Block's Strategic Pivot: Accelerating Bitcoin Mining While Winding Down Web5

Jack Dorsey’s payments company Block (SQ) is fundamentally reshaping its investment portfolio, channeling significant resources into bitcoin mining hardware development while simultaneously deprioritizing its Web5 venture and scaling back music streaming operations. This strategic recalibration, announced alongside the company’s third-quarter financial results, reflects both internal operational realities and the shifting regulatory landscape following the 2024 U.S. presidential election.

The restructuring signals Block’s confidence in its emerging mining division, which the company describes as having “strong product market fit and a healthy pipeline of demand.” By redirecting funds previously allocated to TBD—the business division developing Web5 decentralized infrastructure—and reducing investment in Tidal, Block gains the financial flexibility to accelerate its bitcoin mining equipment initiatives and expand its Bitkey self-custody wallet offering.

The Mining Hardware Opportunity

Block doesn’t mine bitcoin itself; instead, it manufactures specialized equipment for companies that do. The company’s mining division recently reached a critical milestone in April 2024 by completing development of a 3-nanometer mining chip, a project that began in April 2023. This technological advancement positions Block competitively within the mining hardware sector, attracting interest from major industry players.

The validation of Block’s mining strategy became evident in July 2024 when Core Scientific, one of the world’s largest bitcoin mining operations, announced plans to deploy Block’s mining rigs across its operations. This partnership demonstrates real-world demand for Block’s hardware solutions and validates the company’s decision to prioritize this sector.

Strategic Resource Allocation and Restructuring

The company’s restructuring efforts acknowledge a fundamental challenge: rapid organizational expansion without corresponding revenue growth. Block stated that “the growth of our company has far outpaced the growth of our business and revenue,” necessitating operational adjustments. Earlier in 2024, Block announced plans to reduce headcount by up to 10% by year-end—a measure directly connected to the need for focused, sustainable operations.

The third-quarter results underscored the urgency of this reallocation. Block reported $5.98 billion in quarterly revenue, falling short of Wall Street analyst estimates of $6.24 billion according to FactSet data. This earnings miss triggered a sharp market reaction, with Block’s stock price declining as much as 10% in subsequent trading.

Bitkey and the Self-Custody Ecosystem

Complementing its mining equipment focus, Block is doubling down on Bitkey, its hardware self-custody wallet for bitcoin that began shipping in March 2024. Bitkey transcends traditional wallet functionality by integrating with Block’s broader ecosystem, including connections to the Cash App payments platform and Coinbase’s exchange infrastructure, enabling seamless bitcoin buying and selling.

This integrated approach—combining mining hardware, payment solutions, and self-custody options—creates a comprehensive bitcoin-focused infrastructure play. The timing aligns with renewed regulatory optimism surrounding cryptocurrency following Trump’s election victory.

Web5 Closure and the Focus on Proven Capabilities

TBD, established by Block in June 2022, was tasked with developing Web5, a technological framework designed to enhance internet infrastructure through decentralized identity, personal data storage, and verifiable data exchange capabilities. While conceptually ambitious, Web5 represented a longer-term, speculative venture requiring sustained investment with uncertain commercial timelines.

By winding down TBD’s operations, Block eliminates a resource-intensive exploratory program in favor of mining and wallet initiatives with demonstrated market demand and clearer near-term profitability potential. This decision represents a pragmatic shift from speculative infrastructure development toward proven market opportunities.

The Tidal Investment Rebalancing

Block acquired the music and entertainment platform Tidal in 2021 for approximately $300 million. The scaling back of Tidal investment, while maintaining the platform, represents another source of capital redeployment. Rather than aggressive expansion in the competitive music streaming sector, Block prioritizes sectors more directly aligned with its cryptocurrency and payments strategy.

Market Context and Forward Momentum

Bitcoin mining faces profitability pressures following the April 2024 halving event, which cut mining rewards by 50%. For an industry operating on compressed margins, the prospect of a more favorable regulatory environment under the new U.S. administration potentially enhances long-term viability. Block’s hardware focus positions the company to benefit from any industry recovery or expansion.

The convergence of favorable regulatory signals, existing hardware partnerships, and concentrated product focus suggests Block believes its mining and cryptocurrency wallet initiatives represent the most promising growth vectors. By consolidating resources around square mining capabilities and self-custody solutions, Block is signaling that the future of the company rests increasingly on its ability to serve the bitcoin infrastructure and custody markets directly.