Facebook (FB) may have found its next big catalyst if bullish comments from some cryptocurrency experts hold water.
Shares of the Mark Zuckerberg-led company have been carried higher on Tuesday morning, boosted by its ambitious endeavor into the crypto space under the guise of its new Libra Association consortium and a minor boost from President Trump's Twitter (TWTR) feed.
Steven Eliscu, EVP of Corporate Development at DMG Blockchain, told Real Money that this could signal a tectonic shift in technology as more companies embrace the crypto wave that had initially appeared to crest in late 2017.
"While the Facebook payment system is an in-network permissioned blockchain that does not fulfill the "Satoshi vision" of an open un-censorable public blockchain free from government control, the launch of [Libra] may nonetheless be looked upon as an 'iPhone moment,' just as when Steve Jobs showed us in early 2007 a prototype of the smartphone as we know it today -- an event which transformed the technology industry," he commented. "The Facebook-created blockchain is a reinforcement of the long-held idea in the Bitcoin community that a financial services system built on the blockchain will supplant legacy bank-based systems."
In that lens, tech could take over the mantle as the key place for payments and displace a large degree of the massive global banking system.
Decentralized Dilemma
Still, Eliscu noted that the centralized control of data, a departure from original models of cryptocurrency, carries with it a note for caution.
Eliscu drew a corollary to AliPay from Alibaba (BABA) and WeChat's payment systems under Tencent (TCEHY) as indicators of consumer sensitivity to centralized payment systems that can be accessed by either governmental or big tech entities globally.
"Given ongoing news about Facebook in this regard, we expect privacy concerns to remain at the forefront," Eliscu concluded.
Analysts have also noted that while the effort may indeed (possibly) be the monumental shift that Eliscu expects, it will take time for the numerous variables at play to give a clear signal to investors.
"Given the recent run in the stock, many investors may be overestimating the near-term impact of a cryptocurrency launch," Jefferies analyst Brent Thill said. "We think most advertisers will wait and see what the potential impact will be on their businesses before allocating more ad dollars to FB."
He added that consumers, especially in well-banked nations that already have access to products like PayPal (PYPL) and Square (SQ) may be much slower on the pick-up of the innovation, especially if regulators hamper development into the expected 2020 launch.
"Regulatory oversight and heightened scrutiny could slow FB's crypto rollout," he added. "Trust issues have persisted on the Facebook platform, and may take time to heal."
For now, Thill noted he is more comfortable setting his model with the existing trends in the business, which he believes still carry upside regardless of the moonshot at payment processing.
Keeping an Eye on Other Coins
As the departure from the original vision for crypto comes to a crossroads for many current crypto enthusiasts, the impact on existing currencies like the hard-charging bitcoin (BTC) , ethereum (ETH) , and litecoin will be important to gauge.
Bitcoin has been particularly bullish ahead of Facebook's white paper release on Tuesday, building a nearly $1,000 gain in just the past five days.
"It has nothing to do with blockchain. Fully private, controlled, centralized, verified and authorized by a small number of permissioned nodes," Roubini Macro Associates CEO Nouriel Roubini said in an interview with CoinDesk. "So what is crypto or blockchain about it? None."
While he disagrees with crypto enthusiasts on a completely decentralized "Satoshi Model," his characterization of the system is likely precisely why many current crypto coin holders will feel quite safe with their positions and underlying ideas about the currencies they hold.
The new offering likely has a stronger corollary to the more centralized Ripple or other ""stablecoins" than it does to any of the more volatile "true" cryptocurrencies that garnered much market attention in years gone by.
Despite the differentiation, Eliscu remained optimistic on Facebook's play as a bellwether, expecting institutions to adopt a more accommodating stance toward cryptocurrencies before they can be beat to the punch by companies like Facebook.
"Bitcoin enthusiasts and maximalists have always believed, albeit with excessive optimism, that bitcoin (or litecoin or bitcoin cash) would evolve into a medium of exchange and unit of account," he acknowledged. "Whether these or some other public blockchain currency achieves this in the long-term is anyone's guess, but in the immediate future, [Libra] provides a huge overall boost to the sector that we believe will catalyze institutional and government acceptance such that (at least the top) public cryptocurrencies are here to stay and will remain an ever important asset class that hundreds of millions of people will hold through their institutionally-managed wealth management and retirement accounts."
