Just three weeks after PayPal (PYPL) - Get Report began allowing all of its U.S. users to trade Bitcoin, it looks like a substantial fraction of its user base has already taken the company up on its offer.
Mizuho Securities recently surveyed 380 U.S. PayPal users, and found that 17% of them have already traded Bitcoin via their PayPal accounts. In addition, 65% of those who had traded Bitcoin via PayPal said that they’re willing to use the cryptocurrency to buy goods and services.
What's more -- though this number is influenced by the fact that Bitcoin traders appear to be more active PayPal users to begin with -- those trading Bitcoin via PayPal were said to be using the PayPal app more than three times as much as non Bitcoin-traders. And about half of the Bitcoin traders reported using other PayPal functions more after they started trading Bitcoin.
There are some parallels here with how Square’s (SQ) - Get Report Cash App -- the top rival to PayPal’s Venmo platform -- has used its support for low-margin Bitcoin transactions to drive greater engagement for other Cash App services. In Q3, Square’s Cash App revenue rose 174% annually to $435 million when excluding Bitcoin transactions, and 574% to $2.07 billion when including them.
For his part, Mizuho analyst Dan Dolev thinks that enabling Bitcoin transactions, together with the impact of Bitcoin trading on broader PayPal engagement, could allow PayPal to deliver 20% revenue growth in 2021.
For comparison, the current FactSet analyst consensus is for PayPal, which has seen revenue, payment volume and active account growth accelerate sharply since March, to see 18.7% growth next year.
“Our work hints of significant share gains for PayPal’s checkout button, and a first-mover advantage in QR code checkout in the US. We believe PayPal should trade at a mid-teens revenue multiple, as the best-in-class e-commerce beneficiary merits a premium multiple [relative to] U.S. payment peers,” wrote Dolev. He’s raising his PayPal target by $20 to $290, while reiterating a Buy rating.
Mizuho isn’t the only firm to recently share data suggesting that PayPal users account for a large portion of recent Bitcoin purchases. Two weeks ago, hedge fund Pantera Capital estimated (citing Bitcoin volume data) that PayPal users were collectively buying nearly 70% of all newly-issued Bitcoins.
PayPal's move appears to have been a tailwind for Bitcoin. Since PayPal unveiled its plans to support Bitcoin trading on Oct. 21, Bitcoin has risen nearly 60% to roughly $19,000, gains that have led its market cap to top $350 billion. On Monday, the cryptocurrency temporarily surpassed its 2017 high, reaching a peak of $19,920 before pulling back.
PayPal’s stock is up 2.2% in Tuesday trading to $218.92, amid a 1.6% gain for the Nasdaq. Shares are up 101% year-to-date.