Block reveals a 34% reduction in Cash App bitcoin sales and a $36 million bitcoin loss in Q2

Block reveals reduction in Cash App bitcoin sale

Block (SQ) reported second-quarter earnings on Thursday, showing that bitcoin revenue from its Cash App offering decreased 34% to $1.79 billion, with the business taking a $36 million charge on its bitcoin investments.

Gross profit for the quarter totalled $1.47 billion, compared to Wall Street projections of $1.46 billion, while adjusted earnings per share of $0.18 exceeded expectations of $0.16. Excluding bitcoin, total net sales was $2.62 billion in the second quarter, up 34% year on year.

As of the conclusion of the quarter, Cash App’s Borrow function had over 1 million active accounts.

Block’s stock dropped as much as 5% in after-hours trading.

In the three months ending June 30, the price of bitcoin decreased by 57 percent from $46,262 to below $20,000 per coin, reducing gross profit from bitcoin from $43 million to $41 million.

Block has stated that the decline was “driven primarily by a decline in consumer demand and the price of bitcoin, related in part to broader uncertainty around crypto assets, which more than offset the benefit of volatility in the price of bitcoin during the quarter.”

Block dropped as much as 5% in after-hours trading
Block dropped as much as 5% in after-hours trading

“In future quarters, bitcoin revenue and gross profit may fluctuate as a result of changes in customer demand or the market price of bitcoin,” Block added.

The impairment charge depicts the weakest value of bitcoin.

Because of how digital assets are treated under GAAP accounting regulations, Block’s $36 million impairment charge indicates an unrealized loss reflecting bitcoin’s value at its lowest point during the quarter.

According to these laws, bitcoin’s gain in value from the low of the quarter to the end of the quarter cannot be declared unless the asset is sold, therefore the impairment charge reflects bitcoin’s lowest value during the previous quarter rather than its Q2 end market value.

MSTR Discloses Almost $100M 

Microstrategy (MSTR), for example, disclosed a $917.8 million impairment on its bitcoin holdings earlier this week.

Block estimated the fair value of its bitcoin holdings at $160 million as of June 30, 2022, based on observational market rates, which is $47 million higher than the carrying value of the investment after asset impairments but significantly below the $366 million fair value it acknowledged at the end of the prior quarter.

With the popularization of Bitcoin (BTC-USD), businesses like as Microstrategy (MSTR), Block (SQ), and Tesla (TSLA) have incorporated the virtual currency to their balance sheets, creating a new class of shareholders who earn all or a portion of their revenue in cryptocurrency.