With the buzz about Facebook’s (FB) entry into crypto, there are key questions not being asked. Will Facebook’s entry into crypto make its stock go up? If FB goes up, will it stay up?
Looking at the Facebook (FB) chart, we see important developments.
Facebook (FB) is just barely above the bottom of the massive gap lower from July of last year (Figure 1). In our view, that gap was created when people realized that Facebook (FB) is “just an app,” and it may be a lousy one at that.
Yes, it is a powerful platform for ads, but it’s not a company that makes or builds a product. It relies on eyeballs. Facebook (FB) needs people drifting their day away looking at other people’s lives instead of focusing on their own. While Facebook (FB) does allow a connection between people, it also makes people feel like their life is meager in comparison to others.
Facebook (FB) is a digital depressant.
In our view, these reasons along with the data and privacy issues are why Facebook (FB) has not been able to climb back to its prior heights.
Going one step further, we see Facebook’s (FB) attempt to get into crypto as a potentially desperate move. Globally, Facebook has to figure out a way to compete with WeChat. WeChat is all-purpose social media and e-commerce platform. You pretty much can’t go anywhere or pay for anything in China without it.
It is also worth noting that Facebook’s (FB) entry into crypto may be a large scale repeat of the Long Island Iced Tea move. In that case, a small cap beverage company tried to make it’s stock go up by changing its name to Long Blockchain. The experiment did not turn out well.
One other key indicator of the impact of Facebook (FB) entering crypto will be how it impacts the technology sector overall. Looking at the Nasdaq 100 (QQQ), this Facebook news has created a sweep above the 76% retracement of the recent down move (Figure 2). This could be a breakout to the upside. It could be a chance for short sellers and hedgers to get ready for a big move lower in stocks.
While it would be great for crypto if Facebook (FB) and QQQ took off to the upside off crypto news, there is plenty of room for skepticism.
Bottom Line: We wonder if people are considering Facebook’s (FB) entry into crypto as an act of desperation. We suspect that once the headlines fade, any disappointment trade could really hurt Facebook’s stock and stocks as a whole. We don’t know for sure what will happen, but it reminds us of a famous saying: The four most dangerous words in the English language are: “This time is different.”
The Crypto.IQ Trading Desk is the best place for crypto wisdom on such topics. Our analyst team is also on top of the Facebook (FB) announcement and has plenty to say about it.
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