Block Inc. plans to invest 10% of its monthly product gross profit and Bitcoin is trading 17% below its March record.
TakeAway Points:
- Block Inc. sees Bitcoin as a long-term revolutionary technology and intends to invest 10% of monthly gross profit in Bitcoin products.
- Amrita Ahuja, CFO, highlights how Bitcoin may help underserved customers move money more quickly and pay less in fees.
- Despite Bitcoin’s enormous potential, founder Jack Dorsey points out that less than 3% of Block’s resources are devoted to projects using the cryptocurrency.
Block Inc.’s Approach to Bitcoin
Block Inc., led by founder Jack Dorsey, is making a significant long-term bet on Bitcoin, viewing it as a “potentially transformative” technology. Chief Financial Officer and Chief Operating Officer Amrita Ahuja emphasized the firm’s commitment to Bitcoin, stating that Block will invest 10% of its gross profit from Bitcoin products each month into purchasing the cryptocurrency.
This strategy is part of Block’s broader vision to enable money to move at the speed of the internet. Ahuja highlighted Bitcoin’s resilience, security, and battle-tested nature as key reasons for this investment. She also pointed out that Bitcoin could help underserved consumers who currently pay high fees to access and move money.
Jack Dorsey, in his recent letter to shareholders, reiterated Bitcoin’s potential to “level the playing field” for both firms like Block and global consumers. Despite this focus, less than 3% of Block’s resources are allocated to Bitcoin-linked projects. Block’s diverse portfolio includes businesses like Square and Cash App, as well as newer ventures such as TBD and Spiral. The company’s first-quarter Ebitda nearly doubled from the previous year, showcasing its robust financial health.
The Price Changes of Bitcoin
Bitcoin’s price has been volatile, recently falling below $60,000 for the first time since May 3. As of Tuesday afternoon, it was trading above $61,000, approximately 17% below its March record of $73,797.68, according to Coin Metrics.
Analysts are cautious, with Oppenheimer’s Ari Wald noting that Bitcoin is under pressure below the $66,000 resistance level, which is its 50-day moving average. Wald identified key support at $57,500, the 200-day average, down to $56,500, the May low. A breach of these levels could be damaging, potentially leading to a further decline to $49,000.
David Keller, chief market strategist at StockCharts.com, echoed similar sentiments, identifying support around $58,000 and potential downside to between $50,000 and $52,000. Tom Fitzpatrick of R.J. O’Brien pointed out major support at $56,527 and warned of a possible 22% to 29% fall if this level is breached. Despite these concerns, Wald emphasized the strength of the $57,500 support level and the 200-day moving average, suggesting that the bullish trend could continue if these levels hold.
Market Attitude and Developments in Regulation
Bitcoin and other cryptocurrencies have recently bounced back from a slump caused by concerns over refunds linked to the collapsed cryptocurrency exchange, Mt. Gox. The trustee of Mt. Gox is set to return more than $8.5 billion worth of crypto to creditors starting in July, which initially raised fears of a market flood.
However, Bitcoin has recovered from levels below $60,000, buoyed by prospects of lower interest rates later this year. eToro analyst Simon Peters noted that central banks globally are beginning to lower interest rates and loosen financial conditions, which has historically been favorable for cryptocurrency prices.
In regulatory news, the Securities and Exchange Commission (SEC) has approved critical rule changes to allow spot Ether exchange-traded funds (ETFs) to trade. SEC Chair Gary Gensler mentioned that the review process for these ETFs is “going smoothly,” with final approvals expected this summer. This development has added to the positive sentiment in the crypto market, with smaller cryptocurrencies or altcoins like Solana also seeing gains.
