That scandal turned out to be a blessing for bitcoin. Basically it went viral. Suddenly everyone was hopping on the bitcoin express -- mainstream etailers like Overstock, car dealerships like Lamborghini and Tesla, swampland salesmen, and space vacation hawkers like Virgin Galactic. ATMs popped up in California and New York, and the financial wizards in Cyprus began to use it when their own banks started to fail (bet they're pissed).
For a while, everyone who was anyone wanted to become part of the bitcoin scene. Its value skyrocketed for a short time, but then started the up-and-down valuation dance indicative of a volatile commodity in a completely free market. People got smart and realized that bitcoins probably aren't the place you want to keep the down payment for that eventual old-age condo in Boca -- everyone outside of Mt. Gox anyway.
Still, that didn't slow down massive venture investments in bitcoin mining operations or the enthusiasm with which traders approached the market probably because, hey, it's more fun than Wall Street. Anything can happen. But get past the Mt. Gox faceplant, and the fun is going to end. The Goxxers spoiled the party. Or did they?
Head I win, tails you lose
It depends on whether you wanted bitcoins to stay the fun-loving, wildly fluctuating crypto curiosity they are today, or evolve into an actual currency on the same level as meatspace dollars and euros. If you're in the latter camp, the Goxxers gave you a leg up. When someone loses $400 million of a pie our government suddenly realizes it doesn't have its grubby fingers in, you can expect only one thing: regulation.
Bitcoins weren't that high on Washington's to-do list until this happened. Partially because if drug dealers and assassins were using it, politicians had an image problem; more likely, it's techie and a little difficult to understand, and boning up would have burned valuable time better spent on golfing and booze naps. But now that we've exposed good, old-fashioned white collar criminals/incompetents burning that kind of cash, that's a whole lot of graft, reelection, and escort money floating around without a regulatory siphon. We can't have that!
In all probability, armies of leather briefcase-clutching legislators are now drafting bill upon ill-informed bill each designed to regulate bitcoin trading and valuation, ineffectively protect your investments, and get their snarfing noses as deep into the currency's taxable trough as possible. Believe it or not, this might be a good thing.
You may have noticed that I lean ever so slightly toward the opinion that our slavering big brother already regulates too much, but for bitcoins I think it'll be a boon. As long the bitcoin community is really looking to make the technology a viable currency, being regulated is like showing a little ankle at the cotillion. It says you've arrived, you're legitimate, and you're being run by stodgy, reliable men in Brooks Brothers suits, not pot-toking dungeon masters. It'll rob bitcoins of some of the fun, but it'll also add a perception of stability that can make bitcoins a mainstream financial instrument.
Maybe you love that, maybe you don't, but there's no way around it: The lawyers have found bitcoin. It'll never be the same again.
This article, "Bitcoin grows up, Mt. Gox melts down: The crypto currency crapshoot," was originally published at InfoWorld.com. Follow the crazy twists and turns of the tech industry with Robert X. Cringely's Notes from the Field blog, follow Cringely on Twitter, and subscribe to Cringely's Notes from the Underground newsletter.