Billions of people could benefit from cryptocurrencies

1 Mar 2019 14:37|Bartosz Grejner

“How long will you wait until cryptos become a part of your everyday life? Not long. Facebook, as well as others, start to create cryptocurrencies of their own. These may be fundamental changes for the market,” writes Bartosz Grejner, Conotoxia Analyst.

Adoption of cryptos by renowned international companies is gaining momentum. After announcing the imminent launch of its own by J.P. Morgan Chase and a range of digital currency solutions by Swiss Julius Baer, companies offering instant messaging services, such as Facebook, Telegram, Signal, Line and Kakao are joining the group. That would mean that nearly two billion people in total could soon start using cryptocurrencies in some form.

Bloomberg broke out the news first that Facebook is working on its own cryptocurrency, last December. At that time, little was known about the specifics, due to the high confidentiality of the project. Today, however, thanks to the anonymous sources of "The New York Times" some more details are known. More than 50 people are working on the project. The created cryptocurrency is intended to be used for payments between users in the WhatsApp app, which Facebook owns. The fact that, according to “NYT”, Facebook has already negotiated with cryptocurrency exchanges to sell its product to consumers, may prove how advanced the project really is.

The currency created by Facebook is a stablecoin, i.e. a coin with its value pegged to a “traditional currency”, for example to the dollar. This eliminates one of the main risks of cryptocurrencies, namely high price volatility. According to the "NYT", Facebook even considers attaching the value of the cryptocurrency to a basket of different currencies, in which the dollar, the euro, but also other currencies could be placed.

Whether we want it or not, cryptocurrencies will very soon become a part of everyday life, given the worldwide popularity of instant messengers. Obviously, this has enormous advantages, as it will enable almost instantaneous transfer of funds between users from different countries or continents at minimum or even zero costs. However, what does this mean for example for bitcoin and other existing cryptocurrencies?

On the one hand, it seems that they could be marginalised because giants like Facebook will simply eat them with their vast user base. However, on the other hand, both consumers and institutional investors will probably have a more positive attitude towards cryptocurrencies. This may ultimately "force" financial supervisors in individual countries to introduce more explicit regulations concerning cryptocurrencies.

It is likely that the amounts of individual transactions made in the most well-known instant messengers will be relatively small. This could significantly increase the demand for using other, already existing cryptocurrencies to carry out somewhat larger transfers. The already existing cryptocurrencies may also resemble more and more traditional currencies when it comes to their quotations. This will lead to lower growth potential for prices, but at the same time significantly reduce their volatility. It is likely that the range of financial products based on cryptocurrencies is also likely to be vastly expanded. This would clearly help digital asset managers to experience a higher increase in net inflow of capital and young companies to raise funds for their development.

After a weak dozen months for cryptocurrencies, the current year, and especially its second half, is going to be much more exciting than the 20,000 USD highs reached by Bitcoin. A bit behind the scenes at the moment, but fundamental changes in the cryptocurrency world are already taking place. And it seems that these changes are positive.

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