I think that the market is trying to find a villain right now.
And Sailor is that guy.
Like, he'll be the hero in the bull markets.
And then in the bear markets, you know, he'll be villainized by a lot of the community.
I do think that they did make a misstep when they used that cash reserve to pay off that $1.38 billion of convertible debt.
You have to think of how the market is pricing the risk of the instrument.
And that's simply what it is.
It's just the simple fact that right now, if you go to their transparent information, you can see that right now the effective yield is probably slightly over 13%.
So really, at the end of the day, it's simply the market signaling to strategy, hey, in order to essentially by stretch, if we want to take our money, buy your equity, then we need to be compensated above 13% right now to take on that added risk.
All right, let's do it.
Adam Livingston, thank you for coming on the show, man.
This was a bit of a last minute one.
Stretch has been having a real tough time for the last week or so.
And I thought you were the right guy to get on the call and figure out if Sailor is trapped
in this trade.
But welcome to the show, man.
Thank you, Danny.
I've been a longtime fan of the show.
So thank you so much for having me.
You texted me last night at like close to midnight my time.
I have a new kid at home.
She's about seven weeks old.
And I thought, will I get some sleep?
Will I be sleep deprived?
Can I even articulate my thoughts?
But we're going to give it a go.
So thanks for the invite, man.
I'm a huge fan.
No, thank you for pulling this out of the bag. That's impressive. With a seven-week-old at home,
I don't know if I'd have said yes to that, but thank you for coming on the show.
So I want to start with the stretch thing. It's trading at just under $89 right now,
way below what's meant to be par. How big a deal is this? Is this an existential threat to stretch?
It depends on how you define existential threat, of course. But in my opinion, no.
ultimately it's an equity. It's a credit hybrid equity thing. It's a credit-like instrument in
equity wrappers. So you have to think of how the market is pricing the risk of the instrument. And
that's simply what it is. It's just the simple fact that right now, if you go to strategy.com
and you go to their transparent information, you can see that right now the effective yield is
probably slightly over 13%. So really at the end of the day, it's simply the market signaling to
strategy, hey, in order to essentially by stretch, if we want to take our money, buy your equity,
then we need to be compensated above 13% right now to take on that added risk.
So what a lot of people do fail to understand, though, is that there is no stable coin peg. I do
see a lot of fun about this peg that's broken. And to be fair, I do think there is somewhat
accuracy with the term because they have something that they call the par stability mechanic,
I think is the actual phrase that they use.
And at the end of the day, it's simply that,
hey, we're going to raise the dividend
based on a volume weighted average price guidance
every single month.
If there's too much volume,
if the VWAP's below a certain price,
then we'll be more than happy to raise the dividend.
I expect that we'll see that.
And then on top of that,
once the stock actually trades at $100 or above,
above that par value,
on the other end, you have strategy there
issuing more shares into the market.
So I think a lot of people forget that
if that ATM at the market facility wasn't in place, then the effective yield would actually
be driven down a lot more because of the demand. So there is a par stability mechanic, but I do
think there's a lot of people that don't understand whether or not it's like a stable coin
Terra Luna peg. I think that there's lots of comparisons made. But no, I don't see anything
wrong with it. It's just the market saying, hey, we want an additional percent to be compensated
holding this thing. So, I mean, it's not the first time that it's traded below that par value of $100.
Like in, when was it? In sort of November last year, it traded way below, but this is definitely
the furthest below. And it's not actually traded at par since I think mid-May. So it's been
over a month now. Do you think it will get back to par?
I do for sure. Yeah. I just look at the overall credit quality of the company and
I see they have decades of Bitcoin dividend coverage. They just raised $300 million last
week. So if you look at their year-to-date capital raising, they are raising about 18 times what their
daily dividend bill is or their monthly dividend bill. So the capital markets access remains open.
They can continue stacking Bitcoin, stacking cash. I do think that they did make a misstep
when they used that cash reserve to pay off that $1.38 billion of convertible debt.
So there's been a few missteps that strategy has made in my time as a shareholder. But ultimately,
I don't think there's anything existential.
It's just the market wants an additional percentage point,
the effective yields up,
and then the overall credit quality,
I do think will win out
and it doesn't help when Bitcoin's down 50%.
And timing didn't help either
because Bitcoin dropped like $23,000 in no time.
They paid off that debt
and then Bitcoin went from 83K to 60K.
So that's like, I don't know what the exact percentage is,
but 20% of your Bitcoin value just immediately going away.
So that doesn't help the optics either.
That sort of retiring that convertible debt is something that I didn't understand at all.
I'm not sure what the thinking was behind that.
And I don't know if the company have sort of aired that and said why they did it.
But I thought that cash reserve was there.
So you had dividends for two years in cash.
There was no reason that strategy were going to sell Bitcoin to pay the dividends.
Like they had that as a buffer.
And then they got rid of almost all of that.
I actually, I just saw before we started recording overnight my time, I think they might have
hit the ATM again and put a lot more cash in a reserve to do that. But it made no sense to me.
That convertible debt wasn't due until I think 2029. Why did they do that?
Yeah. So the soonest that the debt was puttable, where I believe that the bondholders could
ask strategy to repurchase them, I think it was in September of 2027. So I agree with you,
still a decent length of time away. So I agree that it was a misstep, but
But you know giving strategy the benefit of the doubt I think when you look at the way the equity was trading and you look at the true MNAV of strategy there was a hefty premium on the common stock And so if you going to pull the lever on selling MSTR
and if it's net accreted to the shareholders,
I would have rather had them do that, to be honest with you.
I think that probably tapping the USD reserve was not the right call.
And what's really interesting is that when you compare
the USD reserve of strategy to that of Strive,
it is really remarkable to see how the market is pricing both of these digital credit instruments
because we both know that it's like competing for retail flows right now.
The sailors coming out and saying,
Stretch is 80% held by retail.
And I'm not naive enough to think that Seda isn't competing for the same flows.
