Pantera Capital: PayPal and Cash App Driving Bitcoin Shortage

The launch of bitcoin support by PayPal, in combination with active purchases through Square’s Cash App, is having a material impact on the shortage of the leading cryptocurrency and, consequently, on the asset’s price. This is stated in the latest letter from the investment firm Pantera Capital.

According to the company, Cash App accounts for 40% of all bitcoins issued. PayPal only launched a service for direct cryptocurrency purchases, and this is already having a huge impact on the market, the report says.

Analysts estimate that PayPal users buy around 70% of all bitcoins issued. This is reflected in the volume growth on the regulated exchange itBit, which is backed by PayPal partner Paxos.

Source: Pantera Capital.

The dotted line on the chart represents the total supply of newly minted bitcoins plus the initial itBit volume. In Pantera Capital’s view, if this growth persists, PayPal alone will begin to buy more bitcoins than are being issued within a matter of weeks.

Chainalysis: Bitcoin rose twofold after the halving thanks to institutions

Researchers argue that PayPal and Cash App customers are already removing from circulation all bitcoins mined daily by miners.

“Where will Cash App customers get their coins? Here we recall the constraints and rigidity of supply. They will buy them at higher prices,” the analysts concluded.

In May, Square developers added to Cash App a feature for automatic bitcoin purchases at regular intervals.

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