Is Facebook like Bitcoin? According to an article on a New York Times blog, the similarities are really close. When you look at the fact that Facebook is decentralized (not controlled by the government) and that it needs all the individual members in the network, you can see similarities with the Bitcoin network and the way it operates. The similarities don’t end there, however. The closer you look, the more you’re going to see that Facebook stock is a lot like the value of Bitcoin stock.
If you haven’t heard, Facebook bought WhatsApp. They spent a lot of money, but they also gave the company a lot of shares – which were treated as if they have value because they do. While not legal tender, Facebook stock actually has a value that can fluctuate depending on a number of circumstances. The same holds true for the value of bitcoins on various exchanges around the world. Yet at the same time, the Facebook stock (worth around $15 billion now) may not be worth as much in a few months, weeks or even days.
Bitcoin is also not yet universally accepted as something of value. For example, while a restaurant here and there may accept it for payments for food, the thousands of McDonalds around the country and world do not. Bitcoin is also not considered legal tender by governments and it’s not currently regulated. This is why Bitcoin is only as valuable as the people in the network make it. This is another big way that Bitcoin is actually a lot like Facebook stock right now. The value of a single Bitcoin is perhaps more volatile, though.
Now, let’s look at some of the differences as well. Bitcoin, as you know, will have 21 million units in play when all is said and done. After that many are created, no more will be produced. On the other hand, Facebook can (and has) increased the number of shares they have in their company, thereby diluting the value of the stock a little. This could turn out to be a huge problem if Facebook adds too many shares to the pile. Every million or multi-million shares they inject into the picture, the value of them all goes down. With the WhatsApp purchase, they added around 9% new shares to the company.
One problem that both Bitcoin and Facebook shares face is that at any time, a newer and bigger beast may step into the spotlight. For Bitcoin, this would be a bigger and better virtual currency network. With the problems that Bitcoin has had with security, this isn’t an impossibility. Likewise, Facebook also has to make big moves (like buying WhatsApp) in order to make sure they keep their edge. If not, another social media network could quickly rise up and become dominant. This would, of course, highly devalue all that Facebook stock.
Here’s a quote from that NY Times blog post that is filled with facts and interesting:
The fundamental value of Bitcoin is incredibly tricky to pin down. According to The MIT Technology Review, Bitcoin was four times more volatile in 2013 than the average stock, and the dollar-Bitcoin exchange rate was 10 times more volatile than the dollar rate with major currencies like the euro or yen.
Looking at that, it’s easy to see that the value of Bitcoin could easily go up or down at any time. The same holds true for Facebook stock. They just bought a company that has no proven track record when it comes to revenue. If they’re not able to monetize the company within the Facebook network, they’re going to make their shareholders very unhappy. And it could signal the demise of Facebook – or at least it losing its position of prominence in the realm of social media websites.
This brings us to the closing of the blog post, where they discuss the overall value of bitcoins and Facebook stock. Because they’re so volatile, there’s a huge chance of making a lot of money. This is why it’s a good idea to get in on Bitcoin now. While it’s a risky gamble, perhaps, the payoffs are huge. Facebook may come out ahead if the WhatsApp acquisition was a good idea. If so, those that held onto their Facebook shares will be very happy indeed.
And for those that are trading in Bitcoin right now, the fact that a lot of value was lost since December 2013 shouldn’t be ignored, but there is a possibility of a huge return if the prices once again begin to rise and even surpass the previous high point of over $1,000 for one BTC. We’d like to know what you think, so if you have a moment, leave a comment and let us know if you’d rather be paid in Facebook stock or Bitcoin if those were the only two options available for one reason or another.