But it's something like Strive has 43 times less Bitcoin than Strategy
or Strategy has 43 times more Bitcoin coverage.
but because strive has 11 more months in cash or eight months now you're just seeing a huge
discrepancy in how the things are trading um now obviously because of the outstanding
SATA the volume is a lot smaller so you need a lot more liquidity to move STRC um but it's
interesting to see how the things are trading but yeah I would tend to agree with you I don't think
that use of the reserve was a good move if you look in the SEC uh filing uh or maybe it was the
strc prospectus i can't remember exactly it must have been the filing after the usd reserve was
announced but they do talk about how they intended to use it and then they also had the phrase
something along the lines of we have total discretion to use it for whatever we want to so
the debate about whether or not they misled anybody it's like well the language is in there
that they have discretion so but yeah as an overall strategic move i don't know if i agree
yeah like the the misleading people is not something that i mean i'm not a micro strategy
shareholder so it doesn't concern me at all really that part of it it's just whether it was the right
move i i don't i don't understand it necessarily but like i i believe they've just raised or just
hit the atm to raise more money to have that sort of backup so i think that's probably a good move
but the thing that i don't necessarily get another thing i don't necessarily get is like
why would you be a mstr shareholder when it seems like you're just going to get diluted at sort of
every opportunity. Yeah, I think that if you look at history and you look at the overall total
returns over a long time horizon, it's pretty apparent that MSTR has considerably outperformed
Bitcoin in fiat terms. We were just talking before the show, as we get further into this Bitcoin bear,
I become more convinced that holding the treasury companies definitely isn't for everybody because
of the added volatility. And it requires a decent degree of understanding of Saylor's financial
engineering. But overall, I do think, you know, you look to history, you look at the strategy,
can they continue to issue equity that's accreted to the shareholders? Can they amplify the Bitcoin
exposure via the preferred stock issuance? And then if you think that they can pay those dividends,
I mean, that's mechanically how the Bitcoin exposure is amplified. So, you know, it's added
risk. You are taking the counterparty risk. You don't own the Bitcoin. You are economically exposed
to the residual. But some people like that trade. I'm an MSTR shareholder myself. I buy Bitcoin
every day. I don't own Stretch, but I do with my risk capital. That's the way I think through it.
I think of Bitcoin as saving, and then Bitcoin is the hurdle rate in my mind. I need to beat
Bitcoin if I'm going to invest in an equity. So I am an MSTR shareholder for that reason.
Just getting back to the SATA versus Stretch thing, it's been interesting to see SATA do
quite well and and i think one of the points you made before i could be wrong on this but
like that you said that stretch is 80 retail and i'm purely guessing here i would imagine
sata is not the same even higher like they they seem like very retail products at the moment and
it's part of the problem that if you play sort of retail games you win retail prizes and like this
is this is part of it like i'm sure huge liquidations played a part in stretch dropping
to like $83 or whatever it did. And I also think you said that the market is deciding that the cash
reserves are sort of the thing that they care about more. I just think it's higher yield. I
think people just chase higher yield. So I don't know how you kind of balance those two things out.
Yeah. I think that what we're witnessing right now in the market, Danny, I think you're spot on.
I should have said that actually, because I agree 100%. I've talked a lot about this where
I saw this study recently. I think Pierre Rochard tweeted it out or somebody else. I can't remember exactly, but it was essentially Bitcoin. Like how much of Bitcoin is explained by an efficient market hypothesis? Like just Bitcoin itself, not even like all of these crazy derivatives that, you know, these market participants continue to come up with, at least these issuers of the digital credit things.
So, like, I continue to see pricings in my mind with the strategy preferreds that to me, in my opinion, like just totally don't make any sense at all, especially when you look at strike, for example, where you have an embedded call option on MSTR going up, which is essentially a call option on Bitcoin going up.
and that thing will trade at the same yield as STRC.
I see a lot of these weird mispricings.
So I don't think that Bitcoin can be explained
by the efficient market hypothesis.
And it's almost like these things aren't either.
But I agree with you 100%
when they're competing for retail flows.
I don't think that a lot of people
are doing the hard risk analysis of them,
to be honest with you.
I think that they're looking at a headline yield number
and think, oh, I'll get paid daily
and I'll get paid more money.
They get that dopamine hit.
So I agree with you.
And did the daily dividends from Seta have an impact on Stretch?
And is that part of the reason we've had this drawdown?
Because I know that before Stretch were doing sort of bimonthly dividends and before Seta
were doing the daily, people were swapping between the two, like getting in the lock-in
date, getting the yield and then moving back.
And that kind of got completely arbed out.
Like the arbitrage was there.
That gone now because people have to hold Seta every day if you want to get the dividend end Has that meant that the retail has gone there parked their capital there and Seta now has less inflows Sorry the stretch has now less inflows Does that play any part in this
Yeah, I think it has to. There's no way of getting around that for sure. I think that
we are so much in an echo chamber with, number one, Bitcoin itself in terms of the broader world,
and then on top of people even know what stretch and Seta are. So ultimately, they've issued
$110 plus billion of STRC in a year. I think that's been a success for them.
They paid every single dividend on time. So like, it's going to take a while for the track record to
really open up strategy only as a B minus credit rating right now. So we're in this weird period
where they have to prove themselves, prove the credit quality of these instruments for a number
of years, maybe before you see larger institutional capital pools, even think of this meeting
mandates, for example. So right now we're just in an infancy stage and there's highly little doubt
in my mind that a lot of people didn't sell Stretch to go to SEDA. Yeah, it's been, I want
to pull up a chart actually. Let me just grab this. Cool. This is by my boy Checkmate. Can you see
this? Yep. So one of the interesting things of this chart to me, he wrote a newsletter piece on
on stretch a couple of days ago um is the number here at the end so i believe and someone can
correct me if i'm wrong but this shows that there is no stretch holder that has made money at these
prices including the yield including the dividend um like this is underwater in quite a big way
um and and i want to know sort of your opinion on this and if this signifies anything about the
digital credit narrative maybe not playing out how people expected maybe like is it still working is
it real yeah uh first thing i'd say i don't know if i need to fact check this the graph is really
small so i don't know what exactly what it says i see the price for the stocks i'm assuming here
it's this stretch total return is at 99.795 so it's um but it was ipo'd at 89 so it's a positive
return so i actually just ran the math on this it was ipo'd on i believe july 28th and uh stretch
has an overall total return because it's only like if it was IPO to 89 and it's around $89 today
with every single successful dividend paid, then they're at about a plus 6% total return.
