1 00:00:00,000 --> 00:00:07,980 We're running around here in the Middle East and we're talking to, you know, oil rich countries 2 00:00:07,980 --> 00:00:12,000 that have tons of wealth that are exploring and looking into this stuff. 3 00:00:12,820 --> 00:00:20,920 FOMO is intensifying and I think we are getting very close to a lot of noise within this marketplace. 4 00:00:21,380 --> 00:00:25,820 If Bitcoin increases, that gives us more capacity to issue our perpetual preferred equity. 5 00:00:26,680 --> 00:00:29,720 And if we issue more perpetual preferred equity, we're buying more Bitcoin with it. 6 00:00:30,000 --> 00:00:31,340 We're in a digital gold rush. 7 00:00:31,480 --> 00:00:33,140 Over the next four to eight years, 8 00:00:33,520 --> 00:00:36,380 we think institutional adoption increases drastically. 9 00:00:36,540 --> 00:00:38,960 We think sovereign adoption increases drastically. 10 00:00:39,120 --> 00:00:40,740 We think digital credit starts to permeate 11 00:00:40,740 --> 00:00:41,720 throughout the rest of the market. 12 00:00:42,100 --> 00:00:44,980 So because of those dynamics, the macro environment, 13 00:00:45,560 --> 00:00:47,440 we see probably the next four to eight years 14 00:00:47,440 --> 00:00:51,860 between a 30 to 50% compound annual growth rate for Bitcoin. 15 00:00:51,860 --> 00:00:54,860 Banks and pensions and insurance companies can't. 16 00:00:55,400 --> 00:00:57,340 We'll not be able to not hold these things. 17 00:01:00,000 --> 00:01:01,860 Jeff Walton, you're back, man. 18 00:01:02,240 --> 00:01:03,180 Third time on the show. 19 00:01:03,340 --> 00:01:03,840 Third time. 20 00:01:04,200 --> 00:01:06,060 You're one of the only people that's been on the show 21 00:01:06,060 --> 00:01:09,060 more than once who wasn't on the previous show. 22 00:01:09,500 --> 00:01:09,860 That's right. 23 00:01:09,960 --> 00:01:11,100 We're moving fast here. 24 00:01:11,200 --> 00:01:12,040 You've been blowing up. 25 00:01:12,160 --> 00:01:12,520 Coming up. 26 00:01:13,600 --> 00:01:15,660 So we've only got like 45 minutes. 27 00:01:15,880 --> 00:01:17,200 So we're going to have to get right into it. 28 00:01:17,300 --> 00:01:17,680 Speed run. 29 00:01:18,160 --> 00:01:19,440 A treasury company's doomed, man. 30 00:01:19,440 --> 00:01:20,700 We're in paper Bitcoin winter. 31 00:01:21,240 --> 00:01:22,240 I guess so. 32 00:01:22,520 --> 00:01:24,040 Paper Bitcoin winter? 33 00:01:24,540 --> 00:01:25,500 That's the first question. 34 00:01:25,740 --> 00:01:26,100 What's that? 35 00:01:26,320 --> 00:01:28,000 Are treasury companies doomed? 36 00:01:28,460 --> 00:01:29,220 Are they doomed? 37 00:01:29,220 --> 00:01:31,020 Yeah, this has been a tough time for them. 38 00:01:31,180 --> 00:01:34,840 There's prices going down, lots of them trading below 1xm nav. 39 00:01:35,300 --> 00:01:41,540 Is the playbook that most treasury companies have implemented, strategy aside, is that getting tired? 40 00:01:42,220 --> 00:01:44,640 Yeah, I think that's a good question. 41 00:01:44,880 --> 00:01:51,080 The initial playbook was put Bitcoin on your balance sheet, sell equity, buy more Bitcoin. 42 00:01:51,280 --> 00:01:52,740 And that's a one-shot model. 43 00:01:52,800 --> 00:01:54,080 And that model has evolved. 44 00:01:54,080 --> 00:02:05,420 And if that was your only, you know, trick, not even a trick, I would say if that was your only tool, that you need other tools in your toolkit now, right? 45 00:02:05,520 --> 00:02:13,620 And so whether that be operating business or, you know, running a digital credit model or earning yield on your Bitcoin in different ways in the market. 46 00:02:13,620 --> 00:02:15,160 And those ways are evolving. 47 00:02:15,360 --> 00:02:19,420 So I don't think the treasury model isn't dead, right? 48 00:02:19,420 --> 00:02:25,640 You take a step back and you look at the companies that have adopted Bitcoin and put Bitcoin on the balance sheet. 49 00:02:25,760 --> 00:02:27,320 And historically, they were zombie companies. 50 00:02:27,520 --> 00:02:28,740 They were dead to begin with. 51 00:02:29,400 --> 00:02:34,360 This was a last-ditch effort to help the company survive into the future. 52 00:02:35,440 --> 00:02:40,360 And putting Bitcoin on your balance sheet helps you survive into the future. 53 00:02:41,100 --> 00:02:46,700 Because with Bitcoin as capital, you can do things with it. 54 00:02:46,700 --> 00:02:48,940 Just like you could with real estate. 55 00:02:48,940 --> 00:02:53,340 right if you hold real estate you can earn a yield on it and now if you hold bitcoin you can earn a 56 00:02:53,340 --> 00:02:58,620 yield on it and just being here running around this conference there are several ways that people are 57 00:02:59,420 --> 00:03:04,060 generating yield on bitcoin assets and those are evolving very quickly i mean just just the last 58 00:03:04,060 --> 00:03:11,740 few minutes i was talking with um hunter albright at salt okay salt provides bitcoin-back lending 59 00:03:11,740 --> 00:03:17,180 products okay bitcoin-backed lending products so you know you as a personal holder if you wanted to 60 00:03:17,180 --> 00:03:22,380 monetize your bitcoin you can go put post some bitcoin as collateral and get fiat dollars to go 61 00:03:22,380 --> 00:03:29,020 use them however you want to now but there's difficult terms you have a margin call if the 62 00:03:29,020 --> 00:03:33,980 price of bitcoin drops 50 you've got to post more collateral and that's a risk that you may have to 63 00:03:33,980 --> 00:03:40,380 be willing to take yep they're offering a new product called salt shield and salt shield is 64 00:03:40,380 --> 00:03:43,700 is effectively insurance on the margin call. 65 00:03:45,100 --> 00:03:50,100 Where they will, if you can buy this little add-on product 66 00:03:50,400 --> 00:03:53,960 that effectively gives you more capacity 67 00:03:53,960 --> 00:03:56,140 in the event that you got close to a margin call, 68 00:03:56,140 --> 00:04:00,020 you effectively borrow more Bitcoin 69 00:04:00,020 --> 00:04:01,500 so you don't get margin called. 70 00:04:01,500 --> 00:04:03,800 Borrow more Bitcoin against what Bitcoin? 71 00:04:03,800 --> 00:04:06,060 Against your loan transaction. 72 00:04:06,060 --> 00:04:07,760 So even if your loan is getting to the point 73 00:04:07,760 --> 00:04:10,760 where the loan's value needs topping up 74 00:04:10,760 --> 00:04:12,500 to make sure you're not margin called. 75 00:04:12,680 --> 00:04:14,120 So how does it get extra? 76 00:04:14,240 --> 00:04:15,020 You buy it up front. 77 00:04:15,480 --> 00:04:15,940 I see. 78 00:04:16,380 --> 00:04:16,940 You buy it up front. 79 00:04:17,000 --> 00:04:18,000 It's like an insurance policy. 80 00:04:19,000 --> 00:04:22,800 And is it the same dynamics of the second loan, 81 00:04:22,920 --> 00:04:24,080 essentially, as the first? 82 00:04:24,740 --> 00:04:24,940 No. 83 00:04:26,060 --> 00:04:27,200 No, different dynamics. 84 00:04:27,380 --> 00:04:28,800 I've got to look more into it. 85 00:04:28,880 --> 00:04:33,180 But the interesting part is the SALT lending 86 00:04:33,180 --> 00:04:37,120 is taking capacity from corporations 87 00:04:37,120 --> 00:04:39,000 that hold Bitcoin on their balance sheet. 88 00:04:39,880 --> 00:04:44,160 And that Bitcoin can be held in an escrow account 89 00:04:44,160 --> 00:04:45,620 with their existing custodian, 90 00:04:46,180 --> 00:04:49,200 and it can be held there within that transaction. 91 00:04:49,340 --> 00:04:51,340 And that loan is over-collateralized. 92 00:04:51,360 --> 00:04:55,260 So you think about the risk of the Bitcoin collateral 93 00:04:55,260 --> 00:04:56,080 that's been posted, 94 00:04:57,080 --> 00:04:59,880 and it's a relatively de-risked product 95 00:04:59,880 --> 00:05:02,160 because the underlying loan is over-collateralized. 96 00:05:02,280 --> 00:05:04,280 So the real question is, 97 00:05:04,520 --> 00:05:06,440 if there is a margin call, whose dollar loss 98 00:05:06,440 --> 00:05:12,460 comes first and it's probably the person that's taking out the loan yeah takes takes the loss 99 00:05:12,460 --> 00:05:18,220 first but that's just one example of innovation that's happening in the space there are hundreds 100 00:05:18,220 --> 00:05:25,040 there are hundreds of examples that are happening in the space um so we're early days and these 101 00:05:25,040 --> 00:05:31,460 treasury companies can always wait they have the luxury of time most of the time 102 00:05:31,460 --> 00:05:44,420 And if the price of Bitcoin goes higher, now they have more capital and they can start maybe that if you get more capital, that gets you into a different echelon where you can run different strategies or access different yield opportunities. 