Square Inc. Buys Further $170 Million Worth of Bitcoin

The San Fransisco-based payments company, Square Inc, raised the bets on bitcoin by investing a further 3,318 bitcoins worth $170 million to add to its expanding position and Chief Executive Jack Dorsey promised on Tuesday to “double down” on the payment firm’s commitment to the world’s biggest cryptocurrency.

“The Internet needs a native currency, and we believe bitcoin is it,” the longtime bitcoin enthusiast and chief executive of social media firm Twitter Inc said. Square bought 3,318 bitcoins in the fourth quarter, adding to the mainstream acceptance of the digital currency that has been winning support from several big investors.

“By us owning bitcoin, our incentives are aligned with skin in the game,” Dorsey said on a post-earnings conference call with analysts. Square Inc has been involved with the currency for years and its Cash App, a payments service, has allowed users to trade it since 2018. The app had three million active bitcoin customers in 2020, with a million new users buying the currency for the first time in January, the company said.

In October last year, Square Inc bought about 4,709 bitcoins at an aggregate price of $50 million. Since then, the coin’s price has scaled record highs, at the time, the purchase amounted to about 1% of the company’s cash and cash equivalents, with Tesla Inc investing $1.5 billion and Bank of NY Mellon Corp saying it will set up a unit to help its clients deal in digital assets.

For comparison, Tesla’s $1.5 billion purchase of bitcoin amounted to about 8% of Tesla’s cash equivalents when it was announced earlier in February. That position had already swelled by about $1 billion when bitcoin surged past $58,000 to hit a new all-time high before the cryptocurrency collapsed this week back down to about $48,000. This weekend, Tesla CEO Elon Musk tweeted that the price of bitcoin seemed, “high.”

Business intelligence software company MicroStrategy was the first publicly-traded company to add bitcoin to its balance sheet last year. Its CEO Michael Saylor told Yahoo Finance earlier this month that other businesses were likely to follow Tesla and Square is adding bitcoin to its cash holdings. He made his prediction shortly after holding a virtual conference with about 1,000 business leaders and just before his company filed to raise more than $500 million to purchase more bitcoin. Saylor was quick to take to Twitter to celebrate Jack Dorsey leading Square to double down on bitcoin in a Tuesday tweet.

Square shares fell by about 5% in after-hours trading after reporting mixed results. Bitcoin was little changed after Square’s announcement, hovering around $48,000, so in its latest purchase, Square paid more than $51,200 per bitcoin, according to Reuters calculations. However, the spot price of the currency on Tuesday crashed more than 13% to below $47,000 amid a broader market downturn. Shares of the company fell about 5% after the bell on Tuesday, extending losses booked during the session.

Square’s revenue in the quarter more than doubled to $3.16 billion, which the company said was helped by bitcoin purchases on Cash App. Square’s gross profit on bitcoin trading rose 13 times in the fourth quarter, but it was still just 2% of its revenue from the cryptocurrency. Its bitcoin holdings are now worth about 5% of its $4.4 billion cash pile. The company posted adjusted earnings of 32 cents per share, beating market expectations of 24 cents.