750,000 Bitcoin bites the dust after Mt. Gox Mishap

The Financial Focus

Friday morning in Tokyo, Mt. Gox announced nearly 750,000 cliental Bitcoin, along with 100,000 corporate Bitcoin – worth an estimated $470 million – had been lost due to fraudulence. The announcement also included the company’s filing for bankruptcy protection and top-level management changes. The loss accounted for roughly seven percent of the global Bitcoin total of an estimated 21 million. Although the victims of this incident claim Mt. Gox and its CEO are guilty of multiple counts of fraud, there is nearly no action required to be taken by government authority as the virtual currency was unregulated, leaving the Mt. Gox victims empty-handed. Charles Shrem, the Bitcoin capitalist who was arrested in late January for money-laundering, speculated Mt. Gox still holds over 90,000 Bitcoin of the reported 100,000 missing corporate Bitcoin, which has raised further investigation [1, 2].

As reported by Forbes, the company released the plan of action for the future of Mt. Gox which includes closing shop until April 1, 2014, at the earliest. A few changes are alleged to occur during the closing, such as Mt. Gox plans to drop the “Mt.” and just go by Gox, release account history to victims, have a new platform with a new brand, supply new services, and create a new business model [1, 2].

Here’s a summarized version of Bitcoin history and how Mt. Gox is involved in the Bitcoin world:

As assumed creation in 2007 by an unidentified Satoshi Nakamoto of Japan, Bitcoin is an online currency that is backed by nothing but faith.  Bitcoin is managed by an outside authority, much different from other global currencies regulated by government bodies. As many consumers are skeptical of virtual payment systems having access to their personal information, Bitcoin was created to remove that worry as there is no tie to personal information with the currency. Although Bitcoin is traceable, many have taken advantage of the virtual currency. For example, Silk Road, otherwise known as the illegal drug version of eBay, was a hotbed for Bitcoin usage until it was shut down by the FBI in late 2013. Many online retailers and businesses have accepted Bitcoin in the past, such as Overstock, Tesla, Zynga and eBay. Mt. Gox was born in July of 2010 to be the exchange of Bitcoin and also provided a reliable Bitcoin index. Bitcoin has gone through its rollercoaster timeline, with peaked values worth over $1,200 per Bitcoin [1, 2]. This Bitcoin era is commonly known as an investment bubble that is soon to pop and drop drastically, once investors find its true value. Any hot commodity or financial security has seen its fair share of bubbling and dates back to the first bubble, known as the 17^th Century Tulip Craze [3].

Sources:

[1] Wall Street Journal

[2] Forbes

[3] A Random Walk Down Wall Street, Author: Burton Makiel

Entrepreneur of the Week: The Winklevoss Brothers (Cameron and Tyler)

Background:

Identical twins Cameron and Tyler Winklevoss have done everything as a partnership since day one. They were born in Southampton, New York, August of 1981, and raised in Greenwich, Connecticut. They taught each other HTML computer programming at the age of 13, and in their teens, they formed a company that was geared toward creating websites for outside businesses. In high school, they founded the crew team, and both earned enrollment into Harvard University the fall of 2000 [2].

While at Harvard, they were members of the crew team, the Porcellian Club and the Hasty Pudding Club. What brings fame to their name is the co-founding of the social media site, HarvardConnection, which was later renamed to ConnectU, and later developed solely by Mark Zuckerberg to create Facebook. The Social Network portrays the birth of Facebook, along with the Winklevoss twins in a true-story motion picture. They are also known as, “The guys who had their social media website idea stolen from by Mark Zuckerberg.” Beyond internet entrepreneurship, the brothers competed as American rowers in the 2008 Beijing Olympics. In 2010, the brothers spent time overseas studying at Oxford University’s Graduate Business School. After their honorable educations at Harvard University and Oxford University, the brothers created multiple start-up companies involving technology, consulting services and venture capitalism [2].

