According to Pantera, a well-known cryptocurrency and blockchain investment firm, PayPal's recent leap into the crypto market is helping fuel the current Bitcoin (BTC) rally.
In a November 20 investor letter, the venture company compared the ongoing bull market to BTC's most recent spike above $ 18,000 three years ago.
"In the past, the friction when buying Bitcoin was quite annoying," the letter said. This contrasts with the difficulty with which e-commerce giant PayPal made it easy for millions of users to become potential buyers of Bitcoin, Ether, Bitcoin cash, and Litecoin.
In fact, all eligible PayPal account holders in the US can now buy, hold and sell these cryptocurrencies – earlier than expected by the payment company due to strong customer interest. In addition, the company recently increased its weekly crypto purchase limits from an original $ 10,000 to $ 20,000.
"BOOM! The results are already evident," wrote Dan Pantera, managing director and founder of the fund of the same name, in his November letter. "When PayPal went live, the volume exploded."
Panterra claims that PayPal is already buying nearly 70% of the new Bitcoin offering. Along with the routine Bitcoin purchase of Square's Square app, Panterra says more than 100% of all newly minted bitcoins are lost.
The Bitcoin network issues new BTC on a fixed and set schedule. After this year's “halving”, only 6.25 new BTC will be mined every 10 minutes. This amount will continue to decrease every four years until all 21 million BTC are in circulation.
Panterra's thesis focuses on a supply-side understanding of the Bitcoin market. The idea is that as the supply of BTC decreases, due to lower mining premiums, the demand naturally increases – which leads to a price increase.
“When other, larger financial institutions (PayPal) follow suit, the supply shortage becomes even more unbalanced. Supply and demand only balance each other out at a higher price, ”wrote Panterra.