Mt. Goxalypse Now! Bitcoin's Credibility Faces a Make-or-Break Moment

For the past few years, Dave Carlson has stored 1,100 Bitcoins in an online account with Mt. Gox, the Tokyo-based exchange that once led the world in trading the digital currency. By the end of 2013, with the Bitcoin price booming, the value of Carlson’s holdings had surpassed $1 million. Their value now: zero, most likely. “I’m disappointed in myself for not getting off the exchange when I saw the problems,” says Carlson, a Seattle-based entrepreneur who says he feared withdrawing his holdings would further destabilize the company. “This is Bitcoin, after all. It’s the Wild West.”

Mt. Gox ceased operations on Feb. 24, taking roughly $400 million of its customers’ digital currency down with it. The collapse has cast a shadow over Bitcoin, whose proponents have channeled a revolutionary fervor into startups built around mining and facilitating transactions with the currency. The question now is whether the Mt. Goxalypse marks an end to Bitcoin or a new phase of its evolution toward stability and widespread acceptance. “I think some people will lose faith,” says Naval Ravikant, a Silicon Valley investor active in the Bitcoin community. “There will probably be a lot of people who stampeded in who now stampede out.” Within hours of Mt. Gox going offline, the Bitcoin price dropped to about $430, from more than $1,000 late last year. It recovered somewhat by the following evening.