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I think there's sort of like a gradually then suddenly inflection point.

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This is becoming a real discussion across corporate boardrooms.

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The asset is maturing and this is a way, if Bitcoin is going to eat the world,

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and that's what kind of a lot of us came to the conclusion of five years ago,

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then it's not going to be everybody just buying Bitcoin on cold cards.

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There's huge pools of money that can't access the asset.

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Equity on the stock market was just the first pool.

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and you know really the bigger market in terms of exposure is the credit markets

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it's just a much much bigger game the pools of capital are huge

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in Bitcoin when you buy. That's river.com forward slash WBD. All right, Dylan Leclerc,

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probably the most prolific 20-something in the world. How's it going, man? Last time we spoke was,

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I think it was like just around a year ago, Metaplanet had a couple of hundred Bitcoin on

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the balance sheet or something like that. Now you're at like 16,000 and a bit. What a wild

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year. How's it been? What a wild year indeed. I appreciate you having me on, Danny. It's been

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been a crazy year you've managed to uh to boot peter off the podcast and take the reign hostile

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takeover yeah congratulations on that um yeah it's uh it's it's been exciting um i don't even

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know where to begin but uh i feel like the last time we spoke the the situation was a bit different

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so a lot to catch up on it was very different and i i know you're a busy person i don't know how

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much you listen to the show but i've been pretty skeptical about a lot of the bitcoin treasury

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plays. And for full context, I think strategy is its own beast. That's different. I think

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MetaPlanet, again, for a couple of reasons, one being super early and then also being in Japan,

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you're probably different. And I think there'll be a handful of others that do really well in this.

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But I'm kind of skeptical about these new treasury companies that pop up every week.

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I mean, it seems like almost one a day at the moment. What's your kind of read on the entire

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market for this? Yeah. I mean, one is I think I, you know, for the last four or five years,

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I would say I've tried to be a champion of Bitcoin, you know, no matter what the circumstance up down

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sideways. So it's amazing to see, you know, the Bitcoin treasuries.net there was, I don't know,

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what's 10 companies, 20 companies a year or two back. And now there's like 200 companies around

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the world racing to announce and acquire Bitcoin. So, you know, this is, you know, I think it's

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unilaterally positive for our mission. Even if you are, you know, the cypherpunk sort of,

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you know, the cypherpunk minded Bitcoiner, you know, the crypto anarchist, if you will,

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you know, what did you think Bitcoin winning and taking over the, you know, the world looks like,

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right? Well, one of those avenues is, you know, the public capital markets are going to embrace it,

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you know, it wasn't just going to be like a libertarian, you know, toy, right? But I,

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Let me clarify, like I'm not dissing or putting away the cypherpunk anarchist sort of view.

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They exist in parallel, right?

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You know, Saylor leveraging the preferred equity market with his Bitcoin collateral does not inhibit any of the other use cases or the lightning network or anything of that extent.

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So, I mean, I think that I sort of naively in 2021 thought that this would happen really fast.

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You know, Sailor adopted it. And, you know, Pierre was like 500 companies in S&P 500 are going to adopt Bitcoin. And I was like, yes, like 100 percent. And so, you know, for me, I was a bit of, you know, I was in a bit of disbelief that I had the opportunity, even though Metaplanet was in a Japanese market. I'd never been to Asia. I don't speak the language. I didn't know the first thing about Japanese public markets at that point last April.

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But the opportunity for me to work at a public company with a Bitcoin first, Bitcoin only vision was really exciting because at that point there was, it was NSTR and some miners and Coinbase.

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so you know a year out to see what 50 announcements in the last week or two if nothing else it's

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vindicating because you know i think we had this vision as as you know bitcoiners and sailor was

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out there tooting you know his horn about this begging companies to to copy him and no one did

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right and so i think there's sort of like a gradually then suddenly inflection point that

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we've, you know, whether we've passed it in the grand scheme of things or we're nearing that

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inflection point where, you know, it goes from, you know, sort of the gimmick like, hey, we're

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doing this because we get attention and volume and liquidity, you know, in our equity to, you know,

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this becoming a real discussion across, you know, corporate boardrooms, right? It's like, okay,

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we're still going to have our business, you know, but at the same time, it makes sense to, you know,

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accumulate this and sit on a bunch of cash. What was it? Like Figma, right? Figma is going public.

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Like they casually had $50 million of Bitcoin on their balance sheet.

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No one at Figma is talking about Bitcoin.

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They don't have a dedicated Bitcoin strategy officer that I know of.

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But at the same time, they have $50 million of Bitcoin.

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Like that's not a joke.

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That's a lot of money, right?

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So I think that this is where this is all going.

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You know, in terms of the scale or, you know, the capacity for, you know, however many purpose dedicated Bitcoin only accumulation vehicles that are, you know, we'll see.

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You know, I think there's obviously going to be a dominant monopoly in, you know, each of the largest local markets.

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Right. There's just economies of scale that, you know, there's a winner take all dynamic.

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Even though the, you know, Bitcoin, it's it's it's homogeneous collateral.

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It's fungible. Right.

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In theory, one Bitcoin equals one Bitcoin, no matter what company holds it.

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But in reality, I think, you know, in public markets, there's there's just a dynamic of size and liquidity, never mind like the passive indexation.

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Right. So so there is somewhat of a winner take all or winner take most dynamic, especially, you know, in the various public markets.

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So, yeah, I mean, I think it's all extremely positive.

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I've been really, really encouraged to see, you know, more and more people, you know, whether it's reaching out to MetaPlanet or there's been companies, I think there's now, you know, 10 or so companies in the Japanese public market that have a little bit of Bitcoin.

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And I think, you know, MetaPlanet has certainly been, you know, kind of a driving force there.

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So it's really cool to see. And, you know, to be frank, I think we're still in the grand scope, you know, the grand scheme of history. I think we're still in the early innings of, you know, the Bitcoin corporate adoption story, even though, you know, all of the Bitcoin, the Bitcoiners, if you will, in our own echo chamber are like, okay, guys, this is really frothy. The reality is like the rest of the world actually simply doesn't care.

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um so i think it is pretty early despite you know what what everyone sorts sort of believes is uh

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you know if you know everyone thinks it's reaching a fever pitch um but i think if you step back it's

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it's actually we're still you know and the the huge pools of global capital we're still this

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bitcoin story is still pretty small so when i've just pulled up the bitcoin treasuries.net website

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and there's like such a crazy drop off from say they're at like 600 000 bitcoin i think the

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hundredth in the world right now is at 25 so like there there's a enormous gap between those two

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things um but how much demand and how much of a market do you think that is for these bitcoin

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treasury companies that trade at an actual premium to net asset value like something significantly

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greater than one like because one of the things that i've been sort of trying to figure out is

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whether we're going to have a lot of these that trade basically just at par and then a couple that

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will be at two or three X. And like, where do you think that, that goes? Yeah. You know, I think

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there's, it's a, it's a constant, it's a constant like fight with gravity, if you will, uh, you know,

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above one XM now, you just think of the math and the mechanics, right? Like if your stock's at,

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you know, a two X premium and the stock price is flat and you buy some more Bitcoin, you're,

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you know, your premium to nav goes down. If Bitcoin goes up, your premium to nav goes down.

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Right. So so in order to say, you know, stay at a constant 2x premium, if you will, every time you buy Bitcoin, you know, the share price has to has to ratchet higher.

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Right. So it takes it takes, you know, more and more capital.

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So that's why I think there's there's a, you know, sort of a natural trend towards the winner take most dynamic.

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Yeah. Is because, you know, the liquidity, the liquidity you need to, you know, sort of maintain a consistent premium, especially as, you know, you scale a treasury, ideally exponentially.

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right like for instance a 5x premium when meta planet was a 10 million dollar company was 40

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million dollars of value or you know whenever you're a 50 million dollar company or whatever

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them you know whatever kind of math you want to do is really really small in terms of the value

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right now you know meta planet so i think we're a we're a five billion dollar company right so

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at a 3x m now you know that's billions of dollars premium strategy is at a at a measly 1.8x premium

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but the premium is like $50 billion of value, right?

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So in absolute terms, this is a massive, massive scale.

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And so everyone's like, well, the premium's as compressed as it's ever been.

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It's like, well, in fiat dollar terms, it's as large as it's ever been.

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So I think, you know, there's people often are like,

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and we've seen this with analysts, you know,

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kind of across the board in the treasury sector,

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people are comparing a company or companies

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that are two orders of magnitude in different size, right?

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And so I think the expectations have to sort of be set there where just the magnitude of like, okay, well, if you do your job and you execute well as a treasury company, the scale quickly approaches billions or tens of billions if you can execute.

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And so, you know, from that point on, maintaining, you know, that sort of premium, one, it requires a lot of liquidity and two, it requires sort of a kind of a dominant monopoly or a near sort of monopoly on, you know, you say your markets, you know, liquidity, you know, the Bitcoin vision.

