I had to laugh a bit at this story this morning…
Apparently, fintech pioneer PayPal are about to launch cryptocurrency services for their 305 million users.
I laugh because it was around about three years ago that PayPal froze my account for trying to buy bitcoin through them…
At the time they didn’t allow such transfers even though cryptocurrencies weren’t illegal.
They just ‘decided’…
Anyway, three years later, here we are.
Cryptocurrencies haven’t gone away. In fact, they’re stronger than ever.
And as I’ll explain shortly, they could even be the one rare spot in finance where investors can generate some interest on their savings right now.
More on that next.
But first, what’s PayPal’s strategy and why is it a big moment you need to pay attention to…
…then you win
‘First, they ignore you, then they laugh at you, then they fight you, then you win…’
The famous quote from Gandhi could have been written for cryptocurrencies.
I’m sure you’ll remember the mocking headlines from a few years back.
It was pretend money, it wasn’t real, it was a con, it was only used to buy drugs etc. The mainstream journalists happily toed the party line.
Even today, few in the mainstream realise the significance of cryptocurrencies. Or the game-changing nature of the technology behind it.
(Hint: Decentralisation is the innovation.)
But perhaps this latest move from PayPal will pique their interest again?
According to the Daily Hodl:
‘One of three sources tells Coindesk that PayPal will work with cryptocurrency exchanges and appears to be exploring a partnership European Bitcoin exchange Bitstamp and expanding its partnership with Coinbase which already allows US, European and Canadian crypto customers to withdraw their fiat balances to PayPal.
‘PayPal has the kind of brand name that could help cement Bitcoin and other cryptocurrencies as mainstream forms of money.
‘At the same time, PayPal would become another middleman, “working with multiple exchanges to source liquidity,” according to the report, to bring peer-to-peer cryptocurrencies to the masses.’
It’s not the first time a big fintech company has tried to muscle in on the crypto action.
You’ll recall last year that Facebook made headlines stating they would be launching their own cryptocurrency, Libra.
PayPal was actually one of the 28 original corporate partners in this project but quickly withdrew as it became clear Facebook’s grand ambitions were not going to succeed due to regulatory concerns.
This move into ‘crypto proper’ seems to be an admission that true cryptocurrencies are where the real opportunity lies.
And PayPal is making a play to be part of that infrastructure.
Perhaps the latest crypto trend of ‘yield farming’ is behind the move too?
This is a way to generate ‘interest’ from your cryptocurrencies and it’s taken the crypto world by storm over the last couple of months.
Let me explain more…
Crypto yield farming
As this Forbes article explains:
‘DeFi “yield farming” is the latest meme exciting investors in the crypto universe.
‘Yield farming is the act of leveraging DeFi protocols and products to generate high rates of return, in some cases reaching over 100% annualized yields when factoring in “cashback” bonuses and incentives.’
This sounds complicated. And it is to an extent. To be clear, it’s a lot riskier than most forms of ‘income investing’.
But in these early days, some people are making huge returns as a reward for being the crash test dummies of a new world of finance.
Consider this example:
‘For example, according to yesterday’s rates, a user who lent out 1,000 DAI (equivalent to $1,000), and took out a loan for $2,500 worth of the BAT crypto asset would have generated 77.48% APY in COMP rewards paid out daily, assuming a COMP token price of $360.
‘This could all be done using InstaDapp’s maximize COMP mining feature.’
As the article goes onto conclude:
‘Considering the average bank saving account interest rate is 0.1% and DeFi products can yield 100%+ annualized yields, are these products inherently 1,000 times riskier? Probably not, and thus savvy investors and traders are cashing in on these arbitrage opportunities.’
A brave new world
Look, I’m not telling you to dive headfirst into crypto yield farming today.
Even me — a crypto veteran of seven years — am a bit wary.
Though like the article says, there’s a decent return for the risks too if you know what you’re doing, so I’m having a dabble.
But what I am saying is that, as the traditional finance world succumbs to a long slow death caused by constant central bank meddling in interest rates and money, forward thinkers are looking for a true ‘free market for money’.
And that’s what’s to be found in the world of cryptocurrencies.
The herd are slowly coming around.
Today, it’s PayPal realising it, tomorrow it might be ANZ or the CBA.
But one thing’s for sure…
When everyone else thinks crypto is a good idea, the opportunity will be long gone.
Editor, Money Morning
PS: We believe these rapid-fire market opportunities are a fantastic way to grow your wealth. Which is why you’ll find us talking about the big trends that can uncover them. If that is something up your investment alley, then click here to learn more.