Libra is crushed and major cryptocurrencies supposed to be crushed along with it. Instead, they staged a big rally, catching many cryptocurrency observers by surprise.
Apparently, there’s something missing here, and finding it is crucial to determine whether the recent rally in major cryptocurrencies has legs.
When Facebook and its partners announced project Libra a couple of months ago, it created a positive social media buzz for digital currencies, sparking a strong rally, which sent Bitcoin firmly above $10,000, again. Other cryptocurrencies rallied in sympathy with Bitcoin.
What’s the connection here? Associating digital currencies with a big company like Facebook could bring both awareness and trust to major cryptocurrencies. It could also help cryptocurrencies win favorable government regulations, which will further add to public trust.
Awareness and trust are both important in helping major cryptocurrencies win “early adopters,” a key group for every product to reach the “tipping point,” the mass user market.
“Love it or hate it, Libra was a huge boon to mainstream acceptance of cryptocurrencies,” says Daniel P. Simon, CEO and Co-Founder of Vested and author of The Money Hackers: How a Group of Misfits Took on Wall Street and Changed Finance Forever.
Unfortunately for cryptocurrency enthusiasts, things didn’t turn that way. The Libra project has been falling apart, as key partners are leaving the projects, and government regulators seem determined to pull the plug from it altogether.
At least that’s the impression one gets from the Congressional hearings last week.
That’s why major cryptocurrencies sold off early in the week, as these hearings got under the way in the American capital.
Then, towards the end of the week, major cryptocurrencies staged a big rally, which reminded the old good days.
What’s missing here? A couple of things.
One is that some cryptocurrency investors may be too pessimistic for the future of Libra. “Libra is in a precarious spot but it’s far from dead,” Simon says. “Don’t write Libra off just yet – Facebook has more than a fifth of the world’s population on its platforms, with significant resources at its disposal to do battle over the future of Libra.”
Perhaps, it was this realization that turned things around for major cryptocurrencies, in an oversold market.
And there is Wall Street, which have placed short bets against Bitcoin; and had to cover once things moved in the wrong direction.
And there’s the upcoming Bitcoin “halving,” which is usually a bullish catalyst for Bitcoin and other major cryptocurrencies, as discussed in a previous piece here.