here's how you 70x your money do you want 7 000 returns or here's how you 29x your money
do you want 3 000 returns i mean they sound great right buy my equity and you can outperform bitcoin
these are just some of the terms i've heard thrown around recently who's saying them why
and how can we actually get involved in this opportunity well that's what i'm going to dig
into in this episode. It's the latest hot take in the market and it's Bitcoin treasury companies.
So I'm going to do a bit of a review. What have I learned? What did I do? Run you through an
analysis framework that is new to equity investing due to the innovation that is Bitcoin and take you
through why I consider things always from the perspective of portfolio allocation and paint a
bit of a picture on the future and where this is all going. My name's Jake. Thank you for joining
the podcast. I've been investing my own money for over 10 years. I love sharing what works.
I also love sharing what doesn't work. And it helps people make the right decisions as well.
So if you like this, give us a subscribe, get in touch, hi at jakewoodhouse.io if you have any
questions at all. And I always encourage people, flick over to Nostra, chuck us a zap, get on
Fountain to listen to your podcasts and get involved in the uncensorable social media platform
or protocol that NOSTA actually is. So what are we doing here today? We are going to run through
how I am currently looking at Bitcoin treasury companies. Now, what are they? Like, what is a
Bitcoin treasury company? What are you actually buying? So a little historical recap here is,
since I've been very closely involved in Bitcoin, and I've now almost owned Bitcoin, this December
It'll be 10 years since I first bought some, but it's really from 2020, the last five years that I went headfirst into this as a profession, in a sense.
And when I rewind five years, there was no such thing as a Bitcoin treasury company.
And one of the reasons I got into Bitcoin was the announcement that Michael Saylor made when MicroStrategy decided to reallocate from US dollars as a treasury reserve asset into Bitcoin.
And if there was such a thing as a sailorite, I would be someone like that. Someone who has been investing for a long time, is following people that they believe are making great decisions and understand when, oh my gosh, that's a big deal.
And so when a stock listed public company took Bitcoin on the balance sheet, that was a big deal. How many accountants are going to say you can't do that? How many lawyers are going to say you can't do it? How many shareholders are going to say you can't do it? And there it was, MicroStrategy. Boom. We've just bought 200 million, 300 million dollars worth of Bitcoin. And here's why.
Now, I'm not going to go fully into that story, but there were other versions of that prior, which was, for example, Daniel Pickering running a business called Listed Reserve or Brian Estes.
Both guys I had on my previous podcast, Bitcoin with Jake.
You can go back and find those episodes.
But they were like digital asset funds.
In some ways, they were also front running what was the regulatory clarity required for the ETFs, which all launched in kind of January of 2024.
and have been the most successful financial products
that businesses like BlackRock have ever created.
I mean, it's absolutely extraordinary
what the ETF story is as well.
Basically, there's a different way
of getting exposure to Bitcoin
that isn't Bitcoin in self-custody.
Now, you could own equity in a Bitcoin treasury company,
like we'll discuss today,
but you could also own an ETF
or you could own a part of a digital asset fund
like what I mentioned.
Or of course, you can have Bitcoin
as a derivative on a exchange, which I don't recommend,
or you can have it in a different type of self-custody of your own,
whether that's a single SIG or a multi-SIG.
There's a whole different array of processes of owning Bitcoin.
But to specifically focus on Bitcoin treasury companies,
like this year there's been a proliferation of them, right?
And what are they?
So what's the performance been like?
And, you know, over one year, over five years,
definitely buy yourself a TradingView account
and subscription because it's the only way that I've found to be a straightforward process for
actually analyzing these things. And beware the timeline, like are you choosing the daily chart?
Are you choosing the weekly? Are you measuring over 12 months, over six months, over three years?
You'll get different answers every time. And what are you actually comparing against? Well,
in some ways, these are equities and they're publicly listed. So the comparison that most
equity investors will be using is some kind of benchmark to the general equity market performance
like the MSCI. Now, you could just say, okay, how's the FTSE 100 performed? How's the ASX
performed? How's the S&P 500 performed? What are the index tracking funds you can buy and do some
kind of passive investment play? Or you might be a sound money advocate, but you're still fixed on
gold as the solution. So you're looking at gold as a return. Or what I do, which is Bitcoin as a
hurdle rate. In my opinion, owning Bitcoin in self-custody is the new risk-free rate of return.