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Um, part of, I think why we were so successful early on. And I think still to this day is that

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Japan, there was no Bitcoin, there was no Bitcoin exposure, narrative, or story, or, or really,

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I would say like, you know, uh, you know, visionary belief, right? Like sailor, when sailor burst onto

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the scene in, in August of 2020, why did Bitcoiners rally, rally around him? Right. Because we were,

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we were, you know, sort of all in our own little echo chamber speaking, speaking the same language.

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And then some billionaire shows up on the NASDAQ and is like, there is no second best. And everyone's like, oh, my God, you know. And so I think there was somewhat of a parallel or like an analog there for us in Japan. There was no one. Everybody, if you believed in Bitcoin or crypto, you believed in digital asset Web3 blockchain-isms. And that's not what we stood for.

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So I think that was part of the reason that, you know, we got such a jolt of a start. But, you know, in terms of like the U.S. markets, right, how many billions of dollars of Bitcoin exposure currently exists and floating? And that's a lot, right? And I think, you know, there's also like there's now sort of like private Bitcoin that is being taken public, right?

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Yeah. Versus like with MetaPlanet, we have 16,000 Bitcoin. That's 16,000 Bitcoin of demand that didn't exist prior. It was trapped in the equity market. There wasn't exposure. We raised $1.6 billion and bought $1.6 billion of Bitcoin.

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Right. So I think that just because of, you know, the marginal sort of supply and demand, there's going to be, you know, amongst the hundreds of companies, there's going to be sort of a natural, you know, winner take most dynamic.

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um but i think really the scale ultimately the real moat um here one is there's there's brand

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right there's there's a sailor premium um you know in the same way that there's an elon premium or

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there's a steve jobs premium back in the day but the real moat here um is i mean it's not it's not

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just having a public company right like a year or two ago or three you know if you had if you were a

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public company in the Bitcoin or crypto space, like that was a real, real differentiator.

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Yeah.

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Now there's a lot of crypto companies. And I think, you know, it was the ATM,

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right? The ability to raise equity at the market. Like if you, if you've operated in public markets,

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raising money is a, is a grueling game. You know, it's like nonstop legal, regulatory,

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investor meetings, nonstop, no, no sleep, especially if there's like, you know, sort of like,

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you know, a private placement or convertible bond process where there's like a three day

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sprint window where it's nonstop meetings, roadshow, roadshow. It's grueling. But the ATM,

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you get it live and then it's, I don't want to say it's smooth sailing, but you do the hard work

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up front and then the process gets very much, it's easier throughout than constantly raising money.

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And so for a while, there was sort of a monopoly. Sailor was the only one in town doing this.

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And now I think there's too many to name that are selling equity at the market to buy Bitcoin.

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Now, increasingly, there's some crypto digital asset companies, which is interesting.

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But I think the real moat here is not just issuing equity to buy Bitcoin.

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The real moat is, can you hit a scale in absolute terms of Bitcoin exposure where you can access

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to fixed income markets?

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And I think Saylor and MSTR are, to this point, the only company that's hit that scale.

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even convertible bonds right the convertible bond process is it's long it's grueling it's

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heterogeneous credit right so every convertible bond has a new process has new terms um you know

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and the investors don't actually believe in in you or your story or your company right like the

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convertible bond investors they'll woo you and they they'll you know talk a big game and they'll

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talk about loving your vision and then they short sell 60% of the money they put down to hedge.

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They're not actually even net long at all. They're just farming volatility. So they're not

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your friend. And I say that, that's no diss. That's their business. They're in the business

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of trading volatility. That's fine. But with this preferred stock,

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you know, I guess just with the preferred equities that sailors laid out,

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I didn't really see the, like that vision wasn't clear to me until, you know, the first one rolled

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out and then the second and the third. And then it's sort of like an aha moment, like, you know,

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convertible bonds were never the end game. Like I thought the magic innovation was, okay, you can

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lever your balance sheet with Bitcoin volatility and access 0% cost of capital. But now it's really

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clear that, you know, that process was a bit clunky. And, you know, it's also like the relative

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pool of capital for convertible bond arbitrage. It's pretty small versus fixed income, you know,

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broadly, I know that's a broad stroke term, but the fixed income markets, like the true fixed

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income markets are absolutely massive. And so, you know, when Saylor said, we're going to go for

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every pool of capital, investment grade, junk, long duration, short duration. And now we're seeing,

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We're seeing that take form.

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I think that's really the only moat that exists for the Bitcoin treasury companies.

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I think implicitly, I don't know if anyone has said it out loud, but really every other company but strategy is in a race to hit that scale to be able to access that market.

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Because you can't issue preferred equity with $100 million of collateral on your balance sheet.

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Because that's not interesting.

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Because what?

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Okay, you issue $20 million of fixed income, preferreds.

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it's not worth an investment. It's like a real big investor isn't going to take the time to

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look into it, to trade it. It's not liquid enough. So you have to hit a scale to be able to access

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those capital pools. And I think that's the real monopoly. That's the real differentiator

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for the one company versus the hundredth company. So I've got like a million questions from what you

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just said there. Let's start with, you were talking about these companies that are taking

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basically private Bitcoin public.

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There's obviously 21 and Blockstream's

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Bitcoin standard treasury company, I think,

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that are about to go public.

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Have they gone public?

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I'm not sure.

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They're about to go public.

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And they're bringing a lot of Bitcoin on,

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like 30,000, 40,000 Bitcoin.

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It's significant.

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But they're still a long way behind Saylor.

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Do you think these companies have any chance

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of ever catching Saylor?

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Well, let me clarify that.

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But it was no, you know, taking the private Bitcoin public statement, there's no slight at all.

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I think the more Bitcoin in public markets, the better.

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And I'm a huge, huge fan of both Jack and Adam.

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I spoke actually, coincidentally, I've had fireside chats in Amsterdam with both of them, two separate years, you know, before any of this, you know, unfolded.

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So I'm really close to them.

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And it's really awesome to see your friends winning.

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With that said, I think that I think sailors reached escape velocity.

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I say that in the position of a public company We have aspirations to catch strategy Is that feasible You know I guess we see

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But I think, you know, 600,000 Bitcoin lead more or less is, you know, pretty, pretty insurmountable.

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And so we will see.

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I think the beauty of it is Michael is welcoming the competition and cheering for them and retweeting them.

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And, you know, I don't think I've really, you know, I'm young, but I've thought pretty deeply about any sort of precedent where, you know, a titan of industry is openly welcoming, cheering and platforming all of their competition.

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And I can't find a parallel. So that's really interesting.

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But no, I think, you know, the higher the Bitcoin price goes, the more the moat solidifies, the more they can access the fixed income market.

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Repeat, repeat, rinse, you know, rinse, repeat.

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So, yeah, I mean, you know, really like the only way that I, you know, it's probably not a Bitcoin industry incumbent, right, that if there is a potential challenger.

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Like, you know, if Mark Zuckerberg took the orange pill tomorrow, could he get close?

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Well, probably. I mean, Facebook has, you know, Facebook makes $100 billion a year or something, right? So, or whatever the numbers are. So, yeah, I mean, that would be interesting, right? If Mark Zuckerberg took the orange pill, fired up an ATM and said, we're going to issue $10 billion preferred. You know, that's an interesting story, but I don't think that's happening. I think the incentives aren't there just to, you know, go all in on Bitcoin when so many other things are happening, right? You know, AI and everything else.

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So I think, you know, if I had to put my money on it, I would say overwhelmingly that MSTR is in the lead, you know, just probabilistically 10 years from now.

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But we will we will see how the you know, how it plays out.

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OK, so I do. I definitely want to talk about this new product that Sailor's just launched.

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But let's just hold that for one second, because when it comes to the premium on NAV, like you say, Sailor's at like 1.8 at the moment.

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You guys are at three. You were. How high did it get?

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that it gets like seven, even higher potentially.

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Is that the only metric that really matters

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when it comes to this?

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Or is that too much of a simplistic way

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of looking at this?

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I mean, it's definitely a metric.

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It's probably one of the more important ones.

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But I think often people are looking at this

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in a static form, right?

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So for instance, what was it?

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A few months ago, MetaPlanet's,

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let's say April, right?

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MetaPlanet had a premium to net asset value

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of three and the share price was, you know, $4, right?

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Metaplanet now has a premium to net assets of three

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and the share price is $8.80, right?

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So, you know, that's three months

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and the stock was, you know, remarkably overvalued

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by the traditional analyst perspective.

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And, you know, now it's the same valuation,

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but it's repriced, you know, over 2X higher.

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And so I think, you know, I say,

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Instead of one snapshot, I give you two snapshots and I would pose an analyst or someone from Wall Street to say, okay, well, how did this happen? It's repriced twice as high, but it's the same relative valuation. And so there is somewhat of a forward-looking aspect here.

