The next phase in the Bitcoin revolution could 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 planet has agreed that a Bitcoin provides a stored way of measuring value just as that silver and gold have throughout the ages. Like silver and gold, Bitcoin is worth what your partner is ready to pay you for it. This has led to cheating since trading began. Bitcoin Evolution Scam and filled ore all became section 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 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 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 issues 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 may 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 New Jersey, 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. Almost all commercial currency trading is done through swaps agreements which is why we follow the commercial traders inside our own trading. A swap agreement is basically an insurance policy that provides 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 are the superhighways of the financial industry. They process massive volumes while collecting a small toll on each transaction. Therefore, the price on the average person swap is small however the sheer volume 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 in the face of the Mt. Gox debacle 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 turned out to be very orderly. While prices did fall over the board, the market appeared to understand that it was an individual company’s problem and was therefore confined to Mt. Gox customers’ ability to get their money out. As a result, 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 little bit 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 ability to be taxed by the offline governments it had been developed to circumvent. The Internal Revenue Service finally decided enough is enough and 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 get their share while legitimizing the necessity for a central exchange to see value. In addition, it eliminates arguments with the U.S. Treasury and Congress over legal tender issues. It’s simply valued as a good which might 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 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 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 proper place at the proper 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 continue its evolution as the financial industry is left to determine how to monetize it.