Bitcoin Price Recovers
If you like your investments to be exciting—if at times unnerving—then cryptocurrency is the market for you. While the bitcoin price soared to new heights in 2018, it came crashing down just as fast in a massive meltdown that had many detractors dolling out “I-told-you-so’s” left and right. But now the shoe is on the other foot, as the cryptocurrency market is once again on the rise as “Big Tech” looks to play an increasingly significant role in the future of digital currency.
First, let’s explain why the bitcoin price is on the comeback.
There are a number of factors that are motivating the push to five digits, but here’s the biggest one: Facebook, Inc. (NASDAQ:FB) and tech in general becoming some of the first major adopters of cryptocurrency.
At first blush, this seems like a match made in heaven. Crytocurrency tends to appeal to technophiles and those with a libertarian bent who prefer private industry (and privacy in general) to having governments run just about anything.
Big Tech has both of those attributes in spades, with futurists and anti-government, libertarian-leaning luminaries running wild.
So it only makes sense that they would eventually come together like this. Things get a little more complicated when we consider who is bringing us the first Big Tech-backed cryptocurrency: Facebook. The Facebook that famously plays fast and loose with user data and doesn’t exactly inspire confidence when it comes to privacy.
Not to mention that cryptocurrency lovers typically like the fact that many of the major digital currencies (bitcoin, ethereum, etc.) are decentralized. Facebook’s new cryptocurrency, the Libra, will not be.
The company plans to make the Libra available by 2020. It will be operated by Calibra, a newly formed subsidiary of Facebook, with the goal to, “provide financial services that will let people access and participate in the Libra network.” (Source: “Coming in 2020: Calibra,” Facebook Newsroom, June 18, 2019.)
The Libra, Facebook’s cryptocurrency, will be powered by blockchain and makes similar claims to privacy that many other cyrptocurrencies promise. But as stated above, many will likely take that promise with a grain of salt.
The company makes a point to note that the Libra will be integrated across “Messenger,” “WhatsApp,” and as a standalone app, basically guaranteeing that millions of consumers will not have to work hard to make use of the Facebook cryptocurerncy; integration across its many apps will give the Libra a huge advantage.
Facebook’s plan is to turn people’s smartphones—already loaded up with one or several of Facebook’s apps—into digital wallets, allowing easy integration and adoption of the Libra, something that many other cryptocurrencies have struggled to overcome. For instance, ask the layman about Bitcoin wallets, blockchains, encryptions, and mining and their eyes will likely glaze over.
Facebook promises that from the start you’ll be able to send, “Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost. And, in time, we hope to offer additional services for people and businesses, like paying bills with the push of a button, buying a cup of coffee with the scan of a code or riding your local public transit without needing to carry cash or a metro pass.” (Source: Ibid.)
Another very important reason that the Libra could radically redefine the crytocurrency market has to do with Facebook’s value; this is a multi-billion-dollar company, after all, one of the largest in the history of humankind.
One of the big stumbling blocks for cryptocurrencies right now is stability. These digital dollars are driven by good faith and confidence alone, with literally nothing tethering them to real world value.
When you buy an Apple Inc (NASDAQ:AAPL) stock, for instance, you know it has assets that are tied to their value: patents, products, storefronts, factories. It owns things that have value and you can directly peg its valuation to those things, along with sales and revenue.
But cryptocurrency is stardust—ethereal, worth only as much as people believe it is worth. That makes challenging government currency, which has the weight of an entire country backing its value, very difficult.
But, as we all know, Facebook makes more in a year than most countries, with $55.0 billion in revenue last year, which has it slotted just under Lebanon—good enough for the 81st richest country in the world, according to the International Monetary Fund.
So it has the weight to back a cryptocurrency and support it. What this represents is a potential compromise for crypotcurrency supporters: a currency neither decentralized nor tied to a government, but with blockchain technology still supporting the privacy aspects.
Big Tech Adopts Cryptocurrency
It’s also worth noting that Facebook is hardly the only company to support digital currencies.
Companies like Uber Technologies Inc (NYSE:UBER) and Spotify Technology SA (NYSE:SPOT) have already reportedly come out in support of the Facebook cyrptocurrency. (Source: “Bitcoin Hits Year-To-Date Highs As Litecoin Soars–Here’s Why,” Forbes, June 16, 2019.)
This then raises interesting questions over whether the Libra will soon be a direct competitor for bitcoin and other cryptocurrencies. While bitcoin and company will certainly enjoy the boost of Big Tech’s endorsement, this could be a double-edged sword.
As I outlined above, while bitcoin is more in keeping with the original intent of cryptocurrency, it may be Big Tech and its bastardization of the crypto model that gets consumers to adopt digital money.
If this does come to pass and people swarm wholesale to Facebook’s cryptocurrency, that would dramatically curtail the future market potential of bitcion and other decentralized currencies.
It would be an interesting showdown, indeed, and could radically redefine the future of digital currency.
Meanwhile, one major tech company (and a competitor to Facebook), Twitter Inc (NYSE:TWTR) has come out in support of bitcoin, calling it the potential “future of money,” and with CEO Jack Dorsey still supporting one of the original digital currencies. (Source: Ibid.)
So what was seemingly a no-brainer to start, Big Tech falling in love with crypto, is finally coming to pass, but whether this will help or hurt current cryptocurrencies remains to be seen.
What we do know is that in the short run, this is a massive boon for the bitcoin price and other cryptos. As such, I firmly believe that the bitcoin price can hit $15,000 in 2020, depending on when the Libra hits and what the immediate market reaction is to Facebook’s cryptocurrency foray.
It’s also worth noting that it’s not entirely impossible that Facebook will allow bitcoin and other cryptos onto its platform, integrating systems that will allow for all manner of digital currencies to be usable via its apps. This will depend on what Facebook’s vision is for the Libra: to shepherd in a new era of money, or to be the new era of money.
FB Stock Prediction
This move has garnered a lot of praise for Facebook, Inc., and for good reason. FB stock now has a very powerful ace up its sleeve that, if deployed correctly, could see the company enter another era of dominance in a whole new market.
Considering it’s the first to make this move, I believe that FB stock has now the highest potential of any of the FANG stocks or other major tech competitors. It’s a big “if,” but if the Libra is successful, that would be a truly monumental achievement in the tech industry and potentially send FB stock on a meteoric rise.
The company is already enjoying a strong comeback after a very weak 2018:
Chart courtesy of StockCharts.com
The flip side, there are some concerns about FB stock.
The main one is that cryptocurrency has never really enjoyed a good relationship with governments; after all, it is trying to muscle in on what was formerly exclusively under the purview of states.
Facebook already has a strained relationship with governments, particularly the American one following the 2018 election. The fact that Facebook is leading the charge, and that the company hardly enjoys much support from the public either, is concerning.
It also comes at a time when many investors want to shake up the leadership at the company, particularly when it comes to Mark Zuckerberg.
It also doesn’t help that the Libra takes its name from the Roman Libra, as in the Roman Empire. I don’t think a company that has already been slagged off for its at times deviously ambitious intentions for the public is doing itself any favors by drawing comparisons to a conquering empire.
We’re already seeing lawmakers call on Facebook to slowdown with its crypto venture, and it’s barely a few days old. (Source: “Facebook’s Libra Is Already Hitting Turbulence,” Wired, June 19.)
Analyst Take
The amount of excitement around Facebook’s cryptocurrency should be high. This could be a game-changer for the company and the world.
But this is by no means a sure thing. A lot of obstacles stand in the way of the Libra. If it is able to navigate those obstacles, however, then expect both cryptocurrencies and FB stock to rise exponentially.
Source: Price Confidential