Bitcoin IS HERE NOW to Stay
The next phase in the Bitcoin revolution will be the standardization of the exchanges where the coins are traded. Bitcoin happens to be in the Wild West prospector days of its evolution. The planet has agreed a Bitcoin provides a stored way of measuring value just as that gold and silver have through the entire ages. Like silver and gold, Bitcoin is only worth what your partner is ready 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 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 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 problems 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 needed 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 prove to be 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 with trading Bitcoins through a swap-execution facility or, centralized exchange. The vast majority of commercial currency trading is performed through swaps agreements which explains 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 particular point in time to protect 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 however 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 in the face of the Mt. Gox debacle is a testament to the energy of a global grassroots movement. Bitcoin must have plunged across the globe as owners of Bitcoins tried to exchange them for hard currency. The market’s response ended up being 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. 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 little bit 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 financial system is its capability to be taxed by the offline 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 at the mercy of 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 could be exchanged for other goods and services, barter.
Bitcoin is a global marketplace executing transactions on an electronic network. That sounds a lot just 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 average person resolve of global Bitcoin users rather than ending this upstart’s existence. technical analysis of Bitcoin will clamor for the federal government to protect its folks 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 right time with the proper 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 keep its evolution as the financial industry is left to figure out how to monetize it.