1
00:00:00,300 --> 00:00:22,980
30 seconds

2
00:00:22,980 --> 00:00:24,220
Isoy mystery

3
00:00:25,360 --> 00:00:26,380
Ripley

4
00:00:31,440 --> 00:00:33,400
activation

5
00:00:34,920 --> 00:00:38,420
Counting

6
00:00:45,420 --> 00:00:47,780
Minion

7
00:00:48,440 --> 00:00:50,580
Be cotton

8
00:00:50,580 --> 00:01:18,620
Woo!

9
00:01:18,620 --> 00:01:19,960
Here we go.

10
00:01:19,960 --> 00:01:28,040
Welcome back. True North, episode 54. Margin is not calling. And we're back with a brand new

11
00:01:28,040 --> 00:01:34,020
episode. We're going to get after it today. We've got the crew here. Despite the price of Bitcoin

12
00:01:34,020 --> 00:01:38,960
being down, we are going to grind through it. A lot of despair in the marketplace these days.

13
00:01:39,960 --> 00:01:44,000
And yeah, welcome back to True North, the investment grade Bitcoin podcast,

14
00:01:44,180 --> 00:01:48,680
where we talk about securitized Bitcoin. We talk about Bitcoin. We talk about what's happening in

15
00:01:48,680 --> 00:01:53,400
the financial world. We talk about leverage. We talk about capital structures. And I think we've

16
00:01:53,400 --> 00:01:57,640
got a pretty good show for you today. It might be a little bit of a quick one, just given the

17
00:01:57,640 --> 00:02:01,280
landscape of the market, and we'll crank through it. So today, we're going to talk a little bit

18
00:02:01,280 --> 00:02:07,020
about capital structure, 101, preferred equity design. We'll think about the macro of the Bitcoin

19
00:02:07,020 --> 00:02:12,240
landscape, kind of where we're at in the marketplace. Metalphoria, we might get into that a little bit.

20
00:02:12,240 --> 00:02:19,000
risk market relativities, and then capital raises in 2026. I know Soleil has done a little bit of

21
00:02:19,000 --> 00:02:23,280
research on what's going on here. And obviously a lot of noise happening with like Tesla, SpaceX,

22
00:02:23,280 --> 00:02:29,100
open AI. We've got to think through what that looks like. So without further ado,

23
00:02:29,520 --> 00:02:32,700
we've got a quick word from our friend, Tim Kotzman.

24
00:02:35,760 --> 00:02:41,960
Ladies and gentlemen, what you're about to hear may be amazing, but it is not financial

25
00:02:41,960 --> 00:02:50,700
advice. It's for informational and educational purposes only. Back to you. And we're back.

26
00:02:51,740 --> 00:02:57,280
Okay. There we go. We're going to cook. All right. How are we feeling? Obviously,

27
00:02:57,860 --> 00:03:07,620
what are we at right now? Bitcoin is at 71,463, just absolutely grinding down. We've got a 42%

28
00:03:07,620 --> 00:03:12,240
drawdown, I think, from where we're at right now, from all-time high at $126,000.

29
00:03:12,520 --> 00:03:13,220
How are we feeling?

30
00:03:13,780 --> 00:03:14,280
How are we feeling?

31
00:03:16,060 --> 00:03:17,640
Early, I hope.

32
00:03:17,880 --> 00:03:18,240
Early?

33
00:03:19,980 --> 00:03:21,660
I mean, it's pretty brutal out there, right?

34
00:03:21,820 --> 00:03:23,580
I mean, pets' heads are falling off.

35
00:03:23,580 --> 00:03:28,680
People are screaming for margin calls, as we've seen in every single one of these so

36
00:03:28,680 --> 00:03:29,160
far.

37
00:03:30,000 --> 00:03:34,460
And yeah, it's brutal out there.

38
00:03:35,560 --> 00:03:37,060
Mike, Dan, what are we thinking?

39
00:03:37,060 --> 00:04:04,540
You know, look, brutal. Sure. It's so much more fun when the price is going up. We all have to agree to that, that it's true. And I think what I'm looking at it, you know, all the conversations that I had over the past week with the price action, what most people are that I've spoken to that are large holders or industry players, what they've all said is basically consistent with what we're seeing on the outside.

40
00:04:04,540 --> 00:04:07,140
They're baffled just like we are.

41
00:04:07,240 --> 00:04:09,860
I mean, Mike Novogratz, he posted this.

42
00:04:09,920 --> 00:04:10,700
There was a short video.

43
00:04:10,840 --> 00:04:12,620
It was two minutes long and put in the stream.

44
00:04:12,960 --> 00:04:16,040
And what he said was, look, gold is ripping silver.

45
00:04:16,180 --> 00:04:20,680
Obviously, silver has dropped down, but it does not appear that Bitcoin's going along

46
00:04:20,680 --> 00:04:21,060
with that.

47
00:04:21,140 --> 00:04:22,600
And he seemed to be baffled also.

48
00:04:22,880 --> 00:04:24,440
So that's my point.

49
00:04:24,920 --> 00:04:28,820
We all thought that Bitcoin would rip higher than gold, but it appears to be decoupled

50
00:04:28,820 --> 00:04:30,540
from gold right now for whatever reason.

51
00:04:31,160 --> 00:04:32,920
And just weathered the storm.

52
00:04:32,920 --> 00:04:38,880
yeah that decoupling i think is what is causing a lot of people indigestion is it's like okay

53
00:04:38,880 --> 00:04:43,700
these things it's supposed to pump everything why are some things pumping but you know our bags are

54
00:04:43,700 --> 00:04:50,320
not pumping so that's kind of like causing some heartburn yeah the debasement trade not hitting

55
00:04:50,320 --> 00:04:55,060
bitcoin it's hitting hitting gold and silver and people are like wait isn't bitcoin supposed to

56
00:04:55,060 --> 00:05:00,400
move with this yeah that's it it's an interesting argument i mean i also argue and like people are

57
00:05:00,400 --> 00:05:05,200
saying, like this is the debasement trade. I mean, true inflation is, you know, below 1% here. We're

58
00:05:05,200 --> 00:05:10,340
seeing liquidity kind of stagnate in the US markets, but we're seeing the People's Bank of

59
00:05:10,340 --> 00:05:15,860
China injecting mass amounts of liquidity. And if you overlay the People's Bank of China liquidity

60
00:05:15,860 --> 00:05:21,520
injections with our total money supply with gold, like they're clearly printing money to back their

61
00:05:21,520 --> 00:05:28,180
currency with gold as kind of to get off the US dollar standard. So, and you know, gold is a

62
00:05:28,180 --> 00:05:31,740
massive market. So I don't think it's any surprise that Bitcoin's not moving with gold here because

63
00:05:31,740 --> 00:05:37,240
we kind of see the drivers of this gold trade, which is, you know, large macro funds piling on

64
00:05:37,240 --> 00:05:45,020
as China buys the hell out of gold. But I think, you know, five monthly candles here in the red

65
00:05:45,020 --> 00:05:50,020
is definitely tough for anyone. Yeah, but Dan, I agree with what you're saying. I'm going to give

66
00:05:50,020 --> 00:05:56,600
you a good point here. The reason why gold is going higher is because central banks are buying

67
00:05:56,600 --> 00:06:02,440
it right i mean it's it's not it's it's not the guy that's living somewhere you know in any state

68
00:06:02,440 --> 00:06:06,360
in the u.s or somewhere around the world some guy shows up he's like oh i'm gonna buy 20 grand worth

69
00:06:06,360 --> 00:06:11,720
of gold at my local gold dealer that's not forcing the price of gold up trillions of dollars right

70
00:06:11,720 --> 00:06:16,760
up trillions right that's from a central bank buying it and i'm not saying i'm not making a

71
00:06:16,760 --> 00:06:21,320
value judgment here i'm just saying that it's not from retail the reason why gold is ripping higher

72
00:06:21,320 --> 00:06:28,480
So yeah, so I'm agree. You guys want to hear this is a concept that I haven't discussed with you guys even privately

73
00:06:28,480 --> 00:06:32,740
Maybe it's an inversion and i'll explain what this is

74
00:06:32,740 --> 00:06:36,720
You know, we think that bitcoin is supposed to go up because of money printing and so forth

75
00:06:36,720 --> 00:06:43,180
But I think what happened is there used to be two and a half million bitcoins on exchanges and between strategy

76
00:06:43,180 --> 00:06:46,020
And ibit spot bitcoin etfs

77
00:06:46,020 --> 00:06:51,140
They picked up maybe net half a million bitcoins on the spot bitcoin etf

78
00:06:51,140 --> 00:06:52,680
because they rolled out of GBTC.

79
00:06:53,060 --> 00:06:55,620
And then you have strategy over the past,

80
00:06:55,760 --> 00:06:58,620
whatever, two years acquired another half a million Bitcoins.

81
00:06:58,880 --> 00:07:00,440
So there's about a million Bitcoins

82
00:07:00,440 --> 00:07:02,400
that are off the exchanges, right?

83
00:07:02,760 --> 00:07:05,440
So now what happens is you have a smaller pool

84
00:07:05,440 --> 00:07:07,380
of Bitcoin that's on exchanges.

85
00:07:07,760 --> 00:07:09,280
So from that perspective,

86
00:07:09,760 --> 00:07:13,760
people that like to short and make the perps

87
00:07:13,760 --> 00:07:17,120
or to make this a grind trade down,

88
00:07:17,460 --> 00:07:18,560
there's less Bitcoin.

89
00:07:18,720 --> 00:07:19,580
So to the downside,

90
00:07:19,580 --> 00:07:23,420
They have downside convexity because the pool of Bitcoins is smaller.

91
00:07:23,880 --> 00:07:27,760
Now, many people think, well, if the pool is smaller, then the price should go up.

92
00:07:28,380 --> 00:07:30,860
Convexity works both to the upside and to the downside.

93
00:07:31,480 --> 00:07:33,000
And I think this is why you're seeing this now.

94
00:07:33,120 --> 00:07:38,480
Now, this is not as bad as 2022 or 2018 in terms of percentages.

95
00:07:38,920 --> 00:07:42,480
But I think this is why the expectation now is off.

96
00:07:42,620 --> 00:07:48,380
Oh, we wanted Bitcoin to come off the exchanges, right, to have this supply shock, right?

97
00:07:48,380 --> 00:07:51,720
There's less supply and therefore the price should only go up.

98
00:07:51,840 --> 00:08:00,420
But coupled with the Binance 1010, October 10th, with MSCI FUD on MSTR combined with tax

99
00:08:00,420 --> 00:08:07,480
loss selling, that all hit, not a conspiracy theory, it just happened to hit all into mid

100
00:08:07,480 --> 00:08:09,480
October through November.

101
00:08:09,800 --> 00:08:11,880
And the price really hasn't recovered since then.

102
00:08:12,340 --> 00:08:13,660
And so that's where we are today.

103
00:08:13,660 --> 00:08:15,820
And we need to find a new bottom.

104
00:08:15,820 --> 00:08:21,120
them. And then I think that from my view is that, you know, look, I've been this for eight and a

105
00:08:21,120 --> 00:08:25,540
half years. If I didn't think it was going to come back up, I wouldn't be on the show right now.

106
00:08:26,600 --> 00:08:32,400
Yeah. I mean, if you liked it at 126, you're getting it for 40% off, 50% off, buy one,

107
00:08:32,480 --> 00:08:37,980
get 150 off, you know, right? By the way, this is not financial advice, but I would tell people

108
00:08:37,980 --> 00:08:43,460
My belief is buy low and sell 20% when it's high.

109
00:08:45,740 --> 00:08:49,060
But what happens is people FOMO in at the top, right?

110
00:08:49,500 --> 00:08:51,600
And so that drives the price even higher.

111
00:08:51,820 --> 00:08:54,760
But I think we have moved now to a true institutional play.

112
00:08:55,460 --> 00:08:58,580
And the retail is kind of out of it right now.

113
00:08:58,640 --> 00:09:00,520
So I think we will see the rotation.

114
00:09:01,680 --> 00:09:04,020
Yeah, you know, all the FUD is pretty much the same.

115
00:09:04,460 --> 00:09:07,100
It's just it hits a little different when the price is going down, right?

116
00:09:07,100 --> 00:09:15,460
All the flood seems believable and credible when the price is going down and you really, you know, you can't just tell the bears to stuff it, you know, temporarily.

117
00:09:15,460 --> 00:09:18,040
You're just kind of like handcuffed.

118
00:09:18,400 --> 00:09:19,580
You have to sit and take it.

119
00:09:19,580 --> 00:09:23,040
By the way, you know, fun fact here.

120
00:09:24,780 --> 00:09:29,220
Remember, there was all the FUD about proof of reserves for strategy at the beginning of the year.

121
00:09:29,720 --> 00:09:35,240
And we and when we were Jeff, you and I were on a stage in Las Vegas and I was the host.

122
00:09:35,240 --> 00:09:39,560
and we were talking about it with richard byworth and ben work we were on stage talking about this

123
00:09:39,560 --> 00:09:45,160
yep okay because people have short memories so we talked about it and we said there's re

124
00:09:45,160 --> 00:09:48,360
michael say there's a video why he doesn't do this you're like okay why am i bringing this down

125
00:09:48,360 --> 00:09:57,320
so the same fud returns again whatever five days ago yeah interestingly enough mike belchia bit go

126
00:09:57,320 --> 00:10:02,840
you're like what the hell does this have to do with strategy um they took all of the employees

127
00:10:02,840 --> 00:10:07,080
off of LinkedIn so they would not be attack vectors

128
00:10:07,080 --> 00:10:20,714
in order for people to do a phishing or some type of attack on the employees at LinkedIn And they contacted LinkedIn to say hey we going to remove our people off because people will target us

129
00:10:20,714 --> 00:10:24,034
because our people hold wallets for institutional access.

130
00:10:24,574 --> 00:10:25,494
And so this is all real.

131
00:10:25,634 --> 00:10:26,714
This happened live.

132
00:10:27,034 --> 00:10:27,814
And people are like, oh, well,

133
00:10:27,814 --> 00:10:30,174
it's not a big deal to post your wallets.

134
00:10:30,754 --> 00:10:33,754
No, I mean, think about what Mike Belche just said.

135
00:10:33,834 --> 00:10:35,254
And their company just went public.

136
00:10:35,494 --> 00:10:36,994
And he's, by the way, in the book,

137
00:10:37,314 --> 00:10:39,074
Bitcoin Billionaires by Ben Mesrick,

138
00:10:39,074 --> 00:10:41,814
which I read years ago, I could pull that back out.

139
00:10:41,974 --> 00:10:44,034
He was one of the guys referenced in the book.

140
00:10:45,674 --> 00:10:46,074
Yeah.

141
00:10:46,154 --> 00:10:48,934
I mean, it goes been around for a long time, like 2014.

142
00:10:49,454 --> 00:10:52,254
They've been at the forefront of all this stuff, but it makes sense, right?

143
00:10:52,274 --> 00:10:55,194
You don't want an attack vector out there at all.

144
00:10:55,494 --> 00:10:57,174
Look, the attacks are real.

145
00:10:58,134 --> 00:11:01,654
I got invited to be on a podcast, right?

146
00:11:01,654 --> 00:11:05,374
From somebody that I know on X and it wasn't them.

147
00:11:05,494 --> 00:11:06,834
Their, their account was hacked.

148
00:11:06,834 --> 00:11:13,674
and when I clicked the link to, you know, to the, to the podcast, it was actually spyware

149
00:11:13,674 --> 00:11:19,734
and they tried to, you know, send the code and get me to give them the, the, the access

150
00:11:19,734 --> 00:11:23,134
code so they could get into my emails and, you know, God knows what else.

151
00:11:24,054 --> 00:11:30,094
You know, I was able to, you know, detect it in time, but this stuff is for real.

152
00:11:30,094 --> 00:11:38,274
And it's on a monumentally greater scale for these companies than my personal stash.

153
00:11:39,094 --> 00:11:39,654
100%.

154
00:11:39,654 --> 00:11:41,734
Hey, I want a fun fact here.

155
00:11:43,814 --> 00:11:44,714
Here's the book.

156
00:11:45,634 --> 00:11:47,614
Bitcoin Billionaires, Ben Mesrick.

157
00:11:47,834 --> 00:11:49,354
Can you read the date on it?

158
00:11:49,714 --> 00:11:50,874
I read it on...

159
00:11:50,874 --> 00:11:52,154
Yeah, I'm dyslexic, so I can read it.

160
00:11:52,214 --> 00:11:52,434
Right.

161
00:11:52,694 --> 00:11:53,034
Yeah.

162
00:11:53,034 --> 00:11:59,714
So I read it on July 23rd, 2019, and I wrote The Price of Bitcoin.

163
00:12:00,094 --> 00:12:06,574
9,505. And I'm like, when's this fricking thing going to get over 10 grand? You know, I was like,

164
00:12:06,754 --> 00:12:13,674
and this was after I got in in May of 17 and it got in almost a 20,000. And I read the book and

165
00:12:13,674 --> 00:12:17,734
I wrote the price and I said, one day in the future, I'm going to, you know, and this is a

166
00:12:17,734 --> 00:12:23,254
great book to read. You got the Winklevoss, uh, Winklevi twins in here and Charlie Shrem and all

167
00:12:23,254 --> 00:12:29,814
the OGs and Eric Voorhees. So, so read the book, but look 95. And back then I was like, Oh,

168
00:12:29,814 --> 00:12:35,094
if we can only get back above 10 grand and now we're all unhappy because it's,

169
00:12:35,194 --> 00:12:39,754
you know, whatever it's 71,000, whatever it is right now. And so, you know,

170
00:12:40,294 --> 00:12:44,234
what is, I don't think I'm an OG. I got in 2017, but

171
00:12:44,234 --> 00:12:48,334
hopefully that was helpful. I don't know.

172
00:12:48,414 --> 00:12:53,354
Yeah. Helpful. I, I, I'm going to share a little bit of a background analysis that I'm just doing

173
00:12:53,354 --> 00:12:58,934
here. Why is it so small on my screen? I got to figure this out here.

174
00:12:59,814 --> 00:13:00,354
One second.

175
00:13:02,134 --> 00:13:07,214
The just looking looking at where we're at in the in the general grand scheme of things.

176
00:13:07,854 --> 00:13:10,114
Looks like this is not wanting to work here.

177
00:13:11,854 --> 00:13:14,274
Well, maybe we can't get over there.

178
00:13:14,354 --> 00:13:14,914
Give me a second.

179
00:13:16,374 --> 00:13:22,834
But I was looking at the just the backdrop of maybe I'll just zoom it in if that if this is the case.

180
00:13:24,194 --> 00:13:28,594
I was looking at the backdrop of Bitcoin versus the U.S. Fed funds rate.

181
00:13:28,594 --> 00:13:30,174
Let me see if I can make this bigger.

182
00:13:30,894 --> 00:13:31,714
It doesn't really work.

183
00:13:32,194 --> 00:13:32,354
Okay.

184
00:13:33,394 --> 00:13:35,594
Bitcoin versus US M2 money supply.

185
00:13:35,734 --> 00:13:39,774
So what I've done here is I've taken an image of Bitcoin and I've pasted it in the background.

186
00:13:40,754 --> 00:13:46,654
And then I overlaid the US M2 money supply to look at where we were last.

187
00:13:46,774 --> 00:13:50,274
And there was a 40% drawdown in Bitcoin, just the general macro environment.

188
00:13:50,734 --> 00:13:55,374
So I'm going to make this more less transparent so you can kind of see the general thought here, right?

189
00:13:55,934 --> 00:13:57,914
It's connected the same day.

190
00:13:57,914 --> 00:14:03,954
So it goes from January 1st, 2020 to today, looking at M2 money supply and how that's changed over time.

191
00:14:04,714 --> 00:14:06,654
So I'll leave it here around 50% transparency.

192
00:14:07,294 --> 00:14:12,194
So this white line here is last time, last cycle, there was a 40% drawdown.

193
00:14:12,294 --> 00:14:15,074
And looking at the macro environment, I think this is a helpful perspective.

194
00:14:15,754 --> 00:14:21,674
After there was a 40% drawdown in 2022, Bitcoin proceeded to draw down another 50%.

195
00:14:21,674 --> 00:14:26,814
So there's a lot of concerns that people are saying it's going to do the exact same thing here.

196
00:14:26,814 --> 00:14:33,114
it's going to go down another 50% to 38,000. And maybe it can, right? I don't know. I don't have

197
00:14:33,114 --> 00:14:39,274
a crystal ball. So I don't know exactly where this stuff is going, but I can make some connections to

198
00:14:39,274 --> 00:14:44,114
what was happening in the macro environment. So at that point in time, the M2 money supply was

199
00:14:44,114 --> 00:14:48,934
actually coming down. They're pulling liquidity out of the market. And you had Terra Luna collapse,

200
00:14:48,934 --> 00:15:01,494
You had FTX collapse, Celsius, BlockFi, all of these exchanges and institutions get, you know, they're over leveraged and got out of control.

201
00:15:01,834 --> 00:15:07,674
They went bust. Right. So and you had a political regime that was literally trying to kill crypto and kill all of these companies.

202
00:15:08,494 --> 00:15:12,374
So that's kind of the backdrop there. And you look at where we're at now. Right.

