Market Analysis

PayPal’s crypto integration means Bitcoin could triple its user base

Bitcoin (BTC) price has again punched through the $13,000 mark after yesterday’s PayPal’s announcement sparked a powerful rally which drove the price to a new 2020 high. 

Currently sitting near $13,100, Bitcoin price has rallied nearly 10% since the announcement and BTC is now close to overtaking PayPal as the 21st biggest asset by market capitalization.

PayPal’s crypto announcement comes two weeks after Square, another payments giant, announced its own foray into Bitcoin by investing roughly 1% of its assets into Bitcoin.

According to Lanre Jonathan Ige, a researcher at Amun AG, the continuing trend of large sized investments will be material in bringing institutional interest to Bitcoin. Ige said:

“Corporations are often trend-following and we can expect a number of other corporations to follow the lead of Square and Microstrategy, as the returns of the assets continue to impress.”

However, the recent news from PayPal is more likely to bring the masses to Bitcoin, rather than Bitcoin to institutions. This is because PayPal may bring a more mainstream audience up to speed with the cryptocurrency as an investment vehicle for now and as a payment method in the future, which has been one of the main focus of the Bitcoin community when it comes to mass adoption.

PayPal should boost Bitcoin’s user base

According to data from glassnode, Bitcoin currently has over 187 million users or “hodlers”. While impressive, crypto analyst Willy Woo noted that this pales in comparison to PayPal’s 487 million users.

Total Bitcoin HODLers. Source: Twitter

By adding Bitcoin, PayPal is bringing the name to a mainstream audience. While it is only possible to buy, sell and hold Bitcoin through PayPal for the time being, the company announced that it would be adding cryptocurrency payment and transfers in 2021. Once this occurs, it could cement Bitcoin’s reputation as a payment and remittance mechanism.

Transacting through PayPal and other centralized platforms could even become one of the ways in which Bitcoin is able to scale to a mainstream user base. Centralized transactions (along with other methods like sidechains and lightning network) could be used to alleviate congestion in Bitcoin’s blockchain, allowing it to be used only for bigger transactions that require more safety, transparency or immutable proof of ownership.