103 00:05:44,420 --> 00:05:52,540 So for us, for example, at our company, Strive, we issued $200 million of perpetual preferred equity. 104 00:05:52,540 --> 00:05:58,880 and in order to access the perpetual preferred equity market you you kind of need about 105 00:05:58,880 --> 00:06:07,100 5 000 bitcoin 5 000 6 000 bitcoin and need to issue about 150 to 200 million dollars 106 00:06:07,100 --> 00:06:12,760 of this product in order for it to be attractive to that marketplace so there's a as you get higher 107 00:06:12,760 --> 00:06:17,700 up in scale there are more opportunities that open up to you and so this is really all of these 108 00:06:17,700 --> 00:06:21,640 treasury companies like this has always been i think pretty obvious to anyone watching that they're 109 00:06:21,640 --> 00:06:28,280 to become some kind of Bitcoin bank. Do you think that is a sort of transition that will happen in 110 00:06:28,280 --> 00:06:33,640 the next three or four years or is that a longer playbook? Can you repeat the question? 111 00:06:33,640 --> 00:06:37,640 Like, so with strategy particularly, it was always obvious they were going to become some 112 00:06:37,640 --> 00:06:42,200 kind of Bitcoin financial service bank, whatever you want to call it. Like, do you think any treasury 113 00:06:42,200 --> 00:06:46,760 company from here that's going to survive at good scale is probably going to do the same thing and 114 00:06:46,760 --> 00:06:50,140 and become either a lender or... 115 00:06:50,140 --> 00:06:51,220 Not necessarily. 116 00:06:51,580 --> 00:06:52,780 They don't have to be. 117 00:06:52,920 --> 00:06:55,160 It just gives you power to operate, 118 00:06:55,340 --> 00:06:57,140 the power to continue to operate into the future. 119 00:06:57,920 --> 00:06:59,340 You don't have to be a bank, right? 120 00:06:59,360 --> 00:07:02,960 You look at a company like 21 that just came out, 121 00:07:03,020 --> 00:07:05,300 they're focusing primarily on the operating business 122 00:07:05,300 --> 00:07:07,120 and Bitcoin infrastructure. 123 00:07:07,920 --> 00:07:10,240 So having the Bitcoin on their balance sheet 124 00:07:10,240 --> 00:07:13,320 gives them access to dollars that they can utilize 125 00:07:13,320 --> 00:07:14,300 in their operating business. 126 00:07:14,300 --> 00:07:15,920 So the real question then becomes, 127 00:07:15,920 --> 00:07:19,380 for 21, does that use of those dollars, 128 00:07:19,820 --> 00:07:21,460 is that better off in the operating business? 129 00:07:21,660 --> 00:07:23,160 Like if Bitcoin's your hurdle rate, 130 00:07:23,960 --> 00:07:25,720 would you rather deploy those dollars 131 00:07:25,720 --> 00:07:27,460 into an operating business or buy more Bitcoin? 132 00:07:27,800 --> 00:07:29,460 Yeah, and that's the key question. 133 00:07:29,700 --> 00:07:32,480 Because like, I don't pay loads of attention 134 00:07:32,480 --> 00:07:33,160 to treasury companies. 135 00:07:33,200 --> 00:07:34,200 Apart from when I do shows on them, 136 00:07:34,200 --> 00:07:35,080 I talk to people like you. 137 00:07:36,480 --> 00:07:38,580 But from the outside looking in, 138 00:07:39,120 --> 00:07:41,220 it doesn't seem like any of the underlying businesses 139 00:07:41,220 --> 00:07:42,260 are actually very important. 140 00:07:42,740 --> 00:07:45,180 Like that's not why strategy's gone up in price a load. 141 00:07:45,180 --> 00:07:49,220 That's not why they've got to 650,000 Bitcoin or wherever they're at now. 142 00:07:49,760 --> 00:07:54,920 Like, do you think that's the wrong way to approach this in terms of looking at an operating 143 00:07:54,920 --> 00:07:57,000 business instead of just more like pure play treasury? 144 00:07:58,820 --> 00:08:02,400 Yeah, like there's, I think there's just room for so many different types of companies. 145 00:08:02,560 --> 00:08:05,560 I mean, our future and our world is moving significantly more digital. 146 00:08:05,940 --> 00:08:12,300 And we don't know exactly what the future of Bitcoin backed finance looks like, or even 147 00:08:12,300 --> 00:08:15,600 what these companies can potentially do in the future. 148 00:08:15,920 --> 00:08:20,000 So there's just optionality 149 00:08:20,000 --> 00:08:21,500 by having Bitcoin on your balance sheet. 150 00:08:21,600 --> 00:08:22,600 It saves you. 151 00:08:22,680 --> 00:08:25,180 So you have the ability to operate into the future. 152 00:08:26,180 --> 00:08:27,860 This episode is brought to you by AnchorWatch. 153 00:08:28,160 --> 00:08:29,620 The thing that keeps me up at night 154 00:08:29,620 --> 00:08:31,080 is the idea of a critical error 155 00:08:31,080 --> 00:08:32,520 with my Bitcoin cold storage. 156 00:08:32,820 --> 00:08:34,420 And this is where AnchorWatch comes in. 157 00:08:34,860 --> 00:08:36,560 With AnchorWatch, your Bitcoin is insured 158 00:08:36,560 --> 00:08:38,060 with your own A-plus rated 159 00:08:38,060 --> 00:08:39,800 Lloyds of London insurance policy 160 00:08:39,800 --> 00:08:42,120 and all Bitcoin is held in their time-locked, 161 00:08:42,120 --> 00:08:46,480 multi-sig vaults. 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205 00:11:01,200 --> 00:11:01,720 Yeah, Strive, 206 00:11:01,720 --> 00:11:04,520 We have 7,525 Bitcoin. 207 00:11:05,380 --> 00:11:08,260 And so just, I think it's about $650 million, 208 00:11:08,660 --> 00:11:09,360 something like that. 209 00:11:09,800 --> 00:11:13,320 And yeah, we're pretty sizable. 210 00:11:13,540 --> 00:11:16,080 I think we're 14th largest company 211 00:11:16,080 --> 00:11:17,220 that holds Bitcoin on the balance sheet. 212 00:11:17,320 --> 00:11:19,600 And we have the similar transaction. 213 00:11:19,760 --> 00:11:21,800 We went through the process of acquiring similar. 214 00:11:21,960 --> 00:11:23,200 So once that transaction closes, 215 00:11:23,380 --> 00:11:26,960 I think we'll be top 10 publicly traded companies 216 00:11:26,960 --> 00:11:28,260 that hold Bitcoin on the balance sheet. 217 00:11:28,520 --> 00:11:31,360 And that gives us more ability to grow 218 00:11:31,360 --> 00:11:33,780 and run the digital capital, 219 00:11:34,180 --> 00:11:38,000 digital asset treasury strategy into the future. 220 00:11:38,800 --> 00:11:44,140 So I would argue that there's going to be room 221 00:11:44,140 --> 00:11:45,660 for different types of strategies here. 222 00:11:46,220 --> 00:11:48,840 A hundred, maybe, maybe more. 223 00:11:49,120 --> 00:11:53,760 If you look at the existing structure of the world, 224 00:11:54,320 --> 00:11:56,800 there are 5,000 banks. 225 00:11:57,260 --> 00:11:59,260 There are 5,000 insurance companies. 226 00:11:59,260 --> 00:12:10,237 There are 5 credit unions and they all offer the exact same product Yep And so how do you differentiate They all operate in different places different locations 227 00:12:10,977 --> 00:12:14,137 offer different risk-return metrics, have different pricing. 228 00:12:15,097 --> 00:12:18,897 And I think that's a world in which we're moving. 229 00:12:18,997 --> 00:12:21,577 Obviously, you're going to have strategy, which is the biggest. 230 00:12:21,757 --> 00:12:21,897 Yep. 231 00:12:21,997 --> 00:12:24,597 And their lead is just getting even larger every day, right? 232 00:12:24,637 --> 00:12:26,037 They bought 10,000 Bitcoin last week. 233 00:12:26,077 --> 00:12:26,677 Yeah, insane. 234 00:12:26,677 --> 00:12:30,177 They bought a Strive last week worth of Bitcoin. 235 00:12:30,277 --> 00:12:31,517 We've been working really hard, right? 236 00:12:32,177 --> 00:12:32,697 Damn. 237 00:12:33,217 --> 00:12:37,497 But there's room to innovate within that. 238 00:12:37,857 --> 00:12:39,377 And you look at a company like Strategy, 239 00:12:39,517 --> 00:12:40,477 they're so large, 240 00:12:40,617 --> 00:12:43,817 and the responsibility that they have 241 00:12:43,817 --> 00:12:44,577 within the marketplace, 242 00:12:44,837 --> 00:12:47,797 they have to be incredibly transparent and simple. 243 00:12:48,177 --> 00:12:52,557 If they start doing things beyond what they're doing 244 00:12:52,557 --> 00:12:54,977 and that are difficult to quantify 245 00:12:54,977 --> 00:12:56,377 and difficult to understand, 246 00:12:56,477 --> 00:12:59,137 the story starts to get muddied very quickly. 247 00:13:00,037 --> 00:13:04,197 So I wouldn't necessarily look to them to be a leader. 248 00:13:04,637 --> 00:13:06,617 They are a leader in the professional preferred equity 249 00:13:06,617 --> 00:13:08,337 that their company is absolutely killing it, 250 00:13:08,437 --> 00:13:11,957 but the smaller companies may have room to innovate 251 00:13:11,957 --> 00:13:15,677 in these little smaller niche areas of capital markets. 