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How Bitcoin Venture Could Boost Square’s Top Line

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Square supporting Bitcoin buying and selling

Square (SQ) is allowing a small number of users of its Square Cash app to trade Bitcoin on a trial basis, according to a recent CNBC report. Square Cash is a P2P (peer-to-peer) payment service akin to PayPal’s (PYPL) Venmo or Apple’s (AAPL) upcoming Apple Cash. Square recently introduced an accompanying debit card that supports ATM withdrawals for Square Cash users.

Square’s move to support Bitcoin purchases on its network got many on Wall Street talking, with Credit Suisse analysts saying the move could add tens of millions of dollars to the company’s top line over the next few years. Bitcoin is a popular cryptocurrency that has recently risen to trade above $8,000 against the US dollar (UUP).

$30-million boost to top line

In a note to a client cited by CNBC and Business Insider, analyst Paul Condra of Credit Suisse stated that supporting Bitcoin trade could boost Square’s revenues by $30 million in two years. This would only be possible if Square’s Bitcoin service attracts 10 million users, who transact $200 per year on average, and the company charges a fee of 1.5% per transaction.

Coinbase, a leading US (SPY) Bitcoin exchange, is said to charge a transaction fee of 3.99%. It’s believed that Square is currently not charging a transaction fee in the ongoing limited trial of Bitcoin support.

Transactions are Square’s largest source of revenues

Square generates the bulk of its revenues from transaction-based services. In 3Q17, transaction revenues totaled $510 million, representing 87.2% of the company’s total revenues that quarter.

Credit Suisse raised its price target on Square to $37 from $31, following the report of its Bitcoin trade support.

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