November 23, 2020

Paypal gave users access to bitcoins and probably triggered a shortage of the cryptocurrency

On November 13, representatives of PayPal Holdings Inc announced their own cryptocurrency platform: now users can buy, sell and store four popular cryptocurrencies in the application. Paypal is a US-based payment system with over 200 million users; the new option is currently only available in the USA.

The most expected update

The announcement of the new service was done at the end of October. The service has been in test mode for several weeks, and now it is officially open to all US Paypal users. There are four cryptocurrencies available: Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. The new option is licensed by the New York State Department of Financial Services.

An important advantage of Paypal: all cryptocurrency transactions on the platform will be automatically converted to fiat. This means that users will, in fact, operate with their usual payment units.

Cryptocurrency payments are accepted by 26 million merchants which are partners of Paypal, but there is a weekly limit on payments in crypto: about $20,000.

It is expected that in 2021 the opportunity will be used by Paypal customers from other countries; PayPal CEO Dan Shulman said this will happen in the first half of the year.

The ripple effect

Paypal's innovation is truly revolutionary; this is the first available opportunity to pay with Bitcoin for everyday purchases. But analysts have already seen a number of consequences.

For Paypal, the company's shares are up 75% in the past three months, and during preliminary trading on Friday, November 13 (the day of opening the crypto platform), they gained 2%.

For Bitcoin: Paypal users' interest in bitcoins turned out to be several times higher than forecasted. And now, according to analysts, Paypal buys up to 70% of new bitcoins: the numbers are given in a study by the crypto investment company Pantera. The study also states that Paypal is highly likely to be the cause of the recent rise in the price of Bitcoin.

For investors: the mass hoarding of bitcoins through Paypal and through the Cash App is causing a shortage of the first cryptocurrency. Therefore, it is more difficult for capital owners to acquire this asset. Although it is noted that the deficit is now not as high as during the hype in 2017.

Also, experts from Panter and other companies note that deflation (appreciation) is embedded in the Bitcoin ecosystem. Even if all the BTC in the world are mined and bought, this will not cause the asset price to collapse.

When will other payment systems add Bitcoin? Learn more from our article.