Square’s Stock Price Is Now Directly Tied To Bitcoin’s Performance

The cat’s out of the bag as Bitcoin-mania hits the mainstream, with Square’s stock price now intrinsically linked to the cryptocurrency.

Feb. 24, 2021

There’s nowhere for the stock market to hide from Bitcoin anymore as the volatile cryptocurrency becomes more and more ingrained in everyday investing. 

This is especially evident in the effects that its price has had on companies that have taken a stake in it such as Tesla and Square (NYSE: SQ).

Square investors should get ready…

While Jack Dorsey’s PayPal competitor did miss estimates on earnings of $0.04 per share at last night’s Q4 report, it did manage to beat on revenue of $3.16 billion, thanks largely to its flagship Cash App bringing in $2.17 billion of that total. 

While much of this is down to a decline in physical cash usage, Cash App’s facilitation of Bitcoin trading on the platform also played a part.

And Square is putting its crypto where its mouth is after announcing yesterday it had purchased 3,318 bitcoins at an aggregate purchase price of $170 million. Combined with Square’s previous purchase of $50 million, this represents approximately 5% of the company’s total cash, cash equivalents, and marketable securities as of December 31, 2020.

What investors need to be aware of now though is that Square’s stock price will begin to be more directly tied to Bitcoin’s overall performance. Jack Dorsey and Square are now tied to the crypto story in the eyes of Wall Street, and although Square made a $97 million profit on this ‘digital gold’ in 2020, it comes with the added risk of volatility. 

However, Square is much better positioned to make such moves than the likes of Tesla, as it operates in the finance space and has a lot of experience with the asset. But Square investors will need to take this change in outlook into account when considering their positions in the company from now on.

A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!  

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here