Bitcoin Buying Frenzy Fuelled by PayPal and Square

Bitcoin PayPal

PayPal in Cryptocurrency Space

PayPal’s move into the cryptocurrency space is especially notable. PayPal has over 300 million active users globally and is the largest fintech firm to facilitate digital currency trading. Square, the payments unicorn headed by Jack Dorsey, enabled crypto trading in mid-2018. Robinhood, the popular stock brokerage unicorn, also entered the cryptocurrency space in 2018.

Bitcoin Square

Square Holding Bitcoin as Reserve

Square has indicated that it is holding Bitcoin on its balance sheet as a kind of reserve. The Bitcoin trading business of Square’s CashApp has been a major driver of growth for the company. The revenue generated from Cash App’s Bitcoin segment accounted for 80% of the app’s total revenue figure this year. In the third quarter of 2020, Cash App generated more than $1.63 billion in Bitcoin revenue.

Bitcoin at Record levels

Bitcoin is currently trading at near-record levels. In late November 2020, it was trading at over $19,000 per Bitcoin. After trading as low as $3,867 in March, Bitcoin has gained more than 155% since the start of 2020. Ethereum, another popular cryptocurrency, is up 330% since the beginning of the year. Prices have continued to rally as the end of the year approaches.

Hedge Funds Jump In

Recent bullish comments by prominent hedge fund managers such as Paul Tudor Jones and Stanley Druckenmiller have added further fuel to the crypto craze. Paul Tudor Jones referred to crypto as “the best inflation hedge” and declared he has almost 2% of his assets invested in the sector. Mutual fund veteran Bill Miller also publicly stated that he is placing a big bet on Bitcoin’s rise.

New Bitcoin Investors

Excitement from new investors is high. According to Chainanalysis, a company that tracks cryptocurrency trends, there have been more than 11.9 million transfers of less than $1,000 of Bitcoin into personal digital wallets. Participation from young, passionate individuals has been especially influential in driving this year’s rally in Bitcoin prices. Adam Nunn, a 30-year-old insurance underwriter from Virginia, captures the positive sentiment driving investors toward the digital currency: “I haven’t approached it like this speculative investment. I think of it more for the long term. We’re just at the starting gate right now.”

Supply of Bitcoin Scarce

According to Dan Morehead, CEO of digital asset hedge fund Pantera Capital: “When other, larger financial institutions follow their lead, the supply scarcity will become even more imbalanced. The only way supply and demand equilibrates is at a higher price.”

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Carpenter Wellington PLLC

Carpenter Wellington PLLC

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.