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Death of Crypto? Will Facebook Libra’s move to peg CBDC kill the crypto space?

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Facebook bitcoin

Bloomberg reported unceremoniously that “Facebook Inc. and its partners are considering redesigning the Libra cryptocurrency project so that the network accepts multiple coins, including those issued by central banks, in an effort to woo reluctant global regulators and rebuild momentum for the plan.”

While Libra Association’s Head of Policy, Dante Disparte assured that “the Libra Association has not altered its goal of building a regulatory compliant global payment network, and the basic design principles that support that goal have not been changed,” crypto folks know that this move will change everything for Libra.

From an aggressive plan to undermine government issued fiat currency and possibly creating a parallel economy – to – Libra turning into a crypto PayPal – the plot made a 180 degrees turn.  

What sets Facebook’s Libra apart from PayPal would be its sheer size.  

We have talked about Why Governments are scared of Facebook’s move before, however, for the context, between Facebook App, Whatsapp and Instagram, Facebook has direct access to over 3 billion people.  That is bigger and wider than most populated nations in the world. In fact, Facebook messenger alone with over 2.41 billion is bigger than the population of China, Europe and the United States, combined.  When we add numbers for Whatsapp and Instagram (also owned by Facebook) – the numbers are staggering.

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What happens when a company with access to 3 billion people decides to mint its own currency?

facebook communityThat is the question that made governments all over the world summon their powers to put brakes on Facebook’s effort to launch its own currency, Libra.

US officials visited Switzerland, where Libra Association is headquartered, and all of a sudden – Facebook’s evil past has been used against it to thwart its plans to launch Libra coin.

This is how Libra’s white paper introduces its project:

“Now is the time to create a new kind of digital currency built on the foundation of blockchain technology. The mission for Libra is a simple global currency and financial infrastructure that empowers billions of people. Libra is made up of three parts that will work together to create a more inclusive financial system:

  1. It is built on a secure, scalable, and reliable blockchain;
  2. It is backed by a reserve of assets designed to give its intrinsic value;
  3. It is governed by the independent Libra Association tasked with evolving the ecosystem.”

No where in the whitepaper is the mention of using Central Bank Digital Currency (CBDC) as part of the reserve.  

In fact, the white paper is quite explicit (read the underlined section) about describing the missing to create a NEW digital currency and bring about its adoption as a new digital currency: “This approach is similar to how other currencies were introduced in the past: to help instill trust in a new currency and gain widespread adoption during its infancy, it was guaranteed that a country’s notes could be traded in for real assets, such as gold. Instead of backing Libra with gold, though, it will be backed by a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks.”

Facebook made a quick 180 degrees from the bold statements of creating a new currency to becoming a ‘me too currency’, to stay alive.  

Now the question on the crypto minds is: 

How will this move impact crypto space?

This move is significant for many reasons and it is surprisingly being under played, in our opinion.  Let’s look at both the good and the bad of this move.

The Bad

Death of crypto?

end of cryptoNot quite, but it is so for sure for projects that do not have any value proposition other than ‘alternative currency’ or medium of ‘faster transfers’ across borders. 

These projects will be the first to be blown out of water. Remember, 99+% of people around the world have not touched crypto and they never will if Facebook introduces its own ‘crypto’ currency that is ‘backed by’ the US dollar.

Facebook has unlimited marketing budget and resources to convince people around the world to use Facebook’s Libra and forget about those ‘scammy cryptos’ out there.  

When that happens, companies like Ripple may not have a lot of ground to stand on.  Our readers know that we like to pick on Ripple as the worst crypto representation, but Ripple or some other project that promises simpler-faster-cheaper transfer of value will have no chance against Facebook’s libra, especially when it is backed by US Dollar. 

If people are able to exchange value in Libra over messenger that is readily accessible by 3 billion people, why would we need any ‘new’ form of money transfers? And what happens when a company like SWIFT fully supports Facebook’s libra?

Sheer size, popularity, accessibility, government blessing and partnerships will make Facebook’s Libra world’s most popular crypto (may be right after Bitcoin) overnight.  

While it will be a great step for ‘blockchain technology’ and crypto in general, it will be the beginning of the end for the ‘decentralization’ movement, unless something miraculous happens, like people refusing to let Facebook exploit them.

People said yes to Whatsapp and Instagram and Facebook bought both of them.  Looks like there is no escape for us, at least at the moment, from the Facebook’s outreach.  And that is the point – Facebook has the means to undermine this ‘decentralization’ movement overnight, especially with government backing.

