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If paypal allows people to deposit their crypto and pay merchants in fiat, you can be sure that they’ll quickly become the biggest seller of bitcoin out there.

by d--b 6y ago

If paypal allows people to deposit their crypto and pay merchants in fiat, you can be sure that they’ll quickly become the biggest seller of bitcoin out there. With the illiquidity of the btc => usd conversion, they’ll have to pay the merchant before selling the btc, which means they’ll have to take a huge margin to cover potential slippage. No one wants to be the guy who sells bitcoin on a massive scale.

miohtama 6y ago
PayPal also does not need to hold the underlying assets. They can buy Bitcoin derivates instead of spot Bitcoin to maintain the reserves. Not sure if they are doing this, though, but it could be more capital efficient.
- d--b 6y ago
  At some point someone needs to sell the spot though...
ajkdhcb2 6y ago
There are always debit cards that let you 'spend' crypto, paypal is obviously less useful than that. The volume would also be nowhere near big exchangers since trading is by far the biggest activity in crypto
runeks 6y ago
> With the illiquidity of the btc => usd conversion, they’ll have to pay the merchant before selling the btc, which means they’ll have to take a huge margin to cover potential slippage. Bitcoin sell liquidity is currently $162MM USD on Bitfinex at 0.5% slippage. Buy liquidity is $543MM USD (at 0.5% slippage). For comparison, the sell liquidity on Coinbase Pro at the same slippage is only $4.5MM USD. My site https://cryptomarketdepth.com/ https://cryptomarketdepth.com/ tracks the liquidity of various cryptocurrencies over time (for the exchanges: Binance, Bitfinex, Bitstamp, Bittrex, Coinbase Pro).
- UncleMeat 6y ago
  The problem isn't volume, it is latency. It can take 30m for a btc transaction to settle. That's a nontrivial amount of volatility to exposure yourself to.
  - oconnor663 6y ago
    Could PayPal make this the customer's problem, by only allowing them to exchange or spend settled funds?
  - CryptoPunk 6y ago
    Can't they sell before confirmation? Probably on the order of 99% of transactions that propagate to the whole network with a sufficient fee end up being confirmed, and that only takes a few seconds to happen.
    - sfjailbird 6y ago
      I would go further to say that for a large portion of merchant transactions, confirmations are a non-issue. It is not trivial to pull off a double spend and no one is going to do it for a cup of coffee. The miniscule number of times that it might happen could be written off as the cost of doing business, the same way the big credit card companies quietly eat all the credit card fraud that happens.
      - joshstrange 6y ago
        Also, and I could be mistaken, my understanding is the double spend can only happen when the person trying to double spend controls the private/public key to the coins. Normally when you deposit crypto in an exchange (or this hypothetical Paypal wallet) you lose that access and your balance is just a row in a database while "your" coins are swept into a large hot/cold wallet run by the service you are depositing into.
        doomroot 6y ago
mlcrypto 6y ago
They can hold the BTC forever and pay the merchant with their massive cash reserve or 0% interest debt. Profit
- oh_sigh 6y ago
  They could also accept pebbles and sand as payment, hold them forever, and pay the merchant with their massive cash reserve or 0% interest debt. Profit.
  - the_local_host 6y ago
    Pebbles and sand might be safer to hold if they are less volatile than BTC. A company like Paypal needs stability, not a directional bet on an asset.
    - mlcrypto 6y ago
      USD is very stable in it's decline. Good luck
      - imtringued 6y ago
        The USD is suffering from a savings glut. The domestic financial markets are already fully developed. Any additional savings from foreign nations is not helping the USA and merely forces an exorbitant downside. Investments have to match savings. All the potentially productive investments have already been made for the current level of inflation. There is nowhere for the money to go so you have two options: Unproductive investments, reduce the savings rate. Unproductive investments are basically the constant increase in stock and housing prices over the last decade. You're not buying those to make more money, there simply is no other place for the money to go. The only way the savings rate can be reduced domestically is through unemployment or underemployment. Unemployed people don't earn money but they still have to spend, which reduces savings. It's a truly hopeless situation for the humans living the USA. But hey, at least the dollar is still "good". Oh right, presidents are taking on debt to cancel the savings glut that was forced upon them. That's a bad thing.
stale2002 6y ago
The problem of slippage/margins is overstated. Other websites already support this. They just charge a 1% fee and call it a day. Average credit card fees are already much larger than any fee that would be required to cover price changes.

