Bitcoin has been a hot topic in the investment world lately, and it’s not hard to see why. The leading cryptocurrency has recently hit a record high and has grown by about 240% so far in 2020. Also, the institutional interest of hedge funds and corporations has risen to their highest level yet.
However, whether bitcoin has a bright future – either as a digital currency or as a store of value – remains to be seen. This makes bitcoin a very speculative asset to own. If you believe in the long-term use cases for bitcoin, another way to play would be to buy a stock that could make billions if bitcoin does well, but that’ll be fine if it doesn’t. Leader of Fintech Square (NYSE: SQ) is definitely one of them.
Square bitcoin’s operation is huge
Square could benefit from rising bitcoin prices or receive mainstream in four main ways:
- Square Currency App customers can buy, sell and hold bitcoin quickly and easily through its app. In the third quarter, more than $ 1.6 billion worth of bitcoin was bought or sold through the Cash App. Hedge fund Pantera Capital has estimated that Square now accounts for 40% of bitcoin volume in the US
- Square has an entire cryptocurrency division (Square Crypto) that builds and finances projects intended to help transform bitcoin into the world’s preferred currency.
- Square recently purchased $ 50 million of bitcoin as an investment to hold on its balance sheet. It did so when bitcoin was worth about half its current value. If some experts are correct and bitcoin rises to a six-figure price tag, this could certainly be the needle shifter for Square. Also, I wouldn’t be surprised at all if the company bought even more.
- Last but certainly not least, if bitcoin starts to gain traction as a payment method, Square could make it a payment option on its POS terminals, opening bitcoin payments to its network of millions of traders. PayPal (NASDAQ: PYPL) has already announced plans to do this. It would not surprise the Square to follow suit.
The rest of Square’s business should do well regardless of bitcoin’s performance
There is no denying that the bitcoin Square operation has been very successful. It could stand to benefit dramatically if the price of bitcoin continues to rise, or if the digital currency is widely gaining trader acceptance. The point is that Square doesn’t need those things to happen.
At its core, Square is still a payment processing business. It has grown dramatically over its decade-long history. More than $ 100 billion of annual payment volume now flows through Square’s hardware. And with card payments expected to become a $ 45 trillion global market by 2023, this would be just the beginning.
In addition, Square has built a nice business lending operation in the form of Capital Square, which has originated billions of dollars in small business loans. It does this at a much lower credit risk than its peers, as its loans are based on merchant sales. Square received approval for its own banking charter in 2020, and the company plans to launch its own industrial bank next year.
Finally, there’s the Cash App, which offers so much more than bitcoin. The app provides person-to-person payments, the ability to buy and sell stocks, and debit cards. Cash App’s user base has increased fourfold over the past three years. More than 30 million people are actively using the platform, which is still in the relatively early stage of monetization.
In a nutshell, Square’s growth story has been impressive so far, but it could still have more room to grow. That is the case with or without bitcoin.
The bottom line
In the corporate world, few people believe in the long-term potential of bitcoin more than Square’s CEO, Jack Dorsey. There’s no denying that Square’s non-crypto business growth was impressive, to say the least. If you believe in the long-term potential of bitcoin as an asset, but don’t necessarily want your investment results to be solely dependent on bitcoin, Square could be a smart way to go.