That sounds extremely risky for PayPal. They're effectively shorting bitcoin by doing that. If the price rises dramatically they have to just come up with that

That sounds extremely risky for PayPal. They're effectively shorting bitcoin by doing that. If the price rises dramatically they have to just come up with that money out of their own coffers. If they buy bitcoin they can merely liquidate it and pay you the proceeds when you sell your paypalcoins.