Block, led by CEO Jack Dorsey, has announced plans to allocate 10% of profits from its Bitcoin products towards buying more of the cryptocurrency each month. The company was one of the first public companies to add Bitcoin to its holdings in 2020, with an initial investment of $220 million. Its Bitcoin holdings have since surged 160% to reach $573 million by the end of Q1 in 2024. Dorsey stated that he believes Bitcoin is the best candidate to become the native currency of the internet and emphasized the need for an open protocol for money that is not controlled by any single entity.
In the first quarter of 2024, Block’s gross profit increased by 22% year-over-year to $2.09 billion, while net income quadrupled to $472 million, or 74 cents per share. The company also raised its adjusted EBITDA forecast for the second quarter to $690 million and its annual adjusted core earnings guidance to at least $2.76 billion. These strong financial results, along with an optimistic outlook, caused the company’s stock price to increase by 5% to close at $70.30 on Thursday. Despite this positive performance, Block currently allocates less than 3% of its resources to Bitcoin projects, according to Dorsey.
Cash App, Block’s mobile payment platform, continues to be a profit driver for the company. In the first quarter, Cash App generated $1.26 billion in gross profit, representing a 25% increase year-over-year. However, Block is facing potential regulatory issues as federal prosecutors investigate alleged compliance issues at Square and Cash App. Concerns include the company potentially failing to collect sufficient customer information, transactions from sanctioned countries, and enabling crypto transactions for terrorist groups. A former employee has claimed that thousands of transactions went unreported, posing a significant challenge for Block in the near future.
Block has recently unveiled an advanced Bitcoin mining system, transitioning from designing individual chips to developing a complete mining system. The company has finalized the design of a cutting-edge 3 nanometer Bitcoin mining chip and is partnering with a major semiconductor foundry to bring it to life. This move demonstrates Block’s commitment to expanding its involvement in the Bitcoin mining sector and further establishing itself as a key player in the cryptocurrency industry. By investing in Bitcoin mining and allocating profits towards acquiring more Bitcoin, Block is positioning itself to capitalize on the growing adoption and value of the cryptocurrency.
Overall, Block’s strategic focus on Bitcoin and its investments in advanced mining systems reflect its confidence in the potential of cryptocurrency to revolutionize the financial landscape. With a strong financial performance in the first quarter of 2024 and raised guidance for future earnings, the company is well-positioned to continue its growth trajectory. However, regulatory challenges and compliance issues could present obstacles for Block in the near future. Despite these challenges, Block’s commitment to Bitcoin and innovation in the cryptocurrency sector signal its dedication to driving the adoption and integration of digital assets in the global economy.
