After Paypal’s announcement on Wednesday that it will offer crypto services to its 24 million merchants, there was a mixture of enthusiasm and skepticism with the news.
Bitcoin moved more than $ 1,000 in a single day yesterday, with many speculating that the market responded to the news that Paypal will now support Bitcoin.
The payments giant has suffered from a lack of direction in recent years, with the advent of Apple and Google Pay making online payments much faster. Now, it appears to have followed the actions of Square and Greyscale, companies that recently bought millions of dollars in Bitcoins to bolster their reserves, getting involved in the cryptocurrency market.
Could help Bitcoin close weekly above $ 13,000
For Bitcoin, the impact of Paypal news will be tested by the way its price moves over the weekend. If Bitcoin manages to close the week above $ 13,000, it will be the first time since January 2018 – something that, some will remember, happened as a result of Bitcoin’s previous historical record.
If Paypal helps Bitcoin overcome this important resistance level this weekend, it could mean that the market places more importance on other important payment platforms, which will offer their support in the future, taking Bitcoin to a new record in the end 2020.
In negotiations to buy BitGo
After the announcement, it was also revealed that Paypal is in talks to buy BitGo, a digital asset custody service. This could mean a change in Paypal’s strategy of acquiring cryptocurrency companies and securing its position in the market, before other institutional investors also start to act.
BitGo was valued at $ 170 million in 2018, so Paypal will likely have to pay more than that if it intends for negotiations to be successful, due to how much the cryptocurrency industry has evolved in the past two years since the last BitGo valuation .
It may also happen that Paypal wants to use BitGo’s custody services to expand the products it can offer Bitcoin in the future, as part of a change in its business model.
The assets are liquidated at the time of sale, pressing down the price
The highlight of Paypal’s novelty is the fact that digital assets can be bought and sold on the platform, but cannot be taken out of Paypal’s wallet. Some have argued that this does not reflect the way Bitcoin should work, as individuals who own their own wallets and private keys are at the heart of Bitcoin’s core philosophy.
There were also concerns about what this would mean for the price of Bitcoin; if the assets are held in deposit by Paypal and sold later, it essentially means that bitcoins are paid off so that holders can be paid in fiat currency. If Paypal has wide adoption of its cryptocurrency offerings, this could be a potential drag on Bitcoin’s price in the future as it will add to the selling pressure, as any Bitcoin used for purchase will first have to be sold for fiat currency. However, if the coins could be removed from the platform, Bitcoin could be used to buy other digital assets, thereby reducing downward pressure.
Mixed reactions to news
The crypto community on Twitter had mixed reactions to the news. Some highlighted the points above, related to the restrictions that Paypal is imposing on the withdrawal of resources from the platform, such as the Plan B, famous creator of Bitcoin’s stock-to-flow model.
Morgan Stanley’s assessment was that Paypal’s support for Bitcoin would do little for its profitability, saying it was not “clear” whether this move would do much to boost the company. In defense of Paypal, as mentioned earlier, in connection with a merger with BitGo, this could be part of a broader strategy for the payment provider to anticipate its competitors in conventional adoption of digital currencies.