Bitcoin Dominant

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PayPal has announced that it’s going to start selling crypto. Let’s not mince words here: this is freaking huge.

Over the nine years that I’ve been watching, talking about and trading bitcoin, I’ve seen the outside dialogue around it evolve from “wacky monetary experiment” to “ludicrous tulip analogue” to “dangerous scam machine” to “can you believe we ever thought bitcoin was going to happen? Lol, glad I never bought any.”

The one constant has always been that whiff of mockery – the feeling that because of how bitcoin operated, because of the people behind it and the way the community talked to each other, it wasn’t worthy of consideration by Serious People. Ignore it and eventually it will just go away.

There was always a small part of me that wondered if they were right. Perhaps I was just another delusional fanboy, a financial ignoramus unwilling and unable to see bitcoin for what it was. I mean, it’s money powered by grammatically fraught memes. In what universe is that going to challenge the international economic order?

Then last week, PayPal, a company with 346 million users that processed more than US$200 billion in transactions last quarter, announced that it was going to allow its customers to buy, sell and transact in crypto. And so, let me be the first to say to all the doubters, AHAHAHAHAHAHAHAHAHAHAHAHAHA YIPPEE KI-YAY MUTHA FLIPPAZZZZZZZZ.

Insto-matic

By any measure, 2020 has been an incredible year for crypto. Bitcoin is up 80% since January, putting every other asset class to shame. In May, one of the world’s foremost hedge fund investors announced he was dropping 2% of his assets into bitcoin. The hashrate, a measure of how much miners are willing to invest in creating new bitcoin, keeps making high after high – especially impressive since this year’s Halving means there’s 50% less bitcoin going around. Meanwhile, publicly listed software developers Microstrategy put US$425 million of their balance sheet into bitcoin and institutional investment vehicle Grayscale crossed US$7 billion in AUM – they now hold more than 2% of all the bitcoin in existence.

But even against that backdrop, the PayPal news is really something. It’s not just the massive expansion of crypto’s potential customer base that’s so exciting. It’s what this move symbolises: an acceptance of crypto’s rightful place within the digital money ecosystem.

It was only two weeks ago that I was reminiscing about crypto companies being unable to open bank accounts in 2017. Now a company that qualifies as the world’s 20th largest bank by deposits is saying, “It’s here, it’s happening and we need to be ready for it.” It’s hard to believe that they’ll be the last.

Bullshot

Of course, there are caveats. Right now the only supported currencies are bitcoin, ether, bitcoin cash and litecoin. And you can’t send crypto to or from your PayPal account – it’s for internal use only. There’s no arguing that these represent serious (and very un-crypto) limitations to the PayPal offering. And who knows: there might be zero customer interest and the whole thing will be cancelled in a few months. (Although the experience of Square’s Cash App, which has seen US$1.5 billion in user purchases over the last year, would suggest this is unlikely.)

The price of bitcoin is, understandably, heading up. It’s not parabolic, it’s not surging $3k in a single day. It’s just slowly, insistently pushing up. On Monday, the price posted its first weekly close above US$12k since January 2018. The price has never spent this long above US$10k. Most alts are losing ground as bitcoin dominance – the percentage of the overall crypto market owned by bitcoin – begins to surge upwards once more; at the end of the day, everything comes back to the king.

These are strange and volatile times and no-one can say for certain that we won’t witness another March-style crash in the coming months. But I’m looking at crypto right now and I’m starting to get that fizzy little tingle I had in early 2017, in those days and weeks when gravity stopped working and you could believe that these obscure cryptographic puzzles might actually change the world. We were too early back then. But maybe this time it’s different.

Happy Trading!

Luke from CoinJar

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