Most recently, the brothers dabbled into Bitcoin. They filed for registry of an ETF called the Winklevoss Bitcoin Trust in 2013, invested $1.5 million into BitInstant, and in February of 2014, the twins launched the Winkdex. The Winkdex is a weighted-average index of the top three Bitcoin exchanges based on the volume traded daily [1].

Why the Winklevoss brothers are the Entrepreneurs of the Week

Whether it is a seminar, a biography, a public podcast or a documentary, any successful entrepreneur will tell you about a risky decision or set of decisions they made that led to a large payoff or a long lesson. With the current state of the Bitcoin Bubble, the Bitcoin developments created by Winklevoss brothers are considered their risky moment among writers and critics. Not only are they risk-takers, but they are resilient. After the disappointment the brothers faced with their controversy at Harvard University, they became resilient by moving into other markets from the settlement payoff, and later they became venture capitalists for companies that resembled the youth of their college idea. The best part about the Winklevoss entrepreneur adventure is the brotherhood bond they had throughout the process. They show that synergy is greater than singularity. The Winklevoss Brothers are the Entrepreneurs of the Week due to their recent risky investing behavior, their contagious Olympic spirit and the strong partnership that is destined for future entrepreneurial success.

Sources:

[1] Forbes

[2] Facebook

Wall Street’s Watch: (February 23, 2014 – March 1, 2014)

Hot: InterMune Inc. (ITMN)

Tuesday the 25^th, InterMune publicized positive phase III results of its drug, pirfenidone. Pirfenidone, a drug concerned with idiopathic pulmonary fibrosis (IPF) patients showed lung improvement and a slowing in the progression of IPF in the patients. Tuesday’s disclosure alone caused a $23.84 rise in market value from Monday’s $13.96 closing price per share to Tuesday’s $37.80 closing price per share. InterMune slowed down after a Credit Suisse downgrade from Outperform to Neutral, finishing the week at Friday’s closing price of $30.04 per share. Even with the mild slump, InterMune still realized a gain in value of over 100%. InterMune also released it would be filing for FDA approval in its third quarter. Will InterMune’s positive results continue and lead the company to a golden ticket of FDA approval [1, 2, 3]?

Cold: Green Mountain Coffee Roasters, Inc. (GMCR)

Green Mountain Coffee Roasters, owner of Keurig and a recent partner of Coco-Cola, was on Wall Street’s Watch’s hot list for most of February leading up to the twentieth, but since then, the company has experienced a slight cooling in price. This week alone, the company has experienced an $11.71 per share decrease. News of Green Mountain Coffee Roasters’ cold drink competitor, SodaStream, beating its quarterly earnings Wednesday caused a slight bull movement in SodaStream investors and a slight bull movement in Green Mountain Coffee Roasters investors. Market analysts have also portrayed Green Mountain Coffee Roasters to be overvalued. With that being said, will the recent cooling of Green Mountain Coffee Roasters be the start to a landslide in market value? Or is this movement just the beginning of a bear trap looking to spike for future values [1, 2, 3]?

Bold: Tesla Motors, Inc. (TSLA)

Tesla Motors couldn’t keep itself from the press this week. Tuesday, stocks rose 14% after Morgan Stanley initiated the one year targeted price of Tesla Motors to be $320.00 per share (3). Wednesday, Tesla announces the plan to build a $5 billion “green” factory to manufacture lithium-ion batteries for Tesla automobiles and to be powered by multiple alternative energy sources, like SolarCity (Elon Musk’s Solar  energy company) [3]. Friday’s closing price held Tesla Motors at $244.79 [1]. This stock may be out of a college kid’s budget, but for established investors, this stock does hold potential short-term gain. The growth of the company, the success in the industry, and the groundbreaking capabilities of emerging technology will all play a role in holding the confidence of the market for long-term investing. The critics view Tesla as a bubble, but if innovation continues in their automobile technology, $244.79 could be the lowest it will be five years from now. As Tesla continues to be a 50-50 split between bullish and bearish investors, what side are you on? By the start of next August, do you see Tesla’s August 1^st market price above or below the current $244.79 per share [1, 2, 3]?

Sources:

[1] Yahoo

[2] The Street

[3] Motley Fool