When Retail FOMO for Bitcoin?

VYSYN Ventures Weekly Insights #26

Memes are an inseparable facet of cryptocurrency culture. “When Moon,” “Buy the dip,”, “RKT” and “HODL,” are ubiquitous in communication among cryptocurrency enthusiasts. One meme from Galaxy Digital founder Mike Novogratz may best characterize recent conditions – “The herd is coming.” 

Part of this herd are institutions and enterprise-level investors who are beginning to put money in Bitcoin and cryptocurrencies. But a development from PayPal will open the gates of cryptocurrency to another deep pool of capital.

PayPal’s recently announced that it will allow its 346 million users to buy, hold, and sell cryptocurrencies on its platform.  PayPal’s decision is simply the latest in a long line of crypto adoption but will surely not be the last.

In this VYSYN Release, we analyse PayPal’s decision to support cryptocurrency and its impact on the Bitcoin market. We also detail why Bitcoin has been receiving little mainstream press recently and why that is likely to change if Bitcoin reclaims record high prices.

PayPal and Bitcoin – A Brief History

But first, a little history. Around 2011-2012, people began to realize that Bitcoin might have actual value. The fledgling digital asset traded in the single and double-digit range for multiple months on Bitstamp (founded in 2011), one of the oldest crypto exchanges. 

For perspective, at this time, CNET voted the iPhone 4S as it’s top mobile phone model. Bitcoin was relegated to Slashdot and Reddit threads, a curiosity to only the most dedicated cypherpunks and libertarians. 

Some individuals began exchanging Bitcoin for dollars using PayPal. A simple enough transaction – pay dollars and receive Bitcoins. And this strategy worked well for years until PayPal caught on. 

In 2017, the payment processor began suspending and banning accounts associated with cryptocurrency transactions. This seemed like a strange decision, considering that 2017 was near the height of Bitcoin’s influence on netizens. 

Perhaps it was to limit liability. Maybe they thought criminals only used Bitcoin. The theories are extensive. Of course, PayPal can do as it pleases as every user accepts their terms and conditions. 

Then suddenly, and without warning, PayPal announced in late October it’s upcoming support for cryptocurrencies. “Eager” customers can purchase up to $15,000 a week. 

Users can now buy and sell several cryptocurrencies on the platform, with the ability to pay arriving “soon.” Bitcoin, Ethereum, Litecoin, and Bitcoin Cash will be the initial offerings. 

From the perspective of market staying power, this is not a bad first selection. These cryptocurrencies are unlikely to fall by the wayside anytime soon. 

They also happen to be on the New York State Department of Financial Services (DFS) list of approved assets. The only one that may raise eyebrows is Bitcoin Cash, but it still holds the #6 spot on CoinGecko in terms of overall market cap. These crypto services will also be coming to Venmo, PayPal’s mobile application, in early 2021. 

Powering these crypto payments is Paxos, a fintech firm specializing in crypto brokerage services. By handling orders, APIs, and the technical aspects of trades, Paxos is freeing up PayPal’s bandwidth to focus on the front-end and user experience. In an interview with Reuters, PayPal’s president and chief executive Dan Schulman explained they are looking at how they can expand their reach.

“We are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role.” 

However, since PayPal will be handling all transactions and will NOT be allowing users access to their own private keys, there is skepticism among many. It is unlikely that private key ownership will be a part of PayPal’s roadmap anytime soon.

Bitcoin Market Projections?

Despite the PayPal announcement being the most bullish news since Michael Saylor announced MicroStrategy purchased  $425 million worth of Bitcoin, it seems to have been drowned in the noise of the 2020 US Presidential Election. Data of current sentiment and interest highlights that the public is paying little attention to Bitcoin. Bitcoin breaking through its last local high and touching $16,000 generated little mainstream press as the event was outsized by election developments.

The news outlets have the power to move people to action. If the media catches on and decides to begin reporting on all the institutions scooping up Bitcoin, there could be some substantial price increases. 

However, Bitcoin may need to break record highs for this to occur. The disparity between current Google search volume for Bitcoin and search volume during the last time Bitcoin traded at $16k highlights that general attention is much lower.

If Bitcoin can reclaim record highs, it will receive much greater attention from mainstream news outlets. This would likely put eyeballs on Bitcoin as an investment opportunity and act as a self-reinforcing cycle to spur further price increases.

Public Perception to be a Key Factor in the Coming Bull Cycle 

PayPal’s foray into crypto is a huge development. Corporate capital entering the asset is an even bigger development and could raise the value of Bitcoin by orders of magnitude.

But the public perception of Bitcoin is also a crucial element to price movements and has been receiving little attention recently as eyeballs tuned into the election. However, as Bitcoin approaches record highs and the election dies down, the mainstream may start paying attention once again. 

Once the mainstream press starts widely reporting on Bitcoin price, a sense of FOMO will almost immediately kick in. This potential FOMO combined with corporate capital entering would easily bring Bitcoin to multiples of current price levels.

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