Jack Dorsey’s Square reports Q1 bitcoin revenue grew 1,000% to $3.5 billion – and is the 3rd-largest corporate holder of the cryptocurrency

Jack Dorsey
Jack Dorsey.

  • Square’s bitcoin sales volume surged 1,000% year-on-year in the first-quarter, the company said.
  • Overall revenue was $5.06 billion, handily beating analyst expectations of $3.37 billion.
  • Jack Dorsey said Square views bitcoin as “the internet’s potential to have a native currency.”
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Square reported first-quarter earnings that beat analyst estimates on Thursday, powered by surging demand for bitcoin.

Quarterly revenue from bitcoin grew eleven times to $3.5 billion, from $306 million a year ago, the company said in a shareholder letter. But gross profit from these transactions were only $75 million, or about 2% of bitcoin revenue, making up Square’s fee generation from sales.

Square profits from transaction fees that customers are charged with when they buy or sell cryptocurrencies on its platform, which is smaller in comparison to revenue generated.

cash app
Square’s Cash App.

Overall quarterly sales for the digital-payments firm came in at $5.06 billion, beating analyst forecasts for $3.37 billion. Net income for the quarter was $39 million, or 8 cents per share. Gross profit more than doubled by rising 79% year-on-year to $964 million.

Screenshot 2021 05 07 at 08.41.40

The company announced a boosted bitcoin stake in February, having invested an additional $170 million. That accounted for about 5% of its total cash, cash equivalents, and marketable securities.

With that investment, Square bought an additional 3,318 bitcoin at an average price of $51,235.68. It had bought 4,709 bitcoin for $50 million in October 2020, currently worth about $263 million.

Square now holds 8,027 bitcoin, according to bitcointreasuries.org, worth about $448 million. That makes it the third-largest publicly-traded holder of the digital asset after MicroStrategy and Tesla.

“We see bitcoin as the internet’s potential to have a native currency, and we want to further that as much as we can.” CEO Jack Dorsey said during an earnings call. “Our focus is enabling bitcoin to be the native currency. It removes a bunch of friction for our business, and we believe fully that it creates more opportunities for economic empowerment around the world.”

Square counted more than 10 million monthly active users of its Cash Card in the quarter. About seven million active users, on average, used its Cash Cards every week in March.

Square’s shares rose 2.5% to $229.55 per share in pre-market trading on Friday.

Bitcoin was last trading 1% lower on Friday, at around $55,800 per coin, but is up 89% so far this year.

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The best time to buy bitcoin was ‘yesterday’ and allocating 4% of a portfolio is a good bet, a chief strategist at CoinShares says

Bitcoin 1
  • The best time to buy bitcoin was “yesterday” and the second best is “today,” a chief strategist told CNBC.
  • Investors should consider a 4% allocation of bitcoin to their portfolios, Meltem Demirors said.
  • “A 4% allocation to bitcoin balances the reward, as well as the risk of drawdowns.”
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The ideal time to invest in bitcoin has already slipped by, according to Meltem Demirors, chief strategy officer at digital asset investment firm CoinShares.

“The best time to invest in bitcoin was yesterday – the second best time to allocate is today,” she told CNBC’s “Squawk Box Asia” on Monday.

Demirors believes regulatory concerns around cryptocurrencies, which have been around for a long time, are unlikely to thwart investor plans to allocate bitcoin to their portfolios. “At this point, our belief is: Bitcoin is not a question of if, but when,” Demirors said.

The size of the Bitcoin market recently shot past $1 trillion as it hit a record high of $58,354. The digital token was trading lower around $52,976 on Monday, but it has still gained 92% year-to-date. A flurry of adoption by major Wall Street players and large companies such as Tesla, Bank of New York Mellon, and Mastercard has added to its epic rally this year. 

That said, Demirors said investors should not allocate significant portions of bitcoin to their balance sheets.

“Our research has found that in a traditional 60-40 portfolio, a 4% allocation to bitcoin balances the reward as well as the risk of drawdowns,” she said. The 60-40 portfolio mix is considered the simplest strategy for those investors who want diversified streams of income. It involves placing 60% in equities and 40% in fixed income.

Will Hobbs, an investment chief at Barclays, is more skeptical about bitcoin. He told Insider the digital asset sounds “increasingly cultist” and a rise in interest rates could dent the world’s most popular cryptocurrency. Hobbs said Barclays considers two factors in asset allocation – positive expected return and diversification appeal. 

“Now it may well be over time that bitcoin satisfies both of those. But at the moment it’s very hard to say,” he said.

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