Of particular interest however is how PayPal’s entry into the crypto space is affecting the bitcoin price. A look at the PayPal crypto infrastructure provider, Paxos, shows that trading volumes were fairly constant on itBit, the Paxos-run exchange.
However all changed when PayPal went live, and within just 4 weeks, 70% of the new bitcoin supply was going through the exchange. The announcement to increase weekly limits from $10, 000 to $20, 000 for its customers has also been well received, apparently.
According to one analyst, this translates to about $20 – 25 million worth of bitcoin every day currently from PayPal’s +300 million customers.
Do the Math: @PayPal has some 300 mln acconts each holding on avergae $500 => $150 Bln of buying power! There is only 27K #bitcoins produced each month => $450 Mln of emission! Paypal's "buying power" is 330x monthly bitcoin emission. Amigos we are going to 🚀 RT if agree
If this trend persists, especially when the service is opened to global customers by January 2021, PayPal alone would be buying more than all the newly-issued bitcoin within weeks from now.
Considering that other institutions such as Pantera, Cash App, and GrayScale are still buying more bitcoin, with the later holding over 500, 000 bitcoin for its clients (approx. $10 billion worth), it is logical to conclude that the finite-supply, inelasticity will kick in . . . . at a higher price.
To put this in context, GrayScale, for example, added 10, 550 bitcoin to their custody in the last 24h at the current $18, 500 per bitcoin. As comparison, the miners can only mine 900 bitcoin in one day.
It is also predicted that more institutions are likely going to follow suite and introduce their own bitcoin funds. When this happens, it will create a supply scarcity and the only way to equilibrate this supply and demand issue is by the price of bitcoin going up.
“I think every major bank, every major investment bank, every major high net worth firm is going to eventually have some exposure to bitcoin or what’s like it, which is gold or some kind of commodities . . . .
“The bitcoin story is very easy, it’s supply and demand, Bitcoin’s supply is growing at around 2.5% a year, and the demand is growing faster than that and there’s going to be a fixed number of them.”
~ Bill Miller, American investor, fund manager, and former chairman & chief investment officer, Legg Mason Capital Management
A look at other metrics, such as Google ‘bitcoin’ Seaches is a key market leading indicator, and this time round, the price doesn’t feel over-hyped.
Search data has remained fairly stable despite over 100% rise in the price of bitcoin in 2020 so far.
Interestingly, new data shows that bitcoin balance on exchanges has dropped 18% year-to-date, which indicates a low sell-side pressure as more people prefer to hold bitcoin. In the long run, this is a pointer towards a downward liquidity trajectory.
In addition, when legendary investors come onto mainstream media and discuss their bullish views on bitcoin, this makes it easier for institutional investors to make a case for crypto assets to their investment committees.
Wow. BlackRock CIO of Fixed Income Rick Rieder talking about Bitcoin replacing gold on CNBC this morning. pic.twitter.com/9KZR0muJVp
The recent DBS bank (largest bank in Southeast Asia with 650 million customers) announcement about launching a digital exchange and platform is a classic example of institutions already entering the space.
It is clear that the current bull run is driven, not by hype or FoMo, but real use cases and institutional investors are leading the pack. Their growing investments into crypto assets is likely going to drive the value of bitcoin to even greater heights.