Jack Dorsey’s Block Reports $36M Impairment Loss on Bitcoin Holdings

Block Inc., the digital payments company co-founded by Jack Dorsey, reported a $36 million Bitcoin impairment losses in the second quarter, which the company attributed to “broader uncertainty surrounding cryptoassets.”

In a shareholder letter Thursday, Block said the Cash app — an online payment service that allows cryptocurrency purchases — generated $1.79 billion in Bitcoin revenue and $41 million in Bitcoin gross profit, down 34% and 24% year-over-year, respectively to year.

“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 quarter,” the company said in its earnings report for Q2 2022.

On a three-year compound annual growth rate (CAGR) basis, Block’s Bitcoin revenue and gross profit grew by 143% and 168%, respectively.

Dorsey, a vocal Bitcoin supporter, has made the world’s largest cryptocurrency a key priority at the company. Block, formerly known as Square, spent $220 million to buy up 8,027 Bitcoin to maintain its balance.

According to Block, as of June 30, 2022, the fair value of the company’s investment in Bitcoin was $160 million based on observable market prices.

The leading cryptocurrency has lost more than 51% in value since the start of the year, and is currently trading at $23,190, up nearly 1% in the past 24 hours, per CoinMarketCap.

The company is also involved in other aspects of Bitcoin technology, including plans to develop a Bitcoin hardware wallet and create a dedicated team to build mining rigs.

Block’s total revenue down 6%

Block’s gross profit for the second quarter was $1.47 billion, with Cash App accounting for approximately 48% of this amount. Currently, the payment service has 47 million active accounts, up from 45 million in the first quarter.

The firm’s total revenue fell about 6% to $4.4 billion in the quarter, slightly more than Wall Street’s expectations of $4.3 billion. Excluding Bitcoin revenue, total net revenue came to $2.62 billion, up 34% year over year, according to the report.

“While gross profit trends have been healthy through July, we recognize the importance of exercising discipline with our investments as we enter a period of potential uncertainty,” Block CFO Amrita Ahuja said in an earnings conference call.

Ahuja further stated that the company had reduced the pace of hiring and will reduce its planned investments for 2022 by $250 million.

Shares in Block fell nearly 6% in extended trading on Thursday, and are down 6.63% in the premarket at the time of writing.