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Bitcoin Tries To Renew Challenge to Gold ?

If there is one asset, outside of the crypto universe, that bitcoin often gets mentioned in the same breath with, it is gold. The yellow metal has several qualities to which bitcoin and other digital currencies aspire, namely bullion has been used as currency, it is a store of value and seen as a credible alternative to fiat currencies.

Still, bitcoin has a way to go to surpass gold on the investment front.

“Last year, when bitcoin prices rose from their 2017 starting value of just under $1,000 to over $19,000 by mid-December, market chatter was that bitcoin was usurping gold’s role as a store of value and alternative to fiat currencies,” reports CNBC. “After all, bitcoin’s price was skyrocketing, while gold was languishing, staying mostly in the $1,200 an ounce range, despite rising geopolitical worries.”

Commodities as an asset class have a reputation for volatility, but gold is one of the more docile commodities, meaning its comparisons to highly volatile bitcoin may miss the mark. Take the SPDR Gold Shares (GLD) as an example. GLD is an exchange traded fund backed by physical gold. It traded around $118 for much of December while bitcoin was flirting with $20,000. Today, GLD is flirting with $127 while bitcoin is creeping toward $8,900 but only after following below $6,700 earlier this year.

Said another way, gold is often embraced by conservative investors. In its still young life span, bitcoin has proven highly inappropriate for conservative investors.

History Matters

Age matters in financial markets and bitcoin is young by any metric, but gold is old. Really old.

“Gold has been a part of human history for at least 6,000 years, and it has functioned as money since at least 200 BCE in the ancient kingdom of Lydia,” according to State Street, which issues GLD. “Today, gold plays an important role in the international monetary system as a reserve asset in almost all central bank balance sheets.”

Speaking of central banks, many are major buyers of gold while some are looking to ban digital currencies in their respective countries.

Bitcoin and gold have some similarities, including scarcity of supply and that neither is regulated by a central bank.

“Bitcoin is engineered to slowly decline to zero growth around the year 2140, where it will reach maximum capacity of 21 million digital coins,” according to State Street. “Gold doesn’t have a set date or maximum capacity, but on average approximately 3,200 tonnes of gold have been mined every year, adding about 1.7% of the total stock of gold ever mined.”

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Bitcoin

How To Buy Bitcoin (BTC) With Your Paypal Account Step By Step Guide 2020

There are 26 million merchants that offer PayPal around the world. For those merchants, customers paying in crypto won’t have any impact. Everything will be converted to fiat currency when a transaction is settled.

As part of today’s (October 21st, 2020) move, PayPal has been granted a conditional BitLicense by the New York State Department of Financial Service. It should be able to launch its crypto service in partnership with Paxos in New York.

PayPal’s crypto service is rolling out progressively. You can head over to PayPal’s website and join the waitlist. Everybody should be able to access crypto-related features within the next month or so. The company has already updated its fees with more details about cryptocurrency exchange fees.

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Adoption

PayPal Allows Bitcoin And Crypto Spending

PayPal has entered the cryptocurrency market, announcing that its customers will be able to buy and sell Bitcoin and other virtual currencies using their PayPal accounts.

Those virtual coins could then be used to buy things from the 26 million sellers which accept PayPal, it said.

PayPal plans to roll out buying options in the US over the next few weeks, with the full rollout due early next year.

Bitcoin prices rose alongside the news, breaking the $12,000 (£9,170) mark.

The other cryptocurrencies to be added first will be Ethereum, Litecoin, and Bitcoin Cash (a spin-off from Bitcoin).

All could be stored “directly within the PayPal digital wallet”, the company said.

‘Penny stocks’

Cryptocurrencies have remained a niche payment method, partly down to the rapid change in prices they can experience compared with traditional state-backed currencies. That has made them popular among some types of investors.

PayPal said it was aiming “to increase consumer understanding and adoption of cryptocurrency”.

“As part of this offering, PayPal will provide account holders with educational content to help them understand the cryptocurrency ecosystem,” it said.

But David Gerard, author of Attack of the 50 Foot Blockchain and the forthcoming Libra Shrugged: How Facebook Tried to Take Over the Money, said PayPal was describing “a crypto day-trading market”.

“I’m at a loss as to who the market is for PayPal as a crypto-exchange,” he said.

He likened it to playing the stock market, but with Bitcoin – whose volatile and less well-regulated nature was like “gambling on penny stocks”.

“Have a flutter, drop $10 on it, you’ll learn things you wouldn’t learn any other way – but you are gambling,” he warned.