by d--b 6y ago

miohtama 6y ago

PayPal also does not need to hold the underlying assets. They can buy Bitcoin derivates instead of spot Bitcoin to maintain the reserves. Not sure if they are doing this, though, but it could be more capital efficient.

d--b 6y ago
At some point someone needs to sell the spot though...

ajkdhcb2 6y ago

There are always debit cards that let you 'spend' crypto, paypal is obviously less useful than that. The volume would also be nowhere near big exchangers since trading is by far the biggest activity in crypto

runeks 6y ago

> With the illiquidity of the btc => usd conversion, they’ll have to pay the merchant before selling the btc, which means they’ll have to take a huge margin to cover potential slippage. Bitcoin sell liquidity is currently $162MM USD on Bitfinex at 0.5% slippage. Buy liquidity is $543MM USD (at 0.5% slippage). For comparison, the sell liquidity on Coinbase Pro at the same slippage is only $4.5MM USD. My site https://cryptomarketdepth.com/ https://cryptomarketdepth.com/ tracks the liquidity of various cryptocurrencies over time (for the exchanges: Binance, Bitfinex, Bitstamp, Bittrex, Coinbase Pro).

UncleMeat 6y ago
The problem isn't volume, it is latency. It can take 30m for a btc transaction to settle. That's a nontrivial amount of volatility to exposure yourself to.
- oconnor663 6y ago
  Could PayPal make this the customer's problem, by only allowing them to exchange or spend settled funds?
- CryptoPunk 6y ago
  Can't they sell before confirmation? Probably on the order of 99% of transactions that propagate to the whole network with a sufficient fee end up being confirmed, and that only takes a few seconds to happen.
  - sfjailbird 6y ago
    I would go further to say that for a large portion of merchant transactions, confirmations are a non-issue. It is not trivial to pull off a double spend and no one is going to do it for a cup of coffee. The miniscule number of times that it might happen could be written off as the cost of doing business, the same way the big credit card companies quietly eat all the credit card fraud that happens.
    - joshstrange 6y ago
      Also, and I could be mistaken, my understanding is the double spend can only happen when the person trying to double spend controls the private/public key to the coins. Normally when you deposit crypto in an exchange (or this hypothetical Paypal wallet) you lose that access and your balance is just a row in a database while "your" coins are swept into a large hot/cold wallet run by the service you are depositing into.
      - doomroot 6y ago

mlcrypto 6y ago

They can hold the BTC forever and pay the merchant with their massive cash reserve or 0% interest debt. Profit

oh_sigh 6y ago
They could also accept pebbles and sand as payment, hold them forever, and pay the merchant with their massive cash reserve or 0% interest debt. Profit.
- the_local_host 6y ago
  Pebbles and sand might be safer to hold if they are less volatile than BTC. A company like Paypal needs stability, not a directional bet on an asset.
  - mlcrypto 6y ago
    USD is very stable in it's decline. Good luck
    - imtringued 6y ago
      The USD is suffering from a savings glut. The domestic financial markets are already fully developed. Any additional savings from foreign nations is not helping the USA and merely forces an exorbitant downside. Investments have to match savings. All the potentially productive investments have already been made for the current level of inflation. There is nowhere for the money to go so you have two options: Unproductive investments, reduce the savings rate. Unproductive investments are basically the constant increase in stock and housing prices over the last decade. You're not buying those to make more money, there simply is no other place for the money to go. The only way the savings rate can be reduced domestically is through unemployment or underemployment. Unemployed people don't earn money but they still have to spend, which reduces savings. It's a truly hopeless situation for the humans living the USA. But hey, at least the dollar is still "good". Oh right, presidents are taking on debt to cancel the savings glut that was forced upon them. That's a bad thing.

stale2002 6y ago

The problem of slippage/margins is overstated. Other websites already support this. They just charge a 1% fee and call it a day. Average credit card fees are already much larger than any fee that would be required to cover price changes.