On Friday (October 3), Michael Novogratz, Founder and CEO of Galaxy Digital, explained why PayPal’s support for cryptocurrencies is such a huge deal, and in particular, how it will affect the price of Bitcoin.
His comments came during an interview with Emily Chang, the host of “Bloomberg Markets: The Close” on Bloomberg TV.
Chang started the interview by asking Novogratz about the PayPal announcement. As you may have heard, on October 21, PayPal said that in “the coming weeks” it would allow its customers to “buy, hold and sell cryptocurrency directly from their PayPal account.” Furthermore, sometime in H1 2021, PayPal plans to “significantly increase cryptocurrency’s utility by making it available as a funding source for purchases at its 26 million merchants worldwide.”
“Well, listen, PayPal has the the most accounts of any bank in the world. And so you’ve got this giant platform — on deposits, it’s the 30th [largest] bank, but in terms of accounts, in terms of reach, it’s the biggest in the world — who just said we’re going to allow Bitcoin, and so if you’re in the C suite at any of the other banks, JPMorgan, Goldman Sachs, Morgan Stanley, you’re starting to scratch your head and say ‘what are we missing here?’.
“One of the things that Covid did [is it] accelerated this idea of the digitalization of everything, and it’s happening at a rapid pace. And so, we’ve got central bank issue digital currencies coming, stable coins.
“The entire payment system of the of the financial system is going to change, and it’s going to change much faster than people thought, and the banks are left kind of looking and looking at their old legacy systems, and so it’s going to be a race…
“If you look at stock prices this year… Ethereum’s up 200%… PayPal up 100%… Bitcoin up 90%, yet JPMorgan, Citibank, and Wells Fargo down twenty to fifty [or] sixty percent, and so [if] you’re a banker, you’re like ‘what am I doing wrong here?’ [It] is pretty obvious, right?
“We’re gonna rebuild the financial architecture of the United States and the world in the next ten years. That’s going to be built in around blockchain.”
Chang then wanted to know how much longer would Bitcoin’s rally would continue and how high the Bitcoin price could go.
“I think it’s gonna go a lot farther. Listen, one of the reasons Bitcoin didn’t go so high is it’s hard to buy, right?
“You can’t call Goldman Sachs, you can’t call JPMorgan, you can’t call Bank of America, you can’t call E-Trade and say ‘buy me some Bitcoin’, right? And so where most of the wealth is in America — 45 to 80 year olds — they’re not used to logging in on a Square app or on a Coinbase wallet.
“They call their brokers, and so what I’m seeing at a rapidly changing pace is more and more infrastructure being put in place to allow easier access to buy. With PayPal, it’s a huge step in how easy it is for people to buy and sell crypto. You are going to see E-Trade come next. You’re gonna see the credit card companies: Visa, Mastercard and then American Express. They are going to — I would bet you within a year — offer a platform where their 30 million merchants can transact in stablecoins and crypto.”
Chang wanted to know how Novogratz felt about rumors of PayPal getting ready to buy crypto custody solution provider BitGo.
Novogratz believes that we can expect to see more acquisitions both internally (i.e. within the crypto space) and externally (i.e. coming from companies outside the crypto space):
“If you think about PayPal, they are a tech company, yet they need it to to bring in Paxos to do their Bitcoin integration. And so, there’s a lot of domain expertise and knowledge in the crypto community that’s been built over the last seven [or] eight years that the legacy community — even the tech guys — need some of.”
“And so, there’s gonna be a war for talent… there’s gonna be a war for companies that are building infrastructure. It’s gonna suck in talent, and so really exciting time to be in the crypto and blockchain space.”
Next Chang asked Novogratz whether PayPal’s entry into the crypto space could push the price of Bitcoin lower.
Although PayPal is going to allow Bitcoin (as well as Bitcoin Cash, Ether,and Litecoin) to be used (next year) as a means of payment, Novogratz does not really see this being a main use for Bitcoin within the next five years, and instead thinks that people and companies are going to mainly invest in Bitcoin because it is a great inflation hedge.
And although he expects in the future there will be even more fiat-backed stablecoins — some issued by central banks — he says central banks will continue to debase fiat currencies, which will increase interest in Bitcoin as digital gold:
“Bitcoin is being used as a store of value. People are worried that the central banks around the world are debasing fiat currencies…
“Bitcoin as digital gold is just going to keep going higher. More and more people are going to want it as some portion of their portfolio, and as it’s easier to buy — because you can buy it on PayPal — the price is gonna go higher.”