Eat, Pay, Love

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What's going on?

Square reported better-than-expected quarterly earnings late last week, as cryptocurrencies brought the payments provider the inner peace it’s been longing for.

What does this mean?

Square’s sales more than tripled last quarter, surpassing analysts’ estimates by around 50%. That jump was mostly thanks to brisk bitcoin trading on its Cash App: the company adds a fee whenever users buy or sell crypto, and those charges came to 1,100% more than the same time last year.

Still, Square isn’t greedy: it made just $75 million in profit from $3.5 billion of crypto-related revenue. Maybe the company’s simply sharing some goodwill, having announced in February that it’d invested around $170 million in bitcoin. But there might also be an ulterior motive. With rival PayPal hoping its own nascent crypto platform becomes a major source of growth, Square’s low margins could be cannily competitive. Investors certainly seem to think so: they sent Square’s shares up 6% on Friday.

Why should I care?

The bigger picture: Wall Street wants in.
A slew of recent announcements reveal just how keen traditional financial firms are on grabbing a slice of the crypto action. Besides Goldman Sachs’ unveiling of a new dedicated trading team, rival BNY Mellon is vying to administer the US’s first bitcoin exchange-traded fund. One high-profile venture capital firm, meanwhile, is looking to follow its successful backing of Coinbase by raising a fresh $1 billion fund to invest in a few more crypto plays.

For markets: The Fed is not amused.
Investors’ appetite for risk-taking has pushed up the prices of everything from cryptocurrencies to junk bonds. But the US central bank isn’t celebrating: the Federal Reserve is concerned that many parts of the market are unsustainably elevated, and that this – combined with nosebleed-inducing levels of company debt – could pose a risk to the US financial system. Better pack it in and head to Bali…

Originally posted as part of the Finimize daily email.

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