Square’s Dorsey Backs Bitcoin Over Alternatives
By Jonathan Shapiro
Jack Dorsey says Square is dedicated to making bitcoin “the native currency of the internet”, and the company he co-founded has no intention to expand its offerings to other cryptocurrencies.
The day after Square’s shareholders approved the plan to acquire Afterpay, Mr Dorsey told analysts he was working on several initiatives that were all tied to bitcoin, such as hardware wallets to store bitcoin, and functions to allow consumers to mine for bitcoin.
“We believe this focus is important. We believe it’s right. And a lot of it has to do with the resilience, the fundamentals, the principles that bitcoin offers,” he told analysts.
Mr Dorsey said a new business unit called TBD provided developers with a platform to come up with new ideas that use decentralised finance using bitcoin. A related white paper would be released on November 19, he said.
While Square has pinned its future on bitcoin, other providers are building offerings that will be more inclusive of other cryptocurrencies.
The 110-year-old Commonwealth Bank last week confirmed The Australian Financial Review’s report that it would allow users to buy and sell 10 different digital coins inside its banking app. These include Ethereum, Litecoin and bitcoin cash.
Square generates revenue from bitcoin when users of its Cash App buy bitcoin to be transferred to their account. That bitcoin is bought from brokers or from other dealers, while Square charges a small margin.
In the six months to June 30, 2020, Square generated $6.235 billion of bitcoin, revenue, almost two-thirds of its total sales for the period.
That revenue surge lifted Square’s share price as it negotiated to buy Afterpay, while its target’s share price was pressured by news that Apple was entering the installments payments market.
Stock sold off
However, a slowdown in bitcoin transactions as a result of a more stable price weighed on Square’s third-quarter revenue, which missed analysts expectations, prompting a sell-off in the stock.
Overall, reported revenue of $US3.84 billion were lower than analyst forecasts of $4.87 billion. Shares in Afterpay, which will convert to a set ratio of Square shares upon completion of the merger, slid 5.5 per cent on Friday to $117.50.
Square meanwhile slid 4 per cent to $US237.40 in Friday’s US trading session. The stock is 35 per cent higher for the year to date but is about 18 per cent lower than its peak of $US289.23 reached in the week of the Afterpay deal.
Revenue from bitcoin was $US1.81 billion during the third quarter, while gross profit was $US42 million, or just 2 per cent of bitcoin revenue. Excluding bitcoin, Square reported net revenue of $US2.05 billion.
The company said the fair value of its investment in bitcoin was $US352 million based on market observable prices.
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Original Source: https://www.afr.com/companies/financial-services/square-s-dorsey-backs-bitcoin-over-alternatives-20211105-p596fd