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PayPal, Square Gobbling Up All New Bitcoin Supply Fuels Current Price Spike: Report

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PayPal, Square Gobbling Up All New Bitcoin Supply Fuels Current Price Spike: Report

PayPal Holdings Inc (NASDAQ: PYPL) and Square Inc (NYSE: SQ) foray into the cryptocurrency space is fueling Bitcoin’s upward movement, according to Pantera Capital, an investment firm focused on digital currency and blockchain technology.

What Happened: The investment firm analyzed the current Bitcoin rally — looking at numbers from itBit, the cryptocurrency exchange run by Paxos — the partner of PayPal. 

“When PayPal went live, volume started exploding. The increase in itBit volume implies that within four weeks of going live, PayPal is already buying almost 70% of the new supply of bitcoins,” wrote Pantera Capital.

The investment firm said that PayPal and Square’s Cash App are already purchasing more than 100% of all newly-issued bitcoins.

Pantera Capital theorizes that when other financial institutions jump on the cryptocurrency bandwagon, “supply scarcity will become even more imbalanced.”

“The only way supply and demand equilibrates is at a higher price,” the investment company explained.

Why It Matters: Paxos' itBit saw its trading volume surge 500% to $26.57 million in mid-November from $4.41 million a month ago, as per CoinGecko data. The 24-hour volume at press time was $23.65 million.

While it took the Bitcoin community 12 years to grow to 100 million strong, PayPal has brought with it 300 million active users, noted Pantera Capital.

“This rally is much more sustainable than [in] 2017. One of the main differences is the ease of investing in bitcoin now — via PayPal, Cash App, Robinhood, etc,” according to Pantera Capital.

Since the beginning of the year, Bitcoin has gained 155%, while Etereum has risen 330%. Comparatively, the S&P 500 has risen a modest 10.11% on a year-to-date basis.

Paypal’s CEO Daniel Schulman said this month at the company’s third-quarter earnings call that its cryptocurrency leap is “just the beginning of the opportunities.”

Price Action: Bitcoin traded 1.21% lower at $18,298.37 at press time, while Ethereum traded 3.96% higher at $566.77.

Latest Ratings for PYPL

DateFirmActionFromTo
Jan 2021B of A SecuritiesMaintainsBuy
Jan 2021BTIGUpgradesNeutralBuy
Dec 2020KeyBancMaintainsOverweight

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