Payment giant PayPal’s integration of cryptocurrency means that Bitcoin’s user base may triple

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After PayPal’s news yesterday triggered a strong rise in Bitcoin, the price of Bitcoin (BTC) once again exceeded the $13,000 mark, pushing the price to a new high in 2020.

Since the announcement, the price of Bitcoin is currently close to $13,000, and the price of Bitcoin has risen by nearly 10%. In terms of market value, Bitcoin is now close to surpassing PayPal and becoming the 21st largest asset.

Two weeks before PayPal announced the launch of its cryptocurrency service, another payment giant, Square, also announced its entry into the Bitcoin market, investing approximately 1% of its assets in Bitcoin.

According to Lanre Jonathan Ige, a researcher at Amun AG, the continued trend of large-scale investment will greatly attract institutional investors’ interest in Bitcoin. Ige said:

“Enterprises tend to follow the trend. As the return on assets continues to increase, we can expect other companies to follow in the footsteps of Square and Microstrategy.”

However, PayPal’s latest news is more likely to bring the masses into Bitcoin than institutions. This is because PayPal may allow more mainstream audiences to accelerate their understanding of cryptocurrency as an investment tool and payment method, now and in the future, which has been one of the main concerns of large-scale adoption by the Bitcoin community.

PayPal should increase Bitcoin’s user base

According to data from glassnode, Bitcoin currently has more than 187 million users. Cryptocurrency analyst Willy Woo pointed out that while this is proud, it is insignificant compared to PayPal’s 487 million users.

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Total number of Bitcoin hoarders Source: Twitter

By adding Bitcoin services, PayPal brought the name Bitcoin to mainstream users. Although Bitcoin can only be purchased, sold and held through PayPal for the time being, the company announced that it will add cryptocurrency payment and transfer functions in 2021. Once this happens, it will consolidate Bitcoin’s reputation as a means of payment and remittance.

Transactions through PayPal and other centralized platforms may even become one of the ways that Bitcoin can expand to mainstream users. Centralized transactions (and other methods such as sidechains and Lightning Networks) can be used to alleviate congestion in the Bitcoin blockchain and only allow it to be used for large transactions that require greater security, transparency, or immutable proof of ownership.

Bitcoin is surpassing banks

Although payment processing companies and cryptocurrencies seem to be finding more synergies over time, banks are not the case, and this struggle is reflected in their stock prices.

BNN Bloomberg technology reporter Jon Erlichman pointed out that assets such as Bitcoin, Ethereum and payment companies such as PayPal and Square have performed well this year, but since the new crown pneumonia pandemic, financial stocks have performed poorly.

支付巨头PayPal集成加密货币意味着比特币的用户基数可能会增加两倍

Year-to-date performance of Bitcoin and Ethereum Source: Digital Assets Data

So far this year, the prices of Bitcoin and Ethereum have increased by 80.5% and 217%, respectively. At the same time, PayPal is up 99% and Square is up 186%. On the other hand, JPMorgan Chase and Bank of America fell 28% and 32% respectively. Citigroup’s stock price fell 46%, and Wells Fargo’s stock price fell 58%.

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As for Bitcoin, it is still one of the best performing assets in existence, far surpassing gold and the S&P 500 index in 2020.

支付巨头PayPal集成加密货币意味着比特币的用户基数可能会增加两倍

Annual return on macro assets Source: Skew.com

As more and more people interact with Bitcoin as an investment tool, consumers may abandon banks and invest in cryptocurrencies.

Experts say that Bitcoin may even benefit from the so-called “Robin Hood effect”, that is, retail investors with disposable income buy assets through a free, gamified investment platform, thus avoiding the cumbersome things that often happen with banks.

If this happens to Bitcoin, then digital assets may experience an exaggerated investment frenzy similar to the one when Robinhood investors injected funds into Tesla earlier this year.