Block Stock Is a Good Buy Here, But Crypto Weighting Is a Risk

Block (NYSE:SQ) stock has been beaten down over the past 12 months. Formerly known as a Square, Block now embodies a number of other subsidiaries, including the payments system Square that has made farmer’s markets easier to navigate and some cryptocurrency companies.

Someone holds a phone with the Block (sq) logo in front of a stock chart
Source: Sergei Elagin / Shutterstock

While its digital banking tools have certainly helped small and medium-sized enterprises (SMEs), Block is now expanding its offerings to dedicate some of its size and power to Bitcoin (BTC-USD) operations.

As a digital payments platform, I think Square is the featured player here.

SQ Stock Makes a Move in Crypto

I have been following the Bitcoin story since the early 2000s. It has waxed and waned over the past two decades.

The first wave of Bitcoin interest tended to always bring up the story of one of the first miners that owned bitcoins. Basically, the miner spent 10,000 bitcoins on $40 worth of pizza. I wonder if the pizza place still owns those coins!

But the fact is, the original cryptocurrency has been through some various boom and bust cycles.

However, I remain a devout follower of German philosopher Arthur Schopenhauer’s concept of truth. He says all truth passes through three phases: First it is ridiculed; second, it is violently opposed; third it is accepted as self-evident.

I would say we are currently moving somewhere around the second phase. Based on the huge amount of Super Bowl ads for crypto companies this year, it is safe to say there are a lot of people diving in to the crypto world.

However, there are also massive government seizures of cryptocurrencies that are supposedly impossible to trace. There are also crypto brokers that are getting robbed left and right. And remember, there is no Federal Deposit Insurance Company for Bitcoin or others. When it is gone, it is gone.

Personally, that is why I think so many people are opening up crypto shops. There are plenty of people dying to dive in. And, if it all blows up, they don’t owe these folks a dime. This isn’t banking.

And that brings me to my second point, which gets to the violent opposition. Regulators are starting to get involved. This isn’t “violently opposing” Bitcoin, but it will significantly change the marketplace.

Not a New Path

This kind of truth has happened before. The internet was very much the same thing. But it took a dotcom bubble before it became a more sober pursuit and finally became self-evident.

Decentralized finance (DeFi) is the real key to Bitcoin and other cryptos. And personally, I think the power of this new era is in blockchain and DeFi more than in one specific coin.

However, SQ founder and Chief Executive Officer Jack Dorsey has been putting a lot of quality time thinking about things. And he is on board with Bitcoin. That is a significant commitment.

But it also puts the digital payments aspect of SQ stock at a threat. If Bitcoin tanks, so does Block.

Yet, in the long term, the Square platform is where the big growth is. And right now, that business is undervalued after all of the selling. If you are looking for a good digital banking stock for the next couple of decades, SQ stock is a good buy.

I am pretty confident Bitcoin and other cryptos will enter the mainstream, but they have an uphill battle against governments and major financial institutions. Plus, they are far too volatile for any real monetary standard. It is boutique for now, but maybe not in a decade.

SQ stock is a smart and indirect way to play a potential version of the global financial future.

On the date of publication, GS Early did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

GS Early has been an award-winning financial writer and editor for nearly three decades, working with many of the leading financial editors during that time. He’s seen a few things and hears more.

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