Mainstream Support For Bitcoin Grows
by Bogdan Giulvezan
Square, Inc., the company behind Cash App, just announced that it has purchased 4,709 Bitcoins, for a total value of $50 million (aggregate purchase price). The investment represents about 1% of Square’s total assets and is a big nod to Bitcoin and the crypto space in general.
According to Square Chief Financial Officer, Amrita Ahuja: “We believe that bitcoin has the potential to be a more ubiquitous currency in the future” and he continued by adding “As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
The company is led by Jack Dorsey, whom you might know as the co-founder and CEO of another “little” app called Twitter. The recent investment seems in line with Square’s identity and services offered, as Cash App is a major entry point into the crypto space for a lot of retail investors. As reported by the company itself, Bitcoin revenue was $178 million between Oct. 1 and Dec. 31, 2019, which is roughly half the entire revenue for that period.
Square, Inc. is the second tech company to invest in Bitcoin in the last few months, after MicroStrategy invested $425 million. However, MicroStrategy’s investment was aimed at diversifying the portfolio, not necessarily towards having an active role in the crypto space, and in that sense, Square’s investment weighs more because the latter has a more hands-on approach regarding crypto.
The Technical Scene
At the time of writing, Bitcoin is hovering in close vicinity of $10,900 and it looks like Square’s investment was perceived as bullish by most market participants. The large green candle coincides with the first reports regarding the mentioned investment but it is also the result of a bounce from the bullish trend line seen on the chart. Thus we can safely call this is a good example of technical and fundamental factors coming together to generate a strong move.
But as traders, we are more interested in what’s next, not so much in what happened already, so let’s see what the signs are telling us. We can clearly see that price is reacting to diagonal support, jumping higher, which suggests that we are not dealing with a random move, but one that can build up and continue north.
However, price is approaching a resistance zone (minor at $11,000 and a more significant one at $11,150), thus the real question is: can Bitcoin climb above the mentioned resistance barrier? If it can, then it could very well aim for $12,000 (possibly in a week or so). On the other hand, if bullish momentum fades and price cannot surpass resistance, then we will likely see a break of the trend line or a period of stagnation somewhere around $11,000.