Can you explain how this would be "good for Bitcoin" though?
Didn't the price crash after the extreme rise? Or was this because the BTC was stolen and unrelated to the USD insolvency? Was the "good for BTC" tongue in cheek?
Bitcoiners say that things are good for bitcoin whenever its price goes up (because they care more about price than anything else in the bitcoin ecosystem). Bitcoin skeptics like patio use that phrase in a more tongue in cheek manner
The short version: Mt. Gox stopped paying out USD-denominated claims, because (as was correctly perceived by many people) they were insolvent. They continued paying out BTC-denominated claims. The only way to get value out of Mt. Gox was to either go through yen (which the vast majority of customers couldn't do [0]) or buy Bitcoin and withdraw, which caused the price of Bitcoin to gallop upwards in late 2013.
[0] I got a number of interesting business propositions that year: https://twitter.com/patio11/status/423869016776933376