The next phase in the Bitcoin revolution is definitely the standardization of the exchanges where the coins are traded. Bitcoin happens to be in the open West prospector days of its evolution. The world has agreed that a Bitcoin provides a stored measure of value in the same way that silver and gold have throughout the ages. Like silver and gold, Bitcoin is worth what your partner is ready to pay you for it. It has resulted in cheating since trading began. Crooked scales and filled ore all became portion of the norm as both miners and the assayers sought to pad their bottom lines. This led to governmental oversight and the creation of centralized exchanges.
The Bitcoin dream has gone to police its own community and remain beyond the physical scrutiny of any global government. The Utopian dream was shattered a month ago when Mt. Gox, by far the largest Bitcoin exchange, turn off due to a security breach and theft of approximately $300 million worth of Bitcoin. Customers who had Bitcoin on deposit with Mt. Gox still have no idea how much they’ll get back. The issues at Mt. Gox lay bare the cyber security argument. Surprisingly, Bitcoin as a currency shows remarkable resilience. This resilience could very well be just the boost had a need to legitimize the currency and the lean towards governmental involvement which could actually help this fledgling store of value soar to its mainstream potential.
The timing of the Mt. Gox incident may end up being a boon for the currency. Tera Group, out of Summit New Jersey, already had proposed a bilateral agreement to the Commodity Trading Futures Commission (CFTC) to begin trading Bitcoins by way of a swap-execution facility or, centralized exchange. Almost all commercial currency trading is performed through swaps agreements which is why we follow the commercial traders in our own trading. A swap agreement is basically an insurance policy that delivers a guaranteed value at a specific point in time to protect against currency fluctuations. It’s what the commodity exchanges are founded on. The swap markets will be the superhighways of the financial industry. They process massive volumes while collecting a little toll on each transaction. Therefore, the cost on the average person swap is small but the sheer volume of swaps processed makes it a huge revenue source for several of the major banks.
The CFTC has yet to touch upon Tera Group’s proposal. We commented in November that Bitcoin had transcended novelty status and that the revenue pool was becoming too large for global banks to ignore. Bitcoin’s resilience when confronted with the Mt. Gox debacle is a testament to the power of a global grassroots movement. Bitcoin must have plunged across the globe as owners of Bitcoins tried to switch them for hard currency. The market’s response ended up being very orderly. While prices did fall across the board, the market appeared to understand that it was a person company’s problem and was therefore confined to Mt. Gox customers’ ability to get their money out. Consequently, Bitcoin prices have stabilized around $585. This is well off the December most of $1,200 but very close to the average price going back six months.
The last coincidentally timed little bit of the structural transformation from Bitcoin being an anarchist, alternative store of value that exists beyond your institutionalized financial industry to being built-into that same financial system is its ability to be taxed by the offline governments it was developed to circumvent. The Internal Revenue Service finally decided enough is enough also it wants its cut. The IRS has declared Bitcoin as property instead of currency and is therefore subject to property laws rather than currency laws. This enables the IRS to obtain their share while legitimizing the need for a central exchange to see value. It also eliminates arguments with the U.S. Treasury and Congress over legal tender issues. It’s simply valued as an excellent which might be exchanged for other goods and services, barter.
Bitcoin is a global marketplace executing transactions on an electronic network. That sounds an awful lot just like the forex markets. Industry regulators and the banking industry are likely to quickly find that the failure of Mt. Gox has done more to encourage the individual resolve of global Bitcoin users instead of ending this upstart’s existence. Private users of Bitcoin will clamor for the government to protect its people from crooked exchanges just as farmers were cheated in the grain trade of ancient Egypt or gold and cattle by assayers and stockyards in the open West. Tera Group could be in the right place at the proper time with the proper idea as Bitcoin could have proven itself to be self-sustaining at the retail level. Click here and legal structures are increasingly being put in place to continue its evolution because the financial industry is left to determine how to monetize it.