The year 2020 has had many important announcements for the cryptocurrency industry but few were as important as PayPal finally allowing for cryptocurrency transactions on their platform. This was significant because PayPal is one of the biggest fintech platforms in the world, boarding over 300 million users. By allowing cryptocurrency transactions on its platform, they were exposing it to a wider audience.
While many heralded it as a good development for the industry, it appears that there are some unintended consequences of the move. According to Pantera Capital, PayPal is responsible for a new shortage of bitcoin, the world’s most popular crypto.
PayPal Hoarding Bitcoin Supply?
Anyone who has watched the price of bitcoin as of recent would have noticed that the price of bitcoin has surged in the last week. As of now, the price has broken above $18,000 per token and seems well on its way to reaching its previous peak of $20,000 per token. There have been a number of factors attributed to this including the announcement of the PayPal decision.
However, a report from Pantera Capital suggests that PayPal’s announcement may not be the only way in which it has affected the bitcoin price. Their theory is that PayPal is buying up a majority of the new bitcoins that are being mined. By their estimation, PayPal has bought up around 70% of the new bitcoin supply. This has led to an artificial shortage of bitcoin that has, in turn, driven up the price of the token.
“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,” the report says.
PayPal is not alone in that as CashApp was also cited as a large mainstream firm that is buying up a large chunk of the bitcoin supply. This is besides the fact that PayPal’s crypto trading services have not been rolled out globally just yet. Thus, the current scarcity and price hike is likely to last into the future.
There have been concerns in the past about whether there is even enough bitcoin in existence to go around all of PayPal’s millions of users if the demand ever becomes that high. It is apparent that cryptocurrency as a whole is entering a new phase of maturity and the new PayPal saga is only a small part of a bigger puzzle.
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