So ever since the stretch IPO, stretch is about plus 6% total return while Bitcoin is minus 50.
And so I've actually made this point where people say, Adam, like you're cherry picking data. And
I'm like, well, I'm not really. I'm looking at the entirety of the data set, but I decided, okay,
Fine. I actually plugged it into AI just to number crunch everything. And I found out that of every single possible holding period between Bitcoin and STRC, stretch has won out on 86% of all possible time horizons since the stretch IPO when you're comparing it to Bitcoin.
so the stretch return is when you're including the dividends it does go up into the right versus
bitcoin falling off 50 so when you couple that with every dividend being paid successfully
and there are times of high volatility like now in february for example but overall it's been a
success the dividends have been paid um they have it has stripped the volatility out of bitcoin
considerably uh just showing that it's still a total return positive after a uh 50 bitcoin price
corrections so 86% of all possible time horizons since the IPO and uh like at least total return
since the IPO has been positive yeah I'm in the same boat I'd heard back from Checkmate so the
first the first chart that I showed you which was the um stretch returns and his point was that
anyone who bought a par is underwater at this point and that the other prefs are below IPO on
total return basis so and like the question was that like i guess are these preferred working as
intended yeah uh me and checkmate must have different math because um i ran it today it's
on my x account i have a totally different um number it was 89 or 90 at ipo and then we but
he's saying anyone who bought the hundred dollar peg or hundred dollars yeah like yeah like uh
that is well i don't know at any point in time yeah then probably yeah definitely yeah that's
sorry i was misunderstanding because his line was for like a month period so now we're cleared up
but yeah yeah 100 and then the other one that all the other prefs are below ipo price yeah yeah on
a total return yeah he's correct about all that stuff yeah when if you would have bought at 100
yeah you'd be underwater right now even after uh factoring and all the dividends paid that's true
so what was your question i'm sorry well and the other prefs being below ipa ipo price
including like with total returns it's are the prefs actually working as they were intended
yeah i do think so i think that when you look at the amount of capital that's raised by them
um like we are seeing some higher effective yields but nothing that signals that
the dividends can't be paid you look at the capital markets access they are just like
they're having their most successful year of capital raising ever.
Like 2026 with a Bitcoin bear market,
they're still raising more money and buying more Bitcoin at a faster pace than
ever, at least in a January through now year to date basis.
So when it comes to the credit quality, I think the risk is mispriced.
I think it's wild that they have to pay that high.
Ultimately they raised billions of dollars and they bought Bitcoin.
So I think like that's a win for them.
And then the people who bought them, I think, yeah, like just like with anything,
if you would have bought Bitcoin in October,
you would have been down 50% right now.
So buying Stretch,
you would have mitigated a lot of downside.
That's just mathematically true.
So yeah, I think that they're working just as intended.
I don't think anything's broken.
I think their credit quality is being questioned
by a lot of retail shareholders.
But overall, I think the credit quality is great.
And I think when Bitcoin returns you see them trade back up just like how they were last May So I think that what will happen Do you want to pay less in taxes and stack more Bitcoin
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Okay, because the question I have is, how do they raise capital going forward?
Because it seems like they have a few options.
They can obviously sell the preferreds, but that then increases their dividend liabilities.
They can raise more debt potentially, but again, that adds leverage.
They can and have and probably will continue to dilute shareholders.
Do you see that as the best option?
Because the other option is sell Bitcoin.
And as a strategy shareholder, is selling Bitcoin not the best thing for you?
If they just start selling enough to pay the dividends, the Bitcoin market can easily absorb
that amount of money.
I think it's, is it around just under $2 billion a year or something like that?
That they, is that right?
That they owe?
Yeah.
The Bitcoin market can take $2 billion a year in sell side.
Like, is that the best option?
I don't think they'll do it, but is that the best option?
Yeah.
What's really cool is that they have so much optionality.
As a Bitcoiner who like, I hate selling Bitcoin.
I don't, that doesn't drive well with me, to be honest with you.
It's maybe a personal preference where this idea of selling Bitcoin, the market absorbing,
It's $1.7 billion is the annual dividend obligation.
And do I think it can be done successfully?
A hundred percent.
Like the total volume of Bitcoin is orders of magnitude higher.
Like the market would absorb that no problem as evidenced by the fact that he bought 48
times as much Bitcoin the next week after he sold.
And the price probably went down.
So like the market can absorb it no problem.
But we really need to look at their total optionality with the true MNAV.
people continue to look at the basic MNAV with the market cap in the numerator, the market cap,
which is like the value of all the shares, you know, divided by the Bitcoin nav. That's not
telling the entire story because that's not looking at the preferred stock and the outstanding
preferred shares. And then so strategy does a better job with enterprise value where it incorporates
the overall, just a more cohesive picture of the capital structure. But if you look at everything
with the outstanding preferred stock
and you essentially do like an algebraic look
at the capital structure
and find out what is the senior claim Bitcoin.
So like when they issue Stretch
and they use those proceeds to buy Bitcoin,
you have to think of the residual,
what's left over economically for the MSTR shareholders.
And what you'll find is that the residual value
of balance sheet value
that's backing the MSTR shareholders,
it's not just the Bitcoin, it's also the cash.
Because as an equity holder,
you are exposed economically to the total residual,
not just the Bitcoin,
which is why Bitcoin per share is incomplete.
But if you crunch that MNAV number right now,
last time I ran the numbers,
it was like a 1.2X MNAV right now.
And so Saylor has come out
and corrected people online about this,
where if you look at the total capital markets activity,
it is accreted to MSTR shareholders.
