The Square payments company has taken a hit to its stock price on Monday after an analyst criticised its foray into Bitcoin trading as too risky in a note to investors.
Mark Palmer of BTIG said: “We believe Square’s valuation already reflects emphatic and unimpeded growth while failing to factor in competitive, credit-related and macro risks that did not go away when some investors suddenly viewed its shares as a play on a trendy cryptocurrency. We believe Bitcoin could provide a marginal contribution to Square’s revenues if the trial succeeds, it becomes a permanent feature for all Square Cash users, and the company starts to charge a fee for trades. It is not optimal from a risk standpoint for Square to have its fortunes tied to those of a cryptocurrency that has frequently displayed extreme volatility.” He changed his rating of Square to a Sell.
The news comes on the back of a surge in the cryptocurrency Bitcoin in the past week, taking its valuation to close to $10k per unit. But there is concern that it is too volatile and overpriced.
There has been some speculation that PayPal would be making forays into Bitcoin as a payment method but it seems possible that this change may delay such moves.