Jack Dorsey’s Bitcoin bet turns sour

As Jack Dorsey read out his opening statement to a hostile panel of US politicians examining Twitter’s role in spreading misinformation, eagle-eyed viewers noticed a strange object over the executive’s right shoulder.

Strategically placed within the frame of the video call delivered straight from Dorsey’s kitchen was a rectangular device resembling an old-fashioned flip clock that, instead of telling the time, presented a sequence of seemingly-random numbers.

The machine was, it turned out, a “block clock”, which displays Bitcoin’s price, the details of newly-created coins, and users’ personal balances. 

Dorsey’s message at the hearing last March was clear: he may have been ordered in front of Congress to talk about Twitter, but his heart lay in Bitcoin.

In November, Dorsey turned that message into action. The founder of Twitter had led the company through two periods of tumult, taken away Donald Trump’s microphone to the world and become one of Silicon Valley’s most high-profile entrepreneurs, but after 15 years Dorsey announced he was quitting the social network with immediate effect.

While he did not say so explicitly, most people had only one reading of his exit. Dorsey was leaving to spend more time on a greater priority: his digital payments company Square, founded in 2009 - and in particular, Bitcoin.

In the two months since, Dorsey - an introverted, yet eccentric 45-year-old - has become the closest thing to a chief executive of decentralised Bitcoin. In December he changed Square’s corporate name to "Block" - a reference to the "blockchain" technology that underpins the digital coin and has pushed the company further into cryptocurrency. 

The move may have come at the worst strategic time, however. After hitting a record high close of $69,000 in November, Bitcoin’s price has shed almost 40pc. Shares in Block have fallen by roughly half in the same period - rough going even by the standards of a recent drop in tech valuations.

“If there was a single individual who has contributed to Bitcoin in all facets, I think he would probably be the number one,” says Nic Carter of Castle Island Ventures, an investment firm focused on blockchain companies that advises Block on an initiative to cut Bitcoin’s carbon emissions. “It’s been very refreshing to see Jack become so outspoken.”

While regulators have raised concerns about cryptocurrency’s possible use for illegal behaviour and the large quantities of energy required to create it, Dorsey has become an increasingly vocal backer, although not a newcomer.

One former executive says he was encouraging colleagues to invest in the cryptocurrency back in 2011. Those who took his advice would have done exceptionally well: that year, one Bitcoin became worth more than one dollar for the first time, meaning an immaterial investment back then would be worth millions at today’s prices.

Although Trump’s election and the resulting panic around misinformation, social media election meddling and Facebook’s Cambridge Analytica scandal forced more attention on Twitter, Dorsey remained a Bitcoin evangelist. In 2018 - after its value crashed from almost $20,000 to less than $9,000, he told The Telegraph it would become a “global currency”.

Although Square had dabbled in cryptocurrency, allowing users to buy and sell Bitcoin as an investment from 2018, it appeared to be a personal interest, rather than a professional one.

One pivotal moment for Dorsey appeared to be a month-long trip to Africa in November 2019, in which he met owners of Bitcoin businesses and became convinced about the technology’s potential.

“Africa will define the future (especially the bitcoin one!),” he tweeted as he left. “Not sure where yet, but I’ll be living here for 3-6 months mid 2020.” 

Dorsey was an advocate of remote work well before the pandemic, but the move surprised staff, and the tweet would prove to be a costly one even if coronavirus put an end to Dorsey’s plans. Activity investor Elliott Management used it as ammunition for a bid to remove him as Twitter chief, and Dorsey said the announcement was a mistake.

While Elliott’s campaign failed in the short term, Dorsey’s interest in Bitcoin intensified. He changed his Twitter biography section - a keenly-watched piece of internet territory, to simply “#Bitcoin”. 

As 2020 proved to be a breakthrough year for the currency, surging by 200pc amid a stay-at-home trading boom, Square became a face on Wall Street. It revealed that it had spent $50m on 4,709 Bitcoins, making it the most high-profile company to park its cash in the cryptocurrency. Tesla would follow its lead later that year.

“We believe that bitcoin has the potential to be a more ubiquitous currency in the future,” finance chief Amrita Ahuja said at the time.

It was the clearest sign yet that Square was tying its future more closely to Bitcoin. Since then, it has spent more of its savings on it, and unveiled a string of initiatives it says are designed to make the controversial cryptocurrency more accessible - and acceptable.

It has funded research into Bitcoin’s carbon footprint claiming that, contrary to widespread criticism of the energy-hungry asset, it could incentivise investment in renewables, and has said it wants to develop technology making it easier for more people to get into “mining” - the process of creating new Bitcoins that currently requires powerful computer systems.

In a recent note to investors, analysts at Barclays wrote that “crypto is becoming a larger and larger part of Square’s narrative”.

They added: “The company’s various crypto activities … point toward a long-term strategy that assumes that Bitcoin will be much more widely embraced in the future as a daily spending instrument and financial services tool.”

Dorsey has also become more personally forthright, sparring with venture capitalists who back rival cryptocurrencies, and setting up a fund to defend Bitcoin developers from lawsuits. 

Still, Square - now Block - has, at times, appeared to downplay its link to Bitcoin. The company has pursued other initiatives, such as buying the Tidal music streaming service led by the rapper Jay-Z, who now sits on the company’s board, and acquiring buy-now-pay-later firm Afterpay.

Those close to the company point out that its bread and butter work - of letting small businesses take payments and letting consumers send money back and forth through its cash app - are also booming. While Bitcoin trading accounted for almost half of the company’s revenue in the third quarter of the year, its share of profit was much lower at around 4pc.

And in stark comparison to Facebook, which changed its name to “Meta” in a full-throated tilt towards the “metaverse” of virtual worlds, Square was much more ambiguous about its new name, saying “Block” could mean any number of things.

Former executives say Dorsey talks about the company being the “bank of the future” - not necessarily one that is all-in on cryptocurrency. 

But it may become harder to divorce the two. A month ago, Dorsey tweeted that Bitcoin would replace the US dollar, a position that suggests he is nothing if not all in.

Block’s soaring share price during the pandemic - its value crossed $100bn last year - has loosely followed the cryptocurrency. Shareholders were happy enough to be along for the ride on the way up. If its recent crash continues, Dorsey might find himself pining for the days of running Twitter.