Now, the extraordinary thing about it is it's not a US government bond creating you a percent
as a fixed income product each year that if you actually calculate it effectively against
the money printing is net negative real yield. The real inflation rate is faster than the return
you get on a bond the bitcoin hurdle rate is 30 40 50 60 cagr depending on what time frame you've
taken so you need to find other assets that are going to potentially beat that it's quite difficult
as we'll find out but first of all as i think of this as a portfolio it's okay you've got a few
different tranches that you want to think about your net assets in and you know number one cash
right so you're likely to be sitting in some form of fiat currency aussie dollar pounds
whatever it might be then it's cash flow so okay what what businesses do you own or what strategies
do you have in place to generate income with your capital then you've got a capital growth bucket
like how you're actually growing the purchasing power of your net wealth and finally people have
a bracket similar to like a precious metals they might have had before you know like a gold or
whatever. Now, the interesting thing with Bitcoin specifically is it hurdles a cash, like 24 hours,
365 days, it's liquid, but also very volatile short term, so up and down. So it absolutely
smashes the capital growth bucket as well. And what I've tended to do is I actually just buy
Bitcoin, hold, ride it for the capital growth, and as I need cash flow, sell down and pay the CGT.
So that's one way of doing things. But perhaps you could allocate to something that's specifically
a cash flow generating tool. And ultimately, it's like, okay, how do I make my money? How do I
manage my money? How do I multiply my money? Shout out to Laura Tynan that came on the show that has
that really nice framework. And so what is a Bitcoin treasury company? Now, for me, they
currently sit in a bracket, which is okay, let's think about this for a second. It's capital growth.
But within that subset, it's actually speculation. Like to me, these are highly speculative bets.
and I'm willing to make them
with like a very, very small percentage of my net wealth
because if it does do a 10, 20, 30x, happy days.
If it disappears, well, what's the downside?
It's a small percentage of your allocation.
Meantime, I like a large allocation to Bitcoin,
which with a CAGR of 40%, 50%,
it's just crunching away for you in the background
from a wealth growth tool.
It's unbelievable.
what did I actually do about this well I took a position in a company called Matador so the stock
ticker M-A-T-A and I got in at the pre-IPO price which was 50 cents Canadian and what's happened
over the last nine months has been very very interesting at one stage I was going oh god I'm
really pleased with that bitcoin treasury company I bought you know I'm three four x my money
but the the mindset i had on enter on entry was like this is speculative kind of like a an early
stage angel investment in a way but it's always liquid so i saw it as less risky which was great
but it was still it was like this is a five to ten year hold for me like it's it's like maybe
this goes to the moon maybe it doesn't and that's okay but what you'll find out through this episode
is my my thinking's really evolving as to what these companies actually represent and today you
can now buy MATA at less than what I paid in December. Now, the question is, is that a good
price? And price and value are very different things. The concept of investing in lines, not
dots is something I like to talk about. So the initial data point, the initial entry point was,
okay, what was the team doing in December? What was the stock price in December? What progress has
been made since It like okay well there been a product that they released I don really love the idea of like getting gold on the blockchain like just use use bitcoin for what it actually is um and they accumulated some some bitcoin so okay that
interesting i really liked the founding team because of their banking background and their
capital markets background i didn't love it so much because of the kind of crypto lens so am i
happy with performance well not really because matador 21 down from the price i paid shit
okay well that's not quite the headline you might have heard a couple of months ago about how amazing
these treasury companies are what does that really mean it's like okay well for me i'm going to hold
it and see what happens should i be buying more because that's a decision i could make like if i
thought 50 cents a share was good value and it's now 21 below that then why am i why am i not adding
to the position and thus far my thought process is simple it's like you made a small allocation
as a speculative bet, something long-term.
So just let it run, let it do its thing.
But maybe I'm missing a trick.
Maybe I should have exited at the three or four X.
Maybe I should be paying closer attention to this
and monitoring it much more and using my time
and building some kind of system.
And so maybe in the future,
I should implement some kind of sell-side strategy
where it's like, okay, if you buy Bitcoin Treasury Co
and it does a certain multiple, just get out.
Like it's a speculative position, three, four X.
If you've beaten the Bitcoin hurdle rate,
be happy with that, pay your CGT
and get out of the position.
And that's where these Bitcoin treasury companies
are interested because to me, that's pure speculation.
It's like trading an altcoin.
I don't want to own Solana for 10 years.
Like, forget it.
