Bitfloor exchange bites the dust

Alternative bitcoin exchange Bitfloor shocked users last week by announcing it was shutting its doors. The exchange said that its US bank account was closing, and it wouldn’t be able to handle the same volumes as it was used to.

“Unfortunately, our US bank account is scheduled to be closed and we can no longer provide the same level of USD deposits and withdrawals as we have in the past,” Bitfloor founder Roman Shtylman wrote in a statement on the website. “As such, I have made the decision to halt operations and return all funds.”

The site promised to work with all clients to return any bitcoins they had outstanding.

Over the weekend, Bitfloor reported that its bank had issued a check for the remaining account balance. "Once this check is received, we will be working to establish a way to return the remaining USD funds," it said, adding that it expects receipt by the end of the month. "Until then, we will be unable to make any further payouts."

Compared to Mt. Gox, the dominant bitcoin exchange, Bitfloor was a small player. The smaller exchange was one of several that provide a welcome alternative for exchanging bitcoins, especially when Mt. Gox came under attack from hackers.

However, Bitfloor had also suffered from its own troubles in the past. In September 2012, it had to close temporarily after hackers compromised its network and stole most of the bitcoins -- some 24,000 BTC, or around $250,000 worth at existing exchange rates -- that the exchange had on hand.

"One of the last things I want to happen is for Bitfloor to shut down and cause more panic in the bitcoin community," Shtylman stated at the time, acknowledging the effect that an exchange shutdown would have on the currency.

The latest development with Bitfloor isn't likely to help bitcoin's reputation, and the lack of further explanation will do little to bolster confidence. This, along with other problems among bitcoin exchanges, shows the market is still struggling toward maturity.

Bitfloor’s demise leaves even fewer alternatives to Mt. Gox, which itself was felled by a massive distributed denial of service (DDoS) attack on April 10.

Early Monday, the Japan-based Mt. Gox reported on its Facebook page that it was undergoing yet another strong DDoS attack. "We are working hard to overcome it and will update when possible," the company stated.

This latest report has infuriated some Mt. Gox users, who called it "a plain lie," and predicted the exchange's demise in the comments.

In mid-April, when bitcoin prices spiked, Australian exchange Bit Innovate reported it had to temporarily close its Buy Bitcoins service. In that case, the problems were less technical and more economic; the exchange had simply run out of bitcoins to sell.

Some of the larger alternative exchanges still available include Bitstamp, BTC-e, and Bitcoin China. These trade at just a fraction of Mt. Gox’s volumes, however. There are also several far smaller exchanges still trading.