Former Twitter CEO Jack Dorsey’s digital payments firm Block Inc. saw year-over-year (YoY) profit rise 29% to $1.47 billion in Q2, even as its Bitcoin business fell due to reduced customer demand and a drop in Bitcoin (BTC ) prices.
The financial services firm primarily generates Bitcoin revenue by offering BTC trading services via its digital payment application Cash App.
Block Inc. noted that the business generated $1.79 billion of Bitcoin revenue in the quarter, down 34% year-over-year, while Bitcoin’s gross profit was just $41 million, suggesting that offering Bitcoin services could be a high-cost venture to their customers.
Block Inc. said the drop in Bitcoin revenue was attributed to “broader uncertainty”[ads1]; in cryptoassets, saying:
“The year-over-year decline in Bitcoin revenue and gross profit was primarily driven by a decline in consumer demand and the price of bitcoin, partially related to greater uncertainty surrounding cryptoassets, which more than offset the benefit of volatility in the price of Bitcoin during the quarter.”
However, Block Inc. stressed that the BTC profit decline is not reflective of the broader performance of the business. It also noted that BTC profits are likely to fluctuate over time as a result of “changes in customer demand or the market price of Bitcoin.”
The company also noted that it recorded a $36 million loss on its BTC holdings, but this is likely just a loss on paper.
Under US accounting procedures, crypto is classified as an intangible asset on the balance sheet, and companies must report a loss when the price of the asset falls below its cost basis, even if a gain or loss has been realized through a sale during the given quarter.
The company noted that as of June 30, 2022, the fair value of the investment in Bitcoin is $160 million based on market prices.
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However, investors seem unimpressed with Block Inc.’s Q2 results, as the company’s stock SQ has fallen 7.42% in after-hours trading to stand at $83 at the time of writing.
Bloomberg suggested this was because the company reported lower-than-expected transaction volume of $52.5 billion, as opposed to the forecast of $53.47 billion.
Bitcoin from the block
Dorsey, the fervent Bitcoin maxi, has been relatively quiet about his plans for digital gold since announcing that Block Inc. was bypassing the Web3 model to build the Bitcoin blockchain-focused Web5 project in June.
Web5 is essentially a decentralized web platform, or DWP, that allows developers to create decentralized web apps via DIDs and decentralized nodes, which will also have a monetary network built around BTC, and not smart contract-backed tokenization.
— jack (@jack) 16 June 2022