Hip-hop, bitcoin and stimulus checks: How Square’s Cash App became a $40B business

Square’s Cash App could be worth as much as $40B. The story of how it got here includes hip-hop, bitcoin and stimulus checks.


September 7, 2020

Since hitting a pandemic low in March, the fintech firm Square has seen its share price nearly quadruple.

The catalyst behind this explosive growth: Cash App, the company’s digital wallet which facilitates payments and money transfers.

A research firm told the Wall Street Journal the app is now worth up to $40B — almost two-thirds of Square’s current $65B market value. The valuation is supported by 30m+ monthly active users, many of whom joined to receive stimulus checks.

Bitcoin and hip-hop helped fuel early growth

Dan Runcie, who covers the business of hip-hop for Trapital, writes that 200+ hip-hop artists have named-dropped Cash App in their tracks over the years.

These artists often also run cash giveaways on Twitter, asking fans to tag their $cashtag accounts. Recently, Cardi B and Megan Thee Stallion gave 2k random Tweeters $500 apiece — a total of $1m — via the app.

But there’s another key to the app’s success: its uptake boomed when it allowed Bitcoin trading during the peak of crypto mania in 2017.

When the pandemic hit, many thought Square was in trouble

For a time, the firm’s business was heavily reliant on brick and mortar retailers, which use its ubiquitous card-swipe payment dongle.

While retailer payment volume reportedly decreased by 15% YoY in Q2 of 2020, Square benefited from an influx of money (including stimulus checks) into the Cash App. Excluding Bitcoin sales, the app’s revenue hit $325m in the quarter, up more than 2x YoY per WSJ.

Square charges a hefty (some say usurous) 1.5% fee to transfer Cash App funds to a bank account — but many users are eating the cost.

What’s next? (Other than sweet cash giveaways) 

The one-time nature of the government stimulus leaves many skeptical of Cash App’s current growth rate. And relative to the broader stock market, Square is already expensive on a price-to-earnings ratio.

The long term bull case for Square is outlined by Ark Invest, which notes that the market currently assigns a much lower value to publicly-traded digital wallet accounts (<$200/user) than it does to traditional retail bank accounts (>$3k/user).

This gap could narrow as Cash App adds more users and expands its banking services.

And if it does, expect Square shareholders to get their Cardi B on.

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