Yesterday the famous co-founder and former CEO of Twitter, Jack Dorsey, revealed that Block is buying Bitcoin every month.
Since Dorsey left the direction of Twitter, now renamed X, he has been dedicating a lot of time to Bitcoin, so much so that he renamed his financial company Square to Block and transformed it into a company specifically focused on Bitcoin.
Summary
Jack Dorsey: Block’s PAC on Bitcoin
Dorsey yesterday shared the so-called “Bitcoin Blueprint For Corporate Balance Sheets” by Block, in which it is stated that the company is effectively making a BTC PAC.
This document provides an update on the company’s strategy regarding the held Bitcoins.
In particular, it provides an overview of the new corporate purchasing program for BTC and the launch of Square’s Bitcoin Conversions product.
The first purchase of BTC was made on October 7, 2020, when Block was still called Square: they bought 4,709 Bitcoin at an average price of $10,618, investing $50 million. They later purchased another 3,318 BTC in February 2021 at an average price of $51,236, investing another $170 million.
Now they claim to hold 8,038 BTC, because they have never sold the BTC purchased in the past. In total, however, this only amounts to 9% of all Block’s corporate liquidity.
However, the document also reveals the new purchasing strategy, which is in fact a sort of SIP (Systematic Investment Plan).
This strategy involves investing 10% of Block’s monthly gross profit generated from its services on Bitcoin to purchase BTC.
As part of this PAC, they plan to purchase BTC on a monthly basis, starting from April 2024, so it is a plan that has already begun.
After all, the BTC purchased overall between 2020 and 2021 were 8,027, while by March 31 of this year they had already risen to 8,038. So in reality, they had already made other purchases in addition to those three years ago.
Risk reduction
In his Block document, he specifies that the price of Bitcoin can be very volatile and difficult to predict, and that the PAC allows to optimize their long-term investment position on BTC by minimizing price risks.
The concept is that by buying every month, you will end up both buying at a high price, as they did in 2021, and buying at a lower price, as they did in 2020.
Indeed, considering a total investment of 220 million dollars, the current market value of the 8,027 BTC purchased between 2020 and 2021 is over 476 million dollars, with an unrealized gain of 116%, even though the purchase in 2021 was made at a fairly high price.
The PAC allows you to not have to choose the moment of purchase, as long as you always have funds available to make a purchase every month.
Block should always have these funds in theory, because if they manage to generate net profits with their Bitcoin-related services, they will always have 10% available to reinvest in BTC. Moreover, 10% of profits is actually a fairly low percentage, so the risk of this operation has been truly minimized.
It remains a risky operation for sure, but at least they tried to compress it to the maximum.
The Block Company
Block was founded in 2009 by Jack Dorsey and Jim McKelvey under the name Square.
That was also the year when Bitcoin’s blockchain was launched by Satoshi Nakamoto.
Today the company has 56 million users, of which 4 million are businesses, and processes payments for a total value of 228 billion dollars per year.
It is also listed on the New York Stock Exchange (NYSE), and the price of its shares jumped 5% yesterday after Dorsey’s announcement.
It is worth noting that the all-time high price of Block’s (SQ) shares was recorded in August 2021, during the crypto bull run.
From that $289, however, the price has dropped significantly, so much so that by October of last year it had dropped back below $39, a level close to that reached during the financial markets crash in March 2020 at the beginning of the pandemic.
However, in the course of 2024 it has shown clear signs of recovery, so much so that in March, when Bitcoin reached a new all-time high, it had returned to almost $90. Now, instead, it is around $70, a much lower figure than the all-time highs and not much higher than last year’s lows. Just think that this figure was already reached even in June 2018.
To tell the truth, however, $70 is actually a level around which the price of Block shares has been revolving since the second half of 2018, excluding the boom of 2021, and the crash of 2022/2023.
