PayPal has entered the market for cryptocurrencies, revealing that its clients will use their PayPal accounts to buy and sell Bitcoin and other virtual currencies.
It will then be possible to use those virtual coins to buy stuff from the 26 million sellers that embrace PayPal, the comoany said.
Over the next few weeks, PayPal plans to phase out buying options in the US with the complete rollout due early next year.
With the announcement of this news, Bitcoin prices increased, breaching the $12,000 level.
Ethereum, Litecoin, and Bitcoin Cash (a Bitcoin spin-off) will be the other crypto currencies to be added first.
The company said, everything could be stored “directly within the PayPal digital wallet.
Cryptocurrencies, partially due to the rapid shift in prices they can encounter compared to conventional state-backed currencies, have remained a niche payment form, but with current privacy issues and Big Brother watching us all, have gained faster and wider popularity this year.
PayPal said it was aimed to increase consumer understanding and adoption of cryptocurrency.
As part of this offering, PayPal will provide account holders with educational content to help them understand the cryptocurrency ecosystem,” it said.
But David Gerard, author of the 50 Foot Blockchain Attack and the forthcoming Libra Shrugged: How Facebook was trying to take over the capital, said that a crypto day-trading market” was represented by PayPal.
“I’m at a loss as to who the market is for PayPal as a crypto-exchange,” he said.
But with Bitcoin, whose unpredictable and less well-regulated nature was like “gambling on penny stocks” he compared it to playing the stock market. I’m puzzled why this will be provided by PayPal, and what they’re trying to do here isn’t obvious,’ he said.
“There must be someone at PayPal who is very interested in cryptocurrencies,” he said.
Cryptocurrencies for sale have also been sold by other payment companies, such as Square’s Cash app and Revolut. Yet PayPal has one of the world’s largest retailer networks.
PayPal would translate the cryptocurrency into the relevant national currency when it comes to the use of virtual coins, but the business being paid would never obtain the virtual coins – only the right sum of pounds or dollars.
The system meant that there would be “certainty of value and no incremental fees” PayPal said.
But the use of Bitcoin to pay ordinary merchants is not attributable to the “early 2021” launch.
The unpredictable prices of cryptocurrencies – along with their past use as a less traceable means of payment for illicit purposes – have resulted in multiple calls to regulate them.
The New York State Department of Financial Services granted PayPal approval for its operation in the form of a conditional “Bitlicence” – the first such licence granted.
But it is not the first venture by PayPal into the region.
The company was once a partner in the Libra digital currency of Facebook, but became the first to withdraw from the partnership, only a few months after it was revealed.
Possible Reasons Why Bitcoin Is Rising So Fast
What is behind this latest run-up in Bitcoin prices?
What we know is that the price of bitcoin has shot up from the $11,000 range to the cusp of $19,000 since mid-October. And while prices are a few hundred dollars short of their all-time peak, the market cap of bitcoin recently set a milestone by breaking above $345 billion; more bitcoin has been mined and placed into circulation since the 2017 mega-rally.
The cause of the rally is obvious to a wide segment of market observers: more consumers with deeper pockets. But there is also a possible theory that peculiar conditions have temporarily limited supply, putting the staying power of the rally into doubt.
Without any story of a big financial institution opening up to bitcoin, if not fully accepting it it does not seem to be a day passing. A BlackRock CIO said on CNBC that it “could take the place of gold to a large extent.” By the end of 2021, a Citi analyst said bitcoin could reach $318,000. An analyst at Citi said bitcoin could reach $318,000. A JPMorgan report claims that institutions are purchasing three times the amount they were in the previous quarter. Central banks print fiat currency as easily as they can (the stock of Hewlett Packard is up 3 percent year to date, funnily enough). Governments are now in the act, throwing trillions of dollars, euros and everything else they can borrow in an attempt to stave off an economic calamity that might lead to civil chaos and street violence—or more of it.
