Hey, Ozzy Osbourne, and we are about to go on the crazy train talking about preferred equities and Bitcoin-backed securities and MSTR and Bitcoin and all of these fun things.
We have got the, we've got a crew tonight. We've got a bigger crew than usual, and we're going to have the team just popping in because everybody's got opinions.
Things are, a lot of things are happening right now and a lot of things to talk about.
So without further ado, we're going to get into it.
And so today's agenda, we're going to talk about MSDR leverage update, Q2, Q3.
We're going to get into this stretch presentation, which will probably be a majority of the time.
Quintuple threat ATM, Bitcoin back fixed income.
Where is the market going?
What does this look like?
Bears versus bulls, the sentiment right now.
And we'll do a little pulse check on what's going on.
And then BTC treasury company landscape, because we've got some unique perspective that we haven't had in the past and it's going to be a good time.
And we've got the youngsters up in the right hand corner already giggling, having fun by the scenes.
I think they're going to be roommates. So, you know, who knows what's going to happen there?
That'll be interesting. And yeah, if this is your first time listening to True North, the investment grade Bitcoin podcast,
we are here to talk about everything that's happening on the nice edge, the bleeding edge in the Bitcoin treasury landscape.
the evolution of securitized finance with Bitcoin and everything on that front.
So without further ado, I'll pass it over to Tim for some not financial advice.
All right. Happy July, everybody. Almost August.
What you're going to hear tonight may be amazing, but it's not financial advice.
Stock market at the all-time high, Bitcoin near all-time highs.
Back to you, Jeff.
Thank you, Tim. Yeah, we've got a unique time in the world right now. Everything's at all-time highs. SP500 is at all-time highs. QQQ is at all-time highs. Bitcoin is playing around with all-time highs. And it's almost like Bitcoin has seemed boring at $118. Not a lot of people are talking about it. It's like the price of Bitcoin went up.
and it's surprising how comfortable everybody feels
and it's not just like euphoria that I was expecting.
So it's a bit of a unique time in this space.
I know there's a lot of bears in the space
talking about MSTR, its relativity,
IBIT and how that's performing.
And maybe we'll get into it.
We'll talk about it a little bit, MNAV expansion.
I know Dan's got some opinions on IBIT calls,
which has gotten some attention in the market.
And yeah, we'll go through it.
So without further ado,
we will jump into the weekly financial leverage update.
And I will share my screen.
We go through this every week here.
So this is the financial leverage.
So what this is showing is MSDR's assets
relative to its liabilities on its balance sheet
and how the assets compare,
and what is the leverage ratio?
What is the effective credit rating of the balance sheets?
We're looking at the goal of showing this
is to show the financial strength of the company
and its ability to pay out its liabilities into the future.
So starting here, 723.25,
strategy now holds 607,770 Bitcoin.
At the beginning of 2025, they held 446,000 Bitcoin.
Today's Bitcoin price about $118,750,
might be a little bit lower than that.
So assets held, $72 billion of assets held.
And you look at the beginning of 25,
there were $41 billion of assets held.
So nearly doubled the amount of assets held
in almost seven months.
It's an incredibly strong financial position.
Strategy has $8.2 billion of debt on the balance sheet
and then $3.5 billion of preferred stock outstanding.
So the net capital held on balance sheet is $60 billion.
To put this into perspective,
I think this is about 180th largest company by market cap.
If you were to compare the size of that, just the net capital, like the actual financial strength held on the balance sheet.
If you were to compare that to the market cap, which is a, you know, a valuation metric to other companies in the market,
it would be around, you know, 170th largest U.S. company in the market.
So this is a very significant position.
And thinking back to my past life in the reinsurance world, $60 billion would be like the second largest reinsurance market in the entire globe.
And I used to work with 100 different counterparties.
So thinking about the relativity here, this is enormous.
This is so much money.
This is so much collateral.
It's hard to kind of wrap your head around it.
So when you look at the balance sheet and the strength here, you've got $72 billion of assets.
You've got, what is this on a combined basis? $11.7 billion of debt, if you assume the preferred stock is technical debt.
And so that gives you a liability to asset ratio, a leverage ratio of 16.3% and the debt coverage multiple of 6.1%.
But what do we know? We know that $3 billion of the debt, the convertible debt, is currently trading as equity because it is trading significantly in the money.
And if you were to, on a pro forma basis, pull that debt off the balance sheet, the leverage
ratio is actually 11.8% and a debt coverage multiple of 8.5.
So effectively, the Bitcoin price can fall.
In order for the assets to be worth less than the liabilities, the Bitcoin price can fall
to $14,000 or effectively an 88% drawdown from here before there's any potential concerns.
And it's got to, not only does it fall, it's got to stay there and stay there for an extended
period of time.
So we like to show this at the beginning because this just lays the stage here.
A lot of people are bearish right now, but you zoom out and you look at the financial
strength of this company and they are the strongest financial company by far.
If you just look at the relativity of the assets relative to debt.
And certainly the strongest Bitcoin treasury company, and they have more Bitcoin than the
the next closest company by 11 times and continuing to extend that lead.
You think about strategy purchased almost 6,000 Bitcoin last week.
That's more than a majority of the Bitcoin treasury companies that are in the
space. So a lot of positive things on the horizon.
And this financial strength is you can't ignore it. This is huge.
And I'll pause there. Anybody else have anything to add?
No.
you know i'm looking forward to getting into this yeah okay i'm a i'm a vol junkie so i'm like pump
those numbers up like i like the funny more strings but yeah i want a little more leverage
give me more leverage i think that's why you're seeing these new instruments come to market right
they've they've gotten to a 16 leverage ratio and they identified that the convertible bonds
aren't the most effective form of leverage because it's a significant amount of dilution right away
and you have these vol junkies that are trading and are being the convertible bond and the stock
back and forth every day. So it's a significant amount of volume and algorithms that are trading
within the market. So now you're seeing the innovation here by finding these different
capital pools that are going to hold these products long term, whether that be the retail
market or pension funds or banks or anything like that. And that innovation is leading to
more effective leverage.
And it's
difficult to get those numbers up, right, as they're
continuing to add more assets to the balance sheet.
They're
providing these new products and their ability
to issue more of these is a function
of what the market can bear.
Yeah, and
I kind of thought
they were going to do the
ATM on the common, and that
was good because it was accretive.
And we got the convertible bonds, and that
was good because it was accretive.
And then we got the preferreds and those were good because it was even more creative.
But I think what I was thinking was going to happen was just rattling off a bunch of more convertible bond deals.
And we were just going to see this leverage ratio shoot up.
But it seems like it's maybe going to be more of a slow grind.
They're going to ramp it up, you know, 12, 13, 14.
So I'm not sure if we're going to see the vol spike.
say that i didn't broke up there yeah yeah i'm not sure if we're gonna see like this massive vol
spike without a pump from bitcoin itself i mean unless they can just get these rolling super like
faster than we imagine they're going to get you know the liquidity rolled out
i don't think they can go ahead go ahead go ahead yeah no i don't think they can they want to roll
at the converts quickly right now, just because you have to balance it out with the short interest
it's going to create on the equity itself. So they want the volatility, they want the extra
leverage, but if it's going to come at the expense of increasing short interest, they really do have
to weigh that out over time. And I think to your point, they could be waiting for Bitcoin to ramp
up to give them that volatility spike, which is in all likelihood going to happen before the end of
Q4 this year. We're probably going to see a new all-time high, a decisive all-time high in Bitcoin
before Q4. And they may be just spitballing. They may be weighing the risk of
the potential short interest that would create by issuing you converse at this time.
So it's a balancing act. They want the volatility, but if they're going to get a volatility spike,
and then it's just going to subside, and then they have all that additional potential short
interest i don't know if it's necessarily worth it at this time without seeing what bitcoin is
going to do first that's just what i'm guessing yeah if the volatility is volatility is vitality
though i think we need that leverage to be higher to really we need speculation you've got people
that are shorting stock relentlessly uh that are speculating that this isn't going to continue to
exist so you need kind of this perfect storm of all of these things happening in the market and
people getting caught off sides right but volatility is vitality but we remember we can't dictate the
direction of that volatility so that's true inadvertently create a situation where there's
more volatility to the downside versus it being a balance and and that's kind of what i'm getting at
um if the new bitcoin cycle does what we think it's going to do and we're at what 150 175 by
october or something like that right their their situation looks decidedly different the stock price
is going to react it's just a matter of how much it reacts and i think if we do see a decisive
outbreak in bitcoin that isn't like you know us going from 100 to 110 then 110 to 120 but if we
see something like a 120 to 140 120 to 150 i think that's when the volatility spike will happen and
they probably assess things a little bit differently right now i just think if they do a convert of any
size they're just going to disproportionately increase short interest on the stock without
having that bitcoin breakout um but again i'm sweet balling i don't i don't know better than
what they're doing i'm just saying what i think could be happening yeah they could be just done
with the converts completely and we just got to wait for the preferreds to ramp up
yeah and after watching the year-end review video and the stretch ipo video i mean they're
done with the conference they've literally said them are they said it so strife will be the top
um highest in the capital stack instrument and the rest will be junior to it so 100 and on the
volatility thing i think that's wicked important like the volatility the whole thing with bitcoin
that's so so valuable this idea that volatility increases as the price increases that's why we
see these big bubbles, these big spikes. That's why trading is so cool. That's why options behave
in such an incredible way. And I think it's really important that strategy continues to maintain that
high leverage ratio in order to have that upside volatility spike. And that's why I've been vocal
about the ATM being kind of a thing. But recently, the dynamics are such that the upside volatility
has been limited due to certain periods of ATM issuance, which I believe to be kind of the reason.
But whereas downside volatility has been extremely steep as a result of it falling in line with
bitcoin which is good you want that downside volatility you also need that upside volatility
i think that would be extremely help it would be helped a lot by having more leverage ratio and i
think they're trying to do that the other thing i give them a lot of credit they're issuing as much
press as they can as fast as they can leverage ratio up right now they're limited by liquidity
and that's something we can only wait for the liquidity will build we will push these prefs
and it will will come but um you know that takes time and they're not going to do conference so i'm
totally cool with that i think things are going well for the prefs and i think stretch which we'll
talk about in a second is the next step and probably will likely be the single most important
product in their entire account like by orders of magnitude more than any other products like
far and wide we can talk about that in a second yeah i mean i like the evolution um you know with
the with the press i think probably being the most accretive solution that they've come up with
so i'm definitely down with that and and if we were headed into a bear market this leverage ratio
would probably be the perfect you know way to go but um if we got a couple of more spikes in bitcoin
left in in this cycle i just i need some more juice 100 and i think everyone's thinking the
same thing and that's actually not really good for the common because we need that ecosystem to be
working on something adrian said a lot too we need the msty ecosystem to be working we need msty to
blow out the key is we need vol sellers to get smoked on an upside move key here because that's
the only way to maintain unpredictability in the stock price and performance which which is
unpredictability is just another word for volatility which allows the options premiums
to be extremely high we need them to be 1.52x that of bitcoin we need the iv to be that high
relative so you need to blow out the long or the short call holders so i think it's really
really really really important for the future of mstr for the next during the next movement bitcoin
mstr has to smoke the call sellers so it has to be in volatility and the only way for mstr is
volatility to expand to the upside during a rally in bitcoin is for the mnav to expand that is the
single only way for volatility to increase on the upside is the expansion of mf we've seen the
contraction m and that's decreased that's increased volatility on the downside we need it in both
directions for it to can you to be a viable product yeah well so i i know what i'm going to
say people disagree with but i think that um so the reason why i keep saying that m nav is is highly
sentiment driven and it's a sentiment indicator and it's not something that can be levered up or
levered down or be allowed to run is because in my view if volatility is vitality then sentiment
and subjectivity is a fuel for reflexivity.
And what I mean by that is the market sentiment
is what's going to drive the MNav.
That's what's going to drive it higher.
And the sentiment is going to shift
when broader macroeconomic trends shift,
which they have been.