So in terms of a lever to pull,
that would be my number one by far because the stock is still trading at a 15 to 20 true premium
and i think that bitcoin is close to a bottom i could be wrong maybe it goes down to 50k or
something but i don't think that um the premium will probably drop any more than it is now and if
it does like if the true cebem nav goes down to one they only have to dilute the shareholders five
percent per year to pay that annual dividend and that's if they don't tap the bitcoin or the cash
So to me, I'm like the MSTR shareholders are seeing if all the premium evaporates to the residual, they would have to dilute the stock only 5% per year.
And in exchange, you get that 40% Bitcoin amplification.
So I think a lot of MSTR shareholders look at that tradeoff.
And if they're bullish on Bitcoin from a pretty big overcorrection, the math makes sense for them.
It's interesting because I was saying this to you before we started the show.
I get so much hate for trying to ask these questions about treasury companies.
I've said a million times I'm skeptical of them.
And honestly, I've come to the realization that the truth is I just don't really like them.
My gut is just telling me I don't really like them.
There's nothing wrong with that.
There's nothing wrong with that at all.
I don't like the narrative of digital credit.
Like I don't like,
like all these sort of financial terms around Bitcoin,
like Bitcoin is just Bitcoin.
Like I like the idea.
I like what strategy started as.
I like having a business that generates money
and putting that money in Bitcoin.
Awesome.
Like I love what Block are doing.
I love what Tesla and SpaceX are doing.
Like having just a cool business that makes money
and that money goes into Bitcoin is awesome.
What I'm not a huge fan of.
And again, like it's not that I think it's going to fail
or I don't think it'll do well.
It might do amazingly well.
I just don't like it.
Yeah.
And I feel like there's a lot of the sort of at least Twitter world that are kind of coming to that same conclusion.
Like there's been a lot of hate on Saylor.
And to be fair, I think probably that's bear market things.
I'm sure Saylor will be fine.
I'm sure he's not losing sleep over people like me complaining on Twitter.
But like, why do you think this hate has sort of arisen?
Yeah, that's a really good question.
I think that there is a philosophical split in the Bitcoin community that's like really eating it away.
It kind of are previously at least better vibe that we had going on.
I think that it's because people are defining Bitcoin's win condition differently.
Like you just said, you don't like the the treasury companies.
And that's a very common viewpoint right now.
I think a lot of people, they, you know, people come to Bitcoin through a variety of ways and they have their own win condition attached to it.
Because to me, like Bitcoin is this monolith that's just this amazing, pristine, free, neutral
monetary network.
And then a lot of people like to attach their subjective, often political philosophy win
conditions.
What does it look like for Bitcoin to win?
And I think a lot of people are finding disagreement about that.
A lot of people, you know, they'll say Bitcoin doesn't win until government is abolished.
And we live in an ANCAP society where we're all transacting equally.
And then there's some of us that are saying, well, I don't know if that's necessarily a pragmatic thing. Like Bitcoin has improved so many people's lives and it's 16, 17 years since the Genesis block was mined. So I think it's really a philosophical disagreement about how Bitcoin will win. Like, what does it mean for Bitcoin to win? So I don't know what your thoughts are on what it looks like for Bitcoin to win, but maybe that's the source of the disagreement.
I mean that could be it
and like to me
Bitcoin is winning
like I wouldn't say
it's already won
but it's winning
and I think it will continue to win
but the problems
that I have around it
and the areas of concern
that I have
are like
I don't love
that one company
has 4% of the Bitcoin supply
and again
there's nothing I can do about this
and then
like they can use Bitcoin
however they want
and they should
but I don't love
that they have 4% of the supply
like I don't know
where the sort of
crucial number is
where it's too much
but like
if it's
80 90 percent of the supply clearly too much is 4 percent of the supply too much maybe i i just
don't know i don't i don't love that um and like the other thing that i'm unclear on is whether
this is now not actually attracting institutional investment but but dissuading institutional
investment because like like you said um michael saylor and and fong have come out and said like
80 percent of the people buying stretch is retail and to me it's like that's not a good thing like
I thought this was meant to be aimed at institutional type investors. And are institutions
looking at this and being like, let's wait and see how strategy shakes out? And is it actually
putting people off? Are they concerned that strategy has too much Bitcoin can pretend like,
you know, quote unquote, manipulate Bitcoin? Like these are the sort of some of the concerns that I
have around it. Yeah. It's tough because obviously it's a question of like wealth inequality and the
Gini coefficients, like how much is too much? And like, we know there's a finite amount and humans
have never been face to face with true scarcity before. So I find it like psychologically
fascinating how us humans are still absorbing it. I think we haven't even thought through the
proper ramifications of Bitcoin yet. In terms of the institutional capital thing, I think that what
you're seeing when you look objectively, like over the past couple of years, a lot of people say that
Bitcoin had its IPO moments. The OGs are selling like crazy. The individuals are selling their coins
hand over fist to the institutions. Like that has been the trend since the beginning of 2024.
River does a great job where they'll post their graphic about this every quarter or so,
where it's like, you know, I don't know if it's 10 or eight consecutive quarters where
like hand over fist individuals continue to sell to the institution. So I think that you raise an
interesting point, like long term, will that be seen as a negative? But overall, when we look at
the trend of this institutional monetization of Bitcoin. I think it's actually quite the opposite.
We've seen a lot of inflows. The IBIT holders are surprisingly sticky, I think. So yeah, I think
that you raise a very interesting question long term. But like, to me, I'm like, I don't know if
it's a cause for concern as of yet. If Saylor gets half of the network, maybe it will be. But
yeah, thinking that hypothetical future is an interesting thought experiment.
yeah i was reading um checkmate's recent piece on this and and he raised a point i think is super
valid it's the like in a bear market the market goes hunting for the most leveraged people and
they like to take them out to the woodshed and uh and chop them up and and he put a chart in there
which i'm actually struggling to find but i'll put on the video so this shows like where the um
where where the first impairments are for for strategy and it's around 25k um like i don't think
we're going to go to 25K.
But I don't think it's impossible.
And so do you think that the market
is looking at these liquidation levels
and will potentially try and hunt them?
Yeah, I think that it depends
on what you mean by hunt exactly.
