The Pomp Podcast - #757 Earning Passive Bitcoin w/ Zac Prince

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Zach Prince is the co-founder and CEO of BlockFi, an asset management firm specifically built for crypto investors. I'm an investor in the business. I'm a big fan of Zach, and it's incredible what they've built so far. In this conversation, we discussed everything from the Bitcoin reward credit card that they recently launched, to how BlockFi is doing, regulation, and what their future product roadmap looks like. This conversation is packed with information, so I hope you enjoy it. But before we get into this episode, I want to quickly talk about our

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Starting point is 00:02:37 place your bets, and watch the sparks fly with UFC 269 as well. Bet anything, anytime, anywhere with MyBookie. Just go to mybookie.website today. last but not least if you are looking for a job in the cryptocurrency industry whether you're coming from the finance world the technology world wherever you're coming from you're looking for a job make sure that you go to pomp crypto jobs.com pomp crypto jobs.com we've got hundreds of open roles there from the industry's top companies there's been over a couple hundred

Starting point is 00:03:10 people that have already been hired this year one company's hired almost 40 people this year off pompcryptojobs.com. So if you're looking for a job, go to Pomp Crypto Jobs today and you will find the best open roles that you have to offer. All right, let's get in this episode. I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Zach, what's going on? Good to see

Starting point is 00:03:53 you, man. Good to see you as well. I've got two of my brothers, Joe and John here. One of them is having a little issue today. He's eating a whole buffet and got coffee falling out of his mouth. I don't know what's going on, but you got a whole bunch of stuff happening. Let's first talk about the credit card. I've probably told everyone on this show a million times about the credit card. Maybe they hearing it from you would be better in terms of how it works. Yeah, sure thing. So, I mean, if you've been living under a rock and haven't heard where, you know, we were the first company in the world to launch a Bitcoin rewards credit card. This is it right here. I'll see if I can get a little clink sound. You know, it's a nice metal card. Um, this is the world's

Starting point is 00:04:30 first card that lets you earn Bitcoin instead of regular cash back or airline miles. So, uh, you get three and a half percent cash back on in Bitcoin for your first 90 days of having the card one and a half percent cash back on every purchase after that. And there's a bunch of other benefits across the platform. You get rebates on your trading volumes, you get higher refer a friend bonuses. And actually right now through the end of the year, we're running a promotion where if you sign up for the card and make your first transaction before the end of January, we give you 75 bucks on our platform that you can use to buy Bitcoin. So the card's been live since the summer. I've got some interesting stats to share with you, but

Starting point is 00:05:11 that's the card at a high level. It's still really the only premium card in the market right now that lets you, you know, spend credit and earn Bitcoin. So I went back and I looked at the rewards that I've been earning and you're going to correct me if I'm wrong here, but I think you earn, what is it? Three or 4% for the first like 90 days and then one and a half percent after that. that's right three and a half percent for the first 90 days one and a half percent on every transaction after that okay so those numbers they seem like kind of what i would consider normal credit card type returns maybe on the higher end of a normal range but you get paid in bitcoin obviously bitcoin's price has gone up especially since over the summer when you guys

Starting point is 00:05:46 launched it and so at one point i went and i looked and i had earned eight percent back on my purchases and i was sitting there thinking to myself like damn every time i swipe this card if i just keep thinking it's going to be some big percentage whatever the percentage ends up being 5% or, you know, 25%, I'm going to spend more money. Like this is a problem. And what I realized was there's really no other way to get outsized kind of rebates or rewards other than you get paid in an asset that then appreciates in price, right? Like this has to be on the actual, like almost like real return basis, the highest reward credit card if Bitcoin continues to go up over time, right? Yeah. I mean, look, it's, it's changing the game, earning airline miles or

Starting point is 00:06:30 cash back. You are guaranteed that over time, those rewards that you're getting are going to be worth less. And, you know, I believe, and I know you believe that if you're earning Bitcoin regularly and you have a long-term, you know, time horizon, the Bitcoin is going to be worth more. So, you know, what that translates into for our cardholders is exactly what you described. Yes, it's a three and a half or one and a half percent rate like the day that you make the swipe. But over time, it becomes a much higher effective cash back rate as Bitcoin appreciates in value. So, you know, people are catching on to this. Like we've done a few surveys with our card holding clients and we've gotten some interesting data out of them.