We are seeing more clarity with regards to tariffs,
probably.
We're seeing more liquidity come into the market.
All of that's going to have an effect on sentiment
and all of that's going to have a downstream impact
on Bitcoin and on MSDR.
are. And I think that people are trying to treat MNAV as a lever when MNAV is a function
of the market. It's a multiple, right? So because it's a multiple, and if we just think
about the market and just think about all the market as a whole, what justifies a multiple?
I always challenge people to try to justify multiple without sentiment and without future
expectations And all future expectations are is sentiment Even algorithms when they they trade the market as someone that actually designed or written algorithms and I went to school for it I know for a fact that algorithms react to the market They don lead and push the market So everything is downstream from
sentiment and then from liquidity and then from broader macroeconomic conditions. So we just need
to just let the market play out. What we're seeing right now, we had that run up in November.
We went to 543 and you saw things slam down, right? And everyone started talking about the
nav and everyone's talking about atm again but no one paid attention to the fact that global
liquidity went off a cliff at the end of november and we're seeing global liquidity trend back up
right now and the trend is slowly but surely taking up and bitcoin tends to lag that so in my
view i think dan to your point m nav absolutely needs to to expand but it's not something that
that strategy can teeter up and teeter down by issuing the atm on the preferreds versus the common
if we have enough sentiments we have enough volume and we have enough liquidity it's not
going to matter what they do the market will take care of the rest yeah i mean all right jack go ahead
i just there's a few things going on in the market right now right we're in the middle of
summer we're in the dog days of summer right this is generally the least liquid time in all
public equity markets sideways summer sideways summer it's just it's just the way it goes it's
It's the least liquid time.
All of the rich people that manage money are out of their Hamptons house.
They're out at the lake.
They're driving their boats.
They're doing things with their families and their kids.
They're doing summer camps and all those things.
People generally aren't working in a summer.
I'm going to throw that out there.
Two, we're also coming on the single largest catalyst probably in MSTR's history with their earnings report.
their Q2 earnings report. This is the first time in history that they're going to post a positive
earnings report as a result of FASB fair value accounting. And the number is absolutely massive.
Like their largest earnings report ever in company history was like $400 million. And that was in
21 as a result of some of the Bitcoin accounting. But now we're talking about a 10 to $11 billion
dollar net income and that's going to be announced in the end of this month seven days from now
and that's going to create significant buzz it'd be the first time qualifying for the s p 500
technically after an earnings report and there's going to be people that are going to turn their
heads to this and i i personally think this is this is an enormous event that is on the horizon
that is going to change the narrative and the landscape of the space does it reprice instantly
No idea. I don't think so.
But it's the continuous noise.
It's the news cycle.
It's getting in front of people.
It's like, oh my God.
Everybody here on Twitter,
everybody following us right now,
watching this video,
everybody in the X space
thinks that the entire world
knows what's going on here.
The reality is 99.99% of people
have no fucking clue.
They have no clue.
Like, go talk to somebody about this stuff.
Nobody has any idea.
You talk about Bitcoin back credit.
Nobody has any idea. You talk about BitBonds, you talk about MSDR, right? 99.99% of people have no
idea what's going on here. And that's going to change. And what is the catalyst to make a change?
It's an enormous earnings press release, right? It's not MetaPlanet, you know, adding 5,000 Bitcoin
to their balance sheet. I love MetaPlanet, but it's not them adding 5,000 Bitcoin to their balance
sheet, it's strategy posting a $10 billion gain in a single quarter that blows out 99.5%
of the companies in the entire United States. Where did that come from? That's this kind
of Adrian, to your point, this like sentiment driver, like you're going to have new buyers
coming to the scene here as a function of this. And I think that's where some of this
happens, right? Like think about back to November and QQQ, right? There was a ton of excitement.
apparently a ton of people bought the top because people are big people are big men and you know
what actually i'm i did a little analysis maybe we'll start with this before we go into the stretch
presentation so this is uh this is the number of days uh that's in the last um
within the last 1244 trading sessions there have only been 30 days that have closed above 400
So all of those other days, if you would have invested in all of those other days, you'd be in the green.
So, you know, we're talking, what is this?
2.4% of the trading days in the last 1,244 trading days.
This isn't Bitcoin, right?
Buying an MSTR is not Bitcoin, right?
If you just want Bitcoin exposure and one Bitcoin is one Bitcoin, then just buy your Bitcoin and get out of here.
If you're buying a publicly traded equity, it's not going to have a 100% correlation to Bitcoin.
It's not Bitcoin.
You're buying a company that is collateralized on Bitcoin and has the largest Bitcoin back balance sheet in the entire world.
That's what you're buying. And what can they do with that? What's the optionality that they could do with that?
That's what you're buying. And I think people are confused by that.
You look at the daily price. Who cares? Who cares?
This is a fundamental change in how companies can be designed and capitalized into the future.
I say this story all the time. I don't want to be that uncle or that grandparent that sold Apple in 1989 when you could just hold it forever. And I think people are very short-sighted and not necessarily thinking about the magnitude of this story and how big this is.
I agree because people, I think the mistake people are making is that they're trying to act like this is a 2x ETF on Bitcoin. It's not. It's an equity and it's going to move the way an equity moves. And it's not guaranteed to give you 2x on every single day of Bitcoin's price movement. It's designed to give you 2x or more over time.
Bitcoin. So when people talk about, well, for the last one month, three months, six months,
it's been underperforming Bitcoin. My response to them is, okay, it's not supposed to track 2X
like a 2X ETF. So it's the performance over time. And when you go over nine months to a year to 18
months and so on and so on and so forth, it's outperformed by hundreds, if not thousands of
percent. So I think you're right that we have a lot of people that bought the top in November
or near November and they're pissed, but that's with any equity. People bought NVIDIA earlier
than me and I'm not pissed at them. So I don't really look at it in the same fashion. I'm looking
for a longer term investment that I hold. And that's what I've been doing. And I also think
that if my DMs are any guide, a lot of people are getting blown up on options still somehow.
So we have a lot of people that are rather pissed off with how the market's going because of how
they're acting in the market. Yeah. And to that point, Adrian, I did some math here just to show
some perspective and we'll go 275. Right. If Saylor comes out and says, hey, MSTR is going to be
2x Bitcoin on the year. Right. Okay. So if it's going to be 2x or 3x Bitcoin on the year,
what does it look like on the daily? Right. If you average this out of the time and I just took
365 days throughout the year and just say, okay, well, Bitcoin is going to return 17 bps a day
percentage gain going from 66,000 to 121,000, just give or take, right? That size and scale.
And to where MSTR is today was a 408, I don't know, it's 412, 415, something like that.
Starting at $150, that's 28 bps. So on a daily multiple, it's supposed to be about 1.6
in order to get to 2x Bitcoin on the annual basis.
So people that are thinking it's like it's 2x on the daily basis.
Again, you also have a non-correlation, right?
It's what is Bitcoin and MST are what, like 75, 80% correlated?
It's been between 0.69 and 0.81.
Okay, yeah.
Okay, about 70 to 80% correlated.
So it's not going to be one-to-one.
Again, why is that?
because there are different capital providers that are buying these equities in passive ways
that are accessing this capital differently, right?
You've got people that are buying QQQ.
Anybody that buys QQQ or sells QQQ, anytime there's a transaction there,
they are selling, if they buy QQQ, they're buying MSTR shares.
That is no pressure on Bitcoin, right?
It doesn't impact Bitcoin at all.
If they're selling QQQ, that has impact on MSTR.
So you've got all these different buyers that are passively buying and selling MSTR via algorithms.
And that's what breaks the correlation between the two.
So if you're expecting them to be daily, you know, 100% correlated, you got to wake up to the fact that they're not.
They're not daily 100% correlated.
It's just not the way it works because there are different buyers buying the different instruments at different times in the market.
And, you know, I think that might make sense to bring this up as well.
is this concept of like the algorithms
that are gonna be built on this.
And you think about the future,
I don't know, something like 75 to 80% of the market
is traded via algorithms.
And there are going to be different trading pairs
where you're gonna find ARB opportunities
to go to balance in between
all these individual different products.
Like you could go from MSTR to STRF,
STRF to STRC, STRC to Bitcoin,
Bitcoin to STRD, STRD to STRK. There's different trading pairs in different ways and formulas
of portfolio composition to ARB different pieces of all of these different components.
And I'm only showing six things here. This is happening across all cryptos,
all cryptos, all Bitcoin treasury companies, all of these instruments, and people are going in and
out bouncing around and all of that's happening and like there's just going to be a breaking
correlation so i just want to put that out there as people don't seem to get that it's crazy
but also yeah i mean oh go ahead yeah i love talking and i think that's super important and
we talk a lot about how these different fixed income products will be targeting different markets
and one thing we've been noticing a lot am i still there am i good yeah yeah yeah you're good
I just I'm moving to the other side.
Cool.
One thing we've been talking about a lot is targeting different investors in
different markets and tapping into different pools of capital.
Now, we've seen the volatility in strike and strife be extremely high.
Right.
I haven't actually measured the volatility.
It's actually on the strategy tracker website.
The volatility has been very, very high relative to traditional fixed income
products. And so that's been scaring away investors.
And that's something Sailor and Fong talked about in the most recent STRC
release video.
And that's why this STRC offering is so attractive to so many fixed income investors.
Let's say you want to hold a cash position.
It's actually quite nerve wracking that you've got all this sell pressure and different kind of fluctuating principal amounts,
especially if you have a large, large position in strife or strike.
And so I think it's going to be a product that attracts a monster pool of capital,
especially with the initial offering, plus the cumulative dividends.
We've seen that there's clearly a demand for cumulative dividends over non-cumulative dividends.
if you'd seen like stride hasn't even traded up to its liquidation preference which is quite frankly
incredible right so i think this strc offering is so extremely compelling uh for for those above
reasons especially because it's so applicable in a world in which stable coins are becoming like a
exponentially increasing transactional layer and in the traditional capital markets t-bills are used
as the short duration non-interest rate sensitive store value asset and now that we're attacking like
a real real real market um with a product that has low low low volatility i think um it's going
to be super interesting to see the receptiveness of of such an instrument
completely agree sure jump into it it's funny you look in the chat and everybody's still just
bears there are bears everywhere which is so funny the sentiment feels even more bearish than
like when the etf was launched in february 24. people forget that there was actually a
$2 billion ATM that Saylor used without transparency and 400, that 4 million shares that
Saylor sold in 2024, like the ATM, like this existed in 24.
I'd argue the non-transparency of the ATM was a better way to do it.
It was better.
Not having it.
Unpredictability, I think, is super key here.
And that's not to be a bear.
It's just, it's interesting.
I think the unpredictable nature of the ATM increases all.
and it's all a question of vol like uh yeah just quarterly reporting quarterly reporting your
your atm purchases yeah i mean we can we can say that but the thing is if you're watching the daily
there's guys that are watching daily trading volume and that are making assumptions when the
atm is being issued and when it's not so i think that sailor kind of created a i don't think even
created i think by announcing to the market that the atm is going to be a way that they facilitate
bitcoin purchases the market's constantly looking for when it's going to be issued regardless of
if he would make an announcement or not so i think that genie is kind of maybe out of the bottle i
don't know but to the people that are still talking about m nav it's just strange to me because with
the kind of volume we were seeing last year like around october november 2024 i just don't understand
how people could be saying to themselves so if sailor has stopped selling shares that magically
would have made the market decide to make the m nav run higher because that by itself would have
shifted sentiment not the other 90 to 95 percent of trading volume and then increased liquidity
and so on and so forth yeah but what do you say about passing flows i mean yeah yeah the
it's price and sensitive and sensitive flows right so anything coming from a any kind of funds
qqq potentially s p right this is this is kind of josh man's whole idea of if you didn't atm it it
would just levitate it would just go higher because there is demand that is you know not
determined by yeah at all they're like capitalizing on the excess demand they're like yeah they're
understanding the static demand yeah i'm not sure if there's a if there's a pop in demand they're
capitalizing on it and buying bitcoin exactly and what's well what's the and that's something i
I've been thinking about it. What are the treasury operations worth? Jeff, I think you're right. I
think the treasury operations, the preferred issuance, all of that, the Bitcoin yield is
incredibly valuable, more so valuable than any sort of income generating activities of any Mag7
company. I think they're massively accretive. Bitcoin gain, in my opinion, especially Bitcoin
gain derived from convertible product, sorry, from preferred products, should be awarded a 30x at
least multiple on the us dollar game however that has to be realized in the stock price so i'm i'm
i'm not selling at three nav i'm not selling it for nav if the company's not selling at four now
so that's the and look it's not that black and white that's the point josh is making i'm not
sure if he's totally right or whatever but but at but if the stock is running to three nav
i'm not a seller right i don't think you're a seller we're the market makers right we're
We're the owners of the equity.
