Will Facebook launch a cryptocurrency bigger than bitcoin?
Social media giant Facebook has reportedly overturned its ban on cryptocurrency advertising and is even considering making a move into the cryptocurrency space itself according to reports in semi-credible U.S. news site Cheddar.
The reversal of the crypto advertising ban despite the regulatory heat on Facebook suggests founder Mark Zuckerberg is not against the crypto space and Facebook is investing heavily in the blockchain research space already.
Given it is able to recruit the brightest tech heads out of leading U.S. universities and the Silicon Valley marketplace investors can expect whatever Facebook’s blockchain working group comes up with to be market-leading, with a digital currency or payments system of sorts likely to be flagship products.
Blockchain is the technology that underpins cryptocurrencies as it records ownership and trade in the digital currencies across an incorruptible ledger, although this innovative record system could be used in any number of online applications including share or commodity trading for example.
Tech site Recode has also suggested Facebook may use blockchain technology to provide encrypted data storage to clients in what sounds like a high-security cloud services type business model. It’s also thought it might use the tech to enhance its identity verification procedures, as Facebook continues the fight to monitor the more than 1 billion posts made to its site each day.
Whatever Facebook comes up with to leverage blockchain technology across its broadening platforms is also likely to have a commercial bent given the group’s relentless focus on growing profitability.
While cryptocurrencies generally have been on a slide in value over the course of 2018, with Bitcoin, Ripple and Ethereum all falling lower after a buying frenzy in 2018 by less-sophisticated retail investors betting on nothing more than their prices going up.
Today’s leading cryptos will only establish an intrinsic value if they can be used as a medium of exchange for goods and services in the same as real world global currencies.
Otherwise they have no value other than what someone else is prepared to pay for them ignorant of this fact, or in the expectation that one day they might become a viable means of exchange.
Facebook could attempt to create a digital currency that offered a viable means of exchange and for investors in the technology space the key takeaway is that market leaders or ‘lead huskies’ tend to keep on winning due to their numerous competitive advantages that include the deepest pockets and most talented staff.
In Australia most of the lead huskies in growing global space are in the healthcare sector, with businesses such as CSL Limited (ASX: CSL) or Cochlear Ltd (ASX: COH) posting consistent growth thanks to their scale and market-leading products.
The local market also has some junior tech businesses making waves in niche spaces such as Pro Medicus Limited (ASX: PME), but nothing close to the scale, dominance, and superiority of leading U.S. tech businesses.
As such I’d suggest making sure your investment portfolio has some exposure to U.S. tech leaders as on the balance of probabilities they look to have the best risk-adjusted chance of delivering strong profit growth and share price gains over the decade ahead.
We're living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.
That's why at The Motley Fool we've been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Cochlear...