Bitcoin has been climbing higher this year as the coronavirus pandemic and rising geopolitical concerns have fueled interest in alternative assets.
And this week, the cryptocurrency rose past highs last seen in July 2019 and is up to $12,991.41 at the time of writing.
So what caused the spike? On Wednesday, PayPal (NASDAQ: PYPL) announced a new feature that will allow users to buy, hold, and sell cryptocurrencies, making it the latest large financial services company to demonstrate an interest in the space.
PayPal said in a press release that its new service would launch first in the U.S. within the coming weeks, initially featuring bitcoin, bitcoin cash, ethereum, and litecoin, with the company planning to let customers use cryptocurrencies to shop with its network fo 26 million retailers next year.
“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly,” said Dan Schulman, president and CEO of PayPal, in the release. “Our global reach, digital payments expertise, two-sided network, and rigorous security and compliance controls provide us with the opportunity, and the responsibility, to help facilitate the understanding, redemption and interoperability of these new instruments of exchange. We are eager to work with central banks and regulators around the world to offer our support, and to meaningfully contribute to shaping the role that digital currencies will play in the future of global finance and commerce.”
After the news broke, bitcoin, the largest digital coin, bounced as much as 4.9% to $12,488 on Wednesday, surpassing the previous high for 2020 of $12,473 set back in August. Gains among smaller coins were up even more, with bitcoin cash jumping 8% and litecoin surging more than 11%.
Mike Novogratz, who runs Galaxy Investment Partners, on Twitter said it was “the biggest news of the year in crypto,” while adding that banks will soon be on a race to service digital currencies. “We have crossed the rubicon,” Novogratz wrote.
PayPal’s announcement comes amid a wave of recent announcements that suggest wider acceptance of cryptocurrencies by financial companies.
Earlier this month, Square (NYSE: SQ) said it had bought 4,709 bitcoins worth approximately $50 million, or around 1% of Square’s total assets as of the end of the second quarter 2020.
“Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose,” Square said in a release.
“We believe that bitcoin has the potential to be a more ubiquitous currency in the future,” said Square’s CFO, Amrita Ahuja, in the release. “As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
Square’s announcement followed Fidelity Investment announcing in August that it was launching its first bitcoin fund, adding its establishment name and star power to the often-maligned asset class.
“Fidelity has made a long-term commitment to the future of blockchain technology and to making digitally-native assets, such as bitcoin, more accessible to investors,” Fidelity said at the time.
While such announcements have pushed bitcoin far higher this year, with the digital currency up more than 80% year-to-date and nearly 24% over the last month, the cryptocurrency is still down around -34% from its all-time high reached in December 2017.