252 00:13:15,937 --> 00:13:18,677 So kind of take high risk that it wouldn't be worth strategy taking. 253 00:13:20,017 --> 00:13:20,277 Right. 254 00:13:20,277 --> 00:13:26,217 Even for example, we went through the process to acquire similar. 255 00:13:26,817 --> 00:13:29,397 That's something that strategy has been very adamant 256 00:13:29,397 --> 00:13:31,737 that they're not going to do any M&A activity 257 00:13:31,737 --> 00:13:34,237 because there's tail risk associated with it. 258 00:13:34,317 --> 00:13:37,157 But a company like us, if we want to scale, 259 00:13:37,737 --> 00:13:39,437 if we want to issue a perpetual preferred equity, 260 00:13:40,477 --> 00:13:41,697 bringing in a company like Similar 261 00:13:41,697 --> 00:13:43,417 where we're able to double our Bitcoin stack 262 00:13:43,417 --> 00:13:45,997 and then issue perpetual preferred equity against that, 263 00:13:46,077 --> 00:13:48,397 that starts to look very attractive. 264 00:13:48,857 --> 00:13:48,917 Yeah. 265 00:13:49,637 --> 00:13:50,577 And because you're essentially, 266 00:13:50,737 --> 00:13:51,677 I don't know what the MNAV is, 267 00:13:51,937 --> 00:13:53,457 but it's below one for Similar, I believe. 268 00:13:53,597 --> 00:13:55,597 So you're buying Bitcoin at a discount while doing that. 269 00:13:55,597 --> 00:14:12,717 Yeah, effectively. So it was an all-stock transaction. The headline number looked horrible. It looked like we were buying Semler at $90 a share because our stock price at the time was trading at $4 and Semler's was trading at like 1MNAV or 0.9MNAV, something like that. 270 00:14:12,717 --> 00:14:16,697 So we didn't have any cash that went out the door in that transaction. 271 00:14:18,117 --> 00:14:29,617 So we effectively purchased similar using the premium that existed in our stock. 272 00:14:29,777 --> 00:14:30,217 I see. 273 00:14:30,697 --> 00:14:31,237 Does that make sense? 274 00:14:31,277 --> 00:14:33,637 So we effectively got Bitcoin at a discount. 275 00:14:33,737 --> 00:14:34,477 You can think of it that way. 276 00:14:34,617 --> 00:14:41,157 And so that's kind of the point I was trying to get to before where like, what is the market right now? 277 00:14:41,157 --> 00:14:45,037 How many can it really sustain as those sort of pop treasury companies? 278 00:14:45,117 --> 00:14:46,277 I think you can forget about the long tail. 279 00:14:46,377 --> 00:14:49,017 There's going to be people that try unique things in different markets 280 00:14:49,017 --> 00:14:49,737 that are smaller scale. 281 00:14:49,837 --> 00:14:52,337 They might work, but they're not going to ever end up being 282 00:14:52,337 --> 00:14:53,437 like a strategy-sized thing. 283 00:14:54,117 --> 00:14:58,717 So do you think of the, say, top 20 treasury companies, 284 00:14:59,357 --> 00:15:02,737 maybe even top 50, we're going to see continued acquisitions? 285 00:15:04,797 --> 00:15:06,297 Yeah, I think probably in the future. 286 00:15:06,397 --> 00:15:08,337 Well, I think one thing I want to challenge here is that 287 00:15:08,337 --> 00:15:10,397 just because your stock is trading below 1MNAB 288 00:15:10,397 --> 00:15:12,157 doesn't mean your company is like a failure. 289 00:15:12,517 --> 00:15:14,197 The company still holds Bitcoins. 290 00:15:14,317 --> 00:15:15,417 Everybody that works at the company, 291 00:15:15,517 --> 00:15:17,097 like they could liquidate the company today 292 00:15:17,097 --> 00:15:18,537 and it would be worth one. 293 00:15:18,777 --> 00:15:18,957 Yeah. 294 00:15:19,317 --> 00:15:21,457 But the challenge though, I see, 295 00:15:21,557 --> 00:15:22,397 and I could be wrong here. 296 00:15:22,557 --> 00:15:24,497 Like I say, I don't spend all my time 297 00:15:24,497 --> 00:15:25,457 thinking about this is like, 298 00:15:25,757 --> 00:15:27,777 once it's below 1x MNAV, 299 00:15:27,857 --> 00:15:29,477 especially for a sustained period of time, 300 00:15:29,537 --> 00:15:30,657 how do you ever get it back? 301 00:15:31,017 --> 00:15:32,877 Because like, it seems like, 302 00:15:33,177 --> 00:15:34,717 obviously you can't, 303 00:15:35,257 --> 00:15:37,117 you're going to have to either buy back shares, 304 00:15:37,297 --> 00:15:38,737 which you're going to have to raise debt to do 305 00:15:38,737 --> 00:15:39,997 or sell Bitcoin to do. 306 00:15:39,997 --> 00:15:44,657 Like, does it become like a death spiral once it goes below 1x for a long time? 307 00:15:45,357 --> 00:15:49,617 Yeah, I guess it depends on the productivity of the humans that work at the company. 308 00:15:49,817 --> 00:15:49,997 Yeah. 309 00:15:50,157 --> 00:15:54,357 Like, the humans that work at the company, what business can you do? 310 00:15:54,597 --> 00:16:00,657 You know, can you go, you know, make phone calls and leverage your Bitcoin in different ways? 311 00:16:00,777 --> 00:16:03,717 Can you go park at a Coinbase and earn 5% yield on it? 312 00:16:03,777 --> 00:16:07,337 Can you go, you know, be a capacity provider for Salt Shield, right? 313 00:16:07,337 --> 00:16:10,177 Like there's things that you can do. 314 00:16:10,337 --> 00:16:13,737 You go to the conferences and look at all of the opportunities out there, right? 315 00:16:13,737 --> 00:16:15,397 You can deploy that capital in different ways. 316 00:16:15,397 --> 00:16:24,637 So the equity valuations are a snapshot at a point in time. 317 00:16:24,757 --> 00:16:28,097 I don't think it's death spiral because it's really, it's just capital, right? 318 00:16:28,097 --> 00:16:31,317 If you're trading below one MNAB, you still have the money. 319 00:16:31,317 --> 00:16:39,837 yeah right there are there are one thing that i really like to do is compare these companies to 320 00:16:39,837 --> 00:16:44,057 the rest of the world and you can go compare a lot of these smaller companies that are trading 321 00:16:44,057 --> 00:16:48,377 under one m nav and you look at their balance sheets and go compare it to an equivalent sized 322 00:16:48,377 --> 00:16:53,977 market cap company uh in the rest of the equity market and that that equivalent size company in 323 00:16:53,977 --> 00:16:57,997 the rest of the equity market probably has a balance sheet that's one sixteenth of the size 324 00:16:57,997 --> 00:17:05,217 right and they're in they're in more hot water yeah and the company that actually has the money 325 00:17:05,217 --> 00:17:12,717 on the balance sheet so to to the extent that they can wait or you know get out in the market 326 00:17:12,717 --> 00:17:20,257 and operate i think they're going to be okay like most of them but to your point there's likely going 327 00:17:20,257 --> 00:17:26,797 to be future m&a uh within the market for companies that are just kind of dead in the water maybe 328 00:17:26,797 --> 00:17:30,417 they're too small, they can't get scale, they don't want to take on the risk of the opportunities. 329 00:17:30,637 --> 00:17:34,057 Maybe the board of directors is just tired and they want to be out of there. Maybe the operating 330 00:17:34,057 --> 00:17:39,677 business doesn't work very much anymore. Like they're getting taken over by AI. Even at that 331 00:17:39,677 --> 00:17:47,917 point, your business is an attractive M&A target. Because the operators of the business aren't 332 00:17:47,917 --> 00:17:53,757 attractive to bring on board. Just the Bitcoin. Like think about similar. Think about similar if 333 00:17:53,757 --> 00:17:59,837 didn't have the bitcoin yeah no one's buying that company no like the just recently they've lost some 334 00:17:59,837 --> 00:18:06,237 of their uh largest uh customers yeah and the revenue shrunk significantly because they had a 335 00:18:06,237 --> 00:18:11,277 lawsuit or something yeah there's a lawsuit and you know that it was a company that was going 336 00:18:11,277 --> 00:18:16,077 through challenges okay so if if that would have happened and they didn't have the bitcoin about 337 00:18:16,077 --> 00:18:22,157 sheet now now the company the company's worthless yeah right like it's worth the ip and what's the 338 00:18:22,157 --> 00:18:25,377 the ip worth well the ip is worth whatever somebody's willing to pay for it which might be 339 00:18:25,377 --> 00:18:35,177 a dollar right so that construction is everywhere within these treasury companies that you the bitcoin 340 00:18:35,177 --> 00:18:41,337 is worth something and if you can if you're so you've got two options if you're the if you're 341 00:18:41,337 --> 00:18:47,837 the company that's being acquired you have two options you can liquidate all the bitcoin and 342 00:18:47,837 --> 00:18:50,777 pay out all of the equity. 