Executive Summary / Key Takeaways

• Pioneering Bitcoin Integration: Fold Holdings is a first-mover in integrating Bitcoin into everyday consumer financial services, leveraging a comprehensive suite of products from debit and upcoming credit cards to gift cards and bill payment rewards, all designed to facilitate Bitcoin earning and utilization.
• Strategic Product Expansion & Treasury Growth: Recent launches like the Fold Bitcoin Gift Card and the anticipated Fold Credit Card, coupled with ongoing enhancements to its custody and trading platform, are poised to drive user acquisition and engagement. The company's strategic Bitcoin treasury, holding 1,492 BTC valued at $159.90 million as of June 30, 2025, serves as a long-term investment and collateral.
• Rapid Revenue Growth, Significant Operating Losses: Fold reported a 59% year-over-year net revenue increase to $8.18 million in Q2 2025, primarily from merchant offers. However, operating expenses surged, leading to an operating loss of $6.33 million for the quarter. Net income of $13.43 million for Q2 2025 was largely driven by non-operating gains on its Bitcoin investment treasury.
• Capital Infusion and Dilution Risk: The recent SPAC merger and a new $250 million equity purchase facility provide crucial capital. However, the company's accumulated deficit of $136.80 million and ongoing operating losses highlight a continued need for financing, posing potential for significant shareholder dilution.
• Competitive Niche with Financial Headwinds: While Fold carves a unique niche with its Bitcoin-centric rewards and utility, it faces formidable, larger, and more diversified competitors like Coinbase and Block. Fold's current negative operating margins stand in stark contrast to its profitable rivals, underscoring the challenge of scaling its specialized model.

The Bitcoin Frontier: Fold's Vision and Journey

Fold Holdings, Inc. (FLD) emerged in 2019 with a singular, ambitious vision: to seamlessly integrate Bitcoin into the fabric of everyday financial life. At a time when Bitcoin was largely seen as a speculative asset, Fold pioneered consumer financial services that allowed individuals to earn, accumulate, and spend the digital currency. This foundational commitment to utility, rather than just speculation, has defined its journey.

Early on, Fold distinguished itself by enabling Bitcoin spending via the Lightning Network, a scalability solution that was then underrepresented in the broader Bitcoin ecosystem. A pivotal moment arrived in 2020 with a strategic partnership with Visa (V), leading to the launch of the first-ever Bitcoin rewards debit card. This innovation significantly expanded Bitcoin's practical application for consumers. The company continued its product evolution, introducing a Bitcoin exchange in 2022, complete with spot buys, dollar-cost averaging, direct paycheck conversion, and round-ups. By 2024, Fold had advanced its offerings to enable users to "get on zero," living primarily off Bitcoin, and introduced Bitcoin rewards for ACH payments, offering up to 1.50% back on essential bills like mortgages and rent.

A transformative event for Fold was its business combination with FTAC Emerald Acquisition Corp. (FTAC), a publicly-traded special purpose acquisition company (SPAC). The merger, consummated on February 14, 2025, resulted in Fold Holdings, Inc. listing its common stock and warrants on Nasdaq under the ticker symbols FLD and FLDDW. This public listing marked a significant milestone, providing capital and enhanced visibility, and converting all prior Simple Agreements for Future Equity (SAFEs) into common stock. Throughout its growth, Fold has emphasized the safety and security of customer assets and regulatory compliance, a critical differentiator in a crypto industry often plagued by reputational damage and failures.

Architecting the Bitcoin Bridge: Technology and Innovation

Fold's core competitive advantage is deeply rooted in its technology, specifically its platform architecture designed to make Bitcoin accessible and rewarding for daily use. The company's early adoption of the Lightning Network for spending bitcoin exemplifies its commitment to leveraging advanced blockchain solutions for practical, low-cost transactions. This focus on scalability and efficiency is a tangible benefit, allowing for faster and cheaper micro-transactions that are essential for everyday rewards and payments.

The company's platform integrates traditional financial services with Bitcoin, offering an FDIC-insured checking account and a Visa prepaid debit card. This hybrid model provides a familiar interface for users while introducing them to Bitcoin rewards. The "so what" for investors is clear: this technological bridge lowers the barrier to entry for mainstream Bitcoin adoption, creating a sticky ecosystem where users are incentivized to engage more deeply with the platform.

Fold's R&D initiatives are strategically aligned with expanding this Bitcoin-native ecosystem. Management is "devoting significant time and resources to our custody and trading platform," with plans to refine the onboarding experience, enhance funding options (including larger orders via wires), and open the exchange product to non-cardholder customers. These improvements aim to broaden the user base and increase transaction volumes. The company expects these releases to "further enhance our existing market position and drive increased volumes across the platform." While specific quantitative metrics for technological performance are not disclosed, the strategic intent is to improve user experience, reduce friction, and expand market reach, directly contributing to competitive differentiation and long-term growth.

