Ladies and gentlemen, what you are about to hear may be amazing, but it is not financial advice.
It is for informational and educational purposes only.
Nothing in this discussion should be considered investment advice or the offering of any security
or other investment product.
Please consult your own investment and tax advisors.
And now I'll hand it over to the True North team for your regularly scheduled programming.
Woo!
Welcome back.
True North, episode 60.
Welcome to the Investment Grade Bitcoin podcast.
We're here.
We've got a lot for you.
So much has happened in the last five or six days in the entire world.
It seems like there's chaos kind of going everywhere.
For those of you that are new here, we talk about Bitcoin.
We talk about Bitcoin-backed securities.
We talk about financialization of Bitcoin instruments.
We talk about different ways to think about these things.
We talk about risk profiles.
We talk about options market.
We try to cover everything that's hot this week.
So, I appreciate the time. We've got Adrian today, Soleil, and Dan, and myself. I'm the host, and let's get after it.
And we've already got the Tim intro, and let's jump right into it.
So, the last couple of weeks, I've been passing it around to folks and see what they're interested in or what's hot, what's the hot topic of the week.
But I wrote a few down, and I want to walk through these first to get a lay of the land and kind of kick off the conversation here.
So at the market, what's happening in the market?
So over the last five days, here's a list of the things that have happened.
Over the weekend, Trump gives Iran an ultimatum.
You've got 48 hours to respond and work on a peace deal or else we're going to keep bombing you.
Okay, that happened on Saturday.
You've got Elon Musk comes out with tariff fab.
He's like, we're going to start building our own AI chips.
uh iran comes back to trump says we're actually going to target u.s bases uh private credit
continuing to pull uh pull the door on people trying to exit the trade they're capping withdrawals
on private credit this is happening across several different funds gold and silver on sunday dropped
like 10 on sunday night ended up ripping back three or four five percent higher but significant
declines in the price of gold and silver. These commodities have dropped like $10 trillion in
the last five days. We're now seeing potential digital price tags at Walmart. So if you want to
go get different goods and services like an apple or bananas or something, they might have the ability
to change the price digitally and it might just change on you every day. So this concept of
inflation is starting to become more of a concern. The market is starting to price in tax, not
tax increase rate increases instead of rate decreases, you know, multiple rate decreases
six months ago. Then Trump comes out, says there's a 15, 15 point plan to end the war.
And we're potentially going to get a ceasefire. Then all of a sudden they changed the enlistment
age from 34 to 42. The price of oil continues to rip higher. And then right before Trump talks or
sends a tweet about ceasefire. There's billions of dollars that go in on options trades on the oil
market right before that happened. Crazy deal. Some ships start getting let through the
Strait of Hormuz, but there's a $2 million toll on any ship that comes through.
And then we've got Morgan Stanley files a Bitcoin ETF. Strategy changes or launches another 42-42
plan or I guess a $42 billion plan, 21 billion ATM on MSTR, 21 billion on STRC and a revision
on STRK.
That's kind of what's happened there.
But my gosh, this timeline is insane.
I've never seen anything like it.
And I just want to start with the lay of the land there.
What are you guys thinking about?
What's on your mind?
Adrian, I haven't seen you in a while.
Welcome back.
Well, yeah, I've been crazy busy.
Everything you laid out just kind of shows how nuts things have been this year.
so far. We've got the situation with Iran, the straight oil prices, gold, silver,
the broader market. Every single day, there's one thing after another. So it's really, really
hard to keep up with it. And also, it's really weird knowing that just because you see something
doesn't necessarily mean it's actually accurate. People are just out there tweeting stuff. They're
just putting out information. You don't know what's what. It's really crazy out there how this
year has kind of kicked off and we're only in March. So what, what, what's things going to be
like by the summer when, um, when things really have a chance to settle and, um,
and the market gets to make sense of it. I just, it's been wild, especially with what's going on
with Iran. We're not going to get political here. I'm just saying it's just been kind of crazy to,
um, see what's going on. Well, I think one of the craziest parts about the whole thing is that
the communication is happening on Twitter. It's like you're in the war room. You are seeing the
communication go from country to country. And then you see Trump says he's talking to somebody about
peace deals. And then I guess the Iran military says, no, they're not. And it's like, what's real?
What's fake? What's AI? Who's in control? What is happening right now? And it's just there's chaos
everywhere. It's a bit hard to decipher.
To that point, the fact that the Iranian military's Twitter
page or the actual state pages that are run by the government are
trolling our president, I never
thought in my entire life that I would see two military,
two state forces trolling each other and
tweeting back and forth at each other on Twitter. Yeah, crazy timeline.
Just an insane timeline.
Maybe I'll pass it over to you, Soleil.
I mean, how are you feeling right now?
What's cooking?
What's on your mind?
Well, we're going to get into a ground invasion in Iran.
Kicks off a draft and the second American Civil War, but I got Bitcoin in cold storage.
So I sleep good every night and I haven't missed a sunrise in March.
So there you go.
We can only do what we can do.
Yeah.
Oh, my gosh.
that would be would be hopefully there's no draft i mean fingers crossed that would be
this is gonna be crazy i mean with drones and everything yeah weird times weird times
over to you dan what's uh what's on your mind tokenization you're cooking what's going on with
buck what are you thinking about you're on mute
okay we'll come back to it
we'll work on it
oh I can hear you now
we're good
Oh, you hear that, Dan?
Oh, really?
Dan, you got to jump off and come back on.
Sorry, troubleshooting the new platform.
Join on Chrome, Dan.
Okay.
We will move along.
So while we wait for Dan to jump back on,
let's jump into the update on MSTR, right?
This week, we've got a new updated $42 billion plan,
$21 billion MSTR ATM, $21 billion SDRC ATM.
And then they downsized the SDRK ATM, I think, from $21 billion down to $2.1 billion.
I think this is really not a huge surprise that they came out with this updated plan.
The biggest signal, in my opinion, was the focus on the SDRK ATM, making that a $21 billion ATM,
and just downsizing the size of the SDRK one. It's really signaling this is the focus here.
we are focused on building STRC. I'm sure there's a lot of confidence in all the other products,
but they're not mature yet and they will mature over time as the interest in STRC as just a
general instrument and these digital credit instruments starts to grow. And now I think
we maybe have Dan back. Is he back? Yeah, I think I'm back, guys. Okay, we're back.
hit it dan what's uh what's on your mind yeah uh sorry about the mishap everybody that's my fault
um adrian's point is very very relevant to think financial markets haven't changed since the 1980s
um considering that we're seeing you know uh militaries interact with each other via twitter
would be a completely wrong assumption right we're seeing information speed up seeing the
diffusion of information in record time not to mention that mark andreason and jordy viscer
are outposting saying the new consumer era is beginning with agents as the consumer economy.
If in fact, robots and agents become a dominant part of the entire consumption economy over the
next 10, 20, 30 years, right? The speed of transactions, the way financial markets trade,
the edge in the short term versus the edge in the long term is all going to be like massively
different. So I think largely in the short term interest rate environment is actually,
It matters for the way Trump is handling the war. I don't think it matters as kind of a nitty-gritty
macro trade point. And more importantly, I think it's very hard to trade markets like you have in
the past, macro equities, et cetera, et cetera. So I'm focusing really everything onto STRC.
There's a guy on Twitter named Flood. Pretty much everyone now knows, all the Bitcoin guys,
that STRC is the most important product in all of the Bitcoin market. And I think people are
are starting to become aware that this is going to be a perpetual Bitcoin buyback bid that's
starting to occur. So watching how SDRC trades, watching how it's brought into products, watching
who's on the bid, where the sales happen, how far does it depeg, how is the interest rate adjusted?
I think it's the only thing really to look at right now in the entire Bitcoin landscape. So
that's where I'm focusing all my energy. We've got one of those too. Love Seda. I know.
So, but this is an important topic.
And this is kind of exactly what we were on when talking about the change in the size of the ATMs, right?
The SDRC ATMs now significantly larger.
And we had an update come out today is that options are now available on SATA.
And I think this is a topic worth exploring.
And Dan, you hit on this.
This is, I think, just incredibly important to kind of like think through here.
Who's on the bid?
who's on the ask as well, right? Who's trading both sides of this instrument. So this is something
I watched like throughout the day. I'm watching how are these instruments trading? How are they
trading relative to each other? I'm looking at different relativities throughout the day,
not just between, you know, SATA and STRC, but SATA and strife, SATA and stride, SATA and strike.
How do those all interact together? How do these look relative to HYG? How do these look relative
to TLT? How do these look relative to, you know, like real estate bonds and watching the interplay
between the two. And I think this is, um, and we talked a little bit about this last week.
I think this is the most, uh, this is the most interesting and compelling ARB surface
I have literally ever seen. And, and I think it's going to explode into the future.
And the reason being is like you think about the equity market, right? Like Citadel, Jane Street,
all the people that are doing high frequency trading, just getting fractions of a penny on
the dollar in the equity market. They take significant risk, like downside tail risk in
the equity market because you're trading for pennies, but you can have that one shock that
could just blow up your trade. So that's interesting. The equity market has been developed
and it's very fast, like it's very liquid.
And historically, the credit market has been very illiquid.
Now that's changed over time with the development of these ETFs like HYG and these other bond
funds that have been able to provide like a liquidity layer over these typically illiquid
instruments.
But I think in my opinion, the most interesting thing here is that it fundamentally changes
the risk profile of an ARB, right?
Like if you're interested in arbing a penny or two, your downside risk of like, okay, if this goes the wrong way on me, I'm holding a credit instrument backed by a significant pool of capital that's paying me 11.5% to 12.75% yield monthly.
That's fascinating.
So I'm really excited about the options market and seeing how this thing evolves here.
it's not incredibly liquid, but it's growing in liquidity. I know, Dan, you've talked a lot about
the put market and that potential there, but the ability, the different optionality that opens up
with having an options market is just, it explodes the number of possibilities of potential trades.
And just how my brain is thinking is like, what are we doing? This is a carry trade, right?
We are, you know, you borrow, you borrow dollars to buy Bitcoin.
It's like perpetual carry trade.
Well, now other people can kind of create a similar type carry trade.
I think there's some really interesting trades out there.
And Dan, I'm curious if you've thought about this, but I'm looking at like a theoretical
short HYG, which is a high yield bond fund, long STRC.
And there's, there's an ARB there.