When it looks like Checkmati's math
is spot on with mine,
where it's $25,000
where the common equity is impaired where I see a lot of people get what I see a lot of people get wrong is simply that this is calculating kind of that residual that I was just talking about where
the Bitcoin net asset value would equal the senior capital. So like the outstanding preferreds in the
debt. So there's no room for the common equity. But when we look back in 2022, this exact thing
happened. A lot of people don't realize this, but if you would calculate the residual exposure for
the MSTR shareholders. At the bottom in November of 2022, it was negative 14,000 sats per share.
So it was in the negative and the market never valued MSTR at zero. So a lot of people run this
math and they'll say, you know, MSTR goes to zero. And it's like, well, that's separating
how the market values the residual versus how the residual is calculated. So essentially it won't go
to zero because there's kind of an embedded call option where, hey, maybe Bitcoin will go up again
one day. And obviously, you know, price is sentiment and people will look for those
opportunities. The stock was trading at a 0.7 XM nav that invites the the opportunity for people
to snipe that leverage Bitcoin at such a low price because your return is just higher. So
that it's impaired in the sense where the residual is calculated at zero. But like in terms of
mstr going to zero um i just don't see that happening at all it's when you actually run the
math it's about 2022 they had minus 14 400 sats per share at the bottom in terms of bitcoin
exposure for mstr shareholders and now it's 145 000 today so it's a huge gulf like the capital
structure so much healthier. So like if we go to 25K, I don't think that it will. Like that's a
crazy level of oversold. But yeah, MSTR doesn't go to zero when that happens. It's just the residual
calculation. Okay. That's good nuance because I wasn't fully aware of that. And I actually didn't
realize that it traded below that in 2022. That's interesting. Yeah. Yeah. 2022 is way worse for
strategy, like crazy negative exposure. And I think the stock was a bottom like $11. So yeah,
it's quite a different story than today. What's your take on the whole digital credit narrative?
Because to me, Bitcoin's just money. And I don't fully buy into the digital credit narrative that's
growing amongst the treasury companies. What's your take on that? Yeah, I don't mind the term
digital credit. I think that you're evaluating the equities through a credit risk lens.
this dictionary definition of provisioning money for the expectation of a return.
Like to me, it fits the dictionary Merriam-Webster definition. So a lot of people take issue with it.
I don't take issue with that term. I agree with you. I don't like the digital money term either,
though. There was this clip, me and Jeff Walton, my friend from True North Jeff,
with my recent appearance on True North, we kind of got clipped up where a lot of maxis were
freaking out on us. I think that a lot of people miss the context of the entire situation where
people were acting like I was advocating for digital money that's like tranched credit
replacing Bitcoin as a medium of exchange. I view it as like if some people want to do that as like
an incremental improvement over traditional fiat, like if the capital goes to Bitcoin,
I would view that as a net positive for the overall capitalization of the Bitcoin network.
but um yeah i'm with you i think the idea that you can like
Tranch out these risk tranches from a security and that's somehow money
i don't buy that narrative so i don't like the digital money thing
but uh digital credit i don't have an issue with
okay fair um with strategy we're sorry we're stretch now trading it like
it's 88 post market um this is going to take a long time to get back to par right
I think last time it traded significantly below, it was a couple of months until it got back to $100.
This is going to be sort of a prolonged stretch bear market, I imagine.
Do you agree?
It's tough to say because on February 5th, we saw the largest nominal Bitcoin crash in the history of the asset.
And stretch rebounded in one day.
So I'll be honest with you, I expected kind of the same thing where I was like, man, a rebound to 98, that should be expected.
And we actually did briefly touch 97, not after this Thursday, but with this recent overall price stress, we did see it like reach 97.
I think that overall, they're going to follow the guidance that they've set forth with the volume weighted average price.
If the VWAP is below $95, they will probably raise the dividend to 12%.
That leads me to wonder how many of the people chasing that headline yield with SEDA at 13.
Like, is that enough to bring it back up to par?
You saw Fong Lee today tweet that he bought a million dollars worth of STRC.
So the CEO is doing his part, I guess.
But yeah, I do think it'll go up to par just because I think that overall risk is mispriced
with the strategy preferreds.
I think the credit quality of the company is amazing.
And I think that it's crazy that strategy even has to pay 11.5%.
If I'm being honest with you, I think it's super wild that the dividend rate is as high
as it is.
it tells me that the overall broader market doesn't appreciate Bitcoin. And as a hardcore
Bitcoiner, I hate that. I mean, that's something I do agree with. And if I was ever looking at
buying Stretch, like this is, I imagine one of the best buying opportunities you might ever get.
Like, I don't think that this is going to wipe to the right. I think it will get back to $100.
Like, if you're into it, like I get why you buy it at this point, like it seems very attractive.
The interesting thing, though, is like Bitcoin price is going to determine some of this.
And I feel like this works both ways where strategy can have a really good impact on the price.
And I think right now, this is the big overhang we have.
I think if we didn have stretch trading way below I imagine that Bitcoin price would be doing better than it is I don know if you agree with that Yeah I might have misunderstood you Are you saying that the Bitcoin price is being influenced by the stretch fiasco I wouldn be surprised if it was because people are then baking in like the Michael
Saylor risk of Bitcoin.
Yeah, I think that I'm not so sure if I agree with that, like as being a huge because I do
like going back to what I said earlier, I think that we are in a super niche of a niche
of a niche.
I don't think people know what digital credit or STRC particularly are.
Even amongst Bitcoiners, I see so much misunderstanding about it.
So I don't think that-
But I don't think they have to understand it to look at this.
In fact, maybe it actually works because they don't understand it, because they might look
at strategy being like, this looks like it's at risk of blowing up, therefore Bitcoin is
going to go down.
I think it can be that simple.
Yeah.
I just don't think that Bitcoiners who are orange-pilled, they're going to be dissuaded
from buying Bitcoin because of sailors preferred equity. It might have a I'm not saying it doesn't
have a portion of the influence on the on the price of Bitcoin. Of course, like if you understand
Austrian economics and human action praxeology, it's the price is the reflection of an endless
uncountable number of variables. But like in terms of an overall driver, I don't think that that's
sizable. I'd be interested to see like research on on the sentiment behind Bitcoin and stretch or
something to maybe explore that further. But on its face value, I'm not so sure if I agree.
