Bitcoin shoots higher as Facebook’s Libra faces challenges

by Chris Becker

Bitcoin is on a tear during the Asian session, following a breakout last night above the previous week’s resistance level at $12000USD and now on target to get back to the June high nearer $14000:

What set this all off when other undollar assets like gold and the Australian dollar are falling against a stronger USD? It could be the hashrate effect, that is the Bitcoin miner’s performance which has more than doubled in a year:

 

There is somewhat of a correlation here with price, although its arguable that the hashrate increase comes after the price speculation, because like a lot of things crypto, this still resembles the bucket shops of the 1920’s:

Meanwhile, the new entrant into the ephemeral money space, Facebook’s Libra, is facing a lot of conventional resistance from the central bankers. This morning the PBOC signalled its intention to control the new undollar/unYuan via Bloomberg:

As a convertible crypto asset or a type of stablecoin, Libra can flow freely across borders, and it “won’t be sustainable without the support and supervision of central banks,” Mu Changchun, deputy director of the People’s Bank of China’s payments department, wrote in comments provided to Bloomberg.

This follows a big push back from the Indian government and Reserve Bank:

“Design of the Facebook currency has not been fully explained,” Economic Affairs Secretary Subhash Garg said in an interview in New Delhi on Saturday. “But whatever it is, it would be a private cryptocurrency and that’s not something we have been comfortable with.”

Both the government and the central bank have virtually outlawed cryptocurrencies after it barred banks from dealing in them. While the Reserve Bank of India has placed restrictions, the government is drafting a law with stringent penalties on their use.
Can ZuckerRobot persuade the central bankers to let him play with our digital money?

 

Comments

  1. Haha, Facebook is a big target so struggles where anony-coins flourish.

    A big FU to Facebook.

  2. Also the US congress told (not asked) Facebook to “immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action”

    It seems lost on crypto bugs that US govt have overthrown entire governments for much less than threatening the stability of the US dollar.

      • Way to completely miss the point. Try walking on a plane with all your gold and see how much of it you get to keep.

        PS: I own gold and would probably own BTC if I was confident it would retain its value.

      • Spell it out for me. What’s the point?

        I thought the point was the US annihilating the un-dollar threats….?

      • Gold was a threat at the time it was being confiscated. It will never be a threat again. You can’t carry it all with you as you escape a country. Retailers will not accept it as legal tender even though it technically is. It is not as though everyone in a black economy is going to carry around a $20k metal analyser and weighing equipment to confirm the gold is real or fake.

        Crypto is different. It can be instantly transferred overseas, instantly exchanged for another payment medium. It has the necessary attributes to undermine currency. Although it can’t be confiscated. US govt has the power to do what it did to all the Online Poker sites, that is, threaten all the payment systems that continue to allow money transfers into and out of those Poker Sites.

      • Thanks Freddy. I understand what you’re saying better now.

        I think you underestimate gold, though. You might be more right in an Aus context in relation to movement, but most other countries (US included) have land borders that can be crossed by car or train easily without submitting to scanning/cavity searches, etc.

        Yes, it’s not so practical for smaller transactions, which crypto is OK for. But horses for courses.

      • This is a Facebook hustle. They want the central banks involved because it gives them credibility over all the other “dodgy” coins. And once you have a central bank-endorsed crypto, you can carry on clipping the ticket from all the sheep who just want it to work, whilst the governments crush any attempt by others to muscle in. Bitcoin will continue to be the “protest” offering, but that’s all it will be.

        But how do you get in the room with the central banks when you are on the outer, and they can’t be seen to be getting into bed with you? One way would be to announce a currency, and let the central banks lead the conversation on regulatory supervision. They look tough, you look compliant, and then you clip the ticket and scrape the data.

      • Interesting perspective Phil…. but why Facebook rather than Amex or visa or MasterCard pushing such a ruse, sure they have the platform/eyeballs, but the others have the cred with the CBs and govs.

      • IMO Facebook and Google are only exempt from antitrust suits whilst they continue to be good little govt lapdogs. Give the govt agencies all the user info they need, keep the military informed of all AI developments, etc. There is no hustle. In the space of one senate hearing Zuckerberg transformed from aspiring presidential candidate to a terrified child.

      • I think they probably have to lead, otherwise the story gets hijacked about “….waiting in the shadows is Facebook”. They are the ones with the form on privacy issues, the ones that the regulators will go for. By putting Facebook at the front, and with Facebook leading the “co-operation” charge, the rest is easy. And ultimately it will be Facebook customers that take it up quickly, as they vertically integrate their life. Like a friend’s post, put up a photo on Instagram about how great their life is, click on a targeted ad from an influencer, pay with Libra (from your Calibra wallet, Facebook won’t get the data I promise….). I’m sure it will be where the “pilot study” commences.

        I could be wrong, but this has all the hallmarks of a state co-opting a threat (distributed ledger currencies) to neutralise it.

      • Freddy, you don’t think that was part of the coaching? “Look scared, let them think you know who is boss”. Can you imagine how many friends MZ has in very high places?

      • A plutocracy does not necessarily mean that every billionaire has power. Those who already have the power have no reason to hand that power over to the likes of Zuckerberg and Bezos, especially when those companies can be indirectly controlled with the threat of antitrust legislation and probably espionage as well. Zuckerberg a deluded IT nerd who was well and truly put in his place at those senate hearings. The only coaching was from the FB lawyers begging him to be submissive.

