PayPal (PYPL) is gaining Crypto Momentum

Consumer mentions of buying or investing in cryptocurrencies have increased more than 100% on a QoQ basis. These mentions have far surpassed levels recorded in 2017.

Naturally, Digital Wallet owners $SQ and $PYPL want a piece of the pie. While each digital wallet in the LikeFolio universe has recorded triple-digit levels of YoY growth, PayPal and Venmo have the highest levels of crypto-specific near-term momentum:

• Venmo: +88% QoQ
• PayPal: +51% QoQ
• Cash App: -41% QoQ

What's going on here?

There are 3 major key distinguishers between SQ's and PYPL's crypto approach:

1. Square has most of its eggs in Bitcoin's basket. The platform allows users to buy, sell, and hold only Bitcoin via Cash App. So, its rapid growth will fade more aggressively if Bitcoin stops fueling it (Bitcoin revenue represented 69% of total rev).
2. PayPal supports a wider range of cryptocurrencies on 2 platforms. It facilitates cryptocurrency buying/selling/holding on both its PayPal and Venmo platforms, and it supports a wider range of cryptocurrencies including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
3. PayPal allows users to actually use cryptocurrency to make purchases.

PayPal also has other company-reported momentum:

• New products are services are increasing consumer engagement: +33% in Q1.
• PayPal has a Buy Now Pay Later service (Pay in 4): 50% of customers who used BNPL repeated within 3 months, 70% within 6 months. LikeFolio data shows Buy Now Pay Later Mentions have increased +22% vs. 2019.
• Nearly half of PayPal crypto users open the app every day
• PayPal expects monetization of Venmo to drive future growth as it achieves "Super App" status. Not only is Venmo expanding its crypto offerings, but it's focusing on Business Profiles to allow for purchases of goods. The company noted: "Pay with Venmo is going to be the majority of revenues as you look out several years from now."

Big picture: PayPal has a much higher total mention volume, but Square has overall higher levels of consumer happiness (about ~6 points higher vs. PYPL). We'll be watching both players in the digital wallet space, but right now PayPal boasts a short-term momentum edge.