Mizuho Securities analyst Dan Dolev says payments giants Square and PayPal are ready to take advantage of BTC’s wild price movements even if Bitcoin falls off the abyss.
Square is lucrative as long as the bitcoin price is volatile
In a new CNBC interview, Dolev explains that Square’s earnings have traditionally increased even in the Bitcoin bearish zone.
We did some work. We looked back to 2017, and what we found is that Square’s revenue continued to rise even when Bitcoin wasn’t actually rising. There is currently a rally since December and even November. So it is easy to think that Bitcoin will increase to $ 100,000. But historically, even in times of decline, the gross profit from Bitcoin is increasing.
And the reason for this is two times. First, there are more users using or trading Bitcoin on the Cash App. And second, the number of transactions per user is increasing. So wherever Bitcoin goes, Square will benefit from it.
PayPal also wins
Mizuho analyst points out that users holding rather than trading Bitcoin could be bad for Square.
It has to do with the increased engagement due to Bitcoin volatility. I think as Bitcoin remains so volatile, it actually increases engagement. So if BTC stays at a certain price and does not move, that would not be good for almost everyone else who offers Bitcoin trading, not just Square.
Dolev adds that the Bitcoin volatility affects PayPal in the same way. PayPal began allowing US users to buy and sell Bitcoins in November 2020, while Square launched its Bitcoin buying and selling service in January 2018.
We see the same trends with PayPal. The only difference between PayPal and Square is that PayPal’s offering has just started in November. What we saw in November is that around 20% of the user base started trading two weeks after the door. So I imagine this number is much bigger now.