Square Customers Spent $2.7 Billion on BTC in Q2
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Digital payments company Square, led by Twitter founder and CEO Jack Dorsey, has revealed that users of its Cash App bought $2.72 billion worth of BTC (BTC) during Q2 2021.
“While BTC revenue was $2.72 billion in the second quarter of 2021, up approximately 3x year over year, BTC gross profit was only $55 million, or approximately 2% of BTC revenue,” Square stated in its shareholder letter published late yesterday.
The company’s BTC revenue essentially means the total amount of BTC its customers bought during the reporting period. Notably, despite selling roughly three times more BTC than in Q2 2020, Square’s gross profit amounted to $55 million—or roughly 2% of BTC revenue.
Our Q2 2021 earnings are now available. $SQ https://t.co/57ZXkssqBY
— Square IR (@SquareIR) August 1, 2021
This profit resulted from the spread between the total BTC sale amount to customers and the cost of BTC Square purchased to facilitate those sales. This is because when users buy BTC through Cash App, Square applies “a small margin to the market cost of BTC, which tends to be volatile and outside our control.”
“BTC revenue and gross profit benefited from year-over-year increases in the price of BTC and BTC actives, and growth in customer demand,” the firm noted.
However, Square’s Q2 BTC performance was notably offset by the crypto market’s collapse in mid-May, when the price of many cryptocurrencies was slashed by roughly 50% across the board. By comparison, the company reported a BTC gross profit of $75 million and a total BTC revenue of $3.51 billion in the first quarter of 2021.
May’s dip has also affected Square’s own BTC investments. The company previously bought $50 million and $170 million worth of BTC in late 2020 and early 2021, respectively. While Square considers BTC “an indefinite-lived intangible asset,” accounting rules required the firm to mark down its BTC investment by $45 million in Q2.
“As an indefinite-lived intangible asset, BTC is subject to impairment losses if the fair value of BTC decreases below the carrying value during the assessed period. In the second quarter, we recognized a BTC impairment loss of $45 million on our BTC investment,” Square explained.
Still, on June 30, the fair value of Square’s BTC investment reportedly amounted to $281 million, “which is $127 million greater than the carrying value of the investment.”
Notably, these figures won’t translate into any realized profits—or losses—until Square decides to sell its holdings.
Square scoops up fintech starlet
Alongside the latest letter to shareholders, Square also announced its plans to acquire Australian “buy now, pay later” platform Afterpay for $29 billion.
Afterpay + Square! https://t.co/4UVDOtyI8a
— jack (@jack) August 1, 2021
“Square and Afterpay have a shared purpose,” said Jack Dorsey, co-Founder and CEO of Square, in the announcement. “Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.”
The deal, which has an implied value of roughly $29 billion and is expected to be paid in Square’s stock, will be closed somewhere in Q1 2022.