Starting point is 00:07:13 First off, in six months since we launched the card, we're already on track for folks to spend two billion dollars on the card in the first year. And already we've provided over 200 Bitcoin in rewards to our card hodls, which is over $10 million at the current price. Furthermore, 90% of the folks that have the card are still holding on to every Bitcoin reward that they receive. So we're enabling folks that want more Bitcoin to get it. They're holding on to it. we're also making it easy for folks to come get their hands on Bitcoin when maybe they haven't been as active in the market before and they're looking for an easy way to start earning Bitcoin. So we found that over two thirds of our cardholders are spending less on their traditional cash back cards. And 50% of the folks that have the BlockFi card

Starting point is 00:08:06 are using it for more than 75% of their transactions now. Wow. So, all right. Do you guys release how many cards are actually out in the market yet? Like, what's the last public number you've released? We're at about 75,000 cards at the bottom of the funnel, meaning somebody has received the card, activated it, and already made a purchase. Okay. So we've got 75,000 cards kind of in people's hands, maybe is the way to kind of talk about it. And they're on track to spend $2 billion through this card, which for people who don't know, uh, what it, from like a visa perspective, that's a great launch. That's a, like a market leading one. Is that average? How does that stack up against other types of cars

Starting point is 00:08:47 that they've done? Yeah. Visa has been blown away. Our bank partners on the card have been blown away. It's like the, they've called it the most enthusiastic credit card launch that they've ever seen. Um, and you know, that's because folks understand the value and they similar to you, once they get the card and start using it, they see the Bitcoin price go up, they do the math and they get really excited about it. I mean, I know personally, I'm doing all of my spending, you know, on this card now. And it's been a tremendous launch, you know, an average premium credit card monthly spend, MasterCard or Amex is around 1500 bucks. Right now, the average monthly spend on a BlockFi card is about 3000. Got it. And then talk to us about this number, like 89, 90%,

Starting point is 00:09:33 I think of people have not sold the Bitcoin that they've earned. John and I were talking about it earlier. We were just blown away by how big of a number that is. Like, what do you think feeds into that? It's just Bitcoin holders in general tend to hold it. It's all the training that you and your brothers give people watching the show. Hang on to your Bitcoin. But the other thing is, you know, what BlockFi is probably most well known for is our interest account product. We were one of the first places in the world where you can hold Bitcoin on our platform and earn interest on your Bitcoin in Bitcoin. So folks are earning these rewards from spending on the card. That Bitcoin then goes into their interest

Starting point is 00:10:08 account product and compounds even further because as your Bitcoin balance grows, you earn more interest on it in that account. So, you know, the general behavior that we see on our platform is folks are net buyers of Bitcoin. They want to accumulate more Bitcoin. And this card is really just helping facilitate that, um, and accelerate the trend that was already in place with our clients. Okay. And then talk to me about the difference between a personal credit card and a corporate card. These are only for individuals today, or can businesses also get them? Right now it's just, uh, for individuals. Um, hopefully, you know, by the midpoint of next year, we'll have an option where you can get a card in the name of, uh, your business.

Starting point is 00:10:47 Awesome. Uh, and Joe, John, what questions do you guys have in terms of the credit card? and kind of this launch. It's just absolutely insane when you start looking at these numbers. Is there a wait list for the card now or no? No, there was a wait list before launching. But if you hear anyone say, oh yeah, I was on the wait list.

Starting point is 00:11:05 You know, I don't know when my card's coming. The wait list period is over. In our app or on our website now, you can, you know, two, three clicks, actually apply for the card, get approved and then receive it, you know, in the mail a few days after that. Gotcha.

