To be clear right from the top, I’m not saying Bitcoin (CRYPTO: BTC) is in a bubble.
I’m also not saying it isn’t.
Undoubtedly, Bitcoin’s price gains over the past months have been nothing short of meteoric. And to be sure, these types of huge, rapid gains are frequently followed by some equally huge, rapid losses.
Bitcoin’s meteoric rise
On Friday, I penned an article reporting that Bitcoin, the world’s largest cryptocurrency by market capitalisation, hit US$58,150, within a whisker of its all-time highs.
Over the weekend, it smashed through that record, trading for US$61,520 (AU$79,380) on Sunday (data from CoinDesk). At the time of writing, it’s retraced a bit, down to a mere US$59,702.
Now if you take a step back in time to March 2019, you’d see Bitcoin was worth only US$3,900. Last March 2020, it was trading for US$5,700.
Going by the record price set yesterday, Bitcoin has therefore soared 1,470% in two years and 974% just in the past twelve months.
Is there any stopping this digital token from marching ever higher?
Could this be the pin to pop the bubble?
While Elon Musk has come out in strong support of Bitcoin, Mark Zuckerberg looks to have a different plan.
Although Facebook Inc‘s (NASDAQ: FB) initial plan to launch its own digital currency got mired in international government red tape, the social media mammoth has quietly kept plodding ahead behind the scenes. It has since renamed its Libra digital token Diem.
In May 2019, Facebook released Novi as a digital wallet. And as the Australian Financial Review reports, “Novi confirmed that peer-to-peer payments would support business, and ‘additional merchant services’ would be added online, in-app, and in-store over time.”
Facebook is currently pursuing a payments’ systems license from the Swiss Financial Market Supervisory Authority. Now Diem is different from Bitcoin in some important ways. Including that it will be “updated by trusted nodes within the network, as distinct from a public blockchain”. It could also be more akin to what are known as stablecoins, digital tokens that are pegged to select currencies.
But still, as the AFR notes, “Mark Carney, then as governor of the Bank of England, put this well in 2019, stating that the Facebook project ‘would instantly become systemic…’”
And the universal adoption of Facebook Diem coins could take the wind out of Bitcoin’s sails.
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More reading
- Bitcoin (CRYPTO:BTC) hits another record high. What’s going on?
- ASX 200 Weekly Wrap: Calm restored to the ASX 200
- The FOMO fund: Yes, it’s a real thing and it could be dangerous
- Why the Bitcoin price is rocketing towards new record highs again
- Warning: Latest trap that could cost you more than 3% a year
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Facebook. The Motley Fool Australia has recommended Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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