Square Q2 report: Bitcoin sales exceeded US$2.7 billion, a year-on-year increase of about 3 times

Summary:

Square, the digital payment company of Twitter CEO Jack Dorsey, reported that total Bitcoin revenue in the second quarter of 2021 was $2.72 billion.

At the same time, the company’s own BTC investment suffered a $45 million impairment loss.

Square, a digital payment company led by Twitter founder and CEO Jack Dorsey, revealed that users of its Cash App purchased $2.72 billion worth of Bitcoin in the second quarter of 2021.

“Bitcoin revenue in the second quarter of 2021 was US$2.72 billion, a year-on-year increase of approximately three times, but the gross profit of Bitcoin was only US$55 million, accounting for about 2% of Bitcoin revenue,” Square said in a shareholder letter issued recently .

The company’s bitcoin revenue essentially refers to the total value of bitcoins purchased by its customers during the reporting period. This profit comes from the difference between the total BTC sold to customers and the cost of BTC purchased by Square to facilitate these sales. This is because when users buy Bitcoin through the Cash App, Square applies a small portion of the profit to the “market cost of Bitcoin, which is often unstable and beyond our control.” Square also stated that due to customer demand or Changes in market prices, Bitcoin revenue and gross profit may fluctuate in the next few quarters.

“Bitcoin revenue and gross profit benefited from the year-on-year increase in Bitcoin prices and Bitcoin activity, as well as the growth of customer demand.” The company pointed out.

However, Square’s performance in the second quarter of Bitcoin was clearly offset by the crash of the crypto market in mid-May, when the prices of many cryptocurrencies were directly cut in half. In contrast, the company reported that in the first quarter of 2021, Bitcoin gross profit was 75 million U.S. dollars and total Bitcoin revenue was 3.51 billion U.S. dollars.

The fall in May also affected Square’s own Bitcoin investments. The company previously purchased USD 50 million and USD 170 million worth of BTC at the end of 2020 and early 2021, respectively. Although Square believes that Bitcoin is “an intangible asset with an indefinite period,” accounting rules require the company to write down its BTC investment by $45 million in the second quarter, which is an impairment loss of $45 million.

However, according to reports, as of June 30, the fair value of Square’s Bitcoin investment was US$281 million, which is “US$127 million higher than the book value of the investment.”

It is worth noting that these figures will not translate into any realized profits or losses before Square decides to sell its positions.

Square will acquire the Fintech “Rising Star” Afterpay

In addition to the latest letter to shareholders, Square also announced a plan to acquire Afterpay, an Australian “buy first, pay later” platform, for US$29 billion.

Square stated that the company has signed an agreement to implement the plan and will pay for all acquisitions in Square shares (the agreement allows Square to pay 1% of the total consideration in cash), calculated based on the closing price of Square’s common stock on July 30, the acquisition consideration For 29 billion U.S. dollars. The acquisition enables Square to further accelerate its strategic plans for the payment ecosystem, as the company is seeking to integrate Afterpay into its Seller and Cash App business units to implement “Buy First Pay Later” (BNPL) services. Note: BNPL transactions are also called installment loans, allowing customers to pay bills in small amounts within a fixed period of time. This is actively advocated by global financial companies such as PayPal, MasterCard, Klarna, and Citi. According to the announcement, this integration will enable small businesses to provide BNPL at checkout, which allows Afterpay users to manage their installment payments directly in the Cash App. This will mark a new milestone for Square in meeting consumers’ growing demand for getting rid of traditional credit.

As part of the transaction, Afterpay’s co-founders and senior executives will join Square and help lead Afterpay’s related merchant and consumer businesses in Square’s Seller and Cash App ecosystem. Square has agreed to a secondary listing on the Australian Securities Exchange (ASX) to allow Afterpay shareholders to choose to acquire Square shares from ASX or the NYSE. After the completion of the acquisition, Afterpay shareholders will collectively own 18.5% of Square, and the transaction is expected to be completed in the first quarter of 2022.

“Square and Afterpay share the same goals.” Square co-founder and CEO Jack Dorsey said in a statement. “Through cooperation, we can better connect our Cash App and Seller ecosystem to provide merchants and consumers with More attractive products and services allow them to regain control of the initiative.”

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/square-q2-report-bitcoin-sales-exceeded-us2-7-billion-a-year-on-year-increase-of-about-3-times/
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