Starting point is 00:11:20 Can you talk about the different rewards? So can you get you can obviously get Bitcoin in return? Can you do cashback? Can you do other cryptocurrencies? And then like, what are people using it for? Yeah, so you can you can select to earn your rewards in any of the cryptocurrencies or stable coins that are supported on our platform. So if you decide I'd rather be earning Ethereum this month or, you know, Uniswap or Litecoin, or actually if I just want, you know, to increase my cash balance on the BlockFi platform where I earn 9% on the cash that I hold in the form of stable coins at BlockFi, you can do that as well. We see the vast majority of people just stick with the Bitcoin option. But we launched that, you know, Flex Rewards feature about six weeks ago. So, and I think around 15% of people have elected to, you know, get the rewards in a different currency than Bitcoin so far.

Starting point is 00:12:12 So I've got a bunch of questions coming in from the chat. I'll just kind of fire them off at you and you answer. First is US versus international markets, the card itself, where is it available? And if it's not available in some markets, do you have any sort of timeline for when that will become available? Yeah, so it's only available in the US market today in every state except New York. We intend to launch a card that will be available outside the U.S., probably starting with Canada and as many Western European markets as we can get in the second half of next year. Got it. People are asking in terms of interest rates in the interest bearing accounts.

Starting point is 00:12:49 Help folks understand. Actually, this is one of the biggest misconceptions is how those interest rates actually get determined and why they are variable in nature. Sure. So if you go to BlockFi.com slash rates, you can always see our rates. We only change the rates on our platform once a month, which is very different versus like DeFi, for example, where the rates are variable 24-7 and could increase or decrease in a short amount of time. So we change the rates once a month and we set and manage the rates based on market conditions. And the market conditions in this context is really the institutional and retail borrowing market for dollars and for cryptocurrencies. So directionally speaking, when the cryptocurrency market is bullish, we see a greater demand

Starting point is 00:13:42 to borrow dollars. And when the cryptocurrency market is bearish, we see a greater demand to borrow cryptocurrencies. currencies. So you'll see us, you know, directionally speaking, when the market gets really bullish, decreasing the rates we offer on cryptocurrencies and increasing the rates we offer on dollars. And when the market gets bearish, the reverse, you'll see us decreasing rates on dollars and increasing rates on cryptocurrencies. Yeah, it makes a ton of sense. There's some questions around when people will be able to pay off the credit card balance using USDC or other stable coins versus fiat? Yeah. So let's talk about the roadmap for the card. So the card is

Starting point is 00:14:18 great already, but we have a lot of new features that we want to introduce on the card. And we're hoping to knock all of these out in the first half of next year. The three new things that we want to introduce to the card are a merchant partner program where you'll get a higher cash back rate at select uh you know premium merchants that want to you know advertise to uh you know our universe of of cardholders so imagine instead of getting one and a half percent cash back at um you know best buy you're getting ten percent cash back uh or at amazon you're getting five percent cash back not to say that those are specific retailers that will be coming out with but that type of concept so higher cash back rates at select merchants is coming um being able to pay

Starting point is 00:15:05 off your balance with stable coins that you hold at BlockFi is coming. And we're also planning on launching a roundup feature where if you want to, you can select an option to round up every transaction that you make on the card to the nearest dollar and have that roundup amount also get converted into Bitcoin on your regular reward cycle. Yeah, it's pretty cool. Once you have the card in people's hands, how quickly you can iterate and kind of add all of this functionality. And obviously, as an investor in the business, I'll say it, I don't know if you're allowed to say it, but you just make it better and better over time, right? And it's like, if you keep doing that, then it serves customers well. There's a ton of people asking about

Starting point is 00:15:45 regulation. I'm gonna leave this as open-ended as I possibly can and just let you take the floor. But what's going on from a regulatory standpoint, at least what you're allowed to say publicly? Sure. I mean, look, obviously, we're in a massive education period and a very critical moment in time for not just BlockFi, but the broader crypto industry in terms of regulation. We've seen a hearing at the House. We've seen a hearing at the Senate. There's questions about stable coins. There's questions about whether our interest account products or things in the DeFi market are securities or not. And, you know, we're kind of at the forefront of receiving some regulatory attention and working to, you know, help protect our clients, you know, right to