And I actually don't play any altcoin trading games at all.
But I do have some friends that play in that space
and some have done very well.
I would argue that it's going to be much harder
to do that going forwards, but who knows?
I mentioned the 21% down.
That's hopeless.
And Bitcoin from 20 December last year
through to spot market today 12 up wow well that that business has really got a lot of work to do
now to get back up and over that that bitcoin hurdle right and for that reason like this is that
classic concept like action leads to clarity take some risk get some skin in the game and and make
a bet and see what happens and you learn so much as you go along right now in terms of like past
performance i think it's also really important to just point out that obviously bitcoin is the
the hurdle rate but why is this happening with with bitcoin treasury companies and in some ways
like right now august and september is a very quiet period and that's because markets are driven by
people and guess what august is the height of the holiday season so the leading investment decision
makers across the northern hemisphere are on holiday enjoying time with their kids and not
we're trying to take a break right that these guys are and you know guys and girls they are
absolutely active investors and they're following the markets really closely all the time but you
have to take a rest and so what a surprise is a bit of a lull in the market everyone gets back in
september okay what's been going on not sure what are our targets for the end of the year what do we
actually need to get achieved all right we've got two or three month window here to make it all
happen before christmas or even in the u.s thanksgiving which comes a bit before so basically
there's some market fatigue going on right now.
We're like, ooh, Bitcoin treasuries
haven't done quite what we expected.
In fact, I should have just held Bitcoin in some cases,
like me with Matador.
And it's just boring, right?
It's just crunching away, like when's the blow off top?
You know, I've already extended my all-time high prediction
to something like end October,
having originally thought August.
So what's happening here?
And just the market and this cycle
just feels different to before.
What a surprise.
Things are changing.
So the question then becomes,
what happens with Bitcoin treasury companies
between now and going forwards.
Now, I'll get to that in a bit,
but let's just continue this idea
of what has happened thus far.
MicroStrategy, in the last five years,
since they announced their Bitcoin treasury strategy,
they've gone from 31 bucks a share to $330 a share.
That's a 10x in five years.
Well, that's absolutely excellent.
Why wouldn't you want to own some of that equity?
Like, that's a brilliant result.
Now, of course, always peg that back to what Bitcoin has done in the same time frame.
But you've also got MetaPlanet, a business that took on a strategy very similar in April of 2024 through to the spot price of today.
Their Japanese yen price of 27 bucks, 27 Japanese yen, has flown to 596 yen as of today.
That's a 2000% increase, 21x your money.
Wow.
Now, of course, be very careful of the timelines that these prices are quoted against.
Because when I started this podcast, I mentioned a 7,000% return.
Well, that was actually in relation to MetaPlanet that at one point was 70x your money.
Had you got in at the right time and exited at the right time.
But would you have known that that was the right time to get in or the right time to get out?
Did you have the lens and the analytical skills to know where you were actually at?
Well, perhaps not, right?
And that's where this gets really interesting.
So what are we dealing with here?
We're dealing with an investment scenario that hasn't really existed before.
So what the hell is going on out there?
And the typical lens that a value investor would take to these equities, they don't work.
They do not see value when there might be.
And so how do we find that?
A huge shout out to Mark Moss.
If you're a follower of his content and newsletter, you know that he's part of the Bitcoin Opportunity Fund.
and is also raising a fund in the Bitcoin treasury space.
And he had an excellent PDF that I got my hands on at one point
that I was able to run through that helped to identify
how professional investors are starting to analyze these companies.
Like, why has MicroStrategy performed like that?
Why has MetaPlanet performed like that?
And why have other companies like Assembler Scientific not performed like that?
And my feel here is what I want to understand is,
like who are the grifters out there they're like oh my equity is just not doing very well i tell
you what should we jump on this bitcoin bandwagon and see if we can make a bit of extra money and
then you know tin the whole thing you know how am i going to um not get into some kind of pump
and dump scenario like an altcoin how do i actually look at this in a serious manner
versus what the rest of the market might be doing and the the the sell is so obvious right in terms
of, oh, you want to outpace Bitcoin?
Yeah, maybe you're a bit scared of owning Bitcoin in self-custody.
Why don't you buy my equity and I'll do it for you?
And I can see a lot of people getting tripped up by that,
especially with the issue with the unit bias of Bitcoin.
They're like, oh, shit, Bitcoin's at $115,000 of Bitcoin.
I can't afford that.
