Bitcoin investment impairment loss of $20 million, Square temporarily gives up adding Bitcoin positions

Amrita Ahuja, chief investment officer of payment company Square, said in an interview with Financial News that the company has no plans to buy more Bitcoin: "At present, we have no plans to make any further purchases, nor do we have any plans to reassess the company's situation from a financial perspective."

Square is a payment service provider led by Twitter CEO Jack Dorsey. Square allows users to use credit cards by swiping them on a Square device through their mobile phones or manually entering details. Square Ltd. was founded in 2009 and launched its first application service in 2010, later renamed "Cash APP". It currently provides services in the United States, Canada, Australia and Japan. Square spent $50 million to buy Bitcoin in October last year. At that time, the price of Bitcoin was only between $10,000 and $15,000. Foreign media reported that Square bought a total of 4,709 Bitcoins at that time. On February 23, Square announced in its fourth quarter 2020 earnings conference that it had purchased 3,318 Bitcoins for $170 million. The total value of Bitcoin on the company's balance sheet has reached $394 million.

Ahuja said the company is currently spending about 5% of its cash on hand on Bitcoin.

Ahuja's comments on Bitcoin came after Tesla CEO Musk closed the Bitcoin payment channel. According to Bitpush terminal data, the price of Bitcoin once fell below the $48,000 mark, falling to a low of $47,727.15 in 24 hours.

In Square’s latest quarterly earnings report, released on May 6, the company said it reported a $20 million impairment loss on its Bitcoin investment, even though the fair value of Bitcoin had risen to $472 million based on market prices.

"We are evaluating, as we have always done, and we will be customer-led, and if we see new developments in bitcoin products or other cryptocurrency products, we will make further evaluations when appropriate," Ahuja said.

Square recently published a joint report with Ark Invest, which stated that Bitcoin could be the key to solving the clean energy problem. The company also launched a $10 million initiative in December to invest in companies that promote the use of clean energy for Bitcoin supply chain development.

“There’s a broader supply chain question about how renewable energy and clean energy can become a bigger part of the whole blockchain and a bigger part of the whole mining and trading network… That’s something we need to address,” he said.

Square’s first-quarter revenue surged 266% year-over-year in March to $5.06 billion, thanks to a big boost in Bitcoin revenue from Cash App, which offers cryptocurrency trading to consumers. Square reported $3.5 billion in Bitcoin revenue, 11 times more than the year before.

Square also could prove volatile given that it makes only a small profit on each Bitcoin transaction, according to the report: The company’s gross Bitcoin profit was just $75 million, or about 2% of its cryptocurrency revenue.