And so we are the buyers, the margin.
If the passive flows are also adding buy pressure,
that NAV will run.
And I've come to realize that I think that is true
because I thought originally it was just Bitcoin yield So if Bitcoin yield is falling the NAV wouldn expand It would just be a closed ended fund But I starting to realize that both the active treasury management coupled
with the operating cashflow covering the liabilities, which no longer is the case,
but then also the shareholders and the passive flows and the ability to be included in ETFs
makes it special Bitcoin and something which the MNF could go really high. And I think that's kind
of the point. And if it did go up, it's important to remember that would be
insanely creative if they were to atm let's say hypothetically to pay dividends or
i got one for you let's let's think about the scale here right so we're talking about
these preferred instruments having a total addressable market of 600 trillion right enormous
massive and they've issued 4 billion to date and we think that that number can 100x
400 400 billion you probably go higher so if if you think bitcoin's going to double from here
you you've got 70 billion dollars of uh assets and if it doubles you got 140 billion if you lever that
up 30 you can issue 43 billion dollars with this stuff so every dollar of asset that you bring in
the door early, understanding that with the idea that Bitcoin is going to move higher,
gives you that much more ability to capitalize on the leverage and make the thing move faster.
The ability to capitalize on the fixed income side of the market, understanding what's going on.
I think the demand here, there's probably 1%, I'd say between 1% and 10% of the fixed income market,
that $600 trillion of total addressable market can buy unrated perpetual preferred equity.
I'd probably say 1%, maybe less.
So we think that if these instruments get rated, that number 100 Xs,
the number of people that could buy these instruments, 100 Xs.
So you're talking going from $4 billion of perpetual preferred equity
to $400 billion perpetual preferred equity,
people that can potentially buy this instrument.
And you need the assets to support it.
No, totally. I think that's a good point. No, completely, completely.
But I do think, yeah, I think that's a really good point.
But like people in the short term, if you're looking in the short term, yeah.
But ATM on the common stock adds pressure, right?
It's more liquidity in the market. There's more shares trading.
There's more shares that could be ARB.
ARB. You also have $5 billion of convertible ARB that's like in the high gamma zone of these people
that are trading back and forth between the price of the convert in the secondary market. So you've
got like this massive amount of pressure that's bigger than it's ever been, $5 billion of convertible
bonds. And you've got ATM capitalizing on the assets coming in the door at the same time. So
yeah, I mean, it's a weird time. And on top of low liquidity in summer months,
and we're in this period of time where nobody knows what the earnings are,
even though everybody that's paying attention knows what the earnings are.
It hasn't hit mainstream media,
which is exactly what I was talking about when the quarter closed.
There was a lot of buzz for a day and it hasn't been brought up again.
And I think it will, like,
Sailor's going to be on CNBC.
There's going to be news cycles.
This thing is going to hit Wall Street Journal.
It's going to be all over the place.
My view is that.
So yeah, that's all true. But my view is that I think all this is an assumption. The ATM is an easy thing to point to. And I just based on my own personal view, and Jeff, your camera's kind of blurry. I don't know if you have something on it right now. There you go.
I don't know if it's just a matter of when people bought in and who loudest voices are right now,
but the impact of broader market trends are definitely weighing on this more, in my view,
than the ATM or the converts or anything to that nature. That's just my opinion. And I think that
people need to stop looking for the easiest explanation and start doing some deep diving on
what can actually be pushing this trade because the bitcoin per share bitcoin yield all that is
a function of the different atms that they do so it's it's all based on a model that needs the atm
to run not just the mnav run go ahead i just think there's a lot of people who have been in
this thing for a really long time and are just trying to figure out you know performance and
volatility so i think it's unfair to say that most people just got in at a high mnav in the fall
well i don't think most got in i said i think those are loudest voices okay yeah i think those
are loudest voices and and so because from my perspective when i got into this trade bitcoin
per share was not a thing bitcoin yield was not a thing that was being discussed yeah it was not
like well this company has a monopoly on bitcoin and since then none of this was being discussed
right and i think that to your point dan people are trying to make sense of it but in trying to
make sense of it i think that many are looking for the simplest easiest most quick and expedient
explanation the the fact of the matter is is that markets traded multiple jeff this is something
you've said all the time you have companies like nvidia and tesla and we're trading at ridiculous
multiples you just said dan that you think the dollar amounts justify what a 30x multiple
I think the smaller Bitcoin gain generated by preferred equity issuance deserves a 30x plus multiple.
Right. So let's say that's a forward expectation of what you're expecting, right? The market needs to
essentially, I think we need two things to happen. Bitcoin adoption needs to scale. And as Bitcoin
adoption scales and as the price of Bitcoin runs, the price of the strategy equity is going to run,
then all these other factors are going to start running along with it people are treating mstr
like it's a equity and this this economy that exists somehow is separated from bitcoin as
bitcoin goes strategy is going to go so so you just said but then you just say that that's not
the case that we have to we have to not look at the correlation too closely and that this is an
equity and i shouldn't trade one-to-one with bitcoin yes but because it doesn't trade one-to-one
with bitcoin it's not going to it's not that bitcoin is going to go up and then the adoption
is going to go up and everything's going to go up and then strategy must go up with it
there are too many moving parts in the strategy because it's an equity
okay because because it's an equity because now we have all the preferreds now and we have the
common stock there are too many moving parts that are taking place for it to just say that that is
only going to be correlated to bitcoin bitcoin needs to move yes but the strategy economy ecosystem
needs to scale out and it needs to stabilize the the the the matter of the 2x multiple or 3x or
whatever it's going to be in time that's going to stabilize with time but it it's not just a
matter of sailors hitting the atm and it's preventing the atm the m now from running
that's that's too simplistic okay but i think it seems like the market has stabilized around a fixed
you know it seems like it's stabilized around a fixed msdri ratio you look at the msdri bit
around 6.5 and it's been pinned there it's been absolutely pinned there it's been there for like
yeah and there's some there's algorithms right i went to school for algorithms as well and there's
some algorithm that is pinning it there right there's there's traders out there that are sticking
it there and how are they doing it right it gets up they sell they sell they borrow at a very low
borrow cost because the shares are not scarce they sell and then they buy it back but instead of
having to buy it back from uri they buy it back in a block trade from the equity and it's a very it's
a very um what do you say it's a very profitable trade for them they sell millions hundreds of
millions make a nice couple million that day and buy it back in a block trade that doesn't have any
new buy pressure in that single day is it a creative to common shareholders as a form of
bitcoin yield absolutely 100 but is it kind of pinning the price and dampening the volatility yes
it is quite frankly because that mcri bit ratio is pinned there the market likes it so i think again
that is what we're looking for unpredictability perhaps so let me ask you the question
are you saying that the trading activity is what's pinning the multiple
i think it's a large portion of it yeah well obviously some form of trading activity is
pinning the multiple right that's the definition of of like trading well okay so what what i'm
trying to say is i think the market doesn't understand the trade and the multiple has not
been defined retail retail retail well institutional capital i mean it's a lot of
capital doesn't understand the trade a lot of capital needs to trade market yeah i didn't want
to i didn't want to pin on one or the other because then someone's gonna get pissed off right but what
what i'm what i'm saying is we've all just given opinions and our sentiment around where we think
the multiple can go and what i'm saying is the market right now everyone's focused on it as if
mstr is going to trade at a multiple regardless of broader market trends and what i'm saying is
there's going to be a flow of activity we need broader macro economic
broader macroeconomic trends to cooperate we need market sentiment to cooperate we need liquidity to
cooperate what we're seeing right now is the function of the fact that we don't have all
three of those operating in tandem yet all of that's going to impact the sentiment on the equity
yeah yeah said multiple times in interviews that he he thinks mstr should trade at a premium
always right he and he was even asked i think was it the the joe burnett interview or
he was asked do you think it will go to one and he said no and i think i think he what was that
in the context of a bear yeah bear market yeah i i think in the context i think another one you're
talking about yeah yeah yeah yeah so i i think i think if we think uh bitcoin yield deserves a
multiple then there there needs you need to allow a multiple to occur and i think that's what people
are really frustrated about and i think what dan is saying is that the shorts are getting exit
liquidity essentially from the ATM. So it's kind of a-
Shirts are getting exit liquidity, but it's adding assets to the balance sheet.
Yes. Yes. So it's chicken or egg. Maybe it's like long term. And to Ryan's point, I do
want to just say the stock can trade at $10 to $20 billion a day. No form of buying and
selling activity included. ATM is singularly influencing the price. That 1% nowadays dollar
value of ATM total liquidity, like Dan said on Josh's face, that might be 1% of the trade
volume. So the ATM may only be 1% of trade volume. 100%, I totally agree. That is so
right. That is so correct. The problem is, and I can't figure it out. Maybe the ATM is
completely relevant. But what I understand from the market dynamics is if you're able
to sell massive amounts of equity and then get the, at a certain price, and you know where
you want to take the stock and get the offer to buy back your short liquidity, then you're
essentially there's a gravitational pin. And I think what we've seen is that gravitational pin
has been 6.5 MST or IBIT. And other shorts and other traders will come in and create that
gravitational pin. So what we need to see is that pin be moved. It needs to be moved up. And I think
the passive buying is going to do that. And so I think a little less marginal sell pressure could
be the catalyst. Could I be totally wrong? Maybe they shut off the ATM. Maybe it's still pinned
6.5 i that 100 that could be the case that's just where the market wants us that's the future
expectation of bitcoin yield but i think it's well worth the time or experiment to see if we can move
that pin up in the short term long term whatever that's true so i'm just going to add the the notion
i think i used to strictly believe that that bitcoin yield is the only thing that justifies
the multiple but i think josh mann changed changed my mind on that just from from the passive flows
he's just said it will levitate up if you just leave it it will levitate that's what i've been
saying the whole time yeah this is this is the architecture of the market right yeah i think
you're really right here of the market this is what i've said since the very beginning is it's
gonna be the largest company in the world it's a function of like what it takes to get there and
you know how much how much capital is raised at different points in time depending on different
catalysts in the market, right? You've got very specific times where a lot more energy comes into
equities at different periods of time for whatever reason, right? We saw it in November,
we saw it in March. You've got periods of time where that happens. We haven't seen that since
November. I think that's typical with what we've seen in the past. We saw it actually, it was like
last July or it was July, 2023, huge spike, March, 2024, huge spike, November, March,
sure huge spike and we just we haven't seen one yet in 2025 and i think that's possibly on the
horizon with the catalyst and personally when i'm thinking about this stock like i love that we're
diving super nitty gritty into all these different components because it's it's useful to understand
like all the different players in the market here and what's going on but personally when i'm
thinking about this like from a long-term perspective opportunity cost of capital is huge
Like what else would you rather be in?
And we're going to sell this.
If you're going to go buy Bitcoin, just go buy Bitcoin.
If you just want Bitcoin exposure, what are you doing here?
Just stop complaining.
Just go buy Bitcoin.
Well, yeah.
So you think about opportunity, cost of capital and risk, right?
What's the downside?
What's the downside of all these instruments that you're holding?
What's the downside in every scenario?
