Blockchain Bites: The Rise of the Bitcoin Investment Fund
1. Qualified investors are plowing money into cryptocurrency-focused investment funds. Yesterday, macro trader Dan Tapiero, most known for his DTAP Capital fund and eye for gold, announced a new $200 million fund called 10T Holdings that will make bids on crypto startups.
2. PayPal’s cryptocurrency business has beat expectations, according to CEO Dan Schulman during the company’s Q4 earnings call. Launched late last year, PayPal’s (PYPL) crypto services – buying, selling and transacting – volumes have “greatly exceeded” the firm’s initial projections.
3. Only 16 nations have specific tax policies regarding cryptocurrency, according to a U.S. Library of Congress report examining 31 different jurisdictions. The library’s law division released a report detailing the differences between how nations tax “block rewards.”
Great debate?Earnings season is upon us, meaning the latest snapshot of publicly traded companies’ financials will come into view. This includes the handful of firms playing around with crypto. As mentioned above, PayPal has seen explosive growth in its newly launched crypto services business.
The fintech giant enabled buying, selling and holding for a number of large-cap cryptos for its 350 million users on Nov. 12, 2020. While the total number of crypto users on the platform or the profitability of this business line aren’t known, the company executives seemed pleased with the decision to enter the market.
In CoinDesk reporter Nathan DiCamillo’s terrific rundown of the company’s earnings report, he included comments from Susquehanna Financial Group regarding merchant crypto adoption on PayPal.
Comparing PayPal’s trading services to Square’s (SQ), Susquehanna noted that the latter’s bitcoin business hasn’t been all that profitable. Although revenues have been growing every quarter, Square doesn’t “really mark it up,” meaning it’s not bringing in much cash from CashApp.
It’s for this reason that Susquehanna is interested in PayPal merchants accepting crypto as part of their business. “Trading is interesting but it’s not nearly as interesting to us as a payments acceptance device. … [PayPal has] incredible merchant volume,” James Friedman, a senior fintech research analyst at Susquehanna, said.
As DiCamillo notes:
"In December 2020, Susquehanna surveyed more than 120 small to medium-sized business owners to poll their interest in adopting bitcoin payments."More than 70% of respondents said they would accept bitcoin for payment at checkout if PayPal or Square enabled it, but around half of respondents said they believed there would be no impact on their business if they added the feature."Susquehanna also surveyed more than a 100 American adults on attitudes toward cryptocurrencies… [and] found that nearly half of respondents would not purchase a product or service with cryptocurrency, while 5.5% of them would do so 10 or more times per year."
The sample size is small, though largely matches the sentiment about bitcoin. Although initially figured as a “peer-to-peer” cash system, in Satoshi’s white paper bitcoin is increasingly seen as a store of value.
Many of the market entrants in 2020 that made headline splashes pointed to bitcoin’s prospects as “digital gold.” Bluford Putnam, chief economist and managing director of CME Group, for instance, went on record saying bitcoin is an “emerging competitor” to gold.
For some bitcoin OGs or outside watchers this trend could subvert the aspects that make bitcoin such a powerful tool for financial freedom.
Responding to Francis Pouliot, CEO of Bull Bitcoin, who said “The next attack [on bitcoin] could very well come from self-proclaimed Bitcoin Maximalists under the cover of the corporate store of value narrative,” Bloomberg’s Joe Weisenthal noted:
“This has been my theory as well. With Bitcoin becoming increasingly corporate, some players in the space may find the cypherpunk/censorship-resistance angle to be an embarrassing distraction.”
“‘Why have private wallets, when Bitcoin can be a SoV in an ETF?’” he said. (The U.S. has yet to accept a bitcoin exchange-traded fund application.)
As mentioned before, PayPal doesn’t let users move bitcoin they’ve purchased off its platform. This introduces a middleman to what exists on its own as a self-contained and uncensorable payments system.
It should be said the bitcoin codebase has been running for 12 years, without downtime, allowing anyone to transact with anyone, without exception. But the corporate environment around bitcoin is still emerging and it’s unknown the total impact it may have on the ecosystem. The tension between corporate actors and a fully decentralized system will be a thing to watch.
Yesterday, Ethereum miners earned $27.75 million in transaction fees as the blockchain’s native currency, ether (ETH) rallied. The average transaction fee was as high as $23.43, the highest it’s ever been (it’s never been above $20, in fact), according to crypto data provider Blockchair. This means it’s more expensive than ever to actually run decentralized applications or send funds using Ethereum – a blessing and curse, experts say.