Bitcoins have no intrinsic value. They only have value in trade.
If I started my own currency called a superdollar, and I had the only superdollar in existence, it would be worthless, despite the fact that it was very rare.
If a foreign entity can make the bitcoins you have disappear, that leads to less confidence in your ability to use the bitcoins for trade. The fact that there's fewer out there doesn't mean yours are more valuable. The number of bitcoins has been constantly increasing, yet the price has been going steadily up as well. That's because they've become more trusted, more usable. More places will accept them in trade, and more exchanges exist.
When places like Mt. Gox fail, or fear that foreign entities have the ability to essentially rob the banks with impunity, it makes the currency less trusted.
Consider this. The government issues a currency called digibux. They are matched to the USD, you can buy one digibuck for 1 USD, but they are limited in volume, only so many are offered. Looking at this naively, digibux has the same value as USD. Now consider the following happens, the government takes down a giant drug operation, and invalidates all of the digibux that were involved in the operation. A friend of yours who was a pizza delivery guy has hundreds of dollars removed from his digital wallet because they were tips from people who had participated in the drug trade.
Now you're sitting with 10,000 digibux, and you know that the government is pleased with the results of the previous sting and wants to set up more operations like that. Someone offers you 8,000 USD for your 10,000 digibux. You know that the 8,000 USD can never just vanish.
The number of digibux in circulation went down. But did that make the total value of digibux go up?
If I started my own currency called a superdollar, and I had the only superdollar in existence, it would be worthless, despite the fact that it was very rare.
If a foreign entity can make the bitcoins you have disappear, that leads to less confidence in your ability to use the bitcoins for trade. The fact that there's fewer out there doesn't mean yours are more valuable. The number of bitcoins has been constantly increasing, yet the price has been going steadily up as well. That's because they've become more trusted, more usable. More places will accept them in trade, and more exchanges exist.
When places like Mt. Gox fail, or fear that foreign entities have the ability to essentially rob the banks with impunity, it makes the currency less trusted.
Consider this. The government issues a currency called digibux. They are matched to the USD, you can buy one digibuck for 1 USD, but they are limited in volume, only so many are offered. Looking at this naively, digibux has the same value as USD. Now consider the following happens, the government takes down a giant drug operation, and invalidates all of the digibux that were involved in the operation. A friend of yours who was a pizza delivery guy has hundreds of dollars removed from his digital wallet because they were tips from people who had participated in the drug trade.
Now you're sitting with 10,000 digibux, and you know that the government is pleased with the results of the previous sting and wants to set up more operations like that. Someone offers you 8,000 USD for your 10,000 digibux. You know that the 8,000 USD can never just vanish.
The number of digibux in circulation went down. But did that make the total value of digibux go up?