So I got curious about what @fold_app ‘s cash-back card can do to soaking up demand. Let’s run through some napkin math. My guess is in 2-3 years before next halving, bitcoin-back card can soak up ~10% of inflation, and if it reaches 7% penetration it may soak up all inflation.
1- Googling suggests 60-80% of the US population owns a debit card, ~225 mm debit card owners, with Visa claiming ~450-500 mm cards in the US, on-average 2 cards / card-owner. 60-70% of people claim they only have 1, that means the remainder 70 mm owns ~4.5 cards on average.
2- US spending on debit card today is probably ~3 trillion USD per annum, or ~6.3k USD per card and this is roughly ~14% of US average disposable income of ~45k per annum. People use debit cards to buy groceries, pay for a night out, etc; makes sense.
3- Top banks like JPM / C / Capital One each have ~15-20% of US credit card debt; the market share in debit card is probably similar. Top 10 vendor = 90% market share with # 10 USDB being ~3% share. So unless this benefit hits mainstream, its share would likely be <1%.
4- So let’s assume Fold + competition makes up 0.25% / 0.5% of cards amongst 1-card owner / multi-card owners (roughly 10-25% that of USB). This would be ~3.5 mm cards. Assuming this demographic has similar spending habits & earning power vs. average…
5- … 6.3k of annual spend on 3.5 mm card user = ~22.5 Bn USD of annual spend, of which ~1.5% = ~330 mm USD would be directly funneled into stacking sats. At 9.5k USD BTC = issuance of ~3 Bn USD worth of BTC / year, this translates to a 10% annual buying vs. inflation.
6- Now the cool thing is, if penetration reaches 7% (i.e. 7% of cards offer this program), then the automatic “bitcoin-back” would then soak up all the annual issuance of BTC. Wonder when the larger banks like Chase would follow suite.
7- Caveat is of course people can sell their sats, but I think the offset is Fold & other competitors can offer bitcoin mortgages – 5-10 year 20-30% type LTV loan secured by the BTC at a 5-10% interest then securitized out as CLO, could have good demand on both sides…
8- A 10 year mortgage for 7.5k for 1 BTC (25% LTV) at 7.5% interest is only ~89 USD / month. BTC can be lent out via BlockFi to generate yield (almost like a rental). I could see significant demand for both borrowing (own now!) and buying the CLO.
9- Nonetheless, the direction Fold is taking is pretty interesting; wish them all the best in getting more traction. You should also use my ref-link to sign up so that I can get my card faster (perhaps that’s why I posted 😂): use.foldapp.com/r/PPU9FNTA
One caveat here of course is the multi-card owner would likely split up the budget and bitcoin-cash back likely won't see the full 6.3k. But who is to say cardholders won't allocate more budget towards this card / spend more?