What's the downside of other Bitcoin treasury companies?
What's the downside of these preferred equity instruments?
Like, where do you want to, like, it all comes, like, you've only got $1.
Where do you spread that dollar?
And if you're complaining about MSTR and you want to go invest in NVIDIA or Apple or Tesla,
like, go do that.
I don't know why people are just complaining so much.
Because the long term here, you're thinking about what does this look like five years from now,
10 years from now, based on the setup and everything you know.
That's kind of how I'm viewing it.
It's like, this is an investment-grade investment.
yeah they created investment grade preferred equity instruments Bitcoin back credit that
are revolutionary they're fundamentally going to change the world and people are complaining
because it there's breaking correlation in the middle of the summer in 2025 when the Bitcoin is
10 higher than it was you know a month ago so all the Bitcoin treasury companies are experiencing
downward pressure right now. So are we saying that is it the ATM in all those cases of those
companies as well? Or is it just the ATM in the case of micro strategy or strategy? All I just
want to bring up and I just keep hammering this point until people perhaps consider it.
Market sentiment is not a lever that can be pushed up and pushed down.
The market is going to treat it as it sees fit. The multiple is the multiple.
and i don't think that what sailor's doing and what strategy is doing is the deciding factor and
what's pushing the multiple down that that's just more shares in the market i guess there's more
shares in the market there's more shares in the market but the shares in the market is not going
to determine the multiple the multiple is going to be a factor of market sentiment yeah and sentiment
It's one input into demand.
Yeah.
Sentiment is one input into demand yes But the number of that multiple that the market going to put on it is a function of broader dynamics than simply supply and demand that all i saying yeah but okay so what one one other thing thinking about the catalyst here
on the horizon potential s p 500 i've talked about this a lot but you look at some of the mag 7 right
the s p 500 holds seven six to seven percent of any of the mag seven publicly traded equities
This is huge. If we're talking about what event will happen that will significantly increase demand, it's the S&P 500. Is it already priced in? Do all of the publicly traded, do all the ETFs have S&P 500, all the shares necessary?
I personally don't think so. Like, I think this is the last biggest demand factor that we can think about into the future.
And I think you got to think about what Saylor knows, too, right?
Like, what's he know? Like, he knows information that we don't know.
Is it government information? Is it information about what's going on in Bitcoin?
like there's there's some information asymmetry here um especially after being on the other side
of the curtain at another company there's information asymmetry all over the place
so um i guess just something to keep into consideration
should we talk straps go ahead the thing that i thought about when um what what dan said about
the the atm being public and and predictable um i think that kind of relates to to adrian's
comment about market sentiment and and i'm not one of the people who thinks that the at the common atm
has like a direct fact effect like it's pushing the price down literally but there could be some
second order effects like um you know if anticipation of death is worth worse than
death itself then maybe the anticipation of the m of the atm is worse than the atm
them. Like if the, if the short sellers think they can get liquidity, then they're emboldened.
And, you know, people who may or may not have bought at the top get a little bit of a
demoralization effect. So I'm not sure if that, how much that factors into market sentiment
or not, but it's just something that I was thinking about when you guys were talking about it.
Makes sense. Makes sense. Should we jump into stretch?
Yeah.
Let's talk about it.
I'll write your notes.
Let's jump in.
Someone said in the chat, Mason's writing Dan's notes.
Is he the big brain?
No.
Yeah, Mason's backing me over here.
Did World War III start today?
What is going on?
We got some serious, a lot of haters in the chat, man.
I mean, it makes sense.
I mean, people are frustrated, right?
the ATM is put more shares in the market. There has been pressure, but the stock is like we're
in top 99 percentile of stock closes trading at 1.85 MNav. Historical vol is at all time lows.
And let's just look at the vol real quick. Historical vol is at all time lows. But you
look at history, right? Goes high, goes low, goes high, goes low, goes high, goes low. It's like a
mean reverting statistic here. And we're at an all time low. What has historically come next when
you're at historical ball at all-time lows like where we go from here it's kind of how i think
about it but let's jump in who wants to who wants to take this dan you're mr preferred give us a
give us a rundown all right uh i just know the little maybe jeff why don't you get an overview
of what this is designed to be because i always just like rock right into the nitty-dirty stuff
Yeah.
I'll take over from there.
Yeah. Okay. So let's jump into this.
So this is now Strategies fourth perpetual preferred equity that they've issued to the market.
This is called Stretch, STRC.
So preferred equities, this is a function of collateralizing the capital stack
such that you are now creating different risk tranches across the capital stack that have different risk return metrics.
So in the event of a bankruptcy liquidation, the highest up on the capital stack is going to have first priority over capital coming in the door.
Lowest on the capital stack has last priority on any money that's left over.
So when you think about seniority here, seniority is incredibly important because that is a function of who gets money in the event of a liquidation, which we think is an incredibly low probabilistic scenario.
What's up, Ben?
We've got so most senior, you've got convertible debt.
most senior, second most senior, STRF. Now you have STRC, stretch, then you have STRK and then
STRD. So it is the second most senior, sits right below STRF. STRF is the investment grade
product that they're looking to provide to the market and they have STRC, which is stretch.
And from a duration perspective, this is effectively a zero duration instrument
with a relatively high yield and the yield is meant to float such that the price of the equity
itself is relatively stable. So I will pause there and I'll kick it over to you guys. I want to talk
about this. Yeah, I mean, this is it. So a couple of the really interesting parts of the perspectives
that from my understanding is they agreed to not issue strc at prices either via atm or via just
secondary market offerings um outside of the range of 99 and 101 so if the price gets too high it goes
to 102 they'll stabilize the price using a couple different methods one of which is they'll drop the
yield which may lower the price or they'll issue they'll issue new strc at 99 right and they have
have to issue in that range. So they have covenants in the prospectus that make it such that
they have ways, specific, legitimate ways in which they'll stabilize the price. And another really,
really interesting part of this prospectus you won't read in the pitch deck here is,
there's this question. And a lot of people say this, and it's actually quite frustrating to me.
And it's kind of a valid concern with stride, but not really. It's that sailor will just stop
paying the yield. Well, you read the prospectus, you figure out, no, that's actually not valid
whatsoever. So you may say, well, what if stride just goes up and sailor wants to drop the yield
to zero and not pay any yield and we're all left holding the bag? Okay. That's not going to happen.
So in the, in the perspective of the covenant is such that they can't drop the yield on a month
to month basis. Again, it's changed every month. So the new yield for the next month is announced
in the last day of the prior month, and they can drop it by the change in the SOFR rate over the
prior month. So the SOFA rate dropped by 10 basis points. That's the drop in SOFA rate over the
prior 10 months plus 25 basis points. So that's the maximum drop. They can drop the yield over
the next month, or they can only drop it to a floor of the SOFA rate. So you know the yield on
stretch will never drop below the SOFA rate. This is extremely important. Liquidation preference is
the same. Liquidation preference floor is 100. This doesn't really matter because they're not
to let it rise other than that. But that's kind of the interesting protections you have.
And then finally, the dividends are cumulative, which is hugely important, right? As long as the
dividends are cumulative, you have protections against not having that dividend paid.
And the cumulative dividend is a little bit different than STRF because the dividends
compound into perpetuity. So if strategy misses a dividend payment on a month,
that dividend payment then compounds against strategy at the dividend rate.
So for example, let's say they miss a 0.75% monthly payment, which annualizes out to about
the 9% that we're talking about annually. Let's say they miss it. The next month, they'll own
0.75% dividend payment that they missed times 0.75. So it compounds at a rate of the compounding
dividend into perpetuity. Point being, missed dividends compound against strategy into
of perpetuity, it's highly protective strategies incentivized to pay them under all circumstances.
So you have lots of protection, lots of stability, lots of mechanisms MSTR can use to stabilize
the price.
Boom.
I hit the nail on the head.
So right, you've got multiple different things that tools that you can use to pin the price
in any one direction.
But alternatively, you also can think here,
if the price of STRC goes above 100,
you're not buying it, right?
There are other people, they're going to issue shares
into the market such that the price does come down to 100.
Alternatively, if the price is below 100, let's say 98, 99,
there's an instant opportunity to go buy it at 98 or 99,
knowing that they're going to get it back up to 100
using these other instruments.
This is like, Dan, to what we were talking about earlier,
you've got this algorithm component
that's gonna move back and forth all the time,
understanding this ARB opportunity
and this capital going to be coming in the door
to pin it there at 100.
And I mean, I'm sure traders are thinking about the field
that they're gonna have with this instrument.
I think it'll be a little bit volatile in the beginning.
It might, the spread or the Delta between 100 might be,
as it's outlined here, a dollar or so, or maybe two.
But I think that will compress over time
as the depth of this market gets significantly larger
and the liquidity gets significantly larger.
Like instead of being a dollar spread,
it might be 10 cents next year.
A year from now, the spread might be 10 cents.
It moves up $1.10 and then down to $99.90.
And then two years from now, it might be a penny.
Every time it goes up a penny,
somebody's arming that penny down in volume and size.
So there's significant opportunity
to get alpha in any one direction,
knowing that there's an ARB basically.
That's a really good point, Jeff.
Yeah, that market, the more depth of liquidity,
the more ARBing will happen
and the more stable the actual equity is,
even without strategy's input, right?
The incentives are such that people will be likely
to ARB it back to that kind of desired price range.
Ben, what are your thoughts?
You've been thinking about this a lot.
talked about in a bit yeah i think it's a fascinating product to put out particularly
while you were seeing some of the repricings happening for strike and strife over the last
little period of time but i think it's more interesting the timing with which he's dropping
this one into the market you know everyone's looking forward to a point where rates start
coming down and they're starting to be a lot of pressure to start lowering rates and because of
of that, they're going to be able to lower the rates on STRC likely right out of the gate. So if
he can keep this stable at 100 and raise capital at 100, but he only has to pay out, you know, say
it's $8.50 or 8.5% or 8.75%, it becomes pretty accretive to raise capital through this product.
So what I'm going to be very interested in watching as this one moves forward is the size
of the ATM they assign to it. You know, that's kind of how I'm viewing all of these products,
because that's telling you where they want the markets to look.
Where do they want them to participate in these products?
And they've said that explicitly as well, right?
They're limiting strife.
That's kind of the crown jewel top of the capital stack.
You know, that one, they're keeping a very low ATM relative to the others.
Strike, obviously, one of the main ones that they're trying to issue out to the market.
Massive ATM against that one.
Stride, lower.
This one, I'm pretty interested to see where it falls
because the mechanics of having something so stable like this, you know, in this area where
we all love volatility, it seems really boring, right? It's kind of like creating the equity
version of a stable coin here. And so for us, you know, we look at those, well, if it's not going to
move, there's nothing interesting there, but we're ignoring that the rest of the world is really
looking for stability, right? Not everyone's been investing in, you know, options and all this other
stuff that's super high octane a lot of people are looking for ways to generate really strong yields
without capital risk and with this one being pegged at a dollar so they're essentially saying
you know you can bet that we're going to actively manage this thing to a hundred dollars and we're
going to keep it within a range there and we've got a lot of tools to make that happen that
certainty at a dividend like stretches carrying is going to be very attractive in these markets.
And not just for the pools of fixed income buyers, but for individuals as well. When you look at,
if you can find the slide, Jeff, that shows the categories where they're sizing the market around
this one. Yeah, that one right there. You can see the largest one they're highlighting there is US
dollar bank accounts. So if rates start coming down and we end up back in an environment here
where your high interest checking account is back to 1% or below, we all remember the days
when you had 0.1% interest in a lot of your bank accounts. This is massively attractive,
but it's going to depend on how much supply they put out there in the market, right? How much of
this is actually going to be available? And I think the demand is going to be incredibly high
just because of how universally applicable this product is when you're not looking at capital risk,
right? It's not going to be tied to the movements of the common stock equity.
And that is going to be very important. So this one, I just, this one fascinates me.