And the interesting ARB is HYG is a monthly bond fund.
STRC pays dividends monthly.
Now, there's a difference in the record date.
So not only does STRC have a larger interest rate, the borrow costs are relatively cheap
on some of these bond funds.
If you hold a short position on one of the bond funds during the record date, you have
to pay the dividend.
But if you open a short and close a short before the record date, I don't think you have to pay the dividend.
So there's a ton of different risk return trades that are arbable that I think can be very compelling from a risk standpoint when seeing what your other options are out there in the market.
So this is going to explode, in my opinion.
Like the options market is going to get much more, I think much more compressed.
Like if you look at a zero DTE options on like the spy, you can, there's like dollar spreads between the options market.
And so like right now you look at STRC and you look at all the options strikes that are available and they're like $5 increments.
I suspect that's probably going to go to dollar increments and it might even go to 50 cent increments and then 10 cent increments and just get tighter and tighter and tighter.
as the volatility of this thing gets tighter and tighter and there's more demand for these options
products. And why is that compelling? Well, it's compelling because you see the history and the
trading patterns of something like STRC and you know that there's this constant bid near the record
date to push it back to 100. So after the record date, if the price drops off, the ARB opens up.
it's like our window open and there's there's people that are going to be interested in that
trade and that um i think this is like it's going to breed massive liquidity it might take a while
but uh like those those arb windows like right now is very big and i think it will shrink over time
but as people start to recognize like the downside risk associated with the relative arb
So a lot of words there.
I went for a walk with my wife and she's like,
what are you thinking about?
And I tried to explain it.
I was like,
that was the wrong question.
I was like,
we got to stop.
I got to talk about it.
I think that's a super,
super good point because right.
We've seen the release of interweek options on IBIT.
So now there's options every two trading days for the IBIT ETF,
which are going to be used to hedge the credit quality of some of these
preferred equities.
and I know institutions are already starting to think about this. Ultimately, it will likely be
on the common equity issued by these preferred, the common equity of these preferred equity
issuers, right? So a lot of people are hedging their stretch exposure with MSCR puts, et cetera,
et cetera. And I think that will be a theme that will continue. And then on this idea of a massive
trade. So I would, I personally would push back a little bit on being short the US bond fund,
because ultimately by not owning dollars, you're implicitly short dollars. That would be a really
interesting trade if you're betting on that. I think that trade would be extremely interesting
for something like you'd be short the US 10-year and long strife because now you're hedged on
interest rate volatility, right? Similar idea. And then furthermore, like we know, and we're
Bitcoiners because we understand that M2, the way fractional reserve banking works is that when the
When the bank reserves are increased at the Federal Reserve, all of the U.S. bank reserves, those are then essentially levered and levered 10 to 1, right?
Because the actual reserve ratio is sub 10% United States across all banks.
So money is being printed.
Okay, well, where do you, if you have money and the cost of that money is right now 3.8, 3.5% in an overnight repo market, a bank's job is to lend it out at a rate that is higher than that. And that is how the money is created, essentially.
So what Stretch is, is it's like a vacuum. It's like a pit for this money that is seeking a return higher than the risk-free rate, because that's how the institutions which create credit in the United States make money. That's how they're profitable.
So I would say that I don't think this is going to happen in the next four months or five months, but I do think any rational actor, probably hedge funds first, will capitalize on this arbitrage by taking this levered money that really isn't real and dumping it into a higher yield vehicle.
That ultimately is funneling all that capital into the Bitcoin network, which has a hard cap, which then therefore powers up the network, increases the value of the coins, and continues this perpetual, effectively short USD long BDC trade in the form of Bitcoin treasury companies, which are the speculative attack on a fractional reserve capital.
Yeah, it's a Trojan horse.
And that was breaking news with the IBIT having three expirations a week because as an option seller, one of the things that I think about is how often can I compound this investment?
And with weeklies, you can do that 52 times a year.
You can just plug that into your compound interest calculator and figure out if I average my premiums this much and then compound it 52 times, that would be my profit at the end of the year.
And that basically triples it. So now you can compound your returns if you're reinvesting them
all 150 times a year which is pretty insane And then Jeff what you were saying about maybe even getting smaller than strikes it does kind of make sense I mean if you going to be spending 99 of the stock life
between 99 and 101,
then no one's trading the $80 strike on these products.
So we might as well have the 99.10 cents,
or 99.05, 99.10, 99.15.
Those are more interesting.
but even with the way they are now there was a guy in my live and he's like oh yeah I sold
I sold some calls I think on stretch at the hundred strike and I'm like why you know it's
like one percent of the underlying premium for like a month out and I'm like that's like a quarter
percent profit a week like it was very uninteresting to me but he was like easiest money I ever made
it was you know i mean it was just like it was just like easy peasy i'll just take them free
money in his you know in his view so so let i was fascinated with this i did a little analysis on
stretch right before this and i just looked on you know robin hood i looked at the dates and just
the dates the expiration dates alone are fascinating right we got april 17th may 15th
june 18th september 18th uh the record date is the 15th so the open interest on the dates that
were after the 15th was significantly higher right so so there are people that are uh i guess selling
calls on the hundred dollar strike after the record date but you go look at may 15th the open
interest on a hundred dollar call is like a fraction of all the other dates because it's
the record date. Like that's when you expect the most demand. And this is kind of what I'm getting
at. It was like, what we're eight months in and we're like brainstorming these ideas that there
are thousands of people and going to be 10,000 people. And then a hundred thousand people
equipped with AI and interested in these types of products and going to be making like trading
algorithms with it. That's going to happen all over the place. And Dan, you brought up not doing
short the traditional bond long, unless it's long strife. I disagree because you could do it on the
short, you could do it in a day. You could short one instrument for a day, buy in on the record
date, exit, close the trade, not have to pay the dividend. That's interesting. Theoretically,
right i'm not i'm not suggesting i think it's an interesting trade and it's like an arb opportunity
and i think there's like how much risk do you take on for that day of work or two days of work
eight hours of work what does that look like relative to other risk return trades in the
market i think you're gonna have the high frequency guys jumping all over this uh and finding different
opportunities here. Quick, quick word of caution for anybody trying to sell covered calls, even if
you think you're slick and you're going to do it before or after the record date, if the price is
close and it makes more sense for whoever bought your call, just keep in mind that the buyer has
the right to exercise at any time. They don't have to wait for the expiration date. So they can
exercise and snatch your shares on the record date if it's beneficial to them to get that one
percent uh dividend right if it's close enough to the share price to make it worth their while
you can you can get your shares snatched so just just be very very careful with it yeah
dividend paying equities are always different when it comes to options and they become far more
uh risky because of that very complex we're talking very sophisticated i mean this is the
investment grade bitcoin podcast we're talking about sophisticated potential potential um things
that you could do or at least consider right like this is the stuff that people people that do this
for a living are going to be doing this right people that are far more sophisticated than
anything i've ever done and like literally been trading for a decade or two are they're going to
be doing this because that's like that's their job they're going to be making the markets they're the
ones making the options markets they're the ones you know figuring out things uh unique trades here
But I mean, I've seen several people talk about like, oh, this is the ultimate carry trade.
Like this, you can run your own effective carry trade.
Dan, you've talked about it.
You could borrow money, borrow money in a cheap currency, deploy it in an expensive currency.
It's just deployed in a more powerful, more powerful system is exactly what you're talking about.
I mean, Adrian, what's your take?
I mean, you're Mr. AI.
you've got all the computers underneath your desk running cranking all the time what's uh what are
you thinking so i do i do think that the arbitrage opportunity is going to be very interesting for
larger players and hedge funds initially i don't really think this is something that
guys are going to be vibe coding their way through right now to figure out the market isn't mature
enough and there's too many moving factors just like the ones that soleil pointed out around the
the record date.
And however, as stretch becomes more mainstream,
I do think that the biggest,
and I'm going to sound really, really boring here.
The biggest draw for it is just going to be that steady dividend.
And that's what's going to create the opportunities
for different arbitrage plays with the bigger players.
I don't know if smaller players are going to be arbitraging it.
I think that for most people, it's going to be a way that they can get a steady dividend or engage in some kind of a carry trade where they're borrowing money in one currency, deploying it in another, right?
That makes sense.
But the algorithmic plays that we're discussing, these kinds of high-frequency opportunities, I think that's where the big player is going to make their hay.
and I think that it's going to become more and more interesting
as volume becomes steady state
because my view is that stretch is going to hit a normalized level of volume.
That's going to become the new reality,
and then it's going to move up from there.
As it becomes more steady, as it becomes more mature in the market,
different players are going to enter in for different reasons.
But if I'm going to attempt any of this,
as of right now, I'm going to say no.
One, I don't have the time.
And two, I just like the fact that I've got a wad of money
is stretched, I'm going to get the dividend. And for the time being, that's sufficient for me.
Will I think through different ways to arbitrage this as it goes on? Absolutely.
Yeah, 100%. And again, that's the answer for 99% of people. But I mean, look at the chart,
this is so fascinating. It opened the day at what? 99.97, hit 99.99, and it traded $151 million
dollars of volume and it only moved five six cents like what like what do you mean it traded 150
151 million dollars of volume and only traded five cents like what is going on who is trading
these things and that like again it's the the what's happened here is that there's a an arb
surface that like it's got this natural gravity that's pushing it higher why because we all have
the underlying thesis that this is probably the best like risk return yield position in the
marketplace. So it's like, it's almost like a safe haven, right? You could be in here,
you could go find opportunities elsewhere and you can jump back in. Like there's, there's ways to go
in and out of it. And it's, it's creating a liquidity pool and an ARB surface that has
interesting incentives. Again, the downside risk, if this moves against you, is you're holding an
instrument with 11.5% or like our instrument, 12.75% return paid monthly. And then you're taking
the downside risk of the collateral management, right? What's the collateral and the balance
should look like? That's the downside risk associated with it. But relative to other
things in the equity market, it's so fascinating. Digital credit is the most fascinating instrument
in the entire market right now. This is the biggest story in all of finance. This thing is
trading $150 million plus a day of volume and it's growing.
It's just getting bigger and bigger.
And we're right close to par.
SEDA is in 99 territory.
We're approaching par.
These are interesting securities that have never existed before.
And that's just going to create new trading ideologies that, again, have never existed before.
Y'all going to buy some Bitcoin or what?