203
00:15:12,374 --> 00:15:16,114
We've seen a 40% drawdown from the peak at 126,000.

204
00:15:17,074 --> 00:15:21,614
And that same environment just isn't really there, right?

205
00:15:21,634 --> 00:15:23,134
We're seeing macro liquidity.

206
00:15:23,314 --> 00:15:25,514
I mean, Dan spoke about it just previously.

207
00:15:25,874 --> 00:15:27,634
China's pumping liquidity into the market.

208
00:15:28,114 --> 00:15:31,154
I think there's a high likelihood that more liquidity comes into the market in the U.S.

209
00:15:31,174 --> 00:15:31,834
here in the future.

210
00:15:32,474 --> 00:15:36,554
At least that's what the current speculations are on the horizon.

211
00:15:37,394 --> 00:15:41,874
So from there, I also did the same analysis on the short-term risk-free rate.

212
00:15:41,874 --> 00:15:47,034
U.S. Fed funds rate. And I think this one is even more glaringly obvious. And I'm sorry,

213
00:15:47,114 --> 00:15:53,514
this is so small. I'm on a new screen here. But same thing. I overlaid the U.S. Fed funds rate from

214
00:15:53,514 --> 00:16:01,654
January 2020 to today and looking at what happened after the 40% drawdown. So after the 40% drawdown,

215
00:16:01,654 --> 00:16:07,514
there was a immediate change in interest rates. Interest rates went from zero to five.

216
00:16:07,514 --> 00:16:13,574
right here we'll make it less transparent so you can see it interest rates went from zero

217
00:16:13,574 --> 00:16:20,814
to five basically the risk-free rate uh effectively went from like risk on like

218
00:16:20,814 --> 00:16:25,454
there was a huge incentive to be risk on and then when the risk-free rate jumps up to five

219
00:16:25,454 --> 00:16:31,154
people have a flight to safety and we saw a significant reduction in all of the markets

220
00:16:31,154 --> 00:16:38,574
Right. S&P 500, QQQ, Bitcoin came down. Everything kind of came down as the risk free rate went higher.

221
00:16:38,894 --> 00:16:49,494
And you look at, again, the landscape of where we're at today. At that point, Bitcoin was down 40 percent, proceeded to go down another 50 percent while interest rates did a, you know, infinite jump from zero to five.

222
00:16:49,494 --> 00:16:56,834
and now today bitcoin's done a 40 drawdown and you have the president of the united states

223
00:16:56,834 --> 00:17:03,054
like spittily yelling about how interest rates need to come down and saying that he's going to

224
00:17:03,054 --> 00:17:07,814
sue the future director of the federal reserve the future chairman of the federal reserve if he

225
00:17:07,814 --> 00:17:12,694
doesn't bring interest rates down like that's that's the environment we're in right now and

226
00:17:12,694 --> 00:17:21,314
And I really struggle to see, I mean, it's possible and it's probable that there's convexity here still to the downside.

227
00:17:21,314 --> 00:17:28,214
But we're just in a completely different environment, completely different political landscape, completely different liquidity environment.

228
00:17:29,774 --> 00:17:41,074
And at least to my knowledge, there's not as much leverage within the system as there were in past cycles where you've got bad actors.

229
00:17:41,074 --> 00:17:44,494
Like the entire market has learned from what's happened in FTX.

230
00:17:45,134 --> 00:17:46,814
You don't have all of the shit coin schemes.

231
00:17:46,934 --> 00:17:48,394
You don't have NFTs going crazy.

232
00:17:48,954 --> 00:17:50,014
Interest rates aren't at zero.

233
00:17:50,794 --> 00:17:52,714
It's just a completely different environment.

234
00:17:53,214 --> 00:17:55,694
Everybody's learned from the past.

235
00:17:56,534 --> 00:17:59,854
So, yeah, it's just an interesting place here.

236
00:18:01,094 --> 00:18:01,934
What do you guys think?

237
00:18:02,694 --> 00:18:04,214
Yeah, I got two thoughts on that.

238
00:18:04,294 --> 00:18:09,114
One, I think the MSCR chart is really, really interesting when I relate on all this data.

239
00:18:09,114 --> 00:18:13,514
Yeah, because I believe the four-year cycle is front run via MSTR.

240
00:18:14,074 --> 00:18:18,354
People started selling MSTR long before Bitcoin finally peaked in October.

241
00:18:19,194 --> 00:18:24,014
And I think that was because a lot of people were putting on that long Bitcoin short MSTR hedge,

242
00:18:24,054 --> 00:18:29,214
which is a great way to participate in potential Bitcoin upside in the case of the rally continued,

243
00:18:29,214 --> 00:18:35,754
but also protect yourself in the case that there was a downside move or even taking puts out on MSTR while holding spot Bitcoin.

244
00:18:35,754 --> 00:18:44,614
I think MSTR ultimately served as the drain of speculative Bitcoin money and a lot of hedging liquidity because of the volume in the options market and the equity, etc.

245
00:18:44,754 --> 00:18:48,454
And then there was also, you know, ATM equity issuance that was pushing the price down.

246
00:18:48,814 --> 00:18:52,214
So I think that came kind of front run into the four year cycle.

247
00:18:52,654 --> 00:18:55,454
Now we're seeing everyone's big, OK, four year cycle, whatever, like sell everything.

248
00:18:55,794 --> 00:18:57,234
I'm going to buy back next October.

249
00:18:58,014 --> 00:19:03,314
And so I think there is real human psychology at play here.

250
00:19:03,314 --> 00:19:06,034
and we'll see what the next few months bring.

251
00:19:06,074 --> 00:19:06,474
But I agree.

252
00:19:06,554 --> 00:19:07,814
I don't think the macro environment is that bad.

253
00:19:07,894 --> 00:19:10,414
I mean, someone just called it the SaaSpocalypse.

254
00:19:10,974 --> 00:19:11,854
And that's totally true.

255
00:19:12,054 --> 00:19:13,854
Like, you know, in Jordy's recent video,

256
00:19:14,014 --> 00:19:18,474
if you take out the top software names from the NASDAQ,

257
00:19:18,474 --> 00:19:23,234
the drawdown is like getting close to the 2022 low.

258
00:19:24,074 --> 00:19:27,314
So what you're seeing in Bitcoin is similar action to the 2022 pullback.

259
00:19:27,414 --> 00:19:30,214
What you're seeing in software is very similar to the 2022 pullback.

260
00:19:30,294 --> 00:19:32,814
But what you're seeing in, you know, energy stocks and industrials

261
00:19:32,814 --> 00:19:35,834
is they're moving aggressively, broadening out the market,

262
00:19:36,254 --> 00:19:38,934
and sustaining kind of the NASDAQ and the S&P.

263
00:19:39,414 --> 00:19:42,834
So that's why I believe this idea that the indices are going to collapse this year

264
00:19:42,834 --> 00:19:43,974
is completely faulty.

265
00:19:44,154 --> 00:19:47,854
And then we had a massive 52.7% PMI print,

266
00:19:47,934 --> 00:19:50,234
which is the largest jump in over four years,

267
00:19:50,494 --> 00:19:53,394
above into expansionary territory on Monday.

268
00:19:53,714 --> 00:19:56,194
I mean, you don't look at this stuff and think the economy is collapsing.

269
00:19:56,194 --> 00:19:59,254
Like, labor market's soft, but AI.

270
00:20:00,414 --> 00:20:02,694
So can I do a non sequitur here?

271
00:20:02,814 --> 00:20:07,034
so so dan my question to you is are you going to be wearing that hoodie tomorrow

272
00:20:07,034 --> 00:20:14,994
i'm gonna put on a collared shirt are you gonna shave depends if i get to bed early enough tonight

273
00:20:14,994 --> 00:20:20,734
okay for those that don't know dan's asking a question on the earnings call tomorrow so uh

274
00:20:20,734 --> 00:20:24,434
you get to be the analyst that represents true north and which is fantastic

275
00:20:24,434 --> 00:20:38,648
has sailor repost stream yet yeah we got a sailor repost sailor sailor birthday we got a birthday repost yeah we cooking so so before we go on so i i could talk about your stuff so um all you guys

276
00:20:38,648 --> 00:20:43,588
are you know what guys i was thinking maybe we should all go to las vegas and hang out there

277
00:20:43,588 --> 00:20:49,988
you think that sounds like a good idea i'm down i'm down you're down when you guys gonna be there

278
00:20:49,988 --> 00:20:58,248
uh yeah i'm there sunday sunday yeah i get in february february 23rd it's gonna be a good time

279
00:20:58,248 --> 00:21:03,928
we we have an event coming up it is a true north inside event it's happening at vegas it is on

280
00:21:03,928 --> 00:21:10,128
monday february 23rd it's going to happen from 1 p.m to 5 p.m and then there is an evening

281
00:21:10,128 --> 00:21:16,408
after party as well the it's a good time to bring up the schedule there grain and i'm pulling it up

282
00:21:16,408 --> 00:21:21,128
here. We've developed a schedule a little bit more. This is going to be a very unique

283
00:21:21,128 --> 00:21:28,328
in-person event. None of it's going to be recorded. These conversations are only going

284
00:21:28,328 --> 00:21:32,768
to happen here. And our goal is to give the highest bang for buck alpha of what's actually

285
00:21:32,768 --> 00:21:36,868
happening in the industry for people that are working in this space. We've been spending a lot

286
00:21:36,868 --> 00:21:44,208
of time behind the scenes getting this dialed in. And I am excited to share with you what that is

287
00:21:44,208 --> 00:21:56,008
going to look like. And here is the schedule. For those that are interested, we are going to have

288
00:21:56,008 --> 00:22:00,008
the first half is going to be True North discussion. We're going to talk just like we do on this stuff

289
00:22:00,008 --> 00:22:04,508
every week, hit on whatever's happening that week, state of the market. We've got a couple

290
00:22:04,508 --> 00:22:08,368
individual presentations. We're going to talk about the future, what the future looks like,

291
00:22:08,468 --> 00:22:13,048
think about risk and our perspectives. Then it's going to be a break. And then we're going to shift

292
00:22:13,048 --> 00:22:19,048
into a really unique institutional lens into the marketplace. I think this is going to develop a

293
00:22:19,048 --> 00:22:23,568
bit more from where it's at right now as we're in conversations with several people. But we're

294
00:22:23,568 --> 00:22:28,408
going to have James Lavish there to talk about macro and he represents the BTC Opportunity Fund.

295
00:22:28,828 --> 00:22:32,908
We're going to get into digital credit and beyond and like where this industry is going.

296
00:22:33,308 --> 00:22:37,388
We've got a representative from Barclays there that's been involved in several of the securities

297
00:22:37,388 --> 00:22:42,528
that have been issued in the market. So he's got just such a unique perspective that

298
00:22:42,528 --> 00:22:49,408
it's hard to understand what's going on until you talk to some of these bankers.

299
00:22:50,208 --> 00:22:54,268
This next one is going to be, where's the Bitcoin Lebowski? We're talking about

300
00:22:54,268 --> 00:23:01,848
trading and custody. How does this stuff work? Is the Bitcoin real? How does the trading

301
00:23:01,848 --> 00:23:05,648
environment work where you actually go out, you take these dollars, you go into the market,

302
00:23:05,808 --> 00:23:10,268
you buy the Bitcoin. Where does it go? How does the custody work? What is the behind the scenes

303
00:23:10,268 --> 00:23:14,628
transaction look like just to explain the complexity because a lot of people think this

304
00:23:14,628 --> 00:23:18,188
stuff is fake, but it is so incredibly complex.

305
00:23:18,708 --> 00:23:23,188
And we've got somebody from Anchorage Digital coming to talk about the specifics within the

306
00:23:23,188 --> 00:23:23,528
marketplace.

307
00:23:24,288 --> 00:23:29,428
Then we're going to get into what's it like buying $500 million of Bitcoin, a CIO's view

308
00:23:29,428 --> 00:23:29,928
of the world.

309
00:23:30,048 --> 00:23:33,588
We've got Ben Workman, CIO of Strive, also a member of True North.

310
00:23:33,588 --> 00:23:39,348
And then Matt Hogan from Bitwise also talking about just the landscape of this market and

311
00:23:39,348 --> 00:23:44,748
what it's like actually buying Bitcoin. And then the bull and institutional case for amplified

312
00:23:44,748 --> 00:23:49,608
Bitcoin, just to get people fired up. I think this is a really big opportunity with a large

313
00:23:49,608 --> 00:23:53,708
landscape. And we've got a couple of people that I think you guys will be excited about

314
00:23:53,708 --> 00:24:01,048
coming to talk through the bull and institutional case for Bitcoin. And then also last year we had

315
00:24:01,048 --> 00:24:06,708
Fonglish stopped by and chatted. So we'll probably get some members of the strategy team swinging by

316
00:24:06,708 --> 00:24:12,268
as well. Hopefully, fingers crossed, no promises. But all of this is subject to change. But this is

317
00:24:12,268 --> 00:24:20,168
what we're aiming for a really high alpha industry view from behind the scenes to give a unique

318
00:24:20,168 --> 00:24:25,268
perspective that, you know, we try to bring every week. And it will only happen here.

319
00:24:26,268 --> 00:24:28,868
Right. And so so Jeff, how many people have signed up already?

320
00:24:29,428 --> 00:24:36,348
We've got 35 tickets remaining. There's 115 people that have signed up and paid and paid.

321
00:24:36,348 --> 00:24:42,148
So the tickets are available. They're in the chat. It's on the MSTR True North website.

322
00:24:42,568 --> 00:24:46,328
You can take a look there. It's available via Luma. Only 35 tickets left.

323
00:24:47,168 --> 00:24:51,768
And yeah, please come hang out. It will be a great time. We are going to have a great after party.

324
00:24:52,288 --> 00:24:56,428
We've got some cool giveaways that we'll have there as well for people attending.

325
00:24:57,288 --> 00:24:58,908
And yeah, it'll be good.

326
00:24:59,888 --> 00:25:06,068
Yeah, I'm super excited. I think I'm just so impressed by what everyone at Strive has been able to pull off for this True North event.

327
00:25:06,068 --> 00:25:07,608
And I think it's going to be really, really special.

328
00:25:07,968 --> 00:25:08,928
Last year was special.

329
00:25:09,288 --> 00:25:16,648
Like, again, and I said this before, but the people that join at this event, you know, we are the ones putting it on and kind of leading the discussion.

330
00:25:17,068 --> 00:25:24,328
But people come to this event with much more experience than any of us in capital markets, in different businesses, so on and so forth.

331
00:25:24,328 --> 00:25:29,808
So you go to network with these, you know, highfalutin people, and it's quite an amazing experience.

332
00:25:29,928 --> 00:25:30,748
So I recommend joining.

333
00:25:30,748 --> 00:25:37,428
Yeah, you'll rub shoulders with very interesting people, which is a great experience.

334
00:25:37,568 --> 00:25:44,088
I mean, once I went to my first Bitcoin event, my conviction just elevated drastically when

335
00:25:44,088 --> 00:25:46,248
you're actually talking to the people that are working behind the scenes.

336
00:25:46,548 --> 00:25:51,828
It's really kind of funny because several of the people that I work with day to day

337
00:25:51,828 --> 00:25:54,988
have no clue what's happening on X.

338
00:25:55,808 --> 00:25:58,388
Like they can't even access X on their computers.

339
00:25:58,388 --> 00:26:04,068
so but yet they're still working in the crypto environment they're still working in bitcoin

340
00:26:04,068 --> 00:26:09,508
they're still operating behind the scenes legal environment banking environment etc and they like

341
00:26:09,508 --> 00:26:15,108
are unaware uh of what's happening here but they're spending all their life's energy working

342
00:26:15,108 --> 00:26:23,588
on this stuff so yeah please join come hang out we'll be a good time all right switch gears

343
00:26:23,588 --> 00:26:27,248
Shall we talk about debt leverage capital structures?

344
00:26:28,168 --> 00:26:33,248
Everybody thinks that everybody on the internet thinks that strategy is going to get margin

345
00:26:33,248 --> 00:26:40,048
called, which is just continuously hilarious, given that they haven't done a lick of research.

346
00:26:40,428 --> 00:26:41,168
So let's talk about it.

347
00:26:41,168 --> 00:26:47,388
You know, when people say that margin called, I don't think they know what margin call means.

348
00:26:47,848 --> 00:26:49,548
They just don't.

349
00:26:49,548 --> 00:26:58,928
Look, if you go back to the 2008, 2009 housing financial crisis, those people that levered on their houses, they did not get margin called.

350
00:26:58,928 --> 00:27:13,348
What happened with them is that they took out, if you go watch the movie, The Big Short, right, about Michael Burry, what happened was when those loans reset, right, and the interest rates went up, those people couldn't pay the loans at all, right?

351
00:27:13,348 --> 00:27:20,648
And what's different with strategies, they have two and a quarter billion dollars sitting in cash, right, which is good for whatever, 30 months of making payments.

352
00:27:21,188 --> 00:27:32,408
And like, look, if there's a bear market in Bitcoin for the next four years, you know, complaining about Michael Saylor is probably like the worst thing because he's the guy that acquired 700,000 Bitcoins.

353
00:27:32,988 --> 00:27:35,248
Right. So I don't get I don't get the logic.

354
00:27:36,028 --> 00:27:41,948
And and from this perspective, you know, he has the most liquid asset ever.

355
00:27:41,948 --> 00:27:46,768
and i say this to people all the time what's the best feature about bitcoin you could buy a billion

356
00:27:46,768 --> 00:27:51,488
dollars over the weekend liquidity the worst feat what's the worst feature about bitcoin you could

357
00:27:51,488 --> 00:27:57,468
sell a billion dollars of it over the weekend you know in minutes and so you you see you tend to see

358
00:27:57,468 --> 00:28:02,868
these dumps on sunday and people get demoralized when when it opens on a monday so let's go through

359
00:28:02,868 --> 00:28:09,048
the numbers but yeah i think i think you hit the nail on the head right like you don't like

360
00:28:09,048 --> 00:28:17,948
the capital structure does not have margin calls. Period. Like the strategy capital structure does

361
00:28:17,948 --> 00:28:23,628
not have margin calls. It doesn't exist. These are senior unsecured, like the debt that they

362
00:28:23,628 --> 00:28:28,268
have on their balance sheet is senior unsecured. Let's go through the statistics. We'll talk about

363
00:28:28,268 --> 00:28:31,908
it. We'll do 101. We'll go through capital structure. We'll talk about the debt. We'll

364
00:28:31,908 --> 00:28:36,208
talk about the preferred instruments. And we'll talk about like, what are the options here? And

365
00:28:36,208 --> 00:28:40,968
you know, how to think through this. So first of all, we show this every week. This is MSTR

366
00:28:40,968 --> 00:28:46,128
financial leverage looking over time. I've got the comparison this week against 11-15-22. So you guys

367
00:28:46,128 --> 00:28:53,248
can see like really how different this entire situation is compared to where they were back in

368
00:28:53,248 --> 00:29:03,508
deep bear market territory in November of 2022. So this column BX is as of today, so 713,000 Bitcoin.

369
00:29:03,508 --> 00:29:06,508
I think the price of Bitcoin has dropped to 71,000 here since then.

370
00:29:06,588 --> 00:29:07,108
Let's just do it.

371
00:29:07,188 --> 00:29:08,008
Let's just update it.

372
00:29:08,628 --> 00:29:09,328
71,000.

373
00:29:10,288 --> 00:29:10,608
Okay.

374
00:29:10,828 --> 00:29:12,168
MSDR price, $124.

375
00:29:12,508 --> 00:29:15,448
So they've got $50 billion of assets, 50.6.

376
00:29:16,028 --> 00:29:20,828
USD reserve, 2.25 billion, 8.2 billion of debt, 8.3 billion of preferred.

377
00:29:21,348 --> 00:29:26,228
So the net capital that they're holding on the balance sheet in USD terms is 44.6 billion.

378
00:29:26,788 --> 00:29:29,428
The annual preferred obligation is 888 million.

379
00:29:29,428 --> 00:29:40,648
So they have 53 years of dividend that they could pay with a net capital held on their balance sheet, assuming that they sold the Bitcoin and they paid off the debt as of today, which they do not have to do.

380
00:29:40,848 --> 00:29:42,388
It's just a conservative perspective.

381
00:29:43,488 --> 00:29:47,708
So their debt to asset leverage ratio, their leverage ratio is 11.8%.

382
00:29:47,708 --> 00:29:49,588
Again, Mike, you bring this up all the time.

383
00:29:49,728 --> 00:29:54,988
When anybody goes to put 20% down on a home, you are 500% leveraged on that house.

384
00:29:55,468 --> 00:29:57,208
That house can light on fire.

385
00:29:57,208 --> 00:30:03,368
A lot of things can happen and you're 500% leveraged on the house. This company is 11%

386
00:30:03,368 --> 00:30:09,528
leveraged on debt. Very different place. The coverage multiple on the balance sheet is 3.1.

387
00:30:10,008 --> 00:30:14,488
And then including the preferred equity, which again, the equity does the notional value of the

388
00:30:14,488 --> 00:30:21,108
equity never has to get paid back. The total amplification is 31%. So the Bitcoin price needed

389
00:30:21,108 --> 00:30:27,268
for the assets to be worth less than the debt is $11,197, which is another 84% drawdown from where

390
00:30:27,268 --> 00:30:33,988
we're at. This next column shows a 50% drawdown from where we're at, getting down to 35,000. I

391
00:30:33,988 --> 00:30:39,328
personally think that's unlikely, but I think it's helpful to look at the perspective here.