Competitive Dynamics: A Niche Challenger in a Crowded Field

Fold operates in a highly competitive landscape, vying for market share against fintech giants and established cryptocurrency platforms. Its direct competitors include Coinbase Global Inc. (COIN), Block Inc. (SQ), and Robinhood Markets Inc. (HOOD). Fold's market positioning is that of a specialized player, focusing intensely on integrating Bitcoin into everyday financial activities, particularly through rewards and utility. This contrasts with its larger rivals, which offer broader, more diversified financial services.

Comparing financial performance, Fold faces significant headwinds. For the trailing twelve months (TTM), Fold reported a Gross Profit Margin of -438.20%, an Operating Profit Margin of -321.58%, and a Net Profit Margin of -655.72%. These figures starkly contrast with its competitors' 2024 annual performance: Coinbase boasted a 75% Gross Profit Margin and 35% Operating Profit Margin, Block achieved a 37% Gross Profit Margin and 4% Operating Profit Margin, and Robinhood reported an 83% Gross Profit Margin and 36% Operating Profit Margin. This indicates that while Fold's revenue is growing, its operational costs relative to revenue are substantially higher, reflecting its emerging growth stage and investment phase.

Fold's unique value proposition lies in its dedicated Bitcoin-centric approach, offering a simpler interface for Bitcoin rewards and utilization compared to the more complex ecosystems of Coinbase or the broader fintech offerings of Block. Its pioneering role in the Bitcoin rewards debit card and Lightning Network spending provides a competitive moat in this niche. However, Fold lags in overall scale, product diversity, and financial resilience. Coinbase, with its extensive user base and regulatory relationships, and Block, with its integrated payment and crypto ecosystem, demonstrate superior profitability and cash flow generation. Robinhood's intuitive app and multi-asset trading platform offer faster user growth and better financial health. Fold's smaller scale likely results in higher operational costs per user, making it challenging to compete on efficiency with its larger, more established rivals. The company's Price-to-Sales (P/S) ratio of 32.25 (TTM) is significantly higher than Coinbase's 9.36, Block's 2.17, and Robinhood's 11.13, suggesting high market expectations for future revenue growth despite current unprofitability.

Strategic Momentum: Product Expansion and Treasury Growth

Fold is actively pursuing several strategic initiatives to solidify its market position and drive future growth. A key development is the anticipated launch of the Fold Credit Card in 2025, an expansion of its successful Bitcoin rewards debit card. This product is expected to offer unlimited 2% Bitcoin rewards for premium customers and is projected to "drive both new user acquisition and deeper engagement within the Fold ecosystem," given high user interest.

Another significant product is the Fold Bitcoin Gift Card, announced in May 2025 and already available on Fold platforms. Its recent launch on Giftcards.com on August 11, 2025, marks a crucial step in expanding its distribution to the nation's largest online gift card marketplace, with further rollouts to brick-and-mortar retail locations planned throughout 2025. These new products are "collectively expected to drive higher volumes, revenues, and margins," creating synergies across product lines.

Beyond product launches, Fold is investing in its growth strategy through "increased investment into organic and paid marketing channels." This includes leveraging social media and referral programs, alongside increased spending on paid marketing and affiliate opportunities to support new product rollouts.

A distinctive element of Fold's strategy is its Bitcoin Treasury. As of June 30, 2025, Fold held 1,492 Bitcoin in its Investment Treasury, valued at $159.90 million, with 800 Bitcoin ($85.70 million) restricted as collateral for convertible notes. The company views these holdings as a "long-term strategic investment and not as a trading asset." Management believes "existing macro conditions to be favorable towards adding additional bitcoin to our balance sheet at current market prices." Future Bitcoin acquisitions are planned to be funded primarily through common stock issuances via various financial instruments, including its recently secured $250 million equity purchase facility. This treasury strategy not only aligns corporate goals with product offerings but also provides a unique asset base that can be leveraged for financing, product collateral, or income generation.

Financial Performance: Growth at a Cost

Fold's financial performance in the second quarter of 2025 and the first half of the year reflects a company in an aggressive growth and investment phase, particularly following its public listing. For the three months ended June 30, 2025, net revenues increased by 59% year-over-year to $8.18 million, primarily driven by a 61% surge in merchant offers revenue to $7.50 million. Similarly, for the six months ended June 30, 2025, net revenues grew 52% to $15.26 million. Custody and trading revenues, while still a smaller component, showed significant percentage growth, increasing from nominal amounts in 2024 to $241,600 in Q2 2025 and $393,455 for the six-month period. Management views this segment as an "important growth driver for both volumes and revenues going forward."