But I think you're right. I don't think orange pill Bitcoiners who are just stuck in SatsCare,
and I think they'll still be buying consistently, but it's the big money that I wonder if this is
putting off. Yeah, I think it's definitely a possibility. I just don't know. It's difficult
to say to the extent that it is. It's like an unfalsifiable thing right now. I just wish that
we had more market data to tell us that. But I think that it's an interesting theory.
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anchorwatch.com. Okay, so let's talk a little bit about Bitcoin price. This is, when we hit 60 the
first time, I thought that was the bottom. When we hit 60 this time, I think it's the bottom.
Do you think this is the bottom?
That's so tough, man.
I'm not like a technical analysis,
astrology for man, chart squiggler guy.
But when you look at so many indicators
that mark bottoms,
you look at the deviation
from the four-year moving average,
which to me is like the most bullish indicator ever,
how that line just continues to compound
at over 20% per year.
We're like in the single digit percentile
with a deviation from the four-year moving average.
Bitcoin priced in gold is like cheapest since 2010 level of percentile.
I don't know if you're a power log guy, but the same thing there.
Like we're seeing so many indicators, relative strength index, where we're just seeing the
same levels as 2022.
It's flashing November 2022 FTX levels.
So I don't think a wick down to 50K or even 30K is impossible.
Nothing is impossible. But I think a lot of people are freaking out because that's what happens when you are in like a single digit percentile of Bitcoin's oversold price. So, yeah, I think that given Bitcoin's volatility, a lot of people don't realize this, but Bitcoin's volatility has almost been cut in half since 2022, which is a wild stat.
Like the volatility has been crushed for Bitcoin.
And a lot of people don't realize that the moves necessary on a daily basis to get you
below like a 40K Bitcoin number or like a FTX black swan after black swan type situation.
It is so much more statistically unlikely given the amount of capital that has to move now Like so I think that you know who knows if we in exact bottom but it has to be close I don know if you agree with me but it seems like we right there
Sentiment, I think is the worst it's ever been. So I don't know.
And sentiment's always like, that's kind of the counter trade, right? When sentiment's the worst
ever been, you're probably close to the bottom. And I don't go off anything but vibes at this
point. Like I've been in Bitcoin long enough that I sometimes get feels and it feels like the bottom.
I don't know if it is, but like I've certainly been any spare cash that I could possibly get my hands on has been going into Bitcoin recently.
And that's not always the case.
Like it just it feels like we must be close.
Do you what do you think is going to sort of play out over the next sort of Bitcoin cycles?
Do you think we have sort of diminishing returns?
Like because, again, Saylor obviously talks about his like he has his CAGA targets and he thinks Bitcoin is going to continue to perform in the way it has in the past, at least somewhat.
Do you think that's true?
Yeah. As of now, I think when you look at the actual price data and the price performance of
Bitcoin, it's tough to argue that diminishing returns aren't a thing. And like a lot of people
do this super cringe thing where they'll draw a line from the 2021 top and they'll do a horizontal
line to now and they'll say, look, it's been flat, dead capital. But what I like to look at is the
year over year, four year moving average compound annual growth rate where you smooth out the
volatility. And you are seeing that, you know, 10 years ago when it was going up 54% per year,
year over year, now it's 30, then 29, then 28. I might be making some numbers up there,
but that's essentially what it is. You are seeing a decrease in the CAGR of the four-year moving
average. So the people that say diminishing returns like aren't a thing, well, we just saw
a huge muted upside with the October 2025 bull run,
where we were trading at the power law trend,
which is way less than previous bull markets.
So it's tough.
Like, I think that we're going to see
muted downside volatility as well.
I think that's the most realistic scenario.
I think the people calling for 30K Bitcoin
like it's some certainty are smoking crack,
to be frank.
I think it's totally insane.
When you actually go to AI and crunch in
the statistical likelihood of moves like that with how big Bitcoin is now. But yeah, I think
that overall, I'm bullish. The money printer has to print, man. And the Fed's in an interesting
situation where they're being triple squeezed with oil inflation. And do you cut rates in this
environment? Maybe we don't see that for another half year or a year. Overall, I'm bullish on
Bitcoin because monetary fiscal repression is going to be what happens. There's no getting
around that fiat has no bottom so long term i'm super bullish on bitcoin uh but i cannot
be speaking with any degree of certainty right now that's for sure i do want to ask a question
i did allude to earlier which is something that i can't get out of my head in that is sailor stuck
in this trade whether he likes it or not and and this idea that he does have to just keep his foot
on the accelerator keep coming up with new things and and maybe that means adding leverage maybe like
whatever it is is he stuck and he has to just accelerate at this point uh no i don't think
he's stuck at all because i think that everything they're doing is working um if you look at their
kpis um i don't like bitcoin per share bitcoin yield but that's up considerably year to date
they're raising money at a faster pace than they ever have before they're buying more bitcoin
faster than they had before so what they're doing is working uh it's an amplified expression of
Bitcoin, the amplification ratio is about 40% right now. So I think that when you saw that crazy
blow off top where MSTR went to a 3.4 XM nav in November of 2024, when you have that, and then on
top of like leverage on the way down with Jim Chano shorting the stock and a lot of people taking
advantage of that frothy premium on the way down, I think the price performance is largely explainable.
And then of course, man, getting kicked in the teeth with a 50% Bitcoin price correction,
And that doesn't help an amplification story.
So yeah, I don't think anything's broken.
I think it's largely explainable by those market forces.
And with the, like you said, it got to 3.4 XM NAV.
Are those days gone?
Like, do you think it can ever get back there again
as like a MSDR shareholder yourself?
Like, do you think anything over two now
is kind of out of the question?
That's a good question.
It's really hard for me to think of that happening again.
I'll be honest with you.
I see this critique a lot.
You'll see there's some MSTR maxis out there that are losing their mind.
I'll be honest with you.