And it fascinates me both because of its simplicity, right? How boring it sounds,
but also just because this is one that they can market to an entirely different pool of capital
than we've been looking at with all the other preferreds.
This one's almost universally attractive
if you've got cash sitting on the sidelines.
So you could make the play just to capture what's in money market accounts
or what's held in the cash accounts on brokerages.
And if people are just settling into something that's stable like this,
but high yield, and as long as you're settled out of a trade,
but you want to sit in something that's going to yield you something meaningful,
this is a great product.
So, you know, in the early days, we all talked about it.
I was trading and when I'd settle out of a trade, I would settle into strife and I would just sit in
strife and wait for the next opportunity I was going to get into. And this is effectively probably
even taking the place of that for temporary parking of capital monthly dividends. So you've
got much more of an opportunity to hit that. And I think that for a lot of people, monthly is a huge
deal. Waiting for a quarter feels like forever for those dividend checks. People are conditioned to
get those quick you know they get them with all the etfs with msty and imst people love seeing
activity you know if they did one of these with a weekly payout you know people would go crazy for
it because there's just that dopamine hit of seeing money hit your account and so being able to get
you know quick effectively interest payments on your cash and being able to just park it without
worry about about capital risk is a huge huge deal so i do like this product a lot i wasn't expecting
it at all that is not what i was expecting them to launch as the next product was something that's
going to function as a stable coin but you know here it is and i think it's a pretty brilliant
move the other thing that that is interesting and then i'll stop my rant here but is there's a
a difference in the preferreds for qualified dividends.
And I don't think a lot of people know it in the timing that you have to hold it
to qualify for them. So on something that's cumulative,
I believe it's 60 days out of 121 day period you have to be holding it to get the qualified dividends.
But on non-cumulative products, it's 90 out of 181 days.
So you have to hold the other products longer to get the qualified dividends.
So just something I learned along the way that I'm guessing a lot of other people didn't know as well,
that there is a difference between the preferred products, whether they're cumulative or non-cumulative,
and what it takes to qualify for the qualified dividends.
yeah the boring part is a feature not a bug because i texted my mother today if
about stretch specifically because if her account went up 50 yeah she'd be euphoric
but then if it went down 10 she'd be on the ledge it doesn't matter that she's still up 30 or 40
if it goes down she's freaking out and i'm like this would be perfect for her she can just
see the cash that would just be in her bank account and getting, you know, insane dividend
payments off of it. So I was psyched about it. You know, obviously I'm a vault junkie and,
and she's not, so this would be perfect for her. I think you explained 75% of X.
Yeah. Started about 50% gain and then 10% down. I think that's a lot of what's the,
a lot of what's going on in the chatter in the community at the moment yeah my mother's definitely
inside that big green dot right there usd bank accounts usd bank accounts you know what i was
thinking is like i think there's going to be a race right here to uh offer a credit card with
cash back and stretch or cash back like think about like acorns or any of these like uh man
And if I can convert my airline miles to stretch, I would do it in a heartbeat or any of these one, any of these preferred equity instruments, I would do it in a heartbeat.
And yeah, I got to figure out a way to do that.
I think that would be an interesting, somebody could do that, maybe Fold.
Maybe Fold offers a card where you get cash back and it goes into one of these instead of sats or something like that.
you get an option you go into sats or you go into stretch or any of these other preferred equity
instruments but yeah ben i mean you highlighted a couple of huge things here the the the capital
pools are absolutely enormous that can that should be interested in this type of product and
i was explaining this earlier on the space with ryan and matt it's like these are
are these are products that the entire world needs nobody can stop and very few people understand
and it's it's like i feel like i'm banging my head against the wall most of the time trying
to explain these to people but like these are these are going to be so pervasive in all of society
over the next decade these are going to be absolutely enormous products because they're
backed by bitcoin right the the bitcoin network continuing to grow is what's going to facilitate
the growth of these instruments and the pro the a bit as the as these products
get more attention and have more success over time because the information is symmetry as they have
more success over time that is going to draw more capital into these instruments the yields are going
of fall, which is going to lower strategy's cost of capital and their ability to raise capital
goes higher. And the duration and the yield that they have to pay over time falls, which is more
accretive to strategy's balance sheet into the future. And that just, these are levering,
the coil for Bitcoin to go tighter and tighter, to go more vertical because they've got more capital
that's able to come in the door via these instruments and drive Bitcoin higher because
they're using Bitcoin as their permanent form of capital to back these products.
I don't think people quite get that yet. And that's why we spend so much time on them,
because they're huge. This is going to change the world.
I think people miss a big thing with these. They see these preferreds that are coming out
and they're constantly comparing them to MSTR.
And these are not MSTR, right?
These are entirely different products
and they're not even meant for the same reason.
So, you know, I know that there's a lot of comments
that come out saying, you know,
why do you even talk about the preferred
you should be talking about MSTR?
This is, what you have to realize
and appreciate about these products
is if you look at just this chart right here,
this is capital being onboarded to Bitcoin, right?
this is the loading dock for capital coming into Bitcoin. If you are a Bitcoin maxi and you want to
drain capital out of the traditional system, this is the ramp. This is how that happens.
So I'm not even necessarily looking at these all the time for, well, what's the impact going to be
on MSTR? I mean, yes, obviously they're raising capital, they're buying Bitcoin, it accretes
Bitcoin per share. I know you guys had a debate before I jumped on about volatility and all that,
But, you know, this I look at it from a bigger picture.
I mean, this is so.
Such a massive movement for them to prove out these products and be able to go and say,
listen, this is universally applicable.
If you're holding cash, this product applies to you.
Right. You've got whether you've got ten thousand dollars or you've got a hundred million dollars,
this product is applicable for you, because if that money is sitting in a bank
account, this highlights that you are now losing, right? You can effectively get S&P 500 returns
with no capital risk. I mean, just think about that, right? That's why these products are so
fun to cover. And it's why I'm going to continue talking about these products because this is such
a big deal. You know, we quickly moved past what was happening with strategy because now they've
scaled up and their liquidity is so deep and people are focusing on the options and all this stuff.
I'm still looking at the fact that they are draining massive, massive amounts of fiat capital
and bringing it into the Bitcoin network and into the Bitcoin system. And that's going to continue
to drive that demand for Bitcoin up. Bitcoin's got the finite supply. And when you've got a finite
supply and there's no amount of demand that's going to change that, the only thing that can
give is the price. So I think these products deserve a lot more appreciation than they're
getting. And this is just opening the door for these. You know, more companies are going to come
in and get creative in this way and find products that tailor to different people. But it's this
type of universally applicable product. This would have sounded like a dream a while ago.
No capital volatility, right? Your capital is going to remain begged. You got a 9% dividend
that's paid every month. Like you got an emergency fund, right? Sign me up. It's way better than
parking it in a bank account. There's a lot of cash in bank accounts. So, you know, these are a
big deal, regardless of whether you're looking at them and you're just tying them to the performance
of MSTR, the volatility or whatever it is. If you just zoom out from that, you know, there's some
appreciation that I think needs to be out there for just how big of an idea these products were
and seeing them scale out and build out this yield curve is incredibly impressive. I mean,
this is going to make a huge, huge impact in the price of Bitcoin long term. So I love these
products and I'm going to continue to follow these because I think it's just an amazing
shift in the market and the ability to attract that capital so seamlessly into Bitcoin is just huge.
This is going to solve the retirement crisis in America. I think I personally think this will
solve the retirement crisis in America. You've got Bitcoin backed securities. When you look at
the alternatives out there, there's so much physical risk in the world. Mortgage backed
securities, you're looking at, you know, all these other fixed income products from all these other
corporations that just are piled with physical risk, they're probably mispriced. And this is
the ability to onboard the rest of the world into Bitcoin backed credit, which could solve some of
the retirement crisis. You think about somebody that holds 10 Bitcoin, let's just say Bitcoin goes
to $2 million. You now hold $20 million. So you take half of that at a future point in time,
and they're still offering strategy, still offering these products. Now you've got $10 million.
Let's say you've got something that's giving you 8% interest in fiat. That's $800,000 a year,
and you still have half your Bitcoin. This world is going to look way different when the price of
bitcoin rises and these products become more popular it's going to take time it's not going
to happen tomorrow right there's not going to be a huge rush of capital in the door into these
preferred products tomorrow no it's going to take time to mature just like any new product coming
to the market like when the iphone came out it took time started with a very basic product and
then it evolved over time and it got better and better and better and more people bought it and
And as these products made their way into the world,
everybody started talking about them.
Hey, I got this iPhone, let you check it out.
And you're like, wow, that's super cool.
Now, instead of a $1,000 iPhone,
you're talking about something
that you could store your economic energy in
and get paid capital with Bitcoin backed safety.
Like that's a really interesting value proposition.
And that takes time to penetrate the market.
That's why we're talking about it.
This is the biggest story.
This is the biggest story in all of finance right now.
We need to talk about it.
People need to talk about it.
It's different.
I kind of want to,
I just want to double tap what Ben said.
Just the fact that now, if you are holding cash,
the, in my opinion, the best thing that you could do
with no capital risk, no volatility, 9% return,
as Ben said, almost beating the S&P 500,
put it into stretch, right? And then that leads to buy pressure on Bitcoin. Beyond strategy,
that just made me so incredibly bullish for Bitcoin. 100%. When you think about,
and I tweeted this, when you think about all the people selling the top,
and then they have all this cash, it's like, what are you going to do with that cash?
Where does it go? You're selling for dollars. You don't want dollars, you're a Bitcoiner.
What do you want? So, okay, well, I could actually, if I think it's, everything's looking super toppy
here, I could sell and you can move into these other instruments. And you're like, great, this
is over collateralized. It's senior in the capital stack. I think the probability of this going to
zero is incredibly low. It's over collateralized and still Bitcoin backed exposure. I just want to
push the clutch in. You can now push the clutch in and still be Bitcoin related in a Bitcoin
related security. That's never existed before. It's just ironic. If you're selling Bitcoin to
try to profit and then go into this and strategy is just going to ATM and then buy the Bitcoin that
you just sold. It's like, what are you really doing? It's the same thing as the ETF, right?
It's the kick yourself in the deck trade, right? This happened in February of 24 when everybody's
saying, oh, MSTR is dead.
I'm going to sell MSTR and I'm going to buy the Bitcoin ETF.
And it's like, well, do you realize what you're doing?
Like you're selling the thing to buy the thing that makes the thing that you just sold more
valuable.
And it's the same concept, right?
And like we're going to see this, this, right?
People are going to be moving to all of these different instruments at different times in
the cycle, just depending on what they think is going on.
right? People are going to be in MSTR and they're like, okay, I think I'm going to peel off a little
bit on MSTR and maybe I go to some strike and strife because I want some more safety, but maybe
I do that with 10% and if it goes higher, maybe I, maybe change that from 10% to 20% and you're
just kind of like constantly moving between these pieces and maybe I'm peeling off some into Bitcoin
all the time. And there's just so many different permutations and combinations
of these different instruments that you can hold at any one given time based on what you think
market expectations are for the future. And all of it flows into Bitcoin, right? It is the defense
strategy, the Pentagon, it's the Bitcoin defense strategies, all these different ATMs. So it's
it's interesting to think about you know what sailor said winter's not coming back
does that mean there's not going to be bear market drawdowns no are there going to be extended
periods of time where things are as bad as they were maybe in 22 with ftx clubs may be different
right it may look completely different and the plumbing has changed right this infrastructure
didn't exist previously. If you look back in history in 2017, if you wanted to buy Bitcoin,
if you wanted a Bitcoin exposure, you had to take your money from a bank account,
move it over to some sketchy exchange that you didn't know how it worked and then figure out
how to do it. And then buy some thing on the internet that is just untested and move it over
to a flash drive. It was a tough sell, really tough sell. Now, 2020, you have MSTR buys Bitcoin
and you're like, okay, now I could get correlated exposure in an equity. 24 comes and now I can buy
a Bitcoin ETF from all of these different institutions. And now 25 comes and you've
got Bitcoin backed credit fixed income instruments that are still tied and correlated to Bitcoin.
