Square buys $50 million in bitcoin, says cryptocurrency 'aligns with company's purpose'
- Square said Thursday it bought 4,709 bitcoins, worth approximately $50 million.
- This represents about 1% of Square's total assets as of the end of the second quarter of 2020.
- "Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company's purpose," the company said in a release.
Payment company Square is buying a large block of bitcoin, an unusual use of corporate cash.
Square said Thursday it bought 4,709 bitcoins, worth approximately $50 million. This represents about 1% of Square's total assets as of the end of the second quarter of 2020.
"Square believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company's purpose," the company said in a release.
The price of the digital currency has risen to around $10,724 from $7,100 in January, according to industry site CoinDesk, in a year roiled with the coronavirus pandemic. The digital currency did drop below $5,000 during the recession in March.
"We believe that bitcoin has the potential to be a more ubiquitous currency in the future," said Square's Chief Financial Officer, Amrita Ahuja, in a release. "As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey."
Square founder and CEO, Jack Dorsey, is a advocate of the digital currency, saying in 2018 the cryptocurrency will eventually become the world's "single currency." However the founder of Twitter said it could take a long as a decade.
Using it or another cryptocurrency as a global currency would lower the barrier for Dorsey's payments company to enter new markets, he said in 2018.
Bitcoin has been marked by volatility in its 11-year existence. That and its high transaction costs have largely kept it from being used as an everyday payment method. Instead, it's seen by some backers as a store of value, or "digital gold." That global hedge use-case seemed unlikely in 2018 after it ended the year down more than 73%; however, some attribute its uptick in 2019 and 2020 to a hedge against the then U.S. China trade war and now coronavirus pandemic.
Square has enabled it clients to buy bitcoin on its Cash App since 2018.
Outspoken technology investor Chamath Palihapitiya told CNBC on Tuesday that Social Capital uses bitcoin as a 1% hedge in its portfolio.
"This is an instrument we use as a hedge," Palihapitiya said. "I don't think this is something that you trade and the more people obsess and focus, in my opinion at least, on what the price action is, the more that it will confound you, the more it will frustrate you. You buy it, you hold it, you put it away and you hope that you never need it," he added.
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