343 00:18:52,537 --> 00:18:55,717 Or you can look at being an acquisition target 344 00:18:55,717 --> 00:18:56,857 for any of these other companies 345 00:18:56,857 --> 00:18:59,537 and getting conversations with them and say, 346 00:18:59,617 --> 00:19:01,397 hey, I'm looking to be acquired. 347 00:19:01,997 --> 00:19:03,237 And then you can negotiate terms. 348 00:19:03,477 --> 00:19:04,257 If you don't like the terms, 349 00:19:04,517 --> 00:19:06,437 just look at the Bitcoin and pay out all the equity. 350 00:19:07,817 --> 00:19:10,197 So there's optionality within those 351 00:19:10,197 --> 00:19:12,577 just by having that Bitcoin. 352 00:19:12,577 --> 00:19:14,637 Yeah, I'm not trying to give you a hot time here at all. 353 00:19:14,737 --> 00:19:15,777 I'm just trying to figure out. 354 00:19:15,797 --> 00:19:16,977 These are good questions. 355 00:19:16,977 --> 00:19:19,697 And it's something that a lot of people are trying to figure out. 356 00:19:19,757 --> 00:19:22,677 And there's been a lot of hatred in the market about these treasury companies. 357 00:19:22,817 --> 00:19:27,017 A lot of people, you know, YOLOing and they've been volatile, right? 358 00:19:27,137 --> 00:19:32,657 These companies have been the volatility absorbers in the Bitcoin market, right? 359 00:19:32,657 --> 00:19:37,177 As we've been in this, you know, mini bear market here on the price of Bitcoin dropping 30%. 360 00:19:37,177 --> 00:19:40,257 It's like, where does all the excess liquidity come from? 361 00:19:40,297 --> 00:19:41,597 It comes out of the treasury companies. 362 00:19:41,717 --> 00:19:42,617 You've seen it with strategy. 363 00:19:42,617 --> 00:19:48,077 I mean, strategy's gone from a $120 billion company to $50 billion company. 364 00:19:48,277 --> 00:19:55,257 Like, that's a significant amount of liquidity that's left the market, yet the company's still trading $3 billion a day. 365 00:19:55,357 --> 00:19:59,457 Like, the company's still attractive to people that are trading the stock and holding the stock. 366 00:19:59,637 --> 00:20:01,997 So, yeah, it's an interesting dynamic. 367 00:20:02,337 --> 00:20:06,237 Yeah, and like, I have no problem with the treasury company. 368 00:20:06,377 --> 00:20:10,217 Like, I think companies going out there, buying loads of Bitcoin, putting on the balance sheet, that's cool. 369 00:20:10,217 --> 00:20:12,557 and like I love that there's someone out there 370 00:20:12,557 --> 00:20:13,437 buying a load of Bitcoin 371 00:20:13,437 --> 00:20:16,877 and I think if I was running a big corporation 372 00:20:16,877 --> 00:20:18,257 I would want Bitcoin on the balance sheet 373 00:20:18,257 --> 00:20:19,837 so none of that is like my issue 374 00:20:19,837 --> 00:20:23,257 the only place I have a slight issue is 375 00:20:23,257 --> 00:20:25,277 the people who are being 376 00:20:25,277 --> 00:20:28,937 like I don't know the right word 377 00:20:28,937 --> 00:20:29,917 it's definitely not tricked 378 00:20:29,917 --> 00:20:31,377 but they're being like incentivized 379 00:20:31,377 --> 00:20:32,997 to go and chase greater volatility 380 00:20:32,997 --> 00:20:33,997 in treasury companies 381 00:20:33,997 --> 00:20:36,717 because Bitcoin's been pretty flat over the last year 382 00:20:36,717 --> 00:20:39,137 and like I think selling Bitcoin 383 00:20:39,137 --> 00:20:40,137 to buy a treasury company 384 00:20:40,137 --> 00:20:41,737 is a very risky take. 385 00:20:41,837 --> 00:20:42,957 It's essentially the same as... 386 00:20:42,957 --> 00:20:43,437 I think that's a bad idea. 387 00:20:43,697 --> 00:20:44,697 Yeah, it's essentially the same 388 00:20:44,697 --> 00:20:45,117 as being like, 389 00:20:45,217 --> 00:20:46,237 I'm going to sell Bitcoin now 390 00:20:46,237 --> 00:20:46,857 at $90,000 391 00:20:46,857 --> 00:20:47,917 to buy back at $80,000. 392 00:20:48,017 --> 00:20:48,817 It's the same idea. 393 00:20:48,977 --> 00:20:50,037 And I think that generally 394 00:20:50,037 --> 00:20:51,277 doesn't play out well for people. 395 00:20:53,057 --> 00:20:56,177 Well, I would also challenge that. 396 00:20:56,277 --> 00:20:57,857 I think you kind of... 397 00:20:57,857 --> 00:20:58,997 You may step back 398 00:20:58,997 --> 00:20:59,817 and look at your life. 399 00:20:59,957 --> 00:21:01,257 There are bad entry points 400 00:21:01,257 --> 00:21:02,477 on all these things, 401 00:21:02,517 --> 00:21:03,437 becoming very obvious 402 00:21:03,437 --> 00:21:04,097 and very clear. 403 00:21:04,197 --> 00:21:05,037 There are bad entry points. 404 00:21:05,217 --> 00:21:08,617 I mean, I personally... 405 00:21:09,137 --> 00:21:15,057 went in very deep to micro just microstrategy at the time in november of 22. i thought that was a 406 00:21:15,057 --> 00:21:20,337 great entry it was like this company's solvent you know and everybody thinks they're dead and i was 407 00:21:20,337 --> 00:21:28,497 you know buying tail options in uh early 2023 um so i thought that was a very good entry point and 408 00:21:28,497 --> 00:21:35,937 you know in november when the stock was trading at 540 dollars was probably a bad entry point and 409 00:21:35,937 --> 00:21:37,977 and it was trading at four and a half XMNAP. 410 00:21:38,077 --> 00:21:39,837 But you look at the fundamentals of the company, 411 00:21:39,897 --> 00:21:40,837 the fundamentals of the company, 412 00:21:40,937 --> 00:21:43,097 like the company has literally never been stronger today. 413 00:21:43,997 --> 00:21:45,617 When the company is trading at $540, 414 00:21:46,157 --> 00:21:48,837 they had 250,000 Bitcoin and zero preferred equity. 415 00:21:50,217 --> 00:21:52,797 Now the company is trading at $180 416 00:21:52,797 --> 00:21:55,137 and they got 660,000 Bitcoin 417 00:21:55,137 --> 00:21:57,257 and five perpetual preferred equities. 418 00:21:58,377 --> 00:21:59,317 Which one's better? 419 00:21:59,597 --> 00:22:01,877 It's like the one that's $180, 420 00:22:02,217 --> 00:22:02,757 the one's 500, 421 00:22:02,877 --> 00:22:04,177 if you liked it at 540, 422 00:22:04,257 --> 00:22:05,797 it looks like a screaming deal here. 423 00:22:05,937 --> 00:22:07,417 Yeah, no, so I totally agree with that. 424 00:22:07,497 --> 00:22:10,217 And again, this is where it gets hard 425 00:22:10,217 --> 00:22:12,317 because comparing strategy to some of the other ones 426 00:22:12,317 --> 00:22:14,597 is they're just two different worlds. 427 00:22:14,657 --> 00:22:15,217 Yeah, totally. 428 00:22:15,577 --> 00:22:17,357 Because you can, at the same time, 429 00:22:17,397 --> 00:22:19,017 as I totally agree with what you're saying, 430 00:22:19,137 --> 00:22:20,657 you can look at something like NACA 431 00:22:20,657 --> 00:22:23,157 and it's like everyone's got completely wrecked. 432 00:22:23,357 --> 00:22:25,257 And maybe where it is right now is not a bad buy. 433 00:22:25,337 --> 00:22:25,797 I don't know. 434 00:22:25,957 --> 00:22:27,497 But the point is it's trading. 435 00:22:28,017 --> 00:22:30,277 And I always try and tell people not to trade 436 00:22:30,277 --> 00:22:31,837 and it's no different with treasury companies 437 00:22:31,837 --> 00:22:32,897 than it is with Bitcoin. 438 00:22:32,897 --> 00:22:33,337 Yeah. 439 00:22:34,337 --> 00:22:37,697 But as there's trap pools of institutional capital, 440 00:22:37,997 --> 00:22:40,277 I think you serve a really good market there. 441 00:22:40,337 --> 00:22:42,117 So it's not like I'm trying to give you too hard a time. 442 00:22:42,717 --> 00:22:43,897 And I do think that there's... 443 00:22:44,777 --> 00:22:47,577 Well, let's dive into this a little bit 444 00:22:47,577 --> 00:22:48,897 because if you're... 445 00:22:49,757 --> 00:22:52,137 I'm not recommending anybody sell Bitcoin 446 00:22:52,137 --> 00:22:52,937 to do any of this stuff, 447 00:22:53,017 --> 00:22:58,297 but you've seen large OGs do this, right? 448 00:22:58,377 --> 00:23:01,337 People that have had thousands of Bitcoin. 449 00:23:01,337 --> 00:23:04,177 I mean, Adam Back's funded pretty much every treasury company. 450 00:23:04,177 --> 00:23:11,397 You look at Adam Back, he's like, well, this is actually a really appealing opportunity if I could do this in a tax efficient way. 451 00:23:11,537 --> 00:23:14,057 If you could do this in a tax efficient way and start getting into this market. 452 00:23:14,177 --> 00:23:18,217 Yeah, you start to look at, you know, if you've got so many Bitcoin you don't know what to do with. 453 00:23:18,397 --> 00:23:25,817 Yeah, you might want to have some exposure here if you're underweight in some of these deals. 