I'm like the biggest strategy bull,
but I think it's going to be the most valuable company in the world.
I'm like, Bitcoin's going to $3 million a coin.
They're going to have trillions of dollars of assets.
That said, some people are losing their minds.
They will say, Sailor and Fong, stop selling MSTR.
Wait for the MNAB to go to a 2.5.
And I'm like, you think that the company, like the market's going to give them $80 billion in premium just because?
Like, they're too big now, man.
Like, I think that me and you probably are in agreement there where like a 3.4XM nav, you got to think of when that happened.
That was when there weren't so many Bitcoin derivatives in the market that you could access with a brokerage account.
That was when Trump just won the election where we were talking about a strategic Bitcoin reserve.
you saw Bitcoin move from, I don't remember exactly, 55K in September to 90K. That was
like lightning in a bottle, everything going right to hit 3.4 at that time. And that's why
Saylor was selling stock hand over fist, because you don't squander that opportunity. Like, go get
the Bitcoin when the stock is that expensive. So I think MNAP will always oscillate just because
the price is in the numerator, the price of the company, and price is a reflection of market
sentiment. So I don't think that like we go to one and stay there forever. I think that's insane.
But also I don't think like we just go back to a 3.4 either. It's tough because we're thinking
of these like long-term hypotheticals. Could MSTR one day command a huge premium because
they own 6 million Bitcoin and they can issue more credit than everybody and Bitcoin is like
the new foundation monetary base? That's an interesting question, but it's all like hypothetical.
At least in the next five years, I would be shocked if we ever saw...
an MNAV explosion like that again. Yeah, me too. Okay. I want to get back into sentiment because
you mentioned before, like this feels FTX level sentiment. And I totally agree, if not even worse.
And I've said this before on the podcast, but I think it's true in that when FTX blew up,
if you were a Bitcoin or in Bitcoin land, you could look over there and be like huge fraud,
scams, like, of course, the market's going to dump. Makes sense. Nothing's changed for Bitcoin.
therefore like sentiment surely sure was bad because the price was way down but everyone knew
why and then whereas this time like price is down a lot we didn't really get the the sort of highs
that we expected last cycle and there's nothing to point to directly and be like that's why and i
feel like that's adding to the sort of negative sentiment within bitcoin world and obviously
sailor is now bearing the brunt of that in a lot of ways because people are just mad about something
and trying to find someone to blame it on.
Is that a bullish sign though,
that we are at these levels
and there isn't some like out and out fraud blow up
that you can point out and be like, this is why.
Yeah, I agree with you a hundred percent.
I think that the market is trying to find a villain right now.
And Sailor is that guy.
Like he'll be the hero in the bull markets
and then in the bear markets,
he'll be villainized by a lot of the community.
I think that it is a buy signal.
I think that, and it's not even a question of opinion almost.
It's almost like a mathematical reality.
Just going back to what we talked about, people often forget that your statistical likelihood
of higher returns skyrockets when you buy at this level of oversold versus these indicators.
And nobody has a crystal ball.
You can't predict the future.
But it's so fun to load up Bitcoin's entire price data for every single day since January
3rd, 2009, or at least the exchange data in July 2010. And just ask it, what are the forward six
month, 12 month, 18 month, 24 month returns of Bitcoin whenever we've been at this level of
oversold? And you could do it for the fear and greed index if you wanted to. And all of the
numbers throughout all of history are triple digit returns where sometimes I'm seeing them thinking,
man, I want to take out a second mortgage to buy Bitcoin right now because seriously,
that's what it is. Your statistical likelihood of higher returns skyrockets when you buy one
were this oversold. And the sentiment is an indicator. It is a buy signal. It literally just
is. The people who bought MSTR call options in 2022 and made $10 million, they literally bought
the most leveraged possible Bitcoin at the worst ever sentiment in history, and they made out like
bandits. So like, are we 2022 levels of oversold? It's pretty close. But yeah, I think I agree with
you, man. Like the negative sentiment is it's a buy signal for me. I'm like, I've never been more
bullish because I understand the mathematical reality of to make money and to go up NGU,
you need to be buying right now. A hundred percent. And it's one of those funny things
in bear markets. Like I kind of like perversely enjoy when price is crashing. It's always exciting.
There's always stuff to talk about.
I don like the just dragging out Like this bit boring and I just can wait for the tide to turn again I ready for us to go up again The time pain is awful Yeah Yeah I couldn agree more
But I'm, it's weird.
I'm sort of,
I have this turbo bullishness around Bitcoin
and if I was to trade,
it would get me in big trouble.
It's like the big reason I don't trade,
but I can't see Bitcoin
staying at these levels for long.
I hope not anyway.
Do you follow what's going on
like on macro side
with everything that's happened
in the Fed recently?
Yeah, I do to a degree. I don't have a total technical understanding like a lot of these macro experts do, but like I do a lot of analysis on my own channel and then on the Swan channel as well. I have a two day a week show over there where I talk about this a decent amount. But yeah, following the macro side a little bit, I kind of alluded to it earlier, but like the Fed's being triple squeezed right now, man. Like it seems like, like how do you explain away potential monetary easing or rate cutting?
That seems like the battle they've got right now.
Yeah.
Because when you talk about headwinds in Bitcoin,
we don't really have one that's necessarily intrinsic to Bitcoin this time.
But the macro side is the thing.
And they seem totally trapped.
Inflation's high and they want it.
Jobs are pretty good, but they need to cut rates.
And how do they do it?
But this is very interesting.
If people have been paying attention to what Warsh has said
leading up to his appointment and recently,
he's mentioning things like we need to recalculate how inflation is calculated and then with his last
statement after this latest fed meeting warsh is saying that like we're going to be giving less
future guidance like less commentary essentially so that's very interesting like what does that
tell you to me it's almost like you need to play your cards closer uh with any like obvious moves
you're going to be making i'm not quite on the level of like the conspiracy tinfoil hat like
he's Trump's puppet and he's going to do the bidding of cutting rates. But those two things
are very interesting. I think like they're already being open about talking about how you recalculate
it. And we've seen this game happen time and time again. The government lies to us about CPI.
