MtGox To Restore Bitcoin Withdrawals 'Soon'; Is This Too Little, Too Late?

MtGox released a statement Monday saying that fiat and bitcoin withdrawals will resume “soon.” The Japan-based bitcoin exchange credits advocacy group Blockchain.info for helping come up with a solution to the exchange's problems. “Thanks to our friends at Blockchain.info, MtGox now has a workaround that will use a unique identifier created by Blockchain to show whether transactions have been modified or not,” stated MtGox’s release. “This will prevent any fraudulent use of the malleability issue and protect the assets of our customers."

The workaround mentioned includes re-indexing the entire blockchain, which may take a while. That means that the timeframe “soon” seems to be later this week (if not later than that), as the exchange site states in its letter to customers: “We will update everyone again by Thursday at the latest.” This comes after 10 days have passed since MtGox suspended withdrawal functionality, and Thursday will make it two weeks of down time. In that time bitcoin prices have dropped to their lowest point since October, trading between $250 and $350 each. Prior to the withdrawal suspension, prices were at around $900 per bitcoin.

The drop comes as investors are losing faith in the oldest exchange. MtGox was established in June of 2010, when bitcoin prices were below 10 cents. As the cryptocurrency rose in subsequent years MtGox grew its customer base and investor confidence. However, early in February when the exchange noticed a flaw in the way their systems handled withdrawals, specifically related to transaction malleability, the exchange was forced to put withdrawals on hold. This shook investor confidence and the price started to plummet.

Now, as the exchange’s technical side is on the mend, MtGox is hoping prices will correct. But the withdrawal problems have existed for longer than reported. According to a poll compiled by Coindesk.com, nearly 68 percent of nearly 3,000 respondents said they have been “waiting months for their withdrawal requests to be fulfilled, despite being ‘verified’ or ‘trusted’ account holders.” The poll was launched on Feb. 4, prior to when the transaction malleability fiasco came to light.

With technical issues, flagging prices and cries of MtGox’s demise, is the correction to their code too little, too late? MtGox trades at prices nearly half those of the other big exchanges, and new exchanges are coming online every day. Safello, a Swedish bitcoin exchange, has attracted names like Erik Voorhees and more than $600,000 in investment funding. MtGox hasn’t even given a timeline for how long withdrawals will take to process with the new implementation. Considering the circumstances, it may be a long time before MtGox returns to its former glory, if it returns at all.