Jack Dorsey revealed that Block is regularly dollar-cost averaging Bitcoin every month for its corporate treasury. Their approach involves dedicating 10% of their monthly gross profit from bitcoin products to this strategy.
Introduction:
Jack Dorsey, the CEO of Block, announced a new investment strategy aimed at bolstering the company’s Bitcoin holdings. The strategy involves regular purchases of Bitcoin using a dollar-cost averaging (DCA) approach, wherein 10% of Block’s monthly gross profit from Bitcoin products will be allocated to Bitcoin investments.
Details of the Purchase Strategy:
Block’s initiative stems from the launch of Square’s Bitcoin Conversions product, which facilitates the automatic conversion of a portion of sales into Bitcoin holdings. The new corporate balance sheet DCA program marks a departure from their previous lump-sum Bitcoin purchases, reflecting a more methodical investment approach.
Execution Plan:
Commencing in April 2024, Block will execute Bitcoin purchases on a monthly basis using time-weighted average price (TWAP) orders. These orders will be spread over a two-hour window, chosen for its historically high liquidity, to mitigate slippage risks. The decision to switch to a monthly cadence stems from improved Bitcoin liquidity compared to previous years, reducing the potential impact of market fluctuations.
Rationale Behind DCA:
The DCA program aims to address the inherent volatility of Bitcoin prices, which often deviate from traditional asset class movements. By consistently investing a portion of monthly profits, Block aims to optimize its long-term investment position while minimizing exposure to price fluctuations associated with infrequent, larger purchases.
Conclusion:
Block’s adoption of a DCA strategy reflects its commitment to strategic and disciplined Bitcoin investments. By leveraging a regular investment cadence and TWAP orders, the company seeks to navigate the dynamic cryptocurrency market while enhancing its Bitcoin holdings for long-term growth and stability.
