worldoftechnicalanalysis.com in the Bitcoin revolution could be the standardization of the exchanges where the coins are traded. Bitcoin is currently in the open West prospector days of its evolution. The world has agreed that a Bitcoin provides a stored way of measuring value just as that silver and gold have through the entire ages. Like gold and silver, Bitcoin is worth what the other person is ready to pay you for it. This has resulted in cheating since trading began. Crooked scales and filled ore all became part of the norm as both the 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 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. 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 shows remarkable resilience. This resilience may be just the boost needed to legitimize the currency and the lean towards governmental involvement that may 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 with trading Bitcoins through a swap-execution facility or, centralized exchange. Almost all commercial currency trading is performed 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 specific 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 price on the average person swap is small but the sheer volume of swaps processed makes it a huge revenue source for several 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 when confronted with the Mt. Gox debacle is a testament to the power of a global grassroots movement. Bitcoin should have plunged across the globe as owners of Bitcoins tried to switch them for hard currency. The market’s response ended up being very orderly. While prices did fall over 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. Subsequently, 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 financial system is its capability to be taxed by the offline governments it was developed to circumvent. THE INNER Revenue Service finally decided enough is enough also it wants its cut. The IRS has declared Bitcoin as property rather than currency and is therefore subject to 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 which might be exchanged for other goods and services, barter.
Bitcoin is really 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 likely to quickly discover that the failure of Mt. Gox has done more to encourage the average person resolve of global Bitcoin users instead of ending this upstart’s existence. Private users of Bitcoin will clamor for the government to protect its people 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 could be in the right place at the right time with the proper 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 as the financial industry is left to figure out how to monetize it.