What does Facebook’s Cryptocurrency mean for Bitcoin?
What do we know so far?
Facebook’s cryptocurrency has finally been announced, with the white paper for Libra going live today. The strongly rumoured naming of their coin has stuck with suggestions such as my personal favourite ZuckBuck proving to be too outlandish. Unlike Bitcoin, Facebook’s cryptocurrency will be pegged to a reserve which will invest in low risk and stable assets. The idea being that Libra will have a relatively stable price and will only work as a speculative asset for very early investors if Libra is a success. Price stability is important as it makes everyday transactions more attractive and less complicated by huge price fluctuations. This is something that has been a problem for cryptos such as Bitcoin, Ethereum and Litecoin. Normal everyday transactions are less attractive while people continue to hold these coins as speculative assets.
The Wall Street Journal has previously reported that a consortium intended to govern the coin will each invest 10 million dollars. Facebook itself like those that are currently investing 10 million dollars will have only 1 vote each in the governance of Libra. This effectively means that Facebook will not have sole control of the new cryptocurrency. So far it looks likely that Mastercard, Visa and Uber have all signed up to Facebook’s cryptocurrency. Certainly a strong endorsement for the new cryptocurrency from many of the key players in traditional financial payment services.
Will Libra kill Bitcoin?
Could Facebook’s cryptocurrency achieve overnight what Bitcoin has failed to achieve in a decade? Mass adoption of the new coin certainly is on the cards with an already huge user base primed for the uptake. Libra will let users buy things or send money globally for almost zero fees. With their own wallet Calibra built into apps such as WhatsApp, Messenger and Facebook it will make the uptake of their new cryptocurrency highly accessible to billions of users worldwide. However, success for Facebook’s new coin could yet face some key issues.
Data privacy and protection concerns have plagued the social media giant for the last few years. Facebook does still have something of reputation to rebuild on that front as well as regulatory issues that could also arise.
Bitcoin vs Facebook’s cryptocurrency (Libra)
Does Facebook’s foray into the crypto market with the creation of their own cryptocurrency signal the end of Bitcoin? There are two lines of argument on this. The first is that Facebook’s cryptocurrency will prove too powerful for Bitcoin and ultimately bring about Bitcoins demise.
Facebook's new crypto currency "Libra" is bad news for Bitcoin. Facebook will target the very market Bitcoin is counting on for growth, the unbanked in nations with high inflation. Libra will be stable, and much easier and cheaper to use as a medium of exchange than Bitcoin.
— Peter Schiff (@PeterSchiff) June 14, 2019
The second viewpoint is much more bullish on Bitcoin. Many Bitcoin enthusiasts remain very confident of Bitcoins success now that cryptocurrency will enter the mainstream via Facebook.
Facebook has secured Visa and MasterCard as two of the backers for their new cryptocurrency.
— Pomp ? (@APompliano) June 13, 2019
Very positive signs for future adoption of Bitcoin ?
Who has called it correct?
Bitcoin’s Value
A good starter point is looking at Bitcoin’s value since news of Facebook’s impending cryptocurrency hit the headlines. We might expect Bitcoins price to drop as investors become spooked at a big rival hitting the market soon. So far the opposite has happened with Bitcoin’s value hitting an all-time high this year. Bitcoin’s value growth has exceeded that of any traditional assets in 2019 as reported in The Wall Street Journal.
The crypto rally rolls on: Bitcoin is back above $9,000, a 13-month high https://t.co/SDT3X4djve
— Steven Russolillo (@srussolillo) June 17, 2019
Evidence to date suggests that Bitcoin is likely to benefit from social media giants such as Facebook onboarding their own cryptocurrency. Exposure to cryptocurrency through Facebook and apps such as Whatsapp could bring billions of people into the crypto sphere.
Facebook’s cryptocurrency will help bring a broader understanding of cryptocurrency and blockchain technology to the general public. This can only be a good thing for Bitcoin which has so far failed to achieve widespread adoption.
If there is one thing Facebook has proved most successful at is its ability to create an easy and accessible user interface. It’s likely that this same experience will be transferred to its new cryptocurrency payment system. Familiarity with cryptocurrency through Libra coin is likely to see some users delve into other crypto assets such as Bitcoin. At least that is the hope of the Bitcoin evangelists who will expect Bitcoin’s value to continue to soar to new heights.
How to Buy Libra?
Facebook’s cryptocurrency has not yet been made available to the general public to buy. However they have stated that the cryptocurrency will eventually be available for purchase through crypto exchanges and compatible digital wallets.
Please feel free comment and ask questions in the comments section below. What impact do you think Libra will have on Bitcoin?