What's that?
I said, y'all going to buy some Bitcoin or what?
We hope so.
The most common use case I'm seeing with this and the thing that most people are talking
to me about is using leverage on stretch.
They're taking out leverage positions on leverage on stretch and they're arbitraging opportunity
between the interest they're paying and the dividend payment they're getting.
And that's what most people have been talking to me about.
So I think that there's a lot of different people going to be coming to this for a lot
of different reasons and that's going to aid its growth.
The only thing I'm trying to be mindful of, and I haven't really thought it through fully
just yet, is does this additional surface create an attack surface?
But besides that, I think that Stretch, they really have a winner on their hands.
And it's going to be very interesting to see how it performs as this year goes on, because
even though Bitcoin has gone down, Stretch has been relatively stable, right?
So that has implications for what they can do in a prolonged bear market or just in a
prolonged side-based shop. They'll be able to buy Bitcoin, even if it's a relatively small amount,
every single month, week, whatever. And as you were mentioning early on, there's going to be
a consistent bid on Bitcoin. And I really think it's going to be interesting how the market reacts
to that. Exactly. Exactly. Okay. Well, I mean, that's topic number one. Let's see here. Let's
get back to topic number two and which is I guess really just the credit market. We've been watching
cracks in the credit market. We've got the gates that are coming up on many of these private credit
funds. And this is the opportunity that's presenting itself. You've got several, it's hard to go a day
on Twitter without seeing something about private credit, something about the private credit market.
Somebody is trying to or stops withdrawals from the private credit market.
And that is opportunity that's opening up for digital credit.
You've got these opaque funds that you're unsure of what's in there.
There's zero liquidity.
Maybe it was sold with a liquidity wrapper, but it turns out when people actually want
the liquidity, everybody's running to the door at the same time.
And I think what's happening with these private credit funds, just for clarity, I think they
have limits on how much can be withdrawn every quarter. So it's like, okay, we can only accept
10% withdrawals this quarter and then 10% withdrawals next quarter. What will be fascinating
is to see the compound effect here, right? Like the same risk that is associated with these private
credit funds is not going away. So in fact, it's probably accelerating. So the compound effect and
the compound nature of this impact on private credit will be interesting to see like how that
how that takes shape and again like right as of right now it's just a liquidity problem for the
most part not a default problem necessarily but we did just see I think a couple days ago there
was a triple b a triple b minus investment grade private credit fund that did get downgraded from
investment grade to junk status like we were talking last week I think that's where the big
potential concern is in the credit market. And I guess I would pose this question to you guys,
and I think it's probably pretty apparent. Do you think the rating agencies have priced in
AI risk appropriately, and are they moving fast enough?
That's kind of a leading question, Jeff.
I mean, but I agree. I think it's, you know, obviously you can't price future cash flows in an age of uncertainty, especially with AI. There's, you know, that's the absolute truth. And capital will become scarce in a world of AI, especially when capital as we know it, most of the collateral in the traditional financial system are backed by these Mag7 equities that have essentially been funding the sustained price and growing PDEs via share buybacks.
So if cash flows decline on any big business, especially with them outlaying instead of their annual cash flow, instead of into share buybacks, into CapEx spend, if there isn't a return on that CapEx, the collateral environment across all of the financial markets is going to change significantly.
And that affects both the common equity of these big companies that are affected by AI, but also the credit markets, that being the bond markets or the private credit markets.
And so I think there will be a starvation and a desire for capital. And what is capital,
digital capital, when MAG7 and digital monopolies aren't as profitable as maybe they once were?
And I think that's what we're trying to figure out here.
Yeah, it's kind of that transition in capital. Historically, all of the large, big tech stocks
throughout the 2010s were the best store of value. That was the best capital. It was better
than real estate, better than anything else. Go ahead, Soli. Yeah, I was going to say, I mean,
they're not even priced correctly now without the advent of AI and the threat of AI. Like they're
just priced on vibes at this point. They're just built on air. I think it would be challenging to
even figure out what they're basing their valuations on. I saw this interview, Dave
column on BTC sessions. And they basically said that what you were talking about before where they
put limits, it's called gating. And some some have it and some don't. And the only reason why there
hasn't been a stampede is because so many of them are gated. And you can only take out a certain
amount at a time. But that's just going to start like a domino effect. And if you're looking for
something that's performing. I mean, the only two preferreds that are backed by pristine capital,
Stretch and Seda, seem like they would be the inevitable recipient of that money.
But here's two memorable quotes from that interview. He said that the private equity
market is a cottage industry of morons. So he had no confidence in their ability whatsoever.
And I think what you were saying about AI is perfectly aligned to expose them as such.
And the other notable thing that I wrote down immediately was he said that there were more
private equity offices than McDonald's franchises. And so there's just this enormous
uh like just pile of just nothingness just go up in smoke at the first spark
yeah because all this all this capital was plowed into illiquid things and there was like a scarcity
of things to invest in in the private market and deals were getting done because there was
like kind of some liquidity people are taking 10-year horizons and now like
what is a 10-year horizon now? That might evaporate 50% of the market. I mean,
who knows? And who's there to buy whatever you have on the other side of it?
When the younger people coming up today don't have any money, who has the money? It's like,
all this money is stockpiled and everybody, boomer age. What is that transition of wealth?
Like what is it? What is a transition of wealth to this younger age look like?
I mean, right now, like a like a Gen Z, a typical Gen Z, they're not even looking.
They're not even close to looking at buying a house.
Right. They're like they're just getting DoorDash Taco Bell to their minimum wage job.
And they're like, I don't even care anymore because I'm never going to afford a house ever.
That's that's their point of view that they've got.
Yeah, it's this demographic shift idea. And there are going to be Gen Zers that inherit massive amounts of Boomer wealth. And will that be reinvested into private equity? I mean, that's the bet you're making. Because the private equity funds have a return period. At some point, the fund pays out. And so you can roll it into the next deal, or you're going to reinvest it, allocate it elsewhere, and the landscape will look a lot different.
yeah completely completely well those pensions take a haircut though before
the next generation inherits them and you know will their houses be worth what they what we
think they will too like there could be a lot of young people thinking they're going to inherit
a big chunk and it's just shrinking yes but i'm super i'm i've turned the corner i'm very
bullish on real estate. I think land is going to be super valuable in the future. Like, and my
friend brought the idea to me. He was like, okay, look, like, yeah, you know, obviously when you own
real estate, you're largely owning the land. And if we have all these autonomous robots that are
bringing the cost of labor down significantly, you know, you're going to be able to build for
really cheap. You're going to be able to refinish your house for very cheap. So the land again is
the scarce asset. And especially in the United States where you have, you know, pretty good
property rights and in states where property rights are enforced, this is going to be a scarce,
desirable asset, especially one that's so easily financed. And that leads me to believe it's like,
okay, so financing homes are essentially what has inflated the prices and keep prices sustained.
I think mortgages are going to be taken out to 50 years, especially with a longer lifespan.
And then that breeds the question, okay, so if financing real estate is so important for
elevated real estate prices, I think we're going to see the financialization of Bitcoin do the same
thing to Bitcoin prices over a long period of time. I did a tweet. It was like, oh, well,
can you put 10% down on Bitcoin? There's people working on that. But even just the extension of
margin on IBIT, big development, the Bitcoin-backed lending is the first step in that direction.
Stretch is another way in which you're financing Bitcoin. It's a mortgage-backed security.
It's a Bitcoin-backed security offered by the most credit-worthy issuer on the planet.
So this is all the financialization of Bitcoin that will lead to inflated prices over long periods of time.
Yeah, what is a mortgage?
A mortgage is credit on physical capital.
What is a government bond?
A government bond is credit on sovereign society or your society.
And then what is digital capital? Digital capital is credit on digital capital.
Right? I agree with you on real estate, Dan. The caveat is commercial real estate in cities.
and that's a we i agree with that we talked about this yeah we talked about this on the
hurdle right earlier this week and it's like there's this one we just looked up one example
uh in 2019 it was this place in houston it got appraised at like 1.3 billion and then just
recently in the last year got appraised at like 400 million and it's like an office park or
And the, the challenge is that like a lot of these commercial,
a lot of these commercial real estate,
a lot of this commercial real estate was in private credit instruments And a lot of these leases are turning over like pre leases are turning over
So these companies that used to be in the offices are no longer having to go to the office.
So the leases, they're just walking, people are walking away from leases that they've had,
you know, 10 year leases.
And there's nobody there to pick up, pick up the bill on the other side.
So what is the function?
What is the value function of the commercial real estate?
It's a function of whatever the cash flow is of the people that are renting that specific location and like the relative cap rate in different locations, etc.
So, I mean, that's fundamentally changing.
And that's tied, like a lot of that is tied into the private credit market.
So people are seeing not only this AI pressure on cash flows, you've got just a change in societal, like how society operates in cities and like different businesses.
Well, to the original question that you asked, is the private credit market pricing in AI
appropriately? I'll say no. Financial markets and finance as a whole seems to be very risk-averse,
and I think it's more likely that they'll wait for the AI flood to come in, and then everyone's
going to start piling into the same ideas. So I don't think that they're likely pricing it
inappropriately. To the point about real estate, yes. I do think real estate is going to become
more valuable as time goes on, as it always has.
But the caveat I would give with Dan's point
regarding the ability to build more cheaply, more efficiently,
I think that's going to happen,
but I don't think it's necessarily going to be because of robotics.
Robotics is actually, we don't have the manufacturing,
we don't have the compute,
we don't have the data centers to support
a massive build-out for robotics yet.
But I do think the cost of production
for the things that we build houses with will come down.
due to broader markets opening up globally outside of China, for instance.
And I think that the ability to rapidly turn around homes,
like flipping homes and building new homes
and building in areas that are perhaps less than ideal right now,
but as technology and different methodologies advance,
we'll be able to build out into these areas.
For instance, like in Arizona right now,
they're building out in areas where 20 years ago they never would have
because they can effectively run water there.
They can effectively run internet there.
They can effectively run power there.
But that's all changed, right?
So I think that real estate is going to become a very, very hot money,
but for a different set of reasons.
When robotics happens and when you can have a whole bunch of robots building a house,
I think all hell breaks loose.
But I think that we are still quite a ways away from that.
Well, housing should already be a depreciating asset.
It should go down in value as soon as you take the keys.
