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.