That is a fundamental change in the architecture and the plumbing of the market that didn't exist
previously. Fundamental. And that's exciting. So do I think we're going to get an 85% drawdown?
I don't think so. Like, I don't think it's going to happen because there's these different
instruments, like the architecture has changed. And now there's opportunity to stay within Bitcoin,
as opposed to moving to altcoins or dollars or, you know, pushing the clutch in, you have
alternatives that you can go into. And that's what I'm excited about. Well, I'm getting accused of
being a permable, which is fine because I am incredibly bullish on all of these different
instruments. I'm incredibly bullish on all the new capital coming the door. And this is the biggest
story in all of finance. And I'm going to hang my hat on that. Well, I'm always going to be bullish
all of these because I'm so bearish. Our politicians and the fiat monetary system,
right? Like that's the only thing I need to continue to be bullish on products coming out
in the Bitcoin space, right? This is the other side of the trade of fiat currencies. You know,
if they're out there with their unlimited supplies, you know, able to manipulate it to try to create
the economy and stimulate growth and keep everything rolling, keeping people spending as consumers,
you know, I want to opt out of that. And I want something that's got a completely fixed supply
where no matter the demand, the only thing that's going to be able to give us the price.
And it depends on what you're going to view as risk, right?
People look at bear markets and shakeups in the markets and they say well you know there going to be a flight to safety Well what do you think safety is going to be in 10 years Like I don know if people are looking at all these spending bills that are coming
and everything that's happening out there, but I'm not thinking
that parking back in U.S.
dollars is going to be safe at some point.
I think you're going to want to opt out of that, whatever the country is.
U.S. to I don't care what country you're in, right?
whatever you currently is. I think that the world is evolving to a point where people are going to
really start valuing true decentralization. And that, I think, is still massively underpriced in
Bitcoin. So, you know, I don't even look at these to tell people to buy them, right? I don't think
these belong in everyone's portfolios. A lot of people still have really long timeframes and
Bitcoin's probably the better bet because if you've got a long time horizon, you're accumulating
wealth, like the money printing is not stopping. So you might want to get in Bitcoin instead and
ride that for the long haul. But I also try to put myself in other people's positions.
And what we have right now is a massive amount of people exiting the workforce.
And that is huge. You know, my financial advisors, you know, I hear all the time about the aging of
his clientele, right? And it's not getting replaced. The next generations don't have nearly
the capital available. It hasn't changed hands. It hasn't changed generations. So you've got this
huge cohort of people that are hitting retirement. And we all live in this space where we're constantly
seeing people make huge wealth on all these trades. And we've all been finding Bitcoin early
and doing well. We live in a very unique bubble of affluence, but not everyone's in that bubble.
And you got to realize that not everyone is out here able to be speculators. Not everyone out
here is going to try to YOLO into Mason's 1080s at the end of July.
You know, not everyone's going to be doing all these things.
Some people, what they need is stability and something they can depend on because they
have bills and they have finite resources with which they can fund them.
They cannot take the same risks that the younger generation can.
And it's because of that cohort that I look at these products and go, this is a huge win
for people that are in that spot, right?
If you can get that capital stability and a 9% interest rate, that's life-changing for a lot of people.
You know, if you're living on Social Security and you've got a small asset pool, but you can augment it if you've got 9% coming in on it, right?
Maybe you've saved $200,000 and that $18,000 a year makes a huge difference in paying your bills.
That's massive.
So, you know, not everything is about trades and 10,000% returns, right?
Some people still have lives they have to live in these products, if they find them,
right, which is the other thing.
We also live in a small world where we know these exist.
There's a lot of people that don't, but if they find them, these could be very impactful
in creating a product like stretch is one of the ones that I think would be that first
stopping point.
I used to always think it was strife, but now you're seeing the value of that move around.
I think that does make people nervous, even though it went up right now, they're going
to be nervous that it comes down.
something like stretch where they're saying explicitly, we're trying to hold it at a hundred
dollars. That's more dependable for people to dip their toe in. And it might lead them to the point
where they say, well, I want some directional long exposure. So maybe I'm moving into some of it into
strike now. And they start moving out that risk curve if they're comfortable with it. But, you
know, that's, that's what I really appreciate about these is these are, these are products that you can
weave into your everyday life. If you need to, it's not for everybody, right? It very much depends
on where you're at in your life, what you've managed to accumulate through your career,
what you've got available to you to support yourself in retirement, and how much risk
you can take with that nest egg that you built.
But there's a massive cohort of people that are not in the position to take big swings.
And because of that, something that's stable, pays out monthly, and is giving you effectively
the return of the S&P 500, that's powerful.
And that's important to a lot of people.
a lot of people and institutions. Yeah. And institutions is what I'm excited for.
That's where my background is identifying term liabilities with different durations and
identifying how to get there. So I talked about this on the last couple of podcasts I've been on
where I think stretch is really interesting is this is an alternative to a US treasury.
And so my background was working in collateralized finance. So in collateralized finance, you got to
take assets and pledge them as collateral for a future point in time. So let's just say a duration
of two or three years for a reinsurance contract. Let's say you post $100 million of US treasury
bills and those treasury bills sit there for two years or three years. And the entity that is taking
on that capacity in case of a loss for risk, they want stability that that $100 million is going to
be there at a future point in time. So now here's a new product that strategy has created, a Bitcoin
backed credit instrument that can be stable and will effectively be stable at a future point in
time, assuming the market agrees. And that can now be used as collateral in those types of
instruments. And that's a big function of the insurance and reinsurance market is this
collateralized world that's evolving and changing pretty rapidly and growing very quickly.
So that's exciting. And it's going to take a while for these things to get in there,
but that's the future of these things. These have use cases that people aren't aware of yet,
and that's going to evolve. And that's where there's a lot of opportunity in the space for
people to think about how to use these in different ways and go talk in those different
marketplaces, like go contaminate all of your other financial realms with these products
in different ways.
You know, Dan's got a lot of models there in the background.
Imagine Dan has to reset all of his risk-free rates to 9%.
What do you think that does to the returns for a lot of things you're evaluating?
Right.
If your risk-free rate's 9% and you're, I don't know, say you're eight times over collateralized
on that position, you know, that changes the formulas in a pretty big way.
So it's a powerful, powerful product that they're putting out there in the market.
And I think it's going to do quite well.
And I think that you're going to see this one probably, maybe it's going to be second
to strike in terms of how much of it they're trying to raise.
I don't think they're probably going to put out a $21 billion ATM on it, but I can see
it being a 10 to $12 billion ATM and having this be the second largest that they're trying to raise
through because that carry cost can go down. If you're betting on rates going down, you know,
it's going to adjust down with SOFR, you know, so the carry on these can be lower than it can be on
a lot of the other ones that are purely fixed. So I think it's going to be one they're going to lean
on pretty heavily. Yeah. How is it not a direct swap for U S treasuries in every case where you
have the ability to do that it's just well it's market acceptability of the strength of the
collateral or the the the collateralization level and the security right like the
u.s treasury is backed by the u.s government this the strength of the u.s government so is
strategy stronger than the u.s government in bitcoin terms yes but in other terms no leverage
Yeah. Yeah. Just think of leverage and Bitcoin terms. Yes.
And leverage terms. Absolutely.
So it definitely changes your, your cost of capital mechanics.
Like all of your weighted average cost of capital requires the risk-free rate.
So if you start plugging in the risk-free rate at nine,
using those instruments, like your models are upside down.
This is rewriting finance and with different instruments and different
perspectives. One thing that will be really interesting,
and maybe Dan,
you might want to follow this or somebody else in the community,
like just can build this is tracking the volume of these instruments over time because that might
indicate uh where things are moving um and like um i guess the relative volume of all these
instruments next to each other so then you might be able to see where energy is flowing into is it
is it moving into strc like is that is that a bearish indicator is it moving into sdrk is that
a bullish indicator? Is it like, what is the relativity of all of these volumes together over
time and how does that change? And that might be an indicator of sentiment or market movement.
That could be interesting to follow. Yeah, it makes me a little bit sick to my stomach that
the ETFs can't hold something like this. They have to hold the treasuries. There's like $400
billion dollars of treasuries held by ETFs. And, you know, like if Misty could hold STRC instead of
US treasuries, they, you know, they might not have nav erosion. Yeah, there's, there's a lot,
a lot of things that can be used for here. Yeah, go ahead, Ben. I was just going to say it does
change. You know, we always talk about Bitcoin being the hurdle, right? Right. And it should be.
But for a lot of people, if you just look at your traditional investment portfolio now,
Now you look at these products and you know this is the hurdle rate.
If you can effectively sit risk-free, and risk is always in quotes, right?
Because there's always risk to everything.
But if you can sit risk-free at 9%, you got to evaluate everything else you're holding, right?
How much risk are you taking on to outperform that 9%?
And you got to look at the tax treatment of it and figure out what that net performance is.
So it does change your mindset when you look at it.
you've got something that's built to be stable you can monitor that collateral position in real time
so you know if you're starting to lose credit quality on the on the instruments you're holding
and you can make adjustments through the liquid market right trade them like equities in and out
very easy you know it's they're good products and i think that when people discover them there's
going to be a lot of people that you know might kind of reset their portfolio and go if this is
where i'm gonna settle and park in the base and then i'll move in and out of this but every time
i settle back out i'm not settling into a money market fund anymore i'm just going to settle into
these so you know everything's got risk clearly right i mean there's you've got risk with any
corporation that's issuing any securities wow that's a new the darkest dark yeah darkest ride
with this for a while timer lights but uh but they're pretty powerful because they already have
the assets that are backing them so i did hear on on one of the spaces i think it was when you were
on jeff and i think it was karan that was talking about it about the potential in the future where
they might have to actually carve bitcoin out collateral ease yeah to collateralize the
preferred products in order to try to get ratings which would be pretty interesting because now you
would have direct collateral tied behind these instead of just you know the entire pool that
would be segmented out by product so i thought that was an interesting conversation yeah it's
it's possible uh the rating agencies are interesting and that's that's something that we talked about a
little bit earlier but i think it's helpful to hit on again these rating agencies are for profit
entities and the people that work at these rating agencies are not like these aren't the smartest
people of the bunch right like if you're if you're really brilliant in finance you work for a company
to go make a lot of money. You don't go work for a rating agency. So the fact that they haven't
rated these into these products yet is not a surprise. They probably are having a hard time
wrapping their head around it. They also have a target on their back after the financial crisis
when all these products that were AAA rated collapsed. And they're probably a little bit
skittish about issuing a credit rating on something that doesn't have a ton of history,
despite it being significantly over collateralized. So there's work to be done there in order to get
of credit rating agencies around.
And maybe it's something like that, Ben,
where you've got a special purpose vehicle
that's got different collateral
in each one of these different buckets.
And that's how you go get the ratings in the door.
That's possible.
But ultimately, it's going to take time
and other people in the market
just continuing to pound the table.
And when the products themselves
reprice to different levels,
that's when the rating agencies
will also have an easier time to rate these products.
So right now, if, you know, strategy wants STR to be rated investment grade, well, it's got an 8% yield right now. That's not an investment grade yield. Now, if it reprices to 160 or 180 and it drops to five, maybe that's an easier message to go into the rating agencies and have that conversation. Or if there's, you know, a dozen other of these companies and you have some relativity, that's the other thing that the market is missing right now is a relativity, right?
Like you can compare this to like other preferred equities, but they're not the same because it's not some expectation of future cash flow.
It's a function of balance sheet strength and their ability to raise capital.
It's a different beast and a different animal.
So, yeah, that future is going to take some work.
work. And the weird dynamic here is that these rating agencies are for-profit entities, and you
have to pay to go get those products rated every year. You're paying to get those products rated
every year. It's just an interesting element of how these things work. So they could probably get
those products rated, B plus rated or something right now, but they don't agree with that rating.
