Thanks to an increase in the amount of Bitcoin sold to its customers, Block’s Cash App generated $50 million of Bitcoin gross profit in the first quarter of 2023, up 16% year-over-year, the company said in a shareholder letter Thursday.
The total sale amount of Bitcoin sold to customers, which Block said it recognizes as Bitcoin revenue, was $2.16 billion, up 25% year-over-year.
In its previous earnings report Block reported $1.83 billion in Bitcoin revenue from the Cash App business.
According to the company, “the year-over-year increase in Bitcoin revenue and gross profit was driven by an increase in the quantity of Bitcoin sold to customers, partially offset by a decrease in the market price of Bitcoin compared to the prior-year period.”
Block, formerly known as Square, is a payments company founded by Twitter co-founder Jack Dorsey. It serves small and medium businesses, with mobile payment service Cash App being a popular tool for buying and selling Bitcoin, especially for younger users and those who prefer to conduct financial transactions on their mobile devices.
With Cash App, users can link their bank accounts, credit cards, or debit cards to their account and use the app to send or receive payments from other users. Cash App also offers a range of other features, including the ability to invest in stocks, and a debit card that allows users to spend their Cash App balance at retailers and withdraw cash from ATMs.
In October 2022, Block announced full support for Lightning Network, Bitcoin’s second layer scalability solution that enables users to conduct fast and low-cost transactions off-chain, while still enjoying the security and trustlessness of the network.
No impairment loss on Bitcoin holdings, says Block
In its latest earnings report the company also revealed it did not post an impairment loss on its Bitcoin holdings in Q1 after investing a total of $220 million in the leading cryptocurrency in the fourth quarter of 2020 and first quarter of 2021. Back then, Block purchased $50 million and $170 million worth of Bitcoin, respectively.
As explained by Block, Bitcoin as an indefinite-lived intangible asset is subject to impairment losses if its fair value decreases below the carrying value during the assessed period.
As of March 31, 2023, the fair value of the company’s investment in Bitcoin was $229 million, or “$126 million greater than the carrying value of the investment after cumulative impairment charges.”
“The accounting rules for Bitcoin currently require us to recognize any decreases in market price below carrying value as an impairment charge, with no upward revisions recognized when the market price increases until the sale of that Bitcoin,” said the company, adding that it revalues its Bitcoin holdings on a daily basis using the closing price at midnight Coordinated Universal Time (UTC).
Block’s shares (SQ) changed hands at $60.43 at the closing bell on Thursday, up 1.87% over the day, jumping almost 5% to $63.35 in Friday’s pre-market trades.
