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On August 2, Square released its Q2 financial report showing that its Bitcoin holdings suffered an impairment loss of $45 million. The company attributed this to the more than 50% pullback in the crypto asset market in May and June.
As a U.S. listed company, Square currently holds 8,027 BTC, worth approximately $320 million. These bitcoins were purchased twice by the company in October last year and February this year.
Although Bitcoin brought impairment losses to Square, the mobile payment company earned $2.72 billion from providing Bitcoin services, with a gross profit of $55 million, accounting for 4.8% of the total gross profit of $1.14 billion in Q2. The financial report shows that Bitcoin contributed 200% year-on-year growth to Square in the second quarter.
Square's ability to make money from Bitcoin is largely due to its CEO Jack Dorsey, who is also the CEO of Twitter. This programmer-turned-CEO is a fan of Bitcoin and crypto assets, and he sees these new financial forms as a means to transform the future world.
The day before announcing its new quarterly financial report, Square announced plans to acquire Australian installment payment service platform Afterpay for $29 billion, and intends to integrate the platform's "buy now, pay later" feature into Square's flagship product Cash App. This means that users in Australia, Europe, North America and other countries covered by Afterpay will become potential Bitcoin customers of Cash App. Bitcoin brings $546 million in gross profit to Cash App In February this year, Square purchased 3,318 BTC for $170 million, expanding its Bitcoin holdings from 4,709 in October last year to 8,027. However, the market conditions of the crypto asset market in May and June caused impairment losses to Square's Bitcoin holdings. Its Q2 financial report disclosed that the impairment loss caused by Bitcoin reached $45 million, resulting in a 22.3% drop in its investment income and profits on Bitcoin.
Despite this, the mobile payment giant's Q2 gross profit still increased by 91% year-on-year to US$1.14 billion; its flagship product Cash App had a gross profit of US$546 million, a year-on-year increase of 94%.
Square's Q2 financial performance is worth noting that the Bitcoin purchased by Square was impaired, but the Bitcoin services provided by Cash App brought it $2.72 billion in revenue and $55 million in gross profit, accounting for 4.8% of the total gross profit.
Cash App, also known as the American version of Alipay, is a peer-to-peer payment software owned by Square. Initially, it mainly served small merchants and enterprises, and has linked 70 million active users and millions of sellers worldwide. In early 2018, Cash App added the function of buying Bitcoin with one click.
Remember, that was during the last bull run of Bitcoin. The increase in Cash App has led to a 100% annual growth in Bitcoin sales through the software. In Q1 2020, the software sales generated $306.1 million in BTC transactions, which is 10 times the amount in Q1 2018, and gross profit reached $7 million. The gross profit of BTC sales increased by 90% compared to Q4 2019. Today, the gross profit of Bitcoin sales has reached $55 million.
Some media have calculated that based on the price of Bitcoin of around US$10,000 in 2020, the total amount of Bitcoin sold through Cash App was about 30,000. Cash App sold at least 18% of the total Bitcoin mining in the first quarter of last year.
As early as November 2019, cryptocurrency analyst Rhythm predicted that Square's mobile payment app Cash App would purchase 8% of the new supply of Bitcoin every quarter. After the Bitcoin block reward is halved, if the company continues to purchase at the same rate without an increase in Bitcoin prices, the company's Bitcoin purchase rate will account for 16% of the total new Bitcoins per quarter.
Now, the amount of Bitcoin sold through Cash App is likely to increase significantly.
The day before Square released its Q2 quarterly earnings report, it announced that it had agreed to acquire the issued shares of Australia-based installment payment platform Afterpay. The implied value of the transaction is approximately US$29 billion and the transaction is expected to be completed in the first quarter of 2022.
The Afterpay platform features buy now, pay later (BNPL) and is currently available in Australia, the United States, Canada, New Zealand, as well as the United Kingdom, France, Italy and Spain. As of June 30, 2021, Afterpay serves more than 16 million consumers and nearly 100,000 merchants worldwide, including major retailers in key verticals such as fashion, home, beauty, sporting goods, etc.
