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Highlights
- Square Inc.’s bitcoin revenue and gross profit are down compared to last quarter.
- Jack Dorsey’s fintech firm reports US$1.8 billion in bitcoin revenue.
For NYSE-listed fintech company Square Inc., bitcoin revenue represents the total sale amount of bitcoin to its customers, and bitcoin costs refer to the total amount of bitcoin it purchases. The purchases are to facilitate customers’ access to Bitcoins.
Is bitcoin boosting Square Inc.’s revenue?
In Q3 2021, Square generated US$1.82 billion in bitcoin revenue, which is up 11% year on year. However, compared to the second quarter, Square’s bitcoin revenue and gross profit have decreased.
In Square Inc.’s third quarter, the share of bitcoin in gross profit was just 2%. Compared to the second quarter, bitcoin revenue and related gross profit have decreased on a quarter-to-quarter basis. The fall, as claimed by the company, was driven primarily by a relative stability in bitcoin prices, which affected trading activity compared to prior quarters.
Square explained that it had invested US$50 million in Bitcoin in Q4 2020, topping it up with an additional US$170 million in Q1 2021. In Q3 2021, however, the company recognised an impairment loss of US$6 million on its bitcoin investments.
While bitcoin sales in Q3 accounted for 47% of Square’s total revenue, it contributed very little to the bottom line. In its quarterly release, Square Inc. also warned that its bitcoin revenue and profit might fluctuate in future quarters. It expects these changes based on customer demand and market price changes in bitcoin.
Source: Pexels
What is Square Inc. looking for in future?
The company is working on other products and feature additions related to bitcoin- beyond just buying and selling the cryptocurrency. Square Inc. CEO Jack Dorsey, who also runs Twitter, is amongst prominent Bitcoin advocates globally – he tweets about the currency quite often. However, Square now has plans to allow buying other cryptocurrencies within its Cash App.
Also, last month Square Inc. expanded its Cash App offerings to teenagers. It has given the company access to around 20 million teens in the US alone. The company believes teens would represent a more significant portion of cryptocurrency spending in the future years. With this move, Square has taken steps to meet individuals much earlier in their financial journey and seeks to grow with them over time.
What’s more, Square Inc. shareholders recently approved issuing new shares for the US$29 billion purchase of Australian company- Afterpay Ltd (ASX:APT). The purchase underlines the growing popularity of the consumer credit market. The move marks Square Inc’s major stride in its Australian BNPL (but now, pay later) sector journey.
Bottom line
Jack Dorsey’s fintech company has reported disappointing third-quarter sales, held back by a drop in bitcoin-related revenue from its Cash App. As a result, its shares have plunged on the NYSE. Although bitcoin transactions have grown on Cash App tremendously over the past two years, bitcoin revenue numbers seem to be confusing investors.
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