Former Twitter CEO Jack Dorsey, digital payments company Block Inc., profit rose 29% year-on-year to $1.47 billion in the second quarter, even as its bitcoin business plummeted due to declining consumer demand and falling prices to bitcoins (BTC).

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The financial services firm primarily generates bitcoin revenue by providing bitcoin trading services through its digital payment app, Cash App.

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Block Inc. noted that for the quarter, bitcoin revenue was $1.79 billion, down 34% from the previous year, while bitcoin gross revenue was only $41 million, suggesting that the provision of bitcoin services to its customers can be a costly undertaking.

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Block Inc. stated that the drop in bitcoin earnings was due to “wider uncertainty” in crypto assets, stating:

“The year-over-year decline in bitcoin revenue and gross margins was driven primarily by lower consumer demand and bitcoin prices, partly attributable to broader uncertainty around crypto assets, which more than offset the benefits of price volatility. bitcoins during the quarter.

However, Block Inc. stressed that the drop in BTC earnings does not reflect broader business performance. He also noted that BTC earnings are likely to fluctuate over time as a result of “changes in consumer demand or the market price of bitcoin.”

The company also noted that it has recognized a $36 million impairment loss on its BTC holdings, however this is likely only a loss on paper.

Under U.S. accounting procedures, cryptocurrencies are classified as an intangible asset on balance sheets, and companies must report a loss when the price of an asset falls below its cost, even if the gain or loss was realized through a sale during that quarter.

The company noted that as of June 30, 2022, the fair value of its Bitcoin investment is $160 million based on market prices.

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Investors don’t seem to be impressed with Block Inc’s results. in the second quarter as the SQ of the firm’s stock fell 7.42% after hours to $83 at the time of writing.

Bloomberg speculated that this was due to the company reporting a lower-than-expected transaction volume of $52.5 billion. against to $53.47 billion.

Bitcoin from block

Dorsey, the fiery bitcoin maxi, has been relatively calm about his plans for digital gold ever since he announced in June that Block Inc. bypasses the Web3 model to create a Web5 project focused on the bitcoin blockchain.

Web5 is essentially a decentralized web platform or DWP that allows developers to create decentralized web applications with DIDs and decentralized nodes that will also have a monetary network built around BTC rather than tokenization supported by a smart contract.