Block gained $207M on its Bitcoin Holdings and Ethereum Spot-Exchange Traded Fund

In its fourth-quarter earnings report released recently, fintech company Block reported a remarkable remeasurement gain of $207 million on its bitcoin holdings. As of December 31, 2023, Block held approximately 8,038 BTC for investment purposes with a fair value of $340 million.

The company’s earnings report highlighted a significant increase in bitcoin revenue, totaling $2.52 billion, representing a 37% year-over-year rise. This growth was driven by both an increase in the average market price of bitcoin and the price appreciation of Block’s bitcoin inventory during the quarter.

Block’s subsidiary, Cash App, played a crucial role in these gains. The platform generated a gross profit of $66 million on bitcoin sales last quarter, representing an impressive 90% increase year over year. The total sale amount of bitcoin sold to customers—which Block recognizes as bitcoin revenue—was $2.52 billion.

Shares of Block (NASDAQ: SQ) surged by 13% in after-hours trading, reaching $76. Overall, Block reported that its gross profit grew by 22% yearly, reaching an impressive total of $2.03 billion. Square, another subsidiary of Block, generated a gross profit of $828 million (up 18% year over year), while Cash App contributed $1.18 billion (up 25% year over year) to the company’s overall performance. In summary, Block’s strategic investment in bitcoin has paid off significantly, positioning the company as a major player in the cryptocurrency space.

Ether spot-exchange traded funds (ETFs) may increase institutional investment and power the world’s most-used blockchain, but they are unlikely to create euphoric price surges, according to some market observers. While interest in ether bets has risen significantly, an ETF could create sustained growth rather than explosive growth in the ether market.

Last week, Ethereum’s native token crossed the $3,000 mark for the first time since April 2022, rising 15% in a week and beating bitcoin’s relatively modest 8% rally in the same period. Crypto circles on social application X expect such price action to continue after the expected issuance of ether ETFs later this year. The narrative is that these inflows could later find their way to the broader Ethereum ecosystem.

However, some believe an ETF could create sustained, rather than explosive, growth in the ether market. Jag Kooners, head of derivatives at Bitfinex, stated that “Ethereum ETFs won’t cause bubbles.” He further explained that institutional investment through an ETF could stabilize the Ethereum market, similar to what has been observed with bitcoin and gold ETFs, fostering sustained growth.

Kooners also highlighted that Ethereum’s Layer 2 solutions which enhance scalability by enabling faster, cheaper transactions outside the main blockchain, play a role in fostering growth. Unlike bitcoin’s security focus, Ethereum’s L2 solutions prioritize rapid expansion, potentially attracting institutional investment and broadening application scope.

Bitcoin’s status as a macroeconomic asset has made it increasingly sensitive to global economic developments. As institutional participation in Bitcoin grows, adverse macro events can impact its price significantly.

Recently, Federal Reserve Chair Jerome Powell expressed concern about high inflation, leading to expectations of faster stimulus unwinding. Additionally, Evergrande’s debt crisis and IMF warnings have added to market jitters. In contrast, Ethereum’s deflationary asset credentials and its transition to ETH 2.0 have helped it remain relatively resilient.

However, it’s important to note that an ether ETF still faces regulatory headwinds. The classification of ether as a security or commodity remains a key hurdle despite ongoing regulatory discussions. Some traditional finance firms estimate a 50% chance of an ether ETF approval by May 2024 with ether considered the “only digital asset other than bitcoin” to get spot ETF approval in the U.S. Several companies have submitted applications.