The bigger you are, the bigger the splash when you jump in the water. And when it comes to mainstream payments companies, there are few bigger than PayPal.
In case you’ve been totally avoiding the headlines over the past few days (and who could blame you), PayPal (NASDAQ: PYPL) this week confirmed its entry into the crypto asset industry with the announcement that it was enabling the buying, selling and holding of cryptocurrencies on its platform. Within the next few weeks, users in the U.S. will be able to trade bitcoin (BTC), ether (ETH), litecoin (LTC) and bitcoin cash (BCH) using their PayPal accounts. The service will be rolled out to Venmo, a PayPal company, and to other geographical areas in the first half of next year. Users will also be able to use these cryptocurrencies to purchase goods at 26 million merchants within the PayPal network.
The market took it as good news, evidenced by the almost 15% increase in the BTC price (at time of writing) since the announcement was made. The other cryptocurrencies supported by PayPal also saw weekly returns of 10-15%.
A cheerful rally is generally good news, and this one seems to have energized a market that had been slipping into sentiment doldrums. Indeed, the PayPal news is positive for the industry as a whole. But the news is not the boost to the fundamental outlook for bitcoin and peers that many market observers seem to think.
Looking beyond the numbers
What’s more, the details that have been added to our reporting are disappointing.
PayPal does bring over 340 million users to the crypto table. For context, Bitcoin currently has 32 million non-zero addresses (only 5 million of which are active), according to data firm Glassnode. But PayPal’s crypto users would not necessarily add to the address count, as they would not have access to their own private…