It should depreciate like your car.
the cost of materials has been going down, but artificially inflated by money printing.
And the other problem is that cities wanting to protect the value of those houses are probably
not going to ease up on the zoning laws. So you can want to build 500 more places for people to
live in your city, but nobody wants the value of their house to go down. So the zoning laws can
artificially prop up housing. Whereas maybe somewhere in the middle of nowhere, those problems
don't exist. And it's going to be a lot more affordable for people to live in those type of
places versus the big cities. It's a dance point about the land itself, maybe not the home,
but the land. I think that that is a different angle to it. So right now, there's there across
the country right now there are a lot of people that are fighting with these um mag 7 companies
and these big data center companies i want to build out um these data centers because they
don't want to sell their land right so where we could have a situation in the future let's say ai
does what everyone thinks is going to do and we're going to have this this massive need for data
centers this massive need for manufacturing this massive need for all these other things
are they going to do what they're doing in arizona right now with tsmc and build somewhere
further out and take on a very, very complex task? Or are they going to go into cities,
perhaps into urban areas that are somewhat dilapidated, into areas that have been a victim
of urban sprawl and start repurposing them for data center build-outs? What is that going to do
to real estate prices when you now have cities that are becoming massively overtaken by technology
and by data centers and by means of manufacturing just because it's easier to build there than it
is to build 100 miles out. I think that there's all kinds of different things that can happen
when it comes to the value of land versus the value of homes. I actually think the homes
are going to become less of a long-term store of value, but people that own the land that the home
is on are going to be the, that's what people are going to focus on. Owning the land, the home that
going to build on it i think that home is going to be coming down like like up and down like crazy
now homes that they build right now are not built to last 100 years they're built to last 25 to 30
if you're lucky before the roof falls out from under you right all these new construction homes
so i can see that people are going to be buying a house buying the house just to have the land
and i'm tearing it down building a new house on it and i think that can have very very interesting
impacts on the prices of the homes themselves but the land i think is where things are going to be
really interesting because we're going to need it if ai is going to do what we think it's going to
do we're going to need land and companies are going to be less and less inclined to build further and
further out for the reasons you listed so late and also because of what dan was talking about
with the land itself why would you build when you could already just knock down some ghetto somewhere
or some area somewhere that's low-income housing that they're already doing right now
and building apartments on it instead of building apartments they'll be building data centers
i'm just laughing thinking about a 30-year house with a 50-year mortgage
that just sounds about right it's true though that's what's going on right now it's true
i mean damn thing falls down you still got to pay for it for another 20 years
yeah i mean if they launched it i would take that leverage though
you know jeff you'll insure it right yeah you'll go put gap insurance for that
from 30 to 50 yeah exactly price that there's a deal there's a deal to be had there for sure
100%. Well, the appeal of a 50-year mortgage
is because you know your money is going to be inflated
away, right? So over time,
that's the whole benefit of it.
I take it all day.
And also,
I mean, yeah, well, the thing is,
what Dan mentioned isn't that far-fetched.
Didn't someone already float 40-year mortgages
just like six months ago?
Trump was talking 50, right?
Whatever it is, right?
So 40, 50, boom.
For all we know,
Do I hear 100?
that's what I was just going to go with.
People are going to start living to 120 before you know it.
Don't be surprised if we're all in our eighties and they're going to start
seeing 70 year mortgages out there.
Right. And so, so what,
what does that mean for the value of a home?
And what does that mean for the land that the home sits on?
I just think that.
I guess there's so many, there's so many unknowns.
There's like known unknowns. Like what does population do? I mean,
nobody's having kids. So like this population expand,
the robots just take over.
Do people just live longer and like keep their brains alive and,
shifted over to like a robot body. I mean, the stuff I've been seeing just the last couple of
weeks on like Neuralink, there's people with ALS that are communicating telepathically with
computers and it's like coming out with their voice and AI. I'm just like completely blown away.
This stuff is changing how everybody interacts. I mean, even just having internet, like the,
the fact that Starlink, you can live in the middle of nowhere and have Starlink access or like,
okay, well now, now rural properties just got way more expensive because the people that want to get
away from people can now still be connected and get away from people. They can still do their jobs.
That's, that's fascinating. Um, you know, what becomes important, the fresh water, access to food,
um, you know, some, some of those things, but yeah, I think the world's going to look a bit
different. And I mean, all this stuff is moving so fast, but the whole point of this conversation
was like getting back to rating agencies, right?
Like these industries that are purposefully built
to move slowly and not like jump react to anything
are doing what they have historically done
and move slowly.
And they're likely way behind
on the relative risk profile
on a systemically broad category of risk securities
that the broader financial ecosystem relies on.
like that's a concern for sure and but that's also like when we're thinking about digital credit and
the opportunities here bullish digital credit right like bearish that system that design bullish
digital credit i posted about this maybe i'll show my screen is uh the i mean one of the reasons i'm
bullish here on digital credit bullish case for digital credit the dominant u.s rating framework
values Bitcoin as worth zero on the balance sheet. I know we've said this plenty of times before,
but it's worth zero. Literally the rating agencies say, hey, yeah, strategy, all of that $50 billion
of Bitcoin that you hold on your balance sheet. Yeah, actually we're going to market to zero,
but we're going to give you a B minus credit rating. Strategy still have a B minus credit
rating. And what does a B minus issuer credit rating means? It means that you're more vulnerable,
but you're currently able to meet all your commitments, but highly sensitive to adverse
conditions. And like when you, when we think about this, right, we're thinking about, all right,
well, a lot of these adverse conditions that may happen, um, you know, we're putting, putting our
head around the corner and trying to wrap our heads around them. They all seem very, you know,
positive for moving in this, you know, future direction. And so right now the rating agencies
believe that strategy was able to meet all their commitments. This is before they raised
two and a quarter billion dollars of USD cash, by the way. But they're highly sensitive to
adverse conditions. So basically it's saying they could pay their dividend payments even if the
capital didn't exist. Basically their access to capital markets is the only thing that is being
rated as the risk rating for their company. It had nothing to do with the capital.
Now, if that capital is worth just greater than zero, right? If it's worth greater than zero,
they have to go up the rankings. It's got to go to double B. If they get into triple B,
it's technically investment grade, right? So what is investment grade? Triple B means adequate
capacity, adverse conditions, more likely to weaken ability to meet commitments. So we think about,
okay, how many years of dividend coverage does strategy have? Well, they've got 50 plus years
of dividend coverage. They've got two years of dividend coverage held in cash. Yes, they have
$8 billion of bonds, convertible bonds on the horizon in the next three years, but they've got
sufficient capital to cover multiples of that. So they've got, in my opinion, adequate capacity.
Can adverse conditions more likely to weaken ability to meet commitments? Sure, adverse
conditions would hurt anybody. But I think you could also conceptualize calling them strong
capacity or even very strong capacity, just based on our understanding of liquidity profile of
Bitcoin, how it works, the size of the balance sheet, the relative size of the commitments,
the perpetual nature of the instruments, the construction of the balance sheet being relatively
healthy, 11% leverage ratio, et cetera. So, I mean, that's the bullish case right there.
like they're at the bottom rung if they get any any increase in that valuation they move up
and just to put this into comparison uh the ratio of u.s investment great bonds to high yield bonds
is roughly five to one so like the amount of capital could could that that could come that
could possibly come into these instruments is not just like doubles like it may 5x it gets you know
materially larger. And for reference, here are some recent deals that were done in 2026. So
Google $32 billion bond deal, Amazon $37 billion, Oracle 25, Honeywell 16. And these are just,
these are just typical bonds. I think these have like 10 year terms and like, I don't know, 4%
interest rates. You've got strategy offering and strive offering significantly higher with assets
on the balance sheet.
I mean, just reading the letter of this,
and it says, you know,
adverse conditions more likely
to weaken ability to meet commitments.
But with however many years
of the cash reserve to pay dividends,
wouldn't that be like adverse conditions
most like least likely to weaken their ability?
Like the opposite of this.
There's no way that they should be anything
under frickin double A.
Yeah, I think the assumption is
that there's cash flows
to support the payment
versus holdings to support the payment.
I think that can be the big disconnect.
Well, it is.
That's exactly the point, Adrian.
It's like they're giving the holding zero credit.
Yeah.
Which is just insane.
Like the...
there there's a historical reliance we're talking about a credit system that's been built and has
evolved over time but it's like historically archaic with some of the least tech savvy people
uh you know working through some of these things and like the implications i think the other crazy
part is just like the incentive structure right the the implications of making a change are so big
in both directions, either moving strategy up or notching down anything that's investment grade
to below because of AI risk. Think about that. Think about there's, I don't know, 50, 100 trillion
dollars of this credit floating in the market somewhere. Somebody's holding it.
So if anything happens on the AAA investment grade stuff or the BBB investment grade stuff,
and it gets notched down. There's some portion of it that just has to liquidate it because they
can't proceed with their market structure or they've got mandates that says they have to hold
investment grade or insurance companies. It changes my cost of capital requirements. Now I
need to buy more reinsurance and I can't afford it. So I have to drop these and go grab other things.
so it's a the second order effect of making a change like that like holistically to a broad
category is very very very large alternatively the second and third order effects of going the
opposite direction so strategy going from b minus to triple b oh like okay well what does that signal
if you signal that hey there's a company that's now investment grade but they're paying 11 and a
half percent what's the right cost of capital right like everything else investment grades like
five or six maybe and so like now you've got an investment grade instrument at 11 and a half
like wait wait hold on right like what's the there's there's implications of that right like
Are you just now saying that, okay, the cost of capital is now 11.5% and you have to, do interest rates float up to that?
Or is there a change in interest rate?
Do interest rates come down?
What is the evolution there?
And I think it's a really big decision.
I want to know if the signals.
Yeah, go ahead, Adrian.
Yeah, no, I agree.
I think that the reality of it is rating the strategy preferreds as we think they should be rated, right?
As AAA, what have you, fundamentally says to the market something very, very different about Bitcoin, right?
It puts Bitcoin on footing with the US dollar.
It puts Bitcoin on footing with other currencies.
What does that say for the broader market, to Jeff's point?
I think the signal it puts out there is, and I don't want to sound, I'm not trying to sound dramatic here, but if you signal to the market that Bitcoin now has equal footing with other forms of currency in the most fundamental way, you can't just re-rate the offerings.
