Ah, hefty “fees” & fat “spreads.” But wasn’t the promise of bitcoin to buy stuff without using fiat currency payment systems such as PayPal?
By Wolf Richter for WOLF STREET.
I got an email from PayPal, with this in the subject line: “Earn a $25 reward when you buy $25+ of crypto with PayPal.” And when I opened the email, it said, “Crypto for the people is here.”
And yes, I checked if this was from that infamous Nigerian colonel that had been offering me fortunes that I have been missing out on. But no. It was actually from paypal.com, and I would need to go to my PayPal account to get this done. OK, so this is truly PayPal.
I didn’t get this offer in my WOLF STREET media mogul empire PayPal account that I use as payment platform for donations. This is for a personal PayPal account I haven’t used in many years.
So this is a promo to get me to use the personal account again. I got promos before, but nothing ever like this. I mean, look at the possibilities: I can turn that $25 from PayPal into cryptos and become a billionaire for free before the year is up.
It came with simple instructions on how to proceed:
“Step 1: Save offer to your account by 9/25/21”
“Step 2: Buy $25 or more of crypto with PayPal by 9/30/21”
“Step 3: Use your $25 reward by 10/31/21”
And it went over the basics:
“What exactly is crypto? Crypto is short for cryptocurrency. Many believe that crypto could one day be as commonly used as cash and credit.”
“The crypto market never sleeps: It’s the only financial market that runs 24/7, 365 days a year. Since all cryptos are global currencies without borders, prices change every minute of every day.”
“Understanding volatility and risk: Crypto is considered volatile because of how much and how quickly its value can change. Like all currencies, there’s potential for gains and losses.”
And it came with lots of small print and linked an ALL CAPS warning.
If you’re into cryptos, you’re better off not reading the small print or follow the link to the ALLCAPS stuff.
At the bottom of the email was a litany in small print about risks and terms and conditions and fees and exchange rates and spreads – yep, no freebees on PayPal. This is about increasing PayPal’s profit.
It said among other things: “When you buy or sell cryptocurrency, we will disclose an exchange rate and any fees [extract profit] you will be charged for that transaction. The exchange rate includes a spread [extract profit] that PayPal earns on each purchase and sale.”
One of the links leads to the PayPal Cryptocurrency Terms and Conditions, which includes at the top an ALL CAPS warning:
“BEFORE YOU START: BUYING AND SELLING CRYPTO ASSETS IS INHERENTLY RISKY.” And yada-yada-yada, “…WHICH CAN RESULT IN SIGNIFICANT LOSSES IN A SHORT TIME, INCLUDING POSSIBLY A LOSS OF TOTAL VALUE.”
OK, I got it. PayPal is going to extract profits via hefty fees and fat spreads, and I get the risk of losing all my money “in a short time.”
In October 2020, as cryptos were spiking, PayPal announced a series of initiatives and future initiatives to get into the crypto space, not to take risks – that’s my job – but to extract profits from fees and spreads.
It said that it offered a service that would allow its customers “to buy, hold and sell cryptocurrency directly from their PayPal account,” and that it had plans to make cryptos “available as a funding source for purchases at its 26 million merchants worldwide.”
At the end of March 2021, when bitcoin was getting close to $60,000 and billionaires were frothing at the mouth, and just days away from its high of nearly $65,000, before plunging 55%, before bouncing off, and now, at $39,000, being down only 40% from the high – yes, just on the eve of all this crypto-drama, PayPal announced that customers who held bitcoin, ether, bitcoin cash, and litecoin in PayPal digital wallets would be able to convert them into fiat currencies at checkouts to make actual purchases in fiat currencies.
OK, wait a minute…
In the promo I got, PayPal called cryptos “global currencies.” So if they’re “currencies,” why would I need to convert them into hated and despised fiat currencies to buy anything?
And why would I have to pay PayPal hefty fees and fat spreads to convert cryptos into hated and despised fiat to buy stuff with when the whole promise of bitcoin at al. originally was cheap and easy payments anywhere by avoiding the hated and despised fiat payments systems that took fees and spreads out of everything? Where did that promise go? Ha, I don’t know either.
Upon the disclosure that Wolf Richter wasn’t going to fall for this crypto promo from PayPal that blew all original promises of cryptos out of the water, shares of PayPal collapsed by 0.3% to $299.40 before recovering as the Plunge Protection Team stepped in ?
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