Facebook Libra is here. — Kind of. Despite still being at least 6-months away from launching, Libra Vs Bitcoin debates and speculation are causing excitement and controversy on the cryptocurrency market.
Libra’s Facebook cryptocurrency, is argued by some to transform Facebook into a society wrecking shadow bank. (At least, in everything but name.) Others say Libra will be the final financial inoculation Bitcoin needs before BTC is allowed to go mainstream.
Below, we’ll look at how Libra might really affect fiat cash and cryptocurrency market dynamics.
Libra Vs Bitcoin – Bizarrely, Facebook Libra Might be Good for BTC
Facebook’s Libra cryptocurrency will be launching as a stablecoin. For this reason, Bitcoin bag holers have breathed a huge sigh of relief. Libra won’t be competing as an investment asset against BTC, and this in itself is a good thing. More importantly, Facebook Libra’s design is very different to existing stablecoins.
Libra won’t be pegged to a single fiat currency like the U.S. Dollar. Instead, a Libra Reserve will stabilize Libra coin values against a collection of different fiat currencies, government bonds, and securities.
As well as being more legitimately stable than Tether, Libra will also be listed on cryptocurrency exchanges. This will make Bitcoin more accessible to new-to-market investors. At the same time, Libra will make everyday BTC retail purchases easier than ever.
- Calibre Libra wallet designs allow users to cash out Libra for fiat cash at ATMs and in supporting retail stores.
- Facebook will give Businesses and merchants incentives to accept Libra payments.
- Facebook has the power to roll-out POS systems and real-world cryptocurrency payment infrastructure at an unprecedented scale.
Libra, in short, will make it easier to invest in and use Bitcoin than ever previously.
Facebook Libra Will be a Tether and Stablecoin Killer
When Libra launches in 2020, we will likely see a mass exodus from existing stablecoins like Tether.
Tether, USD Coin, GUSD and other stable coins, will not be able to compete in terms of liquidity or popularity with Libra. Tether, for example, currently admits that Tether balances are not wholly backed by like-for-like cash deposits of U.S. dollars.
Many will no doubt argue that the demise of Tether is overdue. However, it is important to keep in mind that Tether going down could have severe ramifications on the cryptocurrency market.
- A Tether bank run could see Tether users struggle to claw back money owed.
- In a worst-case scenario, a Tether bank run could take popular cryptocurrency exchanges like Bitfinex down with it.
Libra Will Eliminate Payment Coins Like Bitcoin SV and Bitcoin Cash
Could Libra kill Bitcoin Cash and Bitcoin SV? — Yes, and faster than people might imagine.
Since 2017, the argument for forking Bitcoin and increasing Bitcoin transaction block sizes, has focused on one thing.
BSV and BCH say mass adoption of cryptocurrency will only occur when Bitcoin can be transacted as fast as Visa. Conversely, BTC supporters argue that Bitcoin is used predominantly as a store of wealth. As a result, BTC doesn’t need to scale to the extent of coins like BSV.
Now the scaling debate is over. With Libra, BTC can be transacted instantly and be used to store wealth at the same time. Bitcoin also has several advantages over BSV and BCH now that Libra is coming to market.
- Bitcoin Cash and Bitcoin SV are privately controlled Bitcoin variants which are largely centrally mined.
- BSV and BCH only have speculative value by borrowing the Bitcoin namesake and promising faster transaction speeds.
- Existing lack of trust and a diminished use case will see the cryptocurrency market start to shun coins like BCH and BSV, as Libra comes online.
Libra Will Cause a Global Liquidity Crisis
Could Libra wreck the world economy? — Possibly. Moreover, this is why governments and regulators in Europe have already raised concerns about Libra.
To ensure that Libra coin values remain stable, the Libra Reserve will effectively vacuum up existing fiat cash reserves.
To put this in perspective, think about what happens when you top up a pay-as-you-go mobile phone.
When buying the likes of a $10 top-up voucher for a mobile phone, that $10 stays in the local economy. Credit used for calls and app purchases benefits independent businesses. Banks and governments, meanwhile, collect charges and sales taxes on top-ups. By comparison, Facebook’s Libra will completely remove cash from circulation in local tax jurisdictions, before depositing cash in a private Libra Reserve fund.
Libra Vs Bitcoin Vs The World
With Libra, Facebook will effectively become a shadow sovereign bank.
- If Libra becomes popular, people choosing to store wealth in Libra wallets (and not banks), may cause a cash liquidity crisis and eventual bank runs.
- Banks use fractional reserve banking to create funds to make available as loans, which are guaranteed by existing bank deposits. Fiat cash taken out of banks and converted into Libra will make fractional reserve banking as we know it impossible.
- Forcing banks to rein in lending will see small businesses suffer. It will also be harder and more expensive for everyday people to qualify for credit and home loans
- Libra will make it difficult (if not impossible) for central governments and banks to manage their own monetary policy.
Is Libra a Giant Economic System Wrecking Ball?
In a worst-case scenario where Libra does cause a global liquidity crisis, Bitcoin bag holders will be able to rejoice. Bitcoin is a hedge against just such a crisis. However, the cryptocurrency community may want to be cautious about supporting Libra out of self-interest.
As discussed in our post, ‘5 Concerning Facts About Facebook Coin,’ Facebook’s Libra may very well be the precursor to global financial authoritarianism. It is also not beyond the realms of possibility, that Libra will one day drop support for Libra to Bitcoin exchanges if it ever desires to consolidate its financial power completely.
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