Happy Friday, and welcome back to the Blockspace newsletter!

For today’s letter, a note on Fold’s public debut and Bitcoin Layer’s rebrand. Plus, Strategy is raising money again, Javier Milei’s memecoin woes could land him in legal trouble, STARK proofs come to a Bitcoin testnet, and Abu Dhabi’s sovereign wealth fund goes deep into bitcoin.

NiceHash has moved to Switzerland, offering institutional miners a secure, compliant, and transparent platform to manage and maximize their mining output– delivering the reliability and performance expected from the best mining pools. 

Fold enters the public fold, Bitcoin Layers pivots with new raise

Fold goes public

Another public bitcoin company is in the books. 

Bitcoin financial services company Fold went public this week via its merger with FTAC Emerald Acquisition Corp, marking the first “bitcoin-only” financial firm to enter public markets. The stock ($FLD) traded every-which-way on and after the debut, and as of Thursday’s market close, it settled at $9.24 after peaking at $13.30 earlier in the week.

OUR TAKE

Fold made its name early on as a hub to purchase gift cards with bitcoin, but it has evolved into a bitcoin rewards platform where users earn BTC-back on gift cards and other purchases, which includes their rent or mortgage when using a Fold FDIC bank account. The service also features a Visa debit card that doles out rewards for everyday purchases, and you can also buy bitcoin directly on the platform.

So, how much appetite does the market really have for a bitcoin-rewards platform that also functions like an exchange?

Well, just a few days after launch, quite a bit. Its market cap is a perky $426 million, which has it trading at nearly 18x its projected 2024 revenue of $24 million, according to an October 2024 S4 filing for the business combination. This multiple is pretty tame compared to Coinbase’s current 50x valuation from its 2024 revenue, but Coinbase also has much wider margins than Fold. 

We don’t have EBITDA from Fold’s S4, but we do have 2023 and 2022 revenue and expenses. The company earned $21.5 million in 2023 and $28.9 million in 2022, but it also paid $21 million and $32 million in banking and payment costs for its services. Them some thin margins, Jim. After all, Fold generates revenue on interchange fees deducted from Visa’s transaction fees, and then Fold has to pass along part of those interchange fees as BTC rewards to its users – slim pickins. (Fold also generates revenue from gift card affiliate programs and its Fold+ membership program).

Now, when Fold launches its credit card, its interchange fees will be fatter, but to-be-determined how much this moves the needle. 

All that said, Fold has 1,000 BTC on its balance sheet. Investors historically gravitate toward companies with BTC balance sheets, trading them like high beta plays during bitcoin bull markets, so this stack should favor Fold’s stock when bitcoin appreciates.

It also has a fiercely dedicated user base and killer product market fit. I mean, what Bitcoiner doesn’t want to passively stack sats on things they already purchase? Buy your next dinner with Fold, hodl, and the rewards pay back the purchase in X number of years — the product pitch literally sells itself.

Rewards are a huge financial services draw, and we expect Fold will continue to be the biggest, best game in town for Bitcoiners. As the company and its userbase grows, so too will its offerings, and we wouldn’t be surprised to see Fold’s financial services mature as a result (lest we forget, it started as an app to buy gift cards with bitcoin, and now it offers checking account and soon-to-be credit card services).

We’re rooting for them, and we look forward to seeing what Fold has in store now that it’s in the big leagues.

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Lemon Drop announces seed round

The builders and researchers behind Bitcoin Layers raised a seed round in a pivot to their new business model, a bitcoin onboarding startup called Lemon Drop.

“Our pivot will see us build products that help crypto-native users stack sats. From there, we’ll build products that drive them into bitcoin native solutions,” Lemon Drop Co-founder Janusz told Blockspace.

OUR TAKE

Janusz, Red, and other contributors spent the past year building one of the most important research products in the Bitcoin Season 2 ecosystem in Bitcoin Layers. We’ve referenced the work throughout our newsletters on Wrapped/Staked BTC, bridge designs, and Layer 2 TVL tracking. Now, Bitcoin Layers is transitioning to an open source project and the team is focusing on product oriented bitcoin onboarding. Despite the Bitcoin L2 ecosystem being “complete anarchy,” the bigger problem is just how to incentivize users to come to Bitcoin.

The startup’s first product will be demoed next week and is a simple, bitcoin focused tool that seeks to get more btc into the hands of crypto users. Cofounder Janusz says they will meet users where they are.

“We’re laser focused on two things. How can we get people on other chains easier price exposure to bitcoin. Then, how can we seamlessly get them over to more trust-distributed systems where ‘improved security’ isn’t the sole product?”

Epoch VC led the seed round ,and it also includes Sats Ventures, Rootstock Labs, and several angels.

Disclosure: Blockspace’s Charlie Spears is an angel investor in Lemon Drop.

Bitcoin news

Strategy proposes $2 billion convertible note offering

Michael Saylor-led Strategy (formerly Microstrategy) has proposed a $2 billion private offering of zero-coupon convertible senior notes due 2030. As ever, Strategy will use the proceeds to acquire bitcoin (and for general corporate purposes).

Argentina’s President Milei promotes memecoin, faces investigation for fraud

Javier Milei promoted the memecoin $LIBRA on Twitter, saying it would “encourage the growth of the Argentine economy.” Hours later the token had lost $4 billion in market cap and has not recovered since. Multiple scandals lie in its wake, from domestic legal risk to the unmasking of a new crypto villain Hayden Davis.

STARK proof demo hits Bitcoin testnet

Starkware engineer Abdel demonstrated a STARK proof of a Fibonacci computation on Catnet, a version of Bitcoin’s signet with OP_CAT enabled. The work builds upon the breakthroughs that L2Iterative’s Weikeng Chen made earlier this year.

Abu Dhabi buys $436m of Bitcoin ETF

Abu Dhabi’s sovereign wealth fund Mubadala Investment Company is holding a $436m position in Blackrock’s $IBIT bitcoin ETFs. Nation states are coming for your (paper) bitcoin.

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