The Pros and Cons of PayPal-Bitcoin Combo

Last week, the long-running competitor of the Bitcoin payment network turned into one of its largest integrators. Ladies and gentlemen of the crypto-verse, please welcome PayPal, a $240-billion global payments giant.

With a history of firing nasty comments at Bitcoin, the Wall Street mammoth, ranging anywhere from “bubble” to “financial scam,” appeared with candies in its hands this time. In an announcement Wednesday, PayPal said that it would soon offer its US-based customers the ability to store, purchase, sell, and even spend Bitcoin and a few other altcoins. 

In short, GOOD NEWS for an industry that was itching to gain global exposure.

Perhaps, that is among the only remaining pros of a PayPal-Bitcoin combo: adoption. PayPal currently has 286 million active users. It’s practically the 21st largest bank in the world, albeit not being a banking service. For Bitcoin enthusiasts, PayPal is a perfect shortcut to global adoption.

Traders have already assessed the event as a cheerful one. Soon after PayPal announced its foray into the cryptocurrency industry, Bitcoin popped up by almost 15 percent, disregarding technical resistances to log its 18-month high near the $13,360-level (data from Coinbase).

Bitcoin rises above $13K after the PayPal announcement. Source: CoinStats

The idea is simple: PayPal brings more exposure; People buy more Bitcoin. The demand goes up while the supply stays systematically low. Therefore, the price shoots upward.

But there is a catch!

PayPal is A Step Back

The most attractive feature of Bitcoin upon its launch was its ability to sideline expensive and heavily-centralized financial companies and replace them with a cheaper, peer-to-peer alternative.

What PayPal does by integrating Bitcoin into its existing services is: Bury the very feature that it competed with all these years. The firm brings Bitcoin into its walled-garden and subjects the cryptocurrency would all the scrutinies that it has tried to avoid in its 11-year lifetime.

Take money transfers, for instance. Many of us folks switched to Bitcoin because it could process a money transmission within minutes at a 99 percent cheaper rate than any banking and payments service. Besides, the recipients sold those Bitcoin for local fiat at an exchange rate they preferred without paying a humongous fee for it.

Under PayPal, that feature is likely to go missing. First, users won’t transfer their BTC to digital wallets that are not PayPal’s. Second, converting them to fiat should bore an excessive fee of 2.3 percent – that is what PayPal charges its customers anyway. And third, the firm can always censor payments, a move that punches Bitcoin’s very core philosophy of anti-censorship right into its guts.

Bitcoin Stockpiling

The very idea behind Bitcoin’s launch was to create an alternative financial system, wherein people replace the always-devaluating fiat currencies with scarcer ones. Its beauty lay in people’s ability to own a part of the financial system by “HODLING” its tokens.

But what PayPal’s model would likely do is take the ownership of that Bitcoin away. A user who would like to spend BTC would be depositing it into the reserves of PayPal. A merchant who would receive the funds would also need to sell their BTC to PayPal or its partners for fiat.

That would effectively take more BTC out of the current supply. They will instead land in the custody of big firms. The stockpiling will give them more access to the BTC market sentiment. Their access to more BTC units would have them vote unanimously on Bitcoin’s future developments as a blockchain project.

So far, the best thing about BTC is that an average Joe can access it as much as a Wall Street firm can. But with big firms buying or getting to access a massive amount of Bitcoin, the supply deficiency would force small investors to speculate on the cryptocurrency’s derivatives, instead, mainly options.

Bitcoin won’t remain Bitcoin, should that happen.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

The post The Pros and Cons of PayPal-Bitcoin Combo appeared first on CoinStats Blog.

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Bitcoin Begins Q4 With a Bang: Is $20K By Year’s End Possible?

A battered final month of the third quarter signaled more pain for Bitcoin, a decentralized cryptocurrency known for hedging global market risks and enabling cheaper and quicker cross-border payments.

Its rate against the US dollar closed September more than 7 percent lower. The reasons were out in open; Bitcoin was relying on the liquidity injections committed by global central banks as they aimed at filling the pockets of the unemployed and the owners of stilled small businesses.

Unfortunately, the stimulus failed to materialize because of disagreements between the two sections of American politics. The Democrats asked for a $2.3 trillion package while their opponents, the Republicans, stuck to $1.6 trillion.

