The price of bitcoin hasn’t been this high in about two years and bullish investors in the world’s most popular cryptocurrency are seeing fresh reasons to cheer for the asset.
The recent rally for the progenitor to the cryptographic currency craze comes as PayPal Holdings Inc. announced plans to accept cryptocurrency and allow its use for merchant payments.
PayPal said that users on its platform will be able to purchase bitcoin BTCUSD, +0.48%, as well as other sister cryptos like ethereum ETHUSD, -2.26%, bitcoin Cash BCHUSD, -1.91% and Litecoin LTCUSD, +1.32%. That news has helped to drive the value of bitcoin to above $18,000, marking its highest level since around January of 2018, when the appetite for blockchain-backed currencies was just off its apex. The PayPal move into cryptos comes about three years after Jack Dorsey-founded Square Inc. SQ, -0.18% said it would accept transfers of bitcoin for a select number of its Square Cash platform customers. The PayPal announcement is being hailed as a sign of wider adoption of the alternative to fiat currencies like the U.S. dollar DXY, -0.23% and euro EURUSD, +0.00%. Square’s bitcoin-related activity exploded this past spring amid the coronavirus pandemic, with the payments company enjoying a 600% surge in bitcoin revenue, to $875 million, driven by new active bitcoin customers and increased demand for the cryptocurrency. Square reports results in about two weeks on Nov. 5. PayPal’s announcement is a further recognition of the legitimacy of digital currencies, crypto enthusiasts say. “The news hasn’t really come as a surprise to the industry,” given the rise in Square revenues, wrote Danny Scott, co-founder and CEO of CoinCorner, a U.K.-based bitcoin exchange, in emailed comments. “With PayPal’s 346 million users and 26 million merchants this development brings digital assets to the mainstream public in a more meaningful way than anything else we have seen this year,” wrote Charles Hayter, founder and chief executive officer at CryptoCompare, which provides cryptocurrency data and analytics. But PayPal’s report isn’t the only reason that digital currencies are garnering more shine, after the price of bitcoin’s staged a stunning collapse from a December 2017 peak at around $20,000 a bitcoin. The 3rFederal Reserve Chairman Jerome Powell endorsed digital currency, saying that there might be benefits to a digital version of the U.S. dollar, speaking at a virtual event hosted by the International Monetary Fund. The Fed was among a number of banks that jointly released a blueprint for the future of digital currencies just weeks ago. Powell, however, said that challenges of creating a digital dollar include the threat of cyberattacks, monetary policy implementation, and preventing illicit activity. “We have not made a decision to issue a [central bank digital currency] and we think there is a great deal of work to be done…before making such a decision,” Powell said. The People’s Bank of China is at the forefront of digital currency use, pushing to make the yuan, more of a global currency. The second-largest economy in the world launched a trial of a digital currency last week. The Fed chairman views a digital dollar as a complement to physical currency rather than a replacement. It’s important to note that because such central bank currencies would be centralized and overseen by a government, traditional crypto investors don’t view those monetary units as analogous or competitors to bitcoin. bitcoin, which originated in 2009 as a decentralized platform, was created by Satoshi Nakamoto, the person or persons who wrote the software code for the digital currency back in 2009. bitcoin is underpinned by the blockchain network, which is the digital-ledger technology that makes bitcoin and other cryptos decentralized and anonymous payment platforms. It’s hardly a coincidence that bitcoin originated in the aftermath of the 2008 financial crisis, when fears that monetary stimulus employed by world central banks to stabilize the financial system would rapidly erode the value of local currencies. The public health crisis created by the coronavirus pandemic is creating another such environment that should be prosperous for digital currencies, bitcoin bulls argue. “The blistering speed of the digitization of economies and every aspect of our lives, including financial lives, shows that there will be a growing demand for digital, global, borderless money—characteristics that are inherent to the likes of bitcoin.” “There’s a growing sense that we’re set to experience a miniboom similar to that at the end of 2017,” he wrote. That said, bitcoin and cryptos still have their critics and are still wrestling with one of its biggest issues, investor security. Malta-based crypto exchange OKEx, one of the largest platforms in the industry, was forced to momentarily suspend withdrawals due to being “out of touch” with one of its keyholders. Others view cryptos as intrinsically worthless, with Berkshire Hathaway’s Warren Buffett once referring to bitcoin at its ilk as “rat poison squared.” Still, some proponents see bitcoin as a legitimate competitor to safe-haven assets like gold if not dollars. bitcoin is up nearly 78% so far this year, as gauged by CME Group futures. Gold futures GOLD, -0.22%, meanwhile, are up a relatively pedestrian 27% at around $1,928, according to FactSet data tracking the most-active contract. Meanwhile, the S&P 500 index SPX, +0.24% is up 7% so far in 2020, and the Dow Jones Industrial Average DJIA, +0.12% was off 0.7%.