392
00:30:39,788 --> 00:30:53,682
Even in that scenario the leverage ratio on the balance sheet would be 23 and the debt plus preferred total amplification ratio would be 60 Okay so how does that compare to November of 22 The leverage ratio

393
00:30:53,682 --> 00:31:03,342
on November 22 was 130%. The debt plus preferred total amplification was 130%. When everybody was

394
00:31:03,342 --> 00:31:09,302
losing their heads in November of 22, yeah, maybe that actually was a little bit of a better time

395
00:31:09,302 --> 00:31:14,342
to be losing your head about the future of this company. The future of this company was far more

396
00:31:14,342 --> 00:31:21,182
uncertain back in November of 22, when they had $2 billion of balance sheet assets and $2.7 billion

397
00:31:21,182 --> 00:31:28,942
of debt. Granted, that debt had a long term. It was convertible debt. They had some term debt

398
00:31:28,942 --> 00:31:38,022
and they had to power through the price of Bitcoin going back up in order to get to the position that

399
00:31:38,022 --> 00:31:45,182
they're in today. But you look at the health of this balance sheet, even if the price of Bitcoin

400
00:31:45,182 --> 00:31:50,842
went down another 50%, I would say this balance sheet still looks incredibly healthy compared to

401
00:31:50,842 --> 00:31:57,682
my past life working in the insurance world where companies like insurance companies would have

402
00:31:57,682 --> 00:32:06,482
their premium to surplus ratio would be three to one. So that means they would take in three times

403
00:32:06,482 --> 00:32:12,822
the amount of premium in the door than they had surplus on the balance sheet. So let's say you had

404
00:32:12,822 --> 00:32:18,442
$3 billion of premium and you'd have a $1 billion of surplus. Now that $3 billion of premium, you

405
00:32:18,442 --> 00:32:25,282
might have $10 billion of liability risk in the balance sheet. And these corporate vehicles are

406
00:32:25,282 --> 00:32:31,562
only making like 6% to 8% returns a year. Wait, Jeff. Okay. I understand your math. You're bringing

407
00:32:31,562 --> 00:32:36,382
in three dollars for every for every one billion dollars that you have in your balance sheet what

408
00:32:36,382 --> 00:32:41,502
they do with the other money and you if they only make six percent a year just pay out claims they're

409
00:32:41,502 --> 00:32:45,682
paying they're paying out claims with premiums that are coming in the door oh okay got it okay

410
00:32:45,682 --> 00:32:52,522
yeah yeah so so 90 so if you make a six percent net 94 of what you're bringing in is just going

411
00:32:52,522 --> 00:32:57,382
out for claims yeah they've got like reserves and you they hold the float right so you've got like

412
00:32:57,382 --> 00:33:02,022
three the three billion dollars the surplus is like surplus the extra that they're holding there

413
00:33:02,022 --> 00:33:09,542
but uh yeah the balance sheet returns are you know not fantastic so okay so i've never seen this

414
00:33:09,542 --> 00:33:17,942
i don't wait you showed this before right yes yeah okay sure so if you look at column e uh row nine

415
00:33:18,502 --> 00:33:26,662
right so in in i understand they had two billion dollars of of btc assets and millions and then

416
00:33:26,662 --> 00:33:28,142
As of today, they had 50 billion.

417
00:33:28,482 --> 00:33:31,042
Rough math, because this is what the clowns always say.

418
00:33:31,142 --> 00:33:33,122
Oh, strategy is only made.

419
00:33:33,442 --> 00:33:34,762
Let's say they're negative on that.

420
00:33:35,142 --> 00:33:37,562
They're negative on their balance sheet.

421
00:33:37,822 --> 00:33:41,782
Meanwhile, they 25X their balance sheet, right?

422
00:33:41,782 --> 00:33:45,982
They 25X it because two times 25 is 50, right?

423
00:33:46,602 --> 00:33:48,822
So they 25X the balance sheet.

424
00:33:49,182 --> 00:33:54,762
The debt to asset ratio dropped by more than 10X.

425
00:33:54,762 --> 00:33:56,682
It's now one-tenth the size, right?

426
00:33:56,862 --> 00:33:59,782
It went from 130% down to about 12%.

427
00:33:59,782 --> 00:34:01,482
So it's now one-tenth.

428
00:34:01,622 --> 00:34:02,982
So they de-levered it.

429
00:34:03,242 --> 00:34:05,722
This is where everybody says, oh, Saylor's levered up.

430
00:34:05,762 --> 00:34:07,482
He's got massive leverage.

431
00:34:07,682 --> 00:34:13,822
No, in a notional amount, you may say he's got whatever, $8 billion in debt and $8 billion

432
00:34:13,822 --> 00:34:15,702
in preferred stock.

433
00:34:15,822 --> 00:34:19,562
But his leverage ratio is only 11.8%.

434
00:34:19,562 --> 00:34:23,542
And even if the price of Bitcoin gets cut in half, it goes to 23%.

435
00:34:23,542 --> 00:34:33,302
23% and 23% is approximately one, was it one sixth of the 130%. Did I get that? All right.

436
00:34:33,642 --> 00:34:39,102
Yeah. Right. Cause six times 23 will get you right, right about there. Sorry. Five. Yeah,

437
00:34:39,102 --> 00:34:44,362
no, more like five times. So with that said, they're in better shape right now. I think the

438
00:34:44,362 --> 00:34:51,462
biggest problem that we have is that people who are the people, there are accounts that have 500,000

439
00:34:51,462 --> 00:34:56,682
followers, 800,000, a million followers or 100,000 followers that can't do a table like this

440
00:34:56,682 --> 00:35:05,202
from first principles that say stuff that is factually untrue. And what we call that is FUD,

441
00:35:05,342 --> 00:35:09,362
fear, uncertainty, and doubt. I don't know why they do it, probably because they don't like the

442
00:35:09,362 --> 00:35:16,542
guy that has increased his market cap by 25X since 2022. And if you were to start that with a company,

443
00:35:16,542 --> 00:35:20,302
What was their market cap, you know, prior to?

444
00:35:20,862 --> 00:35:21,902
No, in 2020.

445
00:35:22,902 --> 00:35:24,942
Oh, it was like a billion, a billion dollar.

446
00:35:25,122 --> 00:35:25,202
A billion.

447
00:35:25,422 --> 00:35:26,982
So they've done 50X.

448
00:35:26,982 --> 00:35:36,722
So I would tell anybody watching this, if you have 50X your net worth in five years, you're probably okay.

449
00:35:37,302 --> 00:35:38,262
Probably, right?

450
00:35:38,382 --> 00:35:40,562
I mean, unless you start with a dollar, right?

451
00:35:41,062 --> 00:35:44,442
So I think that's the big thing.

452
00:35:44,442 --> 00:35:48,002
They 50X their market cap since the start.

453
00:35:48,582 --> 00:35:48,722
Yeah.

454
00:35:49,262 --> 00:35:49,902
Yeah.

455
00:35:49,982 --> 00:35:54,582
And there's people in the chat right now that are complaining about the share price in the ATM.

456
00:35:54,882 --> 00:35:57,542
You can complain about that.

457
00:35:57,822 --> 00:36:03,222
And the balance sheet has accreted value.

458
00:36:03,822 --> 00:36:09,622
There is more Bitcoin per share now than there was back then.

459
00:36:09,622 --> 00:36:11,062
Like you have more exposure.

460
00:36:11,062 --> 00:36:18,662
Like 1x MNAV is going up and it's rising into the future, right?

461
00:36:18,822 --> 00:36:24,602
There's a point in time, there's an inflection point in time where Bitcoin moves fast, right?

462
00:36:24,982 --> 00:36:27,942
Bitcoin is going to move incredibly fast like it does, right?

463
00:36:27,982 --> 00:36:30,182
It makes most of its gains in 10 days.

464
00:36:30,502 --> 00:36:32,202
And so we've seen this multiple times in the past.

465
00:36:33,062 --> 00:36:37,822
Bitcoin went from, what, $30,000 to $100,000 in like 50 days.

466
00:36:37,822 --> 00:36:47,042
strategy at that point went from $100 to $543 in 50 days. Go back even further. All right, 2024

467
00:36:47,042 --> 00:36:57,622
strategy went from $250 to $2,000 in like 30 days. And those are the opportunities that this

468
00:36:57,622 --> 00:37:03,502
kind of convexity can provide. Like they are building this balance sheet and they're cranking

469
00:37:03,502 --> 00:37:08,802
it tighter, cranking it tighter, getting the preferred equity, taking long-term perpetual

470
00:37:08,802 --> 00:37:16,042
liabilities. And as that balance sheet begins to turn the other way, this thing can be incredibly

471
00:37:16,042 --> 00:37:22,962
explosive. We haven't seen the PREF business model in a bull market. We've seen what the

472
00:37:22,962 --> 00:37:29,022
convertible bond business model can do in a bull market. What does the PREF business model look

473
00:37:29,022 --> 00:37:34,662
like in a bull market where they have six different instruments that all have ATMs on top of them,

474
00:37:34,862 --> 00:37:39,642
where as the price of Bitcoin rises, the relative risk profile of all the preferred stocks start

475
00:37:39,642 --> 00:37:46,242
decreasing. And they can be selling shares of the preferred instruments without even potentially

476
00:37:46,242 --> 00:37:50,882
touching the common. I'm sure that they will. But theoretically, you could do that without even

477
00:37:50,882 --> 00:37:56,022
touching the common and just use the common to pay dividends. And this thing could get incredibly

478
00:37:56,022 --> 00:38:01,562
explosive and that's that's what they've built here they've built this incredible engine and

479
00:38:01,562 --> 00:38:06,462
they've got the uh the balance sheet stability with the usd reserve as well the ability to pay

480
00:38:06,462 --> 00:38:12,842
dividends for two years into the future two and a half years into the future it it quells a lot of

481
00:38:12,842 --> 00:38:19,322
the uh the the fud and the concerns in the market but people are still going to yell because they

482
00:38:19,322 --> 00:38:24,142
don't get it which is like i mean also sailor said it on a recent interview too it's like

483
00:38:24,142 --> 00:38:29,462
just because if you buy a stock and it was overvalued at the time or the price goes down,

484
00:38:29,502 --> 00:38:33,362
it doesn't mean it's a bad stock or the capital structure is messed up. I mean,

485
00:38:33,362 --> 00:38:39,602
clearly the market was going to take it to one MNAV. Everything's clear in hindsight, but

486
00:38:39,602 --> 00:38:45,882
markets took it to book value. And I don't think the ATM ultimately took it to book value any

487
00:38:45,882 --> 00:38:51,102
quicker than it was going to. There was hedging mechanisms in the market, lots of short pressure,

488
00:38:51,102 --> 00:38:57,402
like let's go on book value now here we are at book value with 30 leverage i like to trade i think

489
00:38:57,402 --> 00:39:05,242
bitcoin is going to pull a 5x or so what is it we got a 7x to 500k bitcoin based on mstr's current

490
00:39:05,242 --> 00:39:10,402
just amplification if it continues to trade at book value you know you'd get roughly a 10.5x

491
00:39:10,402 --> 00:39:18,022
if mstr just stays at book value so i mean that's a beautiful thing this is like this is the time to

492
00:39:18,022 --> 00:39:22,222
enter for sure. And I remember I was talking to Mason a little bit about this. It's like,

493
00:39:22,222 --> 00:39:25,342
now are the times when it's like, okay, what are the lessons I learned last cycle? What are the

494
00:39:25,342 --> 00:39:30,362
lessons I learned during the pits of the bear last time in 2022? You know, what were the macro

495
00:39:30,362 --> 00:39:34,582
indicators and what were the undervalued kind of equities across the board? And obviously,

496
00:39:34,682 --> 00:39:39,262
MSCR was undervalued. Like, were there calls I wish I had bought? Did I even know what a call

497
00:39:39,262 --> 00:39:44,582
option was back then? Could I have created a put spread? Could I have sold some puts to make maybe

498
00:39:44,582 --> 00:39:50,022
a better entry right you can sell puts to enter here if you're buying you know maybe make a little

499
00:39:50,022 --> 00:39:53,382
bit extra cash there's a lot of things you can do here i think it's just important not to get

500
00:39:53,382 --> 00:40:00,262
emotional yeah i mean they raise so much capital in such a short period of time in 2024 and 2025 i

501
00:40:00,262 --> 00:40:09,062
mean they've got 700 000 bitcoin look in 22 they had 130 000 bitcoin right that that's crazy to

502
00:40:09,062 --> 00:40:13,382
to your point dan right if bitcoin does a 5x let's just do the math here you're talking oh

503
00:40:13,382 --> 00:40:15,722
Oh, not going to zero.

504
00:40:15,862 --> 00:40:16,642
Let's not do that.

505
00:40:17,102 --> 00:40:19,042
Let's do 71,000 times five.

506
00:40:20,442 --> 00:40:22,122
You're talking about a balance sheet.

507
00:40:22,302 --> 00:40:25,062
The assets on the balance sheet are worth 250 billion

508
00:40:25,062 --> 00:40:27,362
if Bitcoin does a 5X.

509
00:40:29,802 --> 00:40:31,382
Yeah, and I think these things will take time,

510
00:40:31,622 --> 00:40:33,582
but that's what we're looking at, right?

511
00:40:33,762 --> 00:40:35,142
And I don't know.

512
00:40:35,162 --> 00:40:36,702
It'd be interesting to see what software does

513
00:40:36,702 --> 00:40:37,262
for the rest of the year.

514
00:40:37,422 --> 00:40:39,702
Like Jensen might have put a floor in software

515
00:40:39,702 --> 00:40:41,002
coming out and saying, you know,

516
00:40:41,002 --> 00:40:44,382
I don't know, software shouldn't be this oversold,

517
00:40:44,382 --> 00:40:46,562
but I think I'm really looking forward to the day

518
00:40:46,562 --> 00:40:48,502
when Bitcoin starts to trade a little bit more

519
00:40:48,502 --> 00:40:51,382
like a risk off asset and it's gonna take time.

520
00:40:51,382 --> 00:40:53,142
But I think this is a critical year

521
00:40:53,142 --> 00:40:55,682
with kind of the OG selling out of the asset class.

522
00:40:55,682 --> 00:40:56,882
But over time, I mean, this thing,

523
00:40:56,882 --> 00:40:58,082
like if you look at the gold chart,

524
00:40:58,082 --> 00:40:59,182
the gold chart is really remarkable

525
00:40:59,182 --> 00:41:00,442
because it's pretty much just like up

526
00:41:00,442 --> 00:41:02,562
and then stagnates for like a very long time.

527
00:41:02,616 --> 00:41:05,176
And that's the benefit of having a non-cash-flowing asset.

528
00:41:05,416 --> 00:41:09,256
And then Saylor talks about that as being the benefit of Bitcoin a lot of times too.

529
00:41:09,356 --> 00:41:11,516
And so, you know, it's still an immature asset class.

530
00:41:12,676 --> 00:41:17,756
Yeah, Jeff, what you said about we went from convertible bonds to the preferred strategy,

531
00:41:17,756 --> 00:41:20,516
and we've never seen what that can do in a bull market.

532
00:41:20,596 --> 00:41:22,876
And it reminded me of something that Tony Siba said.

533
00:41:23,456 --> 00:41:26,136
He did a really good series called The Great Transformation.

534
00:41:26,136 --> 00:41:32,216
and one of the things that he said that really stuck with me was that a butterfly is not a

535
00:41:32,216 --> 00:41:39,136
caterpillar with wings it has to cocoon and when it comes out it's a completely different creature

536
00:41:39,136 --> 00:41:44,176
and and i think that's what's happening to strategy right now it it used to be built on

537
00:41:44,176 --> 00:41:49,596
this convertible bond model and now it's you know it's metamorphosizing into something completely

538
00:41:49,596 --> 00:41:54,796
different and you know when this next bull market comes we'll see you know what the butterfly looks

539
00:41:54,796 --> 00:42:01,036
like. Absolutely. And, you know, we talk about this a lot at our company internally

540
00:42:01,036 --> 00:42:10,936
about the fickleness of capital markets. And when a door to raise capital is open,

541
00:42:11,936 --> 00:42:16,616
you don't just like walk through the door. You kick the door open and you go get it.

542
00:42:16,616 --> 00:42:26,256
right and you you have to do it because that window can close on a dime and so i mean you

543
00:42:26,256 --> 00:42:32,076
think back to what what's happened in 24 and 25 and like how this marketplace works they capitalized

544
00:42:32,076 --> 00:42:37,496
on that opportunity in 24 and 25 and they're now sitting in this position that they're in right

545
00:42:37,496 --> 00:42:43,156
they've got a 30 leverage balance sheet because they kicked the door open and if they wouldn't

546
00:42:43,156 --> 00:42:47,556
have done that. Maybe the price of the stock would have gone to $5,000 and then came back down to 20.

547
00:42:49,316 --> 00:42:54,656
MSDR price of $17 where it was in 2022. If they wouldn't have had everything in place and worked

548
00:42:54,656 --> 00:43:01,696
to build all these tools and things and to harness that capital and to be able to accept that capital,

549
00:43:02,156 --> 00:43:08,796
I think we'd be in a completely different scenario with a riskier balance sheet. I mean,

550
00:43:08,796 --> 00:43:13,536
this balance sheet is completely de-risked. And the interesting thing that I've been thinking

551
00:43:13,536 --> 00:43:18,136
about too is that we've got this, a lot of uncertainty with the Clarity Act. And it seems

552
00:43:18,136 --> 00:43:22,796
like everybody's been a little bit away from crypto because the Clarity Act is kind of floating

553
00:43:22,796 --> 00:43:27,096
through Congress, unsure if it's going to get approved. And there's some back and forth between

554
00:43:27,096 --> 00:43:35,616
Coinbase and these other constituents. But then you look at what strategy has done and it doesn't

555
00:43:35,616 --> 00:43:40,096
matter. Like the Clarity Act doesn't really matter. Like would it be a tailwind potentially?

556
00:43:40,096 --> 00:43:47,936
Sure. But they've already, they've integrated these, these products with the traditional

557
00:43:47,936 --> 00:43:53,736
financial system. And it doesn't really matter what happens there or not. Like these are

558
00:43:53,736 --> 00:44:01,896
institutional grade products that people can buy, institutions can buy, regardless of whether or

559
00:44:01,896 --> 00:44:03,516
not anything happens with the clarity act,

560
00:44:03,596 --> 00:44:05,216
which I think is a,

561
00:44:05,216 --> 00:44:10,756
another important part to like conceptualize and contextualize here with

562
00:44:10,756 --> 00:44:11,256
these things.

563
00:44:13,936 --> 00:44:14,376
Hey,

564
00:44:14,456 --> 00:44:14,776
you know,

565
00:44:14,856 --> 00:44:14,976
you,

566
00:44:15,216 --> 00:44:17,676
I don't know if you guys are,

567
00:44:17,796 --> 00:44:19,736
you guys ever hear of a company called fidelity?

568
00:44:20,216 --> 00:44:21,796
They have a brokerage company.

569
00:44:22,176 --> 00:44:22,616
Yes.

570
00:44:22,996 --> 00:44:23,996
I've heard of fidelity.

571
00:44:24,296 --> 00:44:24,536
Yeah.

572
00:44:24,556 --> 00:44:24,756
Yeah.

573
00:44:24,896 --> 00:44:25,336
Brokerage.

574
00:44:25,576 --> 00:44:27,076
Maybe people have heard of it.

575
00:44:27,076 --> 00:44:27,796
You know,

576
00:44:27,796 --> 00:44:34,476
It's kind of interesting that they just launched a stable coin and it's called FIDD.

577
00:44:34,616 --> 00:44:39,856
Now, it would have been kind of funny if they would have named it F-U-D-D, called it FUD.

578
00:44:39,856 --> 00:44:46,536
But with that, the fact that a brokerage house and Fidelity was very early, they accepted Bitcoin.

579
00:44:46,736 --> 00:44:49,856
And this may be unknown to the people that are new to this.

580
00:44:49,856 --> 00:45:00,316
But even back in 2017, what they said was, oh, Abigail Johnson, who is running Fidelity, they started mining Bitcoin to see how it worked prior to 2017.

581
00:45:00,376 --> 00:45:06,756
And they accepted Bitcoin in the corporate cafeteria going back prior to 2017 just to see how this whole thing works.

582
00:45:07,276 --> 00:45:19,236
So the fact that a major brokerage house has launched a stablecoin, they're not going to launch a stablecoin if they're not eventually going to be able to pay interest on that to the people that buy the stablecoins.

583
00:45:19,236 --> 00:45:21,416
That's why they probably want the Clarity Act also.

584
00:45:22,076 --> 00:45:25,156
So I think you're going to see a proliferation of stable coins.

585
00:45:26,516 --> 00:45:31,136
And they will pay some form of yield to the people that buy those stable coins.

586
00:45:31,276 --> 00:45:37,496
Right now, that violates the Howey test, which makes it a security so they can't pay that.

587
00:45:37,756 --> 00:45:44,036
But once the Clarity Act gets passed and they allow to do that, you're going to see a mad rush for stable coins.

