Digital payments firm Square published its first-quarter earnings report this week, providing insight into how much revenue the company has raised from its recently-launched bitcoin trading platform.
The company first rolled out bitcoin trading to a limited number of its Cash App users last year, and in January it unlocked the feature for the remainder of its user base.
Square — which acts as a broker between its users and cryptocurrency exchanges — does not charge commission, though it does profit from the spread between buy and sell prices.
The company reports that total bitcoin revenue for the first quarter was $34 million, which amounts to nearly five percent of the firm’s $669 million in total net revenue. However, the report notes that this figure is calculated from the total sale amount of bitcoin to customers and does not account for the costs the firm incurred when purchasing the coins on their customers’ behalf.
When adjusted to account for those costs, Square reports that it earned just $200,000 from bitcoin trading during the quarter — or less than 0.07 percent of the firm’s $304 million in adjusted revenue.
Those figures in themselves might seem to justify Citron Research’s recent claim that Square’s are overvalued because Wall Street is “drunk on bitcoin nonsense.” The firm, which makes money by betting against overvalued stocks, has opened a short position on Square and has predicted its share price could fall by 30 percent.
However, the rollout occurred during a bearish period in the cryptocurrency market, which has seen trading volume decline across the board and many casual investors exit the ecosystem.
Once the bitcoin price enters another bull cycle, it is likely that fair-weather bitcoin investors will return, and the Cash App — which already has a gigantic user base — will likely prove to be an attractive way for them to gain exposure to bitcoin.
Moreover, many investors remain bullish that Square’s embrace of bitcoin could pay longer-term dividends, particularly if the firm begins processing bitcoin payments through its eponymous digital payments platform or opens a cryptocurrency brokerage platform, as at least one analyst has predicted.
Notably, Square CEO Jack Dorsey has called bitcoin a “transformational technology” and has also said that he believes it could be the world’s leading currency within a decade.