Paypal has bought up to 70% of all newly mined bitcoin since the payments giant started offering cryptocurrency services four weeks ago.
Now that is according to the estimates of hedge fund manager Pantera Capital, as revealed in its latest monthly blockchain letter. With Square’s Cash app, the two companies buy over 100% of all newly issued blank bitcoin (BTC), he says.
The letter said demand for Paypal’s encryption service, which runs on Paxos’ fiat-to-crypto exchange Itbit, had hit the roof. The stock market “made a fairly constant volume of transactions … [but] when Paypal went live, the volume started to explode, ”he observed, adding:
The increase in Itbit volume means that within four weeks of going live, Paypal is already buying nearly 70% of the new bitcoin supply.
Paypal announced at the end of October that its customers – with over 300 million active users – will now be able to buy, hold and sell bitcoin and other digital assets using their Paypal accounts.
The move also meant that users could use their coins to buy things from the 26 million merchants who accept Paypal, he said. Paypal rolled out the crypto service to U.S. customers earlier this month, with the rest of the world due to be integrated later.
Bitcoin prices rose alongside the Paypal news, topping $ 12,000 at the time of the service’s announcement, and have maintained bullish momentum ever since, reaching a three-year high of $ 18,997 on November 20.
Pantera Capital noted that the crypto service Paypal “is already having a huge impact.” As the chart above shows, he predicted that if “growth persists, Paypal alone would buy more than all newly issued bitcoins in a matter of weeks.”
The letter also argues that Bitcoin’s current rally is much more “sustainable” than that of 2017 due to growing institutional demand for entities like Paypal, Cash App, and Robinhood, which make it easier to buy Bitcoin.
“Previously, the friction to buy bitcoin was quite expensive: take a selfie with your passport, wait days to a week to activate, daily limits,” the letter said.
Data shows that Bitcoin’s current rally is largely driven by institutional buyers. According to the website bitcointreasuries.org, which organizes bitcoin investments by publicly traded companies, around 21 companies, including Microstrategy Inc and Galaxy Digital Holdings, have a total of $ 14.42 billion in BTC in reserve. This represents 832,351 BTC or more than 4% of Bitcoin’s circulating supply.
A number of these purchases have taken place over the past few months, pushing the price of bitcoin up. Pantera Capital says the bitcoin shortage resulting from strong corporate demand means the likes of Cash App, which recently reported a record $ 1.6 billion in bitcoin revenue, will have to pay more for each coin.
“When other larger financial institutions follow their lead (Cash App), the scarcity of supply 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 getting 70% of the newly minted bitcoin back? Let us know in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons, graphic by Pantera Capital,
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