Bitcoin image from Lightboxx/iStock/Thinkstock. Mao image from XuVs Studio/iStock/Thinkstock.

This past week was one of the most fascinating series of days that I can recall as a market participant -- absent, of course, the financial crisis. It began with the downfall of the world's largest cryptocurrency exchange and ended with forceful evidence that the Chinese government is manipulating the value of its actual currency in an effort to pulverize speculators.

Mt. Gox files for bankruptcy
On Monday, the largest online bitcoin exchange, Mt. Gox, scuttled its own website after suffering a "catastrophic theft" that rendered it insolvent. Somewhere in the neighborhood of $400 million of its customers' money -- though this is an extremely rough estimate at best -- went down with the ship.

By the end of the week, Tokyo-based Mt. Gox had officially filed for bankruptcy protection, destroying any hope that its customers will ever see their money again.

The 28-year-old chief executive officer of the crytocurrency exchange went on public television to apologize -- and, for what it's worth, his remorse appeared to be genuine. "I am sorry for the troubles I have caused all the people," CEO Mark Karpeles said before Japanese news cameras, bowing deeply.

The following chart depicts Mt. Gox's devastation. At present, a bitcoin trading on Mt. Gox's exchange is reported to be worth roughly 25% of an otherwise identical bitcoin on BitStamp, another well-known exchange based in Slovenia -- though, for the record, this is assuming that a Mt. Gox bitcoin is worth anything at all.

China's currency manipulation
Meanwhile, on Wednesday, The Wall Street Journal published an in-depth piece on the manipulation of China's currency -- a fact that's long been assumed but rarely accompanied with such forceful evidence.

According to Wall Street's paper of record:

China's central bank engineered the recent decline in the country's currency as part of its efforts to prepare the tightly tethered yuan for wider trading, according to people familiar with the central bank's thinking.

By guiding the yuan weaker, Beijing intends to thwart short-term speculators betting on a continued rise and to introduce greater two-way volatility into its trading, these people say.

As China continues an effort to open up its economy, a fundamental step is allowing its currency to trade openly as opposed to within the narrow band that prevails currently. But such a leap is replete with hazards, not the least of which are currency speculators, who it seems have been betting heavily on yuan appreciation -- a near certain consequence of its eventual unshackling.

With this in mind, it's hard not to grudgingly respect China's surprise move to guide the yuan lower, as opposed to permitting it to drift higher, before relaxing the trading band. Will it succeed at breaking the backs of speculators -- and particularly those who are levered to the hilt? That remains to be seen, but it's certainly a noble effort -- and, if nothing else, an interesting drama to watch from afar.