454 00:23:26,017 --> 00:23:26,197 Yeah. 455 00:23:26,197 --> 00:23:31,037 maybe that makes sense. But if you're like, if you've got, you know, two Bitcoin, 456 00:23:31,777 --> 00:23:35,817 probably doesn't make sense to sell your two Bitcoin and then buy. Like, it probably makes 457 00:23:35,817 --> 00:23:41,077 sense to just work more and buy additional exposure when you want it. And it's just, 458 00:23:41,217 --> 00:23:45,817 it's the like high volatility, the amplified part of your portfolio. That's probably more. 459 00:23:45,917 --> 00:23:50,597 Yeah. And there's nothing more risk-free than owning self-custody Bitcoin. But Adam Back is a, 460 00:23:50,737 --> 00:23:54,457 like Adam Back is obviously an incredible person, but he's also like, he's always been a trader. 461 00:23:54,457 --> 00:23:55,577 Like he loves trading Bitcoin. 462 00:23:55,577 --> 00:23:56,457 That's true, he does. 463 00:23:56,457 --> 00:23:57,917 That's like part of his shtick. 464 00:23:58,577 --> 00:24:00,737 Do you think there's kind of a dynamic going on now 465 00:24:00,737 --> 00:24:02,437 where as Bitcoin price is dropping, 466 00:24:03,237 --> 00:24:17,293 the market is almost testing a lot of these treasury companies because like MicroStrategy went through this in 2021 or 22 whenever it was where it traded at a discount It like let see whose operational team are on it 467 00:24:17,353 --> 00:24:18,234 who's going to survive this, 468 00:24:18,273 --> 00:24:19,633 who's going to position themselves really well. 469 00:24:19,694 --> 00:24:21,214 Do you think we're going through a bit of a stress test 470 00:24:21,214 --> 00:24:21,773 in that market? 471 00:24:23,093 --> 00:24:24,773 Yeah, a little bit. 472 00:24:24,773 --> 00:24:27,313 I mean, you try to compare it to 2022, 473 00:24:27,734 --> 00:24:31,214 and MicroStrategy had less assets 474 00:24:31,214 --> 00:24:32,954 than they did dead on the balance sheet at that time. 475 00:24:33,753 --> 00:24:35,194 Now you look at the company right now, 476 00:24:35,194 --> 00:24:37,793 and they have 12% leverage. 477 00:24:38,793 --> 00:24:38,873 Yeah. 478 00:24:38,974 --> 00:24:41,454 Yeah, it's like completely, completely different. 479 00:24:41,573 --> 00:24:42,974 Now, some of the other smaller, 480 00:24:43,214 --> 00:24:44,573 some of the other smaller companies, 481 00:24:44,954 --> 00:24:46,313 yeah, they're starting to get tested a little bit. 482 00:24:46,353 --> 00:24:47,474 You've seen a couple of margin calls. 483 00:24:47,553 --> 00:24:48,833 You saw a company like Saquon's, 484 00:24:48,893 --> 00:24:51,773 they sold some Bitcoin to reduce the leverage 485 00:24:51,773 --> 00:24:53,174 from the convertible bond on the balance sheet. 486 00:24:53,273 --> 00:24:55,033 Yeah, that might have been a good idea. 487 00:24:56,414 --> 00:25:00,373 But realistically, I think what we've seen 488 00:25:00,373 --> 00:25:01,633 kind of going on with Bitcoin 489 00:25:01,633 --> 00:25:03,714 probably has more to do with, 490 00:25:03,714 --> 00:25:13,253 just the credit environment in the broader business macro ecosystem, right? 491 00:25:14,214 --> 00:25:18,833 We've got interest rates coming down in a couple days, potentially, in the U.S. 492 00:25:19,674 --> 00:25:25,734 And a lot of incentive for the economy to be roaring in 2026, right? 493 00:25:25,734 --> 00:25:27,633 You've got Donald Trump. 494 00:25:28,954 --> 00:25:33,533 You've got elections in November of 2026. 495 00:25:33,714 --> 00:25:39,153 midterms. He's going to want the economy hot. You want everybody fired up. You just want everybody 496 00:25:39,153 --> 00:25:44,533 like, yes, I want more of this, right? Give me more of this. So there's every incentive for the 497 00:25:44,533 --> 00:25:49,813 economy to be rip-roaring in 2026 and potentially replacing Jerome Powell and the Fed with somebody 498 00:25:49,813 --> 00:25:59,533 that wants easy money and lower interest rates and the business to be booming. So I think that 499 00:25:59,533 --> 00:26:03,353 the four-year cycle is probably broken and you've got a lot of people that have been selling because 500 00:26:03,353 --> 00:26:05,234 of four-year cycle, this is the top. 501 00:26:05,573 --> 00:26:10,353 But we really haven't experienced a euphoric bull run. 502 00:26:10,353 --> 00:26:10,694 No. 503 00:26:11,753 --> 00:26:13,893 And we haven't experienced euphoria. 504 00:26:14,653 --> 00:26:17,133 The market's incredibly healthy from a leverage perspective. 505 00:26:17,853 --> 00:26:19,474 You've got infrastructure that exists 506 00:26:19,474 --> 00:26:20,653 that's never existed before. 507 00:26:20,974 --> 00:26:24,414 You now have credit markets expanding for capital. 508 00:26:24,813 --> 00:26:26,593 Like we're running around here in the Middle East 509 00:26:26,593 --> 00:26:30,313 and we're talking to oil-rich countries 510 00:26:30,313 --> 00:26:33,153 that have tons of wealth that are exploring 511 00:26:33,153 --> 00:26:34,333 and looking into this stuff, 512 00:26:35,454 --> 00:26:37,454 FOMO is intensifying. 513 00:26:37,793 --> 00:26:40,653 And I think we are getting very close 514 00:26:40,653 --> 00:26:44,194 to a lot of noise within this marketplace, 515 00:26:44,373 --> 00:26:45,793 especially if interest rates come down 516 00:26:45,793 --> 00:26:48,553 and money returns to kind of risk on assets. 517 00:26:48,993 --> 00:26:49,253 Let's go. 518 00:26:49,454 --> 00:26:50,853 I mean, I agree with you, by the way. 519 00:26:50,934 --> 00:26:52,573 I think that you can almost, 520 00:26:53,133 --> 00:26:54,273 after being in Bitcoin for a while, 521 00:26:54,313 --> 00:26:55,633 you almost feel when things are getting ready 522 00:26:55,633 --> 00:26:56,353 to heat up again. 523 00:26:56,353 --> 00:26:57,853 And I'm getting that feeling. 524 00:26:57,993 --> 00:26:58,273 Bubbling. 525 00:26:58,493 --> 00:27:00,653 I mean, it's not always right, full disclaimer. 526 00:27:00,873 --> 00:27:02,873 But I do totally see what you're saying. 527 00:27:03,153 --> 00:27:08,434 Is there a world where Bitcoin starts ripping and treasury companies don't perform better? 528 00:27:11,313 --> 00:27:18,033 Maybe. Yes. Some of them may not. It's quite possible that they underperform. 529 00:27:19,393 --> 00:27:23,873 It's also quite possible that a lot of them overperform because they're leveraged Bitcoin. 530 00:27:23,873 --> 00:27:35,893 So like our company, for example, if Bitcoin runs up, if Bitcoin increases, that gives us more capacity to issue our perpetual preferred equity. 531 00:27:36,253 --> 00:27:39,813 And if we issue more perpetual preferred equity, we're buying more Bitcoin with it. 532 00:27:41,273 --> 00:27:44,233 That's an attractive model. 533 00:27:44,714 --> 00:27:49,674 If Bitcoin goes up 10%, we pay out our monthly dividend, 534 00:27:50,093 --> 00:27:54,593 and we are able to issue more perpetual preferred equity, 535 00:27:54,733 --> 00:27:55,153 buy more Bitcoin. 536 00:27:55,214 --> 00:27:57,353 It starts to become a very attractive business model. 537 00:27:57,474 --> 00:27:58,773 That looks appealing. 538 00:27:59,653 --> 00:28:01,873 We've got amplified Bitcoin, and we've got digital credit. 539 00:28:01,993 --> 00:28:02,674 We've got two products. 540 00:28:03,393 --> 00:28:05,153 And so do you already have a preferred outlet in the market? 541 00:28:05,513 --> 00:28:06,053 Yes, we do. 542 00:28:06,194 --> 00:28:06,954 Yeah, and SEDA. 543 00:28:07,073 --> 00:28:08,553 And what are the terms on that? 544 00:28:09,013 --> 00:28:11,013 Yeah, so SEDA is 12% on par. 545 00:28:11,013 --> 00:28:13,454 So it pays $12 per share currently. 546 00:28:13,454 --> 00:28:19,194 it pays $12 per share. It's a variable rate interest perpetual preferred, very similar to 547 00:28:19,194 --> 00:28:24,773 stretch. So we have the ability to adjust the interest rate up and down depending on how it's 548 00:28:24,773 --> 00:28:29,914 trading. We want it to be within a target range between $95 and $105. So it's got a little bit of 549 00:28:29,914 --> 00:28:35,053 a wider band than strategy stretch product, which from a mathematical standpoint, stretches out the 550 00:28:35,053 --> 00:28:42,273 duration a little bit further. But we want this to be a more stable version. Well, it will likely 551 00:28:42,273 --> 00:28:45,694 be a little bit less stable than stretch. So a little bit more volatile than stretch, 552 00:28:45,694 --> 00:28:51,553 but still providing a significantly high yield relative to everything else that's out in the 553 00:28:51,553 --> 00:28:58,214 market. So our company, how we manage this, one of the biggest questions is how do you pay the 554 00:28:58,214 --> 00:29:02,293 dividends? And we pay the dividends by managing the risk on our balance sheet. 