NEW YORK (BLOOMBERG) - Bitcoin surged past US$13,000 (S$17,620) for the first time since July 2019 after PayPal Holdings announced it will allow customers to use cryptocurrencies.
The largest digital coin increased US$950, or 8 per cent during tradition trading hours in New York. It climbed another 2 per cent to US$13,119 in early Asian trading. Gains among so-called alt 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.
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 crypto fans who pointed to a string of recent announcements that suggest wider acceptance by old-school financial mainstays. Two public companies - Square and MicroStrategy - said recently that they invested in Bitcoin. And Fidelity Investments announced in August that it's 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 plans to expand it to Venmo soon. Merchants will be paid in traditional currencies such as the dollar rather than in cryptocurrencies when PayPal customers make purchases.
Dan Schulman, the firm's president and chief executive officer, said in a statement that "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 for governments to disburse funds to citizens quickly."
Users do face some limitations on PayPal. They can't transfer coins in and out of accounts and can only hold cryptocurencies that they bought on PayPal. Any crypto coins held in an account can't be transfered to other accounts, PayPal said.
PayPal is stepping into crypto only a year after pulling out of the Libra Association, an effort started by Facebook to develop a digital currency. David Marcus, who leads the initiative for Facebook, used to be president of PayPal.
Bitcoin's been on a hot streak this month, rising about 19 per cent in October. Still, the use case for the cryptocurrency remains limited. Data from blockchain researcher Chainalysis Inc. last year showed hardly anyone used Bitcoin for anything beyond speculation.
Partly it's due 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 selloff, it fell 31 per cent.