Disclaimer: This is not financial advice, do your own research and consult a financial adviser before investing in Crypto or Stocks.
The S&P 500 gets compared to the Bitcoin market quite a lot in the media, however, the above quote should illustrate the gigantic difference between the two. It is good to know which markets are followers and which of them are the generals, to copy some good old-school terminology.
Cryptocurrencies, including the likes of Bitcoin, are still in their infancy and should be viewed in the right context. It would be wiser to compare cryptocurrencies with stocks of at least a similar market cap and if possible the same niche.
One big difference between the two markets is the fact that the trading volume on cryptocurrencies tends to be a lot higher than that of most stocks.
This report will be mostly technical in nature as comparing fundamentals would be a much greater task.
For instance, Microsoft, worth well over a trillion dollars, has a trading volume of about 50 million daily, at the time of writing. In contrast the Bitcoin market has over 30 billion dollars of trading volume a day, according to CoinMarketCap data.
This is just one example of the variances between stocks vs cryptocurrencies. We will attempt to look at smaller market cap stocks and compare them to some of the top cryptocurrencies being traded today. This is a big topic and will most likely consist of more than one blog post. Hit the notification button to get notified of the next installments.
Bitcoin vs PayPal
With similar size market caps and acting mainly as online payment processors, we thought these two would be a good matchup.
PayPal Holdings, Inc. engages in the development of a technology platform for digital payments. Its solutions include PayPal, PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products.Tradingview
PayPal has become a household name across the globe for safely sending money instantly online to family and friends, as well as making it easier to spend your money at a variety of online retailers. In 2019 the company facilitated an estimated 712 billion in transaction volume.
Bitcoin is a cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin blockchain network without the need for intermediaries. It is powered through blockchain technology.Blockgeeks
Bitcoin, having no centralized company to manage, has been said to be one of the biggest competitors to PayPal. It made news headlines in 2018 when it first surpassed PayPal with annual transaction volume, an estimated cool $1.3 trillion for the year of 2018.
Taking the above into consideration, lets dive into some technicals.
Market performance after the February – March 2020 crash
The markets have been making history since February this year. Here is a simple percentage change comparison between Bitcoin and PayPal during this period. After the market made its top in Feb 2020 the slow decline turned into a violent market crash, pulling bitcoin down by more than 60 percent and the entire S&P market recorded a drop of over 30 percent.
At the time of writing this report, Paypal has almost recovered completely from the initial drawdown. The company has reportedly seen an increase in use with many people quarantined at home and spending more money online. The stock is already trading positive from the start of 2020, which is not bad considering all of the different market pressures.
Bitcoin is well known for its volatile nature and the above table illustrates the magnitude in which the price action can swing. After “recovering” from the initial drop the market is still down 34% from the high this year at $10,490. If you acquired bitcoin at the start of the year as a hold, you would be down about 5 percent on your position right now.
Some analysts say that PayPal is poised for success after covid19 as a lot of people’s new online shopping habits are likely to remain after the pandemic is over. What does this mean for the original decentralized blockchain ledger and other cryptocurrencies?
Surprisingly the amount of daily transactions in the Bitcoin network has dropped a fair amount since February 2020. While noteworthy, this is not necessarily bad news considering the network is still confirming about 250,000 transactions per day, with average transaction size at the moment around $53.
A birds eye view from 2017
It is interesting to note that both PayPal and Bitcoin have been on a bullish run for the last three years, even if all the market volatility convinced you otherwise.
At the start of 2017, the PayPal price popped over $40 a share, possibly igniting the current bull trend. At the time of writing PYPL stocks are up roughly 180% since January 2017.
Bitcoin has a similar story to tell, except with a lot more hype and volatility attached to it. At the start of 2017, BTC was trading at $900 per bitcoin, dropped to around $750 by mid-January and from there started its accent.
Right now the market is still up 808% from its low in January 2017, a very attractive figure for any investor, but also a grave warning of the volatility associated with it.
Both markets show significant growth over the last three years and it is probable that growth will continue in a contact-free payment world. For us it would seem silly to pick one over the other as this report should not be viewed in black and white.
It is interesting to note the centralized and decentralized payment networks managed to get out with their longer-term trends still intact. That seems like quite the feat for a lot of markets right now, as they flounder with the world economy on lockdown.
Crypto vs stocks after the COVID crash: Unique parallels arise
In a world where contactless payments might become the norm in society, both PayPal and Bitcoin are well-positioned and quite robust after navigating some choppy market turmoil. Interestingly it would seem that both centralized and decentralized online payment systems can manage during times of crisis, one with quite a bit more volatility than the other. Be that as it may both can get the job done when the need arises.
For us this awards them both with a star for the time being, as our opinions and positions may change as quickly as the markets.