Square (SQ) logo displayed on a smartphone screen

© Source: Shutterstock Square (SQ) logo displayed on a smartphone screen

Despite concerns about an investment market that is getting perhaps out of touch with the fundamentals, fintech specialist Square (NYSE:SQ) continues to defy gravity. But is this meteoric acceleration of Square stock sustainable amid some not-so-stellar news, such as the disappointing January jobs report?

a hand holding a cell phone: Square (SQ) logo displayed on a smartphone screen

© Provided by InvestorPlace Square (SQ) logo displayed on a smartphone screen

Don’t misread this because I’m a big fan of SQ. Primarily, I appreciate that Square stock is a disruptive investment in the same vein as Amazon (NASDAQ:AMZN). But for me, Square is much more of a feel-good narrative. Rather than disrupting the brick-and-mortar business model – which also includes mom and pops – SQ allows small businesses to level the playing field with larger competitors.

Further, Square stock is well positioned to advantage of the burgeoning gig economy. Prior to the novel coronavirus pandemic, the shift toward decoupling professional ambitions away from the office was in full swing. In the new normal, many worker bees have had a taste of the gig life – and several of them will undoubtedly explore this concept full time.

Thanks to Square’s payment processing products and services, along with business/accounting applications that help streamline administrative duties, entrepreneurs can focus on what really matters – growing their companies and brands.

But then again, that’s the problem – the pandemic has had a detrimental impact on small businesses. Near the midway point last year, 80% of them had stated that the Covid-19 crisis had hurt their bottom line.

To be fair, most of the surveyed businesses were optimistic about reopening and getting back on track. However, the January jobs report gave a stark reminder that we may have a longer road to that recovery. With only 49,000 jobs added against some forecasts calling for nominal growth up to a quarter of a million jobs, the news wasn’t particularly helpful for Square stock.

So does SQ have justification for its market bullishness? Apparently, Bitcoin (CCC:BTC-USD) may save the day.

Square Stock and the Tricky Bitcoin Narrative

Recently, Square CEO Jack Dorsey made waves when he and rapper Jay Z created an endowment to help fund Bitcoin development. Initially, the fund will serve the Africa and India markets and could progress to other regions.

It’s an interesting concept. In Nigeria, for instance, cryptocurrency transactions have soared in volume. A major reason for the adoption of Bitcoin and other blockchain reward tokens is that they provide protection against currency devaluation. Also, cross-border transactions are more efficient and cost-effective.

Therefore, Dorsey and Jay Z wish to feed this momentum, making Bitcoin the currency of the internet. But will this be the catalyst to help Square stock consistently stay above the fundamental muck?

I’m a big fan of both SQ and cryptocurrencies so this is a tricky topic for me. On one hand, I appreciate that virtual currencies are finally going mainstream. At the same time, the narrative may be getting stretched.

Primarily, I don’t believe that Bitcoin is useful as the currency of the internet. For one thing, BTC is clunky relative to the cryptocurrencies that came after it. While I won’t get into the technical granularity, the main point is that BTC is not the most scalable crypto coin.

Indeed, if you wish to have a currency of the internet, Bitcoin’s hardforked token Bitcoin Cash (CCC:BCH-USD) is much more appropriate. Handling higher transaction volume at lower costs, BCH is the platform you should be targeting. Because of this, I’d say that Bitcoin Cash is criminally undervalued.

But that’s also the counterargument. At time of writing, I’m watching Bitcoin Cash charge dramatically higher. Against the prior day, BCH is up 23% and over the trailing week, it’s up 56%.

Honestly, who’d want to have such value fluctuations in their currency? Most cryptocurrencies, when they become popular, cease to be currencies but rather stores of (sometimes extreme) value.

Proceed Carefully with SQ

It should be noted that Square isn’t directly involved with the aforementioned Bitcoin fund. However, the company does support Bitcoin transactions and has BTC in its corporate treasury. Therefore, this latest news item could inspire more positive sentiment toward Square stock.

Nevertheless, you may want to be careful with SQ – as in stay on the sidelines and wait for a better entry point. I’m practicing what I’m preaching, at least for Bitcoin. Several days ago, I took profits from BTC because you just don’t know where this high-flying assets will end up.

I’m still a believer in cryptocurrencies and so I maintain a position. Still, my argument is that belief in a particular asset shouldn’t cloud your judgment. Square stock is a brilliant investment but I believe there is a better price coming up for prospective buyers.

On the date of publication, Josh Enomoto held a long position in BTC and BCH.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.