I am going to go out on a limb and predict that MtGox will announce Litecoin support sooner than anticipated — possibly by the end of August.
There is clearly trouble at mtgox, which started when the US closed gox’s dwolla account for failure to register itself as a money services business; and things got worse with the coinlab lawsuit. The lawsuit seems to have blown over. But more recently USD withdrawals have gotten veeeery slow. Like, months slow. Customer support is evasive as to why.
So, we have a slow motion bank run. It manifests itself by 20% higher bitcoin prices at mtgox than the other large exchanges. There are essentially two BTC/USD exchange rates: Gox and everyone else.
There was a milder version of this unpleasantness back in April. I remember the sickening feeling of “uh oh… what’s happening at gox” that finally prompted me to buy btw with dollars at a much worse rate than the other exchanges, and pull out. Better a bad trade than a total loss, I figured.
So when will the real bank run happen?
I am going to out on a limb and predict that it won’t. Everything is going to be fine!
Mtgox is going to pull a rabbit out of a hat, and stay solvent.
Mtgox has been flirting with litecoin support for months now. Plenty of time to accumulate a sizable position. Or to work out a behind the scenes deal with a litecoin whale like burnside of litecoinglobal, to buy a massive amount of litecoin at a discount in exchange for inside information on when litecoin will go to gox.
What to do?
I have a defensive litecoin position, although I’m bearish on litecoin for the medium to long term. But I think if litecoin goes on mtgox sooner than anticipated it could double or triple in a few days. The trick will be not to get caught up in the hype and sell before it crashes, or at least reverts to the $2-$3 range — which could happen if gox dumps its stash to rescue itself from insolvency on the USD side. I think $7USD is a good price, but don’t wait for it to get that high beforecashing out… sell some on the way up.
Let’s see how this plays out, and fingers crossed.
Note to my readers: I wish I had a better intuition on what effect a litecoin spike will have on litecoin denominated securities, particularly litecoinglobal (which owns btct.co). I have been thinking this through for over a week, and I can’t make up my mind whether litecoin stocks are a buy if litecoin is appreciating, or we will see dumping. Please comment if you have any ideas.
UPDATE: According to
the box seizure was 3M USD, fairly small and probably not enough to force a dollar shortage. I am sticking to my guns anyway. Something is wrong at gox. Maybe a partial cold wallet theft that was covered up, with mtgox trying to make up the difference in trading profits? Something. And we will see litecoin soon.