Jack Dorsey goes all in on crypto with Square - The Average Joe

    Jack Dorsey goes all in on crypto with Square

    Victor Lei — Head of Research

    December 2, 2021

    fintech

    December 2, 2021

    Early this week, Jack Dorsey — the CEO and co-founder of both publicly traded Twitter and Square — announced his departure from Twitter. Now he can truly devote his time to Square and Bitcoin.

    His first order of business — changing Square’s corporate name to “Block” — perhaps a gesture to crypto’s underlying tech, blockchain. Ticker will stay “SQ”.

    Jack Dorsey’s obsession with Bitcoin

    Square (NASDAQ:SQ) — the fintech giant — is known for providing merchants with payment tools and consumers with Cash App — an online banking and investing platform.

    Square’s crypto expansion began in 2018 when Cash App added Bitcoin trading — announcing more plans in 2021 re: Tweets by Dorsey:

    • Square is building a new business line focusing on decentralized financial applications in Bitcoin.
    • He’s thinking about entering the Bitcoin mining business.

    Constellation Research analyst, Ray Wang, thinks Square should diversify its bets beyond Bitcoin and be “in the middle of smart contracts” — a tech most established on Ethereum’s blockchain (via Protocol).

    This month, a big Bitcoin upgrade, Taproot, made smart contracts cheaper — expanding the potential for new innovations and applications on Bitcoin’s network.

    Square’s downward slope

    Square’s growth in the past four quarters: 413%, 266%, 143% — down to 27% in the most recent quarter.

    The pandemic sent Square’s stock up 240% in 2020 — benefiting from massive user adoption of:

    • Online banking: Consumers used Cash App as a direct deposit option for government stimulus checks.
    • Crypto trading: Bitcoin trading grew to nearly half of Square’s sales in the recent quarter.

    But as Square becomes more involved with Bitcoin, it becomes a riskier investment — especially as growth slows.

    Investors: Fintech out of season

    Fall hasn’t been fintech’s season — with the industry down while the broad financial services industry thrived. Since the end of September:

    • The Global X FinTech ETF (NASDAQ:FINX) — is down 12%.
    • SPDR S&P Bank ETF (NYSE:KBE) — is up 8%.

    Highly valued Fintechs took an even bigger hit — with Paypal (NASDAQ:PYPL) down 33% and Upstart (NASDAQ:UPST) down 45% in the same time period.

    CEO of investment firm J.C. Flowers & Co, J. Christopher Flowers, sees signs of a fintech bubble — but still sees potential in the industry. His advice: Focus on the payments industry with a priority on profitable companies.

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