However, this revenue growth came with substantial increases in operating expenses. Total operating expenses for Q2 2025 rose 129% to $14.50 million, leading to an operating loss of $6.33 million, a significant increase from $1.19 million in Q2 2024. For the six months, operating expenses were $31.09 million, resulting in an operating loss of $15.83 million. Key drivers for this increase included a 333% rise in compensation and benefits (to $3.68 million in Q2 2025) due to increased headcount (43 employees as of June 30, 2025, up from 22 a year prior) and $1.73 million in non-cash share-based compensation. Marketing expenses also surged to $0.62 million in Q2 2025, reflecting planned investments. Professional fees increased dramatically to $1.27 million in Q2 2025, primarily due to costs associated with becoming a public company and ongoing regulatory compliance.

Despite the operating loss, Fold reported a net income of $13.43 million for Q2 2025 and $35.45 million for the six months ended June 30, 2025. This positive net income was largely attributable to non-operating items, specifically a $36.58 million gain on digital assets – investment treasury in Q2 2025, driven by the appreciation of Bitcoin. The company also recognized a $9.61 million loss on extinguishment of debt and an $11.84 million loss from changes in the fair value of convertible notes for the six-month period, highlighting the volatility introduced by its Bitcoin holdings and complex financing structures.

From a liquidity standpoint, as of June 30, 2025, Fold had $6.60 million in cash and cash equivalents and positive working capital of $7.80 million.

Cash used in operating activities for the six months ended June 30, 2025, was $8.95 million, a significant increase from $1.21 million in the prior year, reflecting the higher operating expenses. The company's accumulated deficit stands at $136.80 million. To bolster its capital, Fold secured a $250 million equity purchase facility in June 2025, providing discretionary access to capital for corporate treasury, working capital, and general corporate purposes, including further Bitcoin acquisitions. This facility, along with existing cash and digital assets, is expected to fund operations for one year from the 10-Q filing date.

Outlook and Risks: The Path Ahead

Fold's management remains optimistic about its future, emphasizing continued innovation and expansion in the Bitcoin financial services space. The rollout of the Fold Credit Card and the broader distribution of the Fold Bitcoin Gift Card are expected to be key drivers for increased volumes, revenues, and margins, fostering deeper user engagement and new customer acquisition. The ongoing refinement of the custody and trading platform, including support for larger orders and access for non-cardholders, is also anticipated to be a significant growth engine.

However, the investment thesis is not without substantial risks. The company is "exposed to the market price change in bitcoin," and "negative swings in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our bitcoin-denominated assets and liabilities." Given the significant gains from Bitcoin appreciation in Q2 2025, a reversal in Bitcoin's price could severely impact future net income.

Financing remains a critical consideration. While the $250 million equity purchase facility provides a capital runway, the company's substantial accumulated deficit and ongoing operating losses suggest a continued need for additional capital. The facility itself carries dilution risk, as the sale of common stock to SZOP Opportunities I, LLC, or the perception of such sales, could depress the stock price. Furthermore, the company's ability to fully access the facility is subject to an "Exchange Cap" of 19.99% of outstanding common stock, requiring stockholder approval for sales beyond this threshold. Management implicitly acknowledges this by stating, "Even if we sell all $250.00M of shares of our Common Stock to SZOP under the Facility, we will need to raise substantial additional capital to continue to fund our operations and execute our current business strategy."

Operational risks include the "limited historical financial information" for an emerging growth enterprise, potential delays in product development, and cost overruns. The company also disclosed material weaknesses in its internal control over financial reporting as of June 30, 2025, specifically regarding documented risk assessment and effective controls for accurate SEC disclosures. While remediation efforts are underway with external consultants, these weaknesses pose a risk to financial reporting integrity until fully addressed. Macroeconomic factors, including the evolving regulatory landscape for Bitcoin, institutional adoption, and central bank monetary policies, will also significantly influence Fold's growth trajectory.

Conclusion

Fold Holdings stands at a pivotal juncture, having successfully transitioned to a public company and demonstrating strong revenue growth in its core banking and payments segment, fueled by an expanding merchant offers catalog. Its strategic focus on integrating Bitcoin into everyday financial services, underpinned by technological innovations like Lightning Network support and a robust product roadmap including the Fold Credit Card and Bitcoin Gift Card, positions it as a unique player in the burgeoning crypto-fintech space. The company's Bitcoin treasury strategy further aligns its corporate balance sheet with its mission, offering both a long-term investment and a source of collateral.

However, the path to sustained profitability remains challenging. Significant investments in growth, compliance, and personnel have led to substantial operating losses, with recent net income largely buoyed by the volatile appreciation of Bitcoin. While the recent equity purchase facility provides a much-needed capital injection, the company's ongoing capital requirements and the potential for shareholder dilution warrant close attention. Investors must weigh Fold's pioneering spirit and growth potential in a specialized niche against its current financial performance, the intense competition from larger, more diversified rivals, and the inherent volatility of the Bitcoin market. Fold's ability to scale its operations efficiently, execute its product roadmap, and effectively manage its capital structure will be critical determinants of its long-term success in forging a Bitcoin-native future.