555 00:29:03,113 --> 00:29:04,653 Okay. So that's something I do want to get into. 556 00:29:04,914 --> 00:29:07,954 Yeah, let's talk about it. But just quickly before we do that, 557 00:29:08,573 --> 00:29:11,753 You went for 12% presumably just to be higher than strategy 558 00:29:11,753 --> 00:29:13,753 because otherwise you're not going to be able to compete with them. 559 00:29:13,954 --> 00:29:14,773 Well, we're much smaller. 560 00:29:15,053 --> 00:29:16,313 So we've got a different risk profile. 561 00:29:16,993 --> 00:29:19,253 The other thing that's unique about our product 562 00:29:19,253 --> 00:29:20,773 and our structure of the design, 563 00:29:20,993 --> 00:29:23,073 we do not have any convertible debt on our balance sheet. 564 00:29:23,414 --> 00:29:26,633 So this product is senior on our balance sheet. 565 00:29:27,093 --> 00:29:28,893 So we've got the perpetual preferred equity, 566 00:29:29,053 --> 00:29:29,813 and that's it. 567 00:29:30,593 --> 00:29:34,273 So that's a unique capital structure compared to strategy. 568 00:29:34,273 --> 00:29:42,233 now we can also take uh we can we can be a little bit more flexible uh with with the design of that 569 00:29:42,233 --> 00:29:47,993 product what if you could lower your tax bill and stack bitcoin at the same time well by mining 570 00:29:47,993 --> 00:29:53,414 bitcoin with blockware you can new tax guidelines from the big beautiful bill allow american miners 571 00:29:53,414 --> 00:29:57,793 to write off a hundred percent of the cost of their mining hardware in a single tax year that's 572 00:29:57,793 --> 00:30:02,253 right a hundred percent write-off so if you have a hundred thousand dollars in capital gains or 573 00:30:02,253 --> 00:30:06,093 income you can purchase a hundred thousand dollars of miners and offset it entirely. 574 00:30:06,893 --> 00:30:10,993 Blockware's mining as a service enables you to start mining bitcoin right now without lifting 575 00:30:10,993 --> 00:30:15,493 a finger. 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Get 20% off at bitkey.world when you use the code WBD. That's B-I-T-K-E-Y 598 00:32:14,914 --> 00:32:20,553 dot world and use the code WBD. Yeah, because preferred to like, they're the most interesting 599 00:32:20,553 --> 00:32:25,194 that's happened in the treasury space this year, I think. And I had Fong on the show recently. I 600 00:32:25,194 --> 00:32:26,194 I don't know if you listened to that one. 601 00:32:26,393 --> 00:32:26,934 I did, yeah. 602 00:32:27,013 --> 00:32:27,493 It was great. 603 00:32:27,573 --> 00:32:28,153 Yeah, great show. 604 00:32:28,293 --> 00:32:30,113 And that was the question I had for him is like, 605 00:32:30,233 --> 00:32:33,714 if you have this interest payment that you have to pay out every year, 606 00:32:33,853 --> 00:32:35,434 I don't know how high yours is. 607 00:32:35,493 --> 00:32:37,414 I think strategy is around 750 million. 608 00:32:37,733 --> 00:32:37,894 Yeah. 609 00:32:38,394 --> 00:32:42,773 In a scenario where your shares price is trading at less than 1XM now, 610 00:32:43,013 --> 00:32:44,273 how do you pay that back? 611 00:32:44,333 --> 00:32:46,353 Because you can't really dilute shareholders at that point. 612 00:32:47,153 --> 00:32:51,533 So you either issue more preferreds or you sell Bitcoin. 613 00:32:52,293 --> 00:32:52,454 Yeah. 614 00:32:52,454 --> 00:32:55,894 And what if the demand for the preferred isn't there? 615 00:32:56,493 --> 00:32:58,153 Yeah, there's a few different things. 616 00:32:58,213 --> 00:33:00,493 You can also enter the derivatives market for Bitcoin. 617 00:33:00,633 --> 00:33:01,533 You've got Bitcoin on your balance sheet. 618 00:33:01,633 --> 00:33:02,353 You can enter the derivatives market. 619 00:33:02,353 --> 00:33:02,954 What does that mean? 620 00:33:03,053 --> 00:33:03,674 What do you do? 621 00:33:03,914 --> 00:33:06,333 So there's multiple things that you can do. 622 00:33:06,333 --> 00:33:10,773 So you can sell covered calls. 623 00:33:10,934 --> 00:33:15,513 That's the clear one that most people can wrap their heads around. 624 00:33:15,653 --> 00:33:19,394 But there's also the futures trade. 625 00:33:19,394 --> 00:33:22,473 you can earn yield through that environment. 626 00:33:22,633 --> 00:33:27,213 There's also other yield producing ways 627 00:33:27,213 --> 00:33:28,773 that you can use your Bitcoin as collateral 628 00:33:28,773 --> 00:33:30,973 for just little tiny pieces of yield 629 00:33:30,973 --> 00:33:31,954 to help pay those dividends. 630 00:33:32,153 --> 00:33:33,473 And then you also have operating business. 631 00:33:33,633 --> 00:33:36,213 So operating business, any cash flow that comes in the door, 632 00:33:36,293 --> 00:33:37,833 you can use that to pay dividends as well. 633 00:33:38,093 --> 00:33:40,373 But also another thing that is unique to us 634 00:33:40,373 --> 00:33:43,833 and it's cool seeing strategy follow behind us here 635 00:33:43,833 --> 00:33:46,973 is we came out to market with 12 months of cash 636 00:33:46,973 --> 00:33:48,713 to pay our dividends. 637 00:33:48,713 --> 00:33:50,133 So we had a 12-month cash reserve. 638 00:33:50,174 --> 00:33:50,833 Oh, that's quite cool. 639 00:33:51,454 --> 00:33:53,793 So we actually led strategy in that. 640 00:33:53,853 --> 00:33:54,894 And then just this last week, 641 00:33:54,993 --> 00:33:58,033 they come out with a $1.44 billion cash reserve 642 00:33:58,033 --> 00:34:01,033 to pay 18 months worth of dividends into the future 643 00:34:01,033 --> 00:34:05,194 to kind of mute this concern of how do you pay the dividends. 644 00:34:05,394 --> 00:34:09,113 So it's like, and you can also sell a common stock ATM. 645 00:34:09,253 --> 00:34:11,193 But again, if your common stock ATM is below one, 646 00:34:11,673 --> 00:34:15,414 you would tap these other pools of capital. 647 00:34:15,414 --> 00:34:18,573 You can kind of think of it as a line of defense. 648 00:34:18,713 --> 00:34:19,794 It's like first line of defense. 649 00:34:19,914 --> 00:34:20,794 So like I've got the cash. 650 00:34:21,513 --> 00:34:22,834 Okay, I've got the cash reserve. 651 00:34:23,073 --> 00:34:30,753 And then I've got, meanwhile, if I have to dip into this cash reserve, because my stock's trading under 1MNAV, I'm also going to go explore these other options. 652 00:34:31,834 --> 00:34:34,593 To rebuild and fill back up that cash reserve. 653 00:34:34,914 --> 00:34:39,894 And if the stock recovers at that point in time, then I can, you know, start, you know, dipping back into that. 654 00:34:40,233 --> 00:34:43,874 Is there like, sorry, it would almost be a great problem to have. 655 00:34:43,874 --> 00:34:57,653 But is there a potential problem, especially as like a younger treasury company, that the preferred is so popular and the common share price doesn't raise enough that you can like tap the ATM that your interest payments get so large that you kind of get forced to sell Bitcoin? 656 00:34:58,073 --> 00:34:59,394 Well, we can control that. 657 00:34:59,553 --> 00:35:01,894 We control how much preferred we have outstanding. 658 00:35:02,253 --> 00:35:05,394 So we're constantly monitoring our leverage, right? 659 00:35:05,854 --> 00:35:08,773 Right now, we're about 30% amplified. 660 00:35:08,773 --> 00:35:18,653 so our notional outstanding is about 30 of our bitcoin balance sheet so our annual interest 661 00:35:18,653 --> 00:35:25,374 payment is 24 million dollars we have got 200 million outstanding at 12 interest rate so that's 662 00:35:25,374 --> 00:35:33,814 24 million dollars if you look at uh the interest if you were to break down the interest payable 663 00:35:33,814 --> 00:35:37,673 by day in the trading days throughout the year, 664 00:35:38,233 --> 00:35:41,553 our daily interest payable is about $100,000 665 00:35:41,553 --> 00:35:43,093 if you were to break it down daily. 666 00:35:45,173 --> 00:35:47,894 Lately, our stock has been trading 667 00:35:47,894 --> 00:35:50,414 between $50 and $100 million a day. 668 00:35:51,414 --> 00:35:53,753 So if I just need to raise $100,000 669 00:35:53,753 --> 00:35:56,794 on our stock's trading, it's not much, right? 