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you know, the static premium to net asset value isn't considering, you know, all of the future

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that's baked in, right? Equities trade at, you know, a forward expectation, you know,

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a forward expectation of future, you know, cash flows is traditionally what it says,

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but it's really just forward expectations, right? You know, there's a reason why Palantir trades at,

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you know, 100x revenue and, you know, Amazon traded at 100 times earnings for 20 years and,

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right it's it's it's pricing in the future not not the now and so you know a bitcoiner looks at

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strategy and they say okay well they've generated 10 billion dollars of btc gain um and i btc gain

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not as you know the price of bitcoin has gone up but you know they've the btc dollar gain metrics

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they put out or btc yield is saying well what value have you generated net no dilution so let's

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that let's let's you know if you issued 10 billion dollars of common stock at a 1x m nav

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you would have zero BTC gain, right? There's no additional value is generated or accrued.

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And so if you have a company that's generated $10 billion of value, that's worth something.

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And so the equity markets are rational and they put a forward multiple on that.

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And so I think that there's an entire industry of analysts that are trying to figure out what

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this is all worth. But that's sort of the Bitcoiners at the same time that everybody's

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investing in these equities, it's going up against the traditional world that has always

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looked at forward expectations, not the now.

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Right.

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So like, you know, MetaPlanet, we've, you know, this is rough numbers, so don't quote

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me.

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But when we first spoke, we had 100 Bitcoin, 140 Bitcoin, I think.

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And we had like, you know, split adjusted.

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It was like, you know, I think we've 4X'd our share count and we've like 100X'd our

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Bitcoin, right?

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And so it's like, well, how is that possible? And so obviously, analysts are going to just, you know, slap a, if they believe in the management and the execution, right? This whole flywheel and the net asset per share accrual, it can work in reverse, theoretically, right? If you're selling equity at a discount to your fair value, your net assets, net asset value per share can go down, right?

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So then the whole thing works in reverse.

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And so, yeah, there's a lot of ways, you know, if the company has too much debt or they don't believe in management or, you know, various reasons, you know, maybe it's a Bitcoin bear market, right?

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There could be many various reasons that the, you know, premium to net asset value closes, goes to one or goes below one, right?

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And then there's another toolkit there.

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But, yeah, I mean, I think that it's not – there's not going to be one uniform answer, right?

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There's the scale of the company.

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Are you micro cap, small cap, mid cap, large cap?

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Are you in the mag seven?

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All those things matter. You know, there's some really interesting analysts in Japan that have come up with the it's like they call it an MNAV.

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It's like a theory of MNAV decay. And they're saying basically, OK, theoretically, if you had 21 million Bitcoin as a company, what's your fair value MNAV?

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And the fair value MNAV at that at that Bitcoin holdings is one. Right.

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Well, how could you be worth more than 21 million Bitcoin in Bitcoin terms?

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And so then you take it to the other extreme. Well, if you held one Bitcoin, well, what's your fair value MNAV?

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Right. And so the other room for growth. And so there's like sort of a spectrum, right? The larger you get, the harder it is, or, you know, maybe mathematically the market saying, well, you know, if you have, if you have 11 million Bitcoin, does it make sense to have a 2X MNAV? Well, that would be 22 million Bitcoin. So maybe not. Right. And so I think that there's, there's sort of a, you know, there's different phases of the maturation process, but yeah, I think it's company dependent on the, on the MNAV.

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One of my questions would be if, say, 120K is the top for this Bitcoin cycle, like what do you think happens to MNAV across the board in a bear market?

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Because last bear market, we saw Saylor go to a discount to MNAV.

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Again, like I know there's kind of orders of scale here and maybe that won't happen again.

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But I assume you'll be more volatile both to the upside and downside in terms of MNAV.

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Like how do you see the market playing out in a bear market?

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Yeah, that's a good question.

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um you know i think that the uh broadly the asset class is a bit more mature um so that you know the

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profile of of the just bitcoin trading has definitely changed right like last you know

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last bull market we saw straight parabolic and then you know a crash and then a rift again in

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the you know the fall of 2021 and then this huge epic crash and this time it's like we sort of like

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slowly reprice we chop for six months nine months you know i think uh you know checkmate fellow

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fellow Aussies, like probably the best, you know, sort of analyst these days around the chop

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consolidation thesis, right? Of just like, Hey, we reprice, we chop for nine months, everyone gets

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bored and then we do it again and we do it again. Um, so the terms like, you know, the big secular

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bear market thesis of like, okay, we're going to, you know, 70% down, we're going to call it,

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we're going to all go home for three years, pack it up. I don't know if I, I put Wade into that.

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I don't, I actually don't believe that will happen. It might, um, obviously, um, but everything's

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cyclical, right? So I think there will be a bear market. I think that, you know, during that period,

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there will be pressure on MNAVs as there's pressure on, you know, valuations of any company during,

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you know, sort of a secular bear market. But I think it, you know, it'll be case dependent on

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whether, you know, various companies can, you know, manage that decline. One is, are you levered

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right now? How levered? With what sort of debt, right? Do you have secured debt where your Bitcoin's

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encumbered where if it goes, you know, you have to liquidate the Bitcoin. Do you have secured,

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you know, unsecured convertible debt, right? Do you have a, do you have debt due in one year,

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right? Like if you have a billion dollar, if you have a $2 billion treasury and a billion dollars

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is due in six months, well, you know, that could be a problem, especially if the, you know, the,

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the credit markets freeze up and you can't access, you can't roll that debt, right? So it will be

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dependent. Part of the reason Sailor Lust prefers is there's no debt maturity ever. It's just the

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dividends, right? So that in terms of your flexibility, like one of the biggest things

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that everybody, all the analysts or the commentators, if you will, would flood, create fear,

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uncertainty and doubt around is, well, okay, the converts are coming up. You're going to have to

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pay off all that and sell the Bitcoin. And so, yeah, with the press, it's like, no, we're not

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selling actually ever. And so, yeah, I mean, I also think in terms of the discount that Saylor

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traded at the MSTR traded at last bear market. I think if I'm not entirely sure, but I think if

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you looked at the enterprise value, so you factor in the debt into the market cap that if you looked

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at just face value market cap to Bitcoin holdings, it looked like it traded at a deep, deep discount.

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But the reality was like, you know, at the bottom, he had a couple of billion of Bitcoin and a couple

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billion of debt. Right. So in reality, the discount wasn't as severe as it looks. But it's

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It's still, you know, the conditions were pretty rough, right?

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So I think for us, you know, we're focused on staying, you know, keeping a pristine balance sheet, maintaining maximal flexibility.

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You know, we don't want to be put in a tough spot.

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So we've kept the leverage pretty low.

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If I, you know, off the top of my head, I think our Bitcoin to debt, you know, our BTC rating, as Saylor calls it, is like 16x, I believe.

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Right.

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So we have like 100 million of debt.

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And yeah, it's 16.5x is our BTC rating.

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So, you know, we have 16 bucks of Bitcoin for every dollar of debt.

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that's intentional. Um, you know, and I think, you know, when the opportunity arises, uh, we will

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look to, uh, you know, increase that leverage ratio a bit. Um, but yeah, it's going to be,

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yeah, there's going to be companies that trade at a discount. There's going to be companies that

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trade at large discounts. There's probably going to be a sort of a, you know, uh, acquisition merger,

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uh, season, if you will, right. There'll be, there'll be opportunists, you know, clear off

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some debt by the Bitcoin at a discount. Uh, you know, that's a very familiar world for the

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traditional you know financial wall street world and so i don't expect that to change um but that's

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at least at metaplanet that's not our intended strategy we're pretty laser focused on on just

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btc uh you know if someone else wants to do the acquisitions and all that then then have at it

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um like one of the reasons i i like talking to you about this is because you're definitely a

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bitcoiner first like you you before you joined metplanet you were already like very deep in this

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world. I think there's a lot of people who are trying to copy this play who are kind of cosplaying

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as Bitcoiners because they see kind of a gap in the market. From your just like pure Bitcoiner

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perspective, what do you think of this cycle so far? Do you think we are out of the sort of

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traditional four-year cycles? And how much does people like Saylor play into that in the sense

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that they're kind of a buyer regardless of price? Yeah, you know, it's interesting to kind of,

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come from the Bitcoin world, if you will, and then sort of enter

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the traditional financial world and kind of see it through both lenses.

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Yeah, I mean, to be honest, obviously

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I can feel, you can see that there are certain people that are more

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convicted than others. I think investors can see that too.

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The fact that we can, I mean, Simon was in the,

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not publicly, but he had some Bitcoin on Mel Gox and

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you know saw the last 10 years of craziness the good and the bad right um and you know i i had

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sort of been talking about strategy and bitcoin and everything else for the past five years so

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it's a pretty natural fit plug and play at meta planet um it was just like okay let's go you know

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turbo turbo hyper speed everything is is 110 bitcoin i think now it's like it's it's sort of

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the opportunistic phase and i don't think that's a bad thing i think it's perfectly rational um

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the real the real conviction or test is like can you eat the 70 percent paramount right if if it

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comes right you know whether it's 60 or 50 or 40 percent who knows um you know but that that tests

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your conviction right i mean outside of the bitcoin price like in the in the 15 months since

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i've joined metaplanet metaplanet stock has fallen six you know 50 60 70 percent like three three

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times you know maybe maybe four depending on on where you're measuring from right so like we're

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We're speed running a Bitcoin cycle every few months, once a quarter maybe.

