Just prior to the collapse of MtGox, I noticed an excellent arbitrage opportunity. I worked in finance in Tokyo for a decade, so I had a yen account at a Japanese bank - and MtGox supported fiat deposits using Japan's domestic transfer network. I also opened a Coinbase account just a few months after they went live. For several weeks, the bitcoin prices at MtGox were artificially low because they were having problems with their USD fiat payouts. That should have been a red flag, but I couldn't resist the temptation. Long story short, here's the arb (values roughly correct for Feb 2014):
- transfer JPY from my Shinsei Bank account to MtGox
- buy bitcoin on MtGox for JPY 30000 (approx USD 300)
- transfer MtGox bitcoin to Coinbase
- sell bitcoin on Coinbase for USD 600
- wire USD back to Shinsei
- rinse and repeat
I did a single pipe-clean trade for a very small amount and verified that every step of the arb worked properly, and there was plenty of liquidity. I was a little worried I would run afoul of the authorities monitoring international wire transfers, but was willing to take that risk since I had a valid argument. I would be able to continue this arb month after month until the prices came back inline. What could possibly go wrong?
So I put the first leg of the trade on in decent size, had my MtGox Bitcoins, and then couldn't transfer them out. The door to send bitcoins out of MtGox had closed, and soon after the entire exchange was defunct.
What did I learn from this? Keep your eyes open for any warning signs on a crypto exchange, and never wager more than you're willing to lose. This is the wild west - it's loads of fun, but you have to know when to hold, fold, walk away, and run.
And the reason I recount this story now is because Mr. Mark Karpeles walked out of jail today: http://www.coindesk.com/bitcoin-mt-gox-ceo-mark-karpeles-released-bail/ I've made my peace with my losses, but there are probably people out there who haven't, and I feel for them. Some day soon I'll tell the story of my most painful losses, and the lessons I (hope) I learned from all of them.
Does anyone else out there have a good MtGox story? Any words of wisdom you'd like to impart on steem nation?