It was a monster quarter for Square’s bitcoin business.
“Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year, respectively,” the publicly traded payments firm wrote in its Q3 investor letter published Thursday at the market close.
Square went one step further in Q3, however, officially adding bitcoin to its balance sheet rather than simply making it available to customers.
"We announced two strategic investments," Dorsey said during the earnings call. "The second was a $50 million investment in bitcoin, which we believe will be the native currency of the internet, and help people thrive around the world and the economy."
In Q1 2020, Square brought in $306 million in revenue from selling bitcoin in the Cash App. It brought in $875 million in revenue in Q2. However, the margin on bitcoin sales is always quite small for Square. In late 2019, the company changed the way it supported its bitcoin business, shifting to a fee-based model, in order to make costs to buyers more transparent.
Sales of bitcoin in Cash App earn Square a little under 2% in profit, which is a very thin margin compared to Square's overall business, which runs at much higher margins. For example, the company overall made $597 million on $1.92 billion in revenue in the second quarter, or roughly a 31% profit.
Overall, the Cash App also delivers stronger profits. In the second quarter, it brought in $1.2 billion worth of revenue and $281 million in gross profit, according to its Q2 shareholder letter.
Cash app's profit in the third quarter hit $385 million.
Square's bitcoin research arm, Square Crypto, recently announced a design grant meant to help make crypto wallets more user-friendly.
Read the full investor letter below:
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.