We all know that Bitcoin fly like a rocket last year and the growth of this popular cryptocurrency is phenomenal
No one is surprised that Square CEO Jack Dorsey is a big believer in Bitcoin. The CEO of Square discussed Bitcoin's potential as the currency of the internet in a recent earnings call in February. To be aligned with that notion, Square has acquired Bitcoin aggressively over the past year.
Then Square is a great investment for investors who want exposure to Bitcoin without actually buying it directly. Bitcoin investors can benefit from Square's strong business by diversifying their crypto portfolios. Here's How.
Cash App engagement drives by Bitcoin
As Square's peer-to-peer payments platform, Cash App, launched in 2013 as a mobile app, it has evolved into an integrated financial management package that gives consumers even more options for managing their money.
Square has added Bitcoin purchasing and selling since 2017 as well as launching the Square Cash Card and enabling direct deposit for Cash App consumers. Credit Karma Tax was acquired by Square in November 2020, enabling the company to offer even greater financial capabilities to its customers
A single feature that all of these products have in common is that they are designed to further enhance engagement with friends and family through the development of Cash Apps not limited to peer-to-peer payments. Cash App's strategy is working -- its monthly active users have increased and its gross profit has risen robustly.
It appears that Square has been increasing revenue per user faster than their total monthly active users. This means that Bitcoin plays a major role in increasing Square's revenue per user.
Additionally, Cash App users use other products (such as Square Cash Cards, direct deposits) more frequently. As a result, 3 million Cash App users bought or sold bitcoin last year. This means they provide a higher level of engagement, and higher levels of engagement generate more profit and revenue.
Square has another side to its business. While the Cash App ecosystem is geared toward consumers, its seller ecosystem takes care of the merchant side of the digital payments market.
Seller ecosystems are driven by digitization.
Over the last decade, digital payment methods have become more prevalent due to the convenience and increase in e-commerce. The number of cashless businesses in Australia, Canada, the United States, and the United Kingdom more than doubled in the last year alone, according to a report published by Square.
The shift from cash to digital payment methods benefits Square in two ways: First, Square offers merchants software and hardware solutions for accepting payments at the point of sale.
Second, Square's developer platform helps those who do not possess Square's platform to integrate Square's checkout options into their website or mobile app. In either case, Square charges a processing fee based on the gross payment volume.
Recently, Square has reported a steady increase in the number of GPV processed through its platform.
A huge market opportunity
The market opportunity is estimated at $160 billion. Square's management considers there are $60 billion in potential opportunities from Square Cash and $100 billion in potential opportunities from the Square Seller ecosystem. Based on that metric, Square produced $9.5 billion in revenue last year, which was around 6 percent of its total addressable market. This implies there is still plenty of room for growth.
Additionally, Square can take advantage of both the consumer and merchant sides of the digital payments market by coexisting with these two businesses.
Square seems like a smart long-term investment whether you have Bitcoin or not, as e-commerce and digital payments will keep growing in the coming years.
What are your views?
Would you buy a square stock?
Let me know in the comments.