Although many investors may not yet realize it, PayPal Holdings, Inc. (PYPL 0.66%) has consistently laid the groundwork to capitalize on any future scenario in which cryptocurrencies play a major role in digital payments worldwide. The biggest step, of course, was the company’s decision in October 2020 to allow users to buy, hold, and sell a handful of cryptos, including Bitcoin (BTC 4.23%)directly through the PayPal platform. At the time, the decision was widely hailed as proof that crypto was going mainstream.
Despite a pullback in the broader crypto market this year, PayPal seems determined to move forward with its decision to embrace the future of digital payments crypto. At this year’s World Economic Forum in Switzerland, PayPal was very optimistic about the launch of new cryptocurrency and blockchain services.
Where is PayPal now with crypto?
Currently, PayPal’s crypto strategy has two key elements. One of them is the consumer side. By allowing users to buy and sell Bitcoin, PayPal (which owns Venmo) is arguably the best on-ramp for everyday people to learn, explore, and experience crypto. Many people have had a long relationship with PayPal since the first internet boom and use PayPal for everything from e-commerce transactions to sending invoices for their small businesses. Additionally, PayPal has simplified crypto to the point that you no longer have to worry about opening new accounts, storing new passwords, or creating new digital wallets.
Although this consumer transaction activity does not contribute significantly to net revenues currently, there is a potential indirect psychological effect that should be noted. In late 2020, Mizuho Securities surveyed 400 crypto early adopters on PayPal and found that a majority of them overall had more engagement than regular users, and were more likely to view PayPal as the center of their trading world. digital payment. In other words, crypto could be the “hook” that attracts digital savvy users and drives them to use PayPal more often.
The other key part of the strategy is the trader side. If PayPal makes it easy for merchants to accept crypto as a form of payment, it could be a game-changer in terms of transaction volume. Think of all the big luxury brands (including Gucci, Balenciaga and TAG Heuer) who recently announced that they are now accepting crypto payments. Adoption in the luxury and high end of the market will eventually trickle down to other industries, such as travel and automotive. After all, thanks to Elon Musk, paying Bitcoin for a shiny new $50,000 vehicle is no longer unthinkable.
Is PayPal really committed to crypto?
PayPal seems to be dedicated to the future of digital currencies. In fact, as far back as 2014, PayPal was debating the merits of allowing users to send bitcoin to each other. PayPal has also invested in blockchain companies, filed blockchain-related patents, and partnered with companies such as Coinbase Global, Inc. (NASDAQ: CURRENCY). And, in 2019, PayPal was one of the first companies to join the Libra Association, which is committed to creating a new global digital currency based on blockchain technology.
And this is where things get really interesting, as rumors have been circulating for almost six months that PayPal is set to introduce a new US dollar-based stablecoin called PayPal Coin. Simply put, a stablecoin is a cryptocurrency pegged 1:1 to another currency or commodity. This greatly reduces the risk of price volatility for online transactions. Consider a hypothetical case where you saved $10,000 in crypto for an amazing summer vacation. If you have your money in Bitcoin, you never really know how much your Bitcoin is going to be worth 1 day, 1 week or 1 month from now. But with a stablecoin, you know your $10,000 in crypto will be worth $10,000. Of course, the big caveat here is that the recent crisis of Earth (CRYPTO: LUNA) cast a dark veil over the idea of stablecoins in general.
A new investment thesis for PayPal
If you take the big picture, the investment thesis for PayPal becomes very exciting. If cryptocurrencies are truly the future of online payments and transactions, then PayPal is well positioned for future growth on a massive, global scale.
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If The Future Of Digital Payments Is Crypto, Then This Longtime Internet Darling Could Soar
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