On June 18, Facebook and the Libra Association formally announced their plans to release Libra, a crypto asset backed by the Libra Reserve to maintain a stable value.
By 2020, Facebook has said it plans to integrate Calibra, a crypto wallet designed to support Libra, into WhatsApp and Messenger, introducing the asset to billions of users worldwide by 2020.
According to Michael Levine of Pivotal Research, Libra could see bigger mainstream adoption than bitcoin, especially among merchants due to its stable value. But, are Libra and bitcoin comparable?
Bitcoin and Libra Are Not Comparable
At CNBC’s Closing Bell, Levine indicated that Libra and bitcoin are serving different markets of users and investors.
Due to its stable value, Levine suggested that Libra could better appeal to the mainstream which retailers and merchants would feel more comfortable accepting. Levin said:
“One of the challenges around crypto, we can debate what it is really worth in terms of store of value, but basically, retailers and we saw quite a few large internet companies chose to partner with Facebook as well as in the payments space, are probably unwilling to accept something like bitcoin if you don’t know what the value of it can be a month from now. It could up 10 percent, it could be down 10 percent.”
Some of the most widely utilized platforms in the likes of Booking.com’s parent company Booking Holdings, Uber, Lyft, and Spotify have participated as founding members of the Libra Association.
The anticipation of analysts who remain optimistic on the future trend of Libra is that it would immediately lead to major retailers accepting the asset and merchant adoption has been a challenge for the crypto sector for many years.
However, while it is possible that Libra could see more retail adoption in the foreseeable future, it would most likely not replicate the merit of bitcoin and potentially other crypto assets as non-correlated assets.
In the long term, investors expect bitcoin to evolve into a safe haven asset and a hedge that lacks correlation with the broader financial market, competing against traditional assets like precious metals.
Libra, which is based on the Libra Reserve and real-world assets such as reserve currencies, would not appeal to investors as a store of value that investors are able to utilize to store wealth because of its correlation with existing assets.
“Is Facebook’s Libra a real blockchain? No. Will it compete against bitcoin and truly open, public blockchains? Never,” security expert and crypto researcher Andreas Antonopoulos said.
Analysts Optimistic About Facebook Regardless
Following the release of the whitepaper of Libra, Pivotal Research encouraged analysts to aggressively target the Facebook stock.
“We talked to a couple crypto investors in the space trying to get more color and context, and I think it was off of those conversations that led us to come out with a note first thing Friday morning encouraging analysts to aggressively get more bullish on the stock.
“This is crypto but there is something different about bitcoin and some of the other things that folks have historically been focusing on the crypto market and where Facebook is trying to go with this which is really meant to be a stable currency where the underlying value should be based on the six major global currencies.”
Although Libra will not operate as an alternative to bitcoin and other crypto assets that are considered to be stores of value, analysts like Levin believe it would target a new market that existing cryptocurrencies have struggled to take over, especially in the area of retail and merchant adoption.