You have to re-rate strategy as a company as a whole.
and the the overall message that sends i think it's kind of like a tectonic shift in what the
in what the market understands about finance and they're not i don't think the market is ready for
that that's why i've been saying for the longest while that i don't think the s&p 500 inclusion is
going to happen anytime soon it's not because i don't think strategy is necessarily worthy of it
we can make different arguments for that i think s&p 500 inclusion literally drops 700 000 plus
Bitcoin in the center of traditional finance.
Yeah.
Rerating it, giving it a fundamentally different understanding, giving the market a fundamentally
different understanding of it, which the market is going to have no choice but to perceive
strategy as a company entirely different, which will have trickle-down effects to all
the offerings, which is just going to have this massive reflexive effect once that starts
to coalesce in the market.
And I don't think these agencies, I don't think these committees are ready for that
just yet.
and I think Bitcoin is just going to have to get to such a size
that it makes it almost cartoonish for them not to do it.
But until then, they're going to find all kinds of different rationales
for why it shouldn't happen.
Well, you read my mind, Adrian, because I was going to ask,
what's the minimum rating that they need that signals S&P 500 inclusion?
Like, how far do they got to get rated up?
It's just positive earnings is the last thing.
No, but I think there's a stat that says that like no company under triple B minus has ever gotten in.
So there is potentially some kind of like, it's not a written rule, but they can, you know, you can have any kind of number of unwritten rules you want in baseball or anywhere, anywhere else.
Because the committee gets to meet and, you know, thumbs up or thumbs down, right?
Yeah.
So, you know, like, like at what point is it rated high enough that just poly market explodes from like 10% chance they get into 80% chance?
You know, like when is it when is the market out?
I think inclusion has to happen before a rating.
Oh, I was in the other direction.
I assume the rating was signaling the inclusion.
No, I think the rating, I think if I were to guess, if I had to flip a coin on which way I think it was going to go, I think the SP500 inclusion and credit rating will happen in rapid succession.
That would be my guess.
Just because I think, and I could be wrong here, I'm open to feedback.
I think giving the preferreds a credit rating before they are included in the SP500 seems counterintuitive to me.
you'd be saying to the market you have these credit ratings on these instruments they're all
they're all double a triple a whatever but at the same time you're not including the sp500 when you
meet all the other criteria yeah and i don't go ahead you know how crazy this is strategy holds
700 and what 65 000 bitcoin when they when the price of bitcoin goes back to all-time high
they're going to have a hundred billion dollars of capital on the balance sheet
they will have the second largest liquid treasury on the planet.
Like just back at all time high.
Like we're not even talking about blasting into new all time highs or the
amount of Bitcoin that they're going to accumulate on the way back to all
time highs.
Right.
Like that's just,
that's as of today,
like if they had their holdings and we're back at all time highs,
we're talking a hundred billion dollar balance sheet.
Like the next,
the next one is Berkshire.
Berkshire is a trillion dollar company.
I agree but the thing is this is where I not trying to sound bearish I think they need to find a way to bring in revenue i think that cracks everything open i don think so yeah it just like they gonna they don need it i mean they don need
it they can just keep doing what they're doing right that they brought in a billion dollars
like think about every instrument that they sell right the product is their credit the product is
a credit every share that they sell of sdrc is like you could think of that as like revenue
there's a loss ratio on every instrument that they sell right so if you if you sell a share at a
hundred dollars like there's a loss ratio that you have on that share that you've sold like what's
your terminal loss ratio like revenue yes i agree will the market agree with us though that's what
i'm saying i guess that like no yeah that's a good point and i think it's a case for sustained
relatively tame MNAVs.
Yeah.
So I agree with you.
Do they agree on capital raising?
Do they agree on selling a product?
Yeah.
If you want to find a MNAV,
sure, you need sustainable.
For them, they'd be like,
you need $10 billion cash flow.
But where are they going to go
spin up a business?
It's just like $10 billion
a cash flow a year.
A billion.
I mean, to be fair,
they need a billion.
I don't think they need
to spin up a business.
I think this is, and this is just my view.
I think if they're not going to do anything with the BI business,
they need to kill it and just go full bore on what they're doing with
digital credit and deal with the reclassification and deal with anything
that comes with it.
If the goal is at any point, and this is just my view,
that the goal is SP 500 inclusion.
I do not think that's going to happen anytime soon without them bringing in
revenue of some kind.
I just don't.
That's a fair take.
I just don't.
Yeah, because that's different than saying they need revenue, right?
Like I would agree with you in saying that like there's probably some, you know, the committee is going to discount their liquid treasury if they don't have revenue in terms of an inclusion potential.
But I don't think they need the S&P 500.
They demonstrated.
No, that's the thing.
That's not what I'm saying.
I'm not saying they need the S&P 500.
What I'm saying is if we are thinking in terms of getting credit ratings for the offerings, we're thinking in terms of SB500 inclusion, what does that mean?
How do they get, and let's take them separately, how do they get the credit rating?
The market and the communities and all these different external agents are going to have to fundamentally reclassify how they think about Bitcoin and what they think about digital credit.
Now, that is not me saying I don't think that should happen.
what I'm saying is there's the reality of what we think and then there's what the market thinks and
the market's going to dictate this how long is it going to take for the market to cross that chasm
that's that's the first piece the second piece if if they're thinking about sp500 inclusion
at some point that I don't think that happens without them having some kind of a revenue
some kind of a positive consistent revenue that is separate from bitcoin now with that said this is
where I think their future could be more like a bank or something like that they should forget
about inclusion, they should forget about the indexes, they should go all in on digital
credit, they should go all in on the financialization of Bitcoin, kill the BI business, just focus
on this, and they can become a massive company without any of these considerations.
I think they just need to pick which lane they're going in.
What do they think of the BI business?
What was that?
It's break-even.
It's like, why do you have to kill it?
Because it is still being seen as part of the overall enterprise.
You can't say that the BI business does not matter
and then functionally say at the same time
that it doesn't matter and it shouldn't be considered
even though it's functionally part of the overall enterprise.
Sure, but it's an app positive if it earns free cash flow.
If.
And what I'm saying is...
It does.
it has free cash flow
yeah but that is
what are they is what I'm getting at
are they a BI business or are they a digital
credit business I don't think they can be both
I mean like what is a
university with an endowment
it's a hedge fund that offers classes
that's not the same thing
that's so true
that's not I understand
the corollary but that's not the same thing
I think that
it's Berkshire Hathaway
well I mean
if you want we berkshire hathaway's in the s&p 500 that was actually a big deal um
getting out of the way into the s&p 500 was a big deal because they're effectively an etf like
berkshire hathaway is an etf they own so much shit um you know it's it's real estate it's
insurance companies it's reinsurance companies it sees candies it's like all sorts of like weird
conglomerate stuff they buy companies when they're cheap and then 300 billion dollars of cash it's
like it is an ETF, but they got included in the S&P 500, I guess.
Like, and why, Adrian?
Because they got so damn big that they couldn't not.
And that's probably what's going to happen with strategy.
They're going to be in a situation where like, holy shit, this company is so big.
Like, what how did this happen?
It's real. Oh, my God.
Bitcoin's not a scam.
And we got to do something about it.
Right. Like all of society that invest in the S&P 500
just missed out on this like generational move to a, you know, a hundred, a hundred,
$200 billion company. And I guarantee you, Taylor doesn't care, right? Like he's,
if it happens, great. Like they're just going to go be category killers in every single thing,
right? They went and killed the category, like best performing equity. Okay. Check
best performing a convertible bond. Okay. Check. They're going to go be best performing
preferred equity. Check a best sharp ratio instrument on the planet. Okay. Check.
best bond check, right?
They're just going to be category sellers.
I agree.
But what I'm trying to tell you is that I agree with all of that.
But I think we are grossly underestimating the power of perception
and how the market perceives Bitcoin and as a result,
perceives strategy and how that will impact any decisions
that are to come in the future.
Yeah, that's fair.
That's what I'm saying.
Yeah.
And I completely agree with you.
I mean, I've chatted with some of these rating agency people
and they're just like, it's going to take so long.
And I've got to reverse the change.
Well, I've gone to a few of them and just, it's so odd. Like the, uh,
it's so crazy to see like a technology and see it exist and not be intellectually curious about it.
Like, I think that's the part that's pissed me off the most. It's like, what do you mean? Like,
what do you like there, there, they couldn't even believe we're having the conversation we were
having and like not even intellectually curious and like it's just it's blown me away but uh fun
news i'm going to risk world 2026 uh it's happening in may and it's in philadelphia and it's like uh
all insurance and reinsurance risk world risk world talk about the nerdiest thing of all time
Yeah, I'm going to come hang out.
It's dangerous.
Risk world.
And I'm going to talk about digital risk.
I'm going to talk about Bitcoin risk and I'm talking about like,
you know, reducing the volatility of an asset like that.
Insurance company balance sheets are an asset like reinsurance
reduces the volatility of an insurance company balance sheet.
Like we're doing the same thing, right?
We're just like carving off risk and creating like we're separating it out
into two two different instruments.
And like that's intellectually stimulating.
And that's kind of the approach I'm going to take is I'm going to do a case study.
Like that's the stage amount.
I'm on a case study stage, but we're going to talk about like being intellectually curious
about this opportunity in this space and seeing the similarities.
But I'm probably going to get laughed at.
Maybe there'll be five or six people there.
So if you want to come, maybe seven.
Yeah. How much are the tickets?
I have no idea.
You can give me a comp.
Yeah.
We'll be in the front row.
We might be able to see one.
So Adrian, to your point, I agree with you in principle.
I just think the time frame is probably,
we're probably not on the same time frame.
I don't think that they need to worry about any other products
until Bitcoin's CAGR is below 20.
Once we get there, then maybe what they're paying for stretch
starts to like tangentially approach Bitcoin's CAGR
and then maybe they have to pivot.
But for now, if it's bringing in cash flow,
it just seems like it's enough to overcome
a little bit of the friction that's in the business itself.
I think it's beneficial for now.
Well, so I know, so the BI business,
I know it has benefits for the return of capital for stretch,
for instance, and all that, right?
I understand that.
What I'm trying to say is,
how is it going to be received at some future date,
indeterminate future date, where Bitcoin is at whatever it is,
strategy is at X number of hundreds of billions,
and we're still having the same conversation
whether they should be included or not.
That's the first thing.