While it will not kill all cryptos, it will most certainly kill a great number of them.

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The US dollar is already ‘digital’

Remember, the US dollar is already ‘digital’.  

USD Coin Latest UpdatesAs of February 2020, the dollar value of total bills in circulation is about 1.75 trillion.  This generally represents 10% of total cash value in the US.  That means, 90% or approximately 16 Trillion dollars exist in non-physical cash form.

This means, Facebook’s Libra doesn’t have to wait for the US Government to issue a blockchain based digital dollar to peg it against Libra.  It can do it today.

In theory, the US government could keep the existing fiat system as it is and still become part of the blockchain revolution and drive it wherever it wants it to go.

The good

Counteracting China’s Digital Currency move

china blockchainAs we anticipated, Facebook’s lawyers were not going to let Libra die.  The only way to keep it alive and even become an ally for the government is to help bring US Digital Dollar to the globe so that US dominance of global reserve currency is not challenged.  While China is making moves to become the world’s most popular digital currency, Chinese currency itself does not have the reach or popularity of the US Dollar.  

If our speculation comes to fruition, we could see Facebook’s Libra backed in a majority by Digital Dollar.  

That means, US Digital Dollar will be accessible by over 3 billion people overnight through Facebook’s platform.

Once Facebook gets blessing from the US Government, it will quickly and easily onboard many companies around the world.  

These partnerships in turn will bring access to a digital dollar to even more populace.  

If this happens, China’s dream to become world reserve currency might remain a dream.

Why do we think a US digital dollar dominance is better than China’s global reserve?  A government purportedly fighting for a free world is better than a government that has openly and unabashedly implemented a monarch regime.

Coronavirus: Timing couldn’t be better for Libra

We do not intend to sound morbid or undermine the pain that Coronavirus has caused around the world. 

While China is fighting with CoronaVirus, its plans to launch a global digital reserve currency might take a backseat. This opens a critical window of opportunity for Facebook and government agencies to slip in the US digital dollar to the world.

As we said earlier, the US Government doesn’t have to issue a blockchain based digital dollar currency; Most of US dollars are already digital and to peg it against Facebook’s Libra is easy.

Proliferation of Libra as ‘backed dollar for dollar’ with Libra will remove any resistance that businesses and non-crypto folks have about crypto based digital currencies.

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Conclusion

Facebook’s Libra pegging against CBDC will not kill crypto space, not all of it anyway.  It will, however, kill most of the projects that do not have much use-case than that of ‘crypto-currency’.  

It could also bring a new wave of adoption to the crypto world as more and more people starting using cryptocurrency without realizing that they are transacting on blockchain.  This might actually become a blessing for other blockchain based projects and Libra could end up acting as the ‘cross-platform’ currency to bring blockchain to mainstream, without the jargon.

Let’s hope for the best!

Thank you for reading and sharing this article. We appreciate you.

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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This is What Non-Bitcoiners Think About Bitcoin

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Bitcoin believers

There are two types of people in this world: Bitcoiners and non-bitcoiners.

Many non-bitcoiners stay that way because they have come to associate Bitcoin with certain elements of the society. 

Here is a short list of things non-bitcoiners associate Bitcoin with and whether these allegations have any validity.

Money laundering

moneyBitcoin is criticised to be used for many illegal activities including money laundering. 

Can Bitcoin be used for money laundering?  Sure.

So can gold or cash or you name it.  

Anything of value can be used for money laundering, however, only one of them can be actually tracked forever.

To many people’s surprise, Bitcoin is the only asset among many that is the worst medium to use for money laundering.

Terrorist funding

Haters say that bitcoin is used by terrorist groups to avoid being tracked. 

Fools be those who think Bitcoin is completely anonymous.  

In fact, physical cash is much more anonymous than any medium of exchange out there.

Drugs

Bitcoin was (is) used to buy and sell drugs. 

Bitcoin did not create a single drug and it did not create commerce for drugs either. The drugs commerce has been in existence before bitcoin.  What bitcoin did was create this false illusion that it is anonymous money.

To the dismay of many those who thought they were being smart have etched their dealings on the blockchain for anyone with the right tools to find out.

Dark web

darkwebYes, the dark web has made Bitcoin popular.

Silk Road, illegal weapons, transferring money without going through banks or other legal entities, all of these have colored Bitcoin as Dark Web money.

However, once people understood the myriad of applications that bitcoin and blockchain can help with, the dark web allegations have faded.

