After months of “crypto winter,” bitcoin surged above $11,000 for the first time since March 2018, and experts think Facebook could be fueling the rise.
“The strong resurgence in the Bitcoin price is mainly due to the renewed mainstream interest in cryptocurrencies and the technology that underlines it,” Naeem Aslam, chief market analyst at ThinkMarkets, wrote in a Forbes column. “Projects like Facebook’s Libra have provided a much-needed tail wind for this space.”
Last week, the newly formed Facebook subsidiary Calibra announced plans for a digital currency called Libra. The company framed it as a potential alternative to traditional financial services for the billions of people worldwide who lack access to banking. Libra will be accessible via a digital wallet in Messenger and WhatsApp and could launch as early as next year. It’s backed by 28 companies and nonprofits, including finance and tech giants such as Mastercard and Uber.
Though Libra is built on the same blockchain technology that underlies bitcoin, Calibra head David Marcus is adamant that the two are not direct competitors.
“Many want to pit Libra vs. Bitcoin. In my mind, these two are not in the same category,” Marcus tweeted last week. “BTC is a decorrelated (investment) asset. Libra is designed to be a stable medium-of-exchange. I have been, and remain a fan of BTC, but for very different purposes.”
Many want to pit Libra vs. Bitcoin. In my mind these two are not in the same category. BTC is a decorrelated (investment) asset. Libra is designed to be a stable medium-of-exchange. I have been, and remain a fan of BTC, but for very different purposes.— David Marcus (@davidmarcus) June 19, 2019
Even if it doesn’t take off with its 2.4 billion users, Facebook’s entry into the cryptocurrency sphere could help legitimize a sector that struggles to garner broader public interest and confidence. The appeal of cryptocurrency has long been undermined by its reputation as a fringe alternative to traditional financial systems, as well as by volatility, security issues and lack of regulation.
The Libra "could be uniquely positioned to gain mass digital adoption,” researchers at the cryptocurrency exchange Binance wrote in a report. “In doing so, it paves the way for more end users by driving broader familiarity with blockchain technology, flattening the learning curve for everyday participants in the crypto ecosystem.”
Cryptocurrency’s mainstream appeal could grow as traditional financial institutions bring it into the fold. In February, JPMorgan Chase announced plans for JPMCoin, the first U.S. bank-backed cryptocurrency. And in March, financial services giant Fidelity went live with its cryptocurrency clearing and custody company.
The Libra announcement also lifted crypto-related stocks and lesser-known cryptocurrencies. Ethereum has more than doubled since the beginning of the year and is currently trading around $309, according to data from CoinMarketCap.
Some of bitcoin’s gains also might be partially attributable to economic and political tensions from President Trump’s trade war with China and the U.S. conflict with Iran, as well as impending rate cuts from the Federal Reserve that could be pushing investors to pull their assets out of U.S. Treasurys. Gold — a haven for investors amid economic and political instability — hit a six-year high last week, with prices surpassing $1,400 an ounce.
Bitcoin has experienced a parabolic upswing since January, having nearly tripled in value during the past several months and prompting analyst speculation that it could soon close in on record highs set during the 2017 bubble.
“I think bitcoin is easily going to take out its all-time highs,” Tom Lee, research chief at Fundstrat Global Advisors, said last week on CNBC, noting that the digital currency could potentially run as high as $40,000 if conditions stay favorable. “We’re deep into a bull market.”