Key facts:
Meta and PayPal forecast little revenue and user base growth for 2022.
Crisis of confidence, lack of liquidity and geopolitical tensions affect the stock markets.
Everything that goes up, at some point has to come down, Isaac Newton raised back in the 17th century. This phrase not only summarizes the Law of Gravity, but also the behavior of financial markets. When the value of a product rises speculatively and under a combination of specific factors, at some point its price can precipitate.
This seems to be what is currently happening with the companies and assets that more benefited in the period of the pandemic. While shares of companies like Meta (former Facebook), PayPal, Spotify, and Netflix skyrocketed when the COVID-19 lockdown was at its peak, today they are posting some the steepest falls of all its history.
If we take Meta, Mark Zuckerberg’s company, for example, it lost 200 billion dollars in just one day. It is the worst loss recorded by a company in the history of the United States.. The event occurred a few weeks ago, but the reality is that the old Facebook has not yet been able to recover and its shares are at a price of two years ago.
Meta is not the only one affected, but also PayPal, which is currently trading at a price it had achieved before the pandemic. In a nutshell, it is as if the growth achieved by its shares during the COVID-19 quarantine has been erased. Although the fall of Spotify and Netflix is lower, they also record losses amounting to 45% of their value compared to the highest price they reached last year.
The collapse has been surprising, although some consider that this is only the chronicle of a death already announced. While certain analysts consider that the tensions between Russia and Ukraine keep the stock market on guard, others point out that the changes that have occurred in daily life, with the introduction of the COVID vaccines, disfavor the meteoric growth of these firms. .
And it is that the world has changed in the last two years and the measures to keep COVID-19 at bay have become the new normal. In this sense, the explosion of use that these services had and their great valuation among investors has been diminishing. As if that were not enough, companies like PayPal predict little growth in their business by 2022, due to the devaluation of the dollar and the increase in competition, reasons that have also discouraged the market. Likewise, Meta registers for the first time in its history a decrease in your active user basewho are migrating to other platforms such as YouTube and Tiktok.
In the midst of these red numbers, some may speculate that bitcoin could also be trapped in this bubble of assets that momentarily benefited from the pandemic. Undoubtedly, the cryptocurrency created by Satoshi Nakamoto also saw an unexpected price rise last year thanks to the narrative that it serves as a store of value against the loss of dollar dominance. Also, its digital and cross-border features made it a useful payment method in quarantines.
However, is it true that bitcoin is depreciating in the same way as Meta and PayPal shares? Making it clear that they are very different financial products, we can analyze the variables.
Liquidity crisis and political tensions
There are two external factors that are currently affecting all market assets to a greater or lesser extent. Yes, we are talking from indices like S&P 500, to the cryptocurrency market. These are, first of all, the political tensions between Russia and Ukraine that keep investors on their toes and cause great volatility in asset prices. On the other hand, it is lack of liquidity in the stock markets due to the elimination of aid issued by governments to cover the debacle that the coronavirus generated at an economic level.
In recent days, bitcoin has been hovering between $37,000 per unit and $40,000. Like other stocks and products on the stock market, the fact that the conflict between the two European nations looks unlikely to be resolved peacefully keeps the world on edge. And therefore, no one dares to make a risky financial move.
Regarding the lack of liquidity, it must be taken into account that between 2020 and 2021 the United States government (and the European Union as well) issued various bonds to help companies and citizens due to the work stoppage caused by the pandemic. This produced an explosion of liquidity that was used by some people and institutions to secure capital in various investments.were stocks or assets such as bitcoin.
Today, when these aid packages have ended and the dollar suffers from the artificial injection of capital into the market, the price volatility has increased and purchasing power has decreased. This affects both companies like Meta, as well as the case of bitcoin, which continues to resist entering a downtrend.
Increased competition and reputation crisis
Despite these shared elements, there are variables that are specifically affecting the aforementioned companies. These are the rise of alternative services competing with these brands, as well as a long-standing reputational crisis that hits hard to the giants of the sector.
Although Meta currently has successful platforms such as Facebook, Instagram and WhastApp under its control, it has entered the landscape a powerful competitor: TikTok. The same is true of PayPal, which competes not only with digital banking, but also with services such as Block’s Square, stablecoins, and bitcoin. In the case of Netflix, services such as Amazon Prime, Hulu and HBO have also taken center stage.
So, it would not only be that the reality of the pandemic has changed in the lives of the citizens of the world, but also that these users know that they have a wide range of alternatives that they can choose from when using any of these services. In this case, Bitcoin is one more alternative that is taking away portions of power from the more traditional forms of money.
Refering to reputation crisis, this mainly concerns two brands: Meta and PayPal. The first company with a scandal of private data leak that still carries much regret, the second with multiple censorship complaints by closing accounts to its users. This is the image they have left over the years, but in the past it had not affected them so much because there were not as many alternatives for these services as there are today.
In a world where society demands more ethical, private and responsible products, brands with a “bad reputation” can easily be replaced by those that have managed to adapt to the new moral codes that consumers consider essential to use their services. And this could be one of the reasons that most works against companies like Facebook, while favoring assets like Bitcoin that are part of the change that society demands.
