake the Tokyo-based exchange.
According to some market observers, the MtGox premium relates to a risk perception deriving from the exchange’s persistent withdrawal failures, dating back to last June, when US dollar withdrawals were halted after the US Department of Homeland Security and the Secret Service seized three accounts linked to MtGox.
Currently though, the exchange is thought to have the third-highest volumes in US dollar terms, with just 18 percent of the market, well behind Bitstamp which operates out of Slovenia and the Bulgaria-based BTC-e, with 30 percent and 25 percent respectively.
Right now, BTC/USD is trading at around $619.68, down 9.13 percent intraday, according to the CoinDesk Bitcoin Price Index which averages prices from the three major bitcoin exchanges.
*Editing by Frank Quin*

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