Starting point is 00:16:32 earn interest on their on their cryptocurrency and stable coins and, you know, on the BlockFi platform, leveraging our, you know, risk management and kind of trusted brand that we've built up over the years and also trying to work with regulators to help them understand what's going on, you know, create appropriate structures. And it's not the most fun part of my job, but we are making good progress and I'm feeling optimistic. For anyone that wasn't, you know, following along in the news, this past summer, about five months ago, BlockFi received a cease and desist order from New Jersey and then followed by a couple of other states suggesting that we need to stop signing up new clients for our interest account product. Fortunately, as a result of the

Starting point is 00:17:20 conversations that we've been having with regulators, none of those orders have gone into effect. And I'm really confident and hopeful that early next year, we'll be able to come out and talk publicly and share information with everyone in terms of what the conclusion will be on these regulatory conversations. But in any case, BlockFi's objective is to do what's best for our clients. We think that means protecting and advocating for their right to earn interest on cryptocurrencies, we think we can do that in a safe, sound and perfectly compliant manner with any and all existing regulations. And that's what we're working on. But this is an interesting moment in time. You know, I'm sure I'm sure you all talked about

Starting point is 00:18:02 what's happening at these hearings. And, you know, ultimately, I think there's a positive element to all of this, which is that, hey, this industry that, you know, we at BlockFi, you, Pomp, and so many others have, you know, been working so hard on building and growing and advocating for is now big enough that we're getting this, you know, federal level attention in the U S there will be some things that change. There will be some clarity provided. Uh, and what we're fighting for is, is to make that as, uh, you know, constructive and positive for the industry as it possibly can be. Yeah. I think your, um, kind of insight into the idea that, uh, one we've gotten to this point, like that's pretty incredible, uh, is, uh, often lost in the conversation. Uh,

Starting point is 00:18:46 And then two also is I do think that you bring somewhat of an optimist view to this where a lot of people bring a pessimistic view, which is when there is a conversation, which essentially is happening right now among almost every single one of the largest companies in the industry, from what I know, and regulators or politicians, even central bankers to some degree. You can either look at it as an opportunity to educate or you can look at it as an opportunity to be attacked. Right. And I think that those two different mindsets will ultimately determine how a lot of people kind of, you know, interact here. And, you know, frankly, I'm pretty bullish on the people who are educating because we've seen in some of the recent hearings politicians, you know, two, three years ago, the questions from an accuracy standpoint and maybe an enthusiasm standpoint don't look like they look now. Right. I think now is people kind of say, hey, you know what? Like, I think I tweeted. I was like, I think these people are going to get kind of red pilled, like they're going to see like, oh, wait, this is what these technologists see as an opportunity. And it just takes time. Right. So I think that's awesome. And you guys are doing great work there. Look, at the end of the day, at the end of the day, optimism, forward thinking and technology win.

Starting point is 00:19:56 Right. We can think that we're playing a game of cops and robbers. But the reality is, like in America, we're all on the same team. And crypto is not an issue that's about Democrat or Republican or, you know, is it good or is it bad? It's here. It's not going anywhere. It's a new technology, just like every other new technology that we've benefited from so greatly in the U.S. in terms of having the biggest companies built here and, you know, our economy helping to facilitate these things. We should be doing that with crypto. And that's a message that I think everyone gets. It's just a matter of education. But I agree with you. Like three or four years ago, if the conversation even happened, the questions would be so outlandish and reflect a fundamental misunderstanding. Now there are legitimate advocates across many parts of government who are very well educated.

Starting point is 00:20:48 There's a lot of people still on the fence, still educating themselves and trying to develop their view. And there's a few that are just out in left field. But that's the minority. uh, you know, and, um, we're, we're going to end up in a good spot and the industry is going to keep growing. Yeah, I completely agree. I've got two more questions for you and then we'll let you go. Uh, first is, uh, you guys, when you launched this credit card had a massive marketing campaign, billboards, airports, you know, bus, I mean, just everything. It seemed like a block tie was everywhere. Uh, I think one of the things that has changed is that one companies are big enough to do that too. They're sophisticated enough. How did you guys think about, you know, should we just

