The next phase in the Bitcoin revolution would be the standardization of the exchanges where the coins are traded. Bitcoin happens to be in the Wild West prospector days of its evolution. The planet has agreed that a Bitcoin provides a stored measure of value just as that gold and silver have throughout the ages. Like gold and silver, Bitcoin is only worth what the other person is willing to pay you for it. It has led to cheating since trading began. Crooked scales and filled ore all became section 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 been 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, by far the largest Bitcoin exchange, turn off due to a security breach and theft of around $300 million worth of Bitcoin. Customers who had Bitcoin on deposit with Mt. Gox still do not know how much they’ll reunite. The problems 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 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 end up being 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 trading Bitcoins through a swap-execution facility or, centralized exchange. The vast majority of commercial currency trading is done through swaps agreements which explains why we follow the commercial traders in our own trading. A swap agreement is actually an insurance policy that provides a guaranteed value at a particular point in time to safeguard against currency fluctuations. It’s what the commodity exchanges are founded on. The swap markets are 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 however the sheer level of swaps processed makes it a huge revenue source for several of the major banks.
The CFTC has yet to comment on 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 really a testament to the power of a worldwide grassroots movement. Bitcoin must have plunged across the globe as owners of Bitcoins tried to exchange them for hard currency. The market’s response ended up being very orderly. While coincapcentral did fall over 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. Due to this fact, Bitcoin prices have stabilized around $585. This is well off the December most of $1,200 but very near the average price going back six months.
The last coincidentally timed piece 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 capability to be taxed by the offline governments it was developed to circumvent. THE INNER Revenue Service finally decided enough is enough and it wants its cut. The IRS has declared Bitcoin as property rather than currency and is therefore subject to property laws instead of currency laws. This allows the IRS to obtain their share while legitimizing the necessity for a central exchange to ascertain value. In addition, it eliminates arguments with the U.S. Treasury and Congress over legal tender issues. It’s simply valued as a good that may 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 going to quickly find that the failure of Mt. Gox has done more to encourage the average person resolve of global Bitcoin users rather than ending this upstart’s existence. Private users of Bitcoin will clamor for the government to protect its folks from crooked exchanges in the same way 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 right time with the right idea as Bitcoin may have proven itself to be self-sustaining at the retail level. Institutional and legal structures are being put in place to keep its evolution because the financial industry is left to determine how to monetize it.