588
00:45:44,396 --> 00:45:47,156
Now, they're going to have to back those stable coins with something.

589
00:45:47,156 --> 00:45:55,516
is probably going to be US treasuries, maybe some Bitcoin, maybe some gold, right? Maybe STRC. I

590
00:45:55,516 --> 00:46:01,976
don't know. Does anybody know a company that's doing that? You know, so, right. And so, so I just

591
00:46:01,976 --> 00:46:05,156
see that the marketplace is going to change really fast. I'll tell you the last thing that I'd want

592
00:46:05,156 --> 00:46:11,356
to be right now. If I was the CEO of a SaaS business, software as a service, it's not that

593
00:46:11,356 --> 00:46:16,096
your software as a service business is going to go away in the next six months or the next two,

594
00:46:16,096 --> 00:46:23,316
three years, right? Because of AI. What it is, is, is that if you have a premium service on that

595
00:46:23,316 --> 00:46:29,636
SaaS business and you're paying $500 a seat or $250 a seat per month, and you're a CIO and you're

596
00:46:29,636 --> 00:46:36,136
like, wait a second, we're paying all this money. You know what? Maybe we'll ratchet some of the

597
00:46:36,136 --> 00:46:42,756
people down to the basic service. And what we'll do is we'll build some in-house advanced layer

598
00:46:42,756 --> 00:46:46,136
and we'll keep this, not getting rid of the whole thing.

599
00:46:46,596 --> 00:46:47,696
Just saying, you know what?

600
00:46:47,976 --> 00:46:51,316
It's the perception that we don't necessarily need

601
00:46:51,316 --> 00:46:53,516
as much SaaS services going forward.

602
00:46:53,956 --> 00:46:55,476
And that's the difference between everybody,

603
00:46:55,756 --> 00:46:57,716
oh, the SaaS, they're going out of business tomorrow?

604
00:46:58,136 --> 00:46:59,616
No, you're going to keep it,

605
00:46:59,656 --> 00:47:01,696
but you're going to right-size your subscriptions.

606
00:47:02,416 --> 00:47:03,396
And what you're going to do

607
00:47:03,396 --> 00:47:06,216
when you negotiate those contracts, people,

608
00:47:06,336 --> 00:47:07,296
what do you do if you're a CIO

609
00:47:07,296 --> 00:47:08,576
and you're negotiating the contract?

610
00:47:08,876 --> 00:47:11,236
You say to them, well, you know, this AI thing

611
00:47:11,236 --> 00:47:17,056
is we're building part of this internally. Even, let me tell you something, even if that's BS,

612
00:47:17,356 --> 00:47:22,616
they still say it. So they say it to their salesman that's at the SaaS company. Oh, we're

613
00:47:22,616 --> 00:47:27,716
going to build this internally using Claude or whatever we're going to use to build it on, right?

614
00:47:28,016 --> 00:47:33,496
They have no intention of doing that. They'll just say that as a negotiating tactic. The salesman

615
00:47:33,496 --> 00:47:37,756
goes back to say, dude, they're thinking about doing this in-house. We got to give them a price

616
00:47:37,756 --> 00:47:42,596
concession. That's the reason why you're seeing the SaaS companies come down and be re-rated.

617
00:47:42,836 --> 00:47:47,756
Not because they're all of a sudden going to go out of business in two years, is that the threat

618
00:47:47,756 --> 00:47:54,696
to reducing what you're paying to them is causing them to be re-rated. And that's a simple way to

619
00:47:54,696 --> 00:47:58,496
look at this. Does that make sense? Oh yeah. A hundred percent cashflow. The cashflow is

620
00:47:58,496 --> 00:48:03,116
threatened. The cashflow is threatened and their income statement driven companies. Now you got

621
00:48:03,116 --> 00:48:10,156
this bot, AJ, that's in the comments. Look, Bitcoin treasury companies, they're all balance

622
00:48:10,156 --> 00:48:16,496
sheet companies. They're based on FASB fair value accounting and CAMT. And as soon as somebody says,

623
00:48:16,636 --> 00:48:21,356
we got to look at the cash flows. You know what, guys? That's not the way these companies were

624
00:48:21,356 --> 00:48:27,596
built. They're built on the balance sheet, not the income statement. Yeah. Yeah. I rant's over.

625
00:48:27,596 --> 00:48:35,196
100 percent 100 let's uh let's talk about balance sheets uh because i like that let me share my

626
00:48:35,196 --> 00:48:43,036
screen again and let's go to this one somebody asked how many of these bitcoin treasury companies

627
00:48:43,036 --> 00:48:50,316
are going to be around uh all right and i i had a theoretical construct i wanted to walk through

628
00:48:50,316 --> 00:48:55,356
here so let's let's think about this a little bit all right this is the top 100 bitcoin treasury

629
00:48:55,356 --> 00:49:01,316
companies, I think it's helpful to think about the entire landscape. And some people are in the

630
00:49:01,316 --> 00:49:06,356
comments are saying metaplan is not going to be around. They're like 11%. They have 11%

631
00:49:06,356 --> 00:49:11,776
amplification from a PREF only model. So I think they're doing just fine. They're in a great

632
00:49:11,776 --> 00:49:18,316
position. So just think about the scale here. You've got strategy with 713,000 Bitcoin,

633
00:49:18,316 --> 00:49:20,616
and then you have all of these other companies.

634
00:49:21,816 --> 00:49:25,416
The total of the top 100 is 1.13 million.

635
00:49:26,436 --> 00:49:26,596
Okay.

636
00:49:26,996 --> 00:49:29,576
So strategy, if you pull strategy out,

637
00:49:29,576 --> 00:49:35,456
the net of the top 100 companies is 419,000 Bitcoin.

638
00:49:37,016 --> 00:49:41,896
If you even assumed that 5% of these companies went out of business

639
00:49:41,896 --> 00:49:44,976
or 5% of the Bitcoin associated with these companies went out of business,

640
00:49:44,976 --> 00:49:50,756
which I think is like incredibly extreme and very low likelihood.

641
00:49:51,256 --> 00:49:53,176
You're talking 21,000 Bitcoin.

642
00:49:54,196 --> 00:49:59,956
I think strategy bought 21,000 Bitcoin in the last two weeks with the price at 90K.

643
00:50:01,556 --> 00:50:02,016
Right?

644
00:50:02,076 --> 00:50:04,556
What do we have in the last three weeks?

645
00:50:04,736 --> 00:50:04,896
Yeah.

646
00:50:05,036 --> 00:50:08,416
24,000 Bitcoin in the last three weeks with the price at 90K.

647
00:50:08,956 --> 00:50:11,816
So I, you know, people give me a lot of shit.

648
00:50:11,856 --> 00:50:13,056
Like, why do I focus on strategy?

649
00:50:13,056 --> 00:50:24,736
Well, you got to know what the leader is doing because the leader has a pretty big impact on what happens in the entire industry, because literally all of the other top 100 don't make up, you know, less.

650
00:50:24,916 --> 00:50:33,436
They're a little bit more than half of what strategies entire holdings are of all of the companies across the entire globe that are publicly traded, also holding Bitcoin.

651
00:50:33,956 --> 00:50:40,716
So we've got to know the health and the stability of number one, because that is it is a big indicator of what's going on in the marketplace.

652
00:50:40,716 --> 00:50:48,716
And asking the question, you know, how many of these companies are going to go out of business, like compared to what? Companies that don't have any Bitcoin?

653
00:50:49,296 --> 00:50:49,556
Right.

654
00:50:49,816 --> 00:51:00,016
If I had to ask myself if a regular person was more or less likely to go bankrupt and you asked me, you know, hey, one of them is a Bitcoin. I'm like, he's not the one that's going out of business.

655
00:51:00,636 --> 00:51:04,996
Yeah, right. Right. He's got a long term view of money and how the how the world works.

656
00:51:04,996 --> 00:51:09,076
Okay, so let's think about capital structure here

657
00:51:09,076 --> 00:51:11,096
because debt has come up.

658
00:51:11,096 --> 00:51:12,876
There's been some concerns,

659
00:51:12,876 --> 00:51:26,824
at least like Wall Street Journal come out and talked about the debt and you seen a couple of these people talk about what going on in the balance sheet So let talk about the debt on the balance sheet So strategy has both convertible debt and the preferred equity So they got these two

660
00:51:26,824 --> 00:51:32,444
tabs on the website, debt and credit. And you can look at all of the individual debt instruments here,

661
00:51:32,544 --> 00:51:36,324
different convertible bonds with different expirations. Over here, the final column on

662
00:51:36,324 --> 00:51:41,884
the right hand side, you see conversion price. So conversion price of $183, 672. You see that

663
00:51:41,884 --> 00:51:47,944
all of these converts are technically out of the money. Basically, the conversion price is higher

664
00:51:47,944 --> 00:51:53,564
than the current trading price of the stock. So that would be a little bit of a concern

665
00:51:53,564 --> 00:52:01,004
if you are holding this instrument with no other opportunity. If the balance sheet was small

666
00:52:01,004 --> 00:52:05,124
and the conversion price is out of the money, you would be a little bit concerned.

667
00:52:06,084 --> 00:52:13,884
However, what we just rolled through is that the company is sitting on $44 billion, $45 billion of net capital, even if you subtract out the debt.

668
00:52:14,064 --> 00:52:18,424
So they've got significant coverage over and above the debt sitting on the balance sheet.

669
00:52:18,484 --> 00:52:19,004
Let's look at it.

670
00:52:19,464 --> 00:52:25,984
Eight and a half times more capital than the entire debt stack on their balance sheet.

671
00:52:27,644 --> 00:52:29,024
That's pretty safe, right?

672
00:52:29,024 --> 00:52:33,524
Mike, you want to talk about like you've got 850% coverage?

673
00:52:33,524 --> 00:52:40,444
compared to, again, thinking about buying it out and having 500% leverage.

674
00:52:40,584 --> 00:52:41,964
It's like the complete opposite.

675
00:52:42,704 --> 00:52:44,804
So that's the problem.

676
00:52:46,324 --> 00:52:47,744
People don't get that.

677
00:52:47,744 --> 00:52:51,224
They cannot understand this at all because they look at this.

678
00:52:52,124 --> 00:52:53,444
And so this is debt.

679
00:52:53,984 --> 00:52:54,764
Excuse me.

680
00:52:54,964 --> 00:52:58,364
The converts are debt and digital credit is debt.

681
00:52:58,544 --> 00:52:59,924
And that's why they're not in.

682
00:52:59,924 --> 00:53:06,644
if you look at if you look under uh shares that's why it's not counted in the shares over here

683
00:53:07,284 --> 00:53:13,044
while the converts sorry the converts are there but not the press right that's correct right but

684
00:53:13,044 --> 00:53:17,684
they're in they're legally two different spots here but those haven't converted yet but they

685
00:53:17,684 --> 00:53:24,324
still account for it here so my point about this is that um because the metrics are so

686
00:53:24,324 --> 00:53:30,924
reversed or inverted because they're so good people just cannot understand this they're they

687
00:53:30,924 --> 00:53:35,924
just can't and as soon as i say this to somebody you know with the house analogy or something else

688
00:53:35,924 --> 00:53:42,504
they're like oh i look the simple number is that let's say the company had a billion dollar market

689
00:53:42,504 --> 00:53:47,664
cap before they started buying bitcoin and now they're worth 50 billion they've done a 50x return

690
00:53:47,664 --> 00:53:54,924
in five years, right? And that's to say, if you started with a hundred grand, you'd be worth $5

691
00:53:54,924 --> 00:54:00,084
million, right? Now, if somebody was like, oh, I only have a dollar. Well, your problem, you just

692
00:54:00,084 --> 00:54:05,924
didn't have enough money and your nominal amounts were too low. So I think that this is the

693
00:54:05,924 --> 00:54:10,344
difference here. And they just cannot understand this. The other point was that strategy made a

694
00:54:10,344 --> 00:54:18,984
point out of saying, go back to the previous one on the credit. So here they made a point to say

695
00:54:18,984 --> 00:54:25,924
that the total PREF notional amount is greater for the PREFs versus the total debt. And they

696
00:54:25,924 --> 00:54:33,584
tweeted about that. So when somebody says something publicly, there's two things. Take it at face

697
00:54:33,584 --> 00:54:39,024
value. It must be important that they said it, right? Because they said it. And two, what's the

698
00:54:39,024 --> 00:54:44,184
second order effect. And what happens is, is that they started off with the converts.

699
00:54:44,544 --> 00:54:49,324
And once they figured out how to do the preps, that, that changed things. Because if you,

700
00:54:49,544 --> 00:54:56,164
you never have a maturity date that that's the key part, there's no refinance risk with this.

701
00:54:56,404 --> 00:55:01,764
Yeah. And so people cannot understand the perpetual nature of it. I get it. It doesn't

702
00:55:01,764 --> 00:55:07,244
make sense. You know, what people don't understand also is the finite, the finality of Bitcoin.

703
00:55:07,244 --> 00:55:08,484
you know,

704
00:55:08,544 --> 00:55:09,604
Saylor uses a metric.

705
00:55:09,704 --> 00:55:12,664
He said this on the Jordan Peterson interview.

706
00:55:13,044 --> 00:55:13,804
He said,

707
00:55:13,904 --> 00:55:14,104
well,

708
00:55:14,144 --> 00:55:16,124
gold's growing at two per 2% a year.

709
00:55:16,184 --> 00:55:16,704
So that means,

710
00:55:16,784 --> 00:55:17,384
you know,

711
00:55:17,404 --> 00:55:18,724
after 36 years,

712
00:55:18,864 --> 00:55:20,404
basically the supply is doubled.

713
00:55:21,204 --> 00:55:22,544
And Jordan Peterson's like,

714
00:55:23,084 --> 00:55:23,764
what?

715
00:55:24,664 --> 00:55:26,284
That's called the rule of 72.

716
00:55:26,724 --> 00:55:28,404
And why'd he pick 36?

717
00:55:28,684 --> 00:55:29,944
Because the math is easy.

718
00:55:30,044 --> 00:55:31,724
Two times 36 is 72.

719
00:55:32,044 --> 00:55:36,384
And that is the rate per cycle that it takes for something to double or to

720
00:55:36,384 --> 00:55:36,824
have.

721
00:55:36,824 --> 00:55:46,704
So I use that metric the reverse way. If money, if the M2 and CPI is growing at 7.2% a year,

722
00:55:46,804 --> 00:55:51,504
after 10 years, your buying power is cut in half. It works in both directions.

723
00:55:52,204 --> 00:55:58,824
And so he says this all the time. So again, people just, they never, they never think about

724
00:55:58,824 --> 00:56:04,464
how these metrics work. And if somebody wants to know what the technical term for this is called

725
00:56:04,464 --> 00:56:10,024
applied mathematics. It's not computational math. Computational math is Excel spreadsheet,

726
00:56:10,464 --> 00:56:16,624
doing derivatives and addition, subtraction, so forth. That's computational math. Applied math is

727
00:56:16,624 --> 00:56:22,524
to say, oh, how does this math work in the real world? And that's where things become kind of

728
00:56:22,524 --> 00:56:27,344
weird. And that's why when they post this and I say stuff to people, they're like, they're like,

729
00:56:27,644 --> 00:56:33,584
Mike, why is it a big deal that Bitcoin per share goes up? I'm like, because that shows that

730
00:56:33,584 --> 00:56:39,304
it's not being diluted it's more concentrated yeah and they're like i don't understand what

731
00:56:39,304 --> 00:56:44,144
you just said i'm like i can't it's a creative i don't know how any slower that i can go

732
00:56:44,144 --> 00:56:49,444
or the rule of 72 now the interesting part is they don't teach the rule 72 in school

733
00:56:49,444 --> 00:56:55,004
because that's like back in the old days even before me because they taught a lot of mental

734
00:56:55,004 --> 00:56:59,644
math and then what happened is they changed the way they do it oh let's teach people how to use

735
00:56:59,644 --> 00:57:05,304
calculus. I want to tell you something. I've never had to use calculus after I graduated college.

736
00:57:05,304 --> 00:57:12,704
Never once. I've used calculus, but I'm a nerd. I do it for fun.

737
00:57:14,104 --> 00:57:18,964
I use calculus to calculate the area under my MSTR share price.

738
00:57:18,964 --> 00:57:25,084
Oh, banger calculus joke.

739
00:57:25,204 --> 00:57:25,444
Okay.

740
00:57:25,644 --> 00:57:30,104
I want to come back to this convert, this capital structure for a moment

741
00:57:30,104 --> 00:57:36,084
because the reality about this capital structure,

742
00:57:36,704 --> 00:57:38,184
everybody's losing their marbles.

743
00:57:38,964 --> 00:57:45,564
But the reality is nothing happens with this debt for another 20 months.

744
00:57:45,564 --> 00:57:56,544
the first put date on the first convert is september 15th of 2027 so they have 20 months

745
00:57:56,544 --> 00:58:02,724
to figure out what like if the price is still below the conversion price

746
00:58:02,724 --> 00:58:09,084
strategy has to pay back the one billion dollars of notional debt by september 15th of 2027

747
00:58:09,084 --> 00:58:15,524
okay so you got 20 months i want to make a minor minor clarification there and and

748
00:58:15,524 --> 00:58:21,544
and i think this applies to all the pref sorry to all the converts i believe that they could pay

749
00:58:21,544 --> 00:58:29,264
back as either all stock all cash or a combination of the two uh yeah i'll i need to confirm that but

750
00:58:29,264 --> 00:58:34,584
it's it's definitely it's usually i believe it's all three so let's say the price was 160

751
00:58:34,584 --> 00:58:39,064
they would say oh i'm going to give you the shares and make up the difference in cash because

752
00:58:39,064 --> 00:58:45,624
there's usually like a 40 uplift in in addition to whatever the coupon was that's listed there

753
00:58:45,624 --> 00:58:51,544
so but i believe that's the case for for almost somebody could fact check me yeah we'll have to

754
00:58:51,544 --> 00:58:55,464
double check that we'll get the uh we'll get the ai's working on anybody in the uh in the stream

755
00:58:55,464 --> 00:59:02,104
want to work through that the 8k uh the 8k is from september 20th check it out it's got all the terms

756
00:59:02,104 --> 00:59:07,384
you could go read all of that stuff and plug it into ai and pull it out um i think you might be

757
00:59:07,384 --> 00:59:15,344
right there. Uh, but even if, okay. So the reason I brought this up is because they've got 20 months

758
00:59:15,344 --> 00:59:21,084
to figure out what to do with the first one. The next one comes due, uh, what is this? The,

759
00:59:21,084 --> 00:59:31,824
the put date is June of 2028. So they've got another, what is that? Um, 10, nine months to

760
00:59:31,824 --> 00:59:37,044
figure out how to get the next 3 billion. So I was saying this before. So look, this one's at

761
00:59:37,044 --> 00:59:44,604
672. And this is something on whatever the stock is, 50 vol, 70 vol, whatever it says on the website,

762
00:59:44,684 --> 00:59:52,544
if you look at MSDR right now. So what that means is if you want to make sure that you're deep in

763
00:59:52,544 --> 00:59:58,784
the money, you want to have the stock price more like 800, 900, 1,000 bucks to account for the

764
00:59:58,784 --> 01:00:05,104
volatility when you get close to that 672 number. Somebody's like, oh, we'll just do 673 and we're

765
01:00:05,104 --> 01:00:12,344
all in the clear. No, it's a 50 vol stock. So you would want the price to be like 900 bucks

766
01:00:12,344 --> 01:00:18,204
because you want to account for the price fluctuations on a monthly basis and daily basis.

767
01:00:18,724 --> 01:00:24,544
Right. And I was wrong here. You've got the put date here. You've got 3-1-2028 on the 2030B,

768
01:00:25,024 --> 01:00:31,204
and then you've got 6-1-2028 on the convert 2029. So those put dates come due in 2028.

769
01:00:31,204 --> 01:00:34,884
So we're talking 25, 26 months from now.

770
01:00:35,364 --> 01:00:36,844
And there's multiple ways you could do this.

771
01:00:36,884 --> 01:00:39,104
You can also think about what we just did at Strive.

772
01:00:39,344 --> 01:00:43,244
We inherited similar, or we acquired similar.

773
01:00:43,444 --> 01:00:44,984
We inherited their convertible debt.

774
01:00:45,304 --> 01:00:49,784
And we did a secondary offering of our perpetual preferred equity.

775
01:00:50,504 --> 01:00:56,184
And we exchanged convertible debt for perpetual preferred equity.

776
01:00:56,184 --> 01:01:01,004
and we were able to retire 90% of the convertible debt

777
01:01:01,004 --> 01:01:02,824
in exchange for perpetual preferred equity.

778
01:01:04,424 --> 01:01:05,044
That's interesting.

779
01:01:05,824 --> 01:01:08,364
I was wondering when they were going to start copy trading you on that one.

780
01:01:08,364 --> 01:01:08,484
Yeah.

781
01:01:09,604 --> 01:01:12,264
We're blazing the trail along with each other.

782
01:01:12,604 --> 01:01:14,604
So Jeff, I know that you work at the company.

783
01:01:15,004 --> 01:01:15,184
Yeah.

784
01:01:15,704 --> 01:01:17,684
Was that hard to do?

