The next step in the Bitcoin revolution will be the standardization of the exchanges where the coins are usually traded. Bitcoin is currently in the Outrageous West prospector days of its development. The world has agreed that a Bitcoin provides a stored measure of value in the same manner that gold and silver have throughout the age groups. Like gold and silver, Bitcoin is only worth what the other person is prepared 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 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 worldwide government. The Utopian dream was shattered a month ago when Mt. Gox, by far the largest Bitcoin swap, shut down due to a security breach plus theft of approximately $300 million really worth of Bitcoin. Customers who got Bitcoin on deposit with Mt. Gox still do not know how much they’ll get back. The issues at Mt. Gox lay bare the internet security argument. Surprisingly, Bitcoin as a currency has shown remarkable resilience. This particular resilience could very well be just the boost needed to legitimize the currency and the trim towards governmental involvement that may actually help this fledgling store associated with value soar to its popular potential.
The timing of the Mt. Gox incident may prove to be the boon for the currency. Tera Team, out of Summit New Jersey, already experienced 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 trades agreements which is why we follow the commercial traders in 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 usually founded on. The swap markets are the superhighways of the financial industry. These people process massive volumes while gathering a small toll on each transaction. Therefore , the cost on the individual swap is small but the sheer amount of swaps processed makes it a huge income source for all of the major banking institutions.
The CFTC has yet in order to comment on Tera Group’s proposal. All of us commented in November that Bitcoin had transcended novelty status which the revenue pool was getting too big for global banks to ignore. Bitcoin’s resilience in the face of the Mt. Gox debacle is a display of the power of a global grassroots movement. Bitcoin should have plunged across the globe since owners of Bitcoins tried to exchange them for hard currency. The market’s response turned out to be very organised. While prices did fall across the board, the market seemed to understand that it had been an individual company’s problem and has been therefore confined to Mt. Gox customers’ ability to get their money away. As a result, Bitcoin prices have stabilized around $585. This is well off the December high of $1, 200 yet very near the average price for the last six months.
The last coincidentally timed part of the structural transformation from Bitcoin as an anarchist, alternative store of value that exists outside the institutionalized financial industry to being incorporated into that same financial system is its ability to be taxed by the brick and mortar governments it was developed to prevent. The Internal Revenue Service finally chose enough is enough and it wants its cut. The IRS has declared Bitcoin as property rather than foreign currency and is therefore subject to property laws rather than currency laws. This allows the IRS to get their share whilst legitimizing the need for a central exchange to ascertain value. It also eliminates fights with the U. S. Treasury and Congress over legal tender issues. It’s simply valued as a great that can be exchanged for other services and goods, barter.
Bitcoin is a global industry executing transactions on an electronic system. That sounds an awful lot like the fx markets. Industry regulators and the banking industry are going to quickly find that the particular failure of Mt. Gox has been doing more to encourage the individual solve of global Bitcoin users rather than ending this upstart’s existence. Personal users of Bitcoin will clamor for the government to protect its people from crooked exchanges just as maqui berry farmers were cheated in the grain industry of ancient Egypt or precious metal and cattle by assayers and stockyards in the Wild West. Tera Group may be in the right place at the right time with the right idea as Bitcoin may have proven by itself to be self-sustaining at the retail level. Institutional and legal structures are now being put in place to continue its evolution since the financial industry is left to find out how to monetize it.