Bitcoin (BTC) and PayPal (PYPL): 2X

February 26, 2019 / by Bill Noble

Recently, we came across some analytics on Bitcoin (BTC) that really caught our attention.

Bitcoin (Bitcoin) now does twice the annual transactional volume of Paypal (PYPL). Paypal does $578.65 billion in transaction volume. In contrast, the Bitcoin (BTC) network does $1.3 trillion in transactional volume. So the Bitcoin (BTC) network is doing a little more than twice the volume of PayPal (PYPL).

If you do “back of the envelope math,” if Bitcoin (BTC) is doing twice the transaction volume of PayPal, then perhaps total Bitcoin (BTC) market cap should be twice that of PayPal. If PayPal market cap is roughly $112 Billion, that could imply Bitcoin’s (BTC) total market cap should $224 billion. With 17.6 million Bitcoin (BTC) in circulation that puts the theoretical value of Bitcoin at $12,727.

$12,000 is an interesting technical number for two reasons. First, $12,000 is the location of a Gann line and is near the high upticks from February and March of 2018, right before Bitcoin (BTC) collapsed (Figure 1).  Based on the way the Gann fan lines are drawn, a move to $12,000 by May is not out of the question.

 class= Figure 2

If you glance at the chart of Bitcoin (Figure 1) and the chart of PayPal (PYPL) in Figure 2, you have to wonder why PayPal (PYPL) is rocketing higher and the crypto community is debating the timing on Bitcoin’s (BTC) new low for the move.

 class= Figure 2

Second, if you take the average of all the high points for the two blow-off months (November and December 2017) and the two reversal months (January and February of 2018), the average of the highs during that period is just above $12,000 (Source: Interpreting that number is not easy. Our best guess is to say that when people are again excited about Bitcoin (BTC), the average price could be $12,000. The November 2017 to February 2018 period is shown in the red shaded rectangle in Figure 1.

Qualitatively, Bitcoin (BTC) in totality may be worth way more than 2x PayPal (PYPL).

After all, when you own shares of Paypal (PYPL), you can’t pay for anything with the shares. With Bitcoin (BTC) you own the medium of exchange itself. That feels materially different than owning stock in a company that provides a mechanism for using mediums of exchange controlled by sovereign nations.

With Bitcoin (BTC), you do what you want. With PayPal, you do what you are told. Big difference.

Bottom Line: I spent a good part of this morning worrying that Bitcoin (BTC) was going to fall through $3,700 and wash me out of some tactical ideas. After writing this piece, I see the folly in that worry. Tactical day trading aside, I can’t get my head around the rationale of selling crypto at these levels.