785
01:01:17,924 --> 01:01:20,344
Like, did they just, like, did they agree that that,

786
01:01:20,504 --> 01:01:21,904
I mean, has that been done before?

787
01:01:22,024 --> 01:01:22,444
I don't know.

788
01:01:22,484 --> 01:01:23,684
Whatever you're allowed to say, say.

789
01:01:23,684 --> 01:01:26,304
Yeah, I think there's been negotiation.

790
01:01:26,304 --> 01:01:28,144
Like everything's in negotiation.

791
01:01:28,144 --> 01:01:39,652
Like these are big financial deals and like the companies that hold this stuff they don want the company to go out of business Right They bought this product to make money

792
01:01:40,972 --> 01:01:45,972
And so if they're holding this product and they're still kind of like, it's still kind of long the company.

793
01:01:45,972 --> 01:01:49,312
Like the worst case scenario is that the company goes completely out of business.

794
01:01:49,312 --> 01:01:53,632
if you're holding a convert and you hold short positions,

795
01:01:54,372 --> 01:01:59,972
best case scenario is it converts, it goes into the money,

796
01:02:00,352 --> 01:02:01,732
you make a ton of money on the upside,

797
01:02:02,032 --> 01:02:04,132
and you've got to hold this downside protection.

798
01:02:05,032 --> 01:02:07,152
But thinking about the strength of the balance sheet,

799
01:02:07,212 --> 01:02:09,812
I think you could definitely strike a deal thinking about strategy.

800
01:02:09,812 --> 01:02:13,992
They could strike a deal for converting some of this

801
01:02:13,992 --> 01:02:15,292
into perpetual preferred equity.

802
01:02:15,672 --> 01:02:16,632
Now, maybe they like the terms?

803
01:02:16,892 --> 01:02:17,572
I don't know.

804
01:02:17,572 --> 01:02:22,452
Like the terms and the negotiation on that front is tricky, right?

805
01:02:22,472 --> 01:02:28,372
So maybe they don't want to sell STRC or STRK at a discount.

806
01:02:28,512 --> 01:02:31,952
It kind of depends on market conditions, market terms, what else is available.

807
01:02:32,672 --> 01:02:36,912
Maybe it makes more sense to go issue more convertible debt with a farther out maturity

808
01:02:36,912 --> 01:02:38,972
and go retire some of this stuff.

809
01:02:39,612 --> 01:02:44,472
Maybe it makes sense to just use the USD reserve and buy it back in the open market.

810
01:02:44,472 --> 01:02:46,932
Like all of these instruments also trade.

811
01:02:47,572 --> 01:02:49,392
in the open market.

812
01:02:49,392 --> 01:02:53,232
So right now, if you think about where they were issued

813
01:02:53,232 --> 01:02:55,192
and where they're trading now,

814
01:02:55,192 --> 01:02:57,212
they might be at a discount to where they're issued

815
01:02:57,212 --> 01:02:59,372
and they could have the ability to buy these things back

816
01:02:59,372 --> 01:03:00,432
in the open market as well.

817
01:03:00,432 --> 01:03:02,652
And considering they're sitting on a two

818
01:03:02,652 --> 01:03:04,832
and a quarter billion dollar USD reserve,

819
01:03:04,832 --> 01:03:07,412
that's another lever that they have that they can pull

820
01:03:08,432 --> 01:03:09,272
to do these things.

821
01:03:09,272 --> 01:03:11,912
So there's so many things,

822
01:03:11,912 --> 01:03:15,932
the optionality is huge here with this balance sheet.

823
01:03:15,932 --> 01:03:18,332
So I modeled that a while back.

824
01:03:19,352 --> 01:03:23,972
And that's kind of like, for instance, think about on the flip side.

825
01:03:24,112 --> 01:03:29,352
Let's say you're the 2028 holder and the conversion price is 183, correct?

826
01:03:30,412 --> 01:03:30,692
Right.

827
01:03:30,752 --> 01:03:36,212
If you were to say to that holder, hey, look, I'll make you whole at 183 and convert you now.

828
01:03:36,792 --> 01:03:37,112
Right.

829
01:03:37,112 --> 01:03:38,252
I'll do shares.

830
01:03:38,372 --> 01:03:45,512
They got the cash and split that out into a combination of PREFs and MSTR shares.

831
01:03:45,932 --> 01:03:49,452
If you were to make that offer to them, the question is, do they want to do that?

832
01:03:49,472 --> 01:03:52,272
Or do they want to play that Delta hedge game?

833
01:03:52,532 --> 01:03:54,312
I think that's an interesting concept.

834
01:03:54,732 --> 01:03:59,832
And by the way, you notice how maturity on below that column, it says 4.1 years.

835
01:04:00,512 --> 01:04:02,552
It's kind of, was that always there?

836
01:04:02,572 --> 01:04:03,812
Because that's a countdown timer.

837
01:04:04,052 --> 01:04:06,032
Yeah, I think that might be new.

838
01:04:06,312 --> 01:04:07,972
I saw that for the first time today as well.

839
01:04:08,072 --> 01:04:08,792
It's like a blended.

840
01:04:09,012 --> 01:04:09,252
Oh, it is.

841
01:04:09,312 --> 01:04:09,572
It is.

842
01:04:09,632 --> 01:04:10,592
I didn't know if that was new.

843
01:04:10,592 --> 01:04:12,492
I think that's a countdown timer.

844
01:04:12,492 --> 01:04:23,592
And I think what's going to happen is, look, I do think it's kind of odd that they did the 2030B, which was in 2025.

845
01:04:24,432 --> 01:04:25,512
They did one.

846
01:04:25,772 --> 01:04:30,392
That's the last one that they launched, I think, because it was the last one before the preps.

847
01:04:31,292 --> 01:04:39,752
I think in their view is, and the fact that it was, I think they want to get rid of these sooner rather than later for a variety of reasons.

848
01:04:40,172 --> 01:04:41,452
Well, they've said they want to do that.

849
01:04:41,452 --> 01:04:45,452
i'm sure they'll talk about it tomorrow on the earnings call so can we switch to that now what

850
01:04:45,452 --> 01:04:48,892
do we think they're going to say in the earnings yeah what kind of surprises we're going to get

851
01:04:50,332 --> 01:04:57,772
yeah we can talk about that um yeah let's hit it that would be a good surprise though if they

852
01:04:57,772 --> 01:05:03,532
announced that they were converting one of these over you know you know i i guess some kind of

853
01:05:03,532 --> 01:05:09,052
raise what i wanted to get by here is that they had the optionality and flexibility and they're

854
01:05:09,052 --> 01:05:10,132
They're in no rush.

855
01:05:11,052 --> 01:05:12,272
There is zero rush.

856
01:05:12,852 --> 01:05:14,052
There is zero margin call.

857
01:05:14,632 --> 01:05:16,512
There's zero, like they don't have to post collateral.

858
01:05:16,852 --> 01:05:19,072
These are all unsecured debt obligations.

859
01:05:20,132 --> 01:05:24,192
And they have so much optionality because they have the Bitcoin on the balance sheet,

860
01:05:24,232 --> 01:05:25,552
because they have all these other products.

861
01:05:25,892 --> 01:05:27,232
All the other products are liquid.

862
01:05:27,812 --> 01:05:31,632
And Mike, to answer your question a little bit further, it was pretty fascinating to me

863
01:05:31,632 --> 01:05:34,172
when we were having some conversations on our transaction.

864
01:05:34,172 --> 01:05:45,652
some of the buyers that were interested in our products were convertible desks.

865
01:05:46,112 --> 01:05:50,532
Because the convertible desks are the ones that kind of handle these strange or odd instruments

866
01:05:50,532 --> 01:05:58,012
that are like perpetual preferreds or they're considered like more atypical from the market.

867
01:05:58,012 --> 01:06:06,312
and that was a pretty fascinating discovery for me.

868
01:06:06,492 --> 01:06:10,812
It wasn't like I was talking to specific pension fund managers

869
01:06:10,812 --> 01:06:12,812
that understood the risk profile of these things.

870
01:06:12,932 --> 01:06:15,372
We're still talking to niche money managers

871
01:06:15,372 --> 01:06:18,412
that are interested in high-yield strange products

872
01:06:18,412 --> 01:06:19,692
that are new to the market.

873
01:06:20,612 --> 01:06:24,572
And that's kind of just where this landscape is at.

874
01:06:24,572 --> 01:06:40,732
Like it's not, it's not, it's trickling into a more mature world, but these are unrated instruments paying high yield where people don't understand the, the risk profile of these things.

875
01:06:40,952 --> 01:06:50,452
And you think about the, the coupons here, the people that are holding these instruments are making money on the volatility, like Delta hedging consistently.

876
01:06:50,452 --> 01:06:58,032
And so you look at like the 2028 convert, the coupon payable here is 0.625%.

877
01:06:58,032 --> 01:07:04,432
If you come to them and you say, hey, can we convert this into my perpetual preferred

878
01:07:04,432 --> 01:07:09,732
stretch instrument with $100 million of liquidity every day that pays you 11 and a quarter?

879
01:07:11,612 --> 01:07:12,392
You know?

880
01:07:12,652 --> 01:07:18,572
Yeah, but there was like a 30 or 40% uplift also combined.

881
01:07:18,572 --> 01:07:21,792
The coupon that shows there is correct.

882
01:07:22,552 --> 01:07:31,272
But if the stock was at $100, he agrees to pay you $140 plus the coupon.

883
01:07:32,072 --> 01:07:32,192
Yeah.

884
01:07:32,512 --> 01:07:33,072
Yeah, yeah.

885
01:07:33,112 --> 01:07:34,052
No, I get that.

886
01:07:34,412 --> 01:07:34,592
Yeah.

887
01:07:34,752 --> 01:07:37,112
But your point is still correct.

888
01:07:37,372 --> 01:07:37,592
Yeah.

889
01:07:37,752 --> 01:07:40,452
So look, I asked AI all about this.

890
01:07:40,632 --> 01:07:46,332
And this is why what you're saying is interesting was the response that I got back from multiple

891
01:07:46,332 --> 01:07:52,052
questions about this, is that the convert buyers, conversion bond buyers or convertible

892
01:07:52,052 --> 01:07:59,952
equity buyers, like the Delta hedge, they're used to it and they may be mandated to be in that type

893
01:07:59,952 --> 01:08:05,032
of space as their own rules. But what you're telling me is they may be more flexible than

894
01:08:05,032 --> 01:08:09,112
what AI knows. Is that about right? Sorry, say that again.

895
01:08:09,472 --> 01:08:14,972
Are they more flexible? If a guy's in a convert, he would say, okay, great. What you're saying is,

896
01:08:14,972 --> 01:08:21,212
hey, if I'm going to convert now that pays not even 1% and I'm going to switch you to a pref

897
01:08:21,212 --> 01:08:27,412
that pays 11% or pays 8%, you're saying that they would be enticed to switch?

898
01:08:28,632 --> 01:08:34,352
Yeah, yeah. Potentially. It's a pretty good value proposition, right? Think if you're on the other

899
01:08:34,352 --> 01:08:38,232
side of that trade. You're like, okay, I have this product where I got to do a lot of work,

900
01:08:39,232 --> 01:08:43,112
right? You got to do the work of Delta hedging. Or I have this product where

901
01:08:43,112 --> 01:08:45,352
I get paid 11 and a quarter.

902
01:08:47,332 --> 01:08:47,532
You know?

903
01:08:48,452 --> 01:08:50,972
And like one of the comments here is

904
01:08:50,972 --> 01:08:52,792
that you sell it at a discount to par.

905
01:08:52,912 --> 01:08:55,552
Obviously, there's hedging that can,

906
01:08:55,732 --> 01:08:57,292
you know, happen from like where

907
01:08:57,292 --> 01:08:59,152
the instrument is sold at a discount.

908
01:08:59,252 --> 01:09:00,812
We saw this with all of the IPOs.

909
01:09:01,032 --> 01:09:02,772
All of the perpetual preferred IPOs

910
01:09:02,772 --> 01:09:03,552
were sold at a discount.

911
01:09:03,712 --> 01:09:06,012
There were people that were buying into the IPOs

912
01:09:06,012 --> 01:09:07,292
and selling it as it got to par.

913
01:09:07,292 --> 01:09:09,592
But the really interesting thing here

914
01:09:09,592 --> 01:09:10,772
and thinking through that,

915
01:09:10,772 --> 01:09:23,652
like the mindset of that buyer is that the downside is like with a company you think about

916
01:09:23,652 --> 01:09:29,572
strategies capital structure with a company that's got two and a half years of capital of usd reserve

917
01:09:29,572 --> 01:09:32,452
and you know you're probably going to get paid your dividend for at least two and a half years

918
01:09:32,452 --> 01:09:38,692
assuming zero additional capital is raised your incentive to exit that position like you just in

919
01:09:38,692 --> 01:09:48,052
no rush. Even if you're hedging and arbing the discount, you're in no rush. Worst case scenario,

920
01:09:48,052 --> 01:09:52,572
you hold that position and you get paid the interest rate that's over and above everything

921
01:09:52,572 --> 01:09:59,412
else in the market by 3x or 2x, whatever. It's just an interesting value proposition. It's a

922
01:09:59,412 --> 01:10:06,912
good product. The prefs are a good product. And I think they fit a really interesting buyer.

923
01:10:06,912 --> 01:10:11,812
The other thing, Mike, to your point, with all of these things is liquidity.

924
01:10:13,672 --> 01:10:17,672
I mean, I'm sure most of the people watching this call don't have like a Bloomberg.

925
01:10:18,412 --> 01:10:23,172
But if you have a Bloomberg, you could go see that like these convertible bonds don't trade very much.

926
01:10:24,392 --> 01:10:28,292
And if they trade, they trade in size, like $45 million will trade hands.

927
01:10:28,652 --> 01:10:29,992
$50 million will trade hands.

928
01:10:29,992 --> 01:10:39,052
and the alternative is like okay if I exchange this like incredibly illiquid thing the convert

929
01:10:39,052 --> 01:10:47,272
to the pref that is liquid trades you know every day the market's open and a trade I don't know

930
01:10:47,272 --> 01:10:50,832
stretch trades a hundred million dollars a day all the other instruments combined it's like 150

931
01:10:50,832 --> 01:10:59,032
that's a that's an interesting value proposition uh in a in a negotiation so I'm not I'm not saying

932
01:10:59,032 --> 01:11:02,512
that they're going to do this, they might. It's just an option that they have on the horizon.

933
01:11:03,312 --> 01:11:09,772
And they've got so many things that they could do from here until 2027 before they even have to

934
01:11:09,772 --> 01:11:15,352
make a decision. Meanwhile, everybody and their mother, their heads are exploding because they're

935
01:11:15,352 --> 01:11:20,432
worried that strategy is going to have to sell some Bitcoin. Yeah. And to Vorj's point in the

936
01:11:20,432 --> 01:11:26,712
chat, I mean, could they just cover these with the reserves? I mean, you look at the notional,

937
01:11:26,712 --> 01:11:28,872
they've got 8.2 notional like they could cover

938
01:11:28,872 --> 01:11:30,912
two and a quarter with the

939
01:11:30,912 --> 01:11:32,732
with the reserves yeah

940
01:11:32,732 --> 01:11:34,932
and then like so this whole thing is

941
01:11:34,932 --> 01:11:36,392
almost just like six green dots

942
01:11:36,392 --> 01:11:38,072
on the chart yeah

943
01:11:38,072 --> 01:11:40,492
not even three done

944
01:11:40,492 --> 01:11:42,732
and

945
01:11:42,732 --> 01:11:56,820
and Jeff so if they did this so let assume just just for argument sake they they raise enough cash and they retire all of these right So it billion right

946
01:11:56,900 --> 01:11:59,960
Go back to the other one where it says credit, right?

947
01:12:00,180 --> 01:12:02,260
So it would be $8.2 billion.

948
01:12:02,860 --> 01:12:04,600
So they sell the stock to do it.

949
01:12:04,600 --> 01:12:10,440
So the shares, right, the shares per Bitcoin, Bitcoin per share would drop, right?

950
01:12:10,480 --> 01:12:11,1000
Because they raised cash.

951
01:12:12,180 --> 01:12:14,240
But then they would have no converts.

952
01:12:14,560 --> 01:12:19,1000
So my takeaway, if they raise $6 billion in cash, what would that do for their debt?

953
01:12:20,120 --> 01:12:21,100
The debt would be gone.

954
01:12:22,060 --> 01:12:22,240
Yeah.

955
01:12:22,920 --> 01:12:23,160
Right?

956
01:12:23,280 --> 01:12:27,380
So in your formula that you did on your Excel spreadsheet to start-

957
01:12:27,380 --> 01:12:28,140
Leverage goes to zero.

958
01:12:29,040 --> 01:12:30,680
The leverage goes to zero.

959
01:12:31,100 --> 01:12:31,400
Zero.

960
01:12:32,300 --> 01:12:32,700
Okay.

961
01:12:33,180 --> 01:12:35,740
So am I missing anything?

962
01:12:36,060 --> 01:12:36,300
No.

963
01:12:36,420 --> 01:12:39,160
I mean, look, the last earnings call, they talked about this.

964
01:12:39,160 --> 01:12:46,520
The target goal is by 2029 that they have a zero leverage balance sheet and perpetual preferred only model.

965
01:12:46,700 --> 01:12:51,600
So is there any reason for them to accelerate this and pay this off in half the amount of time?

966
01:12:52,280 --> 01:12:53,660
They don't have to.

967
01:12:53,820 --> 01:12:56,160
They don't have to, but would it be beneficial?

968
01:12:56,580 --> 01:12:57,260
They won't.

969
01:12:57,340 --> 01:12:58,160
I don't think they won't.

970
01:12:58,420 --> 01:13:00,720
It creates bad blood with the issuers.

971
01:13:01,580 --> 01:13:01,860
Right.

972
01:13:02,260 --> 01:13:04,680
Yeah, I don't know about that.

973
01:13:04,680 --> 01:13:15,000
I mean, based on some of the conversations I've had, like, I don't, I don't know if that risk is as big as, I mean, maybe it's there.

974
01:13:15,440 --> 01:13:16,240
But I don't think.

975
01:13:16,320 --> 01:13:19,780
I've heard that there's pretty much zero world in which they pay these off early.

976
01:13:20,120 --> 01:13:20,840
Probably not.

977
01:13:20,960 --> 01:13:24,240
I mean, the rational thing is wait because they don't have to do anything.

978
01:13:25,720 --> 01:13:28,440
So what do you think is going to be the biggest surprise for tomorrow?

979
01:13:30,700 --> 01:13:32,720
I have no, I have no idea.

980
01:13:32,720 --> 01:13:35,240
Yeah, I mean, Saylor's been pretty quiet last couple weeks.

981
01:13:35,740 --> 01:13:37,160
I mean, I haven't seen him on too many things.

982
01:13:37,340 --> 01:13:40,640
Since he's dropped the bombshell on Danny Knowles,

983
01:13:42,260 --> 01:13:44,360
I think he's been relatively quiet.

984
01:13:44,860 --> 01:13:46,140
So, I don't know.

985
01:13:46,180 --> 01:13:47,280
I think they've been cooking on something.

986
01:13:48,100 --> 01:13:50,380
I think you're going to defense mode.

987
01:13:50,380 --> 01:13:53,780
You're probably fighting off every institutional investor

988
01:13:53,780 --> 01:13:55,000
who's pissed at you.

989
01:13:55,280 --> 01:13:58,580
It takes a lot of courage, a lot of conviction to stand strong here.

990
01:13:58,960 --> 01:14:01,760
But, by the way, I've got to take a pot shot.

991
01:14:01,760 --> 01:14:03,560
You guys ever hear this guy, Jim Kramer?

992
01:14:04,180 --> 01:14:04,580
Who's that?

993
01:14:05,240 --> 01:14:07,300
Yeah, anyway, so he's some bald dude.

994
01:14:07,300 --> 01:14:08,420
He said today,

995
01:14:08,600 --> 01:14:12,080
oh, Sailor should do a big convert

996
01:14:12,080 --> 01:14:13,880
and stabilize the whole market.

997
01:14:14,580 --> 01:14:15,180
Dude, really?

998
01:14:16,220 --> 01:14:18,320
I mean, that's the level that you're at,

999
01:14:18,420 --> 01:14:20,080
because we know about the Delta hedging.

1000
01:14:20,200 --> 01:14:21,780
That's not what he wants to do.

1001
01:14:22,520 --> 01:14:24,300
And I don't know how we...

1002
01:14:25,380 --> 01:14:27,000
After a while, you're like,

1003
01:14:27,080 --> 01:14:28,940
do you put any effort into understanding

1004
01:14:28,940 --> 01:14:30,080
a balance sheet company?

1005
01:14:30,300 --> 01:14:30,980
I don't know.

1006
01:14:31,760 --> 01:14:39,900
yeah i thought that oh go ahead go ahead so i was gonna say um i thought they were gonna come

1007
01:14:39,900 --> 01:14:45,960
out with at least one more preferred before end of 2025 so maybe another preferred i guess they

1008
01:14:45,960 --> 01:14:53,540
need an iphone for europe right they already got stre so they need a an strc for for europe right

1009
01:14:53,540 --> 01:14:59,780
but they said canada they said canada and europe yeah we got stre so i think the more interesting

1010
01:14:59,780 --> 01:15:01,580
look, I don't know what they're going to do.