Maybe I'll just buy some of these companies.
And that happens all the time, right?
And my main fear is what happens in a bear market?
Like it's all very well launching a Bitcoin treasury company in the middle of a bull market where everyone's super excited about where the price is going of the underlying asset Bitcoin.
And they think they can trade at a multiple that is attractive.
It's like, OK, cool. Good for you.
What happens when the momentum shifts?
And that's my main fear with these things.
But the point is, is what we've got to figure out is what is the market's confidence in the equity's ability to accumulate Bitcoin?
and so there's a seven metric framework that mark has identified and i'm just going to run them
through you run you through them all because they they basically when combined you can create a
scoring system and that scoring system helps you identify whether or not this is an equity that
you should look more closely at monitor it buy it or like this is an excellent buy you know get
involved now the first is the m nap so the multiple of net asset value this measures the confidence
of the market in the Bitcoin strategy execution.
So for example, I already mentioned
the idea of similar scientific.
Well, they've got Bitcoin on the treasury,
in their treasury, that's great,
but they're still actually considered
a medical business by the market.
So is this a pure Bitcoin treasury play
or is it some other morph of that?
And a sustainable premium,
so you want to be following this MNAV over time,
indicates that the market believes
the company will generate more Bitcoin value per share
than holding Bitcoin directly.
Now, it's a really important thing.
You've got to think about how many Bitcoin per share
the company has.
So when you're buying these equities,
what percentage of the business do you own?
How many shares are outstanding?
And how many Bitcoin are on the balance sheet?
And are they actively increasing the amount of Bitcoin
you're exposed to or decreasing?
You've got to be really careful about this.
Unsupported premiums often collapse
when execution fails to meet expectations.
So if you can see a sustained MNAV in an equity that claims with Bitcoin treasury company, that's really interesting starting place.
OK, well, these guys have managed to sustain a multiple over the net asset value for this period of time.
Cool. Then it's the Bitcoin holdings transparency, the BHT.
This evaluates the disclosure quality and strategic commitment.
So it like okay what is the quality What the frequency And what the accessibility of a company Bitcoin disclosures Are they actually telling everyone how much Bitcoin they have and how often are they doing it
And so it basically evaluates the effectiveness with which companies communicate their Bitcoin strategy and updates on holdings to shareholders.
It's like, okay, because I could just own Bitcoin in self-custody.
I know exactly how much of the network I own.
I know exactly where it's stored.
I know no one can take it from me or debate it on the back end.
So if I'm buying an equity, I want to know exactly what they're doing with the Bitcoin that they have on the balance sheet, because to me, that's the main driver of the equity price over time.
Next is the MTR, the management track record.
So obviously, the management drives every aspect of a Bitcoin treasury.
So the strategic vision, the execution capability, the stakeholder management, capital allocation discipline.
And if they're poor business operators, then of course, the equity value is not going to go up over time versus the hurdle rate that is Bitcoin.
You're looking for exceptional leadership.
And again, that's why so much of investing in decision making comes back to the team, the talent.
Who are you investing in?
And is it someone that you've seen creating Bitcoin content for five years plus that you know is like ultimately a hardcore Bitcoin maxi, can see an opportunity that others don't?
because they're simply already heading where the puck is,
they're already seeing round corners
because their information is just better than others,
well, that is a good bet.
Next up is the BTCCR, which is the Bitcoin credit rating.
So debt structure determines Bitcoin treasury sustainability
during market downturns,
aka are they over leveraged?
Poor credit profiles force liquidation
at disadvantageous prices,
creating strategic constraints,
generating refinancing risk and limits operational flexibility the opposite applies obviously with a
strong credit profile enables companies to maintain strategies throughout volatility
now i saw a stat at one point that microstrategy's net cost of debt is under one percent
holy shit that is an unbelievable statistic it's like hang on so you can borrow at one percent and
you can accumulate an asset that's growing at 40 a year that is a great play and it's one of the
reasons why public market equities are so interesting in this instance because you can
use financial engineering and someone like a sailor is an absolute wizard financial engineer
that spent 30 years as a founding CEO of a business running a company as a publicly listed
business like what a guy to be able to invest alongside and I as a retail investor like what's
the best cost of debt I can get well very recently I've been doing a real estate transaction and my
interest rates are like 9%. Now, perhaps if I fit their loan profiles a bit better, I might get a
7% or an 8%. But still, you get the point. It's not under 1%. It's part of the problem, in a sense,
it's close to the money printer, right? The Cantillon effect, absolutely in play here. But
that doesn't mean that you cannot exploit the system if you see opportunities. Next up, the BTCYP.
