The CEO of Block, Jack Dorsey, has reported a 29% increase in its year-on-year profits to $1.47 billion during the second quarter. However, the Bitcoin business of the digital payments firm recorded a dip following declining demand and a plunge in Bitcoin prices.
Block reports $1.5B profits in Q2 2022
Block said the Bitcoin revenue during the second quarter came in at $1.79 billion, a 34% decline YoY. On the other hand, Bitcoin’s gross profits were only $41 million, suggesting that it would be costly to offer Bitcoin services to its customers.
Block mainly generates Bitcoin revenues by offering Bitcoin trading services through Cash App. The financial services company said that the decline in Bitcoin revenues was caused by the broad uncertainty in the digital asset market.
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The company said that the YoY fall in Bitcoin revenues and gross profit was primarily caused by the low demand and fall in Bitcoin prices because of the uncertainty in the cryptocurrency industry.
On the other hand, Block said that the slump in its Bitcoin business did not reflect the performance of the broader cryptocurrency market. The company added that Bitcoin profits would likely fluctuate over time as the business adjusts to the shift in customer demand and the volatility of Bitcoin’s price.
The company also said that it had reported a $36 million impairment loss on its Bitcoin holdings. However, this could be a loss on paper, as the company has likely not sold any Bitcoin.
In the US, the accounting standards mandate that cryptocurrencies be classified as intangible assets on financial reports. Companies have to report a loss after the price of the asset declines below the cost basis, despite the gain or loss being realized after a sale during the quarter.
Block also reported that as of June 30, 2022, the fair value of the company’s investment in Bitcoin was $160 million going by the current market prices. On the other hand, investors are not impressed with Block’s Q2 performance as the company’s stock dropped by 7.42%.
Block’s support for Bitcoin
Dorsey is a known Bitcoin supporter but has not been very vocal about Block’s plans for Bitcoin. Block said it would create a blockchain-based Web5 project for Bitcoin in June.
Web5 is a decentralized web platform that supports developers who want to launch a decentralized web app through DIDs and decentralized nodes. Block’s Web5 initiative will also involve a monetary network created around Bitcoin.
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