Pay’Bit’Pal

Edited By Barsha B. Baruah

PayPal partners with cryptocurrency service providers

PayPal, eBay Inc’s (NASDAQ: EBAY) payment unit announced on Tuesday, September 23, 2014 that it is partnering with three of the main Bitcoin processors; Bitpay, Coinbase and Gocoin, which also processes Litecoin and Dogcoin, allowing digital merchants to accept the cryptocurrency through its PayPal Payment Service. The partnership will initially be rolled out in North America for merchants of digital goods like games, apps, and eBooks and music files.

Partial Embrace

The news comes shortly after Braintree, the mobile payment arm of PayPal announced earlier last month that it would begin accepting payments in form of virtual currency for its service providers, including Uber and Airbnb. People were keenly watching eBay’s steps to fully integrate the digital currency, when its CEO John Donahoe openly spoke about its admiration for virtual currency in June this year, at the time of presenting the quarterly results of the company.

PayPal’s move comes not as a leap of faith but more as testing the waters, the announcement does not imply that PayPal would allow its customers to store Bitcoin in their online wallets just like currencies such as Dollar and Euros to be used around the world, or allow the transaction to occur on its own PayPal would instead allow the Bitcoin payment partners to handle the processing of payments on their own payment server, thus insulating and its customer from any risk.

Scott Ellison, PayPal’s Senior Director for Corporate Strategy has written in a blog post in the company’s website that the step was a “test” for some time in making, he also stressed that “PayPal has always embraced innovation, but always in ways that make payments safer and more reliable for our customers,” he further added, “That’s why we’re proceeding gradually, supporting Bitcoin in some ways today and holding off on other ways until we see how things develop.”

E-commerce giant, eBay is not the first company to embrace such digital currencies, we have already published details about  other impressive names, such as Dish Network, Zynga, Overstock.com, Virgin Galactic and Sacramento Kings and other 500,000 service providers.

Price High

Bitcoin price soared over 10% on PayPal’s announcement on Tuesday, reaching a level of $443.69 per Bitcoin; the prices are still less than half of $1100 per Bitcoin price, indicated in the beginning of the year. At the time of reporting, the price has fallen from there with one Bitcoin trading at $410.035.

Source: Bloomberg/WSA
Source: Bloomberg/WSA

The Decline

Bitcoin prices are trading at less than 50% of its December 2013’s peak, with Bitcoin enthusiasts still failing to understand the actual reason behind this fall. One of the key assumptions of this decline can be attributed to asset allocation, which means that investors are simply switching to assets that can provide them better returns than Bitcoin. It is worth noting that Bitcoin has a negative return for this year while benchmark stock indices like the S&P 500 has given an average return of 6.79%, and the Dow Jones and NASDAQ 2.68% and 7.51%, respectively.

Source: Bloomberg/WSA
Source: Bloomberg/WSA

Put simply, money will follow the ascending slope and selling will call for more selling. There is always a risk with Bitcoin, following the virtual currency’s fall from $1100 to $400, to continue on this downwards spiral; wary investors would rather move to safety!

There is this irony PayPal’s move has allowed Bitcoin prices to surge with the hope of wider mainstream adoption, Bitcoin is subject to wild swings in the price as the currency is limited and is hold by a smaller audience and thus a small movement have a deep impact on the process however, more widespread or commonly used the virtual currency would be as common or normal would be the use the less it would be subject to price speculation and thus fall the prices would fall down instead of going up.

Bitcoin retains its price as what it was in October, 2013, before it started the unprecedented climb towards $1100.

Just Saying!

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