The price of Bitcoin (BTC) exceeded the $13,000 level for the second time after PayPal’s announcement caused a powerful rise pushing the asset to a new high for 2020.
Currently at around $12,970, Bitcoin gained nearly 10% following the news, surpassing PayPal itself in terms of market capitalization to take 21st place in the ranking of the largest assets.
PayPal’s announcement about the crypto integration comes two weeks after Square, another payment giant, announced the investment of about 1% of its assets in Bitcoin.
According to Lanre Jonathan Ige, researcher at Amun AG, the continued trend of large investments will be crucial in attracting institutional interest in Bitcoin:
„Companies often follow the trend, and we can expect a number of other companies to follow Square and MicroStrategy’s example, while asset returns continue to stagger.
However, recent news from PayPal is more likely to bring the masses to Bitcoin instead of promoting Bitcoin for institutions. PayPal could engage a more mainstream audience, spreading cryptocurrency first as an investment vehicle and in the future as a payment method, one of the main goals of the Bitcoin community in terms of mass adoption.
PayPal could expand the Bitcoin user base.
According to Glassnode data, Bitcoin currently has over 187 million users, or „hodler“. However remarkable, crypto analyst Willy Woo pointed out that this number pales in comparison to the 487 million PayPal users.
Bitcoin HODLer totals
Total Bitcoin HODLer. Source: Twitter
By integrating Bitcoin, PayPal is bringing the name to a mainstream audience. Although for the time being it will only be possible to buy, sell and store Bitcoin through PayPal, the company has announced that in 2021 it will add payments and transfers in cryptocurrency. This could consolidate Bitcoin’s reputation as a payment and remittance mechanism.
Making transactions through PayPal and other centralized platforms could even become one of the ways Bitcoin reaches a mainstream user base. Centralized transactions (along with other methods such as sidechains and lightning networks) could be used to reduce congestion on the Bitcoin blockchain, allowing it to be used for larger transactions that require greater security, transparency, or immutable proof of ownership.
Bitcoin is on track to outperform the banks
While payment processing companies and cryptocurrencies seem to be finding greater synergy with the passage of time, the same cannot be said for banks, and these difficulties are reflected in their quotes.
Jon Erlichman, tech correspondent at BNN Bloomberg, reported that assets such as Bitcoin, Ether and the shares of payment companies such as PayPal and Square have performed well this year, but since the beginning of the COVID-19 pandemic, financial stocks have not delivered the expected results.
Bitcoin and Ether performance since the beginning of the year to date. Source: Digital Assets Data
Since the beginning of 2020, Bitcoin and Ether prices have increased by 80.5% and 217%. In the meantime, PayPal has increased by 99% and Square by 186%. Banks such as JPMorgan and Bank of America have lost 28% and 32% respectively. Citigroup suffered a 46% loss and Wells Fargo saw a 58% drop.
Macro asset returns for this year
As more and more people interact with Bitcoin as an investment vehicle, consumers may turn their backs on banks and invest in cryptocurrency.
According to experts, Bitcoin could even benefit from what some call the ‚Robinhood effect‘, a phenomenon in which retail investors with disposable income buy an asset through playful investment platforms without commission to avoid the rigmarole often associated with banks.
If this were to happen at BTC, the digital asset could experience the same kind of hyperbolic buying frenzy observed months ago when Robinhood investors poured funds into Tesla.