The second thing is, I think,
and this is what I mentioned in the conversation with Fong
that I had with him in the interview I did with him, I think that as a function of growth,
the BI business is going to scale and it's going to get bigger. I think that that's likely going
to happen. What I'm trying to say is at that point, we can draw the correlates between Berkshire
Hathaway and whatnot, but there's a fundamental difference. There wasn't an entirely new commodity
that is still under 20 years of age,
that is still being adjusted to globally
as the underpinning factor in this whole thing.
That fundamentally changes the way that this can go.
And inclusion means,
inclusion and credit ratings means you have,
people think that Bitcoin is legitimized as of right now.
I don't think it is.
I think when you start having it behind digital credit
and it being recognized as we all think it should,
that fundamentally says not to the market,
but also to the world,
you now have a truly 100% vetted, accepted,
appropriately rated, appropriately leverageable asset
that now exists.
What does that mean?
What does that say?
And how long does it take for the world
to want to accept that?
It's not just about Bitcoin getting big enough.
I think Bitcoin is going to be successful regardless.
I think strategy is going to be successful regardless.
what I'm trying to say is what does that success look like and what will that entail it probably
it probably takes it probably takes three years um it probably takes five at minimum three years
track record right like you're building a track record as soon as these instruments are around for
several years like the amount of institutional capital this thing is that these things will get
integrated uh into different systems I mean it just depends on how fast the world changes right
Like we're seeing like how fast is the risk market change?
How fast is the private credit market change?
Is there a, is there a large, um, global systemic, uh, credit crisis?
If there's a large systemic credit crisis, is there a significant money printing?
What does inflation look like?
What is the result of this war look like?
What is, you know, how does AI change how we live in the world?
Right?
Like there's so many things that can happen so fast or slowly.
It just kind of depends on like the pace of society and like its ability to keep up.
Well, three years, those for traditional offerings like this, this is not traditional.
So I don't know if we can make the same, if we can make the same assumptions.
That's all I'm saying.
Yeah, that's fair.
That's fair.
I think, I mean, I agree.
And I think the timeline's uncertain, you know, the future's uncertain.
All we can do is spread awareness.
I think it's cool.
You're going to risk summit, Jeff.
I'm super psyched.
I'd love to.
Come hang out.
Risk world.
I even thought I was like, thanks.
So yeah, that is cool that you're going there.
Risk world.
Okay, this is actually a perfect time.
And I should have brought this up earlier.
We created a website.
We have a new domain.
It is super cool.
And I'm going to share it right now.
And we are going live.
Boom.
New website.
True North, investment grade Bitcoin podcast.
So the domain is tnorth.com.
Check it out. We've got, I'm sure many of you have probably gotten questions. Hey, like,
what is this digital credit thing? Maybe, can you give me something that I could read about it?
Boom. You click on digital credit, the definitive guide to digital credit. And here we got,
you know, thousands, I think nearly 50, 60,000 of words that you can, you know, share with
somebody. We spent a lot of time putting information out there, putting a guide on
digital credit. I've even created a digital credit investment thesis. Boom. You could see it there.
It's about 8,000 words, maybe the base of a book that I write here in the near future.
And we've got a research page.
You can see all the research.
We've got Adrian Morris has popped in a thesis in here.
This is significantly long.
This is a lot of work and energy has been put into this.
And ultimately, what we wanted is a place where we can house all of our information.
We know that the X search function is absolutely horrendous.
A lot of people are putting out fantastic content and we wanted a place where our entire group can house content in an easily digestible manner.
So, for example, if you're curious about what Dan Hillary has been writing, boom, you can click on Dan and it filters his articles.
You want digital credit articles, you can go check it out. Boom, you've got that there.
Capital structure, hit on that or Soleil.
Any articles about him, boom.
Different analysis and commentary, fantastic.
So please go check it out.
The last piece, which I think is awesome, just as everybody else is building out tools,
we are also building out tools.
And we are going to have some more tools and calculators here.
But I think the one that I'm most excited for at the moment, and Michael, if you're watching,
we built this for you.
This is the Bitcoin 24 calculator.
So this is the open source 21 year Bitcoin price model that you posted to GitHub a couple
of years ago.
It was Michael, Sharish, and CJ that put it together.
And we have turned it into a calculator online. So if you have any updates to this, let us know.
We can change the base assumptions, but you could pop in here. And these are Michael Saylor's
assumptions. You can pop in and plug in your bear case, your base case, bull case. Look at what the
starting Bitcoin price is. This is live information. You can pull live Bitcoin prices here. Look at
different growth rate assumptions, growth rate decline assumptions, and terminal growth rates.
So based on Saylor's bull assumption, this model based in 2024, by the year 2032, we're looking at a bull scenario of 2.6 million, a base case of 1.1 million, and a bear case of 377,000.
Obviously, it's a function of where the Bitcoin price is today and how fast that puppy moves.
But this is what we're looking at.
And this is in line with how we view the world of Bitcoin as well as underwriting the long term view.
What do we know about Bitcoin?
What do we know about the infrastructure? What do we know about the plumbing? We've got changing AI world. The world's getting faster, moving to computers. Infrastructure on capital is completely changing. There's a move to tokenization that you can't deny, that you can't ignore those things. The regulatory environment's wide open. You've got banks that are accepting Bitcoin. You've got these digital credit instruments that will eventually probably get ratings on top of them and infiltrate their way into traditional finance.
And this stuff becomes systemically important.
So we're well on the way of creating a track record and this type of stuff helps.
So ultimately, the goal here is to teach everybody, just like we've been doing for the last 60 episodes, spread education, spread information, spread knowledge, and continue to build this out.
We will be putting any new research on here and as well as the X page.
There's a bit about the crew.
There's a bit about us.
future events. You'll see future events that are coming out here. It'll show where we're at and
what's going on. So if you want to come hang out and chat with us, that'd be great. And yeah, we
are also hosting a Bitcoin for business event here in Oregon later in May. So more information
to come on that, that will pop up here. So yeah, check it out. TNorth.com. We'll put it in the show
notes team, if you can put it in the show notes, that'd be great. And we'll, we'll blast it out
here over the next week. The team has put tremendous amount of effort into this. As you can see,
we've, we've now built a website. Our stream is updated and cleaner. We've got a team that's
helping production on the, on the website. We've got clips that are being blasted out a little bit
more here and there. The support of our sponsors definitely helps that we've got a horizon now and
BitGo. So big shout out to our sponsors
and that helps
us continue to get this information out
into the market and our goal
is to just spread education and information
on digital credit.
Yeah, it's pretty slick.
Real clean. Super clean.
Shout out
Dan O.
Fantastic work, Charles Dean.
Fantastic work. Charles Dean. Yeah, Charles Dean
killed it. Totally killed it.
Okay.
I think the last thing I really had is this.
I mean, again, we've got to talk about AI, but open AI offering 17 and a half percent
guaranteed.
I guess it's a perpetual preferred equity.
I think it is.
I think it is a prep equity instrument.
I have no idea how much capital they're looking to raise.
But I mean, have you guys looked into these business models?
I'm super confused by the stuff.
And I think, Dan, this is kind of what you're referencing in the beginning.
i'm using the shit out of these models i'm abusing them i'm running it through like as much as i can
and i will have like several tabs open running complex analysis and i'll do it in multiple
engines right like i'll like while one's going over here i've got another on another screen
doing something else over here and like there's no way there's no way that this is like profitable
like i don't know how much i'm spending on these i don't know maybe a couple hundred bucks a month
i'm spending on these tools but like i'm using i'm abusing them and i'm curious like how much
output is used on the other side like you guys have any idea on this
i think um how does this pencil like i just don't think these these deals pencil right like and
they're all super competitive like are they just are they they're going to jack are they going to
make this so ingrained on what you do that as soon as you're hooked they jack up the prices but but
they can't do that because there's competitors it's like a super competitive environment it's
moving super fast so yeah i think i think a lot of it is um a lot of them are taking a what if
you build a deal come approach that they're just going to keep doing these deals and they're going
to keep pumping money into getting money into these deals and they're going to build up the
data centers and i think that the hope for a lot of them especially open like specifically open ai
is that things that escape velocity and they're able to catch up to um their valuation in a way
i think a lot if i had to really really simplify it i think a lot of it is that to your point about
profitability i mean they can monetize a variety of different ways i think that opening i was looking
to do ads i think right for some of it is what they were doing um the thing is if you take a look at
this just this is sheer size of some of the companies involved i don't know if they're at
any terminal risk of of it's breaking them i do think there's a risk of at least one of these
models becoming defunct and that's going to be a bit of a size of event in the market.
But in terms of how they're financing it, people have called it, you know, they call
it a bubble, they call it all the different names.
I don't know if I'll go as far as to call it a bubble, but I will say that there is a
ballistic financing going on that is getting to the point where it could be somewhat problematic
in the way some of these deals are structured.
And with regards to OpenAI, I don't know what they're doing, quite frankly,
with this new offering that they're trying to kick out.
So it is what it is.
I think we're going to see what's going to happen with a lot of this in the next 18 months.
A lot of this is going to get shaken out.
I don't see any way that they can make money on these things.
Kind of what you were talking about, Jeff, with the competition.
it's almost like
imagine before
calculators were dematerialized
and put on everybody's phone
and you put out a capital raise
like the calculator company was like
oh we're going to do a perpetual preferred
to raise money for this calculator
that's going to be free on everyone's phone in 10 years
where's the profits going to come from
the only thing that I can think of
is governments will
you know maybe start
issuing
regulations and just kind of like enforcing monopolies for a couple of companies that are
deemed too big to fail or something that that's the only way is i can see government is just kind
of stepping in and you know protectionism basically is the only thing i can think of
because if you have if you have this like crazy intelligence tool and you want your society using
it like it probably is systemically important at that point or maybe maybe maybe you don't want
them to your point so lay on calculators real quick texas instruments is 179 billion dollar
company it's actually uh four times like three times the size of strategy and they make calculators
so like they figured out another way though i gotta make something else
yeah also the thing is i um i get what you're saying the calculator analogy but i don't i don't
know if it fits so an l so if we're using llms as the example an llm is not going to be a static
instrument even if you come up with the most perfect llm tomorrow knowledge is still going to
be expanding the llm is going to have to be updated i think that's the future an llm is going to be
like an os that you're going to be paying a fee to update in perpetuity i think that's one
monetization route that they can they can go down it's just a matter of which llms become the
industry standard. And then I think we're also not taking into account that current language models
are being applied to everything. They're definitely going to be highly specialized models for
mathematics, for science, for medicine, and so on and so forth. That's the next frontier I think
they're going to try to milk. And then there's also the fact that there's the world models that
are going to be coming online. There's all kinds of other applications that come in with robotics,
with driverless cars, aviation.
