PayPal Holding (PYPL) has agreed to buy the cryptocurrency security firm Curv, since it assumes Square (SQ) in the digital token space. Amid the investment, Bank of America said on Monday that it expects PayPal shares to earn less than 1% of revenue in 2021 from trading Bitcoins and cryptocurrencies.
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Israel-based Curv provides a cloud-based infrastructure for securing digital assets. The terms were not disclosed. One report said that PayPal could acquire Curv for less than $ 200 million.
PayPal announced its entry into the cryptocurrency market in late 2020. The crypto trading feature is currently available in the United States in PayPal’s digital wallet. PayPal plans to expand the availability of the Venmo app to other regions in 2021.
BofA analyst Jason Kupferberg said in a report to customers that he estimated that PayPal’s shares will bring in at least $ 123 million in revenue and 3 cents in profit in 2021 from the crypto trade. He estimated that crypto commerce would contribute just 0.6% to overall sales growth in 2021.
“For now, our scenario analysis does not extend beyond 2021, given the inherent volatility of cryptography and the nascent nature of PayPal’s cryptographic offerings,” he wrote.
PayPal stock, square stock falls from historical records
Venmo, the money transfer service for family and friends, served 65 million users on September 30.
SQ’s inventory ended 2020 with 36 million Cash App users, up from 24 million in December 2019.
PayPal and Square use different accounting methods for cryptocurrency trading. For now, Bitcoin has a bigger impact on Square’s finances.
In its fourth quarter earnings report, Square reported that 3 million Cash App users traded Bitcoin in 2020, with an additional 1 million trading Bitcoin in January 2021. In the December quarter, Square raised $ 41 million in Bitcoin’s gross profit, which was about 5% of the total gross profit.
Recognizing the cryptography recipe
According to Kupferberg, “PayPal will recovergnize revenue from crypto trading as transaction revenues, net of the exchange rate paid to Paxos (The crypto exchange provider). PayPal will to recognize Internet revenue from cryptographic transactions by billing customers a conversion spread, as well as a transaction fee. “
PayPal shares fell 5.4% to close at 226.09 in the stock market today. Square’s stock fell 6.7% to 201.87.
After big runs, the shares of PayPal and Square declined nearly 30% from all-time highs amid a broad rotation of the expensive growing stock market.
Analysts expect PayPal to lose more transaction revenue from former parent eBay (EBAY) in 2021. The online market is changing its payment processing for Adyen.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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