The next phase in the Bitcoin revolution is definitely the standardization of the exchanges where in fact the coins are traded. Bitcoin happens to be in the Wild West prospector days of its evolution. The world has agreed a Bitcoin provides a stored measure of value in the same way that gold and silver have through the entire ages. Like coincapcentral and silver, Bitcoin is worth what your partner is willing to pay you for it. It has resulted in cheating since trading began. Crooked scales and filled ore all became area of the norm as both the 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 per month ago when Mt. Gox, undoubtedly the largest Bitcoin exchange, shut down because of security breach and theft of around $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 problems at Mt. Gox lay bare the cyber security argument. Surprisingly, Bitcoin as a currency shows remarkable resilience. This resilience may be just the boost needed 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 prove to be a boon for the currency. Tera Group, out of Summit NJ, already had proposed a bilateral agreement to the Commodity Trading Futures Commission (CFTC) to begin with trading Bitcoins by way of a swap-execution facility or, centralized exchange. Almost all commercial currency trading is done through swaps agreements which explains why we follow the commercial traders inside our own trading. A swap agreement is actually an insurance policy that provides a guaranteed value at a particular 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 small toll on each transaction. Therefore, the price on the individual swap is small but the sheer volume of swaps processed makes it an enormous revenue source for all 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 in the face of the Mt. Gox debacle is a testament to the energy of a worldwide grassroots movement. Bitcoin should have plunged around the world as owners of Bitcoins tried to switch them for hard currency. The market’s response turned out to be very orderly. While prices did fall across the board, the market seemed to understand that it was a person company’s problem and was therefore confined to Mt. Gox customers’ capability to get their money out. Consequently, Bitcoin prices have stabilized around $585. That is well off the December most of $1,200 but very near 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 outside the institutionalized financial industry to being built-into that same financial system is its capability to be taxed by the offline governments it was developed to circumvent. THE INNER Revenue Service finally decided enough will do also it wants its cut. The IRS has declared Bitcoin as property rather than currency and is therefore subject to property laws rather than currency laws. This allows the IRS to obtain their share while legitimizing the need for a central exchange to ascertain value. It also eliminates arguments with the U.S. Treasury and Congress over legal tender issues. It’s simply valued as a good that could be exchanged for other goods and services, barter.
Bitcoin is really a global marketplace executing transactions on an electric network. That sounds an awful lot just like the forex markets. Industry regulators and the banking industry are likely to quickly discover that the failure of Mt. Gox has done more to encourage the individual resolve of global Bitcoin users rather than ending this upstart’s existence. Private users of Bitcoin will clamor for the federal 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 may be in the right place at the right time with the proper idea as Bitcoin may have proven itself to be self-sustaining at the retail level. Institutional and legal structures are increasingly being put in place to keep its evolution as the financial industry is left to determine how to monetize it.