The next phase in the Bitcoin revolution will 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 planet has agreed that a Bitcoin provides a stored measure of value in the same way that gold and silver have through the entire 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 section 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 because of 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 get back. The issues 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 needed to legitimize the currency and the lean towards governmental involvement that may 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 is why we follow the commercial traders inside our own trading. Plateforme de trading 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 price 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 big for global banks to ignore. Bitcoin’s resilience when confronted with the Mt. Gox debacle is a testament to the energy of a global grassroots movement. Bitcoin should have plunged around the world as owners of Bitcoins tried to exchange them for hard currency. The market’s response turned out to be very orderly. While prices did fall over the board, the market seemed to understand that it was an individual 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. 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 as 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 brick and mortar governments it had been developed to circumvent. The Internal Revenue Service finally decided enough will do and it wants its cut. The IRS has declared Bitcoin as property instead of currency and is therefore at the mercy of property laws instead of 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 an excellent which might be exchanged for other goods and services, barter.
Bitcoin is really 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 discover 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 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 may be in the right place at the proper 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 continue its evolution as the financial industry is left to figure out how to monetize it.