Facebook, Inc. (NASDAQ:FB) GlobalCoin is no threat to Bitcoin
When Facebook finally confirmed that it will launch its own cryptocurrency, it was quickly labeled a potential ‘Bitcoin killer’ in the media. Taking a closer look, however, it is clear that Facebook’s new online payment system is an unlikely threat to the world’s leading decentralized digital currency. It’s a different story for banks, fintech and payment processors, however.
On June 4, Facebook’s Head of Financial Services & Payment Partnerships Northern Europe, Laura McCracken, told WirtschaftsWoche that the company will release the whitepaper for its digital currency on June 18.
McCracken also stated that the company’s GlobalCoin will be a stablecoin but will not be pegged against the US dollar as previously assumed. Instead, the digital currency will derive its value from a basket of fiat currencies.
The Information reported that Facebook’s digital currency will enable users to send money to each other via Messenger and WhatsApp and make purchases at a range of retailers that Facebook has been in discussions with for some time.
To build trust in the new digital payment system, the social media giant has been engaging financial institutions and technology companies to join a foundation that will be tasked with governing the digital currency to appease financial regulators.
The initial roll-out, which is scheduled for 2020, will take place in a number of emerging markets where the company plans to market its new digital currency aggressively. Facebook also plans to install physical ATMs to enable users to exchange the digital currency for fiat currency and vice versa.
Is Facebook’s GlobalCoin a cryptocurrency?
Bitcoin advocate Andreas Antonopoulos stated in an online Q&A: “What Facebook […] is proposing is not a cryptocurrency. It doesn’t have any of the fundamental characteristics of a cryptocurrency.”
A cryptocurrency by definition is open, public, immutable, neutral, borderless, censorship-resistant and decentralized. Facebook’s currency is centralized and will not meet these criteria. Hence, it should not be considered a cryptocurrency.
Facebook’s digital currency will be under close scrutiny by financial regulators and will have to adhere to strict AML/KYC requirements in each country it operates in. It will, therefore, not be censorship-resistant. Aside from the legal and regulatory aspects of running a payment system, Facebook’s track record of censorship of content will also likely roll over to censorship of its planned payments service.
Additionally, Facebook’s aim to make its payment service borderless will be impossible because as a regulated payment service, the US-based company will not be able to serve customers on the U.S. sanctioned countries list.
Facebook’s currency will also not be public as the company will likely sell user payment data to third parties as it has done with personal user data on its social network. Even if they wanted to make their payments public, they would not be able to for legal and regulatory reasons as they will have to adhere to strict financial privacy laws as a money transmitter.
Finally, Facebook’s currency will not be open. The multinational company will always play a role in each transaction and it is likely that the coin will not be able to be used outside of the Facebook ecosystem due to the centralized nature of this digital currency venture.
Since Facebook’s GlobalCoin is not a “real” cryptocurrency, it cannot be considered a threat to Bitcoin. While the coin will likely see a much larger user uptake, Bitcoin will in many ways remain the superior digital currency because it enables users to make censorship-resistant, fast, borderless payments without the need for a bank account or ID verification.
Additionally, Facebook’s digital currency will be a stablecoin so it will not attract investors, traders, and speculators who have been among the main bitcoin buyers in the past decade.
PayPal, mobile banking apps, and banks should be worried
While Facebook’s digital currency is unlikely to become a threat to bitcoin, online payment providers such as PayPal, fintech banks, and traditional banks should be concerned.
Facebook has up to two billion active monthly users, which means two billion people will (eventually) be able to use the social media network’s native payment system to make low-cost digital payments without the need for a bank account.
This will directly affect the go-to online payment services, such as PayPal, Stripe, and Skrill, especially if Facebook delivers on its promise to offer low-cost digital payments. PayPal, for example, charges a three percent transaction fee, which takes a substantial cut out of businesses and freelancers who use their payment service for the majority of their transactions. Unless PayPal and its peers lower their fees in response to the new competition from Facebook, they could end up losing substantial market share.
The ‘fintech banks’ that offer easy-to-use, app-only mobile banking services, should also be concerned. If everyone with a Facebook or WhatsApp account will be able to use low-cost mobile and online banking, there will not be much need for mobile banking apps. Of course, this will not happen overnight. Facebook will need to successfully integrate its payment system with the broader financial services industry to enable users to pay bills and make in-person payments. This could take years. Should they succeed, however, fintech banks will likely end up consolidating.
Traditional banks will also be threatened. If Facebook manages to onboard two billion users to its payment service, there is no reason why the next generation will bother with banks that require a mountain of paper documents to open accounts when they can just log onto Facebook, fill out a few documents online, and start banking.
While Facebook is poised to become a serious player in the financial services industry, it is unlikely to directly compete with bitcoin, which is increasingly seen as digital gold. If anything, it may help legitimize digital currencies and in turn, attract more people to bitcoin.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 191.95.
The projected lower bound is: 171.02.
The projected closing price is: 181.49.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 3 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 75.7691. This is not an overbought or oversold reading. The last signal was a sell 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 53.85. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 8 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 73. This is not a topping or bottoming area. The last signal was a buy 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
FACEBOOK INC A closed up 3.860 at 181.330. Volume was 0% below average (neutral) and Bollinger Bands were 12% wider than normal.
Open High Low Close Volume___
180.510 181.840 180.000 181.330 16,773,691
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 172.83 181.94 161.35
Volatility: 56 37 42
Volume: 22,798,750 16,701,511 21,958,468
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FACEBOOK INC A gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
FACEBOOK INC A is currently 12.4% above its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of FB.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on FB.O and have had this outlook for the last 19 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.