Block: Suffering From Bitcoin's Winter

Our previous short-term thesis on Block has been invalidated as the mayhem unfolded in the crypto market, which also hammered SQ recently.Therefore, what was a promising "Bitcoin-esque" has now become a liability due to crypto winter. Hence, we believe the market has justifiably de-rated SQ.Our valuation model suggests that SQ could slightly underperform the market at its current valuation. Therefore, investors should wait for a deeper retracement.We revise our rating from Buy to Hold. The price action dynamics have changed and are now uncertain.Investment ThesisWe followed up with an update on Block, Inc. (SQ), as there have been significant developments in its market action since our previous article. We highlighted that we saw a short-term rebound opportunity as its price action was constructive. However, we urged investors to execute risk management strategies to protect their positions if our near-term thesis did not play out.Given its sizeable revenue exposure to Bitcoin (BTC-USD), Square was also pummeled over the past month as Bitcoin plunged further in June, setting up lows not seen since December 2020. Also, its exposure to the BNPL space through Afterpay has been impacted, as BNPL players faced increasingly challenging competitive headwinds. In addition, they are also facing challenges with falling consumer demand and rising rates. Therefore, we believe the multiplicity of significant headwinds forced SQ down from t...