Reddit has sold most of its cryptocurrency holdings, primarily consisting of Bitcoin (BTC) and Ether (ETH), according to a filing with the U.S. Securities and Exchange Commission (SEC) for the third quarter of 2024.
Details of the Sale
The SEC 10-Q filing reveals that during the three months ending September 30, 2024, Reddit liquidated the majority of its crypto portfolio, with the bulk of the assets being Bitcoin and Ether. However, the company stated that the net value of the cryptocurrency holdings and the gains recognized from the sale were “immaterial” for the period, meaning the financial impact was not significant. Reddit reported that the proceeds from the cryptocurrency sale amounted to $6.869 million.
The filing clarified that while the company had previously invested some of its excess cash reserves in crypto assets, the sales of ETH and Polygon’s token MATIC (now called POL) were also not material for the fiscal year ending December 31, 2023, or the nine months ending September 30, 2024.
Crypto as a Treasury Asset
Reddit’s investment in cryptocurrencies began in 2022, when it started using Bitcoin and Ether as part of its treasury strategy. Additionally, the company used ETH and MATIC as a form of payment for virtual goods sales within its platform.
The company’s crypto holdings were limited to BTC, ETH, and any other digital assets identified by U.S. regulators as “likely not being a security.” Reddit had previously expressed optimism about the potential of crypto and blockchain technologies, even referring to them as having “significant potential” in its initial public offering (IPO) filing.
Decline in Crypto Ad Spending
Alongside the cryptocurrency sales, Reddit also reported a slump in advertising demand, particularly from the technology, media, entertainment, and cryptocurrency sectors. The company attributed the decline in ad spending to several macroeconomic factors, including global economic uncertainty, rising interest rates, and geopolitical conditions.
Despite these challenges, Reddit noted that it had partially offset the drop in ad revenue through diversification into other advertising sectors. This shift helped the company maintain some stability in its advertising income despite a slump in certain industries.
Reddit’s Evolving Crypto Strategy
Reddit’s move to liquidate a significant portion of its crypto holdings signals a shift in its approach to digital assets. While the company initially viewed crypto as a way to enhance its balance sheet and diversify its investments, the insignificant gains from the sale and the decline in crypto-related advertising may suggest a reevaluation of its strategy in the volatile crypto market.
The company’s decision to scale back its crypto investments, while maintaining a limited treasury strategy, reflects broader trends in the corporate world where many companies are taking a more cautious approach to cryptocurrencies amid economic uncertainty and regulatory scrutiny.