So they don't want to go out and go get a B plus rating and then be benchmarked against all the
other B plus product products out there and have this kind of peg on what the yield should be if
they think the yield should go significantly lower, which would lower their cost of capital.
So there's this like chicken and egg component with those rating agencies as well.
It's unique. One thing that's also interesting to think about the future here is like the
tokenization of all of these assets or equities in general and your ability to use them as currency.
And if that's the case, you now have a direct competitor for some of these stable coins that is paying a yield where these other stable coins don't pay, don't currently pay yield.
Right. If STRS, STRC is a tokenized product that is transactable peer to peer, that changes how society can work.
I don't think it's going to happen tomorrow. I don't think it's going to happen next year, but it's a unique concept to think about.
these these instruments as currency as well
something less volatile
i don't know all right guys i gotta drop all right adrian see adrian stuff
later should we talk about that should we talk about the retirement of the converts
i think that's that's valuable yeah this this was really the first time where they i mean they
He'd mentioned it a few times already on podcasts that they were moving away from the convert market and he wasn't even suggesting new entrants come into the convert market.
But this was the first time that they really outlined that concretely as the plan effectively just saying we going to completely clean the capital structure and it going to be built around preferreds and commons And that the way that we going to structure this out So I thought it was very
interesting for them to call this out directly and show, you know, yeah, when you equitize these
convertible bonds, you know, that's going to boost the credit quality in all of these preferred
products. And if they're not going to replace them, what's going to be interesting is that's
going to leave a vacuum in the convertible bond market. You know, I got to imagine that these
convertible bond buyers have gotten used to, you know, the volatility of these, you know, even if
the volatility is dampened recently, you know, these have been massive return accelerators for
the guys trading convertible bonds. I mean, if you're out traditionally going and trading
convertible bonds on equities that have, you know, 20 to 30 vol, you know, even getting a convertible
bond on something with a 60 is going to greatly accelerate your ability to generate your returns
through your Delta hedging trades. So I do think that it's actually going to open up a market for
a lot of these other treasury companies where I think they will fill the demand in the convertible
bond market. But, you know, I mean, taking what do they have out there? Eight point. I can't remember
how much it was in convertible bonds, but a little over eight billion, 8.4 billion. Oh yeah. 8 billion,
8.2 billion. 8.2 billion. Yep. I mean, that's a lot. That's a lot of demand to replace,
particularly because you don't have any other real players at major scale. I mean, you saw
Marathon issue one, but there's going to be a void there. And I think that that demand,
perhaps it drives some better terms. Maybe there's some better premiums to be had out there
for some of these smaller issuers that are going to offer them, but it's clear strategy is shifting
off of that i could still see a world where if they weren't able to drive liquidity into these
preferreds fast enough and they got really under levered that you could see them go pull on this
lever again to get an injection but they're pretty clear at the moment that that's not the primary
path they're going to be taking right they they put this was the first time they did this as well
well, they put a pro forma BTC credit rating in here
without the converts as if they did roll them off,
which would show the credit quality of the instruments,
assuming the conversion of all the
in the money convertible notes.
And you see that that improves drastically.
Like STRF goes from, I don't know,
what is it like a six or seven X,
7.7 X BTC rating to a 11.8 X BTC rating.
And all of these other instruments
increase drastically too.
So significantly over collateralized,
and the importance there is
they can withstand a significant drawdown
and still have capital left to pay off the obligation.
There's just so much money on the balance sheet
that this isn't that big of a deal.
And yeah, do you mind if I hop in
and just talk about the definition of cum notional value
or cumulative notional value?
Yeah, I did a little post on this,
and because I didn't know what it was.
And it's just the amount of senior capital above that instrument, including that instrument.
So for like, for Strife, for example, you can see the outstanding liabilities.
This is obviously pro forma, so it's different.
But the cumulative notional value is, the cumulative notional is just all the converts
plus the outstanding Strife liquidation preference, a total of Strife outstanding.
And that's essentially what is prioritized in the case of liquidation, including that liability.
So it's just a cool way to look at it. And then you can use the drawdown scenarios to kind of
put your own Bitcoin rating assumption. It's all kind of saying the same thing with different
different words, Bitcoin rating, you know, Bitcoin backed collateral, all of that. It's all very
similar. Yeah, it's to provide perspective on the asset relative to the liability. That's what
That's how you get to the BTC rating is by summing the cumulative.
Yeah. Bingo. Okay.
Sorry guys, it's getting late over here.
It's getting late. Grow up chat.
Grow up.
Oh man. Okay.
STRC is low volatility, short duration. Okay. So before we end, where's the next one?
Mason's got some thoughts on where the next one fits in this bucket here.
Where are we going to put Stratus, guys?
Stratus is next.
Stratusphere, that's the high leverage.
STRU, Stratus.
But it's going to be the lowest.
Someone when they announced STRC was like,
no way. 9% monthly dividend. This is a mistake. I was like, what? It's funny.
9% monthly dividend might've been a little concerning.
Yeah. I would be bearish on that. Yeah. I would be bearish on that product.
That would raise some questions. That would flip me to the other side for sure.
I mean, Josh and I would have a field day.
Yeah, I would join forces.
I would be concerned at that point.
Go to slide 19.
I think that's the one that Jesse shared.
And there's a bunch of room in between STRC and STRD.
So I don't know.
It's got to be some kind of effective duration between two and eight years.
You can stick two more in there.
Yeah, you can stick.
You can stick quite a few.
Yeah, quite a few in here.
Building out this whole duration curve.
which again my background thinking about insurance right average duration on a like a
workers comp claim might be a decade like six to six to eight years and that means you want you
want products that have a duration of six to eight years and you're going to get paid out over time
for a six to eight year liability and that's like how i see the world is this like this duration curve
where you need to have assets that match to that specific duration.
This is big.
This is really important to wrap your head around this duration component.
I'm still learning it.
I'm still figuring it out.
When we were talking about what the potentials were for the next ones,
I think we mentioned something about a variable rate one,
but the fixed price was shocking to me.
That wasn't on my radar at all.
but so could there be another one that's variable,
but not pegged to a hundred or does that,
does it need to be pegged to something for this to make sense?
To be variable.
That's interesting.
I'm not sure.
Not really.
It could be variable.
You just remove the,
maybe it's a,
maybe it's so for plus something and it's just always,
always floating.
do we need to have predictions on how many more preferreds oh man no it's gonna be it's gonna be
a lot i think i think there's gonna be a whole catalog it's gonna be like uh you know getting
the east bay catalog to get cleats back in the day you're just gonna like look through all of
them you're like a different color different color nike adidas you know uh that's kind of
how I'm thinking about it. And man, I mean, when there are, I mean, Semler is already in their
filing. They've already looked, I think in the shareholder vote, they're going to
look to approve an increase in preferred equity shares. So they're signaling that they're going
to offer perpetual preferred equities. There are going to be dozens of these companies that are
going to do this. These Bitcoin treasury companies are going to do this. And we're going to have this
like yield curve that strategy is creating here and i hope everybody's prepared to talk about
these products forever because there's going to be a hundred of them there's going to be 200 of them
and they're all going to be competing for the same space and uh
i do like where it's pushing us you know as an industry though right i mean it's showing a lot
of maturing in this industry when you know this is moving people away from saying we're going to
compete and doesn't mean someone's still not going to go try to compete on this but we're not
necessarily competing for how much leverage we can apply what we're starting to focus on competing
on is credit quality products we can offer into the market and you know that's a much more
responsible way to scale and i think that that's a pretty good message to put out there now you're
still definitely going to have the other side of this there's still certainly going to be companies
that come out and try to really lever up.
And if Bitcoin's moving sideways,
they're going to try to find a way
to get their equity moving
and kind of be the vol play.
But largely for the players
that are achieving scale,
they're showing that,
do this unencumbered, right?
Don't stack on a lot of debt
and then focus on the credit quality
of the securities you can issue out into the market.
And if you want to go compete
with the products that strategy is putting out,
well, one way to do that
is to have better credit quality on them
than they do right have them be more over collateralized than the product that strategy
has out in market and maybe some companies will only focus on one or maybe two products
and you know that's really where they'll try to dominate by keeping them with a very high
credit quality i mean we'll see how this evolves but i do like that that's becoming the focus
right it's on quality now it's not necessarily on that all the credit quality ability if you want
that you're gonna have to go you know further out on the risk curve and you're gonna have to go
chase the emerging companies you know there's still a lot of a lot of plays out there where
there's a lot of volatility i think people are feeling that right now you know which is uh
which is always interesting there's been a lot in in a lot of these smaller cap plays where you had
some serious volatility happening in the last couple of weeks but uh you know it's it's still
out there but strategy is reaching such a scale where you know clearly with this depth of liquidity
it's not going to be nearly as volatile as some of those small plays are going to be so people are
chasing the super high volatility. I think a lot of people are going to be rotating capital into
smaller plays to chase that. I think you're right. And I think it's so important. And it was something
I was listening to Saylor talk about on a recent interview is why are there volatility sellers?
And what do options participants want on an equity? And I know a lot of these other smaller
companies don't have options markets, but it's something I've been reflecting on a lot too. It's
like, why is the volatility of MSTR more valuable than maybe the volatility of NVIDIA or some other
equity in the market. He says you want liquidity, obviously MSR has that, volatility, obviously has
been dying a little bit, and you want durability. And I think durability is the key here, right?
You have an equity backed by the hardest asset known to man that has an upward trajectory of 30
Kager plus. So I think those things combined make an incredibly attractive equity and pool
for option selling and that sort of those dynamics. So I just think it's really important
we don't forget those things and that's why mstr is valuable in the first place like all of that is
huge and a lot of these smaller bitcoin treasuries don't have that necessarily right and that's you
know it's kind of funny because this goes both ways right a lot of times the people that are
also trading around strategy are also selling options on strategy and they're going well where's
the volatility right well you're selling the volatility right so now imagine dollars in
misty thousands of other people are also selling the volatility now add on the etfs that are
selling the volatility right you're going to get these periods in time where things go sideways
right i mean you're going to get these gamma pins that are out there and it's going to stall things
out and you know everyone that's selling volatility contributes to that but it's a feature and i think
you said something earlier dan when i was just listening to it where you said at some point
there's going to have to be a moment where all these vol sellers get blown out
and I do think that will happen.
These are the types of plays where you get lulled to sleep
and you think it's over and then overnight,
all of a sudden you wake up and you've got a lot less shares
than you had the day before.
So I think that day is still coming.
Okay, now I feel personally attacked.
Well, it was kind of direct that had you, wasn't it?
Yeah, I think so.
I keep crossing my fingers hoping
the shorts will get blown out because I'm still
so freaking irresponsibly long
that I need an excuse to take
off the freaking leverage. Those are always
my favorite days to go watch your show, Solay.
I knew you had to scramble
because you were getting blown out of the water because things
move so quick. Those are my favorite days to watch.
It's always fun to
watch panic moves.
Love your back.
The
The move here on the price from, what was it, like $380 to $430?
When it moved just in the last two weeks, the vol didn't move at all.
Implied vol didn't move at all.
I noticed.
Which is interesting.
It's quiet.
It also feels like Bitcoin is kind of loading up, right?
I've never been more bored at 120,000 or whatever we're at right now, 119,000.
Even though just go back a couple of months and we would have been super excited on that move.
Now it got here and it's just kind of to that point where you just expected it to happen.
It should have been here a long time ago.
We were more surprised it wasn't.
So now it's here and you're going, all right, well, where's 150?
Yeah, where's the rest of it?
People are calling for double top.
It's like, here we are, double top.
It's like there's so much more money on the horizon.
It is a different market.
I mean, people do need to look back at the prior cycles.
And I'm not going to say there will never be a bear market again,
but the probabilities seem to be going down
because you got to look at the types of buyers that we have now.
In the past cycles, you had massive leverage trading in Bitcoin,
primarily from all these offshore exchanges.
You had all the collateral getting passed around behind the scenes for all these bad actor firms that were out there.
