Bitcoin surges past US$13,000 after PayPal embrace

NEW YORK • Bitcoin surged past US$13,000 for the first time since July last year after online payments giant PayPal Holdings announced it would allow customers to use cryptocurrencies.

The largest digital coin increased US$950, or 8 per cent, during traditional trading hours in New York. It climbed another 2 per cent to US$13,119 in early Asian trading.

Gains among so-called alternative coins were even bigger on Wednesday, with litecoin jumping more than 13 per cent and bitcoin cash surging more than 9 per cent.

PayPal customers can buy, sell and hold cryptocurrencies - including bitcoin, ether, bitcoin cash and litecoin - from digital wallets, as well as use the virtual money to shop at the 26 million merchants on its network. Shares of PayPal jumped 5.5 per cent to US$213.07, the biggest increase since May.

Mr Mike Novogratz, who runs Galaxy Investment Partners, on Twitter called it "the biggest news of the year in crypto", adding that banks will embark on a race to service digital currencies. "We have crossed the Rubicon," he said.

The news sparked an exuberant response from cryptocurrency fans, who pointed to a string of recent announcements that suggest wider acceptance by old-school financial mainstays.

Two public firms - Square and MicroStrategy - said recently they had invested in bitcoin. And Fidelity Investments announced in August that it is launching its first bitcoin fund, adding its establishment name and star power to the often-maligned asset class.

PayPal said it plans to make the features available as a funding source for purchases at its merchants worldwide, and intends to expand it to its mobile payments app Venmo soon. Merchants will be paid in traditional currencies such as the dollar rather than in cryptocurrencies when PayPal customers make purchases.

The firm's president and chief executive Dan Schulman said in a statement: "The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability of governments to disburse funds to citizens quickly."

Users do face some limitations on PayPal. They cannot transfer coins in and out of accounts and can hold only cryptocurrencies that they bought on PayPal.

Any cryptocoins held in an account cannot be transferred to other accounts, the firm said.

PayPal is stepping into cryptocurrencies only a year after pulling out of the Libra Association, an effort started by Facebook to develop a digital currency.

Bitcoin has been on a hot streak this month, rising about 19 per cent.

Still, the use case for the cryptocurrency remains limited.

Data from blockchain researcher Chainalysis last year showed that hardly anyone used bitcoin for anything beyond speculation.

This is due in part to its wild price swings. The coin is up about 75 per cent this year, but is still around US$7,000 away from its all-time high of about US$20,000, set in December 2017. In March, during a coronavirus-induced sell-off, it fell 31 per cent.

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A version of this article appeared in the print edition of The Straits Times on October 23, 2020, with the headline Bitcoin surges past US$13,000 after PayPal embrace. Subscribe