Block Inc., the digital payments company of former Twitter CEO Jack Dorsey, saw profit rise 29% YoY to $1.47 billion in the second quarter, though its Bitcoin business slumped due to declining customer demand and a drop in Bitcoin (BTC) prices.
The financial services company primarily generates Bitcoin revenue by providing BTC trading services through its Cash App digital payments app.
Block Inc. noted that the business generated $1.79 billion in Bitcoin revenue in the quarter, down 34% from a year earlier, while gross Bitcoin profit was just $41 million, suggesting it may be a breakout company. high cost to provide Bitcoin services to its customers.
Block Inc. said that the drop in Bitcoin revenue was attributed to “wider uncertainty” in crypto assets, stating:
“The year-over-year decline in Bitcoin revenue and gross earnings was primarily driven by a decline in consumer demand and the price of bitcoin, related in part to broader uncertainty surrounding crypto assets, which more than offset the benefit of price volatility. of Bitcoin during the quarter.”
However, Block Inc. stressed that the drop in BTC earnings does not reflect the broader performance of the business. He also noted that BTC earnings 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 recognized a $36 million impairment loss on its BTC holdings, however this is likely only a paper loss.
Under US accounting procedures, cryptocurrencies are classified as an intangible asset on balance sheets and companies must report a loss when the price of the asset falls below its cost basis, even if a profit or loss has been made. a loss through a sale during the given quarter.
The company noted that as of June 30, 2022, the fair value of its Bitcoin investment is $160 million based on market prices.
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However, investors seem unimpressed with Block Inc.’s performance in the second quarter, as the SQ of the company’s shares fell 7.42% in after-hours trading to settle at $83 in the time of writing this article.
Bloomberg suggested this was because the company reported lower-than-expected transaction volume of $52.5 billion, compared to an estimated $53.47 billion.
Dorsey, the Bitcoin maxi fervent, has been relatively quiet about his plans for digital gold since announcing in June that Block Inc. was bypassing the Web3 model to build the Bitcoin blockchain-focused Web5 project.
Web5 is essentially a decentralized web platform, or DWP, that allows developers to build decentralized web applications through DIDs and decentralized nodes, which will also have a currency network built around BTC, and not tokenization backed by smart contracts.
— jack (@jack) June 16, 2022