We would scorn anyone suggesting that the internet should be banned because there is illegal stuff going on (dark web lives on the internet too).

However, these very people would call for a ban on Bitcoin without understanding that Bitcoin is the next phase of the internet’s evolution.

Gambling

Gambling cryptocurrencyGamblers love to squander their wealth. And those who dabble with Bitcoin with their life savings are no better than gamblers.

This has some truth because there are no guarantees that Bitcoin will succeed (although one could argue that it has already succeeded in bringing blockchain to the consciousness of mainstream).

As such, those putting money in bitcoin understand that they could lose their investment.

While many invest in bitcoin in the hopes of getting rich, there are few who invest in it to own a piece of technology and be part of the history in the making. 

In that sense, Bitcoin is way different than gambling.

Is Bitcoin the panacea?

While Bitcoin is far better than the existing fiat system, we do not think Bitcoin as the panacea.

We believe that Bitcoin will build bridges and connect the world which was deprived of access to financial inclusion and in doing so it will become part of the world financial ecosystem.

It will not replace the fiat system, rather, it will make it more accessible.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Factors adding gasoline to the Bitcoin shortage fire

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Bitcoin shortage

Bitcoin’s creation and its subsequent proliferation may have all been planned for a long time, this is the outcry of many conspiracy theorists.  

These conspiracy theorists also believe that whistle blowers are mere plants to help prepare the world for what’s coming.

One of their theories is that the end of physical fiat was planned a long time ago, however, the transition of physical fiat to digital fiat needed a catalyst to drive the conversation.

Either by meticulous design or by sheer coincidence – Bitcoin came to life in 2009.

We personally think that Bitcoin was designed by liberals who believed a ‘fair world’ was possible.

The invincibility of this groundbreaking technology meant that the forces that were working on doing away with physical fiat had a runway built for them.

So, the rhetoric has now changed from ‘Bitcoin is for anti-social elements’ to ‘Bitcoin is the currency for the visionaries’.

Why is that backdrop of conspiracies and layout necessary?

Because, irrespective of the underlying reasons the rhetoric has changed and it has changed for good.  This means, as the physical fiat follows the path of extinction, Bitcoin – the king of digital currency, will see a lot of demand.

We were warned a long time back that there will not be enough bitcoin in the world for everyone to buy.

Some studies say that owning .28 Bitcoin will guarantee you a seat in the top 1% bitcoin holders in the world while others say you need 5 bitcoins to claim the top 1% in the Bitcoin rich list.

Point is, even if you have all the fiat in the world, there is a limit on how much bitcoin you can buy.

When people who want to buy bitcoin are ready to pay any price while those who own the fractions of it are unwilling to sell it – the prices have only one way to go: UP.

 

The strategic moves into Bitcoin from MicroStrategy, Square, GrayScale, Fidelity and a host of billionaires who actually know something about money and finance is a tell-tell sign for the rest of the world.

Whether you want to get into Bitcoin to own a piece of technology itself, or to hedge against the inflation, or simply to use it as ‘digital gold’ that you can take with you, any and all of these reasons are good enough to look into Bitcoin.

If you had told us last year that a public limited company will convert its cash reserves into Bitcoin we would have laughed at you, but that is precisely what has happened.

As a result of converting fiat reserves to Bitcoin, the stock price of MicroStrategy saw an immediate boost which was as big as the reserve itself.

Do you think other public companies will stay on the sidelines for long?

When a legend like Paul Tudor Jones says ‘Bitcoin is the fast horse’ to bet on against inflation and he himself invests 2% of his portfolio, how long will it take for other fund managers to take note?

Add to this the demand from retail investors in the form of millennials, who are also set to inherit some $60 Trillion dollars from the baby boomer generation in the coming decade.

Conclusion

We personally think the goldilocks moment for Bitcoin has arrived.  It has the perfect combination of ‘scarce supply’ and ‘growing demand’.  It also has the added elements of adoption and ‘nascentness’ working in its favor.

These factors alone make Bitcoin one of the best investment assets of the century, in our opinion. 

We have been investing in Bitcoin using dollar cost averaging.  We don’t go selling our home or taking on insane loans to invest in bitcoin, rather, we invest $100 here and $100 there.

Before you invest your money into bitcoin or cryptocurrencies, spend some time understanding what Bitcoin is and why it is important in taking the world from the centuries old fiat system to a brand new global currency system.

In our personal view, Bitcoin will become one of the best assets to hold by the next halving.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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