Analyst: Bitcoin’s latest rally was a ‘combination’ of factors (not just PayPal)
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Bitcoin returned to the front of the financial headlines last week, with its first major rally since late July.
Was PayPal the catalyst? Certainly the initial move was attributed to news the payments giant will allow users to buy, sell and hold Bitcoin and other major cryptos on its platform
The result was a >10pc jump which saw Bitcoin climb to new 2020 highs above $US13,000.
But after the dust settled, Stockhead caught up with markets commentator (and founder of crypto news network Nuggets News) Alex Saunders, to get his take on the week that was.
Saunders highlighted that the PayPal update was the latest in a run of news flow around increased institutional involvement in BTC.
The most notable of those was a “huge statement” from US company MicroStrategy, Saunders said.
The NASDAQ-listed business analytics firm topped up its coffers with a September BTC investment that took its total holdings to 38,250 coins (investment outlay: $US425m).
Earlier this month, payments firm Square (backed by Twitter CEO and BTC bull Jack Dorsey) bought 4,709 Bitcoins of its own valued at $US50m.
And JP Morgan appears to be cultivating its reputation as a serial crypto back-flipper in the traditional banking space.
In that context, PayPal made its move partly in a bid “to stay relevant”, Saunders said.
“You’ve got traditional finance and banks. Then you’ve got fintech platforms such as PayPal and (Square product) Cash App, and they’re all competing for payments on different rails.”
That being said, “the PayPal news is big”, he said.
“They’ve got over 300m users, 26m active merchants. Those are big numbers, and people can buy sell and hold crypto on their platform now.”
“Yes they can’t hold keys to own crypto or send to other people. They’re the custodians, which in some ways isn’t the true value of BTC.
“So it’s kind of step one. And that’s also what a lot of people do with crypto exchanges anyway — they sign up, buy it then learn how to use a wallet and store it safely.”
As a crypto bull, Saunders says the post-Covid macro environment has also been supportive of BTC – particularly its features as a hard currency amid a rapid expansion in the global money supply.
“I think firstly, price-wise, all markets have kind of been recovering, and that’s mainly thanks to a huge injection of liquidity from major central banks,” he said.
“But gold bugs and crypto enthusiasts have talked all along about hidden inflation. And now listed companies are saying hold on, we’ve got hundreds of million on our balance sheet, and Bitcoin is the best way to store value.”
“In that context, Bitcoin and gold have performed well but I think BTC is an improvement because it’s a tech you can build on top of.”
Looking ahead, Saunders is a believer in a longer-term restructure of global markets where digital currencies will play an increasingly central role in the financial system.
“I still think it’s very early on. We’ve gone quickly from around $US3,000 to $US13,000 (in 2020),” Saunders said.
“Once we get over next hurdle in the charts, there’s not much resistance to $US20,000. Then I think it’s onwards and upwards to $US100,000 over the next four years.”