He said there were “a lot of big players who manipulate the price”, and ordinary people risked losing their money.

“I don’t expect much of a market for this beyond existing crypto holders… I’m baffled that PayPal would offer this, and it’s not clear what they’re trying to do here,” he said.

“There must be someone at PayPal who is very interested in cryptocurrencies,” he added.

Paying with crypto

Other payment firms, such as Square’s Cash app and Revolut, have already offered cryptocurrencies for sale. But PayPal has one of the largest merchant networks in the world.

When it comes to using the virtual coins, PayPal will convert the cryptocurrency into the relevant national currency, so the company being paid will never receive the virtual coins – just the correct amount of pounds or dollars.

PayPal said the system meant there would be “certainty of value and no incremental fees”.

But using Bitcoin to pay at ordinary merchants is not due to launch until “early 2021”.

Cryptocurrencies’ volatile prices – along with their historical use as a less traceable payment method for illegal purposes – have led to numerous calls for them to be regulated.

PayPal has been granted permission for its operation from the New York State Department of Financial Services, in the form of a conditional “Bitlicence” – the first such licence granted.

To begin with, the service will work with an existing cryptocurrency provider in the US, the Paxos Trust Company.

But it is not PayPal’s first venture into the area.

The firm was once a partner in Facebook’s digital currency Libra, but became the first to pull out of the alliance, just a few months after it was announced.

The scheme was controversial, attracting attention from financial regulators in several countries.

Earlier this year, Facebook was reported to be “rethinking” the idea amid the resistance.

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187,000 BTC Drained: Over $2 Billion in Bitcoin Leave the Top Exchanges Since June

Cryptocurrency reserves held on digital asset exchanges have been dropping to new lows, as some of the top exchanges have seen significant bitcoin reserve balance drops. A few months ago trading platforms had a lot more bitcoin reserves on hand and onchain data shows a few exchanges have seen customers steadily drain 187,000 bitcoins ($2.1B) from exchange-owned cold wallets.

In February, Coinbase had 1 million bitcoin under management and today reserves are down over 9% as 92,000 bitcoin ($1B) has left the exchange. Today, according to Bituniverse’s online exchange balance rank tracker, the San Francisco trading platform has 908,560 BTC under management.

36,000 BTC ($408M) left Coinbase since news.Bitcoin.com’s reserves report published on June 30, 2020. A number of top exchanges below Coinbase have also seen cold wallets drained during the last three months.

The top seven exchanges in terms of balance holdings on June 30, 2020, according to Bituniverse’s exchange balance rank tracker.

The second-largest exchange in terms of bitcoin reserves held is Huobi and the trading platform is down over 53,000 BTC ($601M) since June 30. Binance’s balances remained the same as the exchange holds 266,000 BTC today and three months ago, Binance held 269k BTC. Similarly, the fourth-largest reserve holder, Bitfinex, didn’t see much movement in the last three months.

The top seven exchanges in terms of balance holdings on October 16, 2020, according to Bituniverse’s exchange balance rank tracker.

Three months ago, Okex had 240,000 BTC on hand but today, Okex only has 198,000 BTC in reserves. This means 42,000 BTC left Okex since June as 17.5% left the exchange in the last three months.

Statistics show out of the top five crypto trading platforms over 187,000 BTC ($2.1B) has left these exchanges since the June report.

Just recently, Bitmex had some legal troubles with the U.S. government and since the incident, a lot of bitcoin has left the derivatives exchange. Three months ago Bitmex had 224 BTC in reserves and today the exchange only has 113,000 in cold storage. Onchain data indicates Bitmex lost a whopping 49.55% in BTC reserves since June 30.

At the time of publication, Glassnode’s “Exchange Balance vs. Bitcoin” stats show that there’s 2.7 million BTC held on exchanges today. Glassnode’s stats indicate that out of the 21 million BTC cap, exchanges hold 12.85% of all that will exist, and 14.59% of the 18.5 million BTC in circulation.

1.8 million BTC out of the aggregate 2.7 million BTC held on exchanges sits in the world’s top five crypto trading platforms. The top five custodial platforms by BTC reserve status include Coinbase, Huobi, Binance, Bitfinex, and Okex.

Exchange balances have been riding lower consecutively for the last 15 months and the last time balances were this low was around May 2019.

To many crypto enthusiasts and traders, the low balances on exchanges suggest users are storing assets in a noncustodial fashion as opposed to leaving funds with a third party. The data from Bituniverse and Glassnode also suggests that liquidity and selling pressure may lower.

Original Article Appeared On Bitcoin.Com

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