There is never a dull moment in the world of blockchains and cryptocurrencies.
The two earth-shattering stories of the past two weeks – the launch of the Libra project and the wild swings in the bitcoin market – might seem like unrelated topics. And, for the most part, the causal impact of the former on the latter is probably not much greater than that of another oft-noted bitcoin price correlation: the avocado chart.
However, the coincidence of these two developments does speak to how globally impactful Satoshi Nakamoto’s invention has now become.
From that wider perspective, these two developments are not at all unrelated. Indeed, they both capture elements of a massive, worldwide financial transformation, all happening at a time of growing economic uncertainty.
Bitcoin’s role as ‘digital gold’
Whether now or in the future, I believe the arrival of Libra, far from being a competitive threat, will be extremely supportive of bitcoin.
Not only will the looming international debate over Libra elevate the conversation around cryptocurrencies and so draw more people into the most established of them, it also represents a major step toward the kind of world in which bitcoin should thrive.
Whether or not Libra succeeds, it confirms the inescapable reality that international money movements in the digital era will be based on blockchain-like solutions that disintermediate the existing gatekeepers and challenge the bank-and-sovereign money-dominated model of the 20th century. It also underscores how we are moving into an age of digital assets.
And, just as people sought out physical assets to protect their wealth from the vulnerabilities of the analog era’s trust-dependent system – by storing value in gold, for example, or in real estate – they will now seek out similar protection in digital assets with similar properties. Bitcoin is not described as “digital gold” for nothing; it offers a level of censorship resistance and isolation from the politicization of money that the corporate-driven Libra project cannot.
So, regardless of whether or not there is a causal relationship, the Libra announcement offers important context for the continued, accelerating demand for bitcoin, the surge of buying that saw it rally from around $7,000 on June 10 to a peak just below $14,000 on Thursday last week.