Bitcoin is back in the limelight after almost three years out in the cold, brushing up against its all-time high of around $20,000 per bitcoin this week.
The bitcoin price has risen nearly three-fold since the beginning of 2020, pushed on by unprecedented central bank money printing that’s highlighted its fixed limit and fresh interest from Wall Street and big-name investors.
Now, after payments giant PayPal
revealed it would begin to support bitcoin buying and spending services last month, blockchain investment firm Pantera Capital has declared a “bitcoin shortage”—claiming PayPal is “already buying almost 70% of the new supply of bitcoins.”
As part of its announcement, PayPal said it would use New York-based bitcoin and cryptocurrency infrastructure provider Paxos to handle the regulatory, technological and liquidity aspects of the crypto features.
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“When PayPal went live, volume started exploding. The increase in [the Paxos-run bitcoin and crypto exchange] itBit volume implies that within four weeks of going live, PayPal is already buying almost 70% of the new supply of bitcoins,” Pantera Capital wrote in a report published to Medium, adding that PayPal and the Square-owned Cash App could now be “buying more than 100% of all newly-issued bitcoins.”
PayPal, a long-time sworn enemy of many in the bitcoin and cryptocurrency community, sent shock waves through the worlds of finance and technology when it revealed its plans to allow its 346 million users to buy and spend bitcoin and a handful of other major cryptocurrencies last month.
The news kicked off a bitcoin bull run that’s seen the bitcoin price add almost 75% since mid-October.
“This rally is much more sustainable than 2017. One of the main differences is the ease of investing in bitcoin now—via PayPal, Cash App, Robinhood, etc,” Pantera Capital’s report read.
Bitcoin’s epic 2017 rally saw the bitcoin price soar from under $1,000 at the beginning of the year to around $20,000 by December—only to crash to $3,000 in 2018. Since then, bitcoin has bounced wildly around $10,000 before beginning its latest rally this year.
Pantera argues that as more people and “larger financial institutions” buy bitcoin the “supply scarcity will become even more imbalanced,” claiming “the only way supply and demand equilibrates is at a higher price.”
“The dashed horizontal line in the [above] graphic represents the total supply of newly-issued bitcoins plus the original itBit volume. If their growth persists, PayPal alone would be buying more than all of the newly-issued bitcoin within weeks.”
Meanwhile, others in the bitcoin and cryptocurrency industry have also reported a surge in new users over recent weeks—something that could have contributed to bitcoin’s recent rally.
“We’re seeing waves of new users when price action begins, but more importantly we have seen important user growth during quieter times over the past year,” Eduardo Arenas, director of Bitso Alpha, one of Latin America’s largest bitcoin and crypto exchanges, said via email.