Bitcoin Decreased by 99% to $0.01 in June 2011

On a seemingly normal day in June 2011, Bitcoin went from being the leading cryptocurrency to nearly worthless in just a few minutes. The price fell from 32 dollars to 0.01 dollars – a decrease of 99% – shaking the initial cryptocurrency community and causing panic among traders. It is not just a fall of the market, but a chaotic, irreversible turning point due to security flaws, poor oversight, and one of the most infamous hacks in the history of this space. This incident has exposed how the initial Bitcoin infrastructure is truly fragile and unprepared. How did MtGox prepare for the collapse? By mid-2011, MtGox was the main place to trade Bitcoin. Based in Tokyo, it handled about 70% of all BTC transactions. But beneath the surface, everything was falling apart. The exchange was riddled with security vulnerabilities and completely lacked basic operational standards. Hackers had stolen thousands of bitcoin in separate incidents earlier that year. On March 1, 2011, an attacker stole 80,000 bitcoin by accessing the wallet file of the platform. Then, on May 22, another 3,000 bitcoin were stolen after someone broke into an unencrypted wallet left outdoors. Just a month before the major collapse, MtGox lost access to 300,000 bitcoin but managed to recover most of it after the thief unexpectedly returned almost everything except for a "fee" of 1%. Despite these warning signs, MtGox continued to operate without updating its system or providing meaningful responses to user concerns. Traders began reporting suspicious activity and unauthorized logins from early June 2011, but MtGox did not stop trading or investigate the complaints. Flash Crash Day – June 19, 2011 At around 3 AM Tokyo time on June 20 (, which is June 19 in other parts of the world), a large sell order attacked the order book of MtGox Bitcoin, which had been hovering around $17.50, plummeting to just $0.01. For several tense minutes, the price remained at that level before recovering. After the collapse, many worried that the Bitcoin network could be disrupted.

It turns out that a hacker gained access to an account belonging to Jed McCaleb, the original founder of MtGox. Although McCaleb sold the exchange to Mark Karpeles three months prior, the account still had administrative access. After gaining control of the system, the intruder manipulated the account balance, created a large sell wall, and attempted to withdraw as much money as possible - while still operating within the daily withdrawal limit of $1,000. Withdrawal limit for Bitcoin rescue The $1,000 withdrawal limit of MtGox was intended to prevent large thefts. However, it was tied to the market price of Bitcoin on the exchange itself. Therefore, when the price fell to one cent, that $1,000 suddenly meant that someone could withdraw up to 100,000 BTC at once. Fortunately, the exchange also has a little-known bitcoin withdrawal limit, which is the actual flow limit of bitcoin that can be withdrawn. As Mark Karpeles said in the IRC conversation of MtGox: Then, he declared that only 2,000 bitcoins were actually withdrawn. At that time, people doubted that number. But later, analyses showed that this figure could be quite accurate - especially when compared to later losses amounting to hundreds of thousands of bitcoins. What has Bitcoin learned from its worst day? The flash crash incident of 2011 left a lasting mark. It showed how quickly fortunes can change in the cryptocurrency space. It taught early investors to never blindly trust an unregulated exchange. And it shone a harsh spotlight on the internal failures of MtGox, from basic oversight to security and customer communication. Looking back, the collapse was not just a disaster in a day – but the beginning of a prolonged dissolution process. By 2014, MtGox had completely lost its ability to pay, with hundreds of thousands of bitcoins disappearing and thousands of users left with empty pockets.