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And so I think that sort of, not test your conviction because we didn't change anything.

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We continued on unabated, nothing changed, we didn't waver.

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But for the person from the traditional world, if you're just stepping into this new, you're opportunistic,

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that sort of move will test your conviction, will test your will, will test your kind of resolve.

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so yeah I mean I think there will be some wipeouts I mean the reality is like as as I'm a

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diehard Bitcoiner but it's naive to say that every company that adopts Bitcoin will be a success

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there will be failures I mean it's like every company that adopted the internet didn't succeed

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like there was failures so there'll be failures there'll be a bankruptcy like there there will be

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you know it's not all good it's not all sunshine and rainbows it's a it's a brutal competitive

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world. There's a lot of sharks out there and Wall Street and everything else. So, yeah, I mean,

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we're not I'm not naive to that. So, yeah, I mean, the times are good now. Bitcoin's around

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the all time high. There will be a cycle. And so I think that's what will separate the men from the

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boys, if you will. But until then, I think that, yeah, we'll see what happens. But, you know,

374
00:33:34,252 --> 00:33:41,692
I think we're really focused on staying disciplined and, you know, managing risk responsibly in a Bitcoin, you know, in a Bitcoin standard.

375
00:33:42,132 --> 00:33:48,972
Right. And for us, you know, managing risk means buying as much Bitcoin as we can, staying de-levered and making sure we can, you know, weather any storm.

376
00:33:49,492 --> 00:33:59,152
Yeah. And one of the most interesting things in this world that's come out in the last few weeks, really, is this kind of pivot from some companies to go to like crypto treasury companies.

377
00:34:00,052 --> 00:34:04,212
I think it was BitDigital sold their Bitcoin and bought Ethereum and the share price tanked.

378
00:34:04,252 --> 00:34:08,392
um what's your take on that i mean i think i know the answer but give me your take on that

379
00:34:08,392 --> 00:34:15,332
yeah i mean i i um i don't i don't know not to say i don't agree with it um because you know

380
00:34:15,332 --> 00:34:20,912
you're free to do whatever you want but um yeah it's it's it's clear to me that uh it was going

381
00:34:20,912 --> 00:34:25,772
to happen i was surprised it took as long as it did um but at the same time you know there's a

382
00:34:25,772 --> 00:34:33,512
reason that uh i'm a bitcoin maximalist um you know there was i turned down a lot of uh you know

383
00:34:33,512 --> 00:34:39,512
financial and whatever opportunities over the years because it was crypto related, right? And

384
00:34:39,512 --> 00:34:45,792
not Bitcoin. And, you know, I'm focused on what I believe in, which is Bitcoin. And so, you know,

385
00:34:45,872 --> 00:34:50,712
the XRP treasury company, I mean, to be honest, it's not clear to me that a lot of these things

386
00:34:50,712 --> 00:34:56,472
are commodities. And so if you, I know the SEC has sort of rolled back some stuff, but, you know,

387
00:34:56,512 --> 00:35:00,792
if you are capitalizing on security, there's a different set of rules, at least in the US.

388
00:35:00,792 --> 00:35:06,952
but you know I guess that's another another question for me it's pretty simple it's just

389
00:35:06,952 --> 00:35:11,772
like you know chart chart any of these things and even if you're not a you know an analyst or a

390
00:35:11,772 --> 00:35:15,852
someone that likes to chart things just look at any of the altcoins denominated in bitcoin

391
00:35:15,852 --> 00:35:21,732
right like it's pretty clear yeah right like I've the past couple days I've heard um you know on the

392
00:35:21,732 --> 00:35:25,612
on the ethereum treasury company someone well someone said well you know dylan you guys aren't

393
00:35:25,612 --> 00:35:29,912
getting a yield on your bitcoin and they are and I was like yeah well you can get a yield on your

394
00:35:29,912 --> 00:35:35,452
fiat it's still underperformed bitcoin you know so like you know the point is like these the the

395
00:35:35,452 --> 00:35:40,752
crypto companies or whatever like or the crypto alternate cryptocurrencies the altcoins something

396
00:35:40,752 --> 00:35:46,032
like eth staking yield like it's just recycled dilution the reason that eth btc has gone down

397
00:35:46,032 --> 00:35:51,612
only since the merge with a dead cat bounce in the last week is is because of you know people

398
00:35:51,612 --> 00:35:56,732
realize that there was like a fundamental shift in the protocol it's not nuclear weapons grade like

399
00:35:56,732 --> 00:36:01,592
Bitcoin is. And it's a, you know, it's a VC bet. It's a venture bet. It's a tech, it's like Tesla.

400
00:36:01,772 --> 00:36:07,012
It's a, it's a, it's something with, you know, a team in charge. It's not just, it's not a kind

401
00:36:07,012 --> 00:36:12,752
of an autonomous protocol like Bitcoin. So yeah, I mean, I wouldn't be comfortable doing, you know,

402
00:36:12,752 --> 00:36:16,972
building a lasting foundation on any, on any altcoin. And I, you know, obviously you agree

403
00:36:16,972 --> 00:36:22,912
there, but I think it's more so the, you know, there was obviously going to be some copycats.

404
00:36:22,912 --> 00:36:33,212
It's funny that like the Ethereum people in general or the crypto people, you know, religiously mocked Michael for years, you know, like he's buying the top.

405
00:36:33,312 --> 00:36:33,992
What is he doing?

406
00:36:34,052 --> 00:36:34,892
He's averaging up.

407
00:36:34,952 --> 00:36:35,952
He doesn't understand this.

408
00:36:35,992 --> 00:36:44,132
And now they're all like it's finally after looking into it all in the last two weeks, they've realized that, whoa, the public capital markets, you know.

409
00:36:44,372 --> 00:36:49,512
So it's a funny, funny change of events, I guess.

410
00:36:49,632 --> 00:36:51,552
But I wouldn't say I'm shocked.

411
00:36:51,552 --> 00:36:55,932
Yeah, a 7% yield when you're down 50% on Bitcoin doesn't sound like a great trade.

412
00:36:56,372 --> 00:36:58,332
Yeah, yeah. Enticing.

413
00:36:58,912 --> 00:37:02,132
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414
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419
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423
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424
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425
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453
00:39:28,784 --> 00:39:33,244
Let's talk about strategy because they've just come out with a new product.

454
00:39:34,164 --> 00:39:35,844
I think it's really interesting.

455
00:39:36,564 --> 00:39:37,524
Shout out to Odell.

456
00:39:37,644 --> 00:39:41,304
He called Sailor building a stable coin quite a long time ago.

457
00:39:41,384 --> 00:39:44,524
And I know it's not a traditional stable coin, but it kind of essentially is.

458
00:39:44,564 --> 00:39:46,244
Do you want to explain what Stretch is?

459
00:39:47,204 --> 00:39:47,424
Yeah.

460
00:39:48,304 --> 00:39:51,784
You know, I didn't see it coming.

461
00:39:52,124 --> 00:39:53,324
I should have seen it coming.

462
00:39:53,324 --> 00:40:08,724
I actually put out a few thoughts or ideas the past couple of weeks that I think if we kind of take a step back, people are talking like Bitcoin treasury companies are a new idea.

463
00:40:08,884 --> 00:40:09,484
It's a new model.

464
00:40:10,004 --> 00:40:16,544
The reality is in the long arc of history, Bitcoin treasury companies aren't really that unique.

465
00:40:16,544 --> 00:40:22,464
right like if we think of the the model of like the central banks of the past or the banks of the

466
00:40:22,464 --> 00:40:28,864
past right what are you doing you're capitalizing on a hard asset gold and you're issuing liabilities

467
00:40:28,864 --> 00:40:34,844
against that right and as you know fiat or you know gold-backed ious or whatever it was but if

468
00:40:34,844 --> 00:40:39,824
we think of all of the reasons that these that these you know financial institutions of the past

469
00:40:39,824 --> 00:40:46,324
failed you know it was basically you know an asset it was one these are fractional reserved

470
00:40:46,324 --> 00:40:51,584
banks, right? So they, you know, they would issue all this, all this, you know, these liabilities

471
00:40:51,584 --> 00:40:56,404
and money they didn't actually have and just hope that they wouldn't get bank run. But also, you

472
00:40:56,404 --> 00:41:01,284
know, in that process there, you know, they were a lot of these, the gold, you know, the gold banks

473
00:41:01,284 --> 00:41:06,644
of the past, they were issuing the liabilities were redeemable in gold, right? So not only were

474
00:41:06,644 --> 00:41:12,704
the liabilities callable at any one point, but they were in the hard asset, right? And so when

475
00:41:12,704 --> 00:41:17,964
there was any sort of crash or financial crisis or whatnot, all of a sudden, you know, and

476
00:41:17,964 --> 00:41:22,104
there's a rush to gold, all of a sudden your liabilities, you know, are much more valuable

477
00:41:22,104 --> 00:41:25,064
and there's a run on the bank and, you know, you're toast.

