Online electronic finance payment system, PayPal, is seen on a smartphone screen. Picture: 123RF/ALEXEY MALKIN
Online electronic finance payment system, PayPal, is seen on a smartphone screen. Picture: 123RF/ALEXEY MALKIN

Bitcoin surged to almost $13,000 for the first time since July 2019 after PayPal announced it will allow customers to use cryptocurrencies.

The largest digital coin increased as much as 8.5% to $12,915 on Wednesday, surpassing the previous high for the year of $12,473 set in August. Gains among so-called alt coins were even larger, with Litecoin jumping more than 13% and bitcoin cash surging more than 9%.

PayPal customers can buy, sell and hold cryptocurrencies including bitcoin, ether, bitcoin cash and litecoin from digital wallets, as well as using the virtual money to shop at the 26 million merchants on its network. Shares of PayPal jumped as much as 5.9% to $213.87, the biggest intraday increase since July 30.

Mike Novogratz, who runs Galaxy Investment Partners, on Twitter called it “the biggest news of the year in crypto”, adding that banks will embark on a race to service digital currencies. “We have crossed the Rubicon,” he said.

The news sparked an exuberant response from crypto fans who pointed to a string of recent announcements that suggest wider acceptance by old-school financial mainstays.

Two public companies — Square  and MicroStrategy — said recently that they invested in bitcoin. And Fidelity Investments announced in August that it’s launching its first Bitcoin fund, adding its establishment name and star power to the often-maligned asset class.

PayPal said it plans to make the features available as a funding source for purchases at its merchants worldwide and plans to expand it to Venmo soon. Merchants will be paid in traditional currencies such as the dollar rather than in cryptocurrencies when PayPal customers make purchases.

Dan Schulman, the firm’s president and CEO, said in a statement that “the shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly”.

Users do face some limitations on PayPal. They cannot transfer coins in and out of accounts and can only hold cryptocurrencies that they bought on PayPal. Any crypto coins held in an account can’t be transferred to other accounts, PayPal said.

PayPal is stepping into cryptocurrencies only a year after pulling out of the Libra Association, an effort started by Facebook to develop a digital currency. David Marcus, who leads the initiative for Facebook, used to be president of PayPal.

Bitcoin’s been on a hot streak in October, rising more than 17% in October. Still, the use case for the cryptocurrency remains limited. Data from blockchain researcher Chainalysis in 2019 showed hardly anyone used bitcoin for anything beyond speculation.

It is partly due to wild price swings. The coin is up about 70% in 2020 but is still about $7,000 away from its all-time high of about $20,000 set in December 2017. In March, during a coronavirus-induced sell-off, it fell 31%.

Bloomberg

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