Mt. Gox Reopens Trading
Mt. Gox resumes operations after a week-long security overhaul, rolling back the flash crash trades.
On June 26, 2011, Mt. Gox resumed trading after being offline for seven days following the flash crash. During the downtime, the exchange migrated to a stronger server infrastructure and implemented new security measures, including a 24-hour withdrawal limit ($1,000 per day) and the option for Two-Factor Authentication (via YubiKey). Most controversially, Mark Karpelès decided to roll back all trades that occurred during the hack, restoring the price to its pre-crash level of roughly $17.50.
The decision to roll back trades was fiercely debated. Purists argued that 'code is law' and that the exchange should not interfere with the market, even in the event of a hack. However, the pragmatic view prevailed: allowing the thief to keep thousands of coins bought for pennies would have bankrupted the exchange and destroyed the economy. The reopening was tense, but the market held. The price stabilized, proving that Bitcoin could survive a catastrophic failure of its central infrastructure.
The reopening of Mt. Gox was a 'trial by fire.' While it restored liquidity, the trust in the exchange was permanently fractured. Users began to look for alternatives, laying the groundwork for the founding of competitors like Bitstamp and Kraken later that summer. It taught the market that centralized exchanges were the weak point in a decentralized system.
Key Sources: BitMEX Research: Flash Crash Report | Bitcointalk: MtGox Open for Trading