Facebook’s stock (FB) has now wiped out almost all of the gains it made since the 2016 election (Figure 1). This down move is a reminder that Facebook is just an app. It’s a popular app, but when it’s not popular anymore, they are going to need a turnaround strategy.
If you look at one of Facebook’s big competitors, WeChat from Tencent, it is clear that Facebook has to get a payments platform working from its mobile app. In China, WeChat allows users to connect a bank account and pay with a QR code. WeChat’s payment function will no doubt give the company a huge advantage in big data and eventual AI applications to attract more users.
Bloomberg has recently reported that Facebook is developing a crypto payment process via WhatsApp. The product is said to be a stablecoin and aimed at the market in India.
India has 480 million internet users, second only to China. Bloomberg is reporting that the Facebook’s product is said to be under development by 40 employees. Facebook’s challenge is to how to custody all the fiat.
One thing that is amusing about FB’s move into crypto and blockchain is its branding. Is anybody going to trust “Facebook coin?” Many Americans don’t trust Facebook with their personal data. It is unclear if Facebook brand will be seen as being good enough to back a medium of exchange. That’s not to mention how Facebook will surmount the challenge of holding custody of the fiat that backs the stablecoin.
The fact Facebook is trying to penetrate the India market using crypto has profound implications. Silicon Valley is waking up to the realization that its stocks could continue to crash unless they can come up with a payment system that brings commerce to their sites.
This is where Bitcoin (BTC) and Ethereum come into play. With FB making a splash with its 40 person blockchain unit, it is a question of time before another big player comes in and leverages the existing cryptocurrencies like Bitcoin (BTC) and Ethereum to create an “in-app” payment process. Smaller or more local players in Asia may come along with similar alternatives. When that happens, big tech players are going to need to embrace Bitcoin (BTC) and Ethereum (ETH) whether they like it or not.
Bottom Line: The ongoing decline in U.S. tech stocks is such an embarrassment to the CEOs of tech companies that it is only a question of time before Bitcoin (BTC), Ethereum (ETH), and maybe Litecoin (LTC) are used as payment methods from big U.S. social media apps trying to compete with China’s WeChat. It’s not a question of if it will happen, but when.
With the Bloomberg story on Facebook, the Crypto.IQ trading group has noticed a shift in the way media covers crypto from continuous FUD to toward more positive crypto stories. This may be the reason downticks in Bitcoin and Ethereum have been so limited.
Join us as we continue to process and analyze stories like this and integrate them into trading strategies for the short term and for 2019.