The next phase in the Bitcoin revolution would be the standardization of the exchanges where in fact 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 way of measuring value in the same way that silver and gold have through the entire ages. Like gold and silver, Bitcoin is only 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 resulted in governmental oversight and the creation of centralized exchanges.
The Bitcoin dream has been 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 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 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 that 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 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 basically an insurance policy that delivers 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 but the sheer level of swaps processed makes it an enormous revenue source for all 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. worldoftechnicalanalysis.com is really a testament to the energy of a worldwide grassroots movement. Bitcoin must have plunged around the world 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. Due to this fact, Bitcoin prices have stabilized around $585. This is well off the December high of $1,200 but very close to the average price for the last 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 built-into that same economic climate is its capability to be taxed by the brick and mortar governments it had been developed to circumvent. THE INNER Revenue Service finally decided enough is enough also 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 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 can be exchanged for other goods and services, barter.
Bitcoin is a global marketplace executing transactions on an electronic network. That sounds an awful lot like the forex markets. Industry regulators and the banking industry are going 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 federal 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 as the financial industry is left to determine how to monetize it.