The next phase in the Bitcoin revolution is definitely the standardization of the exchanges where the coins are traded. Bitcoin is currently in the Wild West prospector days of its evolution. The world has agreed a Bitcoin provides a stored way of measuring value just as that silver and gold have through the entire ages. Like silver and gold, Bitcoin is only worth what the other person is willing to pay you for it. This has led to cheating since trading began. Crooked scales and filled ore all became part 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 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, undoubtedly the largest Bitcoin exchange, shut down 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 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 had a need to legitimize the currency and the lean towards governmental involvement which 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 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 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 little toll on each transaction. Therefore, the price on the individual swap is small but the sheer volume of swaps processed makes it an enormous revenue source for all of the major banks.
The CFTC has yet to touch upon Tera Group’s proposal. We commented in November that Bitcoin had transcended novelty status and that the revenue pool was becoming too large for global banks to ignore. Bitcoin’s resilience when confronted with the Mt. Gox debacle is really a testament to the energy of a worldwide 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 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. That 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 outside the institutionalized financial industry to being integrated into that same economic climate is its capability 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 rather than 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 necessity for a central exchange to ascertain value. In addition, it eliminates arguments with the U.S. Treasury and Congress over legal tender issues. It’s simply valued as an excellent 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 just like the forex markets. Industry regulators and the banking industry are likely to quickly find 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 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. Bitcoin Era Review could be in the proper place at the right 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 keep its evolution because the financial industry is left to determine how to monetize it.