So this is the Bitcoin yield performance. So Bitcoin yield distinguishes genuine value creation
from simple Bitcoin accumulation.
So companies can purchase large amounts of Bitcoin,
but they destroy shareholder value at the same time
if they issue shares at prices below the Bitcoin net asset value,
or they just deploy the capital inefficiently.
So a positive Bitcoin yield means shareholders gain Bitcoin exposure
without suffering dilution.
Really important, right?
Are you being diluted or not?
Next up is Bitcoin talk, which is basically capital efficiency.
So I think this is a key driver of like,
whether or not you're betting on a good team.
But superior operators from companies
that simply spend money on Bitcoin
without creating shareholder value.
I'll say that again.
Capital efficiency separates superior operators
from companies that simply spend money on Bitcoin
without creating shareholder value.
So high Bitcoin talk indicates strategic leverage,
effective market timing, execution excellence,
and sustainable growth capability
without diluting existing shareholders.
now finally it's the r2 it's the model fit correlation high model fit correlation indicates
market recognition of bitcoin strategy price predictability based on bitcoin performance
strategic validation and pure bitcoin exposure for investors low correlation suggests the market
still values companies primarily on legacy business performance i touched already on the
idea of semi-scientific still being the medical company in the eyes of the market that's what this
identifies right is this an out and out bitcoin treasury code play yes or no and the higher the
correlation the better the answer and at the end of all this you get a score so and i'm not going
into any more detail with these metrics right now but this is a quite sophisticated piece of equity
analytics that requires someone to spend you know 10 to 100 hours going through the different
Bitcoin companies that exist and figuring out this model and then figuring out which company
fits well to the model. I am going to try and figure this out myself because I like the learning
process. I'll touch on this in the conclusion. So one thing I've tried to highlight here is
basically the different types of Bitcoin corporate exposure. And think of it in kind of tiers,
essentially. So at the very bottom, it's like companies that put Bitcoin on the balance sheet.
Now, this is what MicroStrategy did initially, right?
They literally just bought Bitcoin instead of earning US dollars.
And then you saw the likes of Tesla come out and buy some.
There's Bitcoin mining companies that are accumulating Bitcoin all the time.
But this is kind of the lowest level.
And MicroStrategy, absolutely not that any longer, right?
They have moved up in a sense.
The layer above that is then a Bitcoin treasury with a legacy business.
So MicroStrategy is that now, right?
They have a very small operational company, but mainly a balance sheet plate.
MetaPlanet as well, right?
They have a hotel, I think, underneath all of their now Bitcoin plate.
And then the top level is literally the Bitcoin ETF, right?
You basically need to understand what tier of corporate exposure the Bitcoin is at.
And so it's Bitcoin on the balance sheet, number one.
Number two, above that, Bitcoin treasury with a legacy business.
And then number three is a Bitcoin treasury strategy.
and these businesses as they evolve in their strategies are moving up and down in between them
and that's something you just need to be really careful of right now of course as part of this
episode i've done plenty of my own um study and i love obviously there's a certain there's a handful
of podcasts that i regularly tune into but so i listened to preston pish a couple times shout out
to preston i was very grateful to meet him briefly i'd love to meet him again and be on a panel with
him at cheat code in sydney uh almost this time last year actually but he described what micro
strategy is building is a transmission and for engineers out there they're immediately they'll
get this but i'm not an engineer and he then referenced it to a bicycle and i said oh that
makes more sense and when you have a bicycle that's got let's say five gears and you've got
a bunch of cogs around the the pedals and you've got some cogs on the back wheel you have an ability
to increase the power that you put into the bike
and then increase the output
or decrease the output and decrease the input.
And what he's describing MicroStrategy as
with the blend of ordinary shares,
preference shares and debt
is a company that is able to supply a transmission
to wealth in the public markets.
And so as the market heats up,
they can shift things around.
And as the market cools off, they can shift things around again.
And that's an extraordinarily simplified version of what, you know, Saylor is actually doing.
Again, like what a guy, right?
Are you going to bet against Michael Saylor 30 years of managing his own founder-led business?
Like to be able to sit alongside a master financial engineer like that as a retail investor is an incredible opportunity.