You also have military applications.
I think there are a lot of different industries
and different verticals that this can spiderweb into.
I just think that before we get to that point,
one of these, I hate to use the term circular,
but a lot of them kind of are.
One of these circular deals is going to blow up.
And I think the market is, once that happens,
it's going to be kind of a reset for the market.
But the genie is out of the bottle for these LLMs.
Even if opening eye goes down tomorrow,
It's not as if they're going to delete all their source code.
Like the genie is out of the bottle.
And I think optimization and application and then commoditization of the LLMs and the AIs is going to be the next step.
They're going to be able to monetize them.
We just don't see the pathway forward because we're kind of taken into account of like, well, to Jeff's point, I'm using the hell out of these things.
I'm getting so much productivity out of it.
There's no way they're charging me enough for what I'm getting out of it.
But that I think the monetization route is going to become highly specialized in the next two years.
And then things are going to scale appropriately from there.
But this is all contingent upon data center build out.
I think that without the compute, this whole thing falls apart.
So if the build out doesn't really kick off and if these deals don't materialize,
then maybe so late is where it comes in that maybe the government steps in and takes a stake in some of these.
and they start doing that kind of a thing,
I think that is the real terminal risk.
If we have the data centers, if we have the compute,
I think everything else kind of washes out
and it sorts itself out.
Now, which one is Sam Altman?
Is he the OpenAI guy?
OpenAI.
Yeah, so that dirty bird,
he said something along the lines the other day
where he was like,
AI is going to be sold as a utility in the future.
You're just going to be metered out how much intelligence you want to buy.
And it just reminded me of Flowers for Algernon,
where he concocted that stuff to make the mouse smart,
and then they gave it to the guy with a low IQ.
And then he kind of got addicted to being smart.
Who wants to go back to being dumb?
So it just seems like this kind of dirty trick they're going to play on us
to get us addicted to being smarter than we are.
And nobody's going to want to go back to reality.
And it's almost going to be like an intelligence drug.
And they're just going to be like dishing it out to us for fees.
It kind of ticks me off.
Well, the thing with that is, and I understand where you're going with it,
but let's think about what that means.
We have metered usage for all kinds of things right now.
Our internet, for instance, on our phones.
if you have um for instance i have a two gig um connection in my house that um i have it's metered
because they don't have the full build out so they're they're limiting how much bandwidth you
can use at two gigs versus one that's metering right so is it is it really that they're going
to get us hooked on it on on intelligence or is it just going to be another utility
that we use and that we pay we pay to play so if you are someone that has an lm on your phone and
you're hitting your compute threshold, you pay for more compute and you use it. Sam Altman is a
sketchy motherfucker, but he's not exactly far off with what he's saying. I think that a pay-to-play
usage model is how they monetize this thing. And think of it, just think of us, right? Think of us
as a group. Do you really think in three years hence, we're going to say to ourselves, I don't
to pay an extra 25 30 40 bucks a month on top of what i'm paying already for compute when i can
do all kinds of modeling statistical modeling i can do all kinds of research i can do all kinds
of things like that just for that extra compute i think that it's not going to get people addicted
to being smart because the internet was a pretty big deal it put information at our fingertips
and most people are using it to look up stupid post on reddit and be trolls online i think that
reality doesn't change you're going to have the super users that are paying for that are going to
be willing to pay for the compute you're going to have the everyday users that are going to pay for
the compute and they're going to have everybody else that's using it to to make cat videos and
shit right the reality is not going to change it's just going to become a different level of
stratification first it was that first it was access to information then it was access to the
internet then it was access to ubiquitous connectivity through our smartphones and our
smart devices and so on and so forth and the next layer is going to be compute they're going to
commoditize it i i just i i don't know if it's going to create um a dystopia that's agi that's
a different story but to your point i don't know if i think people will get addicted but just like
people get addicted to the internet now you have weirdos that play world of warcraft for 15 hours a day still right or or warhammer 40k or yeah well i i was too so that what but what i saying is i grew out of it at some point
right but you have people that aren't going to grow out of it you're going to have those people
that that gets stuck in the web as usual but you're also going to have everyone else that
kind of adopts and adapts and they're just fine i mean but if my robot's doing my job what
difference does it make i can raid 24 7 if i want to yeah you can but you still i think you got about
30 years to worry about that until then let's enjoy the compute right let's enjoy the compute
and what this brings okay all right this is investment grade right i got one more analogy
star-bellied sneetches anybody else parents read dr seuss to them okay it's the one it's the one
where yeah some of the sneetches got stars and some don't and the ones without the stars feel
bad because they're not as good as the ones with the stars and so then the guy comes around and he
starts selling stars that you can put on your freaking bellies and then it was like a star race
to see who had get the most stars and then he just milked everybody for all their cash and then dipped
and that's like i can just see them doing that with intelligence you're gonna have like competing
ai oh i can get you to 140 iq i get you to 150 i get you to 160 and then everybody just gets fleeced
for their cash and you know the AI companies just run off with all the money okay so here's here's
an here's another one um this Neuralink thing is kind of got me uh it's got my brain and we'll
finish on this like if you had the opportunity to plug an AI into your brain like would you
like would you do it if it if it was starting to become a commonplace and it was like reasonably
affordable like right now one of the biggest constraints on compute is that you have to be
focused on it and you have to be like plugged in and so you're it's like sucking information out of
a straw like it used to be like a coffee straw like a coffee stir stick and now it's like a
i don't know like a bubble tea straw but like what if it was a river and like anytime you
thought about something you're attached to it it's like boom you got it would you do it and like
we're probably gonna have to make that decision in our in our lifetimes super weird uh thought
concept but like it's happening like you you can be connected and like think about things
would you do it you guys are the ones that are all on macbooks you'll be getting it off the app store
and i'm over here on windows and i'll just be on android doing it analog style
no but it's funny that you mentioned that so i think i think the reason why apple's kind of been
biding their time with the whole llm thing and they haven't really been trying to build their
own i think i think they're waiting for the best one or at least the initial best one and they're
going to embed that on a laptop as a secondary it's a secondary os i i think that i think that's
the next big step i think we're going to have local llms on our machines that we are you on
yeah exactly so like so for instance under my desk as everyone likes to talk about right i've
I've got my towers.
I'm running my local models.
I think we're going to have local frontier LLMs.
Once the compression technology and once the algorithms catch up, we're going to have local
LLMs on our machines and we're going to pay for them.
And then we're going to pay to update them.
And the price for them will just be high.
So they're not putting out models like mini and so on and so forth because they're saying,
oh, it is good for this series of questions versus this series of questions.
I think they're building up the pricing tier.
We just don't realize it yet.
So you're going to pay for Grok Mini, right?
You're going to have your yearly subscription for that, that you're then going to pay for
every single year.
Then you're going to have your Super Grok that you can pay for every single year and
so on and so forth.
But the thing is, it'll run on your machine.
It'll be local.
I think that's the step.
And I would pay a thousand bucks, two thousand bucks, three thousand bucks.
Think of it as like a secondary brain that I'm paying for to have it run on my machine. If I know that the LLMs have become significantly more advanced, they don't hallucinate as much, they are far more applicable to other areas of my life, they are more integrated to other areas of my life because they're on a machine.
that use case, I think that's the big step that they're working towards. Everything that we're
doing is working towards that. And I think the two big cases are going to be that and tokenization
because I use my usage on tokens when I'm doing algorithm design and so on and so forth is
significantly higher than the monthly premium I'm paying for Gemini and all these other LLMs
that I'm using on a monthly basis. So I definitely think there's a path that we're working towards
right now um whether open ai survives that or not i don't know if it matters well on that point on
compression algorithms there i just saw google just dropped a compression algorithm exactly
eight times faster while using six times less memory zero accuracy loss what's compression
this is what i think about it the the best analogy is like losses compression for an mp3 file
So you copy it from whatever source and you do it in a way that the data doesn't degrade and it doesn't lose quality while also becoming smaller and more efficient.
That's the simplest way I can put it.
Oh, nice.
So, Sully, you brought up a few episodes back where we're talking about bits, like how much content is on a Bitcoin transaction.
Mm-hmm.
right so um the ai models here turbo quant compresses that memory down to just three bits
per value from 32 bits without losing any quality it's like uh it's like effect effective caching
of your like thread so like i don't know if you've noticed but like if you go if you go into a longer
thread with one of these ai machines it just it starts to get like super slow and just like kind
of your context window blows out yeah yeah so but that that should compress so like you can just
have a full length thread going and going and going and it's not going to slow down on you
because it its ability to like understand the context of everything gets better and better
and it uses less memory and less compute interesting so take that right so take that and
just kind of play this off for the next one minute here when i was a kid the first computer we had
was an IBM Activa.
It had a five gigabyte hard drive.
Five gig.
And it was used, right?
It was used.
The second computer we had
was a 40 gig hard drive.
Many, many years later
that I thought that was crazy.
You're like,
they're never going to get bigger than this.
Exactly.
Now I've got,
where is it?
This on my desk,
I think that's 60 gigs.
Right?
I think my phone's like two terabytes
or a terrible writer and this and this this is a shitty drive that i that i use when i when i travel
just to transfer word documents sheets right it's it's not even a good one i i have other ones that
are much better i bring that up to say this so imagine two three years from now you've got the
ability to have a frontier model on your phone
top of the line localized model on your phone.
You've got to be able to, you have it on your iPad.
Jeff would have it on one of us four iPads, right?
Got it on your laptop got it on your computer Now just picture this Someone like me I got five computers well now six computers in my office in different areas I got a
different LLM, a different frontier model on each one. That costs me a lot of money, right?
I network them together and create a cluster. I've now got five frontier models working for me
in my office doing all kinds of things.
Locally.
At like crazy speed.
At crazy speed.
Because computers are getting faster.
And the reason why I brought up Macs
is there's a reason why they're integrating
neural chips and GPUs
and they're going with a system on a chip model.
It's because it's more efficient.
