PayPal, a digital payment service recently announced its plans earlier this Summer to allow UK PayPal customers to buy and sell cryptocurrencies on their platform after a successful rollout in the U.S. PayPal is allowing customers to invest as little as £1 into cryptocurrencies, a feature that will work alongside the standard PayPal wallet.
The maximum that a user can buy or sell cryptocurrency is £15,000 for a single transaction and up to £35,000 per year.
PayPal will allow customers to purchase cryptocurrencies from Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Jose Fernandez da Ponte, PayPal’s Vice President and General Manager for cryptocurrencies stated that the “company's new service could help introduce more people to cryptocurrency.” Whether this will be the case is actually unknown as to when PayPal announced their plans, the price of cryptocurrencies has moved slowly, Bitcoin has not seen any significant spikes in value.
Nevertheless, Bitcoin is still slowly climbing in value as this afternoon the currency has reached a value of over £51,000, which is the highest the currency has been valued at since May of 2021.
At the same time, the data shows a bullish trend with indicators showing a comfort level as buyers are eager to get their hands on the cryptocurrency at cheaper price points.
However, will this optimistic performance combined with PayPal’s announcement be enough to make more individuals indulge in cryptocurrencies?
Well, the likelihood is that PayPal’s plans for crypto may not actually make a significant difference in demand for cryptos as the majority of individuals who are already in the market for these currencies are likely already in it through using easily accessible apps such as Robinhood or Trading212. Nevertheless, having a major application such as PayPal backing crypto may have a positive effect on currencies such as Bitcoin. Simon Peters, a crypto-asset analyst at trading platform eToro, said told BBC News: "Having major reputable household names involved is good for consumers and good for the reputation of crypto more widely."
So, although a bullish market sentiment combined with PayPal making cryptos more available makes the short-term trend for cryptocurrencies looks promising, they still could be a risky investment.
A Guardian report illustrates that 14% of UK crypto buyers funded their purchases using debt, according to figures released by the FCA in June. So, investing in cryptocurrencies or anything in that matter can be a good way to grow wealth, however, due to the volatility of cryptocurrencies, taking on debt to invest into these assets may not be the most rational choice.
“Some consumers are at risk of getting sucked in and spat out by the crypto craze,” said Laith Khalaf, head of investment analysis at the financial firm AJ Bell.
Also, the surge of Bitcoin draws parallels to a previous crash known as the dot.com bubble, cryptocurrencies may very well be a bubble, and once the market rationalises, the bubble may burst.
At the same time, the introduction of CBDC may be a death sentence for cryptocurrencies in future as once everything is online and standardised, who knows if banks will still be able to accept cryptos as payment.
This combined with the volatility of cryptocurrencies makes it unlikely that they will ever be enough to replace traditional ‘fiat’ money, however, in a cashless society where a standardised digital currency is introduced, perhaps crypto may resurge due to its animosity.
The main benefit of a CBDC for crypto is that once it is introduced, each payment in the economy can be traceable, hence, due to political reasons, some may see this as an invasion of privacy or personal liberty.
For this reason, demand for cryptos may actually increase if these CBDC’s are introduced as they will be the only alternative that will provide users with anonymity when purchasing goods and services.
Written by Hubert Kucharski
Research compiled by Billy Ryan