Square has announced that it has bought more bitcoin by investing $170 million.
This is what can be read in the official note of the results of the fourth quarter and full-year 2020 of the company, which had already announced in October that it had invested 50 million to purchase 4,709 BTC.
That purchase was made at an average price of about $10,600, so to date that investment has already returned more than 350%, in just four and a half months. In fact, those 4,709 BTC bought with $50 million now have a value of $235 million, with a capital gain of $185 million.
The most recent investment, however, resulted in the purchase of a further 3,318 BTC, at an average price of around $51,200, generating a capital loss of 2.3% to date.
In total, Square now owns 8,027 BTC, worth a total of about $400 million, against an investment of $220 million.
These bitcoin now represent about 5% of the company’s entire cash holdings, including cash equivalents and marketable securities as of December 31st, 2020.
Why did Square buy more bitcoin?
The company states:
“Aligned with the company’s purpose, Square believes that cryptocurrency is an instrument of economic empowerment, providing a way for individuals to participate in a global monetary system and secure their own financial future. The investment is part of Square’s ongoing commitment to bitcoin, and the company plans to assess its aggregate investment in bitcoin relative to its other investments on an ongoing basis”.
So in the case of Square, a company founded and run by Jack Dorsey, this is not just a financial investment to try and reduce the risk of depreciating cash reserves in the event of inflation, but also a way to support the Bitcoin ecosystem.
Indeed, while the 5% investment is even lower than Tesla‘s 8%, the purchase price of $51,200 is rather optimistic, given that this is still a much higher price level than Tesla’s estimated $33,000. However, since Square had already invested in October with a large gain, the risk of losing out was largely covered by the large capital gains already realized.
Finally, it is important to emphasize that these are not speculative investments, i.e. with short time horizons, and their purpose is not to resell bitcoin as quickly as possible, but to hold them over the long term as a form of possible protection in particular against the inflationary risks of the US dollar.
This is all the more evident not only because Square did not sell the BTC it bought in October, despite a 350% capital gain, but also because it bought again, at a much higher price.