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Why Bitcoin will fuel PayPal stock’s rally in 2021

PayPal Operations Center in Dublin
Siraj
Sarwar
Updated: 03 Apr, 2021
2 mins read

PayPal’s (NASDAQ: PYPL) stock price rally cooled off last month as investors started taking profits after shares of the payment technology company hit an all-time high of $309.

The sell-off is also blamed on economic reopening and bullish sentiments about value stocks that are likely to benefit from easing restrictions.

Nevertheless, the 20% share price sell-off in the last month has created an attractive buying opportunity for long-term investors.

This is because shares of the payment technology company are likely to bounce back significantly on the back of robust growth in bitcoin revenue, which would help expand the high double-digit revenue growth trend into 2021 despite the negative impact of easing social distancing policies.

PayPal stock performance. Finviz chart. See more stocks here.

PayPal is set to earn billions from bitcoin revenue

The online payment transfer giant has benefitted strongly from its strategy of permitting its users to buy, sell and hold bitcoin and a few other cryptocurrencies.

In the December quarter, PayPal customers who are engaged in crypto transactions have logged into PayPal twice as much as before. 

The company also saw a stunning growth in new activate accounts and transaction revenue, attributed mostly to crypto adoption.

Paypal transaction revenue. Source Coindesk.com

“The volume of crypto traded on our platform greatly exceeded our projections,” PayPal CEO Dan Schulman said on the company’s fourth-quarter earnings call. “We’re excited to build on this early success by allowing customers to use their crypto balance as a funding source. … We hope to launch our first international market in the next several months.”

According to Mizuho Securities analyst Don Dolev, PayPal is likely to generate $2 billion in bitcoin revenue by 2023, with expectations for 20% more than growth in 2021.

“There has been a dramatic increase in engagement due to crypto, with 50% of Paypal crypto users opening the app daily. Both our survey and management commentary unveil a dramatic increase in engagement due to crypto,” said Dolev.

Bitcoin trading volume explodes

On the other hand, Bitcoin trading volume has been increasing at an immense pace.

Data compiled by Finbold analysts show that in 2021, Bitcoin trading volume accounts for almost 40% of the average daily gold trading volume.

Source: Finbold.com

It is a whopping percentage having in mind that bitcoin’s market capitalization accounts for just 9% of gold’s $10.99 trillion. It is an evident indicator that investors are currently more speculative about bitcoin.

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Siraj Sarwar
Author

Siraj is a finance writer based in Saudi Arabia with a strong understanding of and passion for the stock market, cryptocurrency, economics, and finance. He has worked for international clients for many years on several projects related to the stock market, equity research, accounting, and finance. Siraj is a published financial analyst on some of the largest finance websites.