PayPal, Square, and CBDCs!
Bitcoin is getting validated out of obscurity more and more everyday.
This week’s and probably this year’s biggest bitcoin news came out this week when PayPal announced it will support the buying, selling, and shopping of cryptocurrencies on its network. Here are some important to point to realize:
If PayPal were a bank, it would be the world’s 21st largest bank by deposits
PayPal has 346+ million users and 26+ million merchants
PayPal will not allow you to withdraw your crypto off of their platform
PayPal is trying to keep up with its Venmo competitor in Square’s Cash App. Cash App has taken the world by storm and has nearly caught up to Venmo in users in just a couple of years.
According to Google Trends, interest in Cash App is definitely exceeding interest in Venmo. The image below shows the last 5 years of Venmo vs. Cash App interest.
Speaking of Square, a couple weeks ago, Square announced that it bought $50M of bitcoin as part of its Treasury. This means they will have bitcoin on their balance sheet to protect their purchasing power in case the value of the dollar gets inflated away. Square is not the first public company to do so, but they are the most reputable. The first non-bitcoin related public company to do so was MicroStrategy, which bought $425M of bitcoin when bitcoin was priced at $11,111, that now resides on their balance sheet. If you want an interesting story, check out this podcast interview of Michael Saylor, CEO of MicroStrategy.
Going back to PayPal, it should not come as a surprise that they are getting into the cryptocurrency game as they have become a major financial institution. There have been several announcements from governments around the world about exploring creating their own digital version of their own currency. These currencies are called Central Bank Digital Currencies (CBDC). The governments of China, U.S., Cambodia, Japan, and Germany have all made comments very recently in regards to their interest in creating a CBDC. In fact, just this week, on Oct. 21, the Central Bank of the Bahamas officially launched the first CBDC called the Sand Dollar.
China is currently doing a test pilot of its digital yuan. They are giving away 10 million digital yuan to 50,000 people. Those people downloaded an app and they had their digital yuan directly imported into their wallet. They have a couple weeks to spend it at local retailers or it will be taken away. All this is done to test before rolling it out nationwide. Interestingly enough, China’s news outlets have been advertising cryptocurrencies as the best performing asset of 2020. Maybe this is all part of a concerted effort to get their citizen comfortable with crypto. Can you imagine if China leads the way of crypto adoption?
So what happens to cryptocurrencies like bitcoin and ethereum if all these governments create their own? It’s important to note that each cryptocurrency is trying to solve a unique problem. A digital U.S. Dollar or digital Yuan are still fiat currencies that are not backed by anything but the trust of their governments and economies. Central banks can still create an infinite amount. So bitcoin, with its fixed amount of 21 million will still be seen as a digital version of gold because of its scarcity. The big takeaway, is that CBDCs will make it easier to buy bitcoin and make it seem a lot safer and normal. They will only increase the adoption of bitcoin and other cryptocurrencies. The time is now, you’re not too late to join in!
This Week’s Price Action
Bitcoin broke out of range and recently topped around $13,200. This is important because there’s not a lot of points of resistance between here and new all times highs above $19,000. As you can see in the chart below, it has broken the resistance point of $12,762. It ran up to $13,200 and now sits at $12,976 still above the resistance line which is now acting as support.
I’m not saying bitcoin is going to shoot straight to $19k, but there’s a lot of strong momentum implying that those prices are within reach. The best thing to do is realize we are in a bull market now and to dollar cost average (DCA) into the total amount of bitcoin you want to buy. We are still early in this bull market.
As for other cryptocurrencies like Ethereum, well they will also increase in value over the long term, but as it stands right now, bitcoin is king and is in position to lead the way. Once bitcoin tops out, look out for all the other coins to start following up. The key chart to look at when considering other coins is the Ethereum/Bitcoin chart as shown below. This shows ethereum’s price in relation to bitcoin. Other crypto coins tend to follow ethereum.
This chart below indicates that ethereum has broken down below support and could continue lower, which would mean continued strength in bitcoin. Things could change rapidly, but that is what I’m looking at right now.
If you’re interested in joining a Slack group to get my daily take on price let me know.
Until next week, good luck with everything that is on your plate and hope you found this newsletter helpful.
Best,
Spencer