The past several months has seen a dramatic increase in the price of bitcoins, also known as “Bitcoins”, due to a lot more people discovering this brilliant new method for securing their wealth. Although it is difficult to predict exactly how the value of this virtual currency will affect the future of the US dollar, there is no doubting that we are going to be experiencing some major changes in the financial markets over the next few months. The main question that many are asking is just what will be the implications of the recent increase in bitcoin prices? Will it lead to an increase in the value of the US dollar?
The first thing to note is that it is not technically necessary for any government or monetary authority to adopt a form of this currency. Virtual currencies such as bitcoins do not have the same legal status and standing as traditional currencies. Governments and central banks can not back them, and they are not backed by a real asset (in the same way that a gold or silver ounce is). This means that there is really no reason for them to be accepted as payment for trade, exchange, or transactions. The only reason a government would make an effort to force the adoption of this form of Cryptocurrency would be if they were planning on following through with some sort of legislative action aimed at regulating the use of virtual currencies.
However, the IRS has recently cracked down on virtual currencies, and although they haven’t issued any formal warnings yet, it is widely believed that the government may begin targeting these forms of currencies from a few months into the future. In July, the IRS stated that it would impose a 10% tax on the trade of any exchange traded for a heady sounding virtual currency like bitcoins. Although no final decision has been made, the IRS is understood to be looking towards the possible adoption of the tax on a national level, and is expected to announce sometime in the near future.
If the trend continues, it is highly likely that the IRS will announce the adoption of a national standard on virtual currency exchange within the next few months. If you think about it, this makes sense. There is a ton of money being made by virtual currency traders and investors throughout the world. With the constant fluctuations in price, there is a large profit potential to be had, and this profit site is only going to grow in size, and therefore influence the price movements in the future.
The problem, however, is that there may not be an official standard in the exchange of currencies until the government makes one. The absence of a standard may prove to be disastrous for anyone speculating in this field. A virtual currency can be anything from a classical piece of software to an internet application that anyone can download for free. The potential here is almost limitless, and since there are no written rules and regulation, the exchange is left up to chance, which can be very dangerous. As such, the possibility of an official adoption by the government may prove to be a dire mistake.
It seems as though the lack of standards is what will drive this type of trade. People will be able to make money easier and faster than ever before, and with better accuracy than ever before. The biggest things that differentiate currencies right now are the interest rates. A highly appreciated currency will have a high exchange rate, while a currency with poor growth will see its value drop. Since these are driven primarily by economics, it should come as no surprise that people are trading in this manner. While we can expect some type of standardization in the future, it will happen much later than normal.
At the moment, we can only wait and see if the government will jump at the chance of regulating the exchange. If they do, we could enter a period of stability for the top five currencies. This would benefit those who are trading in the top five most and give people a reason to purchase the coins they want to. When the top five currencies are on a steady decline, then we can expect the volatility to return, and this could cause a correction in the btc prices as well. When this happens, it would be ideal for people to sell their back before the prices start to fluctuate even more.
There are a lot of different things that can affect the value of virtual currencies such as the current situation in the US, and the outcome of the presidential election in November. However, the current situation will not have a large effect on the buy prices since it will not go up or down anytime in the near future. In fact, things are going to be quite stable for the next year or two, which means that trading in the virtual currency market will be a great investment strategy for anyone who gets in on the action.