Ideas & Insights
Square Cashes In with Bitcoin

Square made 125 million on Bitcoin during Q2-2019 from its new Cash app, nearly doubling the preceding quarter. The payment processing giant posted a 832,000-dollar profit for Q1-2019 on a record-high 65.5 million dollars in revenue. This caps the current five-quarter run of steadily increasing Bitcoin sales at Square.

What’s Behind the Numbers?

The August 1 earnings report showed a profit of two million dollars from Bitcoin alone. Square attributes this strong number to heavy increases in trading volume for Bitcoin. Square's Cash mobile financial app brought in 135 million dollars through digital financial services, transaction fees and subscriptions. The costs of Bitcoin trading operations are listed at 122.9 million dollars by Square. That means the Bitcoin exchange accounts for 92.5 percent of the Cash app total revenue by itself. Another factor is the 240 percent increase for Square revenues on a year-over-year basis for Q2. As a result, Square's stock started the year at 57.20 and was recently trading at over 80 dollars, an increase of 56 percent. Also heightening public interest, Q2 produced explosive price growth for Bitcoin BTC from 4,134 dollars per share to over 10,000, an increase of around 157 percent. Some analysts have pointed to the "stacking satoshis" trend. Public influencers on Twitter recommend using the Cash app to buy small fractional portions of Bitcoin called satoshis. This makes Bitcoin ownership available to average workers, greatly expanding participation in the Cash app. Also, the Bank of China website published an infographic describing Bitcoin, how to use it and explaining its high value.

What is Square Up To?

Twitter and Square executive Jack Dorsey has invested heavily in Lightning Labs, a Bitcoin developer currently working on a second-layer scalable networking solution for the Bitcoin system. He's been very visible about his support for Bitcoin from both a personal and a corporate perspective. Square established a cryptocurrency subsidiary called Square Crypto and hired Pinterest and Lyft investor Steve Lee to run it. Square Crypto is in the process of hiring developers and engineers to pursue Bitcoin development. Jack Dorsey has reiterated in interviews that he is convinced the eventual "native currency" of the internet will be Bitcoin. Steve Lee has been squashing rumors that Square is developing its own cryptocurrency, insisting Square Crypto will be focusing on Bitcoin. He made the observation that Bitcoin has by far the longest track record in blockchain currency, yet still has a lot of work to be done before it can truly go mainstream at the same scale as government currencies.

Where Does it Go From Here?

It's not clear how far Bitcoin can climb, but there are other factors besides value involved for mass acceptance of this currency. Exchanging value into other currencies is somewhat cumbersome, and losing a digital wallet means the money is gone forever. Besides these types of issues that will be ironed out, there is the question of what happens when inevitably, government regulation shows up? China already banned initial coin offerings (ICO) but continues to promote Bitcoin at the consumer level. The fact that the largest Bitcoin holdings on the planet are in China is an issue. What happens when western countries like the UK, USA and European powerhouses like Luxemborg and Switzerland decide to legislate consumer protections into the blockchain currency realm? No matter where things go from here, Bitcoin and the cryptocurrency industry have been a wild ride from technical, financial and social viewpoints until now. Based on the most recent history, Bitcoin and its impacts are going to be providing a lot of financial thrills for quite some time to come.
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