The next phase in the Bitcoin revolution could be the standardization of the exchanges where the coins are traded. Bitcoin is currently in the Wild West prospector days of its evolution. The planet has agreed a Bitcoin provides a stored way of measuring value in the same way that gold and silver have throughout the ages. Like silver and gold, Bitcoin is only worth what your partner is willing to pay you for it. This 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 led to governmental oversight and the creation of centralized exchanges.
The Bitcoin dream has gone 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, shut down because of security breach and theft of around $300 million worth of Bitcoin. Customers who had Bitcoin on deposit with Mt. Gox still have no idea 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 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 through a swap-execution facility or, centralized exchange. Almost all commercial currency trading is performed through swaps agreements which is 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 specific 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 small toll on each transaction. Therefore, the price on the individual swap is small however the sheer volume of swaps processed makes it a huge 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 in the face of the Mt. Gox debacle is a testament to the energy 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 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’ capability 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 as an anarchist, alternative store of value that exists outside the institutionalized financial industry to being built-into that same economic climate is its capability to be taxed by the brick and mortar governments it was developed to circumvent. THE INNER Revenue Service finally decided enough will do and it wants its cut. The IRS has declared Bitcoin as property rather than currency and is therefore subject to property laws rather than currency laws. This enables 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 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 a lot like the forex markets. Industry regulators and the banking industry are going to quickly discover that the failure of Mt. Gox did more to encourage the individual resolve of global Bitcoin users instead of ending this upstart’s existence. Plateforme de trading of Bitcoin will clamor for the federal 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 Wild West. Tera Group may be in the proper 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 keep its evolution because the financial industry is left to figure out how to monetize it.