Square believes that buy now, pay later offers an attractive opportunity as consumer preferences are shifting away from traditional credit, especially among younger consumers, merchants continue to demand new methods, and omnichannel commerce is growing globally. Square plans to integrate Afterpay into its existing seller and Cash App business units, enabling even the smallest merchants to offer BNPL at checkout, enabling Afterpay consumers to manage their installments directly in Cash App, and enabling Cash App customers to discover merchant and BNPL offers directly in the app.
Perhaps, Bitcoin will also be able to be purchased in installments due to the appearance of the Afterpay model in Cash App. Whether from the perspective of purchase method or the incremental user scale of 1+1, Square's acquisition will increase the potential purchasing power of Bitcoin.
Square has a wide range of Bitcoin layout, and its CEO is a strong backer. From purchasing and holding Bitcoin to embedding Bitcoin purchasing services into its products, Square is certainly regarded as the "pioneer of Cryptocurrency" among traditional companies. The mobile payment company's interest in Bitcoin is definitely inseparable from its CEO Jack Dorsey, whose other identity is the CEO of Twitter.
Even if you are not an old hand in the cryptocurrency circle, you must have heard the news in July this year: Twitter CEO Jack Dorsey said in the second quarter earnings call that Bitcoin will become an "important part" of the company's future because he sees opportunities to integrate cryptocurrencies into existing Twitter products and services, including advertising, subscriptions and other new features such as Twitter Tip Jar (paid tweets) and Super Follows (special attention).
Prior to these remarks, Jack Dorsey had tweeted several times in one day that Square would integrate Seller (its development tool service provider), Cash App and Tidal (streaming media) to create a new business - focusing on building an open developer platform with the sole goal of making it easy for developers to create non-custodial, permissionless and decentralized financial services. This business is called TBD and focuses on Bitcoin.
It is speculated that Jack Dorsey will experiment with DeFi on Square around Bitcoin.
Jack Dorsey, CEO of Square and Twitter The CEO seems to be integrating Bitcoin into all his businesses. Why is Jack Dorsey so enthusiastic about Bitcoin and blockchain products?
This is somewhat related to his geek identity. Jack Dorsey dropped out of New York University after transferring from Missouri University of Science and Technology. He did not have a smooth career as a "worker". Eventually, in 2008, he and Biz Stone (Biz Stone) and Evan Williams (Evan Williams) hit it off and co-founded Twitter.
Jack Dorsey, born in 1976, has witnessed and experienced the growth and transformation of the American information age. As a child, he was always immersed in various maps because he suffered from language barriers. In addition to studying maps and observing the vehicles passing through the city, his most precious gift was an IBM computer given by his father. He also taught himself programming and dreamed of moving all the life scenes mapped in the map into computer programs.
More than 40 years have passed, and human life is indeed inseparable from computers and the Internet. Clothing, food, housing, and transportation all rely on the Internet supported by computer hardware. The Internet has even changed the way people socialize. But in Jack Dorsey's view, in the past few decades, only currency has not really been born from the Internet.
In Twitter's second quarter earnings call, Jack Dorsey called Bitcoin the best choice for a native currency for the Internet, and if the Internet had a native currency, a global currency, we would be able to quickly reach everyone on the planet with products like special attention, advertising, subscriptions, Tip Jars (paid tweets), and enter the fast lane of development, rather than expanding into markets one by one. He explained.
Jack Dorsey believes that there will be a lot of other business innovations besides cryptocurrency, especially when we think more about expanding decentralized social media and providing more economic incentives for it. Therefore, I think it is very important for Twitter and its shareholders to continue to pay attention to this area and actively invest in it.
Judging from Jack Dorsey’s recent remarks, Square and Twitter will both become experimental fields for the adoption of Bitcoin. One is a giant-level payment tool, and the other is the absolute king in the social field. Both tracks are closely related to human’s current life. When Bitcoin is embedded in them, who will popularize whom? |
