Square announced that it bought more bitcoin with a new investment worth $ 170 million.
That’s what it says in official note results of the fourth quarter of 2020 of the company, which had already announced in October that it had invested 50 million in the purchase of 4,709 BTC.
This purchase was made at an average price of around US $ 10,600, so far this investment has yielded more than 350% in just four and a half months. In fact, those 4,709 BTC bought for $ 50 million are now worth $ 235 million, with a capital gain of $ 185 million.
The most recent investment, however, resulted in the purchase of an additional 3,318 BTC, at an average price of around US $ 51,200, generating a 2.3% capital loss to date.
In total, Square now has 8,027 BTC, worth a total of about $ 400 million, against an investment of $ 220 million.
These bitcoins now represent about 5% of all the company’s cash, including cash equivalents and marketable securities as of December 31, 2020.
Why buy more bitcoin?
The company states:
“In line 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 guarantee their own financial future. The investment is part of Square’s ongoing commitment to bitcoin, and the company plans to evaluate its aggregate investment in bitcoin against its other investments on an ongoing basis. ”
Therefore, in the case of Square, a company founded and directed by Jack Dorsey, this is not only a financial investment to try to reduce the risk of depreciation of cash reserves in the event of inflation, but also a way to support the Bitcoin ecosystem.
In fact, although the 5% investment is still less than Tesla’s 8%, the purchase price of $ 51,200 is quite optimistic, given that it is still a much higher price level than the estimated $ Tesla 33,000. However, as Square had already invested in October with a large gain, the risk of losing was largely covered by the large capital gains already made.
Finally, it is important to note that these are not speculative investments, that is, with short time horizons, and their objective is not to resell bitcoins as quickly as possible, but to keep them in the long term as a way of possible protection in particular inflationary risks of the US dollar.
This is even more evident not only because Square did not sell the BTC it bought in October, despite a capital gain of 350%, but also because it bought again, at a much higher price.