There are two risks: the risk of the (1) price moving against you (delta risk) and (2) exchange defaulting (CP risk). The longer your funds spend waiting to transact, the greater your delta risk. The longer your funds spend at the exchange, the higher your CP risk.
Bitcoin is a volatile asset, making delta risk expensive. But the exchanges are opaque and operate in a legal grey area, amplifying CP risk. The risks are also correlated - if BTC/USD falls, the odds of the exchange collapsing increase. This makes the problem complicated. What I can say is this: the solution is far from either end. You should never have a significant fraction of your liquid net worth in any of these exchanges.
The most innocent excuse for taking weeks to process withdrawals is operational inefficiency. Even this increases your CP risk. Do not react to long wait times by increasing your transaction size. Instead, aggressively seek out alternatives.
But we're talking about doing 10-$10 transactions versus 1 $100 transaction. The difference in time that money is at risk for the exchange defaulting is negligible in this scenario.
> You should never have a significant fraction of your liquid net worth in any of these exchanges.
Agreed. The other side of that coin, I would say, is that a "significant fraction of your liquid net worth" shouldn't be used in a single transaction either.
> Do not react to long wait times by increasing your transaction size.
I agree, you shouldn't make a transaction larger than it should be or force a transaction to be sooner than you'd like because of the wait time, but specifically breaking up one transaction seems a bit much.
> Instead, aggressively seek out alternatives.
Agreed. I did a long time ago. Their invalid transactions should have been a huge red flag.
The only problem with doing multiple transactions is the amount of time required to both withdraw and send. If I waited, the price could fall (or rise...)
What's needed is a non-governmental/industry-driven method of showing solvency and competence. Blockchain-transfers and signed messages to show bitcoins solvency maybe? I'm not sure how to show solvency in a national currency. I'm also not sure how to show full compliance with the protocol without an auditing organization.
Also, users need to pay attention. As soon as mtgox started making bad transactions people should have started questioning them more. When they didn't properly fix those transactions, people should have started moving away.