478
00:41:25,404 --> 00:41:30,304
So the reason we got to fiat in the first place was because, you know, the hard asset

479
00:41:30,304 --> 00:41:34,584
treasury companies of the past failed spectacularly over and over and over again.

480
00:41:35,044 --> 00:41:39,684
So like, if you had to think, like if you were a monetary theorist of the past and you

481
00:41:39,684 --> 00:41:46,224
that, okay, well, let's design a financial institution that solves every problem that we

482
00:41:46,224 --> 00:41:52,724
faced or faced today, back 200 years ago. Well, you'd want the gold to teleport.

483
00:41:53,404 --> 00:41:56,844
You would want there to not be able to mine any more gold to devalue your assets.

484
00:41:57,304 --> 00:42:03,404
You would want your liabilities to not be callable, to not be able to be run on your liabilities.

485
00:42:03,744 --> 00:42:06,584
You'd want them to be perpetual. You wouldn't want them to ever come due.

486
00:42:06,584 --> 00:42:11,744
and you'd want the currency your liabilities are denominated in to be printed forever.

487
00:42:13,204 --> 00:42:17,864
Theoretically, if you had to optimize a perfect bank of the past on a gold standard,

488
00:42:17,944 --> 00:42:18,584
that's what you'd want.

489
00:42:19,104 --> 00:42:20,744
And so when you think of what Michael is doing,

490
00:42:20,844 --> 00:42:22,204
if you think of what strategy is doing,

491
00:42:22,744 --> 00:42:25,124
they're capitalizing on Bitcoin, obviously, we know that.

492
00:42:25,524 --> 00:42:27,764
It's better than every way than gold, we know that.

493
00:42:27,764 --> 00:42:29,184
Bitcoin talking point 101.

494
00:42:29,604 --> 00:42:34,204
But the real interesting thing is the engineering and innovation on the liability side.

495
00:42:34,204 --> 00:43:01,184
And they've kind of tested this out all in public, right? If you think about the maturation of their liability profile. MSDR first issued convertible bonds. They did a couple converts. They did a senior note, so just a straight bond. They issued that through a subsidiary. So they put 100,000 Bitcoin in a subsidiary. They issued a bond against it. It was encumbered collateral. That Bitcoin was first claim before all the equity was secured.

496
00:43:01,184 --> 00:43:05,864
right they went to silvergate and did an over collateralized loan and everyone and in the bottom

497
00:43:05,864 --> 00:43:09,984
of 2022 is saying seller's gonna get margin called he's gonna get margin called you better sell your

498
00:43:09,984 --> 00:43:14,704
yacht michael like right so they they tried everything right and they you know did more

499
00:43:14,704 --> 00:43:21,844
converts in 2024 and and you know the perpetual preferreds now i i think this is sort of uh

500
00:43:21,844 --> 00:43:28,044
kind of the final evolution of what theoretically the best liability profile for

501
00:43:28,044 --> 00:43:33,684
a hard asset treasury company financial institution looks like, right? You have the

502
00:43:33,684 --> 00:43:37,904
perfectly engineered asset Bitcoin, but on the liability side, you want something that's

503
00:43:37,904 --> 00:43:43,824
perpetual denominated in a bad money relative to what your asset's holding. It's going to devalue

504
00:43:43,824 --> 00:43:48,484
forever. That can't be called, right? And so, you know, strike and strife were interesting.

505
00:43:48,644 --> 00:43:53,404
You know, strike is essentially a tokenized convertible bond. Strife is, you know, a perpetual

506
00:43:53,404 --> 00:43:58,524
virtual Bitcoin dollar swap that has a duration of, you know, a thousand years.

507
00:43:59,144 --> 00:44:04,564
But, you know, stretch is really interesting, right? Because, you know, everybody, there was

508
00:44:04,564 --> 00:44:08,264
that report from like Bernstein, I think six months ago, and it was like, strategy wants to

509
00:44:08,264 --> 00:44:12,924
become a neobank. And everybody interpreted that like, oh, they're going to, you know, acquire a

510
00:44:12,924 --> 00:44:17,024
bank and they're going to become, you know, get a commercial banking license and, you know,

511
00:44:17,164 --> 00:44:23,204
service deposits. What they did is actually much, much better. Being a bank is a total nightmare.

512
00:44:23,404 --> 00:44:48,444
You know, infinite regulatory hurdles and red tape. There's a limit to what you can do on the balance sheet. There's, you know, it's just it's a total nightmare. And so instead, you know, it's like the stretch is essentially they're issuing a stable coin. It's a, you know, sort of a neo stable coin. That's perpetual. Right. That's and and and so I think that it's a pretty genius feat of financial engineering.

513
00:44:49,184 --> 00:44:54,224
I think that, you know, the total addressable market for stretch is huge.

514
00:44:54,264 --> 00:44:56,804
It's like every dollar in money market funds.

515
00:44:56,804 --> 00:45:01,604
I understand that money market funds are a technically different thing from a regulatory perspective.

516
00:45:01,944 --> 00:45:06,764
And maybe there's just a lot of money that's siloed in those accounts that won't leave to go to a brokerage account.

517
00:45:07,004 --> 00:45:12,444
But like how many, you know, how many Bitcoiners do you know or people, you know, you read our conversation just before this, right?

518
00:45:12,464 --> 00:45:15,904
You're talking about, oh, if you have extra cash in a brokerage account, what do you do with it?

519
00:45:16,364 --> 00:45:18,244
Right. You know, stretch is short duration.

520
00:45:18,444 --> 00:45:20,004
It's a cash equivalent, essentially.

521
00:45:20,224 --> 00:45:22,584
I understand it's technically different, right?

522
00:45:22,684 --> 00:45:28,924
But yeah, it's, you know, the theory, there's this trilemma problem in international economics.

523
00:45:29,044 --> 00:45:30,104
I posted about it yesterday.

524
00:45:30,684 --> 00:45:31,444
I saw this tweet.

525
00:45:31,584 --> 00:45:34,084
Can you explain this trilemma?

526
00:45:34,844 --> 00:45:43,444
Yeah, so essentially, this is a sort of kind of an international economics problem, you know, theoretical, where you can only have two of three.

527
00:45:43,444 --> 00:45:45,424
You can have an open capital account.

528
00:45:45,424 --> 00:45:50,944
you can have a fixed exchange rate currency or you can have control of your interest rates

529
00:45:50,944 --> 00:45:57,204
you can't have all three right and so you know like for instance the u.s we have an open capital

530
00:45:57,204 --> 00:46:04,464
account we control our interest rates but the dollar floats right you know something like china

531
00:46:04,464 --> 00:46:11,084
they you know i guess it's debatable whether it's you know they truly have an exchange rate peg they

532
00:46:11,084 --> 00:46:17,424
have bans, right? But they control their interest rates. They control the price of their currency,

533
00:46:17,604 --> 00:46:22,904
but they have a closed capital account, right? And so, strife, strike, and stride are essentially,

534
00:46:23,324 --> 00:46:29,464
I know this is not a sovereign issuing their own money, but if you can sort of pick up what I'm

535
00:46:29,464 --> 00:46:34,504
putting down, these are monetary instruments. And so, obviously, there's free capital mobility.

536
00:46:35,424 --> 00:46:39,404
And in terms of what monetary autonomy means is, are you setting your own interest rate?

537
00:46:39,404 --> 00:47:05,764
And so with Strike and Strike, they set the interest rate. It's fixed. The dividend is fixed in perpetuity, but the exchange rate floats. And so what stretches is they just decided to flip it. And they said, okay, obviously there's free capital mobility, but we're going to fix the exchange rate at 100 or between 101 and 99. And we're going to let the interest rate float.

