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Paypal has bought up to 70% of all freshly mined bitcoins since the payment giant started offering cryptocurrency services four weeks ago.
This is according to estimates by hedge fund manager Pantera Capital, as revealed in its latest monthly blockchain letter. Together with Square’s Cash app, the two companies are buying more than 100% of all newly issued virgin bitcoin (BTC), he says.
The letter said demand for Paypal’s crypto service, which works on Paxos’ fiat-to-crypto exchange, Itbit, has hit the ceiling. The exchange “was doing a fairly constant amount of trading volume … [but] when Paypal went live, the volume started exploding, “he noted, adding:
Itbit’s increase in volume implies that within four weeks of launch, Paypal is already buying nearly 70% of the new bitcoin offering.
Paypal announced in late October that its customers, with over 300 million active users, will now be able to buy, hold and sell bitcoins and other digital assets using their Paypal accounts.
The decision also meant that users could use their coins to purchase things from the 26 million merchants who accept Paypal, he said. Paypal launched the crypto service to US customers earlier this month, with the rest of the world being integrated later.
Bitcoin prices rose along with Paypal news, surpassing $ 12,000 at the time the service was announced, and have maintained bullish momentum ever since, hitting a three-year high of $ 18,997 on November 20.
Pantera Capital noted that the Paypal encryption service “is already having a huge impact”. As shown in the chart above, he predicted that if “growth persists, Paypal alone would buy more of all the newly issued bitcoin within weeks.”
The letter also argues that the current bitcoin rally is much more “sustainable” than that of 2017 due to growing institutional demand from entities like Paypal, Cash App and Robinhood, which make buying bitcoin easy.
“Previously the friction to buy bitcoin was quite onerous: take a selfie with your passport, wait days or a week to be activated, daily limits,” the letter said.
The data shows that bitcoin’s current rally has been largely driven by institutional buyers. According to the website bitcointreasuries.org, which curates bitcoin investments by publicly traded companies, about 21 companies, including Microstrategy Inc and Galaxy Digital Holdings, hold a total of $ 14.42 billion in reserve BTC. That’s 832,351 BTC or more than 4% of bitcoin’s circulating supply.
Some of these purchases have occurred in recent months, causing the price of bitcoin to rise. Pantera Capital says the bitcoin shortage resulting from high business demand means that companies like Cash App, which recently posted record revenue of $ 1.6 billion worth of bitcoins, will have to pay more for each coin.
“When other larger financial institutions follow their lead (Cash App), the supply shortage will become even more unbalanced. The only way supply and demand balance is at a higher price, “he explained.
What do you think and Paypal is collecting 70% of the newly minted bitcoins? Let us know in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons, Pantera Capital Chart,
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