Payment-processing solutions company Square (NYSE:SQ) is testing support for bitcoin through its Square Cash app. Although this is currently just a small-scale test, it could have major long-term effects on Square, as well as bitcoin. The news sent Square's stock up about 2% to a new all-time high, and it also gave the price of bitcoin a nice boost.

A Square spokesperson said in a statement:

We're always listening to our customers and we've found that they are interested in using the Cash app to buy bitcoin. We're exploring how Square can make this experience faster and easier, and have rolled out this feature to a small number of Cash app customers. We believe cryptocurrency can greatly impact the ability of individuals to participate in the global financial system and we're excited to learn more here.

In other words, you can't simply download the Square Cash app and start buying bitcoin today.

A person using the Square app on their mobile phone.

The Square Cash app. Image source: Square.

What could this mean for bitcoin?

I don't think Square's adoption of bitcoin will result in the price of bitcoin going up or down. Bitcoin is an extremely volatile currency, and there are many reasons for the price fluctuations -- not just what platforms are adopting bitcoin. Besides, after bitcoin's incredible run, I have to believe that some level of mainstream adoption is priced in at this point.

I do think that Square's entry into the bitcoin space could lead to a higher level of mainstream adoption of the cryptocurrency.

More specifically, one of the major obstacles to bitcoin adoption has been its ease of use, or lack thereof. While it is certainly easier to buy bitcoin than it was four or five years ago, it's still a fairly complicated process. Consumers generally need to create an account with a bitcoin exchange, link their bank account or credit card, and often must wait for a few days for their funds to clear before the bitcoin appears in their account or pay massive credit card processing fees.

If Square successfully makes buying bitcoin as simple as pressing a button on an already easy-to-use app, it could effectively remove one obstacle to widespread public adoption of bitcoin. While exactly how widespread bitcoin adoption becomes is anyone's guess, it's fair to say that it certainly wouldn't hurt if buying bitcoin is as easy as transferring money between two linked checking accounts.

If Square's entry into bitcoin proves to be successful, the move could also open up bitcoin acceptance to the ever-growing number of merchants who use Square's payment processing solutions. That would help remove another major obstacle to adoption: Bitcoin isn't yet widely accepted for the purchase of goods and services.

If this were to happen across Square's vast network of small businesses, it could end up being the real game changer for bitcoin. However, at this point, the goal of the test is simply to allow Square Cash users to buy and sell bitcoin, not to make payments or purchases with it.

What could it mean for Square?

Most obviously, this could be an opportunity to add yet another revenue stream to Square's ecosystem, and adds even more long-term growth potential. Bitcoin buying and selling has exploded -- the value of all existing bitcoin has reached $113 billion and leading U.S. bitcoin platform Coinbase has exchanged $40 billion worth of bitcoin.

Another potential effect is that it could increase the popularity of the Square Cash app, which has recently surpassed Venmo to become the most-downloaded financial app on both the Apple and Android platforms.

Longer term, if bitcoin ends up being accepted through Square's payment-processing hardware, it could add income in the form of payment-processing fees. And because bitcoin's processing costs are minimal when compared with credit card companies like Visa, MasterCard, or American Express, this could potentially become a higher-margin form of payment processing for Square.

A new way to invest in bitcoin?

Perhaps most significantly, this development could make Square a good way to invest in the future success of bitcoin without buying the volatile digital currency itself. Square's stock price has roughly tripled this year, but if the company continues to disrupt the payments industry like it has been, this year's performance could be just the beginning.

Matthew Frankel owns shares of American Express and Square. The Motley Fool owns shares of and recommends Mastercard and Visa. The Motley Fool owns shares of Square. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.