Last week’s sharp appreciation in the price of Bitcoin saw it cross the $10k psychological mark, a level that has not been seen in almost 18 months. While Bitcoin has been on an upward trend since the last week of March, when the price was around the $4k level, the 20% price appreciation over the last week can most likely be attributed to the launch of Facebook’s Libra token. The consensus market view seems to be that facebook wants to integrate Libra as a payment mechanism on its various social media and messaging platforms. This is a big boost for cryptocurrencies in general as more people will now be brought into the cryptocurrency ecosystem through Libra.
Facebook, along with its partners can make quite an impact on wider crypto adoption, even if the preliminary objective seems to be to lay out the blueprint for an overarching global payments infrastructure system that will benefit Facebook and its partners disproportionately; a system that will eventually be fairly decentralized, given that Facebook will only have 1% of the total governing vote.
Is Libra competing with any of the major cryptos? What about Fiat? What are ramifications for regulators?
Libra is not competing with bitcoin. Bitcoin is a great SoV (Store of Value), a better version of Gold, with similar correlation characteristics that Gold exhibits with other traditional asset classes.
Libra is not competing with Ethereum, which is clearly the most widely accepted trusted, distributed computing platform.
Libra does not compete with XRP; XRP and Libra are going after two almost non-overlapping markets. XRP aims to become the de facto settlement currency and platform for SWIFT and interbank transfers. Libra is more focused on becoming a global currency for MoE (medium of exchange) between consumers. Libra does not really pose a threat to XRP, at least for now, unless the massive success of Libra forces financial institutions around the world to start accepting Libra as a legitimate currency.
Libra’s main competition, should it take off and achieve its vision will be traditional fiat currencies. If value transfer can happen smoothly and efficiently on the Libra network and if Libra becomes a substitute for fiat currencies, as is for instance, very much possible in a place like Venezuela where Facebook has 12 million MAUs and where bitcoin is the de facto currency, then the central bankers and the governments will have a different sort of problem to contend with. It will get even more complicated for regulators if Libra becomes a gateway crypto from where folks move on to Bitcoin, ZCash, Monero, Grin, etc. At least with Libra the regulators have a corporate target to go after and haul in for instance, for a congressional hearing. That would be next to impossible for most of the key cryptocurrencies.
Bitcoin’s sentiment analysis indicates that as soon as the news about Libra’s launch broke, Bitcoin’s bearish sentiment reversed its trend and swiftly moved into positive category as seen in the image below. Libra’s launch drew eyeballs from a lot of serious institutions and has resulted in an exponential growth in awareness of cryptocurrencies among non-crypto users.