538
00:47:05,764 --> 00:47:11,484
right and so this is a this is basically a market you know there's a they're going to decide the

539
00:47:11,484 --> 00:47:17,584
stretch rate every month but essentially this is going to be a free-floating essentially currency

540
00:47:17,584 --> 00:47:24,404
um that exists and i i think it'll be you know it'll have a premium to t-bills because the u.s

541
00:47:24,404 --> 00:47:32,304
is the money printer um but yeah i mean this is uh quite quite the the financial engineering

542
00:47:32,304 --> 00:47:36,524
instrument. I mean, it's really, really impressive. But with all their products,

543
00:47:36,664 --> 00:47:44,104
they're covering every side of this triangle. Yeah. Well, not C, right? They always have an

544
00:47:44,104 --> 00:47:51,044
open capital account or capital mobility. But for another example of this at the sovereign level is

545
00:47:51,044 --> 00:47:59,644
Hong Kong, right? They have an open capital account, right? And they manage the price of

546
00:47:59,644 --> 00:48:04,744
their money, right? It's pegged to the dollar, but they don't have monetary autonomy, right? They

547
00:48:04,744 --> 00:48:09,764
follow whatever interest rates are set by the Fed, right? So this is sort of kind of an age-old

548
00:48:09,764 --> 00:48:17,664
question or theoretical choice for sovereign nations. And so, yeah, it's interesting that

549
00:48:17,664 --> 00:48:22,944
I don't think, I think like people like, you know, Chuck made an Odell and kind of, they said,

550
00:48:22,944 --> 00:48:27,384
oh, well, yeah, you know, Saylor will create a stable coin or, you know, Chuck and I had a

551
00:48:27,384 --> 00:48:34,744
a conversation in 2022 where we said, you know, really the, from an engineering point of view,

552
00:48:35,404 --> 00:48:41,784
the biggest, you know, the golden goose of crypto generally, like what all of the Ethereum

553
00:48:41,784 --> 00:48:48,464
DeFi engineers were chasing for all of this time, you know, for years was, okay, how do we make a

554
00:48:48,464 --> 00:48:55,084
stable coin that's, you know, decentralized, you know, that's not, you know, and I understand that

555
00:48:55,084 --> 00:49:01,404
this is centralized it's listed on the nasdaq by a you know delaware a delaware company um but

556
00:49:01,404 --> 00:49:07,484
you know the the interesting thing is that no one can really figure it out i understand it's

557
00:49:07,484 --> 00:49:13,024
not a decentralized oracle and it's not this like you know cypher crypto anarchist holy grail that

558
00:49:13,024 --> 00:49:19,324
that you know they were uh intending for but you know all of crypto has been spending a lot of time

559
00:49:19,324 --> 00:49:27,964
to try to figure out how do we make a stable coin that's not some T-bills or money in a bank account

560
00:49:27,964 --> 00:49:34,124
that's sitting in Circle's vault or Tether, right? How do we do this? So they tried DAI.

561
00:49:34,264 --> 00:49:39,604
They tried all these different options and none of them caught on. And Saylor just listed it on

562
00:49:39,604 --> 00:49:43,804
the NASDAQ and none of the crypto people that have been trying this for 10 years have even said

563
00:49:43,804 --> 00:49:51,304
anything about it no one even knows um so yeah i mean i think that stretch might be the most

564
00:49:51,304 --> 00:49:57,504
in-demand product of the preferreds right because with strike and strife there's a very high interest

565
00:49:57,504 --> 00:50:02,864
rate but you're taking you're taking what's called duration risk right so it's like the reason that

566
00:50:02,864 --> 00:50:08,484
if you know this is just sort of some finance jargon but you know if you have a one-year

567
00:50:08,484 --> 00:50:16,004
bond or a t-bill or you have a 30-year bond right a one percent change of interest rates for a one

568
00:50:16,004 --> 00:50:21,324
year instrument doesn't change much right interest rates go from five percent to four percent

569
00:50:21,324 --> 00:50:26,684
the value of your money doesn't change much you get you get less interest but the value of your

570
00:50:26,684 --> 00:50:32,644
money stays pretty much the same if you put money in a bond you know at four percent and it goes or

571
00:50:32,644 --> 00:50:41,124
let's say 2% and it goes to 3% or 4% the yields, the value of your money you put in collapses.

572
00:50:41,404 --> 00:50:46,184
This is what we saw in 2022, right? The whole, you know, the Bank of England and the, you know,

573
00:50:46,224 --> 00:50:50,944
all of these bond markets were imploding because interest rates went from 1% to 4% and the bond

574
00:50:50,944 --> 00:50:55,124
market got cut in half. And, you know, non-finance people were like, what do you mean the bonds fell

575
00:50:55,124 --> 00:51:00,624
by 50%? That makes no sense, right? But that's just kind of how do these things work. So, you

576
00:51:00,624 --> 00:51:04,524
know, with Strife and Strike, these are long, long duration instruments. So, you know, people

577
00:51:04,524 --> 00:51:11,704
last week, they bought at 125 and now it's at 116, you know, and obviously long-term investors,

578
00:51:11,844 --> 00:51:15,224
they understand this and they understand where this is all going and they're not too worried

579
00:51:15,224 --> 00:51:20,884
about that, right? But the beauty of Stretch is that there's no duration risk. I mean,

580
00:51:21,284 --> 00:51:25,224
not to say no duration risk, but there's minimal duration risk. It's a perpetual instrument,

581
00:51:25,224 --> 00:51:30,464
but because this interest rate's floating and not fixed, it's going to be a stable price. At

582
00:51:30,464 --> 00:51:35,284
least, you know, this is the, this is the target for sailor and team. So yeah, I mean, I wouldn't

583
00:51:35,284 --> 00:51:39,764
be surprised if we saw a huge, huge demand for this instrument. Um, they're starting to, you

584
00:51:39,764 --> 00:51:44,184
know, they intentionally price the interest rate at nine. I think they, they know that that's

585
00:51:44,184 --> 00:51:49,604
extremely attractive. Um, and so, yeah, I mean, another tool in the arsenal, um, and, you know,

586
00:51:49,604 --> 00:51:55,264
money market mutual funds and, you know, cash equivalents and stable coins, that's, uh, you

587
00:51:55,264 --> 00:51:58,624
You know, that's the real, that's a, that's a real big game.

588
00:51:59,304 --> 00:52:03,664
You know, it's also, I think it's a bit ironic and a little funny that the, you know, the

589
00:52:03,664 --> 00:52:08,804
sort of the meta of, of crypto, the crypto industry has been stable coins, right?

590
00:52:08,844 --> 00:52:10,924
Everyone's like, what's the real use case for this?

591
00:52:11,364 --> 00:52:11,524
Okay.

592
00:52:11,664 --> 00:52:11,844
Yeah.

593
00:52:11,844 --> 00:52:13,764
Bitcoin, but that's, that's for boomers.

594
00:52:13,784 --> 00:52:14,344
That's boring.

595
00:52:14,744 --> 00:52:16,184
What's, what's the real use case?

596
00:52:16,244 --> 00:52:18,144
Where can I make money on this from this industry?

597
00:52:18,144 --> 00:52:22,844
You know, none of the, the Ethereum or Solanas or none of this is interesting, but stable

598
00:52:22,844 --> 00:52:23,864
coins have a real use case.

599
00:52:23,864 --> 00:52:29,544
and uh you know circle's ipo was a huge success and now everybody's sort of looking okay well

600
00:52:29,544 --> 00:52:35,344
where's the next sort of opportunity here and mstr dropped dropped a stable coin you know at 5 p.m

601
00:52:35,344 --> 00:52:40,544
and no one even no one even said anything it's just the bitcoiners on twitter right so yeah uh

602
00:52:40,544 --> 00:52:46,604
it's uh it's it's pretty ironic in my opinion it should be much much bigger story than it actually

603
00:52:46,604 --> 00:52:51,284
has been so far especially when circle and tether have both been told they can't offer

604
00:52:51,284 --> 00:52:55,704
yield on their stable coins and then say that comes out with this product that is offering at

605
00:52:55,704 --> 00:53:00,684
least at inception nine percent um i would like to get your opinion on where that dividend rate will

606
00:53:00,684 --> 00:53:04,744
go but before we do that just because we've talked a little bit about this but for anyone

607
00:53:04,744 --> 00:53:09,104
who's not been following this closely who didn't see say this presentation like how does he retain

608
00:53:09,104 --> 00:53:15,084
the peg to close to a hundred dollars yeah so there's a few options um you know above 101

609
00:53:15,084 --> 00:53:24,144
One, they don't have it yet, but they're going to attach an ATM to this, meaning that if the price rises, they're just going to issue more securities.

610
00:53:24,484 --> 00:53:29,524
They're going to print more stretch, STRC, and they're going to sell it on the market so they can drive the price down.

611
00:53:30,104 --> 00:53:33,544
They also have a call in this at 101.

612
00:53:33,544 --> 00:53:42,844
So legally, they're allowed to basically take your stretch and give you $101 in return at any point.

613
00:53:42,844 --> 00:53:48,364
And so with these other preferreds, I mean, so the preferred market's interesting, right?

614
00:53:48,384 --> 00:53:52,164
Because for bonds, you know, there's five-year bonds, 10-year bonds, 20-year bonds.

615
00:53:52,924 --> 00:53:57,064
Preferred equity is interesting because there's a concept called there's perpetual instruments,

616
00:53:57,304 --> 00:53:57,524
right?

617
00:53:57,664 --> 00:53:59,904
And so perpetual means forever, right?

618
00:54:00,344 --> 00:54:06,484
And so, you know, in the history of finance, this perpetual preferred instrument isn't used

619
00:54:06,484 --> 00:54:12,244
much or too popular, but if it was issued at all, right?

620
00:54:12,844 --> 00:54:17,724
there was always a call in it, meaning that if I'm a company, company A, and I want to issue

621
00:54:17,724 --> 00:54:22,544
preferred equity and I do, and I issue perpetual preferred equity with an interest rate, right?

