PayPal | Institutions are Coming
With ~350 million users & 26 million merchants using PayPal, this is global adoption of crypto that could only be dreamed of a few years ago in the depths of crypto winter.
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This week in Crypto
It’s hard to find bearish sentiment anywhere at the moment and this past week was no exception. The expectation of new money entering the space and taking entire industry market cap upwards is palpable. As predicted, BTC dominance has increased simultaneously as Bitcoin’s price surged during the last 7 days, catalyzed by the confirmed news that payments behemoth, PayPal had made good on the rumors and speculation from earlier this year that they would be integrating crypto into their global infrastructure. With ~350 million users globally and 26 million merchants using PayPal, this is global adoption of crypto at a level that could only be dreamed of a few years ago in the depths of crypto winter.
Although PayPal will not allow users to self-custody the Bitcoin, Litecoin, Ethereum, and Bitcoin Cash that it will offer, it will allow users to gain price exposure to these assets and use them to transact across the PayPal network. In turn, this will enhance the medium of exchange utility to the select assets that the platform will offer. As the dust settles from this story, it appears that PayPal will essentially become a layer2 payment rail and custodian for users of BTC, LTC, ETH, and BCH, which does actually satisfy most retail users’ needs but is antithetical to Bitcoin and crypto’s self-sovereign fundamental principles. Currently, what PayPal is proposing is that users, much like the fiat currencies in their bank, will not own their Bitcoin as they will not hold their private keys — #notyourkeysnotyourcoins.
PayPal will own the digital assets and provide an IOU to the users of their platform. However, whichever way you cut it, this is strong bullish news for the industry and should at the very least be seen as a giant onramp to millions of users who will start their Bitcoin and crypto journey with PayPal and hopefully move to self-custody of their own assets as they develop their understanding of the asset class. We are encouraged that within the PayPal statement they have also committed to providing educational content to their users, which is so essential to understanding Bitcoin’s core features aside from price speculation.
“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly,” Dan Schulman, President and CEO, PayPal.
What is interesting about this story is the messaging around Central Bank Digital Currencies, CBDCs, which, in our opinion, is the leading story within crypto and macroeconomics presently. Last week, we discussed the current set up for a global re-negotiation of the global USD monetary order established at Bretton Woods in 1944. It’s becoming increasingly clear that CBDCs will be rolled out to de-leverage the current debt-based banking system and replace the banks and cash as we know it — a Bretton Woods 2.0.
In addition to providing these significant cryptocurrency services, PayPal has been exploring the potential of digital currencies through partnerships with licensed and regulated cryptocurrency platforms and with central banks around the world.
The company intends to work hand-in-hand with regulators, governments and central banks in this quest. — PayPal press statement
PayPal is clearly privy to what is going on behind the scenes and understands that the private sector may end up playing a crucial role in how CBDCs are integrated into our lives. We see this is just another signal to the market that in the background, Central Banks and Governments are serious about transitioning to a monetary order of CBDCs, and PayPal may provide the technology stepping stone to Central Banks as they take their first steps towards Bretton Woods 2.0.
The Institutions are Coming
MicroStrategy’s Michael Saylor’s meteoric rise to the top of the list of ‘’crypto influencers’’ has given the industry much needed credibility. Barely a day goes by without Saylor dropping Bitcoin wisdom and quotes that get huge attention and engagement with the media. A quick scan of his Twitter account yields some great insights into this CEO’s way of thinking when it comes to Bitcoin and further adds to the overwhelmingly bullish sentiment from last week.
Bitcoin represents hope to billions of people in need of an instrument of economic empowerment.
A designer knows he has achieved perfection when there is nothing left to take away.
#Bitcoin has no Country, Company, or Competitor — Michael Saylor
As with many new technologies, marketing and public exposure such as the above helps create the attention needed for greater adoption. Last week, Michael’s influencer status was temporarily usurped by legendary macro trader Paul Tudor Jones who reinforced his backing of Bitcoin more publicly than ever on CNBC’s Squawk Box. The interview is supremely bullish and shows PTJ’s now deeper understanding of Bitcoin from what it was in May when he first made public his recommendation for Bitcoin exposure as an inflation hedge. As is the case with many first-timers, it often takes some ‘skin in the game’ before really understanding what is at play here with Bitcoin. PTJ understands that this is not just an inflation hedge but also a bet on early-stage technology that is backed by a global network of smart, passionate, and progressive early adopters who see Bitcoin as a positive vehicle for change and hope for a better and fairer future where money and state are separated.
I’ve never had an inflation hedge where you have a kicker of great intellectual capital behind it, so that makes me even more constructive on it (Bitcoin)….if you are effectively short the bond market, that’s your inflation hedge, you really are betting on the fallacy of mankind…rather than the ingenuity and entrepreneurship…I like Bitcoin even more now than I did then — Paul Tudor Jones
Up next with more bullish sentiment was none other than Kanye West, who needs little introduction when it comes to his ability to influence his fans and attract media headlines with his content and music. Using the Joe Rogen podcast platform which has over 200m monthly downloads, we would speculate that Yeezy is clearly a Bitcoin hodler and had some profound things to say to Rogen over the course of the interview.
…the Bitcoin guys, these are guys that really have a perspective on what the true liberation of America and humanity will be.
Moving from pop culture to white collar culture, JPMorgan has completed its 180 degrees about-turn on Bitcoin with MD of Global Market Strategy, Nikolaos Panigirtzoglou, closing out this week’s flurry of bullish sentiment with a research note highlighting the importance of PayPal’s Bitcoin integration to the utility of Bitcoin and the strong propensity for Millennials to use digitally native stores of value, such as Bitcoin, in the future rather than gold.
Although Bitcoin looks currently overbought in the near term, the potential long-term upside for Bitcoin is considerable we think as it competes more intensely with gold as an ‘’alternative’’ currency… — Nikolaos Panigirtzoglou, JPM
To top off such a positive week of public endorsements from such a diverse and wide varying group, we note that Google searches for Bitcoin remain extremely subdued when compared to the 2017 all-time high euphoric frenzy. The chart below shows how often the phrase ‘’how to buy Bitcoin’’ was searched for on Google and clearly shows that this latest price increase is institutional in nature. We have not yet seen the retail cash and investors enter the market as we would expect to see retail use Google Search as a primary tool to guide them into the various onramps to buy Bitcoin, much like we saw in 2017. There is clearly a long way for this bullish cycle to run.
