Square Buys $50 Million In Bitcoin
Square’s Bitcoin Purchase
Payments company Square has made an unusual purchase. Square announced on Thursday that it had bought 4,709 Bitcoins worth $50 million. This represents approximately 1% of Square’s total assets as of the end of Q2 2020.
The company said in a press release;
“Square believes that cryptocurrency is a vehicle for increasing economic power and provides the world with a way to participate in a global monetary system that is aligned with our purpose.”
According to the industry site CoinDesk, the digital currency’s price surged from $7,100 in January to about $10,724 in the year hit by the coronavirus pandemic. The digital currency fell below $5,000 during the recession in March. According to Square’s Chief Financial Officer Amrita Ahuja,
“We believe Bitcoin has the potential to become a more ubiquitous currency in the future…We want to learn and participate, and this investment is a step in that journey for companies building products on a more inclusive future.”
Square CEO Supports the Bitcoin Purchase
Square founder and CEO Jack Dorsey is a proponent of digital currencies, saying cryptocurrencies will eventually become the world’s “single currency” in 2018. He said the process could take up to 10 years.
Bitcoin has been characterized by volatility in its 11-year existence. Due to its high transaction costs, it is rarely used as a means of payment. Some supporters see it as a store of value or “digital gold.”
The coin also collapsed to more than 73% in 2018, making people lose faith in it. However, some believed the 2019 and 2020 gains were a hedge against the then-US-China trade war and the current coronavirus pandemic.
Square’s Cash App
Since 2018, Square has offered customers the ability to buy Bitcoin through the Cash App. Chamath Palihapitiya, an outspoken tech investor, told CNBC on Tuesday that Social Capital uses Bitcoin as a hedge for 1% of its portfolio.
“This is the instrument we use as a hedge,” said Palihapitiya. “I don’t think you trade it, and at least in my opinion, the more people get hung up on and focused on what price action is, the more confusing and frustrating it confuses and frustrates you. , just put it away and hope you don’t need it anymore,” he added.
The analyst consensus approximates that Square will post $1.5 billion in Bitcoin revenue. These estimates could be different because analysts are not paying attention to the Bitcoin market.
His own estimate is $2.2 billion, beating Square’s third-quarter bitcoin trading revenue by $600 million. In the third quarter of 2020, Square reported $1.63 billion in Bitcoin revenue, resulting in $32 million in total profit from Bitcoin products for the quarter.