1011
01:15:02,000 --> 01:15:03,520
What I can tell you, what I think they are going to do

1012
01:15:03,520 --> 01:15:04,340
is I think they're going to,

1013
01:15:04,740 --> 01:15:07,220
when you look at the statements that come out

1014
01:15:07,220 --> 01:15:08,120
when they buy Bitcoin,

1015
01:15:08,500 --> 01:15:09,980
they always make a change.

1016
01:15:10,680 --> 01:15:12,680
They always show you how much is left on the ATM

1017
01:15:12,680 --> 01:15:13,700
for each line item.

1018
01:15:14,340 --> 01:15:15,580
And so from that perspective,

1019
01:15:15,760 --> 01:15:16,760
I think they're going to provide,

1020
01:15:17,300 --> 01:15:19,320
I think they're going to issue it.

1021
01:15:19,600 --> 01:15:21,260
Look, this is what I can tell you.

1022
01:15:21,420 --> 01:15:23,340
They're going to issue a 2026 plan.

1023
01:15:23,720 --> 01:15:24,840
I don't know what it is.

1024
01:15:24,840 --> 01:15:26,780
The 2026, right.

1025
01:15:26,940 --> 01:15:29,060
Here's their targets and metrics

1026
01:15:29,060 --> 01:15:31,300
how they're going to judge themselves.

1027
01:15:32,680 --> 01:15:35,000
BTC yield is the amount of Bitcoin per share.

1028
01:15:35,340 --> 01:15:37,340
They'll probably pick a number for that.

1029
01:15:37,660 --> 01:15:39,020
I don't think they're going to put a target.

1030
01:15:39,720 --> 01:15:41,520
They represent that as a percentage,

1031
01:15:42,060 --> 01:15:45,320
not as a number, as an integer.

1032
01:15:45,760 --> 01:15:47,700
So I think they're going to put up some percentages.

1033
01:15:48,180 --> 01:15:49,920
I think the key thing when we watch this

1034
01:15:49,920 --> 01:15:52,020
is to see what's different from what it was,

1035
01:15:52,060 --> 01:15:52,880
what we expected.

1036
01:15:53,840 --> 01:15:55,900
And look, I don't think,

1037
01:15:55,900 --> 01:16:02,900
I think that them raising the cash, they realize because the cash raise happened December 1st.

1038
01:16:03,920 --> 01:16:04,700
Yeah, not that long ago.

1039
01:16:04,880 --> 01:16:09,680
It wasn't, but it happened after the October 10th Binance crash.

1040
01:16:10,180 --> 01:16:11,340
So my view was them.

1041
01:16:11,580 --> 01:16:16,200
That was them, not because they wanted to get defensive and the MSCI FUD.

1042
01:16:16,600 --> 01:16:18,660
They chose to get.

1043
01:16:20,900 --> 01:16:22,740
I got a yacht and going to college.

1044
01:16:22,740 --> 01:16:23,840
Dude, that was so.

1045
01:16:24,420 --> 01:16:25,460
So I'll come in.

1046
01:16:25,460 --> 01:16:31,820
But I think the crazy part about, not the crazy part, the rational part was, hey, what happens if this thing trades sideways?

1047
01:16:32,040 --> 01:16:34,060
Let's acquire some cash, which is what they did.

1048
01:16:35,020 --> 01:16:40,100
You know, by the way, the fact that he showed up, I'm like, I refuse to say what files they were in.

1049
01:16:40,380 --> 01:16:48,420
But they're like, oh, we can't blackmail him because all he's interested in is driving around in his yacht and he's too much being like autistic.

1050
01:16:49,020 --> 01:16:53,340
I'm like, no, maybe you're just a dummy and he's too smart.

1051
01:16:53,340 --> 01:16:55,900
I like how they label all the smart people.

1052
01:16:56,060 --> 01:16:56,900
They must be autistic.

1053
01:16:57,380 --> 01:17:00,260
No, maybe they're too smart for you to realize what the hell they're saying.

1054
01:17:01,640 --> 01:17:03,120
I'm going to hold that whole situation.

1055
01:17:03,280 --> 01:17:04,260
I don't even want to get into it.

1056
01:17:04,480 --> 01:17:04,800
No, we're not.

1057
01:17:05,340 --> 01:17:06,480
I don't even want to.

1058
01:17:06,820 --> 01:17:10,000
With how much that they raised with the stretch ATM that one week,

1059
01:17:10,360 --> 01:17:12,300
are they going to have to announce a bigger ATM?

1060
01:17:13,500 --> 01:17:14,560
They'll blow through that.

1061
01:17:14,860 --> 01:17:15,540
That's a good question.

1062
01:17:15,620 --> 01:17:15,940
I'm curious.

1063
01:17:15,960 --> 01:17:17,560
I think maybe an announcement for that tomorrow.

1064
01:17:17,880 --> 01:17:20,560
How big is the stretch ATM?

1065
01:17:20,780 --> 01:17:21,060
I don't know.

1066
01:17:21,120 --> 01:17:21,700
I've thought in my head.

1067
01:17:21,700 --> 01:17:28,640
um i'll look it up right now yeah it's it's less than the eight billion on some of the other props

1068
01:17:28,640 --> 01:17:34,860
so either four or eight billion four four billion four billion it's so interesting they came out

1069
01:17:34,860 --> 01:17:41,180
with a 20 billion dollar or what was it 21 on strike and it just like there's been just not a

1070
01:17:41,180 --> 01:17:45,980
ton of interest in that one so far which is uh which is pretty fascinating another another question

1071
01:17:45,980 --> 01:17:50,960
will there be a super bowl ad like what's the cost of a super bowl ad it's like 15 million

1072
01:17:50,960 --> 01:17:51,940
for 30 seconds?

1073
01:17:54,400 --> 01:17:55,640
Will there be a Super Bowl ad?

1074
01:17:55,860 --> 01:17:56,440
I don't know.

1075
01:17:56,980 --> 01:17:59,600
Like a stretch Super Bowl ad?

1076
01:17:59,780 --> 01:18:00,100
Maybe.

1077
01:18:01,220 --> 01:18:02,220
That would be funny.

1078
01:18:02,880 --> 01:18:06,760
I did see a YouTube short

1079
01:18:06,760 --> 01:18:08,300
popped up and they're trying to feed me

1080
01:18:08,300 --> 01:18:09,320
something through the algorithm.

1081
01:18:09,920 --> 01:18:12,660
It was a stretch short

1082
01:18:12,660 --> 01:18:14,680
and had Michael Saylor's face on it.

1083
01:18:15,440 --> 01:18:15,860
That's cool.

1084
01:18:16,580 --> 01:18:18,720
I don't know if he'd

1085
01:18:18,720 --> 01:18:20,460
bother with it. It wouldn't bother me

1086
01:18:20,460 --> 01:18:23,420
would that be a good use of a million bucks or whatever?

1087
01:18:23,500 --> 01:18:25,400
I don't know what the 30 second ad goes for,

1088
01:18:26,080 --> 01:18:29,400
but 15 million, how much is it for a 30?

1089
01:18:29,720 --> 01:18:30,960
I think it's like 15 million.

1090
01:18:31,540 --> 01:18:31,900
Jesus.

1091
01:18:32,140 --> 01:18:34,700
Well, I don't know if that's a good use of funds,

1092
01:18:34,700 --> 01:18:38,620
but they have two and a quarter billion making money on,

1093
01:18:38,940 --> 01:18:40,520
you know, and treasuries.

1094
01:18:40,680 --> 01:18:41,740
So it's like peanuts.

1095
01:18:41,860 --> 01:18:42,660
By the way, did they ever,

1096
01:18:42,820 --> 01:18:44,820
did they ever say what they're going to put that cash into?

1097
01:18:45,160 --> 01:18:47,680
No, that's, that's what I think they'll talk about tomorrow.

1098
01:18:47,680 --> 01:18:51,320
cash plan for 2026.

1099
01:18:51,480 --> 01:18:53,240
What is the cash plan?

1100
01:18:54,680 --> 01:18:57,160
One of the comical things I saw somebody say

1101
01:18:57,160 --> 01:18:58,420
when they announced it was,

1102
01:18:58,840 --> 01:19:00,880
oh, they should put the cash into STRC.

1103
01:19:01,800 --> 01:19:01,960
Yeah.

1104
01:19:02,860 --> 01:19:04,420
Well, I know another instrument

1105
01:19:04,420 --> 01:19:06,040
that they can put some cash into.

1106
01:19:08,840 --> 01:19:12,060
No, it will be fascinating to see

1107
01:19:12,060 --> 01:19:13,240
what they talk about there

1108
01:19:13,240 --> 01:19:15,300
because another thing that may come up from that

1109
01:19:15,300 --> 01:19:16,500
is rock dividend status.

1110
01:19:17,680 --> 01:19:20,860
because think about it, right?

1111
01:19:20,860 --> 01:19:23,700
You've got two and a quarter billion making 4%.

1112
01:19:23,700 --> 01:19:24,980
I don't know what the number is,

1113
01:19:25,060 --> 01:19:27,000
but it's hundreds of millions of dollars

1114
01:19:27,000 --> 01:19:30,000
and that would technically be profit.

1115
01:19:31,640 --> 01:19:33,920
So how does that change rock dividend status?

1116
01:19:34,020 --> 01:19:34,600
Do they care?

1117
01:19:35,180 --> 01:19:36,220
Do institutions care?

1118
01:19:36,960 --> 01:19:38,700
One of the things I'm most interested in watching

1119
01:19:38,700 --> 01:19:42,300
is like, what do the four institutional analysts

1120
01:19:42,300 --> 01:19:45,020
ask tomorrow, right?

1121
01:19:45,560 --> 01:19:47,660
Like, Dan, I know you're going to ask a killer question.

1122
01:19:47,680 --> 01:19:51,520
but I want to know what the trad that way, wait, not, not to put pressure on him,

1123
01:19:51,620 --> 01:19:55,320
but you're representing us. You better ask a good question.

1124
01:19:55,760 --> 01:19:58,100
I want to know what the four trad five guys are going to say.

1125
01:20:00,320 --> 01:20:00,680
Yeah.

1126
01:20:00,760 --> 01:20:03,300
Or what they're going to ask, right? Like, what are they going to,

1127
01:20:03,340 --> 01:20:05,460
what do they care about right now? I don't know.

1128
01:20:05,940 --> 01:20:09,600
I think a lot of it's going to be like dispelling there.

1129
01:20:09,920 --> 01:20:14,500
I think they're likely going to try to dispel some of the nerves of their peers

1130
01:20:14,500 --> 01:20:16,440
at the financial institutions.

1131
01:20:16,440 --> 01:20:18,440
So they'll probably target their questions around that.

1132
01:20:19,200 --> 01:20:22,180
Like what happens if Bitcoin sells off and you have to meet dividend?

1133
01:20:22,540 --> 01:20:27,420
Like I think there's going to be one of those softballs that Saylor's going to answer the same way as always.

1134
01:20:27,620 --> 01:20:29,540
Like what do you do?

1135
01:20:29,760 --> 01:20:31,700
You don't have to make a decision for 20 fucking months.

1136
01:20:32,080 --> 01:20:32,440
Exactly.

1137
01:20:32,620 --> 01:20:34,700
It's like or we'll sell Bitcoin or we'll sell derivatives.

1138
01:20:34,840 --> 01:20:37,600
It's a great answer to kind of a silly question in my opinion.

1139
01:20:37,920 --> 01:20:40,700
But I expect like a question like that to come up, I think.

1140
01:20:41,300 --> 01:20:41,520
Yeah.

1141
01:20:41,920 --> 01:20:45,040
Do you guys want me to allude to one I'm thinking about asking?

1142
01:20:45,040 --> 01:20:46,180
We can workshop it right here.

1143
01:20:46,440 --> 01:20:52,280
yeah let's go ahead uh yeah but then ask something completely different to put them you know like

1144
01:20:52,280 --> 01:20:59,320
throw them a curveball i uh i'm really interested in how the stretch yield curve so now that

1145
01:20:59,320 --> 01:21:04,520
stretches yield is being moved up and right now it's being moved up to try to get the price up to

1146
01:21:04,520 --> 01:21:11,160
100. it's affecting the entire yield curve of strategies press yeah and they're not really

1147
01:21:11,160 --> 01:21:15,640
trading independently necessarily on a duration basis right kind of like they're kind of like

1148
01:21:15,640 --> 01:21:17,940
They're floating up with a stretch.

1149
01:21:18,220 --> 01:21:24,240
So that creates a weird dynamic where the press actually are kind of all just stretch in a weird way.

1150
01:21:25,320 --> 01:21:32,260
And so my question is, how do you build out a yield curve if these are all just kind of stretch-dependent preferred equities?

1151
01:21:32,320 --> 01:21:39,620
You've set essentially a floor on the credit spread of all the other preferred equities by moving up the stretch dividend.

1152
01:21:40,900 --> 01:21:42,240
But isn't that a good thing?

1153
01:21:43,520 --> 01:21:44,440
I know.

1154
01:21:44,440 --> 01:21:45,320
No, like theoretically.

1155
01:21:45,700 --> 01:21:48,360
You're pushing the cost of capital up on all of your instruments.

1156
01:21:49,240 --> 01:21:49,420
Yeah.

1157
01:21:50,360 --> 01:21:52,400
Wait, hold on a second.

1158
01:21:52,940 --> 01:21:53,760
I'm not a bond guy.

1159
01:21:54,100 --> 01:21:54,260
Right.

1160
01:21:54,380 --> 01:21:57,340
But on the other ones, those are fixed yield.

1161
01:21:57,680 --> 01:21:57,980
Sorry.

1162
01:21:58,140 --> 01:21:58,660
They're fixed.

1163
01:21:58,740 --> 01:21:58,860
I don't.

1164
01:21:59,040 --> 01:22:00,160
They're fixed dividends.

1165
01:22:01,080 --> 01:22:01,260
Right.

1166
01:22:01,400 --> 01:22:05,200
But they're fixed dividends, whereas stretch is the only floating one.

1167
01:22:05,208 --> 01:22:06,928
Right, Graeme.

1168
01:22:07,088 --> 01:22:09,508
So if you jack up the interest rate on stretch,

1169
01:22:09,968 --> 01:22:10,548
or you get it.

1170
01:22:11,088 --> 01:22:11,908
Yeah, I get it.

1171
01:22:12,088 --> 01:22:14,068
The prices fall on the other one,

1172
01:22:14,128 --> 01:22:16,148
so the relative yield is rising.

1173
01:22:16,228 --> 01:22:17,048
At least that's what we've seen.

1174
01:22:17,188 --> 01:22:19,468
Obviously, there's a ton of other market dynamics at play.

1175
01:22:20,728 --> 01:22:22,088
There are, but I also think,

1176
01:22:22,108 --> 01:22:23,548
I think this is the main one.

1177
01:22:24,928 --> 01:22:25,168
Yeah.

1178
01:22:25,168 --> 01:22:26,748
The senior prefs.

1179
01:22:26,928 --> 01:22:27,568
Go ahead, Soley.

1180
01:22:28,088 --> 01:22:30,628
Yes, but if the rates do come down,

1181
01:22:30,988 --> 01:22:34,748
won't that pump up the other prefs more than stretch?

1182
01:22:35,208 --> 01:22:35,588
It will.

1183
01:22:35,708 --> 01:22:36,788
Or will it still be more attractive?

1184
01:22:36,968 --> 01:22:39,588
I think that's what Dan's saying.

1185
01:22:39,748 --> 01:22:41,188
It's like a rubber band.

1186
01:22:41,348 --> 01:22:44,448
If you pull one up, it pulls the other ones up with it too.

1187
01:22:44,568 --> 01:22:48,148
If you pull one down, it's going to pull the yield down with all of them.

1188
01:22:49,088 --> 01:22:50,548
That's a great question.

1189
01:22:50,648 --> 01:22:52,068
It's something I've been thinking about a lot too.

1190
01:22:52,368 --> 01:23:02,028
Something I'm most fascinated with these products is that you create a yield instrument with so many different trading pairs where you can calculate the risk 24-7, 365.

1191
01:23:02,628 --> 01:23:04,268
Stuff like this hasn't existed before.

1192
01:23:04,268 --> 01:23:06,668
Like what other bonds have this much liquidity?

1193
01:23:08,988 --> 01:23:14,248
HYG has this much liquidity, which is an ETF fund of bonds.

1194
01:23:14,328 --> 01:23:20,168
So it's like giving you yield, but it's a fund full of bonds and there's like a cash buffer and the company manages it.

1195
01:23:20,348 --> 01:23:21,088
It's like an ETF.

1196
01:23:22,028 --> 01:23:26,448
But like you're creating so many different trading pairs that you can have between all of these different instruments,

1197
01:23:26,448 --> 01:23:30,488
which is kind of what you're alluding to is like if you have if the one interest rate goes up,

1198
01:23:30,488 --> 01:23:35,148
you would sell some of the other ones to buy that.

1199
01:23:35,308 --> 01:23:38,448
It does kind of artificially change the curve

1200
01:23:38,448 --> 01:23:40,388
based on what the arbitrage opportunities are

1201
01:23:40,388 --> 01:23:41,548
relative to the risk.

1202
01:23:42,028 --> 01:23:43,368
And I guess the real question

1203
01:23:43,368 --> 01:23:44,868
I've been trying to wrap my head around is like,

1204
01:23:45,888 --> 01:23:46,748
does the market,

1205
01:23:47,828 --> 01:23:50,308
I don't know, I say this all the time,

1206
01:23:50,368 --> 01:23:51,188
risk is mispriced.

1207
01:23:51,188 --> 01:23:53,868
How does the market view the risk of these things?

1208
01:23:54,488 --> 01:23:56,188
Is it completely unplugged

1209
01:23:56,728 --> 01:23:58,208
from everything else in the world?

1210
01:23:58,208 --> 01:24:04,708
like how why are these trading like this why is there so much volume who's buying them who's

1211
01:24:04,708 --> 01:24:09,848
selling them like why is there a hundred million of volume like what did stretch trade today

1212
01:24:09,848 --> 01:24:15,328
so let's look it up i think 168 million of volume today

1213
01:24:15,328 --> 01:24:22,028
that's crazy in my mind it kind of comes back to this idea and i know you guys did it at strive

1214
01:24:22,028 --> 01:24:28,668
but it's like ultimately the ultimate capital structure is just a stretch sitting senior and

1215
01:24:28,668 --> 01:24:33,528
nothing else. And I think that's what we're kind of running into with strategy. The other products

1216
01:24:33,528 --> 01:24:42,988
are cool, but ultimately the apex cap structure is Bitcoin and then a senior unsecured perpetual

1217
01:24:42,988 --> 01:24:45,288
preferred monthly short duration.

1218
01:24:45,288 --> 01:24:45,488
Why?

1219
01:24:47,568 --> 01:24:49,108
Because the other products

1220
01:24:49,108 --> 01:24:51,468
will trade relative to that

1221
01:24:51,468 --> 01:24:52,008
interest rate.

1222
01:24:53,588 --> 01:24:54,168
Yeah, it's interesting.

1223
01:24:55,748 --> 01:24:57,468
Having duration on that

1224
01:24:57,468 --> 01:24:59,488
instrument makes

1225
01:24:59,488 --> 01:25:01,528
it such that the interest rate

1226
01:25:01,528 --> 01:25:02,268
on the fixed,

1227
01:25:03,048 --> 01:25:05,668
not in a perfectly efficient market.

1228
01:25:06,208 --> 01:25:07,508
They've all got different risk

1229
01:25:07,508 --> 01:25:08,908
profiles, theoretically, right?

1230
01:25:09,608 --> 01:25:11,768
Yeah, but I want to make a

1231
01:25:11,768 --> 01:25:17,368
distinction here. The duration for all of these is perpetual. The payment schedule is either

1232
01:25:17,368 --> 01:25:23,408
quarterly or an STRC is monthly. And I think the market would rather have a monthly payment schedule.

1233
01:25:23,648 --> 01:25:27,328
And then with everything you're saying about these credit spreads between them is,

1234
01:25:27,968 --> 01:25:35,328
I agree what you're saying, Dan, is that on STRC, because it has, what do you call it?

1235
01:25:35,328 --> 01:25:39,528
it has a variable interest yield that they could change.

1236
01:25:40,028 --> 01:25:42,688
And by the way, it's rule-based based upon the VWAP,

1237
01:25:42,868 --> 01:25:44,648
the last week of the trading month,

1238
01:25:44,648 --> 01:25:48,288
that then changes the credit spreads and all the other ones.

1239
01:25:48,628 --> 01:25:52,528
So I think from that perspective, it kind of affected those.

1240
01:25:53,308 --> 01:25:58,748
Look, I have a 1% belief that they will change the ATMs

1241
01:25:58,748 --> 01:26:00,748
for each of the different preps.

1242
01:26:01,108 --> 01:26:03,528
They could change those shelf offerings and say,

1243
01:26:03,528 --> 01:26:07,668
given what we see here, we could change that. Or they may just leave them the way they are

1244
01:26:07,668 --> 01:26:11,228
and increase STRC. Yeah, I don't think they would do that.

