Since the payment giant started providing cryptocurrency services four weeks ago, Paypal has purchased up to 70% of all newly mined bitcoins.
Now, this is based on estimates by hedge fund manager Pantera Capital, as revealed in its latest monthly blockchain letter. It said that the two companies together with Square’s Cash App purchased more than 100% of all newly issued virgin Bitcoin (BTC).
The letter stated that demand for Paypal encryption services running on Paxos fiat to cryptocurrency exchange Itbit has soared. The exchange “is doing fairly constant trading volume… [but] When Paypal went online, transaction volume began to explode. “It added:
The increase in the number of Itbits indicates that Paypal has purchased nearly 70% of new bitcoins four weeks after it went live.
Paypal announced in late October that its customers with more than 300 million active users will now be able to use its Paypal account to buy, hold and sell Bitcoin and other digital assets.
This decision also means that users can use their coins to buy goods from 26 million merchants that accept Paypal. Paypal launched its encryption service to US customers earlier this month, while the rest of the world will be integrated later.
The Bitcoin price rose at the same time as the Paypal news, breaking through $12,000 when the service was announced, and has maintained a bullish momentum ever since, hitting a three-year high of $18,997 on November 20.
Pantera Capital noted that PayPal’s encryption service “has had a huge impact.” As shown in the graph above, it predicts that if “the growth continues, Paypal alone will buy more money than all newly issued bitcoins within a few weeks.”
The letter also pointed out that due to increased demand for institutions from entities such as Paypal, Cash App, and Robinhood, Bitcoin’s current gains are more “sustainable” than in 2017, which makes buying Bitcoin easier.
The letter said: “In the past, the friction of buying Bitcoin was very heavy: take a selfie with your passport, wait a few days to a week to activate, and there are restrictions every day.”
The data shows that Bitcoin’s current rally is largely driven by institutional buyers. According to statistics from the bitcointreasuries.org website (which is responsible for the Bitcoin investment of publicly listed companies), about 21 companies including Microstrategy Inc and Galaxy Digital Holdings hold a total of 14.42 billion US dollars in BTC reserves. That is 832,351 BTC, which accounts for more than 4% of Bitcoin in circulation.
In the past few months, many such purchases have taken place, which has pushed up the price of Bitcoin. Pantera Capital said that due to strong corporate demand, there is a shortage of Bitcoin, which means that companies like Cash App must pay more for each token, and Cash App recently reported a record $1.6 billion in Bitcoin revenue .
“When other large financial institutions follow their lead (cash app), the shortage of supply will become more unbalanced. The only way to balance supply and demand is to achieve a balance at a higher price.”
What do you think, PayPal dug out 70% of the newly minted Bitcoin? Let us know in the comments section below.
Picture Credits: Shutterstock, Pixabay, Wiki Commons, Pantera Capital charts,
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