The introduction of Bitcoin trading took many Square users by surprise. A strong second quarter of 2018 confirmed the company made the right call. At the same time, overall profit from this venture is marginal at best. It may not become a very profitable business for the company in the long run.
Square Scores a Small Profit
There is a big difference between revenue and profits. For companies, the higher the overall revenue, the better their chance of scoring a profit. For Square, the launch of Bitcoin trading has generated a relatively solid revenue figure in Q2 2018. Close to $37m worth of Bitcoin has been traded through this mobile application. Unfortunately, it has not resulted in any real profits for the company just yet.
Offering Bitcoin trading through the Square Cash App costs a lot of money. The company makes no profit per trade, as they do not charge fees for doing so. Even so, the firm secured a very small profit from this addition, which is a positive sign. Bitcoin trading will not contribute to the company’s overall bottom line, but that is to be expected. Allowing users to trade Bitcoin was never designed to be a new revenue stream right away.
Square is intent on driving functionality for its mobile app first and foremost. Bitcoin trading seems to play a big role in this process, despite its very low-profit margin. The firm will maintain a spread in Bitcoin holdings to cover any sudden volatile price changes. Given the current price swings affecting Bitcoin, the interest in cryptocurrency is not diminishing in spectacular fashion.
The Number Crunching
According to figures released by Square, Bitcoin trading generated $420,000 in profit. This is not spectacular, although it is not disastrous either. Overall, the firm has seen a net 48% increase in net revenue. Bitcoin trading plays its part in this regard. Depending on how cryptocurrency prices evolve, it may become even more popular among Cash App users.
Bringing more functionality to this established financial services app remains the top priority. Bitcoin trading opens a new revenue stream for Square, albeit only a marginal one. The company has not announced plans to support additional cryptocurrencies at this point. Cryptocurrency is about much more than just Bitcoin, after all.
Square has made a very interesting decision regarding their strategy. Initially a credit card processor, they branched out to hardware, P2P trading, small business lending, and cryptocurrencies. It also explains why company shares have soared in value. Over the past year, shares have seen a 140% increase in value. Cryptocurrency trading may not affect the stock price too much, but it is a feature that people enjoy talking about.
Images courtesy of ShutterStock, Square