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Here's How Much Square Is Relying on Bitcoin

By Nicholas Rossolillo – May 13, 2021 at 7:58AM

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Headlines aside, Bitcoin is worth less than it appears on the Square platform -- for now.

Financial technology outfit Square (SQ -0.84%) got 2021 started on the right foot. More than a year removed from the start of the pandemic, revenue from its seller ecosystem (primarily digital payments and related services for merchants) rallied 19% year over year as in-person business transactions slowly started to normalize again. Cash App also had a good first three months of the new year with revenue up a whopping 139% from a year ago as consumers flocked to the digital wallet. 

But revenue overall at Square was $5.06 billion in Q1 2021, up an incredible 266% year over year. The reason? Bitcoin (BTC -0.49%) transacted through Cash App. Nevertheless, Square is by no means reliant on the cryptocurrency price boom. On the contrary, it's barely a money-making affair -- but one generating lots of buzz and helping its more profitable digital money management and payments business continue its expansion. 

A Bitcoin illustrated on a coin sitting on top of a computer chip.

Image source: Getty Images.

Exactly what Bitcoin is worth to Square

Much like how things played out last year, Bitcoin's skyrocketing price driven by consumer interest in owning a piece of the digital currency was a boon for Square's headline numbers. Of the $5.06 billion in revenue generated in the first quarter, $3.51 billion was attributable to Bitcoin -- a more than 1,000% increase from Q1 2020 when Bitcoin revenue was just $306 million. Cash App users buying and selling the digital currency was only part of the story. As of this writing, the value of Bitcoin itself is up 720% since the start of 2020.  

And yet in spite of the epic rise, Bitcoin isn't what's paying the bills at Square (total net income was $39 million, and free cash flow was actually negative $132 million this last quarter). Rather, it's the Square seller ecosystem and Cash App (excluding Bitcoin) that's really moving the needle and generating progress for Square's bottom line. In fact, when factoring for the $19.9 million in Bitcoin impairment costs realized, the cryptocurrency results were hardly meaningful in the last quarter.  


Q1 2021

Q1 2020

YOY Change

Seller ecosystem revenue

$1.02 billion

$853 million


Seller ecosystem gross profit

$468 million

$356 million


Cash App (ex-Bitcoin) revenue

$529 million

$222 million


Cash App (ex-Bitcoin) gross profit

$420 million

$176 million


Bitcoin revenue

$3.51 billion

$306 million


Bitcoin gross profit

$75 million

$6.67 million


Data source: Square. YOY = year over year.

What's the deal with the crypto craze?

Stated another way, Square's revenue was up 44% in Q1 to $1.55 billion when excluding the $3.51 billion in Bitcoin revenue. Besides generating massive buzz in its top-line financial metric, why bother with Bitcoin at all?  

It's all about the bigger picture for Square, which is generating lots of new user accounts by offering crypto trading through Cash App. Once in the ecosystem, Cash App (and the closely integrated merchant ecosystem through Square) can monetize some of those users with its much more profitable digital payments and digital wallet services. Thus, cheap marketing with quick payoff is one way to think of Bitcoin at Square.  

Longer term, if Bitcoin acceptance as a form of payment among businesses does continue to increase, Square will have the infrastructure and user base already built out to make it a top ecosystem from which merchants and consumers can interact using the digital asset. Bitcoin thus gives Square another arrow in its quiver as it rapidly grows its network of users. 

When backing out Bitcoin results, Square sales tally up to $10.7 billion over the last trailing-12-month stretch -- valuing the stock at just over nine times trailing-12-month sales. By comparison, larger peer PayPal and digital wallet competitor Venmo currently trade for about 12.5 times trailing-12-month revenue. Bitcoin or not, Square stock looks like a long-term value right now.

Nicholas Rossolillo owns shares of PayPal Holdings and Square. His cliens may own shares of the companies and cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Bitcoin, PayPal Holdings, and Square. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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