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 just as 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. This has resulted in cheating since trading began. Crooked scales and filled ore all became area 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 a 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. Bitcoin Evolution Review who had Bitcoin on deposit with Mt. Gox still do not know 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 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. The vast majority of commercial currency trading is done through swaps agreements which explains why we follow the commercial traders inside our own trading. A swap agreement is actually 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 will be 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 volume of swaps processed makes it an enormous revenue source for several 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 in the face of the Mt. Gox debacle is really a testament to the power of a worldwide grassroots movement. Bitcoin should 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 across 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 close to the average price for the last six months.
The last coincidentally timed piece of the structural transformation from Bitcoin being 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 Internal Revenue Service finally decided enough will do also 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 enables the IRS to obtain their share while legitimizing the need 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 an excellent that may be exchanged for other goods and services, barter.
Bitcoin is a global marketplace executing transactions on an electronic network. That sounds a 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 average person resolve of global Bitcoin users rather than ending this upstart’s existence. Private users of Bitcoin will clamor for the 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 open West. Tera Group may be in the right place at the proper 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 figure out how to monetize it.