After dwindling down to below $400 and passing the dubious milestone of a 50 percent loss on the year, the price of bitcoin surged on September 23, briefly topping $450. Befitting its decentralized, global nature tracking the exact cause of the price increase can be difficult to identify. But in this case, a key piece of news comes as a result of favorable news from an unlikely ally.
PayPal, the ubiquitous payment service many digital currency proponents have touted as archaic when compared to bitcoin, announced that they would be incorporating the cryptocurrency into their platform. That is, that they would be figuring out a way to work with bitcoin, not against them. To be specific, PayPal is going to be working with emerging bitcoin market leaders Coinbase, Bitpay, and GoCoin to help process transactions in the nascent digital currency.
It’s good for PayPal in that they give little to noting but gain another moneymaking feature they can skim off the top off. The question is: if you like to use bitcoin why get PayPal involved at all? Of course, perhaps the single biggest advantage to the bitcoin protocol is that money can be sent anywhere in the world with zero transaction fees. Eliminate the middleman, so to speak. So why get Paypal involved at all?
It comes down to exposure and ease of use. Getting on PayPal’s platform increases popular exposure to the currency. It’s been a year since bitcoin arguably broke into the mainstream on the heels of the Silk Road bust and subsequent seizure of possible the largest bitcoin hoard in existence.
As of March 2014 only half of Americans even knew what bitcoin was. Though that number has likely increased, there’s still the trust issue. Though bitcoiners might scoff at the idea of “Paypal” being synonymous with “trusted,” for a lot of consumers its name carries weight. People know PayPal and its parent company eBay (EBAY) . If bitcoin is associated with those names it will go a long way to not only educating people about the digital currency, but helping it gain trust — and in turn, increase usage – among the populace.
That assumption is almost certainly what made bitcoin spike. It shows that it’s not always Chinese investors driving the price of bitcoin, even if that is usually the case. And it shows that reassurance of the safety of bitcoin as a method to transfer wealth can spur people to buy in.
