Weekly Crypto Report
BITCOIN PRICE ANALYSIS | POM PORTFOLIO PERFORMANCE | LIBRA BLOCKCHAIN | XRP - MONEY GRAM | June 23, 2019
BITCOIN IS BACK!!!
The bitcoin bull market is back in full swing generating a massive move of over 20% at its price peak of $11,100 USD. This latest market move has a similar feeling of the last bull market when the price of bitcoin jumped from 10k to bitcoin’s all time high of 20k within an 18 day period.
While this bull market is expected to have a more gradual rise than the last, investors can anticipate new all time highs, especially with the bitcoin “halvening” happening next year. Investors should be wary though, bitcoin is very volatile and it would not be surprising if the price saw a retrace to 8k. Regardless, the long term value of bitcoin will be significantly greater than its current price making a long position one of the best investment strategies at this point in time.
Like always, The Proof Of Money Newsletter will keep you updated on the bitcoin market and will deliver investment suggestions on market moves. Stay up to date on the latest updates by subscribing to the newsletter:
Proof Of Money Portfolio Update
The Proof Of Money Portfolio increased over 12% this week with bitcoin being the main driving force behind the price movement. Other big drivers included Binance Coin and Ethereum. The make up of the Proof Of Money Portfolio can be found below.
The Proof Of Money Portfolio:
55% Bitcoin
20% Ethereum
10% Litecoin
5% Binance Token
5% Stellar
5% Komodo
Facebook’s Libra - The Good, The Bad, The Ugly
Don’t like reading? Listen to the podcast here.
Facebook’s recent announcement of the Libra Blockchain has created some major stir in the community. As, a blockchain researcher I’ve taken a deep look under the hood of the Libra Blockchain and I have created an entire analysis broken down into three sections:
The good
The bad
The downright ugly
Before we break down Libra, there are two main points I would like to make:
Libra was created as a business decision and despite some popular belief, Libra was not created with evil or the intent to control the world. The money transfer business is one of the fastest growing industries in the world and is expected to exceed 700 billion USD in 2019. Facebook sees the opportunity to jump in this fast growing market and beat out the competition by leveraging its existing user base and to expand its business model to two billion existing potential customers. No doubt about it, this is a major edge Facebook has over every one of their new competitors.
Libra is a currency, it is not money. I know this confuses most, but I hold the philosophy that money and currency are two separate things and owners of bitcoin can be rest assured that Libra will not be competitor. In fact, Libra may strengthen the argument for bitcoin and its sound money principles. A full definition of my philosophy of money and currency can be found here, but a quick synopsis:
Currency is something that can transfer value quickly and securely, but is not backed by anything other than the belief that is hold value. Currencies are typically completely controlled by a governing body (governments and business) and can be minted at their discretion. Types of currencies include: fiat currencies (US Dollar), digital cash, PayPal, etc.
Money can also transfer value quickly, securely, but is different than a currency in the fact that it is backed by something of real value which could include: gold, resources, land, and energy. I believe bitcoin is money and every other government currency, altcoin, digital cash, and Libra is a currency. Where bitcoin has a fixed supply and a value backed by scarcity. Libra is controlled by a central party and linked to a basket of assets created mostly by central governments.
Now that you understand those key points lets dive right into it!
The Good
Libra has a great chance at accomplishing a feat that every payment cryptocurrency has failed to achieve, global adoption. Most e-cash or crypto payment systems create an innovative product and then attempt to market it to the world. Facebook has approached this task completely opposite (unintentionally might I add). Over 2 billion people use Facebook, nearly ⅓ of the world. They have a competitive edge over every payment cryptocurrency and existing businesses such as banks, wire transfer services, and PayPal.
Facebook is going to leverage their massive user base with a technology copied from 100’s of businesses and projects before them. Libra has the best chance to succeed (unless Big Brother steps in) compared to any existing money transfer business in the world.
Not only does Libra have a chance to actually serve the un-banked (something 100’s of blockchain companies have been attempting the past few years) they have created an open source blockchain that will allow people to build applications on top of and implement them into existing platforms such as Libra and Facebook. Essentially, anyone in the world has the opportunity to create a business off the Libra blockchain and launch it on an existing platform that is interconnected to the entire world.
This is a major opportunity to solve a major global problem and be a world leader in a thriving industry. Like I mentioned in the opener, this is a business decision and an opportunity to please Facebook shareholders (in a company that has taken some hits lately). This is not an attempt to create evil or control the world, but I might add do not be surprised how Facebook handles users’ data. Which leads me into my next point -
The Bad
There are two bad details about the Libra project:
According to their whitepaper they will have a group of organizations called “Founding Members” tasked with promoting business. This includes a group of financial institutions, telecoms, blockchain companies, venture capitalists, and non profits (quite a diverse group). While, this group of founders will help catapult the success of Libra, it creates a large group of businesses who are going to want a cut of the profits and the more fingers in Libra’s pockets will cause them to up the fees which may make them less competitive fee wise to other crypto payments. Their mission statement is to make financial services cheap, but this may come into conflict if they have several founding members to pay. Also, until Libra is adopted world wide, many people traveling around the world may have to trade their Libra for local currencies which will increase fees associated with it.
