Square's crypto business could generate $1 billion in profit if bitcoin soars to $100,000, Wall Street analyst says

• Square's crypto business could generate gross profits of $1 billion if bitcoin soars to $100,000, according to a Thursday note from Mizuho Securities.
• But even if bitcoin falls from its current record levels, user engagement with Square's Cash App to buy and sell bitcoin should continue to boost profits for Square.
• Mizuho reiterated its Buy rating on Square and $300 price target, representing potential upside of 32% from Wednesday's close.
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The record surge in the price of bitcoin is "a boon" for Square's revenue and gross profits as it leads to increased user engagement among its Cash App users that buy and sell the cryptocurrency, Mizuho Securities said in a note on Thursday.

If bitcoin manages to jump to the $100,000 level by the end of 2021, Square's gross profit tied to the Cash App's crypto unit "could drive a 9x increase in Bitcoin GP [gross profit] to slightly over $1 billion," the note said. Square generated an estimated $110 million in gross profits tied to its bitcoin business last year, according to Mizuho.

Bitcoin traded above $39,000 for the first time ever on Thursday, and the crypto market as a whole is now worth more than $1 trillion.

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But if the price of bitcoin starts to trend lower, Square is still set to benefit from an increase in profits tied to the trading of bitcoin within the Cash App, Mizuho said, pointing to past instances as precedent.

From the third quarter of 2019 to the first quarter of 2020, the average price of bitcoin fell from $10,400 to $8,300, but overall gross profits for Square's crypto unit tripled from $2.1 million to $6.7 million, Mizuho said.

Even if bitcoin trades slightly down and ends 2021 at $35,000, Mizuho estimates Square could see its bitcoin gross profits quadruple to $400 million.

Mizuho reiterated its Buy rating on Square and $300 price target, representing potential upside of 32% from Wednesday's close.

Read more: A crypto CEO breaks down why he would not be surprised to see bitcoin and ethereum rise at least 100% in 2021 - and says the current sell-offs are a 'very natural and healthy thing'