Bitcoin (BTC) was a factor in Block’s rating downgrade

Bitcoin (BTC) was a factor in Block’s rating downgrade

blockthe payment company of the founder of Twitter, Jack Dorseyformerly called Squaresaw a drop in its rating, driven by none other than Bitcoin (BTC) – and more accurately, by the company’s “concern” about it.

Source: AdobeStock/sergign

The investment bank Mizuho downgraded Block from “buy” to “neutral”, arguing that the company is overly focused on BTC, despite contributing less than 5% of Block’s gross profit.

Therefore, even though BTC transactions represent a small percentage of gross profit, they “appear to disproportionately capture management’s attention,” the analyst said. Dan Dolevquoted by MarketWatch, in a note from Mizuho.

He added that,

“Assessment of the stock’s behavior shows that it is tracking Bitcoin closely. This is unfortunate as it distracts management and investors from the broader SQ ecosystem.”

According to Dolev, Block “still has huge potential”, but he argues that the company needs to take several factors into consideration, while also failing to capitalize on its opportunities.

Dolev notably wrote,

“After years of being rightfully considered the most innovative player in payments, we believe that user fatigue, plateauing inflows, loss of best point of sale (POS) status and BNPL’s poor execution [buy-now-pay-later] block the growth of SQ.”

Other worrying factors include:

  • a slowdown in net additions as customer acquisition costs increase;
  • buy-now-pay-later estimates are down, but Block has acquired such a company, afterpayearlier this year.

Furthermore, analyst Andrew Bauch of SMBC Nikko Securities America also downgraded Block’s rating, just a day earlier, suggesting that the BTC price crash could lead to company-level exits Cash App.

That said, Block isn’t the only company to have been downgraded. MicroStrategya leading Bitcoin advocate, as well as the crypto exchange Coinbase and the online trading platform robinhoodamong others, have also been victims of this phenomenon.

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As seen today, shares of Block fell 5.92% to a price of $55.93.

BTC is currently trading around the $18,900 area. It is down 3.3% in one week and nearly 12% over the last month. In total, it has fallen 56% over the past year and 72% from its all-time high recorded in November 2011.

BTC price evolution over 7 days. Source: coingecko.com

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