May 3, 2024

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Block Reports Strong Q1 Earnings and Commits to Bitcoin Investment

Block (formerly Square), led by Jack Dorsey, reported first-quarter earnings that exceeded expectations with adjusted earnings of 85 cents per share and revenue of $5.97 billion, surpassing the forecast by nearly $150 million. The company announced a plan to invest 10% of its gross profit from Bitcoin products back into Bitcoin each month, reinforcing its commitment to Bitcoin as the "native currency of the internet." This strategy aligns with Block's broader goals, including the recent development of a three-nanometer Bitcoin mining chip to support decentralized mining. Additionally, Block is dealing with scrutiny from federal prosecutors over its crypto compliance practices.

BNP Paribas Buys Into Bitcoin with Investment in BlackRock's iShares Trust

French banking giant BNP Paribas has taken a step into the cryptocurrency space by purchasing shares in BlackRock's iShares Bitcoin Trust (IBIT), reflecting a modest initial exposure to Bitcoin. According to their latest 13F filing on May 1, BNP Paribas holds 1,030 shares valued at $41,684, a tiny fraction of their overall investments totaling $113.8 billion. This move comes amid BlackRock's anticipation of increased institutional investment in spot Bitcoin ETFs. Robert Mitchnick, BlackRock’s head of digital assets, noted a resurgence in institutional interest in Bitcoin, with various entities actively engaged in due diligence and portfolio allocation discussions regarding Bitcoin. BNP Paribas, Europe's second-largest bank and the world's ninth-largest by assets, symbolizes an emerging trend of significant financial institutions tentatively stepping into Bitcoin investment through regulated ETFs.

Tether Partners with Chainalysis to Enhance Transaction Monitoring and Compliance

Tether, the issuer of the widely-used stablecoin USDT, has partnered with Chainalysis to enhance the monitoring of its token transactions on secondary markets, focusing on compliance with international sanctions and detecting illicit transfers such as terrorist financing. This collaboration is part of Tether's broader commitment to boost transparency and security in the cryptocurrency sector amidst increasing regulatory scrutiny over USDT's potential role in circumventing sanctions and facilitating illicit financial activities. This system aims to identify risky or sanctioned-associated crypto wallets, responding to global regulatory pressures and reports of USDT being used by entities like Venezuela's state-run oil company to bypass U.S. sanctions. Tether, which has over $110 billion in circulation and backs its value mainly through U.S. Treasury bonds, recently announced first-quarter earnings of $4.52 billion, underscoring its financial strength and the pivotal role of USDT in the digital economy.

Trading Desk Insights

Bitcoin has surged past $60,000 following this morning's softer-than-expected nonfarm payrolls data. The U.S. labor market underperformed in April, with a rise in the unemployment rate and a dip in job additions, suggesting a potential slowdown in the robust job growth trajectory. This development could prompt the Federal Reserve to reconsider its stance on interest rate cuts. Bitcoin, which has been restrained by a declining trend line since early April, could see bullish implications if it breaches the $64,000 mark.

Turning our attention to Bitcoin ETFs, we've witnessed a seventh consecutive day of outflows, totaling $34.4 million. However, today's minimal outflow— the smallest since April 18—hints at potential stabilization, and with the uptick in Bitcoin's price, we might be on the cusp of a net inflow.

In other news, the decentralized social platform Friend.Tech launched version 2 of its service and airdropped its native token, FRIEND, this Friday. The token experienced a sharp decline in value, plummeting from a high of $169 immediately post-airdrop to just $2.5.

Meanwhile, Block (SQ), under the leadership of CEO Jack Dorsey, has initiated a dollar-cost averaging (DCA) program, dedicating 10% of its monthly bitcoin-related gross profits to augment its Bitcoin holdings. This strategic acquisition plan will continue through the end of 2024.

Stock futures have also seen a significant uptick following Friday's jobs report, which investors believe could lead to a more dovish Federal Reserve, potentially initiating interest rate cuts sooner than anticipated. The report indicated a gain of 175,000 jobs in April, falling short of the 240,000 expected, while the unemployment rate nudged up to 3.9%. Additionally, wage growth was subdued, an encouraging sign for those monitoring inflation pressures.

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