Bitcoin Shortage? Pantera Thinks Market Rally Driven by PayPal Buys


Pantera Capital CEO Dan Morehead (Credit: CoinDesk archives)

PayPal’s recent leap into the crypto market is helping to drive the current bitcoin rally, according to Pantera, a prominent cryptocurrency and blockchain investment firm.

In an investor letter published Nov. 20, the venture firm compared the ongoing bull market to the last time BTC rose above $18,000, three years ago. 

“Previously the friction to buy bitcoin was pretty onerous,” the letter notes, contrasting that difficulty with how e-commerce giant PayPal has now made it easy for millions of users to become potential bitcoin, ether, bitcoin cash and litecoin buyers. 

Related: Market Wrap: Bitcoin Hits $18.8K as Total Crypto Locked in DeFi Passes $14B

Indeed, all eligible PayPal account holders in the U.S. can now buy, hold and sell those cryptocurrencies – sooner than the payments firm anticipated, due to steep customer interest. Additionally, the firm recently upped its weekly crypto purchase limits to $20,000 from an initial $10,000. 

“BOOM! The results are already apparent,” Dan Pantera, chief executive and founder of the eponymous fund, wrote in the November letter. “When PayPal went live, volume started exploding.”

Pantera claims that PayPal is already buying almost 70% of the new supply of bitcoins. Together with Square’s Cash App routine bitcoin buying, more than 100% of all newly minted bitcoins is accounted for, Pantera alleges.

The Bitcoin network issues new BTC on a fixed and predetermined schedule. Only 6.25 new BTCs are mined every 10 minutes, following this year’s “halving,” an amount that will continue to decrease every four years until all 21 million BTC enter circulation.

Related: 10 Metrics Where Bitcoin Has Already Hit New All-Time Highs

Pantera’s thesis centers around a supply-side understanding of the bitcoin market. The idea is that as the supply of BTC decreases, due to lower mining rewards, the demand naturally increases – leading to an appreciation in price.

“When other, larger financial institutions follow [PayPal’s] lead, the supply scarcity will become even more imbalanced. The only way supply and demand equilibrates is at a higher price,” Pantera wrote.

See also: Bitcoin’s Rally Could Be Caused by a Supply Crunch in China

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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