Many S&P/ASX 200 Index (ASX: XJO) shares suffered nasty sell-offs in the market meltdown over the past week or so. However, shares of tech stock Block Inc (ASX: SQ2) were particularly hard hit.
Block stock closed at $100.10 last Friday. But Monday saw the company lose a horrid 10.56% in one session, a loss that was supplemented by another 3.56% drop just yesterday.
As it stands today, Block shares remain down a chunky 11.6% since last Friday's close despite gaining a rosy 0.95% over today's trading thus far.
Now we know that Block's dramatic drop this week probably had nothing to do with the company's underlying financial performance.
How? Well, it was only on 2 August (last Friday) that the company dropped its latest quarterly results. As we covered at the time, this saw Block reveal an 11.2% spike in revenues for the three months to 30 June to US$6.16 billion, as well as a quarterly gross profit of US$2.23 billion, an increase of 19.7% year-on-year.
In addition, Block also revealed a US$3 billion boost to its share buyback program.
It was arguably hard for investors not to be impressed with these sorts of figures, which probably at least partly explains why Block stock bucked the market sell-off on Friday.
But Block still tanked by that awful 10.56% on Monday. How can we explain this?
Did Bitcoin tank Block stock this week?
One potential explanation is the performance of cryptocurrency Bitcoin (CRYPTO: BTC).
Unlike most companies, Block is a Bitcoin investor. The company's founder, Jack Dorsey, has been a notable Bitcoin bull for years. Block also facilitates the trading and investment in cryptocurrencies through its apps, although this service is not yet available in Australia.
The company is so committed to Bitcoin that it invests in the digital coins itself. As my Fool colleague Bernd noted last week covering Block's earnings, "Block invests 10% of its gross profit from its Bitcoin products to buy the digital tokens".
In the company's quarterly report that we just discussed, here's what Block stated about its current Bitcoin position:
As of June 30, 2024, we held approximately 8,211 bitcoins for investment purposes with a fair value of
$515 million based on observable market prices, of which approximately 173 were purchased in the second quarter of 2024.
Perhaps, unfortunately, for Block stock, those Bitcoins haven't been a great investment to have held over the past week. In fact, the value of Bitcoin has fallen off a cliff since last Thursday.
On 1 August, one Bitcoin was worth around US$65,300. But by this Monday, it was down a calamitous 17.3% to roughly US$54,000.
ASX investors know that Block has gone hard on Bitcoin, as we've just outlined. So it's possible that this precipitous drop in Bitcoin caused some significant selling pressure for Block stock by extension.
Of course, we can't know this for sure. But it is at least possible that the cryptocurrency exacerbated the company's share price misfortunes this week.
The price of Bitcoin has since rebounded, though, up around 5.2% since Monday. Perhaps this is helping Block stock recover today.
