Square and PayPal emerge as whales in the crypto market

The PayPal application can be viewed on mobile phones.

Felix Castel | Photo alliance | Getty Images

Fintech companies are helping fuel demand for bitcoin as they open the floodgates for millions of people.

By a firm’s analysis, PayPal and Square clients are buying most of the new bitcoin supplies entering the market each day. Hedge fund Pantera Capital estimates that Square clients accounted for 40% of the bitcoins that enter the market in the two years since the product was launched.

PayPal may be responsible for even more demand since launching a few weeks ago. The payments company partnered with crypto firm Paxos for custody and trading. The volume on Paxos’s exchange, itBit, was consistently in the same range since last September. But as recently as PayPal went live, according to data from CoinGecko, volumes rose more than the exchange.

Pantera estimated that within three weeks of going live, PayPal customers are purchasing about 70% of the new supply of bitcoins.

“This is a significant increase in price,” said Dan Morehead, founder and chief investment officer of Pantera Capital and former CFO of Tiger Management. “You bring in two corporates who are already buying all the bitcoins they have issued – supply and demand say the price has to go up.”

PayPal’s implied bitcoin volume is


: Pantera Capital
According to the crypto data firm Mesari, between 800 and 900 bitcoins – about $ 15 million at Monday’s price — are added to the market on a daily basis. Only 21 million bitcoins can be mined, which advocates say gives the same value as assets such as gold. Its limited supply is one of the reasons why some investors are looking at it as an alternative to inflation and a weaker US dollar.

While fintech companies are telling BKCM founder and CEO Brian Kelly that the big fintech impact is about the new demand. Square and PayPal are making it easier for merchants to buy through mainstream apps for the first time.

“It has become easier to buy and transact now, and it is opening up new demand by hindering entry,” Kelly said.

Analysts also say that high-profile money managers have introduced asset classes in recent months. Hedge fund manager Paul Tudor Jones called it “the best inflation hedge”, while Stanley Druckenmiller and Bill Miller also told CNBC they were bitcoins for a long time.

Cryptocurrency first hit the $ 20,000 mark around Christmas three years ago. It soon crashed, and did not return to the $ 18,000 level until recent weeks. Cryptocurrency is up 260% since March low and has climbed to 40% in the last month itself. On Tuesday morning, it topped $ 19,000.

Nevertheless, some doubt that bitcoin is a viable “replacement” for gold. Peter Bokover, chief investment officer at Blakeley Advisory, called the idea that a cryptocurrency was in the process of transforming one of the world’s oldest secure-assets “nonsense nonsense.”

“Nothing with a 5,000+ year track record with a 10+ year history is in place,” Boockvar said in a note to clients on Monday. “It can certainly complement it, but not replace it and I believe it will be the supplement that has traction.”

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