You’re reading this because you’ve heard or read somewhere that you can purchase Bitcoin through PayPal. PayPal indeed allows users to buy Bitcoin for as little as $1. That means you can invest in this virtual currency if you have this tiny amount in your PayPal account. However, you can’t transfer the Bitcoin amount in your PayPal account to another account off or on the platform.
And this explains why some people don’t want to use this platform to purchase Bitcoin. Instead, most people opt for crypto exchanges like the bitcoin system. Such a platform allows users to buy, sell, or send Bitcoin to other users. You can also send Bitcoin from this platform to your digital wallet.
The Bitcoins in Your PayPal Wallet Are Not Yours
PayPal made a significant push into the crypto world last year. That’s when this digital payment company decided to allow the U.S users to purchase, hold, sell, and checkout with virtual currencies including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. PayPal owns Venmo, a mobile wallet. Using that wallet, you can purchase and sell Bitcoin and other cryptocurrencies. That means you don’t need a particular account to buy Bitcoin with as little as $1 or deal in the virtual currency.
However, the coins you purchase via PayPal are technically not yours. That’s because PayPal will manage your digital wallet, meaning you don’t have to hold the bitcoins.
Keeping the Keys
When you buy Bitcoin, you get two things that make its ownership official. These are a private key and a public key. The private key allows you to control your digital wallet, while the public access is the digital wallet address.
PayPal allows you access to the public address only while the company controls your private key. For this reason, you can’t transfer the Bitcoin in your account to another account off and on PayPal. And this limitation feels odd for most people because you should own your Bitcoin asset.
It’s like depositing fiat cash into a bank account and trusting it to keep your dollars in the bank account you have with them. But in this case, you can’t move your Bitcoin to a wallet outside the PayPal ecosystem or cold storage. Essentially, PayPal limits users regarding what they can do with their assets from a business person’s perspective.
However, this arrangement makes sense for PayPal because it reduces potential issues regarding anti-money laundering and Knows Your Customer policies that more prominent players experience when managing their wallet-to-wallet transfers outside the platform.
Not everybody wants to be responsible for safeguarding Bitcoin holdings. That’s because losing private and public keys means you’ve lost your Bitcoin. A beginner in the crypto space may be uncomfortable holding public and private keys. In that case, delegating that access to a large company like PayPal seems safer. Some people have lost millions after losing their private keys. However, PayPal provides an interface that many people find easy to use. That’s because it focuses on enabling users to purchase and hold their Bitcoin. Click on the “Buy” button from your existing PayPal account to buy the tokens.
Profiting from PayPal Bitcoins
Buying Bitcoin through PayPal compares to purchasing a financial contract. That’s because you don’t get the freedom to transfer the coins from this platform. You also can’t send somebody else your coins. It’s almost like purchasing a Bitcoin’s derivative rather than the real thing.
Like with an options contract, you can lose or gain a lot of cash. Bitcoin price has continued to increase over the years, and experts note that this trend will continue. That means rising Bitcoin prices could be critical to the bottom line of this company.
PayPal takes a percentage cut whenever a person exchanges fiat money for Bitcoin and vice versa to make profits. And the fees could be steep as a user pays 2.3% for any transaction below $100.
Despite the gains, Bitcoin allows users to circumvent the company’s services. But PayPal shows that it sees Bitcoin as the future by embracing it.