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.
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
Mt.Gox started having issues withdrawing funds to "real" fiat currencies, people got scared, wanted to pull out their bitcoin, suddenly their account says they have a balance, but there's not bitcoin backing up the balance. (In Mt.Gox case, this was because a significant amount of bitcoins were stolen from their treasury.
Similar thing could happen with people redeeming USDT for USD if they don't have enough to cover the already issued USDT.
