Block Inc. shifts focus to Bitcoin mining amid plans to sunset Web5-focused TBD

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As a seasoned analyst with over two decades of experience under my belt, I find myself intrigued by Block’s strategic pivot towards the cryptocurrency mining sector. This move comes at an interesting time, coinciding with Donald Trump’s return to the U.S. political landscape and his expressed interest in Bitcoin mining.

Jack Dorsey, the founder of financial services company Square Inc., which was recently renamed to Block Inc., is shifting the company’s primary attention towards the field of cryptocurrency mining.

In a November 7 shareholder communication, Block (previously known as Square Inc.) announced that they will scale back investments in their music streaming platform, TIDAL, and potentially shut down a project aimed at de-centralizing the internet, referred to as TBD. Instead, they plan to concentrate on expanding their involvement in the Bitcoin mining industry.

Block acquired TIDAL in a 2021 acquisition for roughly $300 million, as the streaming service was facing stiff competition and failing to gain traction. The platform has continued to struggle, with reports indicating workforce reductions and a $132.3 million impairment charge.

In 2022, TBD – a subsidiary of Block – embarked on a mission to develop a decentralized internet experience, which they called Web5. However, it remains unclear as to why they are planning to cease their operations.

Block’s announcement was made at a time that corresponded with Donald Trump being elected as the U.S. President.

In June, Trump expressed his desire for all remaining Bitcoin to be mined in the U.S., emphasizing its possible role in strengthening the country’s control over the energy sector. This announcement positively impacted Bitcoin mining stocks and injected new life into a sector that has been grappling with profit issues since the halving of this year reduced mining rewards by half.

It appears that the company is strategically preparing to leverage the resurgence in the American mining industry, as it sees a robust supply of demand in the near future.

Through its Proto project, Block doesn’t mine Bitcoin itself but instead creates the necessary mining equipment. Notably, they recently unveiled a 3-nanometer mining chip that Core Scientific, a significant Bitcoin miner, intends to use in their operations this year.

In addition to using restructured resources, the Block will also set aside a portion for enhancing their hardware wallet service, Bitkey. Introduced in March 2024, this device allows users to securely store Bitcoin and make purchases through traditional channels thanks to its collaborations with exchange platforms and payment providers.

The company has recently announced a change in its course due to lower-than-anticipated revenue for Q3, which amounted to $5.98 billion instead of the projected $6.24 billion. This decision was made following job cuts across Cash App, Foundational, Square divisions in January, as well as approximately 40 staff reductions at Tidal in December.

While Block is concentrating more on the mining industry, American Bitcoin miners have been growing their operations recently. In September alone, CleanSpark purchased seven Bitcoin mining facilities with the aim of increasing its computing power (hashrate) to a targeted 37 Exahash per second (EH/s) by the end of 2024.

In August, Marathon Digital Holdings raised $292.5 million to fund its strategic expansions.

The H.C. Wainwright & Co. report indicates that during Q3 of 2024, the combined hash rate of public Bitcoin mining companies experienced a 4.5% rise.

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2024-11-08 11:02