Former Twitter CEO Jack Dorsey’s digital payments company Block Inc. saw its year-over-year (YoY) profits soar 29% to $1.47 billion in the second quarter, although its bitcoin business slumped due to lower customer demand and falling bitcoin (BTC) prices.
The financial services company primarily generates Bitcoin revenue by providing BTC trading services through its Cash App digital payment application.
Block Inc. noted that the company generated $1.79 billion in Bitcoin revenue during the quarter, down 34% year-on-year, while Bitcoin gross profit was just $41 million. dollars, suggesting that it could be an expensive business to provide Bitcoin services to its customers.
Block Inc. said Bitcoin’s decline in revenue was attributed to “wider uncertainty” in crypto assets, stating:
“The year-over-year decline in bitcoin revenue and gross profit was primarily due to lower consumer demand and the price of bitcoin, linked in part to broader uncertainty around crypto assets, which more than offset Bitcoin’s price volatility benefit during the quarter.
However, Block Inc. pointed out that the fall in BTC’s earnings did not reflect the overall performance of the company. He also noted that BTC earnings will likely fluctuate over time due to “changing customer demand or the market price of Bitcoin.”
The company also noted that it recognized a $36 million impairment 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 balance sheets and companies must report a loss when the price of the asset falls below its cost base, even if a gain or loss has been realized. through a sale in the given quarter.
The company noted that as of June 30, 2022, the fair value of its investment in Bitcoin was $160 million based on market prices.
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Investors, however, seem unimpressed with Block Inc.’s performance in the second quarter, as the company’s SQ stock fell 7.42% in after-hours trading to $83 in trading. time of writing.
Bloomberg suggested this was due to the company reporting lower-than-expected trading volume at $52.5 billion, as opposed to an estimated $53.47 billion.
Dorsey, the Bitcoin maxi enthusiast, has been relatively quiet about his digital gold plans 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 build decentralized web applications through decentralized DIDs and nodes, which will also have a monetary network built around BTC, not contract-backed tokenization. clever.
—jack (@jack) June 16, 2022