Square, a payment company, is playing around with Bitcoin. In an article on CNBC, we read:
Jack Dorsey’s company is testing support for bitcoin through its Cash payments app.
“We’re exploring how Square can make this experience faster and easier, and have rolled out this feature to a small number of Cash app customers,” a Square spokesperson said via email to CNBC. “We believe cryptocurrency can greatly impact the ability of individuals to participate in the global financial system and we’re excited to learn more here.”
The test does not allow individuals or businesses to send or accept bitcoin, Square said.
Shares of Square spiked more than 5 percent Wednesday to a record high as one Wall Street firm was quick to recommend the stock on this potential development. The stock closed up 2.3 percent at $40.66 a share.
We are always skeptical when we hear something like: “Stock X has rallied because Y.” It is very hard to pinpoint specific reasons behind a given move. We’re not saying that the Bitcoin news was not the reason why Square went up. We’d simply rather say that it is a possibility rather than certainty as it might be gleaned from many media stories. The same goes for the “Bitcoin goes up because of the Square move” story. Wait, does Bitcoin affect Square or does Square affect Bitcoin? Which one is it? Or is it both? You can immediately appreciate the subtlety of any reasonable answer. While the Square story reads well and for precisely this reason is featured heavily in the media, the recent price move might have implications for the Bitcoin market beyond the possible temporary impact of the news.
For now, let’s focus on the charts.
On Bitstamp, we saw very interesting and potentially quite important action as Bitcoin went down hard, and then came back with a vengeance. What might this mean for the Bitcoin market? Recall our recent comments:
The move up was partially reversed with Bitcoin falling steeply to around $5,500 yesterday. Bitcoin went below the 23.6% Fibonacci retracement level ($6,206) before coming back above this level today. This might mean that all the bearish indications have been nullified, particularly since yesterday’s move was completed on significant volume, at least in comparison with what we have seen in the last couple of weeks.