They literally replace ribeye steak with 7327 ground beef. They lie to us and they manipulate
the basket. Anybody who knows shadow stats.com, the true government inflation. I know I'm preaching
to the choir here, but like we're seeing the same language happening. They continue to change the
lingo. And this is very interesting. I saw this recently. There was a meta analysis of Bitcoin
price action relating to not only the Fed's actual actions in terms of rate cutting, but the market
perception in terms of how the media was reporting about it. And the finding was that Bitcoin is the
most reactionary asset by far to even the perception of rates being cut or rates being
hiked. So like a 25 study meta analysis of that, to me, that's a big explainer of the Bitcoin price
action. When you immediately saw this war happen and the poly market, betting markets, price in
rate hikes for 2026, to me, that's like a large explainer. If you look at that meta analysis,
That was interesting.
I 100 agree And the interesting thing is it seems like Walsh is trying to be somewhat covert in what he trying to do like he said no forward guidance um but it so obvious like it so overt like he going to redefine what inflation is he he come out with like a
new cpi adjusted number it'll it'll give us a lower inflation print and i'm sure he'll go to
cut rates or do like monetary easing in some way that's what these central banking snakes do
this is what these snakes do these people manipulate the fiat money supply uh like this is
the case that it's been for over 100 years like this should be so obvious to everybody by now
and i know i'm preaching the choir we're bitcoiners but it's literally the same playbook like change
the name of this uh you know we'll change the inflation statistic it's it's wild man it's it's
literally the uh another page out of their playbook call it something else and then
repress the society monetarily. It's a sad state of affairs. Dude, did you know that the United
States debt is on pace to be over $50 trillion by the time Trump leaves office? It's insane.
It's just numbers that I can't even understand. I don't know what $50 trillion is. I just know
it's absolute insanity. Yeah. It's just crazy. Wait, Elon just became a trillionaire. That's
$1,000 billion and that 50 times over. It boggles the mind. It's just ridiculous.
It's crazy. And honestly, Bitcoin's at $64,000 right now. With all this happening,
there is literally... I don't understand why more people don't know this is the best place
to put your money and move into a Bitcoin world. It's crazy to me. And the other interesting thing
that I think Walsh has to battle with is he's got rid of forward guidance. And like you say,
markets move on what they say, not even what they do. And so without the forward guidance,
Do markets just get even more confused as everyone tries to read the leaves and they don't really have anything to go off apart from vibes?
Like everything's vibes.
Yeah.
I was going to ask you, like, do you feel like that this has been the most uncertain market in history?
Like versus when you first started investing?
To me, I can't imagine being in anything else but Bitcoin.
like literally 100% of my family's future and my the success of my bloodline it is 100% reliant on
the success of the bitcoin network uh because i look at equity multiples and i can't like square
that in my head on how to how these things are investable and what's funny even before i was
totally orange pilled my orange pilling journey has been quite long but uh i have always thought
that about equities. And I've always been able to perceive certain valuations being ridiculous.
And I continue to see that get more crazy as my life goes on and I get older. And it just,
the uncertainty is wild. We have people debating on whether or not MSTR should trade at a 10%
premium to their Bitcoin holdings versus DoorDash stock trading at a 70X earnings.
It's like, to me, I'm like, guys, the answer is probably somewhere in the middle here.
So to me, that's why I love Bitcoin.
And I actually do like the treasury companies because in terms of like a risk reward calculus it so much easier of a tell to me Like do I buy Costco at a 60 PE Is that overvalued or undervalued
Will Costco exist in 2100
when robots have replaced humanity?
There's never been more uncertainty,
yet equity multiples are at the highest
they've ever been.
I believe that the composite price to earnings
multiple for the S&P 500 is a 29.
Like, I don't, I think that's crazy.
I would rather just buy Bitcoin.
JBB, just buy Bitcoin, stack sats and call it good.
That's absolutely nuts.
I didn't realize that across the S&P was 29 times.
That's insane.
And people might think that's silly
because you said before that Bitcoin trades
off what the Fed says more than almost anything.
So sure, it could have a really negative effect,
but we're just playing a different game.
This is a much longer term.
I'll take the short-term volatility
to own Bitcoin for the long term.
That's an easy bet for me.
I can't possibly imagine having my wealth stored in anything else but Bitcoin and then like with some risk capital buying like an equity that's reliant on Bitcoin.
Like I cannot even fathom, honestly, like buying the S&P 500 to me, like I want to like, I don't want to say vomit, but I get like nauseated about this.
It's just like it feels gross.
gross. Like to me, it's like this latest stock market crazy rush. It's like the last big
boomer hurrah where we've seen real estate and equities just at the mercy of the money printer
getting inflated. And we have all of this old boomer capital. I don't say boomer disrespectfully
for anybody older listening to this, but like, that's what it is. It's people that are unfamiliar
with Bitcoin and then they store their money and these things that are absorbing the money
printer essentially. And it's a really sad state of affairs. And you know, as well as I do, like,
you know, the capital is going to hunt scarcity at the end of the day. So I can't buy anything
but Bitcoin. Let's go. Adam, this has been awesome. The takeaway is you think strategy
is going to be fine. Buying Bitcoin is always the way. I'm excited for the next few years,
man i think i think we're gonna have good times are coming back yeah i think so i think there's
a lot of uh this bitcoin civil war is super interesting um people throw in shade at each
there's multiple civil wars there are yeah the core and knots thing that's for sure we didn't
even talk about that so maybe another episode or something but uh yeah like um crazy stuff man it
was a great talking to you uh i'm bullish on bitcoin sounds like you are too and at the end
of the day that's how we win and adam where do people go to find more of your work yeah i do a
daily YouTube show at Adam Livingston, BTC. And then I have an X account where I post analysis
on Bitcoin and a lot of MSTR stuff as well at Adam B. Live. So those are my two platforms.
Let's go. All right. Thank you so much, Adam. We'll have to do this again. That was awesome.
Thanks, Danny. I appreciate your time, man. Have a good one.
Thank you.