And that would be the one business I'm looking at probably the most closely.
but what Preston highlights what I hadn't previously understood is maybe the Bitcoin
treasury companies aren't actually an out and out speculative play for capital growth over and
above Bitcoin maybe they're a cash flow play and he highlights it's like it's all about the bond
market like what's this guy talking about and essentially the boomers they want to retire and
let's say they've got a net wealth of a million bucks well you give that to the US government
on a five-year or a 10-year or a 30-year yield,
you're making a couple of percent.
So what, so you're going to,
your million bucks is going to give you 10 grand a year,
20 grand a year, that's going nowhere.
Whereas micro strategy is pumping out seven, 8%.
So, ah, that becomes a lot more interesting
from an income play
because the dividends are so attractive
and there's different forms of micro strategy, right?
You know, spend a bit of time figuring out,
okay, do you want preference shares
or do you want to own debt
or do you want to own the equity itself?
The ordinary shares or common shares, they might be called.
So there more complexity here This episode is not about diving into micro strategy as an out and out discussion Maybe I can save that for later if you interested let me know and i can run through it the point here is to is to rejig my thinking it like ah maybe this isn a moonshot play maybe this
is a cash flow play and then going back to mark's report what they highlight is the addressable
market for bonds 300 trillion dollars right and it's like okay the fixed income markets are
absolutely ripe for disruption because we know that owning these products is not beating real
inflation now they're good from a liquidity perspective and they're good from a downside
risk perspective in that most people believe that the capital risk is very low right they don't
expect the US government to not pay them back the money now they they won't not pay them back because
they can print their money but the question is what are those things actually worth in real
purchasing power terms in 20 years time in 30 years time well my bet is that they are pummeled
absolutely pummeled so actually why not own a company that pays an excellent dividend
because their balance sheet is unbelievably strong and you're not buying an operation
so it's not a mining company that's got to get shit out of the ground ship it to a port send it
overseas sell it, it's literally holding Bitcoin and then using financial engineering, which is
available to public companies and public offices, such as convertible loans, such as ordinary shares
and preference shares. And it's like, wow, this is actually a very different play. And Mark's
report suggests that if you look at the size of the Bitcoin treasury market today, and you look
at the total size of the fixed income market,
you've got a 6,000x potential in market size.
So, okay, well, this catches my attention
because you're like,
are you batting in a market that's small
compared to what it's disrupting?
And the answer is absolutely emphatically yes.
And if that's the case,
then you can jump on board something
with an excellent tailwind
because the market's massive
and that gives people the opportunity
to get it wrong a bunch of times,
but still it's like actually what you're competing against here isn't necessarily other bitcoin
treasury companies it's fixed income products and what are they paying so okay well there's a value
of the loan itself of course underneath it all but then what's the yield and those yields well
they're crap compared to the dividend that something like a micro strategy is actually
able to play yeah whoa okay so for me this is a big learning maybe i've been thinking about this
all wrong. Now, I'm still very concerned about how do these things perform on the way up versus the
way down. And that remains to be seen, right? Maybe we hit an all-time high towards the end of this
year, and then we're going to crunch back down, I'm pretty sure, for kind of 12 to 18 months or so
until the next rally. My entry point is likely to be at the bottom of the next bear. I think that
makes the most sense. Watch and wait and see what happens. How do these equities actually perform?
Who is to again discuss investing in lines, not dots?
Who's really making progress?
Who's truly figured out what these things actually are?
And of course, with that seven metric framework, you already have an excellent position on
what's going on because it will filter out a lot of companies.
I've got a list on my trading view of companies that have announced that that Bitcoin treasury
strategy.
You can go to the website, bitcointreasuries.net.
I think it is.
there's lots of businesses out there that have bitcoin on the balance sheet now but which ones
are bitcoin companies and which ones are like oh buy my equity because i've got a little bit of
bitcoin what's happening is maybe i'm going to have to shift from this speculation lens to actually
cash flow and the boomers out there that are thinking about how to allocate their retirement
well they're definitely looking for cash flow and so maybe these bitcoin treasury companies are
teeing themselves up to hammer into that market and i think that could well be a good bet
so a final thing I want to talk through before I wrap this up
there's been a situation that popped up recently here in Australia
there was a business called Locate that announced a Bitcoin treasury strategy
and they were an ASX listed
it was a logistics technology company
now what's happened is the ASX has certain guidelines for the type of business
that can register on their index
and one of the subsections of it is it requires the business to not have a 50% or more cash or
cash-like balance sheet and it considers Bitcoin to be cash-like. Now the irony of this is the ASX
considers Bitcoin as cash-like but the ATO, the tax office in Australia, still considers it a capital
asset for capital gains. So that's a clear contradiction. And ASIC, the securities regulator,
has another opinion. So it's a mess in a way. But the reason that we're not seeing a proliferation
of these kind of companies on the ASX is because of this ruling. Now, are they going to change it?
