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In cryptocurrency quarters, 2020 will forever be remembered as the year that digital currencies finally started to go mainstream. In August, Goldman Sachs created a new position for head of digital assets, appointing an internal candidate who previously ran the bank’s internal funding operations. JPMorgan, formerly one of the most outspoken skeptics of Bitcoin, admitted in its October Global Markets Strategy note that “the potential long-term upside for Bitcoin is considerable.”
But of all the bullish events, the entry of PayPal into the cryptocurrency space has perhaps been the biggest news of the year. In October, the payments giant confirmed via a press release that it was launching a new service allowing US users to buy and sell cryptocurrency on its platform. Furthermore, it also plans to launch merchant integration starting early next year, allowing users to spend cryptocurrencies at any of its 26 million merchants worldwide.
To say the markets responded with enthusiasm would be an understatement. In the last few weeks, Bitcoin has been testing the resistance level of its previous all-time high of $20,000, last seen in December 2017. Bullish predictions abound, with one analyst predicting meteoric growth up to the $590k level.
A Shaky Start?
Bullish sentiments notwithstanding, recent news reports indicate that PayPal is having a shaky start to its cryptocurrency services. In late November, a Reddit user complained that the company had frozen their account after they’d made over ten cryptocurrency transactions in a week.
PayPal had subsequently sent a message to them, stating that they would not be allowed to conduct any further business on the platform. The user had ultimately managed to recover their account, but it was too late to stop the news from being picked up by practically all crypto news media.
PayPal’s actions here, along with its determination to convert Bitcoin into a medium of exchange, betray a fundamental lack of understanding on the part of the company. For quite some time now, cryptocurrency users have viewed Bitcoin as a store of value, not a medium of exchange.
It’s for this reason that billions of dollars in Bitcoin futures change hands every day. Institutional investors aren’t making vast investments into cryptocurrency because they think it’s highly spendable. So PayPal’s actions in restricting its users from buying and selling crypto – the very purpose for which the service is advertised – is denying them the right to transact in the way that all other platforms supporting Bitcoin allow.
Will Cryptocurrency Users Vote With Their Feet?
If PayPal misunderstands its target market, then it could risk losing out to the competition. Rival payments firm Skrill is an established operator in the cryptocurrency space. It saw the potential for offering cryptocurrency services all the way back in 2018 and made a foray into the market even though Bitcoin was about to enter a bear market that would last for over a year.
However, it seems that Skrill showed remarkable foresight in this regard. CEO Lorenzo Pellegrino has long been vocal about his belief that cryptocurrencies have huge growth potential and excitement about the overall innovation in the space. He decided to start offering cryptocurrency buy-and-sell services even after PayPal, one of Skrill’s biggest competitors, had previously stopped supporting Bitcoin payments.
Since launching the first cryptocurrency services on its platform, Skrill has enhanced the offering in several dimensions. Users can now trade in all major altcoins such as ETH, BCH, and LTC, but also in others outside of the top ten, including Tezos’ XTZ, DASH, and Kyber Network’s KNC. This provides users with exposure to a broad range of assets helping to diversify their portfolio.
Skrill is also a genuinely multinational cryptocurrency platform. Whereas its rival only offers the service to US users, Skrill users in 72 countries can access crypto trading on the platform.
The Value of Knowing Your Audience
Perhaps most tellingly, Skrill appears to have a better understanding of how users want to use cryptocurrencies than PayPal is currently demonstrating. Whereas the latter is attempting to redefine the use of cryptocurrency as a medium of exchange, Skrill offers users various investor features that recognize crypto as a store of value. Users can configure price alerts allowing them to track market movements to make investment decisions. They can also create conditional orders to automate buying and selling according to price and set up recurring purchases to enable a dollar-cost averaging strategy.
Of course, Skrill isn’t the only PayPal rival that’s made strides into the cryptocurrency space. Revolut also enabled cryptocurrency services around the same time as Skrill. And Square, co-founded by Twitter CEO and crypto native Jack Dorsey, also has well-established form in digital assets. In fact, a recent report estimated that Square clients have been snapping up around 40% of new bitcoin mined since the firm launched its crypto services two years ago.
While all eyes may currently be on PayPal during the BTC bull run, it’s easy to forget that the firm faces stiff competition in the cryptocurrency space. If it makes further missteps, or if it’s wide of the mark in its confidence that users will want to use their crypto holdings to make purchases, then it may be that people start to vote with their feet. Only time will tell if the payment giant really understands the audience it’s aiming to capture.
