Cash App Results Signal Strong Institutional Interest

Cash App Results Signal Strong Institutional Interest

By Benson Toti - min read

One of the top bullish signals Bitcoin could receive is getting a high level of cash inflows from new investors. Since the last crypto bull market, a bunch of new developments have occurred. One of them is the emergence of the “Cash App”, an offering by Jack Dorsey’s financial technology startup, Square.

Recently, Square has been reporting quarter-over-quarter record sales of Bitcoin, which is a bullish indicator (or the sign of the end of a bear market) if we ever saw one. With $65.5 million of BTC sold in the first quarter of 2019, Bitcoin investors are getting excited.

Q4 2018 had $52 million of sales and Q3 2018 and $50 million of sales, which means Q1’s growth was unprecedented. Bears may have been the dominant players over the last year, but this is a strong signal in the opposite direction.

Shift in Market Dynamics

These strong inflows change the whole dynamics of the market, too. It has been pointed out that Square users, based on the current statistics, may be absorbing more than 10% of all the Bitcoin being mined right now. If this were the case and the buying rates continued to increase, it is possible that the Cash App could completely nullify all new supply from Bitcoin mining. This wouldn’t be possibly until the Bitcoin halving that will occur next year, but would be a game-changer for the market dynamics.

Many investors have been looking to institutional investors to bring about the next big bull market, but it’s looking like retail investors are leading the way right now. We’re even seeing record highs in social metrics like the rate of tweets that pertain to Bitcoin and cryptocurrency.

Square hasn’t released the demographic breakdown of current buyers, but they are almost definitely retail rather than institutional investors. The institutional investors would be more likely to buy their Bitcoin through a big trading desk who could work the order better to get a lower price. Additionally, the big concerns for institutional investors have been around custody and the liability they may incur if cryptocurrency is stolen. Fiduciary duty makes management of cryptocurrency far more dangerous for these investors, which is part of why they’ve taken so long to get into the space.

Jack the Crypto Whale

Jack Dorsey is a well-known proponent of Bitcoin (and notably not a huge investor in altcoins). It is rumored that he spends the maximum amount of $10,000 on the Cash App every week. Dorsey has gone on to announce plans to hire five talented individuals in the cryptocurrency space, with no information disclosed about what exactly they would be working on. Additionally, a social media trend of “stacking satoshis” emerged where users would post screenshots of their recurring Cash App purchases on Twitter. This sort of market force and bandwagon marketing is part of what cause the last big bubble.

There are a hundred different reasons why the price of Bitcoin could go either way, but as the sentiments shift and short-sellers are squeezed out of their positions, we would expect resistance levels to be pushed through with more ease. With Bitcoin hovering in the $5,300’s for much of this week, we’ve seen many calls for big price swings in either direction.