Acquisition and Significant Exposure to the Cryptocurrency Market [Market Comment]

PayPal began providing brokerage services for cryptocurrencies in October 2020. Although it initially focused solely on offering cryptocurrencies to retail investors, there are now many indications that PayPal is gradually seeking to extend this offer to institutional investors as well. 

About the Author

Mads Eberhardt, Cryptocurrency Market Analyst, Sax Banks. Cryptocurrency Market Analyst at Saxo Bank. He gained experience as a trader at Bitcoin Suisse AG and founder http://BetterCoins.dk (website taken over by Coinify).

On Monday the company informedthat it took over a European cryptocurrency trust company Curv for the amount reportedly amounting to USD 200 million. This acquisition most likely signals a shift towards offering fiduciary services to institutional investors. In that case, PayPal would join banks such as JPMorgan, BNY Mellon, Deutsche Bank and Goldman Sachsthat already offer this kind of service. 

The transaction further suggests that PayPal wishes to store its retail clients' cryptocurrencies using its own custodial services solution, which could increase margins in the cryptocurrency business area. At this point, the funds are reportedly held by the US brokerage firm Paxos, which also works with PayPal for brokerage services.

40% of Goldman Sachs customers invest in cryptocurrencies

Last week, Goldman Sachs published the results of a customer survey on cryptocurrencies with interesting conclusions. Primarily the study showedthat 40% of respondents invested in cryptocurrencies. In turn, 41% of them invested in cryptocurrencies in physical form. The others most likely chose futures or other financial instruments. 61% of all respondents expect to increase their exposure to cryptocurrencies in the next 12-24 months. 24% of customers believe the biggest hurdle in the crypto industry is the lack of properly regulated assets to invest. The study was conducted with the participation of only 280 respondents, so the sample was small and the representativeness of the results was not very reliable. However, the sample included hedge and pension funds as well as insurance companies and asset managers.

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Ethereum update - miners are not satisfied

Last week creator Ethereum informed that the update EIP 1559 will be implemented in July this year. This update will directly negatively impact the way users pay miners for transactions. The idea of ​​moving from a purely quote model to a fixed fee model with the ability to tip miners is to provide greater predictability and lower costs. Some fees will be automatically burned. The mechanism of burning transaction fees will help keep it going inflation at the minimum level. Updating has been widely discussed in the mining community for years; it is also extremely controversial. As the fees go to miners, they are reluctant to see an upcoming update that will undoubtedly lower their profits. However, both the creators of Ethereum as well as users and developers of applications on the web are positive about this change, as it will lower the amount of fees and facilitate interaction with applications. As a result, it is anticipated that the update will be implemented at the "London" hard fork of the chain (hard fork) in July this year. In our opinion, this will prove beneficial for the Ethereum network as such - despite the lack of enthusiasm among miners.