Bitcoin up as market digests PayPal stablecoin launch

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Bitcoin edged up on Tuesday morning in Asia after U.S. multinational payment giant PayPal launched a U.S. dollar-pegged stablecoin on Monday. Ether was still treading water, however, as all other top 10 non-stablecoin cryptocurrencies traded flat to lower. Dogecoin led the losers. Meanwhile, the Forkast 500 NFT index rose, as NFT trading volume also picked up. U.S. stock futures traded flat after Wall Street closed higher on Monday, as investors await the release of U.S. inflation data Thursday. 

Pivotal role for PayPal stablecoin?

Bitcoin edged up 0.28% in the last 24 hours to US$29,133.55 as of 07:30 a.m. in Hong Kong but remained down 0.25% for the week, according to CoinMarketCap data. The world’s leading cryptocurrency briefly dropped to a low of US$28,724.14 on early Tuesday morning.

Digital asset investment products saw outflows totaling US$107 million in the week ending August 4, according to a Monday report by European alternative asset manager CoinShares. That marked the fourth consecutive week of outflows as profit taking gathered pace in recent weeks.

Bitcoin-related products saw weekly outflows totaling US$111 million, the largest for a week since March. However, outflows into Bitcoin short positions stopped for the first time in the past 14 weeks, according to the CoinShares report. Allowing investors to profit when the token’s price drops, the report’s authors said that the stall in short position outflows suggests institutional investors may be adjusting their Bitcoin strategies.

Ether dipped 0.13% to US$1,824.53, and lost 1.72% over the past seven days.

Paypal ramped up its efforts in the Web3 space by launching the PayPal USD (PYUSD) stablecoin on Monday. The Ethereum-based token is issued by Paxos Trust Company — the U.S.-based issuer of Binance’s BUSD stablecoin — and is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents. 

Paypal’s stablecoin project was reportedly halted in February 2023 amid increased scrutiny from U.S. regulators toward stablecoins — including an order for Paxos to stop minting BUSD.

“PayPal’s news today is a testament to the burgeoning popularity of DeFi,” said Tony Petrov, chief legal officer at identity verification platform Sumsub.

The move highlights the “pivotal role” to be played by stablecoins as a bridge between digital and fiat currencies, Petrov continued. “This rapid ascent signals a major transformation in the cryptocurrency ecosystem, and the potential impact of stablecoins on the global financial landscape is an exciting development to monitor closely,” he added.

Other top 10 non-stablecoin cryptocurrencies all traded lower, with Dogecoin leading the losers. The meme token dropped 1.65% to US$0.07325 and logged a weekly loss of 5.86%.

The month of July saw a decrease in crypto trading activities, with Bitcoin volume decreasing 13.1% during the month, Ether falling by 21.9% and stablecoins volumes down 12.3%.

“The data emphasizes a moment of low activity in the market, which follows a strong uptrend in the first half of 2023,” said Greco, research analyst at Canada-based digital asset and fintech investment firm Fineqia International

“Summer months are notoriously among the ones with the lowest level of trading activity and 2023 data are perfectly aligned with historical metrics on the matter. The overall outlook for 2023 remains extremely positive so far as the institutional / service providers’ news seen in the past few weeks still indicates strong interest towards the market,” Greco added.

For Greco, signs of that interest include multiple applications in the U.S. for exchange-traded funds (ETF) for Bitcoin and Ether. He also pointed to Hong Kong, where regulators have granted crypto exchanges HashKey Exchange and OKX licenses to offer crypto trading services to retail investors.  

The total crypto market capitalization edged up 0.11% in the past 24 hours to US$1.16 trillion, while trading volume gained 59.07% to US$32.76 billion.

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