Bitcoin Constitutes Over Half of Square’s Q2 Revenue

Reading Time: 2 minutes
  • In Q2 2021, Square generated $4.68 billion in net revenue, with $2.72 billion of that coming from Bitcoin.
  • Bitcoin delivered $55 million in gross profit for Square.
  • Square has recognized a Bitcoin impairment loss of $45 million.

Jack Dorsey’s financial services and digital payments firm Square has announced its financial results for the second quarter of 2021. The company has delivered outstanding growth in general, with a major portion of that growth coming from Bitcoin.

In Q2 2021, Square raked in a whopping $4.68 billion in net revenue, up by around 143% on a year-over-year basis. Square’s payment solution Cash App narrated more than 70% of the net revenue, delivering $3.33 billion.

What is notable about the earnings report is the influential role of Bitcoin in the company’s net revenue. Bitcoin revenue totaled $2.72 billion, which is more than half of Square’s net revenue. Bitcoin revenue also made up over 80% of Cash App’s net revenue.

On the subject of profit, Square garnered $1.14 billion in gross profit, which is up by around 91% YOY. Cash App delivered $546 million in gross profit, with Bitcoin accounting for $55 million of that profit. The report noted that Bitcoin earnings and gross profit have nearly tripled on a year-over-year basis.

However, the company’s Bitcoin revenue and gross profit have dropped on a quarter-over-quarter (QOQ) basis. The report mentioned that this can be mainly attributed to the lack of trading activity during the second quarter of this year. In Q2 2021, Bitcoin’s daily trading volume dropped from $16 billion to below $3 billion following the May crash.

The report also mentioned that volatility can significantly impact Cash App’s Bitcoin revenue and gross profit in the future. “In future quarters, bitcoin revenue and gross profit may fluctuate as a result of changes in customer demand or the market price of bitcoin, particularly as we lap strong growth rates on a year-over-year basis in the second half of 2020,” the report noted.

Square Recognized $45 million in Bitcoin Impairment Loss

Square purchased $50 million worth of Bitcoin in Q4 2020, and $170 million worth of Bitcoin in the first quarter of the year. At the time, the company paid $51,235.70 per coin. Since Bitcoin is considered an “intangible asset,” and its price has dropped way below $51k, Square had to recognize a Bitcoin impairment loss.

According to Generally Accepted Accounting Principles (GAAP), Bitcoin is accepted as an “intangible asset.” This means that a firm should report the value of its Bitcoin holdings as an impairment loss once the prices plunge to below the level they have acquired it, even if the prices recover quickly.

Therefore, Square has written down a Bitcoin impairment loss of $45 million in the earnings report. Previously, Tesla has also reported a $23 million Bitcoin impairment in its Q2 earnings report.