The last days of the third quarter saw seesaw remarks from both the Democrats and Republicans’ representatives. Meanwhile, Bitcoin traders decided to buy the cryptocurrency when the dialogue raised hopes for the second stimulus. They sold the positions later over hints of no negotiations.

Entering the fourth and the final quarter of 2020, Bitcoin traders received some concrete but disappointing remarks on the aid. This time, President Donald Trump himself stepped forward to cancel the negotiations at least until the US election.

Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their…

— Donald J. Trump (@realDonaldTrump) October 6, 2020

On the same day, Bitcoin fell by $400 within a few hours.

The Bitcoin Mind Games

Things were looking bad for the cryptocurrency until Mr. Trump reappeared with a tweet wherein he said that he was willing to pass individual coronavirus aids for the airline sector, the unemployed, and the suffering businesses.

The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!

— Donald J. Trump (@realDonaldTrump) October 7, 2020

Bitcoin rebounded by 3.95 percent after the president’s softening stance.

Bitcoin is maintaining support above $10,000. Image Source: CoinStats

But was it just the hopes of the second stimulus package that boosted the cryptocurrency? Not likely. So it appears, Bitcoin ascended also as Square, a multinational payments company, announced that it has bought $50 million worth of BTC units.

Now let’s walk through the trading psychology. A $50 million investment in Bitcoin is peanuts. But when it comes from a global firm such as Square, that the Twitter CEO Jack Dorsey heads, it creates a ripple effect – a buying frenzy among traders that see the investment as a validation for Bitcoin’s long-term potential as a financial asset.

#bitcoin basis moved a couple of % up on the square news pic.twitter.com/PeJ3HTv8LP

— skew (@skewdotcom) October 9, 2020

That is despite the endless bulldozing Bitcoin receives from the likes of Warren Buffet, Peter Schiff, and Nouriel Roubini (Google them, please). Traders and investors have stopped caring about the big men and their opinions on new technologies.

And with the involvement of companies like Square – as well as public-traded firm MicroStrategy and hedge fund veteran Paul Tudor Jones – in the Bitcoin space, the pot stirs for the rest of the financial community.

Here is Eric Dadoun, an early-stage startup investor, telling it better as he responds to Mr. Schiff (sorry, but you’ll need to Google “pomp” as well).

Schiff & Pomp really are made for each other.

No, the Square news isnt significant because of price action. Its significant because its further validation of the narrative and creates further safety for other companies & HNWI to either buy-in or to announce existing positions. https://t.co/SIGq5g2nJX

— Eric Dadoun (@EDadoun) October 9, 2020

Bitcoin recorded a spike after the Square news. But yes, it did not take away the possibility of its falling all over again. If the cryptocurrency had to sustain its uptrend, it would have done so after MicroStrategy’s $425 investment. There wouldn’t have been any big corrections in the first place.

It brings us back to the macro fundamentals: the US stimulus deal.

To Aid or Not to Aid

Bitcoin rose by more than 200 percent throughout the second and halfway through the third quarter – a surge that appeared as the US Congress passed a $2 trillion stimulus relief to walk Americans out of the coronavirus-led recession.

Meanwhile, Bitcoin also jumped because of the Federal Reserve’s unprecedented monetary policies, especially the ones that concern the unlimited purchasing of government bonds and mortgage-backed securities, and ultralow interest rates.

Investors found Bitcoin attractive for two reasons: the cryptocurrency appeared scarcer than the US dollar and was an incredible asset for its decade-long history of delivering more gains than pains.

Even today, that is the very reason why companies buy Bitcoin. They expect their dollar reserves to lose value in the future. Bitcoin is their insurance should that happen.

And the reality is: there is no second stimulus so far into Q4. But the answer to “will there be one” is also the response to whether or not Bitcoin would hit $20,000 by the end of 2020.

Economists expect investors to wait until the US elections. Once the politics become stable, the stimulus bill would follow. It could be this year or the next. But until that happens, Bitcoin should just hold above $10,000 to ensure it could hit $20,000 on the next dollar injection.

All and all, it is better to hold and sleep on it – at least for this year.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

The post Bitcoin Begins Q4 With a Bang: Is $20K By Year’s End Possible? appeared first on CoinStats Blog.

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