So just imagine a future
where you have five local frontier models
running in your house
or one frontier model,
whatever the hell you choose to do.
it's going to cost you three grand a month.
But if you're someone that can afford it,
imagine how productive you'd be.
Imagine how productive businesses would be.
And this is not me talking about like, you know,
people becoming unemployed or anything like that.
What I'm saying is that is the model.
Imagine how many hard models you could run on digital credit.
That's what I'm saying.
Just imagine the different ways that you can take it.
Imagine all the different options, models,
you can come up with Solet.
just with a Frontier model that is local
that you know Big Brother isn't necessarily watching on, right?
You can even have it air-gapped if you want
because once the model is downloaded, you can air-gap it.
You don't even have to hook it up online.
You can just work on it fully locally.
So not just local on your hard drive.
You don't have to hook up to the internet whatsoever, right?
Wow.
Yeah, I wanted to ask you about local inference
because I'm still too paranoid.
I don't want the cloud to have root access to my machine.
is local inference
something that we're all just going to be able to do cheap?
I think that's where
it's going.
Right now,
the local model,
I haven't upgraded my model yet.
I'm still running Llama 70B.
That is
okay
now when you compare
it to what Claude has
with regards to Opus
and Gemini and 3.1
and whatnot.
right but that when you have an ability to have a frontier model so let's say it's a
let's say it's a giant file let's be ridiculous let's say it's a 40 terabyte file
that you have to download right but it's a frontier model you paid a thousand bucks for it
you paid the two thousand bucks for it it is your gpt6 or whatever right you run that locally
The LLM, if it's properly compressed,
and if they make it so that it can run locally more efficiently,
and the model can run on your machine
because the computers have gotten faster, right?
Computers are getting faster and faster every year,
so we're talking two, three years hence.
And we actually reach a point of equilibrium
where we have the local GPU, the local CPU,
and the local LLM at a point where they can run as a frontier model.
People will pay out the ass for that.
there's going to be competition on it it's like it yeah exactly oh my god uh just a race to the
bottom though at the same time so it's like a race to be the fastest but a race to the bottom
yeah so like as you pay for your os right now like we already have a if you have if you have
windows or even if you have a mac os you have you have microsoft office right i i still remember
whether that was a disk or a download.
Yeah.
And then if you wanted to upgrade, you chose to.
Now it's a subscription model.
All right.
So now your LLM is a subscription model.
That's how they, I think that's how they monetize it.
That's probably how they do it, right?
Yeah.
Yeah, that's how they do it.
But it's a function, like all of the systems
are going to be a function of like how much compute they can,
well, I mean, the compute would be run locally.
Like if you had your, oh, interesting.
So what I'm running Lama is running on my tower right now.
I don't have any other external compute power besides what's on my tower.
But that's why I'm saying a frontier model versus a local model.
There's a wide difference between frontier models and local models right now.
It's massive.
What I can do with Claude, what I can do with Gemini, nowhere near Lama is nowhere near that.
So what I'm talking about is the frontier model. So imagine the lowest tier of a frontier model that we can run locally in the future is the best we can run right now. So imagine Claude right now locally. I think that's what's coming. I think that's what they're working towards.
And the reason why they need all the compute and the compute build out is to be able to compress, refine, restructure, get the LLMs to that point where we have the ability to have the individual local compute match the frontier model specs and run it locally.
That's what the build out is for.
That's what they need to compute for.
That is my view.
So, you know, I think that the ability to have your own local model that you can do all kinds of proprietary work on becomes a very, very attractive proposal.
And I think that is when the acceleration takes off because then businesses no longer have to worry about what I spend 60% of my time.
When I'm talking about these businesses doing AI implementations, all of my conversations for 60% to 70% of the engagement.
is internal compliance and information security they don't want these systems having access to
files they don't want these systems having access to proprietary information if you have segmented
local models that are frontier quality that no longer becomes as much of a concern
so i think the boom that everyone's talking about is still three to five years out
but when it hits it's going to be very disruptive yeah that's what everybody's working towards so
So like the AI models that we know of today are just going to,
they're going to look different.
Fundamentally different.
They're just going to be on a different platform.
Yeah.
So to answer your original question,
Jeff,
if I was paralyzed,
I would stick a whole bunch of shit in my brain and move shit with my mind
and play video games or whatever.
But as long as I can carry my ass down to the sunrise and on my own two
feet,
you ain't plugging nothing into my brain.
i've seen that movie yeah the neural link is i don't know man but like i'm not there yet i'm not
about your like local computer ai machine in your brain like plugged in like do you do you fall
behind like there's a prisoner's dilemma problem right like if you the people that do it are going
to get are going to be more intelligent and faster and better than you well has anyone here seen ghost
in the Shell. I don't mean the bullshit movie they made.
I mean the original anime. Has anyone ever watched Ghost in the Shell?
I gotta go back and watch it.
You should. If you want to see what
a world where people plug into their
brains into computers
and what it could look like, that's Ghost in the Shell.
I'm not ready for that, dude.
That's a bridge too far for me. I'm all
about tech, but once you start messing with me,
my brain...
Let's kick that one out.
Yeah.
Let wrap it up here Final thoughts Dan let kick it over to you You been observing the landscape here What final thoughts Yeah I mean I think there big developments in the credit markets here Like the fact that we
seeing a Bitcoin local bottom coupled with an SDRC max bid for two weeks every single month,
plus a fracture in private credit and uncertainty with regards to future cash flows, which finance
the entire credit market across the globe, I think is an interesting intersection,
what it means to have capital that outpaces the interest on bank reserves, short-term Fed funds
rate. So I think all these things are really, really important. And I think Bitcoin is becoming
the base layer settlement mechanism that is funding the higher interest rate environment
we're going into. So I think that's part of the reason why stretch is such an important instrument.
is because it doesn't take on principal risk and it can absorb interest rate volatility moving
forward. Because ultimately, I think interest rate volatility for the next 10 years is going
to be massive. There's going to be massive 10 year, 30 year interest rate volatility,
the move index, right? The move index, which is an index of bonds in the US,
this measures sensitivity and uncertainty across capital markets. And that's what we're going to
be seeing more and more of as AI becomes a more disruptive force. For all those reasons,
You want an instrument that has principal protection in different interest rate environments.
And I think that's why SDRC has such significant and important product market fit.
And I'm looking forward to seeing that play out.
I mean, so many things.
Great review there.
Corporate bonds, corporate credit are a function of the productivity of human capital.
like the last 45 minutes we've been talking about how digital intelligence is is going to make human
capital maybe it makes human capital more productive but it's almost it makes it a little
bit more irrelevant so if you've got all this corporate credit as a function of how productive
your human capital is your human capital is not keeping up like digital capital is going to be a
better form of credit because of the productivity of ai and computers that intersection there that's
interesting. And then you bring up interest rate volatility, going back to sovereign credit.
Sovereign credit is a function of your society. How well are you able to tax your society?
And what is a function of inflation and monetary supply and your ability to control how your
society is moving and changing. If your society is leaving and moving and taking their capital
into different forms, there's going to be disruption and volatility. I totally agree
with that. Great summary. I'm going to pass it over to you, Soleil.
Yeah. So Dan, I think you mentioned this guy in your recent video as well,
uh sminston with and um he had a very interesting graph he's a power law guy and he graphed the
ratio of the bitcoin's price to the cost of production um power law model and if you if
you look at those trends it actually looked like there's a possibility we were we've been in a bear
market since 2022. And if that's the case, it was almost kind of like a crab accumulation phase.
And if that's the case, then we actually had in USD terms, we had a Bitcoin all time high
in the middle of a bear market. And I can't think of anything more bullish that I could possibly say
than that, because when the bear is over and we've already had an all time high in the bear,
what happens in the bull market.
So I couldn't be more excited.
I hope it's all true.
Completely agree.
Yeah, the interest rate environment is completely different than 22.
Capital is still relatively tight.
Not a ton of credit expansion.
Still some concerns on inflation.
All systems go, right?
As Dan mentioned, you've got stretches.
permanent bid becoming a permanent bid on bitcoin on the bottom end and it's created this surface
for people to be trading in in and out of this instrument just like the common equity
oh yeah over to you adrian oh yeah so i think that stretch has been very very fun to watch
these last few weeks i i'm very pleased to see that it is getting to a steady state sooner than
I thought. I think that strategy has a real winner there that they can leverage in a variety of
different ways. There's going to be a consistent bid on Bitcoin. I'm very curious to see what
happens geopolitically. This is not me getting political, this is me seeing, I'm very curious to
see what's going to happen and how it affects the markets. Also, and I'm watching the developments in
AI. I think there's going to be a lot of crossover between the impacts that AI expresses on the
market and how people view money kind of to the points that you know you and dan were just
discussing i think that having instruments that are backed by pristine collateral are going to
become more and more necessary in a world where you have no idea of what inflationary pressures
are going to take place what the inflationary pressures are going to take place and what kind
of destructive events can happen in markets at any given moment if we if we've seen anything in the
last 18 months is that volatility is now becoming something that spikes and troughs within 24 hours
very very unexpectedly from a tweet so it is going to be um very interesting to see how people
navigate that in the future and what kind of instruments they gravitate towards and i think
that in a future like that something like stretch has a home bitcoin obviously has a home and um
It's very exciting to be part of this, I guess you can say, build out of a new digital capital infrastructure in the world is the best way I'll describe it most succinctly.
And it's going to be fun to watch it grow and be part of it.
Capital is changing.
Absolutely.
My final, thanks, Adrian.
And glad to have you back.
Appreciate it.
And my final thoughts are the world is in total chaos and there's a lot changing and Bitcoin feeds off of that chaos.
And digital credit is a category killer.
I mean, these instruments appear to be performing incredibly well and provide a really good opportunity cost against the existing credit system.
It's, you know, taking this old credit world and moving it into the new credit future.
So I couldn't be more bullish about just the structure, the plumbing of this entire marketplace,
the relative health of the industry, et cetera, and how that's shaping up.
So I appreciate the time.
Thank you, everybody, for joining.
Like and subscribe, please.
That helps push out more information and content.
Go check out our new website, tnorth.com, and look at the digital credit topics.
Check out the thesis.
It's really long.
If you want to bore yourself to sleep, go check it out.
and yeah,
appreciate the time,
everybody.
We'll catch you next week.
Signing off.
See you, Ron.