Towards the end of November, eBay president Devin Wenig spoke openly about bitcoin in an interview with the Wall Street Journal.
The news appears to be good for bitcoin’s backers. Despite eBay and PayPal’s announced split, the e-commerce giant is still apparently thinking about following its payments division in its acceptance of bitcoin. Or, in his words: ‘both eBay and PayPal are open to [bitcoin]�PayPal is experimenting with itand through our PayPal relationship we’re likely to do the same. I am very open to it.’
Unsurprisingly, Mr Wenig’s prediction that eBay may begin taking bitcoin at some point in the future was not met with the same market excitement as PayPal’s earlier confirmation that bitcoin will be enabled for merchants of digital goods. Bitcoin’s price rocketed as the news of PayPal enabling the currency hit the wires, rising just under $40 in two hours. Though spikes in bitcoin’s value are common and not always explainable, it appears that bitcoin got a major confidence boost in the short term at least.
Bitcoin’s value did increase in the hours after Mr Wenig’s interview was published, but only around $4 dollars overnight. The move wasn’t just swiftly reversed; two days after the increase, bitcoin was down $40, to $342.
And it isn’t just because of the relative certainty of each announcement, either. On paper, PayPal is a much bigger coup for the crypto-currency. It facilitates a broader range of transactions even if for now only those to digital merchants are available via bitcoin and handles much more money than eBay. In 2013, eBay saw gross merchandise sales of $76.5 billion on its site. PayPal took care of $180 billion of online payments. Whilst the digital payments operator is making an extremely cautious move towards accepting bitcoin, the prospect of tapping into that vast number of payments is huge for bitcoin.
However, it would be foolish to underestimate the effect that eBay could have on bitcoin and crypto-currencies in general.
Year to date performance of eBay, from IG’s trading platform.
For one thing, eBay is a much bigger brand than Paypal. Currently sitting 28th on the Interbrand rankings ahead of Facebook in 29th, and with PayPal not making the list eBay would represent the first company in the top 100 to accept the currency. It is also on the Fortune 500 list, with revenue’s robust enough to remain ahead of PayPal after the split. Prestige from major companies accepting bitcoin has been notable in its absence thus far, and at the moment eBay brings more prestige than PayPal.
More tangible than prestige, bitcoin users need more ways to use the currency. Much depends on what form its acceptance of the currency could take, but eBay comes with huge potential for existing users to spend bitcoin which would in turn improve its liquidity and begin to level out its price. It also brings bitcoin to a much wider audience, one that is separate from PayPal’s.
That eBay’s utilisation of the currency would come as part of a partnership with PayPal should also help address one of the biggest misgivings often levelled at the crypto-currency: security. Bitcoin’s legitimacy is currently undermined by the sheer number of coins that are either lost or stolen. PayPal, as a leader in secure online payments, are best set to ensure that bitcoins can be protected. If eBay can take advantage, then two major companies will be able to fully secured bitcoin transactions.
The arguments surrounding eBay’s split from PayPal tend to focus on the future for the two businesses. PayPal has undergone huge growth as online payments take to the mainstream, growing in eBay’s revenue share every quarter. eBay’s slide in market cap after the split was announced suggests that the markets aren’t optimistic about its standalone future. PayPal has problems of its own, though, with Alipay and Apple Pay both threatening to eat into its market share with far more money behind them. Its rapid growth has drawn the attention of some very big players, and that might not turn out to be a good thing.
For eBay, the need to stand out in a crowded marketplace has never been greater. Bitcoin can service just that need. For users and backers in both camps, adoption of crypto-currency could be an extremely valuable move.
Author bio: By Patrick Foot, financial markets writer at IG. Patrick writes about a number of topics including bitcoin, forex, economics and shares trading in conjunction with IG’s trading floor in London.
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