As a blockchain researcher I have learned that is written in the whitepaper is not set in stone. The whitepaper is generally a guideline lined with promises that may or may not come true. According to the white paper, one of Libra’s goal is to provide the world with a cheaper money transfer service. But like I mentioned, Libra has a large number of organizations they are going to have to pay and Libra is controlled by Facebook, a public company, who like most companies, have a bottom line to fatten and investors to please. This could cause Libra to stray from its whitepaper goals and causing fees to raise.
The Ugly
From a business standpoint I think Libra has a great opportunity to be successful and become a world leader in global payments. There are two ugly problems I see:
Libra is not decentralized. It is controlled by an association of nodes who are given voting power by two thirds majority on certain issues. Libra claims to become decentralized in the future, but there is no guarantee that the network will become fully decentralized, especially when faced with the difficulty of operating a financial system on the world’s largest network. This does not doom Libra or make it a horrible creation. This simply coincidences with my statement regarding the whitepaper and how most blockchain whitepapers typically contain many promises and that are rarely all fulfilled. Libra should double check how they use the word decentralized.
Facebook is under major scrutiny by the DOJ who is pursuing anti-trust suits against the biggest companies in tech. Adding an entire payment system to Facebook has the DOJ foaming at the mouth, eager to break up the big company. It makes you wonder if Zuck jumped the gun trying to squeeze in the money transfer space and couldn’t have picked a worse time. As of writing this the Senate Banking Committee is planning to hold a meeting regarding Libra and they are going to make sure they have the opportunity to track every transaction made with Libra. Oh not to mention the Libra whitepaper mentions allowing users to hold one account which will not be associated with the users personal account. I’m sure the Senate will use every Anti-money laundering law available to make it tough on Facebook.
Regardless of your thoughts on Zuckerberg, Facebook, and cryptocurrencies in general, Libra is a major play and is the best chance for mass adoption of a digital currency. The question is, how many people will actually realize they’re using a cryptocurrency or just think its Facebook’s versions of PayPal?
The Winner & Loser Of The Ripple-Money Gram Deal
Don’t like reading? Listen to the podcast here.
If you were going to build a skyscraper would you use today’s best and latest technology or would you use some dated old building style? Would you hire an old construction company with dated practices who is struggling to stay competitive, or would you hire a new and innovative company really pushing the envelope with its technology?
Its a no brainer, you would pick the new company with innovative system and technology, but not every blockchain company is as savvy as you, especially Ripple.
Ripple decided to shake things up and invest in an outdated organization by agreeing to purchase up to 50 million dollars worth of Money Gram stock.
While, many believe this a great move by Ripple, I personally think this is a move of a desperation and a move that will set back Ripple from fulfilling their goals.
Before I dive in, I most definitely see this as a major win for Money Gram. Their company stock has been demolished over the past month, losing more than half its value in less than 30 days. Money Gram is a dying company, birthed in the time of wire transfer money service. This is where they’ve made their living and with the latest technology (Cryptos) and the ease at which they make cross boarder payments, Money Gram knew they were in trouble and won the “funding lottery” by getting Ripple to buy their share at 3 times its value.
Why this is a bad move for Ripple:
Since Ripples inception in 2013, they have made it their mission to revolutionize payments by inventing an innovative solution (XRP). Cross boarder payments have had several issues and a new age solution was needed to provide cheaper faster services to more people.
For six years Ripple has been developing a platform to change cross boarder payments and they decide to team up with a dated, dying company in Money Gram.
What has Ripple been building all these years? Why do they need Money Gram? If they intend to use Money Gram’s existing infrastructure why not buy them out?
Ripple’s deal with Money Gram played out the following:
-Ripple agreed to buy the stock at three times its value. It was price at $1.40, Ripple agreed to buy it at $4.10.
-Ripple did not get any advisory seats.
-Ripple has 20 million in options they may not want.
-Ripple revealed its desperation.
The stock value of Money Gram was brutal and it shocks me that Ripple wasn’t able to get a better deal, especially since they have no controlling stake in the matter by not gaining any board seats. Essentially, Ripple investing a whole boat-load of money into a company that may are may not implement XRP the way Ripple is planning. Not to mention they’re on the hook for 20 million extra bucks in stock priced at $4.10.
This just goes to show that Ripple seems to have been in panic mode since Facebook unveiled its plans about its own currency, Libra. As mentioned, it doesn’t make sense for Ripple to invest so much money into a company they gain no control over and seems they overpaid in an attempt of desperation to stay competive.
Maybe this will all work out for Ripple, or maybe they will run out of XRP to sell to stay in operations. Either way, Money Gram won on this deal.