I hear they might reconsider it. But the company Locate, I heard, is actually going to go to the
NZX where that doesn't exist. And so what this highlights is there are local geographic driven
market nuances that drive the arbitrage opportunity on stock prices. So why did MetaPlanet rocket the
way it did? Well, it unlocked a load of capital in the Japanese market that didn't have access to
Bitcoin. So what we as investors that have an ability to bet on these globally listed
public markets is find those opportunities. And that I think could be really good fun.
And you're like, oh, right. OK, so the ASX right now, for me, there's no point. Right. But
the day that they update that term to say, OK, 50 percent cash is no longer a requirement of ours
or 50 percent cash like because of Bitcoin's requirement, or they might make a subsection
specific to Bitcoin? I don't know. Shout out to the guy that the Australian Bitcoin industry body
that highlighted this issue for me recently in the work they're doing. So do go and check that out.
But you're like, OK, so where else might this happen? You've got to be super careful about the
timeline, right? You hear 7000% return, 3000% return, but they're over specific timelines and
those prices, they've come off. They've really come off. So those opportunities aren't quite
as sexy as people might have made them sound.
But I think you can say like safely
that past performance has been extremely interesting.
And so has your mindset shifted?
Well, yeah, mine's shifting as you can hear.
The next step is where's it going?
So what's going to happen between 2025 and 2030?
And that's really what I think I want to bet on going forward.
It's like maybe back into 2026, 2027,
there's going to be some interesting equity positions to take
where you know that they've taken really, really fascinating Bitcoin treasury strategy positions
and are a good bet over the kind of medium term.
More recently, we're obviously hearing that the interest rate environment is shifting
and central banks are starting to loosen.
So big meeting in the Federal Reserve this week.
I record on a Thursday morning.
This will be out probably Monday next week, so after the weekend.
and it will not surprise me in the slightest if there's been a rate reduction.
I think I saw a 90% probability of that happening.
And with that, is that going to be immediately priced in
or are we going to see asset prices start to pump?
My recent experience with the real estate market here in Australia,
lots of the sales agents are talking about interest rate reductions in Australia.
Again, the cheaper the cost of capital, it's got to find somewhere to go.
Often it's into asset prices.
So over the next, where are we now?
mid-September, October, November, December. People back from work, interest rates coming off.
It's going to be a very, very, very exciting couple of months to see what actually happens.
And so let me summarize. Where am I actually at as an investor in Bitcoin treasury companies? Well,
number one, I need more time to learn. Absolutely. Even just creating the content for this podcast
episode, I've learned some things. And it's like, oh, that's just okay. I hadn't thought about that.
You know what I mean?
Number two, I just want to watch, witness what actually happens.
See who are the winners, who are the losers,
who are the team that strike me as actually having a high-level integrity,
genuinely understand Bitcoin and have a maximalism philosophy.
I think about the speech that RFK Jr. did,
which included so much about Bitcoin mining
and the ability for Bitcoin as a sound money to improve the world
versus Mr. Trump at the conference's pre-election.
And, you know, Mr. Trump has released a number of his own coins and stable coins.
And it was just so obvious, right, that there was a guy that had really gone out
and looked at the base layer problem of money.
And Bitcoin was an unbelievable solution to that
versus someone who was throwing out buzzwords
and basically was just absolutely buying votes.
And, you know, OK, interesting.
So the same will happen with CEOs of Bitcoin treasury companies.
