SquareÃ¢ÂÂs recently announced $50 million investment in bitcoin (BTC) is a Ã¢ÂÂstrong vote of confidence for the future of bitcoinÃ¢ÂÂ and a signal the payments company sees Ã¢ÂÂa lot of potentialÃ¢ÂÂ for the cryptocurrency as an asset, JPMorgan analysts said in a report dated Tuesday.
- While SquareÃ¢ÂÂs $50 million investment pales next to MicroStrategyÃ¢ÂÂs recent $425 million loading up of the cryptocurrency, JPMorganÃ¢ÂÂsglobal marketstrategists wrote that Square is likely to make more purchases.
- Other payment companies will also likely follow in SquareÃ¢ÂÂs footsteps or risk getting shut out of a growing segment, the JPMorgan analysts wrote.
- Millennials have been using SquareÃ¢ÂÂs Cash App to buy BTC, the researchers noted, and that demand, along with MicroStrategyÃ¢ÂÂs purchases, indicate Q3Ã¢ÂÂs bitcoin demand exceeded supply at a greater level than Q2Ã¢ÂÂs.
- 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 itÃ¢ÂÂs likely retail traffic is driving the surge in options.
- SquareÃ¢ÂÂs 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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