Why Crypto Seems to Grow Faster Than It Shrinks
Jack Dorsey’s payments company Block had a stellar fourth quarter, thanks in large part to its growing bitcoin base.
Bitcoin’s revenue from its Cash App mobile payment service accounted for nearly half of the $4.08 billion total revenue reported in the fourth quarter, and during the year it earned $218 million from to buying and selling the only cryptocurrency it supports. . Bitcoin revenue was up 12% year-over-year in the fourth quarter, the company added.
PayPal, another payment app with a bitcoin business — it also supports ether, bitcoin cash, and litecoin — didn’t fare as well when it announced its fourth-quarter results and of 2021 on Feb. 2, with revenue up 13%, slower than Q4 2020. Up 25%, a result below analysts’ expectations by a hair’s breadth.
But one interesting fact stood out: the mobile wallet it rolled out in September is showing strong signs of adoption by new crypto buyers, with 40% using it to make their first crypto purchase on PayPal.
Then there’s public cryptocurrency exchange Coinbase, which beat analysts’ earnings expectations by more than 25% while doubling their earnings expectations — notably while growing monthly traded users (MTU) by 2.8 million in the fourth quarter of 2020 to 11.4 million at the end of 2021.
Read more: Coinbase’s service and subscription revenue grew 10x
What all of this shows is that there has been growing interest in crypto as an investment and payment method by the general public throughout 2021.
In May, the PYMNTS Cryptocurrency Payments Report found that 16% of US consumers owned or had owned crypto – mostly bitcoin – and a number expected to grow to nearly a third by mid-2019. This year.
“I think in 2022 you’ll see a lot more people – that next wave of people – taking an interest in crypto both from an investment perspective and from a ‘let’s try it for a payout’ [perspective]Stephen Pair, CEO of crypto-payments processor BitPay, told Karen Webster of PYMNTS in January.
“There will be a lot more places with this service – that you can spend crypto and do it in person, which may make people feel more comfortable trying it out than maybe if it’s on. a website where they’re not sure if they’re doing it right or wrong.
See also: BitPay CEO: Bitcoin Payments Will Explode in 2022 as Crypto Hits Inflection Point
What grew and what declined
All of this begs an important question: why did Coinbase stock drop 9% after shattering analyst forecasts?
Well, the company hasn’t painted such a bright picture this quarter, with a current trading volume of $200 billion, which means it will likely end up well below the $547 billion in Q4. . He also predicted that his actual revenue from these MTUs would drop.
This is part of a broader downward trend in crypto trading volumes on exchanges, Bloomberg reported on Feb. 3.
“It’s just an exceptionally quiet, scary and uncertain time in crypto,” said Tyr Capital chief investment officer and co-founder Ed Hindi. “Smart money, as they say, doesn’t sleep, it doesn’t take vacations. Corn [institutional] retail crypto traders, they take a break, especially when they get hurt.
That’s really the goal. Pausing is not the same as quitting. And historically, bitcoin buying crashes when the markets crash – which they have been since November.
The same thing happened in Coinbase’s third quarter numbers, which pulled back significantly with the first crypto crisis of 2021, when bitcoin fell from over $63,000 to under $30,000 – and trading volume Coinbase trading fell 30%. When the market improved, trading volume jumped 67% – and hit new highs in trading volume.
So what you see in crypto is that with every bull market, crypto trading goes up way more than it goes down with every bear market. Just as the number of people using bitcoin on payment apps like Cash App and PayPal is increasing, even though they are reducing their spending when the price of bitcoin drops. Just as every consumer tends to do whenever the economy turns south or there is economic uncertainty, such as during times of high inflation or political unrest.