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Does the Bitcoin Surge Make Square Inc a Screaming Buy?

SQ stock is a low-risk buy

Square, Inc. stock SQ stock

Source: Chris Harrison via Flickr (Modified)

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A few weeks ago, in mid-November, Square Inc (NYSE:SQ) announced that its Cash App would launch a new bitcoin pilot. The app is mainly used to send money from one person to another. However, in the pilot program it would allow select users to buy and sell bitcoin. This added fuel to the fire, helping to drive SQ stock price toward $50.

While the pilot does not allow users to send each other bitcoin, the capability to buy and sell the cryptocurrency is likely a big attraction given the widespread coverage bitcoin is receiving. On the evening of Dec. 5, CEO Jack Dorsey — who’s also the CEO of Twitter Inc (NYSE:TWTR) — confirmed that the pilot would be expanding.

So will a larger pilot program drive up SQ stock price? On Wednesday morning it did, at least temporarily. Shares were up almost 4%, but ultimately closed flat on the session. What does it mean going forward?

Bitcoin and Square

I think the bigger question is, what is bitcoin’s impact on Square? We’ve already looked at the technology that bitcoin is built on — that being blockchain — and how investors can get involved via International Business Machines, Corp. (NYSE:IBM). Is Square now the de facto way to play the so-called “brokerage” side of it?

I wouldn’t go that far, at least not yet. In fact, we don’t know how exactly Square will make money from the buying and selling. Would it collect the difference between the spread? That’s one assumption, but it’s still too early to know for sure. Heck, we don’t even know if Square will stick with its bitcoin option.

Given that the pilot program is expanding is a sign that things are going well, though. Expanding the plan, eventually allowing users to send and receive bitcoin and the ability to pay merchants with it would go a long way. I suspect that’s a ways down the road, but still, investors like to see growth potentials like this.

While many may think of PayPal Holdings Inc (NASDAQ:PYPL) and its Venmo property as the leaders in app-based money-sending platforms, think again. On the Apple Inc. (NASDAQ:AAPL) App Store, Square’s Cash App is No. 20 on the list of top free apps. Venmo comes in at No. 37 and PayPal is up at No. 43.

Square’s Cash App is popular, and a full-blown bitcoin rollout would make it even more so. If Square can find a way to make money off these transactions, it could have a lot of potential.

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