Crypto hedge fund Pantera Capital revealed global payments processor PayPal purchased over 70% of all Bitcoin mined in the past month, as per an investor letter published last week.PayPal began its crypto offering to US clients earlier this month to a warm response, with data suggesting purchases of up to $20 million in Bitcoin (and other cryptocurrencies) daily.“A Bitcoin shortage”Pantera, in its note, said it calculated the amount of Bitcoin on PayPal using metrics from the latter’s exchange provider Paxos-owned ItBit. “Prior to PayPal’s integration of crypto, itBit, the Paxos-run exchange, was doing a fairly constant amount of trading volume — the white line in the chart below,” said Pantera.It added that after PayPal’s crypto service went live, ItBit’s volume “exploded” and implied that PayPal users were already buying almost 70% of the new supply of mined BTC. As per mining tracker site BTC.com, over 900 BTC are mined and sold in the open market by mining firms daily.

Image: Investor letter via Pantera Capital
For reference, ItBit was doing only $5 million in volume last month. This suggests all of the overhead volumes were indeed from a new source, i.e. PayPal. (However, it’s still significantly lesser than regulated bourses like Coinbase or Kraken which did $1.4 billion and $700 million respectively yesterday.)Meanwhile, Pantera noted that if the current buying behavior were to continue, PayPal would end up buying every new BTC produced by miners. “If their growth persists, PayPal alone would be buying more than all of the newly-issued bitcoin within weeks,” the fund said.The San Francisco-based crypto fund added that Bitcoin was poised for a bigger and more sustainable run in the coming months as better fiat-to-crypto on-ramps — like PayPal and Square’s Cash App were now available for new users, providing a trusted and regulated method to access the crypto market compared to using an unregulated exchange.That, in turn, would also see Bitcoin adoption increase among family offices and trust funds, Pantera said:

“When other, larger financial institutions follow their lead, the supply scarcity will become even more imbalanced. The only way supply and demand equilibrates is at a higher price.”

The case for an undervalued BitcoinDan Morehead, the founder of Pantera, said in the note that Bitcoin was neither overhyped nor overvalued at its current $18,300 figure. Instead, he argued that the asset was undervalued considering a basic regression analysis.“At $18,000, the price of bitcoin is 52% below its long-term regression. The trend would put bitcoin at $37,000 today. Bitcoin is trading at the 22nd percentile of expensiveness relative to trend. Not obvious that it’s overvalued,” Morehead said.To point out the retail crowd was absent in the Bitcoin market as well, Morehead turned to search engine Google’s trends about the pioneer cryptocurrency and compared them with those of 2017.

Image: Bitcoin prices vs. Google searches
Morehead said that in the market bubbles of 2013 and 2017, Google searches were a leading indicator of the market — in both the instances surges up — “and then in their peaking and rolling over.” However, as the above chart shows, Google searches for “bitcoin” remain at low levels and haven’t really moved much. “Doesn’t feel over-hyped,” he said.Bitcoin trades at $18,300 at press time and has a market cap of over $300 billion.

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