With PayPal recently introducing Bitcoin and crypto purchases to their 300+ million user base, they are together with Square Inc. buying up more BTC than is being mined, causing a supply shortage.
A report by prominent crypto and blockchain investment firm Pantera Capital indicates that Bitcoin’s recent price rally can be partly explained by PayPal’s entry into the Bitcoin and cryptocurrency market.
PayPal is now allowing its more than 300 million users worldwide to buy, sell and store Bitcoin, Ethereum, Bitcoin Cash and Litecoin in a simple yet custodial fashion. This move is a major recognition and bullish signal for Bitcoin and the crypto industry at large since PayPal for long was sceptical to Bitcoin and unwilling to introduce it to their users.
The interest has been mounting from PayPal’s users to buy BTC that the company decided to swiftly increase the weekly purchase limit for crypto from an initial $10,000, to today’s $20,000 in weekly limit per user, clearly a sign of massive demand for crypto.
PayPal & Square causing BTC supply shortage
To meet their users’ growing demand for BTC, PayPal is reportedly buying up 70% of all newly mined Bitcoin on a daily basis. Moreover, Square Inc, which runs Cash App and is one of PayPal’s main competitors in their industry, was previously reported to be buying up 40% of all newly issued Bitcoins that miners sold on the market to keep their operations profitable.
With PayPal’s entry and insatiable purchasing power of buying up 70% of all new Bitcoins, while adding Square continuing to buy 40% of the newly minted BTCs, this creates and generates a shortage of 10% of all new mined Bitcoins. And as is a well known rule in all economic models, when supply diminishes and demand rises, which is the clear cut situation we are witnessing with Bitcoin following PayPal’s entry into the market, an increase in price follows.
PayPal to enable 28 million merchants to accept crypto
PayPal CEO Dan Schulman went even further down the crypto rabbit hole on November 23 in an interview with CNBC stating: “early next year, we’re going to allow cryptocurrencies to be a funding source for any transaction happening on all 28 million of our merchants. And that will significantly bolster the utility of cryptocurrencies.”
By enabling the future and imminent integration of crypto payments to PayPal’s massive network of merchants, mainstream adoption of Bitcoin and cryptocurrencies is not a question of if anymore, but when. The answer is a lot sooner than most speculators believe.
Although PayPal is providing a custodial service, the fact that crypto is gaining such exposure through their market entry further raises awareness of Bitcoin and blockchain technology, as well as the benefit of decentralized financial protocols, to a completely new audience.
900 new Bitcoins minted every day
The Bitcoin blockchain issues newly minted BTC on a set schedule. Every 10 minutes a new block is created on the network, leading to 6.25 new BTC being mined and distributed at random to Bitcoin miners. This means that since there are on average 144 blocks per day mined on the Bitcoin network, and following the equation 144 x 6.25, we can determine that 900 new BTC are created each day. All of these new 900 BTC, and more, is now being bought up by only two major players in PayPal and Square.
As the supply of new BTC decreases through the process of “halving,“ which means that the block rewards and newly minted BTC per block are decreased by half every four consecutive years, the demand increases as a natural reaction. This combined with surging demand leads to an appreciation in Bitcoin’s market price.
Looking to the future, given that large financial institutions and banks will likely soon follow PayPal’s example and enter the crypto space in a similar fashion to offer Bitcoin and cryptocurrencies to their customers, the supply scarcity will become even more profound and imbalanced than it is today. For this imbalance between BTC supply and rising demand to balance out is simply a higher Bitcoin price.
Klever offers users true BTC ownership
It is however important to note, that although PayPal’s crypto market entry might positively affect the price of Bitcoin and other cryptocurrencies, PayPal offers only a custodial service of cryptocurrency, which means that users do not own their private keys. This somewhat defeats the purpose of full individual ownership introduced by Bitcoin and championed by non-custodial and decentralized p2p platforms such as Klever.io.
With Klever, users are in full control and have complete ownership of their BTC, ETH, KLV, TRX or any of the tens of thousands of other cryptocurrencies supported by Klever app. The ownership of private keys is solely in the hands of our users, and no developer or Klever team member has no way to access this sensitive data and secrets, as we truly live by and believe in the now-infamous phrase “your keys, your crypto.“
Director of Communications and Marketing at Klever.io