622
00:54:22,564 --> 00:54:27,644
That means I'm on the hook for it forever. So any rational CEO or a management team says, okay, well,

623
00:54:28,184 --> 00:54:31,424
if the price rises or, you know, our conditions change and we don't need the financing anymore,

624
00:54:31,424 --> 00:54:35,864
we want to call it in, right? And so perpetual preferreds were always perpetual in name,

625
00:54:35,944 --> 00:54:40,104
but not actually, right? And Saylor's innovation was like, no, no, no, we want to make this the

626
00:54:40,104 --> 00:54:44,444
best credit instrument possible and we're accumulating Bitcoin and our belief is Bitcoin

627
00:54:44,444 --> 00:54:48,464
appreciates relative to fiat forever. So we're not going to give you where there's no call,

628
00:54:48,644 --> 00:54:52,624
right? And so this like sort of melted a lot of, you know, Wall Street minds when they said,

629
00:54:52,684 --> 00:54:57,124
no, no, no, we don't want the call, right? Because the call hinders the value of the call option and

630
00:54:57,124 --> 00:55:02,224
strike and everything else. But with Stretch, unlike the other preferreds, they do have a call

631
00:55:02,224 --> 00:55:06,784
so they can call it in at one-on-one, right? So that's, they have, they have ways to sort of,

632
00:55:06,784 --> 00:55:14,224
manage the upside. They can also lower the interest rate. So if Stretch is at 101, 102,

633
00:55:14,384 --> 00:55:20,064
it's constantly higher and they are not selling the ATM for whatever reason on Stretch, they can

634
00:55:20,064 --> 00:55:24,644
lower the interest rates and they can do this once a month. Conversely, on the other side of this,

635
00:55:25,264 --> 00:55:33,164
what if it falls? The real worry by some is in creating sort of a synthetic stable coin as well,

636
00:55:33,164 --> 00:55:37,224
the downside, right? What if, you know, there's sellers or short sellers or people get scared and

637
00:55:37,224 --> 00:55:42,624
all dump at once. And there's a few tools. One is, you know, the people that are comparing this to

638
00:55:42,624 --> 00:55:47,644
like previous algo stable coins or whatever, it's just a total joke. Like it's totally,

639
00:55:47,644 --> 00:55:56,024
totally different. One, because if the price of stretch falls to $95 or $90, they're not selling

640
00:55:56,024 --> 00:56:01,104
any Bitcoin. Like there's no, there's no like force redeem function here where everybody's

641
00:56:01,104 --> 00:56:06,284
going to all panic at once and take all of the collateral like it's like that that's not going

642
00:56:06,284 --> 00:56:10,144
to happen they don't they're they're not going to sell the bitcoin they have there's no redeemability

643
00:56:10,144 --> 00:56:15,644
for the the user or for the owner of the preferred they can't just take the bitcoin and run like you

644
00:56:15,644 --> 00:56:36,296
could with some crypto you know science experiment um the second is that you know if it falls they just going to raise the interest rate right and then that if their intention is just 100 and you have that sort of trilemma right Well they said we have open capital account and the exchange rate is going to be fixed at 100 or whatever

645
00:56:36,456 --> 00:56:41,076
So if it falls and they said, they acknowledged, hey, we're going to raise 500 million in the IPO.

646
00:56:41,536 --> 00:56:44,096
If we sell it at 100, it's going to be a 9% instrument.

647
00:56:44,276 --> 00:56:48,316
If we sell it at 95 or 90, it could be a 9.5% or 10% instrument.

648
00:56:48,316 --> 00:57:11,776
So that means like it could IPO, I expect it to be at 100, but it could, like the previous preferred instruments, it could open below the IPO price. It could open at 85 or 90 or 95. That's not out of the question. So what does that mean? It means that, you know, in a month, they're going to raise the interest rate to 9.25% or 9.5% or whatever they raise it to, right? And theoretically, that will draw in capital.

649
00:57:11,776 --> 00:57:17,916
um so yeah i mean i think that there's uh you know there's a ton of runway for these preferreds i

650
00:57:17,916 --> 00:57:22,056
think strategy is really looking forward to they mentioned it in the presentation to let these

651
00:57:22,056 --> 00:57:27,156
converts roll off um and then you have really like a pristine pristine capital structure i mean it

652
00:57:27,156 --> 00:57:31,476
already is a pristine capital structure you have 70 billion of bitcoin and you know 10 billion or

653
00:57:31,476 --> 00:57:37,136
so of combined liabilities but 50 of those converts are already through the strike price

654
00:57:37,136 --> 00:57:40,756
It's already basically quasi-equity that hasn't converted yet, right?

655
00:57:40,836 --> 00:57:44,636
So, yeah, I mean, there's a ton of runway for these preferreds.

656
00:57:45,136 --> 00:57:52,096
I think there's a huge, huge untapped demand for, you know, dollar equivalents backed by Bitcoin.

657
00:57:52,716 --> 00:57:59,816
Unlike previous sort of algo stables, if you will, or synthetic over-collateralized stablecoins is probably a better term.

658
00:58:00,816 --> 00:58:03,756
You know, this is like 7x over-collateralized, right?

659
00:58:03,756 --> 00:58:09,916
It's like, you know, okay, you issue a few billion dollars preferreds, but it's 7, 8, 10x over collateralized.

660
00:58:10,436 --> 00:58:14,016
You know, that's unlike anything that's ever been tried and tested in crypto before.

661
00:58:14,236 --> 00:58:14,496
Why?

662
00:58:15,096 --> 00:58:20,576
Well, because if you have, if you wanted to make a 7x over collateralized stablecoin, it's super capital inefficient.

663
00:58:21,096 --> 00:58:26,816
Like if you're familiar with crypto DeFi or whatever, the Ethereum DeFi complex created DAI.

664
00:58:27,416 --> 00:58:29,296
DAI, D-A-I, right?

665
00:58:29,296 --> 00:58:33,796
And so decentralized autonomous something.

666
00:58:34,796 --> 00:58:36,156
I forget exactly.

667
00:58:36,376 --> 00:58:40,656
But that whole idea was let's create a stable coin backed with crypto collateral.

668
00:58:41,096 --> 00:58:42,716
And they first did it with ETH.

669
00:58:43,196 --> 00:58:50,956
But the problem was nobody wanted to put their ETH idle to back a stable coin for no reason.

670
00:58:51,276 --> 00:58:53,296
And so it was really capital inefficient.

671
00:58:53,616 --> 00:58:57,556
So what ultimately resolved, what ultimately happened with DAI, the product?

672
00:58:57,556 --> 00:59:05,416
uh well it ended up being like 50 collateralized with usdc the decentralized algorithmic stable

673
00:59:05,416 --> 00:59:10,716
coin on ethereum was backed by the centralized stable coin because it was more capital efficient

674
00:59:10,716 --> 00:59:15,636
to just back it one-to-one yeah then to like take a bunch of ethereum and and and you know

675
00:59:15,636 --> 00:59:19,976
and so like if you wanted a real real safe stable coin on ethereum you could have theoretically

676
00:59:19,976 --> 00:59:25,816
backed it 10 to 1 with e for every you know every dollar of the stable but nobody wanted that because

677
00:59:25,816 --> 00:59:30,676
as capital inefficient. So there was no product market fit for this. And so that was the same

678
00:59:30,676 --> 00:59:35,036
sort of problem with all the other synthetic stablecoins that existed. Strategy saying,

679
00:59:35,136 --> 00:59:41,396
no, no, no, this is going to be senior to the common equity, senior to two of the preferred

680
00:59:41,396 --> 00:59:44,716
instruments. And ultimately, once these converts roll off, it'll be the second in the capital

681
00:59:44,716 --> 00:59:49,696
structure. So you have a supremely over collateralized stablecoin that's probably

682
00:59:49,696 --> 00:59:56,656
going to be paying you, you know, five, six, 7% interest. And so, you know, while the rest of

683
00:59:56,656 --> 01:00:01,536
crypto tries to sell you on, you know, holding a stable coin with no interest, right? So that's the,

684
01:00:01,776 --> 01:00:09,276
you know, I think it's not really a close competition. And, you know, it's also, it sort

685
01:00:09,276 --> 01:00:13,856
of inverts the model. All the stable coin companies are issuing stable coins, not paying you interest,

686
01:00:13,916 --> 01:00:18,556
and then collecting interest for themselves. Strategy saying, no, no, no, we want the liability

687
01:00:18,556 --> 01:00:20,716
and we're going to buy Bitcoin because that's what we believe in.

688
01:00:21,436 --> 01:00:25,076
Which I, you know, if you had to say, Dylan, would you rather sit on, you know,

689
01:00:25,316 --> 01:00:28,856
would you rather sit on a bunch of cash that, you know, other people have a claim to,

690
01:00:28,936 --> 01:00:32,016
but you collect the interest or would you rather be levered long Bitcoin forever?

691
01:00:32,136 --> 01:00:33,396
I would choose the second, right?

692
01:00:33,416 --> 01:00:34,416
I would want to be levered long.

693
01:00:34,976 --> 01:00:36,736
So I think it's a much superior model.

