Online payment services platform PayPal entered the cryptocurrency market in 2020, and analysts believe the full impact of that move has not yet been fully realised.
In the latter part of last year, PayPal hit the headlines after announcing its decision to open its platform to trading Bitcoin and subsequently launched a service allowing its users to buy, hold, and sell Bitcoins. This has now been expanded to include many cryptocurrencies currently being traded worldwide, including Ethereum and Litecoin.
The move effectively opened crypto trading up to 361 million new users on the PayPal platform. The impact was immediately felt with all significant cryptocurrencies seeing a substantial jump in price in the last few months of 2020. Bitcoin, for example, rose to above $40,000 per coin.
The strength of a platform like PayPal is in its strong reputation. Buying, selling, trading, and generally doing business online can be daunting, especially for the uninitiated. Many of PayPal’s 361 million users may have wanted to trade crypto but had no idea how. Its platform provides a simple way for them to dip their toes in the water without too much risk.
PayPal has built its reputation as the go-to online payment platform available these days. It has done this by providing a safe, secure, and easy to use space for people to transact. Its existence it provides has allowed e-commerce to flourish around the world and opened up a truly global market. It has become a vital service in the food and beverage industry. It is fast becoming the preferred payment method for brick and mortar restaurants and online delivery services.
It is also the go-to payment method in the iGaming industry because of the safety and security it provides to its users. For example, the best PayPal casino sites such as bet365 and Unibet will have thousands of familiar and happy users with the payment platform and will almost certainly decide to use it if they start trading crypto because of ease of use and familiarity with the platform.
This is why BTIG market analyst Mark Palmer has upgraded PayPal shares from Hold to Buy. He is confident the traction PayPal is gaining in the cryptocurrency market could add up to $1-billion to its annual revenues and see its share price jump to as high as $300 per share.
While Bitcoin and cryptocurrency trading have hit the headlines many times over the last couple of years, it remains quite a niche market because of the complexities involved in how the coins are created and how they work. Not understanding something understandably puts people off, but the power of PayPal could bring crypto trading into the mainstream at last, according to Palmer.
”We see this being important for the entire crypto ecosystem. If PayPal can lead the way in promoting merchant adoption for crypto, it would be a huge driver for the space,” Palmer told Barrons.
If cryptocurrencies begin gaining traction on PayPal as Palmer expects, it could also have enormous ramifications for the platform and how people use it. This is because PayPal currently charges merchants a 2.9% fee for standard currency transactions and that can’t be changed because a high percentage of that fee is passed on to the likes of Visa and Mastercard.
However, PayPal would likely charge merchants far less for transactions involving cryptocurrency because they would no longer need to pass any revenue. A high percentage of people on their platform are holding cryptocurrencies in a situation. It suddenly makes a lot of sense for PayPal to encourage its users to transact with them.
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