Bitcoin, Block shares more correlated than they should be: Berenberg

The bitcoin halving slated for April 2024 — an event expected to spur upward price action for BTC — could be a boon for Block’s stock price, analysts say

article-image

Block CEO Jack Dorsey | Frederic Legrand – COMEO/Shutterstock.com modified by Blockworks

share

The upcoming bitcoin halving could be a boon for the share price of payment company Block, as Berenberg Capital Markets analysts argued bitcoin’s impact on the stock is more than it should be.    

The correlation between Block shares and the price of bitcoin — standing at 0.61 — “appears to be a case in which investors’ perception of the impact of bitcoin on the company’s prospects matters more than the reality,” the analysts said in a Wednesday research note.

A potential price boost to bitcoin with the upcoming halving set for April 2024 — an event when rewards offered to bitcoin miners are cut in half — could support Block’s stock price, the note adds.

History would suggest bitcoin’s price could spike in the upcoming halving’s aftermath, industry watchers have said. Matt Lason, chief investment officer at crypto hedge fund Globe 3 Capital, told Blockworks in July that such events “serve as a great reminder for everyone of the power of bitcoin’s monetary policy and the true value of scarcity in an inflationary world.”

Block — formerly known as Square — was founded by Jack Dorsey and Jim McKelvey in 2009. Square remains the name of its payments platform for businesses, while mobile payment service Cash App is another one of its main offerings. 

The company’s stock price was $45.39 at 1 pm ET Thursday — down about 30% year to date. Berenberg’s price target for Block shares is $75. 

A questionable correlation?

Investors have used stock in Block as a means of gaining bitcoin exposure since the company announced in November 2017 that it would facilitate BTC trading for customers, according to Berenberg analyst Mark Palmer.

“There are more equities that provide that kind of exposure now, but Block stands out because of its high profile and large market capitalization,” Palmer told Blockworks.

Stock prices with a correlation to bitcoin higher than Block’s 0.61 correlation include Coinbase and MicroStrategy — at 0.93 and 0.90, respectively, he added. 

Read more: Will MicroStrategy ever stop buying bitcoin?

Block officially launched bitcoin trading on Cash App in 2018. The total sale amount of bitcoin sold to customers of the mobile payment service during this year’s second quarter jumped 34% year over year to $2.39 billion.

The company invested $50 million in bitcoin during the final quarter of 2020 and an additional $170 million in the crypto asset during the first three months of 2021. The fair value of the company’s bitcoin investment was $245 million, as of June 30. 

Block’s affiliates include Spiral, an independent team focused on open-source work around the Bitcoin blockchain and TBD, a builder of decentralized platforms, protocols and tools.  

Still, Cash App reported just $44 million in gross profit from bitcoin transactions in the second quarter — a fraction of its total gross profit was $968 million in the three-month span. 

The bitcoin that Block held on its balance sheet at the mid-year point — when adjusted for fair market value — represented 0.79% of its total assets, Berenberg analysts said.

“The impact of bitcoin on Block’s operating performance is not all that significant at this point,” the Wednesday Berenberg note states.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

Trump insiders say he will dismantle the anti-crypto army within an hour of taking office, but the campaign has been quiet about how it plans to do so

article-image

Plus, Solana set a record for weekly unique active addresses on the network last week

article-image

Launching cryptocurrencies the old fashioned way may soon make a return

article-image

Kraken and CertiK brought their beef to social media after Kraken said researchers exploited $3 million through a bug

article-image

NVIDIA’s historic run is only deepening the divide between mega-cap tech stocks and the rest of the market.