The highs and lows of this week in the stock market are giving investors a white-knuckle ride. With global stock markets from Shanghai to Wall Street breaking records at the start of this week, hopes of a V-shaped recovery were on people’s minds. Alas, it seems that equities simply can’t shrug off the pandemic, with the Dow Jones tumbling almost 400 points on Tuesday evening amid worries about COVID-19’s economic impact.
However, just as the people who catch the virus aren’t affected in the same way, neither are the companies listed on the stock market. Two major payment services providers that are helping people to transact without risking catching germs from cash are Square’s Cash App and PayPal’s Venmo. Paypal’s stock soared by 65% yesterday and Square’s has already doubled in price throughout 2020. And if the rumors that PayPal and Venmo could soon allow users to buy and sell bitcoin are true, PayPal stock could be set to explode.
PayPal Move Bullish for Bitcoin
Former CEO of PayPal Bill Harris could be forgiven for his remarks about Bitcoin in 2018. After all, he was in good company with other well-known CEOs brandishing Bitcoin as a scam. One has to wonder what he’s thinking now though as the fintech behemoth looks set to embrace a new opportunity (or at least, not get left behind). Just as JPMorgan did an about-turn on crypto, now PayPal’s 325 million users could soon be able to buy bitcoin with PayPal and Venmo. That’s pretty big news indeed.
Since the news about PayPal and Bitcoin dropped, the crypto space has seen significant excitement, with some key players even calling it, “bigger than Bakkt,” and even bigger than anything else, in fact. Influential crypto trader and advisor Scott Melker commented, “If PayPal and Venmo are truly entering crypto, then this is arguably the most bullish news that we have seen in the space… ever.”
PayPal has still yet to confirm or deny the news. However, according to other sources, the payments company is busily hiring crypto engineers. Bitcoin price rallied significantly after, reaching as high as $9,800 on June 23; a sign that this is bullish for the space. As we strive for mass adoption, opening up bitcoin and other cryptocurrencies to a new audience of more than 300 million people globally can only be a good thing–and PayPal’s stock is soaring higher.
Why Now, Why Not Before?
Harris did not hold back on his sentiments about Bitcoin. In fact, he called it the “greatest scam in history,” and added that, “It’s a colossal pump-and-dump scheme, the likes of which the world has never seen.” Yet, not everyone at PayPal agreed. In fact, PayPal has been working with Coinbase since 2016 allowing users to cash out their crypto into fiat via a PayPal wallet. The company may have been wary of bitcoin but it liked making money off the people who used it.
But now, fast forward two years and a lot has changed. If the rumors are true, in the next three months, buying crypto will be a lot more accessible and mainstream. So, why now? It seems as if PayPal has finally realized that it must innovate and offer the services its users require or be destined to be left behind as legacy tech.
It almost feels as if PayPal is being dragged into crypto against its better judgment after seeing the numbers posted by competitor Square’s Cash App showing that it was growing fast than Venmo. That was around halfway through 2018 when Square rolled out Bitcoin purchases…
In the first quarter of 2020, Dorsey’s company reported that its revenues from Bitcoin had exceeded those from fiat, climbing by 367% to $306 million. That must have jolted PayPal into action. If the company didn’t act soon on Bitcoin it may be too late. Its competitors were certainly not waiting.
How Will PayPal Survive Bitcoin?
PayPal’s partnership with Libra always seemed a little odd to me, so it wasn’t really surprising when the company pulled out in October of last year. After all, it was openly facilitating a peer-to-peer payment network that would put it out of business. So, what is its plan with Bitcoin?
Despite Square’s giant strides, Venmo is still the largest consumer finance app in the States. It allows people to send money to each other easily–but, for a fairly large fee. Will Bitcoin with its lower fees and peer-to-peer transactions eventually see the demise of PayPal?
All technology has a lifecycle after all. Just think about the fax machine, the cassette tape, digital cameras, or DVDs. When 325+ million people get eyes on bitcoin, essentially a competitor to PayPal, the payments company had better get its approach right.
So how will PayPal survive bitcoin? It seems to be a case of, “if you can’t beat them, join them,” for now, at least. It will be interesting to see what effect this new move has on the multi-billion-dollar company’s fee structure moving forward. Whatever happens, as PayPal and Square’s stock is showing, the business of digital cash is where the money is at right now.