The next phase in the Bitcoin revolution could be the standardization of the exchanges where in fact the coins are traded. Bitcoin is currently in the Wild West prospector days of its evolution. The world has agreed that a Bitcoin provides a stored measure of value in the same way that gold and silver have throughout the ages. Like silver and gold, Bitcoin is worth what the other person is willing to pay you for it. This 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 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 because of security breach and theft of approximately $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 has shown remarkable resilience. This resilience could very well be just the boost had a need to legitimize the currency and the lean towards governmental involvement that 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 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 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, Bitcoin Revolution Site on the average person swap is small but the sheer level of swaps processed makes it an enormous 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 big 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 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’ ability to get their money out. Because of this, Bitcoin prices have stabilized around $585. That is well off the December most of $1,200 but very close to the average price going back six months.
The last coincidentally timed piece of the structural transformation from Bitcoin as an anarchist, alternative store of value that exists beyond your institutionalized financial industry to being integrated into that same financial system is its ability to be taxed by the offline governments it had been 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 at the mercy of property laws rather than currency laws. This allows the IRS to obtain their share while legitimizing the necessity 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 a good that may be exchanged for other goods and services, barter.
Bitcoin is a global marketplace executing transactions on an electric network. That sounds an awful lot like the forex markets. Industry regulators and the banking industry are likely to quickly find that the failure of Mt. Gox did 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 folks 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 Wild West. Tera Group could be in the right place at the right time with the right idea as Bitcoin could have proven itself to be self-sustaining at the retail level. Institutional and legal structures are being put in place to continue its evolution because the financial industry is left to figure out how to monetize it.