1 reason why investors should have confidence in Bitcoin

The news of crypto exchange FTX declaring bankruptcy and how it got to this point represents a low point for the crypto industry – but not for all cryptos, more specifically, Bitcoin (BTC -0.39%). Bitcoin is the oldest cryptocurrency, and throughout its tenure it has been at the center of some of the most infamous incidents in crypto history. One of them puts the recent FTX meltdown to shame. Despite these events, Bitcoin continues to function as it has since its invention in 2009.

Unlike today, when there are seemingly dozens of crypto exchanges and thousands of cryptocurrencies in circulation, it wasn’t that long ago when there were only a few exchanges and Bitcoin was just one of a few dozen options for cryptocurrency investors. The exchange became known as Mt. Gox, and at one point in 2013 it was responsible for handling over 70% of the world’s Bitcoin trades.

The first crypto meltdown

For those who don’t remember, Mt. Gox’s history full of controversy and slip-ups before they finally declared bankruptcy in 2014. In the years leading up to 2014, Mt. Gox suffered a handful of lawsuits, hacks, security breaches and even lost users’ Bitcoin. These events began to compound and eventually pushed the exchange over the edge.

Like FTX and its CEO Sam Bankman-Fried, the Mt. Gox in obscurity and was led by a CEO who later ended up in controversy. In early 2014, the exchange stopped customer withdrawals “to get a clear technical overview of the currency process” after allegedly finding a bug in their software. From now on, Mt. Gox’s problems only worsen.

Within two days of the decision to halt withdrawals, Mt. Gox’s CEO, all of the company’s Twitter posts were removed, the exchange suspended all trading, and the website was eventually unreachable, returning only a blank website page.

Thanks to a leaked document, it was revealed that the company was insolvent after realizing that it lost 744,408 customer bitcoins and 100,000 of its own, totaling around $500 million and representing around 7% of all bitcoins in circulation on the the time. Mt. Gox attributed the missing bitcoins to a hack that took place over three years without the company’s knowledge. In the end, about 200,000 of the lost bitcoins were recovered.

Mt. Gox CEO Mark Karpeles was charged with fraud and embezzlement for manipulating the Mt. Gox computer system to transfer funds from user accounts to increase their own personal account.

Throughout the spring of 2014, Bitcoin’s price fell from around $850 to $360 as these events unfolded. It can be argued that the events associated with Mt. Gox spurred a crypto winter. For the remainder of 2014 and 2015, Bitcoin’s price fell as low as $177, a drastic 80% drop.

Compelling similarities today

Most of this sounds familiar — a CEO without adequate oversight, a centralized agency mishandling client funds, price drops of more than 75%, bankruptcy, insolvency and hacks. But here we are again, eight years later, going through a similar situation.

But one thing to take away from all of this is that although critics considered Mt. Gox fiasco as the end of Bitcoin in 2014, the cryptocurrency continued to rise in price. Since its 2015 low, Bitcoin has gained around 10,000%.

If history has taught us anything, it should be that no matter how many centralized companies and exchanges fail during the current crypto winter we are going through, in the long run Bitcoin should continue to increase in value. If Bitcoin could make it through Mt. Gox disaster, the current FTX meltdown should prove to be a modest obstacle in Bitcoin’s upward journey.