Coin

PayPal launches cryptocurrency payments (the Crypto Mainstream-ification intensifies)

Wednesday, March 31, 2021 by Robinhood Snacks | Disclosures
_When the check comes but they don't take litecoin_

When the check comes but they don't take litecoin

On the (block)chain... is the new off the chain. Over the past year, bitcoin has ~9X'd in value as corporate and retail investors have poured into crypto. In January, the crypto market hit $1T in total value (mostly bitcoin). Now, the mainstream-ification is intensifying: Venmo-owner PayPal, which has a whopping 377M active accounts, is embracing the crypto life.

  • "Checkout with Crypto": Yesterday, Paypal officially launched the service in the US, allowing users to pay with crypto at online stores.
  • 29M: In the coming months, PayPal will expand crypto checkout to 29M merchants. Customers with PayPal digital wallets can pay in bitcoin, ether, bitcoin cash, and litecoin.
  • BTW: Visa also just announced that it'll allow people to use the cryptocurrency USD Coin (a US dollar-backed stablecoin) to settle payments.

Paying with crypto... but not really paying with crypto. Customers' crypto holdings will be converted into fiat currencies (like US dollars) at checkout. It's kind of like selling a fraction of your BTC, then using the sale money to buy a rice cooker. Merchants don't actually get paid in crypto — and that's way safer for them, since crypto is so volatile.

  • For merchants: Imagine if Adidas was selling a hoodie for $50, and you bought that hoodie with a (tiny) fraction of bitcoin. Now imagine if that tiny fraction of bitcoin was worth only $20 the next day. Adidas lost $30 on that bit-transaction.
  • For buyers: Imagine if you bought a $58K car with one BTC, and the next day that same BTC was worth $60K. You would've lost $2K in value. If the value of BTC plunged to $56K the next day, you would've saved $2K. Not super practical either way.
THE TAKEAWAY

BTC is still mostly viewed as a speculative investment (not a currency)... It's too volatile for most to use it as currency, which is why PayPal is converting it (and why Visa is only allowing a stablecoin). It's also why Tesla — which now lets people directly buy cars with actual bitcoin — has instituted a 30-minute purchase window. Given BTC's surge this year, some investors also see more potential upside in holding on to it rather than using it for purchases. But as we've seen in the past (see: 2018), bitcoin has a big potential downside, too.