You had VCs that were really some of the ones that were trading out here.
So it was very driven by retail VC activity.
But now you've got these directionally long accumulators, not traders, that are just putting buy pressure into the market.
you've got the people holding it in their brokerage through etfs like ibit and they've been
holding pretty strong and accumulating consistently you know so while there's of course there's going
to be bear markets at some point i just think the severity of them is what's probably going to
change here agree you know it's not to say that we don't get a 30 or 40 drawdown we might
But I think that you have so many people lined up to buy these days and you seeing more and more of that buy pressure building up and you seeing more and more weakness out there surrounding the US dollar and the narrative there that I think it drawing more attention as the asset class grows So you know yeah we might get a hit 200 come down to 150 you know that kind of stuff that can certainly still happen you can still have these blow off tops but it just seems
like the structural bit is building over time and i'm not necessarily seeing where that slows down
yet this is still such a small small piece of the markets out there relative to where all the other
capital is that I think that this space is going to continue to build.
I agree with that, Ben.
And I think a lot of people who are calling for double tops have crypto PTSD.
And I think what they're not realizing is exactly what you're saying about the structural
change here, which is Saylor and the other Bitcoin treasury companies globally are tapping
into a 300 trillion dollar capital pool that has has yet to be touched by bitcoin and they are
personally our sailors personally and these other companies are personally opening up the floodgates
to to allow that capital to come in and uh bitcoin's only two trillion dollars right
I keep on looking at Nvidia. Bitcoin's not even as big as the largest equities in the US, right?
We're at a unique moment here. Yeah, we really are. And when you look at this,
I do think that there's still a potential for some weakness. The Bitcoin treasury companies
have not reached escape velocity. You've really got one primary player of scale, right? That's
strategy. You've got others coming to the market, but a lot of the capital raising is dependent on
the availability of capital from these institutional investors. And so it can slow down significantly,
right? You can get a period where there's just not capital readily available for these companies
to raise to go buy Bitcoin with. So right now, I think you're kind of in a race for scale.
I think you're seeing a lot of these treasury companies that are trying to accumulate quickly,
Try to get to that billion dollar mark where you can get these products out into the market where you've got control over how you're raising capital versus being out there and being held to the terms that comes with a lot of these institutional capital raises.
And in that market, you're largely dependent on how the prior raises for them went.
right so if you get a pipe transaction that really doesn't perform those investors become
skittish about reloading for another one so that can dry up capital for a while until excitement
comes back into the space the other thing you get is because you have so many of these companies
going through these you know with things like mergers and spacks and all this is you've got a
lot of these institutions that are already allocated in this space and that capital hasn't
freed back up to rotate into other deals. So it's not like every institution on earth is out here
trying to invest money in these Bitcoin treasury company deals, but the ones that are, you know,
are trying to get out of positions that they're already in and then they can reload if that
position performed. So, you know, there's still certainly, we're not really even fully out of
the gates here until my opinion, we have several companies that have, you know, billion dollar
treasuries out there and more products where they're able to raise directly versus going through
and raising, you know, doing the sales rounds and raising money from these institutions.
So I think that's going to be very important to this really taking off. But the other area that
I'm still very bullish on is not even these active accumulators, right? To me, it's the fact that we
haven't even started on the companies just moving treasury assets into Bitcoin as a hedge. We kind
of skipped past that, right? I always assumed that was coming first, that companies would kind of dip
their toe in the water. They'd start converting some of the cash or some of the U.S. treasuries
they were holding into Bitcoin even as a hedge. And then eventually you might get more people that
follow the micro strategy model. But we kind of bypassed that and everyone jumped straight to,
you know, trying to reinvent themselves and trying to do the leverage play. And they're,
you know, creating companies out of nothing and raising capital and getting off the ground with
treasury operations. But I still think the big wave is when corporations start viewing weakness
in the U.S. dollar and in the U.S. economy, and they decide to start rotating into truly
sovereign assets. And there's a massive amount of capital sitting on balance sheets that hasn't
even begun to migrate. So that's actually the wave I look at and say there's still a lot of demand
coming. Right now, it's a lot of excitement for all the capital raising and the leverage being
applied to go out and buy and acquire Bitcoin. And people are excited about Bitcoin yield and
all the new market or all the new metrics. But it's really going to be when it becomes mainstream,
when these companies just start doing it purely as a hedge. And I've said for a very long time,
that's something I would applaud very loudly because just that alone is an incredibly,
my opinion, responsible move for a corporation to take. And I think it's becoming fairly obvious
that that should be the next step for a lot of corporations, even if it's 5%, right? Get off zero,
you know, see the impact of an asset that has a truly fixed supply on your balance sheet.
You're doing your shareholders a favor and you're protecting the value you've created through your
operations. And I think that's where the next really big wave of capital comes from. Treasury
companies are going to continue to scale. Very bullish on that space, obviously. But I'm not sure
that that's necessarily long-term, the major rush capital coming in. I still think it's going to
come from companies that are just holding cash on their balance sheet that are about to have a very
unignorable problem. Hey, Ben. Ben, quick question for you. I just saw this. I can't
believe it happened seven hours ago, and I'm just seeing it. Fidelity filed to amend its spot
Bitcoin ETF to allow in-kind redemptions and creations. What does that mean? Does it even
matter anymore? Are we past that? What are the implications there? I would have to look at that.
I haven't read through that yet to see what it was. I mean, I saw some of those before where it
only applied to the APs, but Jeff, I don't know if you've looked at that one or not yet to see
what they actually put in there. You're on mute, Jeff. Oh, shoot. No, I have not looked into it.
I was just looking at it up here. Fidelity in kind ETFs. Yeah, no, I haven't seen this yet.
I'd take a peek. I mean, that would be, that'd be pretty big, right? Cause I know a lot of people
are concerned that'd be pretty big because i know a lot of people are concerned about you know these
uh institutions actually holding this capital and you have the ability to roll uh
i know josh would love this he's been talking about this a lot basically if you've got options
that are that you exercise you're exercising options and getting the bitcoin in kind
which would put a lot of pressure on the remaining supply, especially if there's no
ability to go get that Bitcoin. Because we're already hearing rumblings of OTC desks are having
trouble filling big orders. And if they're having trouble filling big orders and you've got a big
movement in Bitcoin and all of these call buyers are exercising their IBIT calls or their Fidelity
the Bitcoin calls and then demanding it be returned in kind, that changes the landscape.
There's no temporary moment in time or like buffer period where they can go find the Bitcoin
that they don't necessarily have or borrow it on the balance sheet or whatever that may
be.
I think that makes things a bit more complicated.
so yeah that's interesting interesting tim thanks for sharing
okay we've got uh just four of us there we go dan mason popped off appreciate it we're at two
hours so let's run around final thoughts we'll pass it to soleil we'll start with you and pass
around yeah i'll keep it short and sweet if um fiat is a melting ice cube then uh strategy and
preferred converting fiat to bitcoin is the uh is like glacier formation boom
deep ben go for it i'm good man i think i've ranted enough for you we've cruised we've got
10 000 always bullish on the space i love it there's no better place to be tim i mean
when you zoom out and you realize that the stock market hit an all-time high today like
Everybody listening right now, raise your hand.
We can see all 10,000 of you.
Raise your hand if you had anyone in your life run around like a crazy person and say,
woo, my stock portfolio is at an all-time high.
Like no one's paying attention.
And then think about like one out of 100 of those people that aren't paying attention to the stock market
are paying attention to Bitcoin.
And then one out of 100 of those one people that actually know about Bitcoin
are paying attention to what we're talking about.
Like that's how early we are.
It's just unbelievable when you really zoom out.
To 100% to that point, we need an update of the image, right?
The number of people that understand Bitcoin, one out of 100.
The number of people that understand MSTR, one out of 100.
The number of people that understand STRK, one out of 100.
The number of people that understand STR, you could just do it all the way down the road, right?
In order to understand these products, you got to understand all of them.
Yeah, I think it's just it's really early.
Completely agree, Tim.
Nobody knows what's going on here.
Go talk to anybody.
Yeah, I mean, they're buying XRP.
They think XRP is going to be the financial rails of America.
They don't realize the cognitive dissonance there is just insane.
We've got an XRP treasury company now, right?
We've got a Dogecoin treasury company.
I mean, it's crazy.
Yeah, I mean, it's been a really super interesting day.
First, you have the hurdle rate come out.
Then you have a Josh Mann RaiQuant space.
then you have a strive space then you have a grain of salt space then you have true north i
probably missed a few things and like it's after midnight on the east coast but the thing is there's
only five ten a hundred thousand people listening to these things right you think about pomps event
you think about orlando i mean you're talking about like 500 people in a room that's where we
are right now it's like super interesting when you just zoom out and think about that
pretty wild i kept hearing so many people asking if the space was saturated already
right and you know that tells me what a very small bubble we live in because the minute you
step outside of the communities we've got on x or you know a lot of us working in bitcoin jobs and
you start talking to just normal people out there that aren't fully orange billed already
no idea any of this exists like there is a massive addressable market out there still
for all of this stuff and there's a lot of education to do right because getting people
you know i'll just say onboarding them to bitcoin is could be one of those defining decisions that
they make in their life so it's always going to be a worthy cause we happen to have the luxury
know as a group to be able to sit down and think about these things and look at the macro environment
and study the dollar and the way that they manage the monetary systems to see the problems
not everyone has that luxury right some people are white knuckling it paycheck to paycheck they're
a little busy to go out and try to figure out you know what what it what bitcoin is addressing in
in their personal lives. So yeah, keep talking to people, keep pushing the message out there.
It's important. You know, that's, it's going to help a lot of people.
That's my takeaway too. I've been working in this space now for seven months now, officially for
three weeks. And I've been talking to people about Bitcoin institutionally for years.
And I can confirm even behind the curtain over here, people that have issued thousands of
preferred equities in their lives have still, I had to explain the strategy products day one for
somebody that has issued thousands of preferred equities before. Like that, oh my God, how do you
not understand what's going on here? It's just crazy. So yeah, I would emphasize that it's just
still incredibly early. And like, that's why I continue to be permable. I'm here for the long
run right i'm not going to evaporate off the planet like i'm here to work in the space this
is going to be a ton of fun the next decade is going to be is the gold rush we are in the digital
gold rush and i'm going to be working here for a decade because it's the best place to be it is the
most exciting place to be and that's why i'm permable and yes and i've got a conversation
with ahmet tomorrow that'll be cool so super quick jeff yeah the news came out i want to say today
unless I just missed it, maybe it was a few days ago, that PNC Bank is something, something,
something, working with Coinbase to let their customers buy crypto. I mean, that was a headline
several years ago. And I would go into PNC branches and they're like, oh no, it's not happening. It's
not happening. And obviously we know now why, many reasons why it wasn't happening. But I think
that's one of the things I'm most bullish on is as soon as banks offer it, whether it's through
Coinbase, some other partnership, some other exchange or natively, and you can buy Bitcoin,
you can borrow against your Bitcoin at your local branch, I think it's going to change the game.
I mean, right, you're not going to have to have half a million dollars or a million dollars to
get into the finance department at one of these big exchanges. You're not going to have to pay
14% interest. I think it's really going to be a huge catalyst. It's one of those things that
people need, right? They don't understand necessarily that Bitcoin having the utility
of outpacing monetary debasements, a pretty powerful utility in and of itself. But the ability
to go borrow against that asset is what's really going to drive it home for individuals and
corporations. I think that that is one of those catalysts that drives the next wave. So, and it's
closer than we think. And it's high, high quality collateral. I can tell you that I've chased a lot
of collateral around in my life.
I would have loved to have Bitcoin as collateral.
So that'll drive the rates down.
It'll make it very cheap to borrow against.
And that's going to make it worthwhile for a lot of companies to hold
just for that reason alone.
Quick access to capital.
Bingo. All right.
We got it in the stream.
I got to take my dog out.
Bobo says hi.
We love puppies.
Good night, everybody.
All right.
I'm working.
Yeah.