SquareâÂÂs recently announced $50 million investment in bitcoin (BTC) is a âÂÂstrong vote of confidence for the future of bitcoinâ and a signal the payments company sees âÂÂa lot of potentialâ for the cryptocurrency as an asset, JPMorgan analysts said in a report dated Tuesday.
- While SquareâÂÂs $50 million investment pales next to MicroStrategyâÂÂs recent $425 million loading up of the cryptocurrency, JPMorganâÂÂsglobal marketstrategists wrote that Square is likely to make more purchases.
- Other payment companies will also likely follow in SquareâÂÂs footsteps or risk getting shut out of a growing segment, the JPMorgan analysts wrote.
- Millennials have been using SquareâÂÂs Cash App to buy BTC, the researchers noted, and that demand, along with MicroStrategyâÂÂs purchases, indicate Q3âÂÂs bitcoin demand exceeded supply at a greater level than Q2âÂÂs.
- While noting that options contracts to BTC have risen due to how institutional clients prefer to deal with established exchanges like the CME, the JPMorgan strategists said itâÂÂs likely retail traffic is driving the surge in options.
- SquareâÂÂs investment is a strong vote of confidence for the long term because the September sell-off in BTC only partly alleviated what the JPMorgan team described as overbought conditions created during late July/early August. However, an overhang of net long positions could create a headwind for the price of BTC in the near term, the analysts said.
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