Jack Dorsey, the co-founder of Twitter, has announced that his fintech company, Block, will allocate 10% of its gross profit generated from Bitcoin products towards purchasing BTC every month.
“Going forward, each month we will be investing 10% of our gross profit from Bitcoin products into Bitcoin purchases,” Dorsey wrote in a May 2 shareholder letter, including its better-than-expected first-quarter results.
“We were one of the first public companies to put Bitcoin on our balance sheet,” he added. Block bought $220 million worth of BTC between the fourth quarter of 2020 and the first quarter of 2021.
However, this announcement was made following the release of Block’s first-quarter earnings for 2024, which demonstrated substantial profits from its Bitcoin operations.
Dorsey’s Block Will DCA Into Bitcoin
The company disclosed Bitcoin-related gross profits totaling $80 million in the initial quarter. Should this pattern persist, the introduction of the new dollar cost averaging (DCA) program may result in an investment of around $24 million in BTC over a year. The primary goal of this endeavor is to bolster the company’s BTC holdings by strategically entering the market in a way that mitigates any adverse effects on Bitcoin’s price.
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Jack Dorsey provided further details regarding the corporation’s updated investment approach in a recent article on X, stating that; “Block is DCA’ing Bitcoin every month. here’s how your company can do it too.”
He also shared a detailed document titled “Bitcoin Blueprint For Corporate Balance Sheets,” which serves as a comprehensive guide for other corporations interested in integrating BTC into their financial strategies.
According to the document, Block, formerly known as Square, began its substantial acquisitions in October 2020, purchasing 4,709 BTC at an aggregate price of $50 million. The company later bought an additional 3,318 BTC in February 2021 for $170 million. As of March 31, 2024, Block holds approximately 8,038 BTC, representing about 9% of its total cash and marketable securities.
Block’s approach entails acquiring Bitcoin via over-the-counter transactions with a liquidity provider, employing a Time-Weighted Average Price (TWAP) to mitigate price slippage. This methodology is specifically devised to enhance trade execution within a concise two-hour timeframe, capitalizing on periods characterized by ample liquidity and minimal price fluctuations.
The Company’s Strategy
The organization’s approach demonstrates its conviction in BTC as a means for worldwide economic empowerment. According to the document, Bitcoin is perceived as a vehicle for individuals worldwide to engage in a global financial system and safeguard their financial well-being.
For April 2024 alone, Block executed purchases amounting to $4.4 million under the DCA scheme. Additionally, Block’s involvement in BTC extends beyond investments. The company’s ecosystem includes a range of BTC-related products and services such as Cash App, which allows customers to buy and sell Bitcoin, and TBD, an open developer platform aimed at decentralizing financial services.
Block has conformed to the most recent accounting standards for digital assets on the regulatory side. The implementation of the Financial Accounting Standards Board’s Accounting Standards Update No. 2023-08, which was enforced in December 2023, mandates that Bitcoin investments must be reevaluated to fair value, and any fluctuations in value must be acknowledged in net income. This marks a notable departure from previous accounting methods, where BTC was considered as indefinite-lived intangible assets.
Block has adjusted to the latest accounting standards for digital assets in terms of regulations. The adoption of the Financial Accounting Standards Board’s Accounting Standards Update No. 2023-08, which became effective in December 2023, necessitates that Bitcoin investments are revalued to fair value, with any changes in value being recognized in net income. This represents a significant departure from previous accounting practices, where BTC was classified as indefinite-lived intangible assets.
The report additionally emphasizes the firm’s meticulous method in safeguarding digital assets. From the beginning of its Bitcoin activities, Block has established an all-encompassing framework for safekeeping, with a focus on cold storage solutions supported by Hardware Security Modules (HSMs). This arrangement guarantees the secure management and protection of private keys, which are crucial for accessing BTC holdings, and shields them from unauthorized entry.
