Cryptocurrency Stocks Rebound

Proof that the cryptocurrency industry is bigger than a single tweet, investors bought the dip and hurled BTC 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 BTC, 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%) rebounded on Friday.

Even as more retail investors gravitated towards the speculative Dogecoin, companies dealing with or in BTC, 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 BTC.

On Friday, Jack Dorsey, long a BTC advocate, has said Square (+5.43%) is not planning to buy any more BTC 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 BTC investment despite its fair value rising to US$472 million based on market prices.

But what Square lost on its investment in BTC, it more than made up for by providing users access to BTC.

Square’s first quarter revenue rose 266% year-on-year in March to US$5.06 billion, thanks to a major boost in BTC 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 BTC revenue, 11 times what Square made in the previous year.

While Square only makes a small margin on each BTC transaction, the gross profit of US$75 million should more than cover its investment losses on BTC itself.

Dorsey may also be responding to the fact that Tesla CEO Elon Musk has an enormous amount of influence on BTC’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 BTC, 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.