Since its birth more than a decade ago in the midst of the global financial crisis, such potentially inflationary policies have been just what bitcoin supporters have warned of and even secretly wished for as they started to stock up on digital assets. In a recent article, CoinDesk’s Galen Moore spells out four ways in which this new rally is different from that of 2017. More “whale” accounts hold 1,000 or more Bitcoin than ever before and they have risen in amount at higher prices, unlike three years ago. Bitcoin and its nearest competitor, ether, are making recent highs together, although the record rates for ether were in the rearview mirror for months after bitcoin went higher in 2017. This time around, managed markets are part of the mix, with the amount of CME daily futures trading hitting north by $1 billion most days in the past few months. And some 200,000 Bitcoins have been sold by investors in East Asia since the beginning of 2020 to satisfy the rising appetites of their counterparts in North America.
Preliminary data on three COVID-19 vaccines, after all, showed an efficacy rate of 90 per cent or higher. And also on the political front, confusion has also started to dissipate in the United States about who will lead the federal government in a couple of months. Yet, as all of us know, the other side of the equation is availability. Is there enough bitcoin to slake the thirst of all those new investors, fuelled by economic concerns and egged on by analysts, that have entered the market?
Supply was the main subject for those talking about cryptography months ago. Bitcoin underwent a halving, whereby rewards were cut in half for successfully mining a block. That would automatically lead to a price rise, the idea went, because every day there were going to be 900 fewer new bitcoins added to supply, but every day new buyers were added. In the following few months, the price of bitcoin remained around the $9,000 mark. Since halvings are established events programmed into bitcoin code from the very beginning, when it actually happened, the market obviously wasn’t all that shocked.
Getting back to what else we know, one thing to add to that list is that a government crackdown in China, the site of the lion’s share of bitcoin’s hash power, is taking its toll on some of the crypto exchanges that cater to miners and traders in the nation. The crackdown is not necessarily about stopping cryptography, but about trying to root out money laundering. It just so happens that crypto exchanges are maybe, accused of being in the mix. Therefore, executives at exchanges have earned the third degree.
A key executive at OKEx—literally, the guy who had the keys to the addresses of OKEx—went to MIA and just recently resurfaced after spending some time talking to China’s authority. In the meantime the supposedly Malta-based exchange was forced to avoid withdrawals because, apparently, for one of the world’s largest trading venues, only one person had those keys and he happened to be in China. In case someone is hit by a bus, it is hoped OKEx has worked out a contingency plan. That’s a few days before the price broke out of the $10,000 to $12,000 trading range, where it had been jumping around since July.
Then again just because you can’t withdraw OKEx bitcoin, it doesn’t mean that you can’t trade it. In fact, according to Skew, open interest in its futures contracts is $1.22 billion. For any trade, that’s the largest open interest number.
Although bitcoin is unable to flow into or out of OKEx, its cost is consistent with those of its competitors.
“BTC’s price on OKEx is not that different from other exchanges,” Muyao Shen told CoinDesk’s Ki Young Ju, chief executive officer of data provider CryptoQuant. “…[P]eople can trade their BTC on OKEx despite the withdrawal suspension.”
And miners are considering other venues to unload their freshly minted bitcoin; according to data from Chainalysis, Huobi, Binance and other exchanges seem to be picking up the slack. Sadly, because of the money laundering crackdown, it was not easy for some miners to then turn their crypto into fiat (in this case, Chinese yuan) for Robinhood-easy.
The two reasons discussed above for bitcoin’s bull run — fresh demand and bottled-up supply — are not mutually exclusive. Soon at least one of them will be put to the test: by Friday this week, OKEx is expected to allow withdrawals.
“With all of the institutional flow around crypto, I don’t think the status of any single exchange is enough to affect prices beyond typical daily volatility,”With all of the institutional flow around crypto, I don’t think the status of any single exchange is enough to affect prices beyond typical daily volatility. By the end of this week, we will probably know. If we do so we will actually be able to work out if this is a market driven by demand or a market driven by supply.