E-gold was declared bankrupt? E-gold built a fire under itself…

It so happens but it is not the first issue in a row when we discuss E-gold payment system. We tried to model the future of e-gold, played all kinds of scenarios, considered all the prospects for the company… And suddenly the brand of e-gold again turned into the talking points in the Internet mass media, in blogs and on forums.

Approximately on July 7-8 a number of websites on the Internet dealing with press releases published a mysterious message that E-gold Ltd. and Gold & Silver Reserve (G&SR), Inc via/through E-gold managers: Dr. Douglas Jackson and Barry K. Downey have declared their bankruptcy. The original message tells that the company has become insolvent and is not able to pay the loans to its creditors. Hence the company has supposedly filed a voluntary bankruptcy with the court of the District of Columbia. In this case, such an act means the beginning of the bankruptcy procedure and property sale of a debtor to meet the obligations to the creditors.

As the practice showed such news, even unconfirmed, have had the market over the barrel. As it was expected the exchange services have suffered the worst. Last time E-gold was doing everything to prevent the exchangers from building a successful business on its currency, and after the news about the bankruptcy the business of e-gold exchange to other e-currencies has completely lost its meaning. Here a standard economic effect took place when a currency backed by nothing that was artificially supported on the market, started losing its liquidity.

How did it happen?

However in a few hours an exchange market started to sink in panic moods. In 8-10 hours after the release about the bankruptcy, the rate of E-gold – WMZ was over 0,7 mark.

Then the exchangers have scraped a hole where they have buried the rate wm-egold. All these actions were followed by the forum discussions that immediately have reflected on the rates in spite of a great number of skeptics. In a day and a half the news about the bankruptcy has reached the Runet and appeared in the Russian Internet-press on www.moneynews.ru.

The one who knows a knock-on effect, which occurs when the stocks are being unloaded on the stock market, can realize the situation on the e-gold exchange market. Autocambist was the first authoritative exchanger that has fixed the rate at 40% for the exchange wmz – e-gold and later has completely got rid of E-Gold in its balances. According to the sites which monitor the exchangers, Autocambist still prefers to keep his e-gold balance at a “0” mark.

In 30-35 hours the situation on the market was closer to a nuthouse. The exchangers started selling E-gold to each other, probably, dreaming of getting rid of their balances. So, for example, such well-known exchangers as SuperChange, RoboxChange, Megaexchange had got rid of their balances by the moment when e-gold was accepted at 45%.

However, the lowest mark was established by Exchengine, which was offering only 42,6 E-gold for 100 WMZ. Few days ago nobody could even dream of such a turn of events, but today it is a reality.

It will be interesting to find out the initiative reasons of the e-gold rate drop. Let’s try to ratiocinate why the rate started to undergo such changes. It is obvious that it took place due to the shaky general situation and the position of the system on the market. We can say with confidence that if instead of e-gold the fraudsters have mentioned WebMoney, for instance, the rate would change maximum by 1%. As to E-gold, a minor announcement of the system bankruptcy from the unverified source resulted in a rate drop. The numerous actions, waiver of in- and outexchange with wire have weaken the trust of the users in the system. In other words, people were instinctively expecting the bankruptcy of the system. And many people were ready to refuse from the system. However, the market of E-gold was held by the exchange services for which the rate drop was like a withering of a part of the regular profits.

The continuation was even more interesting… On July 9 the authorities of E-gold who have got tired of the endless tickets or, may be, simply just found the “latest news”, finally made the long-expected announcement which was waited for about 2 days by a good half of the Internet users. In his statement Douglas Jackson has vigorously denied all the rumors about the system bankruptcy and has added that they have already started the investigation and all the culprits will be punished. Intentionally or not, but this whole story with the system bankruptcy was followed by a wave of the DDoS-attacks which have aggravated the situation and dove all the users possessing dome e-gold assets to despair. But nevertheless the statement of Douglas, though a little bit late, more or less stabilized the situation with the rate by having damped down the fire of forum discussions.

However the calm was short. The peace of the Internet inhabitants was broken by another piece of news that came this time from the system itself. So, on July 21 millions of people have found a press release on the official blog of e-gold posted by its founder where along with the dithyrambs to e-gold they said about the changes within the system which according to the founders were intended to revive the system and “whiten” it in the eyes of the publicity and the state. Very interesting, but the same day that government made a sensational statement that the system and 3 of its co-founders have pleaded guilty to money laundering and illegal money transfer charges. The details of this suit have not been published yet, however, the announced and realized changes have already evoked a wide response.

One of the system’s “know-hows” was the cancellation of the option which was previously allowing one user to get an unlimited number of accounts. According to the system, at the moment it works on a next generation User-based log-in system. Thanks to this, the system has stopped the sign-up operations at all. Those who want to get an account with e-gold will get the following picture at least for the coming 6-9 months:
Though, who knows whether people are willing to wait those 6-9 months; and who knows may be during this period the market will get another giant of online payments…

Also, in his rush to please the government Douglas Jackson said that e-gold had addressed the autoexchangers with a request to stop all the converting operations with e-gold, thinking that it was a source of all its failures and misfortune. While talking about this issue, Dr. Douglas has allowed himself to speak harshly towards WebMoney Transfer system and made the blue-eyed looker almost the main offender of e-gold.

The further contour scenario is reminding the previous one which happened right after the publication of the notorious press release. The exchange rates have foully went down, turning the hopes for the system revive into the tenuous illusions that more and more resembled the optical illusions usually seen by the exhausted strangers wondering about the endless deserts… The exchangers have started a new competition in setting the exchange rates which were more close to the Olympic records rather than to the exchange rates of e-gold, formerly one of the most stable currencies throughout the Internet. Finally, the average exchange rate stopped at 100 WMZ for 40 e-gold. In spite of that, the rates that have driven the users “overloaded” with e-gold and damned by the day when they have trusted the promises of E-gold are still available on the Internet. We figure that the mentioning of such well-known exchangers as E-curex and GrandExchange offering only 1 WMZ cent for 10 e-gold will bring back all those people who still hope for the system revive to reality. We think that the further comments on this issue are unnecessary.

Who knows what tomorrow holds for E-gold?

The predictions in our previous issue on the trend towards the concentration of e-gold in a narrow circle of the holders started coming true. Numerous exchanges on the market and unload of e-gold resulted in the appearance of big e-gold holders with the fantastic balances of unstable currency in their accounts who dream of getting rid of it.

Since during the second rate drop e-gold was unloaded to the exchangers at 50-60%, the exchangers will be required to speculate on exchange operations ranging within 40-50% to reimburse their losses and this automatically means that the rate will be fixed in that range. However, if one will think soberly and take into consideration a miserable liquidity of e-gold, he or she will see that the operations within the range of 50-60% will be hardly made due to the absence of a demand for e-gold.

As for the further fate of E-gold, we can safely say that this e-currency has approached the rate that suits it best. Today e-gold exists only in the virtual reality, and hence, it cannot compete in liquidity with cash or with any other e-currencies in 1:1 ratio. E-gold might have become the second Fethard and will never be sold again at 10% against wmz.

It is rather paradoxical but probably the most important question is not what will happen tomorrow but what to do with all that e-gold today? Today e-gold is almost dead: it is a rather conditional electronic currency, the matter of future of which becomes more and more rhetorical. However, we need to make a business today not tomorrow and it is necessary to build relationships with e-gold today not tomorrow. And today e-gold is in a coma and its rate is like the pulse on the encephalogram - constantly decreasing and very soon may just turn into a straight lifeless line. And then a question unwillingly appears: why do we need that e-gold?

Tell your opinion