- Stocks associated with cryptocurrencies, in particular Bitcoin, stage a staggering rebound as Bitcoin clears US$50,000
- Coinbase Global (-2.54%), the largest cryptocurrency exchange in the U.S. still languishes, despite strong quarterly earnings
Proof that the cryptocurrency industry is bigger than a single tweet, investors bought the dip and hurled Bitcoin past US$50,000, a move that helped to buoy cryptocurrency-exposed stocks higher.
After being bloodied by a four-day slide that wiped out some US$6.1 billion in value from a basket of companies whose fortunes are tied closely with Bitcoin, the rebound in the world’s largest cryptocurrency also saw a reversal in these stocks.
Marathon Digital Holdings (+17.40%) halted a nine-day losing streak, while MicroStrategy (+6.81%) rebound
Even as more retail investors gravitated towards the speculative Dogecoin, companies dealing with or in Bitcoin, recovered hard, including Riot Blockchain (+17.05%).
Left out in the cold however was Coinbase Global, the largest U.S. cryptocurrency exchange, where even strong quarterly earnings failed to excite traders.
And while cryptocurrency bulls cheered Friday’s recovery, another company has soured on Bitcoin.
On Friday, Jack Dorsey, long a Bitcoin advocate, has said Square (+5.43%) is not planning to buy any more Bitcoin for its corporate treasuries after losing US$20 million on a US$220 million investment in the past quarter, according to a Financial News report.
In Square’s most recent quarterly earnings, published on 6 May, the company said it had lost US$20 million on its Bitcoin investment despite its fair value rising to US$472 million based on market prices.
But what Square lost on its investment in Bitcoin, it more than made up for by providing users access to Bitcoin.
Square’s first quarter revenue rose 266% year-on-year in March to US$5.06 billion, thanks to a major boost in Bitcoin revenue from its Cash App, which offers trading in the cryptocurrency to consumers.
And the payment services provider also reported US$3.5 billion in Bitcoin revenue, 11 times what Square made in the previous year.
While Square only makes a small margin on each Bitcoin transaction, the gross profit of US$75 million should more than cover its investment losses on Bitcoin itself.
Dorsey may also be responding to the fact that Tesla CEO Elon Musk has an enormous amount of influence on Bitcoin’s price, something which the company may not want to get involved with in the interim.
While Tesla made around US$110 million in the past quarter by selling some of its Bitcoin, Square lost US$20 million, in a reflection of just how volatile the nascent asset class is and serving as additional food for thought for financial executives and CFOs who may have considered putting in with the cryptocurrency.