670 00:35:56,794 --> 00:36:00,954 Like, yeah, I could go issue $100,000 of stock a day. 671 00:36:00,954 --> 00:36:04,013 And that's, you know, that's an interesting way to look at it. 672 00:36:05,013 --> 00:36:21,030 So that uh this is so we we constantly yeah you brought up the champagne problem right You you got so much uh interest in the perpetual preferred equity that that you know you can sell enough of it or the price gaps up right Right now 673 00:36:21,070 --> 00:36:25,110 it's trading at $91. And, you know, if it goes above our estimated trading range, 674 00:36:25,370 --> 00:36:30,790 we can issue more of it to bring it back down to 100, which we would absolutely do. 675 00:36:31,610 --> 00:36:39,590 But to the extent that we got too amplified, we would look at, you know, can we issue more equity 676 00:36:39,590 --> 00:36:42,710 to bolster our balance sheet to reduce the amplification? 677 00:36:43,050 --> 00:36:45,870 Or can we look at taking on a tail hedge? 678 00:36:45,950 --> 00:36:47,190 Can we purchase a tail hedge 679 00:36:47,190 --> 00:36:52,970 where we can pull off downside risk on the balance sheet? 680 00:36:53,530 --> 00:36:54,690 So you've got a few things. 681 00:36:54,750 --> 00:36:59,310 You've got tools that you can use to manage that circumstance. 682 00:37:00,050 --> 00:37:01,990 Yeah, because when I asked Fong that question, 683 00:37:02,890 --> 00:37:05,130 he said he wasn't shy about saying 684 00:37:05,130 --> 00:37:07,370 there is a scenario where they may have to sell Bitcoin. 685 00:37:07,490 --> 00:37:08,430 They don't want to. It might be there. 686 00:37:08,610 --> 00:37:09,210 It's possible. 687 00:37:09,210 --> 00:37:14,010 And I get he's got a fiduciary duty. He has to say that. But do you think there's, 688 00:37:15,690 --> 00:37:21,130 obviously selling Bitcoin as a treasury company is a strange signal to the market, I think. 689 00:37:21,130 --> 00:37:24,490 But do you think that changes over time and it becomes a more commonplace thing? 690 00:37:24,490 --> 00:37:30,490 Yeah. It's capital. It's the most liquid capital on the planet. Imagine if you're 691 00:37:30,490 --> 00:37:34,090 over leveraged and you've got a real estate portfolio, you're screwed. 692 00:37:34,090 --> 00:37:34,410 Yeah. 693 00:37:34,410 --> 00:37:38,890 Right? Like, oh, let me go liquidate the stadium real quick. It's not going to happen. 694 00:37:38,890 --> 00:37:40,430 Three years later, you might get rid of it. 695 00:37:40,770 --> 00:37:42,430 Yeah, but you could go sell. 696 00:37:42,910 --> 00:37:47,190 Like I said, our annual interest obligation is $24 million. 697 00:37:47,650 --> 00:37:47,790 Yeah. 698 00:37:48,770 --> 00:37:50,910 Bitcoin trades $60 billion a day. 699 00:37:51,910 --> 00:37:58,150 Like if I needed to sell, you know, $2 million of Bitcoin, 700 00:37:58,290 --> 00:38:01,490 the Bitcoin price isn't going to move a penny. 701 00:38:01,650 --> 00:38:01,790 Yeah. 702 00:38:02,950 --> 00:38:04,090 And it would clear. 703 00:38:04,250 --> 00:38:05,410 Like that would clear the market. 704 00:38:05,410 --> 00:38:09,130 So it's a tool. 705 00:38:09,590 --> 00:38:27,730 And when you start to run the mathematics on the perpetual preferred equity, if you take a very conservative view of the math, and let's just assume that you sold Bitcoin to pay the interest obligations, the model still works. 706 00:38:28,330 --> 00:38:30,210 So let me pose a question to you. 707 00:38:30,310 --> 00:38:31,070 I think this is fun. 708 00:38:31,070 --> 00:38:33,130 if I gave you 709 00:38:33,130 --> 00:38:35,010 a Bitcoin today 710 00:38:35,010 --> 00:38:36,970 would you be willing 711 00:38:36,970 --> 00:38:37,530 to pay me 712 00:38:37,530 --> 00:38:38,310 $10,000 713 00:38:38,310 --> 00:38:39,210 in fiat 714 00:38:39,210 --> 00:38:40,210 for the rest of your life 715 00:38:40,210 --> 00:38:42,070 $10,000 a year 716 00:38:42,070 --> 00:38:42,550 in fiat 717 00:38:42,550 --> 00:38:43,330 for the rest of your life 718 00:38:43,330 --> 00:38:45,390 yes 719 00:38:45,390 --> 00:38:47,470 that's effectively 720 00:38:47,470 --> 00:38:47,990 what we're doing 721 00:38:47,990 --> 00:38:48,910 with Perpetual Preferred 722 00:38:48,910 --> 00:38:51,790 because 723 00:38:51,790 --> 00:38:53,310 I was trying to figure out 724 00:38:53,310 --> 00:38:54,410 what the interest rate on that is 725 00:38:54,410 --> 00:38:55,570 and if it's the best decision 726 00:38:55,570 --> 00:38:55,810 but 727 00:38:55,810 --> 00:38:56,950 let's just say 728 00:38:56,950 --> 00:38:57,750 just make it 729 00:38:57,750 --> 00:38:59,770 just make it $12,000 a year 730 00:38:59,770 --> 00:38:59,950 yeah 731 00:38:59,950 --> 00:39:10,770 Okay, so if I gave you $100,000 and you bought Bitcoin with it today and you had to pay me $12,000 a year for the rest of your life, would you take that risk? 732 00:39:12,650 --> 00:39:14,930 It's an interesting way to think about it, right? 733 00:39:19,330 --> 00:39:22,370 You've got a fiat liability that you've got to pay into perpetuity. 734 00:39:23,030 --> 00:39:27,010 And if we entered that transaction, you'd figure it out. 735 00:39:27,010 --> 00:39:28,230 We are entering this transaction. 736 00:39:28,230 --> 00:39:34,730 you'd figure it out yeah uh even if the price of bitcoin went down you would you know do more 737 00:39:34,730 --> 00:39:41,190 podcasts and make more money and you you know you figured out you'd pay me cash maybe next year 738 00:39:41,190 --> 00:39:44,970 and instead maybe you sell a little of the bitcoin but because you're like i didn't make 739 00:39:44,970 --> 00:39:49,370 enough cash right you you would you'd go through the process and you'd figure it out so that's 740 00:39:49,370 --> 00:39:53,610 effectively what we're doing on a larger scale anytime we issue perpetual for equity somebody's 741 00:39:53,610 --> 00:39:59,550 giving us cash and we're plowing it into Bitcoin and we are our company is taking on the risk of 742 00:39:59,550 --> 00:40:05,610 how we pay on the dividends so one big criticism that comes out a lot that mainly in like traditional 743 00:40:05,610 --> 00:40:14,070 financial media is Bitcoin's not a yield bearing asset and which is not it's not but neither is 744 00:40:14,070 --> 00:40:18,730 real estate yeah and that's that's a that's a big that's a big statement that a lot of people 745 00:40:18,730 --> 00:40:22,570 disagree with. And you look at real estate by itself. 746 00:40:23,470 --> 00:40:24,390 A house isn't yield bearing. 747 00:40:24,530 --> 00:40:25,750 The house isn't yield bearing. 748 00:40:25,830 --> 00:40:28,050 A house doesn't create more little mini houses next to it. 749 00:40:28,050 --> 00:40:35,010 You have to take risk. You have to put work into it. Okay. Bitcoin is not yield bearing. 750 00:40:35,730 --> 00:40:41,170 You have to take risk. You got to put work into it. And that's the big distinction is that 751 00:40:41,170 --> 00:40:47,910 our company is risk-taking, right? Like we are risk-taking to buy more Bitcoin. We are taking 752 00:40:47,910 --> 00:40:50,450 on that risk of paying that dividend into perpetuity. 753 00:40:50,810 --> 00:40:51,910 So apart from the preferreds, 754 00:40:51,910 --> 00:40:53,570 which you're offering a similar product to Stretch, 755 00:40:53,630 --> 00:40:54,870 which I actually think is the most interesting 756 00:40:54,870 --> 00:40:56,030 of Strategies products anyway. 757 00:40:56,190 --> 00:40:57,210 It's really appealing, yeah. 758 00:40:57,370 --> 00:40:59,930 And you're issuing a slightly higher interest rate, 759 00:40:59,990 --> 00:41:01,050 understandably, like, 760 00:41:01,230 --> 00:41:02,750 otherwise you just won't compete with strategy. 761 00:41:03,150 --> 00:41:03,270 Yeah. 762 00:41:04,030 --> 00:41:05,930 How else are you trying to differentiate yourself? 763 00:41:07,730 --> 00:41:07,970 Yeah. 764 00:41:08,690 --> 00:41:13,230 Well, I think one thing that's a big differentiator for us 765 00:41:13,230 --> 00:41:16,230 is that, you know, we are a bit smaller 766 00:41:16,230 --> 00:41:18,130 and we offer a different risk return metric, 767 00:41:18,370 --> 00:41:20,270 there's going to be hundreds. 768 00:41:20,530 --> 00:41:21,690 Let me put this into perspective. 769 00:41:22,370 --> 00:41:27,450 So when we went out to market with Seda, 770 00:41:28,050 --> 00:41:30,330 we had just came off of a 30%. 771 00:41:30,330 --> 00:41:33,210 This is right after October 10th, the big liquidation event. 772 00:41:33,330 --> 00:41:35,890 And we went out to market right after that. 773 00:41:35,930 --> 00:41:36,390 Bad timing. 774 00:41:36,690 --> 00:41:37,930 Bad timing. 775 00:41:38,070 --> 00:41:40,430 Probably is some of the worst timing you probably could have had. 776 00:41:41,110 --> 00:41:43,050 And we came out with this product, 777 00:41:43,170 --> 00:41:44,850 and we're going to pay 12% interest. 