1245
01:26:11,328 --> 01:26:16,508
They wouldn't change that. So STRK has got plenty of room left on it. So for instance,

1246
01:26:16,768 --> 01:26:24,008
I pulled it up and I'm looking at it right now. STRC has got $4 billion left on it. STRK has got

1247
01:26:24,008 --> 01:26:35,048
20 billion left. STRF is only 1.6 billion. Sorry. STRC is 3.6 billion. STRD is 4 billion.

1248
01:26:35,488 --> 01:26:40,988
So there's only 3.6 billion left on STRC. I think that that'll be interesting. And I think they're

1249
01:26:40,988 --> 01:26:46,228
going to give us a view on MSTR stock. There's only $8 billion left on that. I think they're

1250
01:26:46,228 --> 01:26:51,088
going to revise all of those. Well, they're going to revise the ones they're going to revise,

1251
01:26:51,088 --> 01:26:54,608
but I think the big revisions are going to be an STRC and MSTR.

1252
01:26:55,988 --> 01:26:56,388
Yeah.

1253
01:26:56,488 --> 01:26:56,648
Yeah.

1254
01:26:56,648 --> 01:26:56,968
That makes sense.

1255
01:26:57,388 --> 01:26:57,528
Yeah.

1256
01:26:57,628 --> 01:26:58,028
Yeah.

1257
01:26:58,088 --> 01:26:58,288
Well,

1258
01:26:58,408 --> 01:27:01,668
it will be interesting to see if they have any,

1259
01:27:01,668 --> 01:27:03,368
any revisions in the MSTR.

1260
01:27:03,588 --> 01:27:05,028
Are we going to have an after hours,

1261
01:27:05,028 --> 01:27:06,048
like right after that to,

1262
01:27:06,108 --> 01:27:06,948
to give a quick talk?

1263
01:27:06,988 --> 01:27:07,808
I'm going to be on an airplane.

1264
01:27:07,808 --> 01:27:08,648
So I can't,

1265
01:27:08,668 --> 01:27:09,848
but hop on a space,

1266
01:27:09,948 --> 01:27:10,228
do it,

1267
01:27:10,308 --> 01:27:10,588
rip it.

1268
01:27:10,968 --> 01:27:11,208
Yeah.

1269
01:27:11,608 --> 01:27:11,968
Okay.

1270
01:27:12,328 --> 01:27:12,648
Dan,

1271
01:27:12,688 --> 01:27:13,568
I'm available tomorrow.

1272
01:27:13,968 --> 01:27:16,068
So how many hours we think it's going to go tomorrow?

1273
01:27:16,168 --> 01:27:16,648
Two hours.

1274
01:27:17,668 --> 01:27:19,308
Get yourself a window.

1275
01:27:20,108 --> 01:27:20,468
Whatever.

1276
01:27:20,468 --> 01:27:26,548
ever say it's like scheduled for 60 it's gonna go 120. it'll be interesting to see how many people

1277
01:27:26,548 --> 01:27:35,628
show up for the call yeah yeah absolutely yeah um cool i i mean you know i think that's that's

1278
01:27:35,628 --> 01:27:39,788
really it i i think we've we've hit on most of this stuff should we talk about other capital

1279
01:27:39,788 --> 01:27:47,268
things happening in the market i mean yeah yeah so so lay you uh you did a little research or

1280
01:27:47,268 --> 01:27:52,108
There's obviously some buzz happening in the capital raising world.

1281
01:27:52,308 --> 01:27:58,628
You've got XAI is now a part of SpaceX, which is fascinating, a fascinating development.

1282
01:27:58,948 --> 01:28:02,448
And you think about that potentially getting enrolled into Tesla.

1283
01:28:02,788 --> 01:28:04,408
What's capital raising look like in the future?

1284
01:28:04,588 --> 01:28:06,028
Open AI, maybe going IPO.

1285
01:28:07,688 --> 01:28:09,548
Yeah, a lot of moving pieces here.

1286
01:28:09,828 --> 01:28:11,028
You've been following this pretty closely.

1287
01:28:11,128 --> 01:28:11,688
What are you thinking about?

1288
01:28:11,688 --> 01:28:17,108
Yeah, I was looking at that and how it compares to, you know, what the Bitcoin treasury companies are doing.

1289
01:28:17,268 --> 01:28:22,928
And so there's this guy I follow named Stephen Mark Ryan from my daily, you know, Tesla hype.

1290
01:28:23,348 --> 01:28:29,788
And he said that SpaceX was requesting to launch a million satellites for orbital data centers.

1291
01:28:30,388 --> 01:28:33,948
And if they were going to fund this, they'd need like 50 or 60 billion.

1292
01:28:34,528 --> 01:28:43,128
And they'd need to be valued at like a $2 trillion market cap in order to make that raise kind of reasonable at like a 2% of their valuation.

1293
01:28:43,128 --> 01:28:46,908
and I went back and looked at some of Tesla's old raises.

1294
01:28:47,928 --> 01:28:51,128
And in 2017, they raised like 5% of their market cap.

1295
01:28:51,708 --> 01:28:54,708
2019, 2020, they raised back-to-back years.

1296
01:28:54,828 --> 01:28:56,828
They did a little under 2% of their valuation.

1297
01:28:57,548 --> 01:28:58,908
And what I really started to wonder is like,

1298
01:28:58,968 --> 01:29:00,688
how often can they get away with this stuff?

1299
01:29:01,188 --> 01:29:02,728
You know, can they just raise every year,

1300
01:29:02,828 --> 01:29:04,468
every quarter, every week, every day?

1301
01:29:05,228 --> 01:29:07,148
And even if they could,

1302
01:29:07,228 --> 01:29:09,468
like if shareholders had infinite tolerance

1303
01:29:09,468 --> 01:29:10,548
for capital raise,

1304
01:29:11,468 --> 01:29:16,808
Tesla couldn't actually do an infinite capital raise because they can only sell so many cars.

1305
01:29:16,908 --> 01:29:18,148
They can only build so many factories.

1306
01:29:18,608 --> 01:29:22,008
There's only going to be a certain maximum number of cyber cab rides possible.

1307
01:29:22,368 --> 01:29:27,368
So Tesla can't really raise infinite capital because they can't put infinite capital to good use.

1308
01:29:27,868 --> 01:29:30,988
And so that's limiting factor number one, efficient use of capital.

1309
01:29:31,628 --> 01:29:33,848
But like, you know, what about Bitcoin treasury companies?

1310
01:29:34,368 --> 01:29:35,628
You know, when do they want more Bitcoin?

1311
01:29:36,228 --> 01:29:38,528
Well, that's a trick question because they always want more Bitcoin, right?

1312
01:29:38,528 --> 01:29:43,388
So if there's a continuous need for all people and all companies to buy Bitcoin 24

1313
01:29:43,388 --> 01:29:57,284
seven then there is an infinite demand for capital to buy more Bitcoin which brings us to limiting factor number two which is how much ATM can the market actually handle per day If your trading volume is like a share a day then even

1314
01:29:57,284 --> 01:30:02,184
selling one share ATM would double the daily volume and tank the price, right? So that's where

1315
01:30:02,184 --> 01:30:07,184
the liquidity comes in. And that's where the phrase volatility is vitality actually starts

1316
01:30:07,184 --> 01:30:11,944
to make some freaking sense. Because the bigger the average daily trading volume, the bigger the

1317
01:30:11,944 --> 01:30:16,804
ATM a market can tolerate. And that daily capital raise can be immediately deployed

1318
01:30:16,804 --> 01:30:23,144
to purchase an appreciating asset. So, you know, while investors usually have to wait years to see

1319
01:30:23,144 --> 01:30:28,244
if their gamble paid off, a company that raises capital to buy Bitcoin is not limited by how fast

1320
01:30:28,244 --> 01:30:33,104
they can deploy the money. They still have to wait for Bitcoin number go up technology to kick in,

1321
01:30:33,504 --> 01:30:36,184
but that's not really an issue for Bitcoiners, right? We don't care.

1322
01:30:36,184 --> 01:30:59,404
So to bring this to a close, every company should buy Bitcoin with their income. We know that. But there are a few companies like Strategy, Strive and MetaPlanet that have market caps and liquidities to continuously raise capital to buy Bitcoin. And so the obvious name that I came up to describe that is continuous capital raised companies or CCRCs. And I'll just pause there to see what you guys think.

1323
01:30:59,404 --> 01:31:05,864
continuous capital raise companies i mean you bring up you bring up a bunch of really good

1324
01:31:05,864 --> 01:31:10,604
points here like the the liquidity and the ecosystem that these uh these companies get

1325
01:31:10,604 --> 01:31:16,644
connected to you think about like um mstr i'm just looking today today was the 33rd large public

1326
01:31:16,644 --> 01:31:24,004
33rd largest publicly traded company it traded 3.3 billion dollars of stock the enterprise mnav on

1327
01:31:24,004 --> 01:31:31,204
the company is what 1.13 so they're still trading enterprise value premium relative to the underlying

1328
01:31:31,204 --> 01:31:34,644
bitcoin held on the balance sheet so i mean they theoretically could be in the market

1329
01:31:34,644 --> 01:31:38,484
you know like why does this work like why i think about this a lot this is why i post it every

1330
01:31:38,484 --> 01:31:44,004
single day the liquidity is just so important because that like there's so many different

1331
01:31:44,004 --> 01:31:47,284
trading pairs very similar to what we're talking about the credit instruments there's so many

1332
01:31:47,284 --> 01:31:52,004
different trading pairs like mstr is part of bitcoin ecosystem it's like a pure expression

1333
01:31:52,004 --> 01:31:59,444
of the Bitcoin world. So you can operate in the derivatives market. There's incentive to operate

1334
01:31:59,444 --> 01:32:04,244
in the derivatives market to hedge certain things because it's moving, it's correlated, it's amplified.

1335
01:32:04,964 --> 01:32:09,284
There's a high correlation and connection between the two. So there's so many instruments that

1336
01:32:09,284 --> 01:32:17,524
like the computers can go in and out of any given point of time, any time of the day, long, short,

1337
01:32:17,524 --> 01:32:23,604
any which direction in and out of the pref instruments etc and that provides this liquidity

1338
01:32:23,604 --> 01:32:27,044
to be in the market and just kind of dripping out dripping out shares when you want to

1339
01:32:28,084 --> 01:32:35,204
when it makes sense which is part of the whole thing right so i want to mention something else

1340
01:32:35,204 --> 01:32:40,884
about this which is which is pretty interesting is the fact that there's there's options on this

1341
01:32:40,884 --> 01:32:46,984
and with the preps, right, you could trade these pairs.

1342
01:32:47,844 --> 01:32:54,144
And by not using options, you're not triggering theta decay and expiration date problems.

1343
01:32:54,664 --> 01:32:59,144
So you typically have large gamma with short expiration dates.

1344
01:32:59,144 --> 01:33:04,364
And so by trading with the preps against MSTR versus against Bitcoin or versus Ibit,

1345
01:33:04,664 --> 01:33:07,784
it gets rid of that expiration date piece.

1346
01:33:08,264 --> 01:33:10,824
And I think that that's one way to trade this also.

1347
01:33:10,884 --> 01:33:13,164
The ecosystem is quite large now.

1348
01:33:13,964 --> 01:33:18,484
And I was on a space with, I don't know, a couple of days ago, and people are like, how

1349
01:33:18,484 --> 01:33:23,384
much larger do you think is the derivatives market on Bitcoin than the value of Bitcoin?

1350
01:33:23,804 --> 01:33:31,364
And I'm like, well, it's got to be at least 10x on the low side and 25 to 50x on the high

1351
01:33:31,364 --> 01:33:33,164
side on the derivatives part of this.

1352
01:33:33,964 --> 01:33:36,644
So people ask, is that a good thing?

1353
01:33:37,504 --> 01:33:38,404
I don't know.

1354
01:33:38,404 --> 01:33:39,964
What I can tell you is it's inevitable.

1355
01:33:40,884 --> 01:33:52,684
And what I can say is this, is that when you do get a supply crunch and you do want physical delivery of Bitcoin, they're not going to increase the amount of Bitcoin that can be produced.

1356
01:33:52,924 --> 01:33:54,584
That is what we're all waiting for.

1357
01:33:54,904 --> 01:33:56,184
That cannot be changed.

1358
01:33:56,284 --> 01:34:01,224
Whereas with silver, specifically, as the price ramps up, they can make more silver.

1359
01:34:01,744 --> 01:34:08,404
I get that it's an industrial metal, but that can happen with silver and they could pump up and make more silver to do this.

1360
01:34:08,404 --> 01:34:13,124
With Bitcoin, we know at the next halving, the net new supply keeps on getting cut in half.

1361
01:34:13,484 --> 01:34:15,284
And there's the difficulty adjustment.

1362
01:34:15,684 --> 01:34:16,564
And the difficulty, yes.

1363
01:34:17,204 --> 01:34:28,124
So that component, I've been thinking about this a lot, that component of the difficulty adjustment makes Bitcoin interesting to computers.

1364
01:34:29,044 --> 01:34:38,164
That's what makes it fundamentally far more interesting to a computer than a physical asset like silver or gold.

1365
01:34:38,404 --> 01:34:44,164
like the the difficulty adjustment is it like that is that is the biggest thing um and

1366
01:34:44,164 --> 01:34:49,604
because like you can underwrite you could underwrite the risk of these like the computers

1367
01:34:49,604 --> 01:34:55,304
are going to be able to compute the risk of these instruments relative to like gold or silver and

1368
01:34:55,304 --> 01:35:00,504
they're not going to want gold or silver because the computer can't hold gold or silver um but it

1369
01:35:00,504 --> 01:35:06,344
could hold a digitally native asset and you see the expansion of all of these ai bots and all these

1370
01:35:06,344 --> 01:35:10,944
tools move so quickly, these things are going to want to hold a digitally native currency,

1371
01:35:11,064 --> 01:35:17,324
like digital scarcity. And I saw a comment on one of the posts I made about this. And it's like,

1372
01:35:17,364 --> 01:35:23,744
who's going to pay the taxes? And I just started laughing out loud, like giggling, right? It's like,

1373
01:35:23,744 --> 01:35:32,104
well, what jurisdiction is the internet? Like, okay, good luck going to get the AI bot based

1374
01:35:32,104 --> 01:35:38,804
on the internet to go pay taxes on money that you can't access. Good luck. Yeah. I want to,

1375
01:35:38,804 --> 01:35:44,704
I want to, I want to talk about hash rate for a second before we go on. So here's this site is

1376
01:35:44,704 --> 01:35:49,464
bit info charts. People should use this. Can you see it? I got it in one second. Yeah. Hold it up

1377
01:35:49,464 --> 01:35:55,844
here. So, so when you look at this, this is in linear scale and this is the Bitcoin hash rate

1378
01:35:55,844 --> 01:36:02,584
historical chart over the full lifetime. Now, one of the things about Bitcoin is you change it to

1379
01:36:02,584 --> 01:36:08,284
log scale and you look at it in log scale and you're like, oh, the little dip that we have over

1380
01:36:08,284 --> 01:36:15,364
here is barely representative in the hash rate. And so if you let me back up for one second,

1381
01:36:15,444 --> 01:36:20,724
we'll change it. Let me show you why it gets scary. If you look at the six one year chart

1382
01:36:20,724 --> 01:36:26,504
in three years you see this big dip that we have over here that was because of the big um

1383
01:36:26,504 --> 01:36:30,644
it was a winter storm wasn't it when winter storms right over here that's this big dip

1384
01:36:30,644 --> 01:36:36,824
but as soon as you flip this to log scale right then it's like that dip barely appears on a

1385
01:36:36,824 --> 01:36:42,084
three-year chart or skip all time it's it's it's a rounding error so that's where this becomes

1386
01:36:42,084 --> 01:36:47,064
whether it's the risk curve or production rate whatever term you want to call this

1387
01:36:47,064 --> 01:36:53,104
it's it's been running consistently and people could you know they can model this so i think that

1388
01:36:53,104 --> 01:36:58,764
that's interesting um i i just think this is a great this is one of the first sites that i found

1389
01:36:58,764 --> 01:37:04,604
you know previously here's a rich list i talked about this on the part yeah and and this just goes

1390
01:37:04,604 --> 01:37:09,424
to show you wallets and so for the people that are listening right now here's a little bit of

1391
01:37:09,424 --> 01:37:15,004
hopium okay and you're like it kind of feels like you know i'm doing this all on my own

1392
01:37:15,004 --> 01:37:18,304
And you kind of are, and that's a good thing.

1393
01:37:18,304 --> 01:37:19,884
And let me explain why.

1394
01:37:19,884 --> 01:37:22,084
What this shows you are the amount of wallets

1395
01:37:22,084 --> 01:37:26,724
that are more than 10,000 coins or 100,000 coins.

1396
01:37:26,724 --> 01:37:29,744
And you're like, okay, now each wallet

1397
01:37:29,744 --> 01:37:41,460
could be owned by multiple people right So if there an exchange let say Coinbase or Fidelity they co the Bitcoin this is okay And so there multiple owners for one wallet

1398
01:37:41,580 --> 01:37:47,120
but typically that wallet will be large. On the flip side, one person can have multiple wallets,

1399
01:37:47,200 --> 01:37:52,280
right? You could have eight wallets, right? So it kind of both balances out. Why am I talking

1400
01:37:52,280 --> 01:37:58,460
about this? On the bottom over here is if you have $10,000 worth of Bitcoin,

1401
01:37:58,460 --> 01:38:02,020
I know it's fiat dollars.

1402
01:38:02,620 --> 01:38:05,920
You were one of less than three and a half million people in the world.

1403
01:38:07,960 --> 01:38:12,760
That goes to when I saw this in 2017, that's what made it click for me.

1404
01:38:12,940 --> 01:38:17,320
If I believe that this is a great asset, I want to have an ownership share in that.

1405
01:38:17,800 --> 01:38:19,520
And for me, I have an old chart.

1406
01:38:19,580 --> 01:38:21,280
I had to use the way back time machine.

1407
01:38:21,580 --> 01:38:26,440
But if you have 10 grand in Bitcoin as of right now, you're one of less than three and a half

1408
01:38:26,440 --> 01:38:32,520
million people out of 8 billion people, right? And that's the way that I look at it. It's an

1409
01:38:32,520 --> 01:38:37,740
ownership metric. And now if you have 100 grand, which is about equal to a little more than one

1410
01:38:37,740 --> 01:38:44,640
Bitcoin, you're equal to one and a little bit over a half a million, right? One in 654,000.

1411
01:38:44,760 --> 01:38:50,220
And now out of 8 billion people, that's not a lot. So then it gets kind of skewed when you go to the

1412
01:38:50,220 --> 01:38:55,740
bigger wallet addresses, but usually the distribution curves are about the same.

1413
01:38:56,040 --> 01:39:00,220
You have a few very wealthy people and then the vast majority of people are much lower.

1414
01:39:00,840 --> 01:39:07,140
So I think that if you have $10,000 worth of Bitcoin, you're one of 10 million people

1415
01:39:07,140 --> 01:39:07,680
in the world.

1416
01:39:08,200 --> 01:39:10,040
That's just the back of the envelope math.

1417
01:39:10,460 --> 01:39:11,800
And I think that's something awesome.

1418
01:39:12,000 --> 01:39:13,180
That's just a crazy statistic.

1419
01:39:13,360 --> 01:39:14,440
It's a crazy statistic.

1420
01:39:14,640 --> 01:39:16,520
And I didn't make this up.

1421
01:39:16,520 --> 01:39:21,120
that's on here and people are like, oh, well, a bunch of rich people have the most of the Bitcoin.

1422
01:39:21,300 --> 01:39:25,460
I'm like, well, yeah. Oh, my God. And the way it works. The crazy, the crazy part, like in the

1423
01:39:25,460 --> 01:39:30,760
world. Right. And people have ran into people around the globe that are buying Bitcoin and

1424
01:39:30,760 --> 01:39:35,080
utilizing Bitcoin, like in Africa, for example, I've chatted with a couple of people out there

1425
01:39:35,080 --> 01:39:41,180
and they're they're doing you can send Bitcoin over SMS text message.

1426
01:39:41,180 --> 01:39:47,580
and like there's all of these uh informal economies that exist there in africa like that

1427
01:39:47,580 --> 01:39:55,560
they like hoard cash and like they'll literally have a house full of cash and like a late like

1428
01:39:55,560 --> 01:40:00,600
if you want to go to the atm you like go to this house and a lady opens a window and she's like

1429
01:40:00,600 --> 01:40:06,100
she's the banker and she's got like a house full of cash and so there's like all these type and

1430
01:40:06,100 --> 01:40:12,740
And they're shifting over to Bitcoin because they've got these primitive phones or even

1431
01:40:12,740 --> 01:40:15,120
smartphones, depending on where they're at.

1432
01:40:15,120 --> 01:40:20,700
And they can move money via SMS message, which is like a crazy innovation.

1433
01:40:20,700 --> 01:40:27,660
And so in that society, debasement has been part of their life.

1434
01:40:27,660 --> 01:40:32,940
And so they understand the problem very quickly and they adopt this money and they're very

1435
01:40:32,940 --> 01:40:34,640
interested in holding this money.

