Co-founder of Block Jack Dorsey, recently announced that his firm is upping its game by introducing plans to invest a chunk of its bitcoin profits back into the digital currency. This strategic move, unveiled alongside a lifted profit forecast for the year, demonstrates Block’s commitment to Bitcoin’s future.
Instead of bulk-buying bitcoin, Block is adopting a Dollar Cost Averaging (DCA) strategy, investing 10% of its gross profit from bitcoin products every month.
This method, as described in Block’s Bitcoin Blueprint For Corporate Balance Sheets, aims to optimize long-term investment while mitigating risks associated with volatile market prices. The document reads:
“The price of bitcoin can be highly volatile and hard to predict as its price action doesn’t always correlate with existing asset classes.
We believe this approach enables us to optimize our long-term investment position while minimizing the price risks associated with attempting to aggregate less frequent, larger purchases.”
Dorsey emphasized this approach, noting that currently, less than 3% of the company’s resources are dedicated to Bitcoin projects.
Notably, Block’s Bitcoin ecosystem includes various products, including Cash App, a platform allowing users to buy and sell bitcoin; TBD, an open developer platform focused on decentralized finance; hardware projects like BitKey, a self-custody Bitcoin wallet, and a Bitcoin mining system. It also includes Spiral, a team dedicated to contributing to Bitcoin’s open-source development.
Dorsey expressed Block’s belief in Bitcoin as the prime candidate to become the native currency of the internet. In a letter to shareholders on Thursday, he wrote:
“We believe the world needs an open protocol for money, one that’s not owned or controlled by any single entity. We believe Bitcoin is the best and only candidate to be that protocol, and to ultimately become the native currency of the internet.”
Block’s early investment in Bitcoin, totaling $220 million, has paid off handsomely, growing by around 160% to $573 million by the end of the first quarter of 2024.
By March 31, Block held 8,038 bitcoin on its balance sheet, accounting for about 9% of its total cash, cash equivalents, and marketable securities.
The company’s financial performance is robust, with EBITDA or adjusted earnings before interest, taxes, depreciation, and amortization, reaching $705 million in Q1 2024, nearly doubling from the previous year and surpassing analyst estimates.
Adjusted diluted earnings per share also exceeded expectations at $0.85, compared to the predicted $0.71.
In light of this strong performance, Block has raised its full-year adjusted EBITDA forecast to $2.76 billion, up from the previous estimate of $2.63 billion. The guidance for adjusted operating income has also been increased to $1.30 billion, compared to the earlier projection of $1.15 billion.
Despite these positive developments, Block’s shares faced a downturn, dropping by 9% for the year. This coincides with the company’s trouble with the Federal prosecutors, who are investigating its internal compliance structures and its handling of transactions involving sanctioned countries.