Square’s Cash App deals in bitcoin operationally but a $50 million investment from the publicly traded firm’s cash reserves has grown significantly since being announced last fall.
Along with MicroStrategy, Square was an early entrant in the corporate bitcoin sweepstakes. Such treasury management plays inspired Elon Musk’s Tesla to invest $1.5 billion in bitcoin earlier this month.
Still, ahead of Square’s latest earnings report on Tuesday, analysts aren’t as enthused about the fraction of Square’s treasury (roughly 1% of the firm’s total assets when announced) that is crypto-denominated.
“There will be a bigger focus on the bitcoin purchases of their customer base and Cash App,” said Seaport Global analyst Chris Brendler. “It should be a big number in the fourth quarter.”
Analyst consensus estimates that Square will record $1.5 billion in bitcoin revenue, but those estimates could be off because of analysts who don’t pay attention to the bitcoin markets, Brendler said. His own estimate is $2.2 billion, a $600 million increase from Square’s third quarter bitcoin transaction revenue.
In the third quarter of 2020, Square reported $1.63 billion in bitcoin revenue, which resulted in $32 million of gross profit from the bitcoin product in that quarter.