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Payment company Square purchases a large block of Bitcoin, an unusual use of corporate money.
Square announced Thursday that it had bought 4,709 bitcoins worth around $ 50 million. That equates to roughly 1% of Square's total assets as of the end of Q2 2020.
"Square believes that cryptocurrency is a tool of economic empowerment and offers the world an opportunity to participate in a global monetary system that aligns with the company's purpose," the company said in a press release.
The price of the digital currency has soared from $ 7,100 in January to around $ 10,724 in a year ravaged by the coronavirus pandemic, according to industry site CoinDesk. The digital currency fell below $ 5,000 during the March recession.
"We believe Bitcoin has the potential to be a more ubiquitous currency in the future," said Amrita Ahuja, Square's chief financial officer, in a press release. "As acceptance increases, we want to learn and participate in a disciplined manner. For a company that develops products based on a broader future, this investment is a step on this path."
Square founder and CEO Jack Dorsey is a digital currency advocate and says cryptocurrency will eventually become the world's "single currency" in 2018. However, the founder of Twitter said it could be up to a decade.
Using this or any other cryptocurrency as a global currency would lower the barrier for Dorsey's payment company to enter new markets, he said in 2018.
Bitcoin has been characterized by volatility in its eleven years of existence. This and its high transaction costs have largely deterred it from being used as an everyday payment method. Instead, it is viewed by some supporters as a store of value, or "digital gold". This global hedge use case seemed unlikely in 2018 after falling more than 73% at year-end. However, some attribute the increase in 2019 and 2020 to a hedge against the trade war between the US and China at the time and today's coronavirus pandemic.
Square has been enabling its customers to purchase Bitcoin through its Cash app since 2018.
Outstanding tech investor Chamath Palihapitiya told CNBC on Tuesday that Social Capital is using Bitcoin as a 1% hedge in its portfolio.
"This is a tool that we use as a hedge," said Palihapitiya. “I don't think this is something you trade and the more people obsessed and, at least in my opinion, focused on what the price action is, the more it will confuse you, the more it will frustrate you buy it, you hold it, you put it away and you hope you never need it, "he added.
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