Bitcoin custodian services are a rehypothecation tool of the total supply by banks.
You may think that only fiat currencies and central banks' digital currencies will be able to inflate the money supply, but now even capped cryptocurrencies will suffer the same fate. With the usage of custodial accounts by the regular Joe, the possibility to attack little coins becomes more and more feasible and possible for central banks and centralized entities to print Bitcoin and other cryptocurrencies at will.
In the case of El Salvador, that nation's government will have the theoretical capability to print Bitcoin once most citizens use the government-sponsored custodial account called Chivo. Once enough users use that custodian, the government can use either print Bitcoin or even implement fractional reserve practices where the application will only hold a percentage of Bitcoin that customers have instead of the whole amount. Custodian services only use private ledgers where the regular citizen can't know or audit the custodian to prove that all funds are tangible assets, not derivatives.
If you don't understand how an institution could print or even use fractional reserve practices to print more Bitcoin than the total supply. It would help if you tried to study more, and I am not usually the one that handles teaching you how that process works. It is not my work to teach everything sometimes, and readers must also try to learn more and take the matter into their own hands and learn. That being said, now it enters PayPal.
PayPal is a centralized institution, just like any other bank or service, and the latest news is that they will now raise the limits on how much customers can buy using their centralized platform. The problem with PayPal is that you can't withdraw your funds to your wallet just yet, I have that application, and until the moment of writing this article, I can buy Bitcoin, Bitcoin Cash, and Litecoin. Still, I can't withdraw funds to my wallets, meaning I only accept a derivative, not the actual asset.
If enough demand goes through PayPal services, they could be tempted into issuing printed or fictitious crypto assets that are not backed by any cryptocurrency. People buy those derivatives because they think they are the actual asset, and some do it for convenience.
The Bitcoin Core community likes the usage of custodian services. I think they secretly wish people start using their custodian solutions as if it was the real deal, so say they are a currency when they are just the new bank 2.0 where more of the same old will be happening. Services like Wallet of Satoshi, Bluewallet, and Chivo are banking services where those services can print more bitcoin supply. The adoption of those services is being sold as Bitcoin adoption.
Many are celebrating that PayPal will now have higher limits so that people can buy derivatives and not the actual coins because derivatives markets are how the government and banks control and dictate the price of precious metals. The government sympathizers hope to do the same with the whole crypto market.
The usage of custodial services like Robinhood, PayPal, Wallet of Satoshi, Bluewallet, and many other custodians is just making the price manipulation of crypto assets even worst. It is also enabling the same banks that Bitcoin hoped to destroy the masters of this new money. I hope the whole Bitcoin Cash community becomes a genuinely decentralized market where the DEX dictates the prices of Bitcoin Cash and not centralized entities.
The upbring and rise of SmartBCH will help bring better market tools for the Bitcoin Cash community, and hopefully, it will make for a robust market in that manipulators can't intervene. I hope that SmartBCH, together with DEX's and DeFi, finally break the mark and make the usage of centralized exchanges a thing of the past and that fewer and fewer people start using more Bitcoin Cash to pay for something and to use decentralized tools more and more. Otherwise, we will have a hostile takeover by centralized entities and their centralized custodial solutions.
