Banking, finance, and taxes

Will a New Cryptocurrency Save or Destroy Facebook?

Jon C. Ogg

Published: March 11, 2019 4:45 pm

Last Updated: September 23, 2022 11:55 am

Whether it’s Bitcoin or a myriad of other cryptocurrencies that have been available to the public, some crypto-hopefuls still predict massive upside in the years ahead in the world of cryptocurrencies. To date, it’s important to understand that the losses around cryptocurrency have been staggering as Bitcoin peaked at $20,000 — versus less than $4,000 at the current time. With Bitcoin still being considered the crypto-leader, the losses elsewhere have been worse in many cases.

With all the hype that was behind Bitcoin turning into the Boulevard of Broken Dreams, one has to wonder if another cryptocurrency is even needed. According to Barclays, Facebook Inc. (NASDAQ: FB) has a huge crypto opportunity if it can succeed. Facebook was among the more positive research calls in Monday’s top analyst upgrades and downgrades that we issue each morning, but that upgrade was a rival call from Nomura/Instinet.

Facebook has reportedly been developing a cryptocurrency which could be a multibillion-dollar revenue opportunity for the company. Ross Sandler of Barclays sees as much as a $19 billion opportunity for additional revenue by 2021 from a so-called “Facebook Coin.” That said, the base case scenario is an incremental $3 billion in revenues if the launch is successful.

According to Sandler, even establishing this new revenue stream changes the upside story for Facebook shareholders. The reports so far are that a cryptocurrency would be tied to traditional currencies and would be available through the WhatsApp messenger. Still, there is nothing official at the current time.

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The report suggests that tying to traditional currencies would overcome the massive price volatility that has harmed Bitcoin and other cryptocurrencies.  Another issue is that a more stable crypto-coin would likely attract fewer speculators.

Sandler also opined that if the Facebook Coin was a success that Facebook could get into consumer lending, remittance and into physical payments.

Investors need to understand that some analyst calls prove to be golden, while others prove to be rotten. It’s way too early to know how this one will play out. The company would also be taking on a rather large risk to its reputation and brands.

Facebook would need to tread very cautiously here into any new cryptocurrency. The social media giant is already being targeted by politicians, consumers and privacy advocates. This could end up being one more risk for the company, and it would undoubtedly create yet one more regulatory agency watching and scrutinizing Facebook’s every step.