The Fold App (referral link) offers a mostly complete solution for individuals looking to integrate Bitcoin into their daily financial lives. It enables direct deposit of paychecks and other funds directly into Bitcoin, while offering cash back rewards in Bitcoin for debit card purchases, ACH payments, and gift card transactions. I have previously written about Bitcoin maximalism.
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The primary appeal of Fold lies in its ability to support those wanting to adopt The Bitcoin Standard by Saifadean Ammous. By automatically converting deposits to Bitcoin, unless you are already paid in Bitcoin, users can effectively dollar-cost average while potentially sidestepping inflation. Though the market may move sideways at times, the long-term thesis remains that Bitcoin's value will appreciate over time, thereby protecting you from long-term inflation.
For a monthly fee of $10, Fold provides substantial benefits, particularly for households spending around $2,000 monthly, which is somewhat of a breakeven point to recover the monthly or annual fee in rewards, making the service "free". This comes from a 0.5% cash back rate, with some categories offering higher returns of up to 1.5%. Compared to alternatives like Coinbase One, which charges $30 monthly and debit card with 0.5% in cash back rewards, Fold's pricing structure appears more competitive, though it lacks some useful features like automated tax preparation.
Success with Fold requires careful budgeting and maintaining a surplus. For instance, if earning $2,000 monthly, one should aim to budget around $1,900, allowing the surplus to accumulate in Bitcoin. This is basic money management. While current market conditions are favorable, it's important to recognize that after reaching new highs, markets typically retreat. The ideal entry point is during market lows, though consistently participating in Bitcoin over the long term, along with sound financial habits can mitigate market downturns.
The economics of using Fold can vary significantly with market conditions. In favorable months, yields of Bitcoin and Fold rewards may exceed the monthly fee, while bear markets could result in both the fee and capital losses. Users can mitigate risk during a market downturn by keeping deposits in cash while allowing rewards to accumulate in Bitcoin, potentially even cashing out during bull runs. And capital losses can also reduce your taxes. Fold's annual subscription option of $100 might provide better value for some users as it locks in your participation for an entire year at a discounted rate. In interviews, Fold CEO Will Reeves has stated that Fold rewards people more when they use the app more. So there is some advantage in committing to exclusive and long term use of Fold.
Fold offers a comprehensive package for Bitcoin-focused living, including rewards on spending and automatic Bitcoin conversion of deposits. With several years in operation, the platform continues to evolve, with potential future features including lightning payments and a credit card possibly secured by Bitcoin holdings.
However, transitioning from traditional banking presents challenges. The lack of physical branches for cash and check deposits requires workarounds, such as using PayPal as an intermediary. Additionally, the absence of automated tax preparation, which services like Coinbase provides, adds complexity to year-end accounting.
Something that is not given too much attention is that the Fold debit card is a Visa+ prepaid card, which allows cardholders to push money into the account from participating platforms. For example, you can deposit cash into a PayPal or Venmo accounts at retail locations, then instantly push that cash into your Fold checking account through the card. Coinbase supports instant transfers into Visa+ debit cards, but not Visa+ prepaid cards. Just keep in mind that debit cards and prepaid cards are treated differently despite being largely the same in function. And, the transfer option is not widespread in the market, meaning that there will be limited circumstances for using it. If your financial situation requires a debit card, Fold may not be for you as many merchants will not accept payments from a prepaid card.
For those already integrated into the traditional banking system with established connections to services like Coinbase, the decision to adopt Fold requires careful consideration. While it effectively combines multiple features into one platform, the transition might not solve immediate problems and could add unnecessary complexity to existing financial arrangements. On the other hand, you might prefer to go all-in on Fold to maximize your exposure to Bitcoin and minimize complexity.
Personally, I am hesitant to make a clean break and move my banking over to Fold. I suspect that this may be due to sentimental reasons, having banked with my current bank for many years. But this is an internal struggle that does not detract from the unique proposition that Fold App offers. Moving to Fold would also introduce a degree of reliance on PayPal for fast deposits, which makes me a little uneasy.
The closest alternatives to the Fold App are Strike (referral link) and Cash App, which both allow for direct deposits to automatically convert to Bitcoin. Strike will pay bills drafted from your account by automatically converting Bitcoin to fiat. Cash App requires you to manually convert to fiat for bill payments. Strike would be a good alternative except that it does not have a debit card where I live, or fast, reliable ways to transfer money in. Another drawback both platforms have is that they charge fees for converting in and out of Bitcoin. That's 2% load on your deposits and withdrawals. My main reason for not using Strike is that I never found a reliable way to instantly fund the account. Debit card transfers into Strike worked sometimes, but often failed. This can be troublesome for somebody (like me) on a tight budget where timing is essential.
Other apps like PayPal and Robinhood, for example, have a manual process for converting deposits into Bitcoin, and vice versa. In terms of completeness, Fold App almost has it all, missing out on automatic conversions from Bitcoin to fiat for bill payments like Strike does. However, if you are going to pay a bill, you can simply convert the needed amount from Bitcoin to cash and leave it in checking for the bill payment to draft.
As far as taxes go, Fold allows you to export your Bitcoin transaction history for tax preparation. However, you would have to use some other means to calculate your gains and losses. Compare this to Coinbase, which calculates your taxes when you subscribe to Coinbase One for $30/month. It is a trade-off.
From a financial psychology perspective, Fold can help overcome indecision. You may choose to have all deposits into Fold stay in fiat the Fold checking account, or have Fold convert a fixed percentage of deposits to Bitcoin. However, if you are determined to live on the The Bitcoin Standard, you may choose to have 100% of deposits go into Bitcoin and then cash out as needed. This avoids the mental calculations and manual transfers you would otherwise have to do every time you get paid. It eliminates the mental friction, which may be stopping you from committing to living on Bitcoin.
I know that there will invariably be somebody who will comment, "not your keys, not your crypto". Well, if you do have significant Bitcoin savings, you can transfer out the surplus to a cold wallet, leaving only enough for your expenses. When we are talking about living on Bitcoin, we aren't exactly talking about hodling forever. We're talking about actively using Bitcoin for your everyday personal finances like Satoshi wrote in the Bitcoin white paper. Granted, Satoshi did not envision off-chain banking with Bitcoin. But unless you earn far more than you spend, the added cost of using Bitcoin on-chain can eat into your lean budget.
For now, Fold offers a useful combination of features for living on Bitcoin. In future, we may see other banks adopt similar features. But there is no telling how long it will take for other banks to implement what Fold is pioneering. I hope to have presented enough information to help you decide if Fold App is right for you.