1436
01:40:34,640 --> 01:40:38,900
those economies kind of like work and work in this way. And so that's just like one example of

1437
01:40:38,900 --> 01:40:43,900
what's happening to other places in the world. And so, I mean, if you're, if you're privileged

1438
01:40:43,900 --> 01:40:47,760
enough to hold some of this stuff, like you could think of yourself relative to these other people

1439
01:40:47,760 --> 01:40:55,360
in the world, a very privileged position, right? I don't, I don't think this, I think the likelihood

1440
01:40:55,360 --> 01:41:00,920
this stuff goes to zero is off the table. And when, when you think about probability theory,

1441
01:41:00,920 --> 01:41:03,920
if you wipe the probability of zero off the table,

1442
01:41:04,100 --> 01:41:07,480
like your average skewed distribution just balloons to the right.

1443
01:41:07,600 --> 01:41:09,300
Like there's a huge fat right tail.

1444
01:41:10,440 --> 01:41:14,440
So what I say to that, as soon as somebody says to me,

1445
01:41:14,700 --> 01:41:17,720
well, what happens if you wake up tomorrow, Mike, and Bitcoin goes to zero?

1446
01:41:17,940 --> 01:41:20,540
I'm like, oh, what happens if I wake up tomorrow morning,

1447
01:41:20,580 --> 01:41:21,640
the price goes to infinity?

1448
01:41:23,900 --> 01:41:24,560
Bigger risk.

1449
01:41:24,880 --> 01:41:25,360
Bigger risk.

1450
01:41:25,800 --> 01:41:26,540
Bigger risk.

1451
01:41:26,820 --> 01:41:27,600
Much bigger risk.

1452
01:41:28,140 --> 01:41:28,320
Yeah.

1453
01:41:28,320 --> 01:41:44,300
Like, oh, man, I said that the other day, too, is like, yeah, the bigger the bigger risk here is being short this stuff and you wake up and it moves, it moves in your face.

1454
01:41:45,140 --> 01:41:45,660
Right.

1455
01:41:46,120 --> 01:41:50,800
And you don't know the bottoms in until until after you've experienced it.

1456
01:41:50,940 --> 01:41:54,180
You know, like you don't know the bottoms in until it's behind you.

1457
01:41:55,180 --> 01:41:55,660
Yeah.

1458
01:41:55,660 --> 01:41:57,060
And, you know, right.

1459
01:41:57,060 --> 01:41:58,220
You know what I'll say to people?

1460
01:41:58,640 --> 01:42:00,720
Look, the best time to invest is always yesterday.

1461
01:42:00,820 --> 01:42:02,160
And people are like, well, why yesterday?

1462
01:42:02,300 --> 01:42:04,500
Because it's the time value of money, right?

1463
01:42:04,580 --> 01:42:06,480
And so I know it's going to happen.

1464
01:42:06,820 --> 01:42:08,380
Bitcoin eventually is going to rip higher.

1465
01:42:08,620 --> 01:42:09,660
I'm not exactly sure when.

1466
01:42:09,720 --> 01:42:11,840
I do think it comes after the Federal Reserve.

1467
01:42:12,560 --> 01:42:15,100
You know, whoever gets confirmed and goes into that,

1468
01:42:15,420 --> 01:42:17,640
cut interest rates in a midterm election year.

1469
01:42:18,160 --> 01:42:21,760
So I think that we will get positive news.

1470
01:42:22,520 --> 01:42:24,780
There's always positive news that comes out.

1471
01:42:24,780 --> 01:42:27,300
You know, we don't talk about the end carry trade blowing up.

1472
01:42:27,420 --> 01:42:28,460
Which one are we talking about?

1473
01:42:28,480 --> 01:42:32,500
The one in 24, the one in 25 or the one in 26, right?

1474
01:42:32,600 --> 01:42:34,320
We don't talk about Greenland anymore.

1475
01:42:34,480 --> 01:42:36,840
It's like, oh, we resolve Greenland, you know?

1476
01:42:36,940 --> 01:42:41,360
So I think that once the price goes higher, we'll have the same question come back in

1477
01:42:41,360 --> 01:42:41,760
from people.

1478
01:42:42,040 --> 01:42:43,880
Oh, when's it going to drop so I could buy more?

1479
01:42:43,980 --> 01:42:46,940
I'm like, well, I guess you should buy when the price is low.

1480
01:42:46,980 --> 01:42:48,240
And that's when nobody wants to buy.

1481
01:42:48,860 --> 01:42:49,020
Yeah.

1482
01:42:49,360 --> 01:42:50,940
And so it's funny.

1483
01:42:51,020 --> 01:42:52,500
I see a couple of comments in here.

1484
01:42:52,500 --> 01:42:56,260
like market will test sailor, which I think the market is probably doing right now.

1485
01:42:57,540 --> 01:43:02,260
As well. You think about strategy is going to come out and they're going to pay dividends.

1486
01:43:02,260 --> 01:43:04,020
They're going to pay the dividends. They're going to pay the quarterly

1487
01:43:04,020 --> 01:43:07,140
dividend. They're going to pay the monthly dividend and they're going to keep doing it

1488
01:43:07,140 --> 01:43:10,100
for months. If the price stays down here and they're going to keep doing it for months.

1489
01:43:10,100 --> 01:43:12,100
And people, they're going to do it right in everybody's face.

1490
01:43:12,900 --> 01:43:16,260
These are credit instruments. They've made the commitment to pay these dividends.

1491
01:43:16,260 --> 01:43:19,300
They have cash to pay the dividends. They have a liquid common equity.

1492
01:43:19,300 --> 01:43:20,220
They're going to pay the dividends.

1493
01:43:21,180 --> 01:43:28,000
And I think the likelihood that it stays extended down for a long time is, in my opinion, relatively low.

1494
01:43:28,080 --> 01:43:30,500
But I'm always planning for the probability that it does.

1495
01:43:30,900 --> 01:43:32,640
But you think about the entire environment.

1496
01:43:33,040 --> 01:43:35,460
Like, strategy isn't the only player here.

1497
01:43:35,520 --> 01:43:36,700
They have 3% of the network.

1498
01:43:39,440 --> 01:43:43,000
There are so many other people that are – like, think about Tether.

1499
01:43:43,540 --> 01:43:44,900
Look at Tether's assets.

1500
01:43:45,060 --> 01:43:46,780
The USDT just hit an all-time high.

1501
01:43:46,840 --> 01:43:47,960
It's like $183 billion.

1502
01:43:47,960 --> 01:43:54,680
dollars so when that stuff gets minted they're buying like gold treasuries and bitcoin and so

1503
01:43:54,680 --> 01:43:59,800
clarity act right like if stable coins are you get to get approved and we got clarity on what this

1504
01:43:59,800 --> 01:44:06,120
looks like now you're going to have coinbase usdc and tether usdt probably exploding

1505
01:44:07,880 --> 01:44:13,800
and they're they're going to be buying treasuries bitcoin gold all these other things so it's not

1506
01:44:13,800 --> 01:44:19,320
just everybody just thinks it's strategy like strategy has a shitload of wow i got an idea for

1507
01:44:19,320 --> 01:44:26,840
sailor if he's watching right now convince um if they're allowed to convince fidelity with fiddd

1508
01:44:26,840 --> 01:44:30,600
to have them buy strc but dan that'd be competitive to what you're doing

1509
01:44:31,160 --> 01:44:38,120
but just you know it's it's a small portion right they could do a small portion i mean tether can do

1510
01:44:38,120 --> 01:44:45,460
it. Right. You know, provide, yeah, I can't see why they're not allowed to. It's different for a

1511
01:44:45,460 --> 01:44:50,000
publicly traded company than for a stable coin. That's why you say that, that's why we say that

1512
01:44:50,000 --> 01:44:56,780
MSTR is equitized Bitcoin and a stable coin is basically, you know, it's a, it's a crypto

1513
01:44:56,780 --> 01:45:02,260
wrapper around U.S. treasuries and, and Bitcoin and gold. So it's the reverse.

1514
01:45:02,260 --> 01:45:09,260
right so i look you want to wrap wrap it up and cover the last thoughts yeah let's hit it

1515
01:45:10,060 --> 01:45:14,860
dan you want to go first final thoughts what do you think about

1516
01:45:14,860 --> 01:45:24,096
you getting ready for tomorrow uh big question he got to go find an iron to iron his shirt Grant I got to go pick him up with a dry cleaner Come on

1517
01:45:27,056 --> 01:45:30,656
I think price action is terrible.

1518
01:45:31,136 --> 01:45:32,996
Macro outlook isn't that bad.

1519
01:45:33,516 --> 01:45:36,276
I wish Bitcoin wasn't trading with the SaaSpocalypse.

1520
01:45:36,936 --> 01:45:38,496
It will come out as hard money.

1521
01:45:38,496 --> 01:45:40,976
I liked Grant's chart of the hashrate

1522
01:45:40,976 --> 01:45:43,176
because the hashrate is the ultimate source of truth

1523
01:45:43,176 --> 01:45:45,896
when it comes to Bitcoin's overall adoption trend.

1524
01:45:46,576 --> 01:45:49,216
So, I mean, we had the winter storm, but things are picking back up.

1525
01:45:49,276 --> 01:45:50,396
That brings me a lot of confidence.

1526
01:45:51,096 --> 01:45:55,036
And finally, I think people need to really take a look, step back.

1527
01:45:55,376 --> 01:45:57,136
I saw a post from Chris Camilla today.

1528
01:45:57,216 --> 01:45:58,776
He's like that trader guy.

1529
01:45:59,056 --> 01:46:02,036
And he's like, take a look at your brokerage account or your Bitcoin wallet.

1530
01:46:02,236 --> 01:46:03,076
There's still money there.

1531
01:46:03,276 --> 01:46:03,816
You'll be all right.

1532
01:46:04,536 --> 01:46:09,036
And instead of just thinking like it's all gone, you're all right.

1533
01:46:09,136 --> 01:46:11,456
And then make the best decisions you can moving forward.

1534
01:46:13,336 --> 01:46:15,496
Yeah, absolutely.

1535
01:46:15,496 --> 01:46:16,356
Long-term view.

1536
01:46:16,576 --> 01:46:18,536
Long-term thinking, right?

1537
01:46:18,996 --> 01:46:19,816
Long-term thinking.

1538
01:46:19,916 --> 01:46:26,676
You've got a long-term asset with a long-duration liability and a 50-vol asset.

1539
01:46:26,796 --> 01:46:31,196
If you're going to hold a 50-vol asset in Bitcoin, you should probably hold it for eight years.

1540
01:46:31,516 --> 01:46:38,136
If you've got a 100-vol asset in something like MSTR, you're probably going to want to hold it even longer term than that.

1541
01:46:39,256 --> 01:46:41,276
So long-term thinking, very helpful.

1542
01:46:41,496 --> 01:46:42,356
Look at the Apple chart.

1543
01:46:42,636 --> 01:46:44,816
Look at all the 50% drawdowns in the Apple chart.

1544
01:46:44,816 --> 01:46:47,196
Amazon, any big company.

1545
01:46:47,336 --> 01:46:48,156
Look at Tesla.

1546
01:46:48,396 --> 01:46:51,116
Tesla had a 60% drawdown

1547
01:46:51,116 --> 01:46:53,216
in 22.

1548
01:46:54,256 --> 01:46:55,236
And it just got

1549
01:46:55,236 --> 01:46:56,736
ripped back higher the other way.

1550
01:46:57,116 --> 01:46:58,776
And that was a drawdown from what is like

1551
01:46:58,776 --> 01:47:01,156
almost, it was like trillion and a half

1552
01:47:01,156 --> 01:47:02,976
down to like 600 billion.

1553
01:47:05,376 --> 01:47:05,856
Yeah.

1554
01:47:06,276 --> 01:47:06,576
Anyway.

1555
01:47:07,336 --> 01:47:08,736
So Leigh, over to your final thoughts.

1556
01:47:09,756 --> 01:47:10,236
Yeah.

1557
01:47:10,396 --> 01:47:12,656
So for the bears that like to say that

1558
01:47:12,656 --> 01:47:17,276
you know, Bitcoin treasury companies don't make anything or, you know,

1559
01:47:17,896 --> 01:47:20,756
that it's just kind of ridiculous because number one,

1560
01:47:20,756 --> 01:47:24,756
there's a hundred and trillion dollar bond market to service and their

1561
01:47:24,756 --> 01:47:27,356
products are better. And number two,

1562
01:47:28,096 --> 01:47:31,776
if you're a company that makes cars or widgets or whatever, you know,

1563
01:47:31,876 --> 01:47:34,776
you can build too many and now you don't have a buyer,

1564
01:47:34,776 --> 01:47:38,016
but there's no such thing as a Bitcoin that you shouldn't have bought.

1565
01:47:38,016 --> 01:47:43,716
absolutely no such thing as a bitcoin you shouldn't buy

1566
01:47:43,716 --> 01:47:52,736
over to you over to you mike yeah look um you know ben workman said it you know don't don't

1567
01:47:52,736 --> 01:47:57,076
get your conviction from somebody else or don't rent it and i think that you have to look at these

1568
01:47:57,076 --> 01:48:02,596
assets and think about where you're going to be in the future um after you've been in for a while

1569
01:48:02,596 --> 01:48:07,896
like i said when i you know i showed the book right here and the price you could see it is

1570
01:48:07,896 --> 01:48:14,676
9,000. And I was like, is Bitcoin ever going to get back above 10 grand? Was I, and was I,

1571
01:48:14,916 --> 01:48:22,596
have I been, how do I say this? I don't want to say, do I think the price action sucks? Yeah,

1572
01:48:22,596 --> 01:48:29,196
it does. But with that, I have to be grateful for what I have. And it always comes back up.

1573
01:48:29,496 --> 01:48:34,536
In eight and a half years, the only question is how long does the down cycle last? And then it

1574
01:48:34,536 --> 01:48:39,276
comes back up and you're like, I wish I bought more in the down cycle. You always think back to

1575
01:48:39,276 --> 01:48:45,796
that. You're like, so, so my view is, um, you know, we're human. Like the people that are

1576
01:48:45,796 --> 01:48:50,456
listening to us, we, we get them watching the death. Don't doom scroll, keep on reading these

1577
01:48:50,456 --> 01:48:57,036
feeds. And what I would say is, um, come to Las Vegas, talk to us in purpose in person,

1578
01:48:57,176 --> 01:49:01,856
meet Michael Saylor, meet the people that we're going to have there. I think that once you go to

1579
01:49:01,856 --> 01:49:07,156
one of these events and you talk to real people that are there, especially our event, you're like,

1580
01:49:07,736 --> 01:49:12,876
oh, these people really do care about this. And that's the part I want people to realize

1581
01:49:12,876 --> 01:49:19,016
is that we see what's going on in the price. And sometimes just recently I decided to go on a

1582
01:49:19,016 --> 01:49:23,976
motorcycle ride. I'm like, I'm not looking at the price. Right. And I'm just like, I'm going to do

1583
01:49:23,976 --> 01:49:28,636
something else with my time. So that's what I think sometimes, you know, I don't know who said

1584
01:49:28,636 --> 01:49:33,656
it sometimes the best thing to do is to do nothing and don't look at it yeah go touch motorcycles

1585
01:49:33,656 --> 01:49:40,816
whatever you whatever brings you fun yeah absolutely thanks grain yeah my final thoughts

1586
01:49:40,816 --> 01:49:47,376
is there's the ecosystem seems healthy strategy balance sheet is incredibly healthy compared to

1587
01:49:47,376 --> 01:49:51,496
where it's been in past cycles there's no instruments that are fitting products that

1588
01:49:51,496 --> 01:49:56,836
are fitting markets that haven't existed before you got different capital pools that are buying

1589
01:49:56,836 --> 01:50:00,436
these instruments that have never bought these instruments before. The plumbing and the architecture

1590
01:50:00,436 --> 01:50:07,916
has changed. You've now got Bitcoin ETFs. The Bitcoin Ibit purchased 700,000 Bitcoin in the

1591
01:50:07,916 --> 01:50:13,316
last two years. Some of that's GBTC, let's say 300,000, but Ibit, right? You got 500,000 Bitcoin

1592
01:50:13,316 --> 01:50:18,816
that Ibit purchased in the last two years. They're going to be front running the 2028 halving. They're

1593
01:50:18,816 --> 01:50:25,276
going to have all of their salespeople going to sell the best performing ETF on the planet ever

1594
01:50:25,276 --> 01:50:27,896
and front run the 2028 halving.

1595
01:50:28,176 --> 01:50:30,436
Well, we got a halving coming up right in 2028.

1596
01:50:30,436 --> 01:50:32,636
That conversation is going to happen.

1597
01:50:32,876 --> 01:50:35,056
That is going to be hitting people's portfolios.

1598
01:50:35,596 --> 01:50:36,316
That's on the horizon.

1599
01:50:38,416 --> 01:50:41,836
And yeah, somebody else brought this up

1600
01:50:41,836 --> 01:50:44,856
and thinking about long-term generational holds here.

1601
01:50:45,236 --> 01:50:48,296
The reason I got interested in this entire space

1602
01:50:48,296 --> 01:50:50,196
and the reason everybody's interested in this entire space

1603
01:50:50,196 --> 01:50:53,916
is because we're long Bitcoin bulls about changing the future.

1604
01:50:53,916 --> 01:50:59,156
right we want to upgrade the world we want to upgrade the world to a digital money uh digital

1605
01:50:59,156 --> 01:51:04,216
scarcity every like the world should be a better place that's why we're here and thinking about

1606
01:51:04,216 --> 01:51:09,356
what that looks like in the future companies are going to hold this stuff and i want to be

1607
01:51:09,356 --> 01:51:17,256
connected to the companies that are leading the charge here and i think back to many conversations

1608
01:51:17,256 --> 01:51:22,556
i've had with like my grandparents and my uncles and stuff and when i was younger they would say

1609
01:51:22,556 --> 01:51:31,476
oh man, I could have bought Apple at 82 cents. And my response was, well, you didn't. And here's

1610
01:51:31,476 --> 01:51:36,656
where you're at, right? Like, I don't want to tell my grandkids that I had the, like, oh,

1611
01:51:36,676 --> 01:51:44,336
I bought strategy at, you know, $20 and I sold it at 150 because I got nervous about a 70% drawdown

1612
01:51:44,336 --> 01:51:51,476
in 2026. And I didn't have the conviction to see the future. And like, that's the difference here

1613
01:51:51,476 --> 01:51:57,996
is that I think this industry is worth spending time in,

1614
01:51:58,096 --> 01:52:00,616
so much so that I quit my traditional finance job

1615
01:52:00,616 --> 01:52:02,516
to work in this space full time,

1616
01:52:02,656 --> 01:52:04,776
to do the stuff that strategy is doing,

1617
01:52:05,096 --> 01:52:06,416
and to make the world a better place,

1618
01:52:07,096 --> 01:52:11,616
and to accumulate as much Bitcoin exposure

1619
01:52:11,616 --> 01:52:14,616
as I possibly can across many different avenues,

1620
01:52:15,196 --> 01:52:17,336
and to fix the world, upgrade the world.

1621
01:52:18,116 --> 01:52:19,496
So that's why we're all here.

1622
01:52:19,836 --> 01:52:21,236
That's why we keep doing this every single week.

1623
01:52:21,236 --> 01:52:22,196
That's why we talk about it.

1624
01:52:22,536 --> 01:52:23,276
This is the most,

1625
01:52:23,436 --> 01:52:24,896
this is the biggest story in all of finance.

1626
01:52:25,036 --> 01:52:25,996
Right now it's the red,

1627
01:52:26,176 --> 01:52:28,896
the most red story in all of finance and that sucks.

1628
01:52:29,576 --> 01:52:31,336
But, you know, we're all in it together.

1629
01:52:32,056 --> 01:52:34,896
And yeah, the world can be a better place.

1630
01:52:37,276 --> 01:52:38,236
Cool. Thanks everybody.

1631
01:52:38,396 --> 01:52:39,056
Appreciate the time.

1632
01:52:40,336 --> 01:52:42,336
Yeah, Dan, good luck tomorrow.

1633
01:52:42,696 --> 01:52:44,296
And I hope everybody watches.

1634
01:52:44,756 --> 01:52:47,116
Mike, maybe you host a space if that works.

1635
01:52:47,116 --> 01:52:48,616
I'll do a space after it.

1636
01:52:48,636 --> 01:52:50,296
If Dan wants to join, I think that'd be great.

1637
01:52:50,296 --> 01:52:52,436
And we'll, we'll see what, we'll see what they say.

1638
01:52:52,476 --> 01:52:53,316
I'll do a quick review.

1639
01:52:53,356 --> 01:52:54,496
So I will schedule that.

1640
01:52:54,816 --> 01:52:57,036
I'll just do a pop-up right after it.

1641
01:52:57,036 --> 01:52:58,756
It ends right on.

1642
01:52:58,976 --> 01:52:59,096
Right.

1643
01:52:59,196 --> 01:52:59,456
Okay.

1644
01:52:59,676 --> 01:52:59,996
All right.

1645
01:53:00,056 --> 01:53:00,536
Thanks everybody.

1646
01:53:00,656 --> 01:53:01,276
Appreciate the time.

1647
01:53:01,436 --> 01:53:02,876
We will catch you next week.

1648
01:53:03,396 --> 01:53:03,756
See ya.

1649
01:53:04,196 --> 01:53:04,536
See y'all.