    • The US congress is the legislative arm, not the executive. They don’t “tell” anyone anything, which is why Facebook hasn’t done much in response.

      It wasn’t the whole House either, just a subcommittee.

  3. LOL the reason for BC growth is the fact that Libra is struggling but somehow BC is higher than it was before Libra was even announced

  4. I can travel across any country in the world and take with me millions/billions of dollars worth of assets on a USB stick (e.g. Ledger) with no government intervention/snooping. At no point in human history has this been possible until recently. Bitcoin is here to replace gold and with Bitcoin mining to end in another 121 years, there is no doubt Bitcoin will one day surpass 6 digits (20-30 years). The world is moving to a digital era and gold is being left behind. When you have virtually infinite fiat being printed by bankers the world over and a new asset class that’s a much better value proposition/store of value than gold, (There’s only ever going to be 21 M Bitcoins), that asset is bound to appreciate for a very long time.

    • Unless of course quantum computing comes to reality and is able to crack BTC.. then it’s doomed.

      • It would be funny if THAT provided the needed incentive to actually build a quantum computer.

        Funny and cool.

        The world is all about incentives, after all.

        Maybe we’ll get cold fusion out of it, as well??

    • drsmithyMEMBER

      How much is your Bitcoin going to be worth when you can’t use it to buy anything because transacting in it is made illegal ?

      • I am not sure they can make it illegal. If I sell my couch on gumtree and only accept BTC as payment, what does it matter?

        Govt can’t outlaw basic bartering.

      • drsmithyMEMBER

        I am not sure they can make it illegal. If I sell my couch on gumtree and only accept BTC as payment, what does it matter?

        Govt can’t outlaw basic bartering.

        No, but they can outlaw any business from accepting BTC (or whatever crypto you prefer) as payment and any bank from converting it to real money. So the uses of BTC outside of “bartering” for used goods or black market items will be basically zero.

    • And therein lies the seeds of the demise, mbreader. Currently you can carry code on a USB stick that represents millions/billions of dollars IF you are able to convert it back to dollars. If the government decides that you cannot exchange Bitcoin for dollars, you have a USB stick with code that will enable you to barter with anyone that will accept Bitcoin in exchange for goods or services. Which will basically be the black market. And once the exchange is outlawed, Bitcoin mining will slow down dramatically, because miners don’t do it for Bitcoin they do it for the exchange to fiat that Bitcoin currently represents.

      The value of any non-cash producing asset basically revolves around perception. Gold has limited productive capacity these days, and 80% of new gold coming out of the ground goes to jewellery, mostly to India where for some reason gold is still perceived as a store of value against fiat currency, despite the fact that to have any use it has to be converted back to fiat currency. Much the same as Bitcoin.

      Maybe there will be an “Exchange your Bitcoin for Libra” amnesty period….

      • Yes, de-banking btc could be an approach.

        On the other hand, I’m wondering how one would apply Gresham’s law to this situation. And which is the good money and which is the bad, on the facts…. could Gresham’s law actually make crypto displace fiat….serious question…

        Crypto could be said to be bad because uncertain value, not gov backed. But good because non-inflating. /non-debasing.

        Fiat could be good because gov recognised, but bad because inflating/debasing.

        Maybe there is no way to tell, ex ante. ???

      • Hi Peachy, I’m not smart enough to know. I’m not even sure Bitcoin is a true currency at the moment, more of a currency proxy like gold has become. I’m not sure you can debase/pollute Bitcoin with nicks or alloys. I think it would be more of a Thanksgiving turkey moment, to badly paraphrase Taleb. De-banking, a bad hack, a new coin that is “better” in some way. At least gold is shiny and pretty, or weighty (doorstop, paperweight) if it eventually it is perceived to have little value. A series of 1s and 0s on a USB (and several thousand other servers around the world)? Not so sure.

        Taking on board Freddy’s plutocracy quote, you simply don’t switch currencies when the wealth of a nation (and particularly it’s rulers) is built on that currency (or easy conversion to other national currencies) unless you have control over the new currency, either directly or through allowing them to operate under your rules.

        I don’t want to come across all grassy knoll, but I do think Libra is the start of the government co-opting crypto to nullify its threat. It just looks too staged. Facebook leads a crypto launch, government gets all tough and says no. Next stage, sub-committee with all interested parties. Government announcement on restricted operating environment. You know the rest.

      • Bitcoin is legal in over 100+ countries, won’t be possible to outlaw it completely. The SEC have already come out stating Bitcoin is legal.

        I love that there is confusion in the general public about this tech. You can’t have something rare if everyone owns a lot of it. By the time everyone knows about this and is willing to adopt the tech, it will be too far out of reach for the normal person. People think Bitcoin is a scam because they believe what the news tells them.

      • drsmithyMEMBER

        Bitcoin is legal in over 100+ countries, won’t be possible to outlaw it completely.

        It doesn’t need to be.

      • DrSmithy as long as there’s a bunch of countries where it is accepted I can go BTC > their currency > my currency

        There’s no killing it

      • drsmithyMEMBER

        DrSmithy as long as there’s a bunch of countries where it is accepted I can go BTC > their currency > my currency

        Way too much work and risk for the average punter, with essentially zero benefit anyway.

        There’s no killing it

        Doesn’t need to be killed. Just needs to be so difficult that nobody would bother unless they’re doing something dodgy.