Jack Dorsey’s Mobile payment company Square is testing support for Bitcoin and may be entering the cryptocurrency markets soon.
The company is conducting a trial of the service that allows specific customers to buy and sell Bitcoin using the cash payment app. Moreover, users can now access their virtual funds from any ATM.
? Cash Cards now support ATM access! Just type in your Cash App PIN when you insert your card. pic.twitter.com/uoVglEP9CA
— Cash App (@CashApp) 16 November 2017
“We’re exploring how Square can make this experience faster and easier, and have rolled out this feature to a small number of Cash app customers,” a Square spokesperson said via email. “We believe cryptocurrency can greatly impact the ability of individuals to participate in the global financial system and we’re excited to learn more here.”
The test does not include sending or accepting of Bitcoin by individuals or businesses.
Shares of Square rose up to 5 percent on Wednesday as a Wall Street firm recommended the stock on this potential development. The stock closed up 2.3 percent at $40.66 per share.
“We believe it could place SQ in an early-mover position as a mainstream fin-tech company providing crypto-currency services,” Credit Suisse analysts Paul Condra and Mrinalini Bhutoria wrote on Wednesday. “SQ is also well positioned to enable crypto transactions at the physical point of sale.”
Coinbase, a leading U.S platform for buying and selling of Bitcoin having 12.5 million users, claims that it has exchanged $40 billion worth of cryptocurrency. According to Alistair Milne, co-founder and chief investment officer of Atlanta Digital Currency Fund, Coinbase has more than doubled its users since January.
The price of Bitcoin has been fluctuating the whole year leaping by more than seven times. Coindesk reported that the digital currency traded more than 9 percent higher on Wednesday, above $7,200, after recovering from a sharp plunge last weekend.
Other stocks have also been elevated this year following the news that the companies were working on Bitcoin-related programs. Overstock.com saw its shares surge up to 187 percent this year after investors noticed its three-year-long work related to Bitcoin’s blockchain technology.
Square is testing support for Bitcoin on a very small level that is focused on buying and selling of the cryptocurrency within the app only. “It’s nice, but I think the bigger thing is if you can eventually be able to pay with Square [point-of-sale terminals] with bitcoins,” Nomura Instinet analyst Dan Dolev told CNBC. “It’s a nice PR thing but it’s not a fundamental mover and shaker.”
the experience is instant and seamless. here is a video showing where it is in the app: pic.twitter.com/GMJulaQWVr
— Zach Miles (@zachmil_es) 15 November 2017
Dolev believes that the company is disrupting the payment industry and therefore, he has a buy rating with a target price of $45 on Square.
There are several other risks linked with the use of cryptocurrency that governments have watched cautiously.
“We believe the largest risk is regulation, which could limit its ability to provide the service or outright ban it. SQ is also exposed to liquidity and counterparty risk as it must source bitcoin for users either by pre-buying or using an exchange,” the Credit Suisse analysts said. “Despite these risks, the upside could be significant if cryptocurrencies become more mainstream. We believe PayPal (PYPL) is also well positioned to provide such services.”
PayPal with its Braintree payments platform for merchants has already experimented with proposing support for cryptocurrencies, however, it was adopted by a very few merchant and the transaction volume was considerably low. Amanda Miller, PayPal spokeswoman said in a statement, “If consumer demand increases for any new form of currency, we will consider support for those new payment methods as they become relevant to our customers over time.”
PayPal shares hold gains of 86% for the year, closing at 1.4% lower.