Move fast and break Facebook. It will soon be conventional wisdom that Facebook Libra will fail and you only make money before the herd catches on. In this article, Daily Fintech Subscribers learn why Facebook Libra will likely fail and who/what will win if Facebook Libra fails and how to profit from that.
Like everybody else in this space I pored over the tea leaves scattered by Facebook when they announced plans for Libra in June. I was excited because I had predicted that Facebook would try to monetize their WhatsApp acquisition via payments when they hired David Marcus in 2014 (link to not so humble-brag post here). At the time of the announcement in June, I offered my 10 takeaways from the Facebook Libra announcement which included this:
“Yet many of the partners have more to lose than to gain. For example credit card networks will lose if payments moves to crypto”.
That news forecasting proved accurate when first Paypal and then Mastercard, Visa, eBay and Stripe withdrew support.
The reason Facebook is in trouble is what I described in the June article as “Takeaway 5. Facebook’s delicate dance with regulator.”
The regulator is only a front for the Governments that pay them and those Governments will do whatever they can to stop Facebook creating a global currency that will challenge state monopoly over currency creation. That is why we use the image of 3 boxers in the ring. Facebook is powerful for sure but a) they are regulated entity that exists at the pleasure of the state and b) Bitcoin is the unregulated honey badger that has been attacked by so many rich & powerful and yet still goes strong.
The Qui Amisit (who loses)story is simple and the same as we told our readers in June:
“ The biggest losers will be global banks. Even if Libra fails, the banks will lose. This is now a boxing match with 3 boxers in the ring. When push comes to shove, governments will throw banks under the bus if they think it will save their monopoly over money from either Libra or Bitcoin.”
Now we focus on what subscribers really want which is our Qui Bono (who wins) Analysis. Keeping to the Latin theme, each Qui Bono story has a “fac pecuniam” (make money) analysis:
Qui Bono = Bitcoin
Why: Facebook raised awareness of crypto and one crypto that looks like a survivor is Bitcoin.
fac pecuniam = buy Bitcoin and hold it for a long time.
Qui Bono = USD
Why. This seems to contradict the first Qui Bono = Bitcoin and this one is more short term trading focussed. When the next market crash happens it will likely be on the periphery first ie in developing markets so there will then be a short term flight to safety and that will lead to a short term bump in USD value. Sentiment will change when it becomes clearer that a) there are alternatives to Fiat currencies and b) that the problems are endemic to all Fiat currencies and not just some of them.
fac pecuniam = buy liquid short dated USD assets and sell as soon the first wave of panic recedes.
Qui Bono = Gold backed CBDC
Why: if is unlikely that the reserve currency will shift from USD to the next rising power, because a) the next market panic will lead to a questioning of all Fiat currencies and b) geopolitics will resist so much power to one country. The likely successor to USD will be a) a tokenized digital currency (because the cross border payments will be easier b) issued by Governments (because mainstream acceptance of the idea of stateless currency will take time and c) backed by Gold (because a market panic will cause people to lose faith in government’s ability to print more money at will).
fac pecuniam = buy gold and hold it for a long time. Convert your physical gold into a gold backed CBDC when you want to spend some.
Qui Bono = Crypto Payment Processing using Stablecoins
Why Crypto Payment Processing. Merchants want lower costs and less risk of being blacklisted by Legacy Payment Processors.
Why using Stablecoins. In a word, volatility.
fac pecuniam = find a stablecoin that you believe will be resistant to state shutdown and invest in it.
Confessions of a writing junky. I should give up writing to focus on being the Editor and CEO of Daily Fintech, but I love writing and cannot quite quit.
Inserted by my lawyer: I Am Not A Financial Adviser, just a blogger bloke on the Internet.
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