• The company on Thursday announced it purchased 4,709 bitcoins
  • The stock price of Square and Bitcoin responded positively to the news
  • Squares co-founder Jack Dorsey is a known advocate of Bitcoin

Payments company Square on Thursday announced it purchased 4,709 bitcoins, worth $50 million. The move sparked a rally in Square's stock price, pushing it to its all-time high, closing at $183.5 on Thursday.

Square's announcement comes almost two months after business intelligence firm MicroStrategy made a similar investment.

In a whitepaper published alongside its announcement, the financial company detailed how it executed the purchase. According to the whitepaper, the company purchased the bitcoins on the over-the-counter market. It made the purchase through the same liquidity provider that was part of Cash App's Bitcoin trading product. This is to maintain privacy and price slippage during the execution. Also, purchasing over-the-counter would prevent price reactions that could happen if it was done through a cryptocurrency exchange.

"We negotiated a spread on top of a public bitcoin index and executed trades using a Time-Weighted Average Price (TWAP) over a predetermined 24-hour period with low expected price volatility and high market liquidity," the company said in the whitepaper.

Square also said it has a crime insurance policy to protect its funds against internal or external theft.

Bitcoin's price reacted to this positive news, opening at $10,668 and closing at $10,925 Thursday – its' highest in the last 20 days. It is also a breakout price from the mini-consolidation that happened inside the $10,500-$10,800 level that Bitcoin has been trading in the last 13 days.

Square co-founder Jack Dorsey is a known advocate of Bitcoin. On his profile on Twitter, a company he also leads, Dorsey prominently displays the #bitcoin hashtag. In the past, Dorsey said Bitcoin will become the world's single currency although it could take a decade for that, CNBC reported.

Square's Cash App launched a Bitcoin purchasing functionality in 2018, allowing its users to buy and sell bitcoin through the app. This move proved profitable for Dorsey's company. By August 2020, Square reported significant Bitcoin revenue, a 600% increase in profit on its Bitcoin service alone in Q2.

Jack Dorsey
Twitter CEO Jack Dorsey. Getty