Here at Frugal Pig, we’ve started fielding questions from all sorts of people about buying Bitcoin. Partly, mainstream news hasn’t missed a chance to publish stories about the sudden increase in the value of digital currency. Still, most of the questions have risen from the sudden prompts from PayPal to buy Bitcoin from right within a typical cash account.
So, with the current increase in value and an onset of promotion, what are the pros and cons of buying Bitcoin on PayPal? With the fact that most people who ask about Bitcoin and Paypal don’t have a lot of experience with digital money in mind, we’ll address frequently asked questions about using PayPal to buy and sell cryptocurrency.
As a note, for people who are entirely new to the idea of Bitcoin and other digital currencies, take a look at a previous post: What is Digital Money?
Answers to Frequent Questions About Buying Bitcoin With PayPal
Is Buying Bitcoin With PayPal Safe?
On the positive side, anybody who trusts PayPal security with their cash should feel comfortable trusting them to protect their digital assets. That’s not to say security breaches have never happened. We’ve fielded stories about people getting their accounts compromised or even having digital thieves apply for accounts using stolen credentials.
At the same time, PayPal’s reported to generally have a good reputation for their security and fraud team, so eventually, they appear to resolve most of these problems. Put it this way. There are reasons not to buy Bitcoin through PayPal, but security isn’t at the top of the list.
Does PayPal Have a lot of Bitcoin?
One thing’s for sure. PayPal has plenty of Bitcoin. According to Bitcoin.com, PayPal purchased 70 percent of all of the newly mined Bitcoin in October of 2002, when they first began offering this cryptocurrency to their members.
Along with that news, the price of Bitcoin increased. On the positive side for Bitcoin investors, PayPal’s participation in the cryptocurrency market should be good for the price. Not only will it increase demand, it will also increase the amount of attention that digital currency gets from the general public.
What Can You Use PayPal Bitcoin For?
Now, here’s a better question. Out in the world, people buy Bitcoin and other digital currency for a number of reasons. These include:
- Investment and speculation: With PayPal, that’s about all you can do currently.
- Buying things: Nope, you can’t buy or sell with PayPal Bitcoin. At least, not yet, anyway.
- Using a decentralized currency exchange: No, PayPal is hardly decentralized.
- Preserving anonymity: No, you have to provide some personal information to register for PayPal.
Can Bitcoin Transfer In or Out of Paypal?
As noted above, you can’t transfer Bitcoin into PayPal if purchased from another sources or a buyer. Similarly, you can’t transfer Bitcoin out of PayPal to another wallet, exchange, or seller. You can use PayPal to buy Bitcoin, you can hold Bitcoin within PayPal, and finally, you can sell Bitcoin back to PayPal.
Can You Send PayPal to Bitcoin and Visa Versa?
Some people wonder if there is any other way to covert Bitcoin into PayPal funds, or likewise, to convert PayPal funds to Bitcoin. Some other services do allow users to send the proceeds from Bitcoin sales to PayPal, and visa versa, users can send PayPal funds to a Bitcoin exchange.
As one example, Coinbase allows sending money to PayPal after Bitcoin is sold for a national currency, like dollars. Some P2P cryptocurrency marketplaces allow users to send money and buy Bitcoin. Examples are LocalBitcoin and Paxful.
Investing and Speculating
Right now, PayPal Bitcoin only checks this first box. You can use PayPal to buy or sell Bitcoin and the other cryptocurrencies that the site supports. You can only exchange them with PayPal and not another seller or buyer.
As with every exchange for buying or selling digital currency, you will have to pay some fees. Obviously, they offer these sorts of services in order to make money, which is reasonable. In other words, if you spend $100 of your cash on Bitcoin, you will get somewhat less than that value after your fees have been deducted.
Apparently, PayPal is very transparent about these fees at checkout time, but you still need to look at other features of typical cryptocurrency exchanges to determine if you’re getting the best value.
Buying Products or Services With Cryptocurrency
According to PayPal, they would like to offer the ability to buy things with digital money in the future, but that’s not available right now. You can’t even transfer your cryptocurrency out to another wallet or exchange that will give you the option to make purchases.
You also can’t transfer your Bitcoin to somebody else. Again, PayPal allows you to buy, hold, and sell. That’s it.
Using a Decentralized Cryptocurrency Exchange
No, right now, you’re relying only upon PayPal. That’s a private company and doesn’t fit the vision of having a decentralized exchange for digital money.
Since you need to offer up plenty of personal information to even register for a PayPal account, you certainly won’t be anonymous with your cryptocurrency transactions there.
Are There Any Advantages to Using PayPal to Buy Digital Money, Like Bitcoin?
That’s not to say that some people may find the ability to buy, sell, and hold Bitcoin with PayPal somewhat useful. If you think it’s a good time to speculate or invest in digital currency, because that’s about all you can do with PayPal now, these are some potential advantages:
- Trade globally: Because PayPal serves customers all over the worlds, you can probably use your own country’s currency to buy and sell. According to Privacy Pros, PayPal supports about 25 currencies.
- Easy transactions: PayPal makes buying and selling Bitcoin easy by cutting out the short-term learning curve.
So the advantages of PayPal include it’s large reach and the fact that it makes things easy. To be fair, it’s probably more secure than some digital money exchanges, though no more than the best ones.
Alternative Ways to Buy Digital Currency With PayPal
If you have your heart set on buying Bitcoin or another digital currency with PayPal, you can look into some established alternatives. Note that mentioning these PayPal-to-Bitcoin alternatives doesn’t endorse them. It’s important to figure out which cryptocurrency exchange meets your own requirements for security and functionality. This is just informational. Also, this list may not be all-inclusive.
- Local Bitcoins: Established in 2012, Local Bitcoins is a P2P marketplace that accepts a wide variety of payment methods.
- Etoro: This is more of a trading platform, but it does support PayPal payments.
- Paxful: This Peer-to-Peer marketplace supports hundreds of payment methods and currencies.
What is the Best Cryptocurrency Exchange?
As with answering almost any financial question, the right answer always depends upon the personal requirements and preferences. With that said, look at a few reliable exchanges.
It’s fair to observe that Coinbase has a reputation as the largest and most secure digital currency exchange. It allows them to move currency away into their own wallets, pull out cash to a bank account, and of course, it supports buying and selling and has its own insured wallet.
In 2020, Investopedia named Coinbase the best overall cryptocurrency exchange. It’s fairly easy to use and transfer money into, the interface is intuitive, and the fees are reasonable.
At this time, it supports withdrawals of sold digital currency to PayPal. However, it doesn’t support buying with PayPal.
Other Marketplaces and Exchanges
It’s fair to touch briefly on some other marketplaces and exchanges to research:
- Cash App: This app is another P2P marketplace, and it makes it easy for beginners to get started with cryptocurrency.
- Binance: More for intermediate or experienced cybercurrency users, Binance supports Bitcoin and a lot of other digital currencies.
Is PayPal a Good Place to Get Started With Digital Currencies?
If your main goal is to find an easy way to buy some Bitcoin and hold it for an investment or speculation, PayPal may get the job done. The fees may be somewhat higher for small transactions than Coinbase, but they’re not way out of the park. For instance, PayPal charges 1.8 percent on amounts between $200 and $1,000, and Coinbase charges 1.49 percent.
Mostly, PayPal doesn’t give users a lot they can do with their digital money but buy, sell, and hold it. People who actually want to use cryptocurrency to make purchases and perhaps, support some other benefits of digital money, might consider another alternative. At the same time, PayPal just introduced this new option to buy cryptocurrency, so that could change in the future.