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Mt. Gox Withdrawal Freeze Creates Arbitrage Profits, California’s orders to “Cease and Desist”

June 24, 2013 at 21:09 by BitcoinNews

The news last week of a 2 week freeze on USD withdrawals caused a price differential of nearly 10% between the BTC/USD rate at Mt. Gox, which jumped to $113, and the prices at other exchanges which remained just below $105 over the weekend and even declined further as Mt. Gox’s prices stayed aloft.

The reason for this seemingly odd reaction was that Mt. Gox’s customers were perhaps buying BTC with their un-withdrawalable dollars in order to have an instrument that they could transfer to other exchangers. Even if this were not occurring to a large extent, speculators may have been bidding up BTC at Mt. Gox in anticipation of this behavior, before arbitrageurs had a chance to exploit it.

As the price on Mt. Gox retreated to $103 in regular trading this Monday, some arbitrageurs at Mt. Gox appear to have once again closed the gap. However, these traders may still face the uncertainty of when or if they might withdraw the USD, as well as some delay in adding funds should the gap open up again.

Link to an in-depth analysis of Mt. Gox arbitrage:

http://www.thegenesisblock.com/turbulence-at-mt-gox-creates-arbitrage-opportunities-for-bitcoin-traders/

There is also more news on the regulation front, in which a cease-and-desist letter has left both California regulators and the Bitcoin Foundation in a state of confusion.  The California Department of Financial Institutions may have already been aware that the Bitcoin Foundation is not engaged in “unlicensed money transmission”, but it nonetheless included the non-profit in the letter to an as-yet unknown number of recipients in order to further investigate and find other entities who may indeed require licensing.

“California has likely sent similar letters to all operating Bitcoin entities that reasonably appear to be doing business in California and/or with residents of California,” according to Jay Postma, president of MSB Compliance Inc. in Atlanta, but he added that he is surprised the Bitcoin Foundation received a cease and desist letter at all.

Links to news on the regulatory action in California:

http://www.paymentssource.com/news/is-california-warning-to-bitcoin-group-a-misfire-or-a-dragnet-3014517-1.html

http://contrariancompliance.com/2013/06/24/bitcoiners-must-understand-that-compliance-is-just-the-beginning/

 

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