War on crypto?
Late Thursday, Trump hurled three tweet bombs at cryptocurrencies, specifically naming Bitcoin and Facebook’s (FB) Libra. He started the assault by saying that he’s not a big fan of Bitcoin or other cryptocurrencies. He echoed the same concerns raised by Democrats about cryptocurrencies being used for illegal activities such as the drug trade.
Talking specifically about Libra, he said that the cryptocurrency won’t have much “standing and dependability.” He also said that Facebook should opt for a new banking charter and comply with the same regulations applied to other US and foreign banks.
He concluded his tirade by saying that the US dollar is the only real currency in the US. His claim that the dollar remains stronger than ever didn’t quite hold, as the dollar has fallen against an index of global currencies due to the expectation of a rate cut at the next Fed meeting. Goldman Sachs and JPMorgan Chase don’t think the rate cut will boost equities.
The hall of echoes
On Wednesday, Fed Chair Jerome Powell said that Facebook’s Libra project raises some serious concerns, and it can’t go forward if the regulator isn’t satisfied. His comments didn’t affect Facebook stock, but it took Bitcoin down by over $1,500.
Last week, the US House of Representatives asked Facebook to stop developing Libra, its cryptocurrency, and Calibra, its digital wallet. Representative Maxine Waters, the chair of the Committee on Financial Services, and Representative Carolyn Maloney, the chair of the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, sent a letter to Facebook executives including CEO Mark Zuckerberg and COO Sheryl Sandberg. Three other representatives also signed the letter. The letter raised concerns about Libra undermining the US dollar, something Trump’s tweets echo.
Trump’s comments about Libra put him in the same circle as Democrats and Powell. It’s an interesting development, as Trump isn’t happy with the Fed not cutting interest rates to drive growth. His dislike of Powell is also well known.
Trump’s dislike of tech companies
It’s not just the Fed that Trump dislikes. His comments regarding Libra come amid the backdrop of his dislike and mistrust for US tech companies. He feels that Facebook, Google, and Twitter (TWTR) are on the side of the Democrats. Despite his dislike for it, however, he continues to use Twitter ardently. Trump has also been at war with Amazon. His view of Facebook could also be influencing his strict language about Libra. Interestingly, the Bezos-owned Washington Post ran a story about how Facebook helped Trump’s presidential campaign.
Facebook falls, payment companies gain
Shares of Facebook fell 0.74% yesterday and were trading lower in premarket trading today. Since Trump tweeted after market hours, we’ll likely see the impact on the associated stocks today. Facebook underperformed the S&P 500 (SPY), which gained 0.23% yesterday. SPY saw a boost on hopes of a rate cut following Powell’s testimony.
Other members of the Libra Association had a good day yesterday. PayPal (PYPL) continued its dream run this week with the expectation of an earnings outperformance. It gained 0.84% yesterday and was up 0.23% in premarket trading at 4:02 AM ET today. Visa (V) gained 0.8% yesterday and was up 0.42% in premarket trading at 5:35 AM ET today. Mastercard (MA) gained 1.07% yesterday and was up 0.14% in premarket trading at 4:42 AM ET today.
Bitcoin was unaffected by Trump’s tweets.