PayPal’s Long Term Cryptocurrency Gamble and its Stock Share Consequences

PayPal updated its app to allow users to buy, sell, and hold crypto in 2020, later expanding in early 2021 with the new ability to check out millions of businesses with cryptocurrency. The business has now taken it one step further by allowing every user to transfer cryptocurrency across accounts to other wallets and exchanges. 

PayPal: An American, now multinational, financial technology company that operates online money transfers in a majority of countries that support it. Although it has been a formidable competitor against other fintech companies, its stock prices have been marked with volatility as it continues to deteriorate with its share price down 13% in the past three months. 

Perhaps that is why PayPal has begun to shift their focus towards the world of cryptocurrency. PayPal had been dabbling into crypto for a while now, with them releasing an update allowing users to buy, sell, and hold crypto in October 2020. After March 2021 provided users with a chance to check out at businesses with cryptocurrency, consumer demand rose with people demanding a feature where they could take cryptocurrency transactions across accounts.

In an interview with Time 100, PayPal CEO Daniel Schulman mentioned that “Demand on the crypto side has been multiple-fold to what we initially expected. There’s been a lot of excitement.”

The capability of PayPal’s new software allows PayPal customers to seamlessly transfer supported crypto coins into PayPal, transfer crypto from the app to external crypto addresses (like exchanges and hardware wallets), and send crypto directly to other PayPal users in just a matter of seconds. 

Fernandez da Pointe, VP of Global Business Development, commented to TechCrunch: “We see ourselves as a conduit between the fiat, or traditional finance, environment and the web 3 environment. We are enabling connectivity to other wallets, exchanges, and applications.”

As the universe travels on a shift from hard cash to digital transactions, PayPal’s ability to help users move crypto assets like Bitcoin and Ethereum is a necessary move to not fall behind in the industry and fast changing fintech environment. PayPal’s CEO and VP believe that the volatility behind most cryptocurrencies will begin to slow as more companies incorporate them into their businesses. “The volatility will lessen over time; the utility will increase,” adds Schulman. 

PayPal’s latest attempts to lift themselves out of their stock slump are raising mixed opinions for investors. Some investors argue that PayPal’s stock is argued to be a good stock to invest in right now due to it being near its all-time low; while the stock was originally on a decline due to its late adaptation to crypto transactions, its new updates may lead to a significant increase.

While these investors have a point, there are a plethora of reasons to believe that PayPal stock will sink further and that it's best to cut losses. As the COVID-19 crisis slows to a stop, e-commerce transactions are slowly being cut down as in-person shopping resumes. More lossage of transactions is faced as the Russia-Ukraine conflict continues to build. Even more so, cryptocurrency not being regulated yet is a risky factor that could lose trust among the market.

 “We think a substantial amount of commerce and payments will happen on digital currencies in the future, and we are playing the long game,” states da Ponte. 

What Does This Mean for the Future: PayPal’s long-term plan for incorporating cryptocurrency into its products could mean substantial gains for its investors, but the effects could be equally devastating.