On Wednesday, the price of Bitcoin topped $13,000 for the first time since 2018, after PayPal announced it would allow customers to use cryptocurrencies.
The currency rose $950, or 8%, in traditional Trading in New York. In early Asian trading, the index rose another 2% to $13,119. So-called Alt COINS rose even more on Wednesday, with Litecoin jumping more than 13% and Bitcoin cash surging more than 9%.
Paypal customers can buy, sell and hold cryptocurrencies such as Bitcoin, Ether, Bitcoin Cash and Litecoin through digital wallets, and use these virtual currencies to make purchases at the 26 million merchants on its network. PayPal shares rose 5.5 per cent to $213.07, the biggest gain since May.
Mike Novogratz, the head of Galaxy Investment Partners, called it “the biggest cryptography news of the year,” on Twitter, adding that Banks will start a race to serve digital currencies. “We are over the hump,” he said.
The news has prompted an enthusiastic response from encryption enthusiasts, who point to a series of recent announcements as evidence of wider acceptance of encryption by the old-school financial mainstream. Two publicly traded companies, Square Inc. and MicroStrategy Inc. Recently said they invested in Bitcoin. Square said three years ago that it would accept bitcoin transfers from selected Square Cash customers. This spring, amid the outbreak, Square saw a surge in bitcoin-related activity, with the payment company’s bitcoin revenue soaring 600 percent to $875 million, driven by new active bitcoin customers and increased demand for the currency. Square will release its latest results in about two weeks, on Nov. 5. In addition, Fidelity Investments announced in August that it would launch its first Bitcoin fund, adding corporate endorsement and star power to an often reviled asset class.
Paypal has said it plans to make the feature a source of financing for its merchants around the world and plans to expand it to Venmo soon. When PayPal customers make a purchase, merchants will pay in traditional currencies like dollars instead of cryptocurrencies. Dan Schulman, the company’s President and chief executive, said in a statement, “The shift to digital money is inevitable and offers clear advantages in terms of financial inclusion and access; Payment systems will thus be able to increase efficiency, speed and flexibility. Our global reach, digital payment expertise, two-sided networks, and stringent security and compliance controls provide us with the opportunity and responsibility to help promote understanding, exchange, and interoperability with these new trading tools. We are eager to work with central Banks and regulators around the world to provide our support and make a meaningful contribution to shaping the role digital currencies will play in the future of global finance and commerce.”
Danny Scott, co-founder and chief executive of CoinCorner, a Bitcoin exchange in the United Kingdom, wrote in an emailed comment that given Square’s revenue growth, “this news is not a surprise to the entire industry.” “PayPal has 346 million users and 26 million merchants, and this development has brought more meaningful digital assets to the mainstream public,” wrote Charles Hayter, founder and chief executive of the CryptoCompare company, which provides cryptocurrency data and analytics.
Users do face some limitations with PayPal. They can’t transfer COINS into or out of their accounts, and can only hold the cryptocurrency they bought on paypal. Any cryptocurrency held in an account cannot be transferred to another account, paypal said.
PayPal is moving into encryption just a year after dropping out of Libra Association. Libra Association is a campaign launched by Facebook Inc. to develop a digital currency. David Marcus, who leads Facebook, used to be President of PayPal.
Bitcoin has had a hot month, rising about 19% in October. However, use cases for cryptocurrencies are still limited. Statistics from blockchain research firm Chainalysis Inc., released last year, show that bitcoin is used by few people other than for speculation.