778 00:41:44,850 --> 00:41:48,610 and still at this point strategy hasn't raised any cash and we went to the market and we're saying 779 00:41:48,610 --> 00:41:54,050 hey we're going to have a cash reserve we are our business is an asset management company everybody 780 00:41:54,050 --> 00:41:58,130 that works at the company are finance people we're going to operate in the financial markets we're 781 00:41:58,130 --> 00:42:05,250 going to explore yield opportunities we're going to find ways to um generate bitcoin yield that are 782 00:42:05,250 --> 00:42:09,410 are maybe a little bit more niche than what strategy may do for example like the m a yeah 783 00:42:09,410 --> 00:42:11,530 which was part of our original value proposition. 784 00:42:13,250 --> 00:42:14,810 And we went to the market, 785 00:42:15,430 --> 00:42:18,410 and initially we were going to market to raise $125 million. 786 00:42:19,410 --> 00:42:21,630 We upsized the deal up to $200 million 787 00:42:21,630 --> 00:42:23,170 because there was significant demand. 788 00:42:23,170 --> 00:42:26,710 And at the $200 million at a price of $80, 789 00:42:27,230 --> 00:42:30,030 we actually had nearly $500 million of demand. 790 00:42:31,050 --> 00:42:34,870 So we could have issued even more than that. 791 00:42:34,930 --> 00:42:36,870 So there was significant demand from that perspective. 792 00:42:36,870 --> 00:42:46,150 And we think this marketplace is going to expand drastically, especially as we start making inroads within the rating agencies. 793 00:42:46,190 --> 00:43:05,890 As the rating agencies start to wrap their heads around Bitcoin and digital credit, then we can start having real conversations with some of my old colleagues in the insurance and reinsurance world about adding these instruments to their balance sheet to protect against debasement and long-tail liabilities that they're not doing a great job managing right now. 794 00:43:05,890 --> 00:43:10,430 Yeah. We've not had enough time here, Jeff. We've only got a few more months. 795 00:43:10,430 --> 00:43:12,230 We'll do a fourth one down the road. 796 00:43:12,310 --> 00:43:31,470 But I do have a question for you before you go. So, strategy obviously have their Bitcoin projections, where they think Bitcoin will go. They have a bull bear case. How do you think about Bitcoin right now? Because I know you are a Bitcoiner, but you've been very heavily in the treasury world for the last year and a bit. What do you kind of project out for Bitcoin? 797 00:43:32,470 --> 00:43:34,770 Short term or short term, long term? 798 00:43:34,770 --> 00:43:41,730 whatever you're thinking about yeah we we view that over the next we're in a digital gold rush 799 00:43:41,730 --> 00:43:46,530 over the next four to eight years we think institutional adoption increases drastically 800 00:43:46,530 --> 00:43:50,770 we think sovereign adoption increases drastically we think digital credit starts to permeate 801 00:43:50,770 --> 00:43:58,130 throughout the rest of the market uh and because of that those dynamics you've got even the bitcoin 802 00:43:58,130 --> 00:44:04,450 etf being the most successful etf in history those dynamics are that success is going to breed more 803 00:44:04,450 --> 00:44:10,990 success and it already has so because of those dynamics the macro environment uh we see probably 804 00:44:10,990 --> 00:44:16,750 next four to eight years between uh a 30 to 50 compound annual growth rate for bitcoin and we 805 00:44:16,750 --> 00:44:24,190 think that will start to taper off as uh economies of scale and large economies of scale start to 806 00:44:24,190 --> 00:44:28,670 come into play once bitcoin's at a 10 trillion dollar asset it's probably going to be significantly 807 00:44:28,670 --> 00:44:35,330 less volatile. And the compound annual growth rate will be reducing over time into the future. 808 00:44:35,550 --> 00:44:40,030 But you think we get 30% to 50% over the next decade? I'll take it. I'll take that. 809 00:44:40,390 --> 00:44:48,070 Right. I mean, you look at the last seven years and it's been like 70%, 70% compound annual growth 810 00:44:48,070 --> 00:44:55,250 rate. Even what in 2022 is at 16,000 and we're in 90,000 right now. What is that? That's a lot. 811 00:44:55,250 --> 00:44:57,731 A lot of times, annualize that. 812 00:44:58,450 --> 00:45:00,731 That's 70%, 80% probably. 813 00:45:01,590 --> 00:45:05,390 And I don't think it takes a lot of capital 814 00:45:05,390 --> 00:45:09,050 to move it much higher. 815 00:45:10,370 --> 00:45:12,530 So one of the interesting things in the treasury world 816 00:45:12,530 --> 00:45:14,450 is that when strategy came out, 817 00:45:14,950 --> 00:45:16,650 started this whole genre, 818 00:45:17,110 --> 00:45:19,030 it took quite a long time for the companies 819 00:45:19,030 --> 00:45:20,950 to do the same thing, which always surprised me. 820 00:45:21,050 --> 00:45:23,050 When Saylor first came out and started doing his thing, 821 00:45:23,050 --> 00:45:24,850 I thought there was going to be essentially 822 00:45:24,850 --> 00:45:27,550 like a gold rush of corporations trying to own Bitcoin. 823 00:45:27,810 --> 00:45:29,990 And it wasn't really until 12 months ago, 824 00:45:30,090 --> 00:45:31,770 maybe 18 months ago, that really kicked off. 825 00:45:32,690 --> 00:45:35,370 If you were to look out another four years, 826 00:45:35,490 --> 00:45:37,930 how do you think these business models will have evolved? 827 00:45:38,070 --> 00:45:40,450 And what kind of market will they be fulfilling there? 828 00:45:40,990 --> 00:45:41,250 Yeah. 829 00:45:44,090 --> 00:45:46,470 Yeah, the market will evolve significantly. 830 00:45:47,231 --> 00:45:49,470 I think there will be another doubling 831 00:45:49,470 --> 00:45:51,750 of the number of companies that hold Bitcoin on the balance sheet 832 00:45:51,750 --> 00:45:53,330 and then it'll double again, right? 833 00:45:53,330 --> 00:45:54,750 I think that will happen. 834 00:45:54,850 --> 00:46:22,090 There are millions of companies out in the world. I think small, medium enterprises will start to adopt Bitcoin as well out of necessity. And I think digital credit is a multi-trillion dollar idea and that will probably take off like a wildfire and it will likely get to a point where some of these larger capital institutions will have no other option but to own it. 835 00:46:22,090 --> 00:46:28,510 you compare it to some of the other debt in the market and they're it just these products are 836 00:46:28,510 --> 00:46:35,570 so much better on a risk return basis that like banks and pensions and insurance companies can't 837 00:46:36,290 --> 00:46:40,250 will not be able to not hold these things especially if they get rated appropriately 838 00:46:40,250 --> 00:46:47,910 and so yeah i think we've got a lot of excitement on the horizon and the the yield generating 839 00:46:47,910 --> 00:46:52,930 opportunities are going to expand as well. If you think about if the price of Bitcoin goes from, 840 00:46:52,930 --> 00:46:58,270 you know, 100,000 to 500,000, the number of people that are interested in taking out a Bitcoin back 841 00:46:58,270 --> 00:47:03,090 alone is going to 5x. Yeah, that's not just going to double. That's not going to double, 842 00:47:03,170 --> 00:47:13,731 it's going to 5x, right? And if that happens, that provides more opportunity for these other type of, 843 00:47:13,731 --> 00:47:19,410 you know, yield environments or credit environments where the infrastructure can support itself 844 00:47:19,410 --> 00:47:23,150 as long as the risk is managed appropriately, which I think is incredibly important. 845 00:47:23,150 --> 00:47:28,030 And we now have institutional actors that are operating in traditional financial markets 846 00:47:28,030 --> 00:47:35,790 with risk backgrounds that view the responsibility as very large, right? 847 00:47:35,870 --> 00:47:40,530 So, Saylor and the strategy team and our team at Strive, we have a really big responsibility here. 848 00:47:40,530 --> 00:47:45,630 And we are laser-like focused on making sure that we manage our liabilities into perpetuity. 849 00:47:46,310 --> 00:47:49,250 Every part of the company is aligned for that. 850 00:47:49,830 --> 00:47:53,590 And we want to be the second largest issuer of digital credit on the planet. 851 00:47:54,350 --> 00:47:54,370 Awesome. 852 00:47:55,110 --> 00:47:57,290 I'm sorry we had to speed run this one so quickly. 853 00:47:57,290 --> 00:47:58,650 We've been really tight on time. 854 00:47:58,890 --> 00:48:00,170 But I love talking to you, Jeff. 855 00:48:00,350 --> 00:48:01,650 We definitely should do it again. 856 00:48:01,890 --> 00:48:02,410 Appreciate it. 857 00:48:02,530 --> 00:48:03,030 Thanks for the time. 858 00:48:10,530 --> 00:48:40,510 Thank you.