The digital currency project Facebook detailed on Tuesday will take up to a year to become publicly available and two to five years to be judged a success, or failure. But even before it became official, the project, known as Libra, has been able to do what seemed impossible: Drag the price of bitcoin out of the doldrums and to a one-year high.
Since March, the value of bitcoin, the best-known virtual currency, has nearly tripled. It hit a high of $9,469 in the evening of June 17 -- hours before Facebook revealed a white paper detailing Libra, its cryptocurrency project.
That's the highest value bitcoin has seen in over a year, but it's nowhere near its peak. The virtual currency enjoyed a spectacular escalation in 2017, rising 20-fold to $18,000. That climb was followed by an even more dramatic nosedive the following year. By the end of 2018, a bitcoin wasn't worth the cost it took to mine, and pundits were comparing the virtual coin's tumble to the collapse of Dutch tulip mania in 1637.
If anyone could turn around that trajectory, it would be the world's biggest social network. After all, with 2.3 billion users, it's several hundred times more popular than the most popular crypto coin.
The missing "catalyst"
"This is only going to accelerate the mass usage of cryptocurrency or digital currency. … I think this is the catalyst everyone's been looking for," said Chris Ligan, vice president of acquisitions for Auric, a credit card processing company. "JPMorgan Chase made their big announcement, and that had barely any effects. This, this is huge." Added Ligan: "Particularly with Facebook's marketing announcements. … You see a lot of speculators getting back in the market."
Still, bitcoin fans disagree on whether the latest runup in its price is a speculative blip or a sign that investors are starting to realize the technology's true value.
When you filter out speculative trading, bitcoin's value is closely linked to how popular its underlying technology is with developers, said Bill Ottman, CEO of Minds, a social platform that pays users in cryptocurrency. "Bitcoin isn't just money, it's infrastructure for Web 3.0. You can build applications on top of it. You can build smart contracts."
Ottman was one of several who suggested that Facebook's currency -- which doesn't meet the strictest definition of cryptocurrency -- would act as a gateway to generate interest in other virtual currencies like bitcoin, ethereum and ripple, which are fully anonymous and not controlled by a central entity like Libra is planned to be.
Jonathan Johnson, president of Medici Ventures, a blockchain-focused subsidiary of Overstock.com, said less-volatile virtual coins, like Facebook's, "are easier for the novice to use comfortably at first." But over time, he said, cryptocurrencies that are limited in number, like bitcoin, "will store value better and become the cryptocurrencies of choice."
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