Many people were wondering whether or not bitcoin was on its way out as fast as it had made its appearance. The cryptocurrency fell below $4,000 for much of 2018. However, earlier this week, bitcoin rose over $14,000. All of this stemmed from Mark Zuckerberg’s announcement that his social media website would soon introduce its own cryptocurrency: the Facebook Libra.
About The Facebook Libra
This isn’t the first time Facebook has dabbled in digital payment. Folks in the United States have been able to send money through the Messenger app since 2015. Facebook in France and the United Kingdom began a similar service in 2017. So, why develop Facebook Libra?
Facebook founder and CEO Mark Zuckerberg wants Facebook to expand this option on an international basis. With the Libra, you’ll be able to send money to anyone anywhere, even if they don’t have a bank account. Additionally, those advertising on the site will be able to sell items and collect payments directly through their ads.
Before you start converting to the Libra, you should know a few things.
- Facebook Libra is fairly stable. While bitcoin has been unstable, the Libra will be tied to bank accounts and government securities. As long as international currency remains stable, so will the Libra.
- The currency will not be controlled by Facebook. The social media site isn’t known for its security, and it knows that. So, the company has partnered with larger names in finance, like Visa, to make the Libra a success.
- It could be an easy way to pay (if it works). There is no telling if the Libra will actually work or take off. However, if it does, it could be one of the easiest, fastest ways to pay online.
Facebook Libra vs. Bitcoin
The Facebook Libra has not yet been released, but there are some pieces of information that allow us to compare it to other forms of digital currency. When it comes to the Libra vs. Bitcoin, these are the main differences…
- Facebook, WhatsApp, and other Facebook properties will be where you can use the digital currency at first. With bitcoin, you can pay for just about anything (just about anywhere). Libra payments may also be accepted at websites within the Libra Association (a group of companies working with Facebook on the Libra). That has not been confirmed yet though.
- Where the Libra is used is completely under the control of Facebook. On the other hand, bitcoin is deregulated. In some cases, it has been used to purchase black market items.
- Libra is also much more centralized, meaning more people have a say in what happens with it than bitcoin. The Libra Association is projected to grow to 100 members by the end of 2020 and each member will have a say in the currency’s evolution. In bitcoin blockchain, if you own 51% or more, you have the final say.
The Rise and Fall of Bitcoin
As mentioned above, bitcoin skyrocketed this week when the mention of the Facebook Libra was made. Many people were surprised by this because bitcoin has been called a “bubble” in the past, meaning eventually it would burst and longer carry any value.
Even though it did drop in value last year (hovering around $4,000), interest in digital currency seems to continue to drive bitcoin up. Not to mention, any time there is any mention of a trade war or other political issues that may cause a decline in value of a currency, people tend to look to bitcoin as a safety net.
The rise this week can be partially attributed to the announcement of the Libra but can be tied to other occurrences as well. China and the U.S. are also in the middle of a trade war. Bitcoin is an easy way to get money in and out of China during this time.
On top of that, the Democratic Party continues to suggest a wealth tax. Presidential candidate Elizabeth Warren has proposed a 2 percent wealth tax. This may increase the desire for having bitcoin in your wallet because cryptocurrency is able to be held outside the reach of tax authorities.
Consider Currency Risk Before Investing
Before you go converting your money to the Facebook Libra, bitcoin, or any other form of digital currency, be sure to do your research. There are a number of reasons to be skeptical about investing in bitcoin.
The most important of these reasons seems to be that none of the cryptocurrencies on the market are safe. Each of them carries some type of risk. As we’ve seen with Bitcoin, the value of the currency can swing drastically in one way or the other, losing you thousands of dollars. This is possible with Facebook Libra as well. If international currency rates drop, Libra owners could lose up to 10 percent.
The risk would only cease to be a factor if you did all of your transactions in Facebook Libra, bitcoin, or other cryptocurrencies. But to eliminate that risk, you’d have to get rid of every other type of currency, which just isn’t likely to happen.
Readers, what do you think about the Facebook Libra? Would you use it?