Starting point is 00:21:23 like run Facebook ads versus do what's more of kind of like an analog marketing campaign like that. And then how do you think of that marketing campaign as part of the success? Like how integral was it of the card success that you've seen so far? Yeah. So generally we try to be super data driven in our marketing, which generally means less, you know, out of home advertising and more kind of, you know, digital channels where you can measure things really effectively. We were just so amped up about the credit card launch and wanted to kind of, you know, poke fun at that airline miles that we were like, we're going to, we're going to test the big out of home campaign at airports and, you know, train stations. And, you know, the direct data that we gleaned from that

Starting point is 00:22:04 doesn't really, you know, didn't really support us continuing to do it at large scale. But I'm sure there was some, you know, qualitative brand effects that, that we got from it that, you know, are hard to measure, but, but really valuable to, uh, to our business. For sure. And the last question is a lot of people are asking, uh, we talked about kind of what's coming for the credit card next. Are there other products, other services, things that you're thinking about for the overall business? If you kind of just zoom out and think of the BlockFi business in totality,

Starting point is 00:22:31 what else is coming in 2022 or 2023? Yeah, sure. So, I mean, look, our, our big focus is, uh, on the retail side of the platform is, um, payments. Uh, that means a few things, enhancements to the credit card product, launching a debit card product and adding more payment channels so that our clients in the U.S. or around the world can more easily move money onto and off of our platform. And then on the institutional side of our platform, we're really focused on trading. We expanded into real-time spot markets this year. We'll be adding derivatives next year for our institutional clients. Maybe

Starting point is 00:23:07 some of that will trickle through to the retail platform. We're going to be adding a lot of cryptocurrencies that folks can trade early next year. And I think we'll be doing some interesting things with kind of crypto native functionality like staking and potentially even DeFi over time. So there's no shortage of things to work on. So I used to say all the time, long Bitcoin short the bankers. I feel like now I should be like long BlockFi short the bankers as well. I feel like you guys have now entered into that realm. So I'm obviously a huge fan of what you guys are doing and it's been pretty incredible to watch this whole thing get built you guys are doing a great job and we'll definitely have to bring you back again as you continue to

Starting point is 00:23:46 progress where can we send people to find you on the internet because my favorite thing by the way hold on i actually got to tell this to you i'm going to say this publicly my favorite thing that zach tweets is when prices go down book it 25.25 bitcoin for sure i know this every time i stole it from you, Pomp. I'm still trying to find this. Yeah, that's my Twitter. I'm at BlockFiZack. Our corporate handle is at BlockFi. BlockFi.com is the website. We're in every app store with the BlockFi app. I still want to find this video, Pomp. Y'all need to get your research team or, you know, one of your brothers to find the CNBC video. We have it. You have it? Yeah, we'll send it to you. We have it. I'm waiting. That's what I'm thinking of every time. You went

Starting point is 00:24:31 on cnbc we were coming from like you know we were somewhere on the path from 20k down to 3k and and they were and you were just like i'm buying it i've been buying it all the way down i'm going to keep buying it no matter how low it goes and they were like oh really pop all the way down and you were like all the way down there's like laser you know it's like all the stuff and uh how did i think of but look i'm from before i started blockfi i i view this as a long-term asset that's going to produce tremendous risk-adjusted returns. The data proves that out. Before I invested, since I've invested, you don't have to overcomplicate it. If you just buy and you can be strong enough to not freak out when the inevitable volatility that this asset

Starting point is 00:25:18 class has comes around, you're going to do phenomenal. And one way I try to remind people of that is just like in those moments where you might be getting a little nervous, I'm like, i'm buying that that tends to be a pretty good time right when prices go down that there's uh somebody who once told me like uh maybe it was uh mark yousko i forget who told me this but uh they said uh never sell on big days down right like like the panic sell like if it's down 10 percent like that's a clear signal like you're not allowed to sell today right and in fact it's probably don't sell on down days and don't buy on up days exactly you got it man all right listen thank you so much for doing this if uh folks haven't gone and checked out the blockify credit

Starting point is 00:25:57 card. I've dropped the link in the chat. Go check that out. And Zach, we'll definitely have to bring you back in the new year. So if we don't talk, have a great holidays and long BlockFi, short the bankers. Thanks for having me, guys. All right. Later, buddy. Happy holidays.

The Pomp Podcast - #757 Earning Passive Bitcoin w/ Zac Prince

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