The bigger you are, the more attention your every move will attract. And when it comes to mainstream payments companies, few are bigger than PayPal.

PayPal confirmed its entry into the cryptocurrency asset industry this week, announcing that it will enable the buying, selling and holding of cryptocurrencies on its platform. In the coming weeks, users in the United States will be able to trade bitcoin (BTC), ethereum (ETH), litecoin (LTC) and bitcoin cash (BCH) using their PayPal accounts. The service will roll out to PayPal's Venmo and other territories in the first half of next year. Users can also use these cryptocurrencies to purchase items at 26 million merchants within the PayPal network.

The market regards it as good news, which can be seen from the nearly 15% (2020.10.25) increase in the price of BTC since the announcement. Other cryptocurrencies supported by PayPal have also seen weekly gains of 10-15%.

The rally appeared to breathe life into a market that had been mired in depressed sentiment. Indeed, PayPal's news is good news for the industry as a whole. But the news is not the boost to the fundamental outlook for bitcoin and several other currencies that many market watchers seem to think.

What can the numbers show?

First of all, this news is not unexpected. The news was reported a few months ago, and it was later added that the actual cryptocurrency transactions would be handled by Paxos.

PayPal will indeed bring more than 340 million users to cryptocurrency. For context, according to data firm Glassnode, there are currently 32 million addresses holding Bitcoin (only 5 million of which are active). But PayPal's cryptocurrency users won't necessarily increase this number of addresses because they won't be able to get their own private keys. What's more, users will not be able to transfer their cryptocurrency holdings out of their PayPal accounts, nor will they be able to send cryptocurrency to other PayPal users. In other words, PayPal more or less dictates what users can do with their cryptocurrencies, presumably freezing accounts if they see fit, at least for now, and that's not quite in the spirit of what cryptocurrencies are all about .

Another thing that many people are excited about is the network of 26 million merchants where users will be able to spend their cryptocurrencies, and PayPal will handle the fiat-to-crypto exchange. However, over the years, as investment uses have come to dominate,"buy things with cryptocurrencies"The use case for has attracted relatively little attention. Why would one spend an investment asset, forgoing any potential gains? Admittedly, in some countries it may be easier to pay via PayPal with, for example, Bitcoin than USD. But just because the service is available now, doesn't mean people will use it heavily.

underperforming indicators

Most importantly on a side note, the rally broke out amid relatively bearish sentiment. For context, it's helpful to compare this week's rally to the sharp price surge in late July of this year, when BTC gained nearly 30% in 10 days.

In the weeks leading up to the July rally, the number of transactions on the bitcoin network had been rising, indicating increased activity. In the weeks leading up to this rally, the number of deals was slipping.

Likewise, the number of active addresses on the Bitcoin network was increasing heading into the July rally, but decreasing as it rallied this week.

Both indicators hint at a decline in network activity, perhaps a result of reduced interest from traders and investors given that prices have been hovering within a relatively narrow range.

The derivatives market has also shown some bearish sentiment, with the funding rate for Bitcoin perpetual futures turning negative in early September. A negative funding rate means that there are more bears than bulls. By contrast, funds rates have been mostly positive since early summer, when the rally began in July, suggesting traders and investors have become more positive about the market outlook.

gather momentum

gather momentum

However, the cryptocurrency market changes quickly, and the indicators above are adjusting. As we've seen, sentiment can shift in a split second, which can completely change market indicators fueled by FOMO. different into this round of rally"mood"That could partly explain the rapid rise in asset prices, as unprepared traders scrambled to adjust their positions. It could also mean that the rally could be short-lived as the novelty of PayPal wears off and the bearishness returns.

However, the nature of the bearish sentiment and the fallout from the PayPal announcement suggest otherwise.

The waning of interest over the past few weeks appears to have more to do with tepid prices than negative fundamentals. In fact, the reasons to invest in Bitcoin have been increasing, with inflation concerns not only encouraging traditional fund managers, but also corporate treasurers to hedge against currency debasement.

In the derivatives market, institutional activity has been growing steadily. The Chicago Mercantile Exchange (CME), the largest regulated venue for cryptocurrency derivatives in the U.S. and often cited as a proxy for institutional participation, now has the second-highest open interest in BTC futures on the market, while just three It was ranked fourth just a month ago.

inevitable trend

inevitable trend

Perhaps even more important than these and other market indicators (interest in cryptocurrencies is slowly increasing) is the message of the PayPal announcement.

hacker"hacker"、"or"or"money laundering"and other words. This is a great time for Bitcoin to be accepted by the public.

However, the underlying message is more important, that is, PayPal is showing people that the world of digital currency is inevitable.