Right.
guys that come out and they just like yep well look it turns out i'd actually been reading
ludwig von meisies for the last 20 years and i've been a sound money advocate but i just
never looked into bitcoin i was also the ceo of the stock listed company and it's actually so
clear to me that this is the best way to protect the purchasing power of the company for the
shareholders it is a it is a responsibility of mine as the official leader of this business to
protect the capital of the shareholders i'm buying bitcoin versus shit guys our business is really
not doing great. Should we just like throw out the word Bitcoin and see if we can pump our retail
price a bit more and let's maybe try and fold the company. You just don't know, right? So number one,
need more time to learn. Number two, keen to witness performance. Number three, aware that
the opportunity might be closing. So yes, I'm looking at point number four, the bottom of the
next bear, check out the chances. But like maybe this opportunity is closing. I don't yet know.
there are people out there that would like to say that it is hence buy my equity or invest in my
fund but i i don't i don't know like bitcoin's so early right look at net assets globally bitcoin
two trillion okay we've got a long way to go right so for me this still is a speculative thing
like nothing beats bitcoin in self-custody go and figure that out first once you figure that out
Okay maybe it appropriate to take a bit more of a speculative position with some of your wealth So point number five yeah for me it remains a speculative bet And point number six finally is nothing beats Bitcoin in self
Now, I want to caveat these conclusions with a couple of things,
which is I think I might be wrong about Bitcoin treasury companies
representing a speculative play.
And actually, I should look at them more as a cash flow play.
And therefore, instead of comparing the equity position to Bitcoin, the hurdle rate, perhaps I should be comparing it to the S&P 500 index returns or the real rate of inflation in terms of monetary debasement and the ability to return a dividend, aka a yield.
So it's kind of like instead of owning Bitcoin itself, you own an equity in a company that understands how to use financial engineering, which therefore pays you rent.
so it's kind of like you know the traditional real estate play in terms of like the model and
the capital growth and the yields um so that's definitely one i need to spend some more time
thinking about caveat that number two with well if the if the yield on an equity is 10 percent and
you owned a million bucks of it and therefore you've got a hundred grand a year just to play
on that example i gave earlier that sounds nice from an income perspective but if that equity only
goes up by the same as the S&P index over 12 months.
So 12% so it's suddenly 1.12 and you make another 100 grand the next year.
So okay so you made yourself a net gain of let call it 1 1 but Bitcoin might have doubled And so you could be sitting on two and you send sell down the 200 grand
and you still have 1.8 million bucks worth of capital.
So it needs to be played with, right?
And some more thinking.
One other thing this has thrown up
is I love spending time with my kids.
I'm a homeschooling dad.
My time during the day
is best spent focused on playing with them.
And for me to go and spend hundreds of hours
analyzing Bitcoin treasury company opportunities,
yes, it would be a fantastic way of learning,
but maybe it's just not what I want to do with my time right now.
And another opportunity is to invest in a fund.
And that is what Mark's building, the Quantum Wave Fund.
So do go and check that out as well.
It might be just a simpler process.
Okay, just allocate a percentage of your portfolio
that you feel comfortable with to make a speculative bet slash a cash flow play and let someone else get
on with the hard work of figuring out how to actually do that. So I'm trading off this idea
of like, do I want to learn more myself or do I let someone else get on and do it for me? And what's
my time worth and what's important to me? And that, of course, is a lens that everyone should take.
I saw something recently that was very interesting when I was researching the power law in relation
to Bitcoin and someone described, if your understanding of Bitcoin is good, then you're
1% of the population currently.
If you understand that the power law is the pricing trajectory of Bitcoin then you 1 of the 1 So your 0 of the population has understood that Bitcoin is important and that Bitcoin is following the power law Now the power law could be broken
of course, but that was an interesting lens. I'm like, if you're understanding Bitcoin,
you're 1% of the population. If you understand Bitcoin treasury companies as an opportunity
with this level of sophistication, i.e. I've got to run every Bitcoin company that's claiming to be
treasury company play through those metrics, I would argue also 1% of the 1%. So probably 0.1%
of the global population is currently looking in this much detail at what a Bitcoin treasury
company might be. That's mad, right? What do I know? Well, Bitcoin's inevitable. Everything I've
studied about it, it's just going to do its thing. The question is, what part do I want to play in
that? And which area do I want to focus my time and attention? And if it's doing a 30, 40, 50%
CAGR on its own maybe you just kick back and go and enjoy being a dad and it's funny because I find
that I find that so hard to go and do there's something that's so deeply conditioned within
me to be always hunting for these opportunities working quote unquote but I guess that's just me
so let's see where it all goes I'd love to hear from you if you found this valuable reach out
hi at jakewoodhouse.io drop me a message and equally jump onto fountain send us some zaps
boost and I'd love to hear from you so with that awesome enjoy your day and that is my latest take
on what Bitcoin treasury company is