694
01:00:36,876 --> 01:00:43,236
Nevermind, we're not even talking about the nightmare of compliance and KYC AML and money laundering

695
01:00:43,236 --> 01:00:46,716
and, you know, blah, blah, blah, blah, blah, that you have to deal with as a stablecoin issuer.

696
01:00:46,716 --> 01:00:53,256
um so yeah i mean it's uh it's like the best of both worlds it's like you you know there's

697
01:00:53,256 --> 01:00:58,776
it's sort of an entrance into the quasi banking system slash stable coin world without service

698
01:00:58,776 --> 01:01:04,296
servicing any you know true like uh i mean they're servicing customers they're not servicing

699
01:01:04,296 --> 01:01:08,796
customers they're servicing investors right and that's you know that's a much much better world

700
01:01:08,796 --> 01:01:13,556
uh to operate in in my opinion yeah i totally agree and i assume this is going to be massively

701
01:01:13,556 --> 01:01:18,956
the demand is going to be huge for this. What happens to the interest rates there? Because I

702
01:01:18,956 --> 01:01:24,256
assume the Fed's fund rate basically sets a floor that it likely won't go below. But do you see this

703
01:01:24,256 --> 01:01:31,236
trading down to like 5%, 6%? Well, so the beauty of it is the floor is actually the SOFR rate.

704
01:01:31,596 --> 01:01:37,656
Okay. So the lowest interest rate will ever go is actually the Fed funds rate. But yeah,

705
01:01:37,656 --> 01:01:38,596
I think it'll be market driven.

706
01:01:38,996 --> 01:01:39,256
Um,

707
01:01:39,896 --> 01:01:40,336
to be honest,

708
01:01:40,356 --> 01:01:40,956
I think that,

709
01:01:41,096 --> 01:01:41,516
uh,

710
01:01:42,076 --> 01:01:42,356
you know,

711
01:01:42,376 --> 01:01:42,816
there's,

712
01:01:43,176 --> 01:01:43,916
I believe,

713
01:01:43,916 --> 01:01:45,876
and I have to read the documentation more clearly,

714
01:01:45,876 --> 01:01:46,836
but I believe the low,

715
01:01:46,916 --> 01:01:47,136
the,

716
01:01:47,216 --> 01:01:50,456
the most they can lower the rate per month is 25 basis points.

717
01:01:50,596 --> 01:01:51,856
It's like that difficulty adjustment.

718
01:01:52,696 --> 01:01:53,576
It is right.

719
01:01:53,656 --> 01:01:55,136
It is like the difficulty adjustment.

720
01:01:55,416 --> 01:01:55,676
Um,

721
01:01:56,176 --> 01:01:56,676
and so,

722
01:01:56,776 --> 01:01:57,036
yeah,

723
01:01:57,056 --> 01:01:57,356
there's,

724
01:01:57,396 --> 01:01:57,556
you know,

725
01:01:57,556 --> 01:01:57,996
once a month,

726
01:01:58,016 --> 01:01:59,176
they're going to declare the stretch rate.

727
01:01:59,196 --> 01:02:00,056
They're going to pay the dividend.

728
01:02:00,536 --> 01:02:00,856
Um,

729
01:02:01,536 --> 01:02:01,876
you know,

730
01:02:01,876 --> 01:02:02,076
I,

731
01:02:02,196 --> 01:02:02,856
I think that,

732
01:02:03,456 --> 01:02:03,676
you know,

733
01:02:03,696 --> 01:02:04,976
and also anybody that's like,

734
01:02:04,996 --> 01:02:05,156
you know,

735
01:02:05,176 --> 01:02:06,656
making a fuss about the dividends,

736
01:02:06,996 --> 01:02:07,156
you know,

737
01:02:07,156 --> 01:02:12,996
they have to pay is like, you know, totally just missing the scale of this all. Right. Um, you know,

738
01:02:12,996 --> 01:02:17,356
they can raise, they have raised the dividends they need to pay for a quarter in an afternoon

739
01:02:17,356 --> 01:02:22,316
of trading and no one noticed, right. Like strategies, common equities, supremely liquid.

740
01:02:23,136 --> 01:02:28,736
Um, so that, you know, that doesn't worry me at all to be frank, but, um, yeah, I think the

741
01:02:28,736 --> 01:02:34,836
interest rate on the, on stretch probably, I mean, ultimately settles, you know, just right above the

742
01:02:34,836 --> 01:02:39,956
risk-free rate probably in the long term with a bit of a spread just for the, you know, any

743
01:02:39,956 --> 01:02:45,996
perceived credit risk. But yeah, I mean, right, probably I would, I wouldn't be surprised to see

744
01:02:45,996 --> 01:02:50,876
6% in the, you know, or like, like, you know, 200 basis points above the Fed funds rate in the near

745
01:02:50,876 --> 01:02:55,596
term, you know, or the short medium term. But, you know, probably should go lower than that,

746
01:02:55,656 --> 01:02:59,936
you know, to be honest, right. There's not, there's not another issuer of fixed income that's

747
01:02:59,936 --> 01:03:02,116
this over collateralized, that's this transparent.

748
01:03:03,556 --> 01:03:05,916
You know, everyone else that's borrowing money doesn't have it.

749
01:03:06,116 --> 01:03:08,576
I guess, you know, the big tech companies have the money

750
01:03:08,576 --> 01:03:10,756
and they just borrow it to get some leverage.

751
01:03:11,076 --> 01:03:13,776
But most of the borrowers in the corporate credit market

752
01:03:13,776 --> 01:03:16,616
are companies that need the money that don't have it, right?

753
01:03:16,656 --> 01:03:18,176
And they don't have collateral.

754
01:03:18,176 --> 01:03:22,976
They have, you know, future discounted cash flows to pledge, right?

755
01:03:23,116 --> 01:03:28,576
So, yeah, that's the real innovation is that they have the money.

756
01:03:28,856 --> 01:03:29,636
They don't need it.

757
01:03:29,636 --> 01:03:35,496
They're just doing it to get some operating leverage and the collateral is transparent and homogenous.

758
01:03:36,076 --> 01:03:40,516
So, yeah, it should be a pretty low interest rate, to be honest.

759
01:03:41,656 --> 01:03:43,316
And, yeah, short duration, too.

760
01:03:43,756 --> 01:03:50,816
You know, we're not even talking about what happens 12 months from now when, you know, sort of a patsy Fed chair is put in.

761
01:03:51,276 --> 01:03:52,476
That's if it takes 12 months.

762
01:03:53,636 --> 01:03:54,356
Yeah, true.

763
01:03:54,656 --> 01:03:55,096
Right.

764
01:03:55,096 --> 01:04:04,916
But, you know, and a Fed chair resigning from, you know, decree of the president or prime minister is sort of what happens in Banana Republics.

765
01:04:05,516 --> 01:04:11,636
And I would implore anybody to sort of look at what happens to like the bond market in those scenarios.

766
01:04:11,636 --> 01:04:18,896
You know, ask someone from Turkey what happens when Erdogan fired their Fed, their central bank chief, you know.

767
01:04:18,896 --> 01:04:28,296
so yeah i mean this is all very very uh pro btc um i and i say that you know not like not political

768
01:04:28,296 --> 01:04:32,776
or social or whatever but just purely from like a flow's fundamental standpoint uh there's a lot

769
01:04:32,776 --> 01:04:38,356
of people in finance that are saying oh wow well if that happens then i really wouldn't want to own

770
01:04:38,356 --> 01:04:46,316
bonds it's like uh well yeah no kidding like where have you been um so all of this is is you know

771
01:04:46,316 --> 01:04:53,576
it's that the tailwinds are supremely bullish uh for for strategy and for you know for bitcoin and

772
01:04:53,576 --> 01:04:57,516
for bitcoin treasury companies all right last question on sailor because when i was watching

773
01:04:57,516 --> 01:05:01,036
his presentation of stretch um he was talking about something else that i thought was interesting

774
01:05:01,036 --> 01:05:06,656
um where he was talking about equitizing the convertible nodes why would he do that is that

775
01:05:06,656 --> 01:05:12,596
purely just to deleverage the company i think it's uh it's because they're sitting senior to

776
01:05:12,596 --> 01:05:18,516
the preferreds. So right now, the preferreds, you know, outside of the fact that the convertible

777
01:05:18,516 --> 01:05:25,116
bond guys are sort of, I guess it depends where the strike is, but, you know, a simple model is

778
01:05:25,116 --> 01:05:30,996
when the price of your stock goes up, they're shorting. And when the price of your stock falls,

779
01:05:31,176 --> 01:05:35,716
they're buying, right? And so there's never been a serial issuer of convertible bonds like MSTR,

780
01:05:36,436 --> 01:05:40,796
partly because there's never been a, you know, collateral or abuse of proceeds as strong as

781
01:05:40,796 --> 01:05:46,156
Bitcoin, but more so because, you know, you do a convert or two or three. And, and I mean,

782
01:05:46,156 --> 01:05:49,396
it's basically like, you know, I guess the equivalent, I could, this isn't a perfect

783
01:05:49,396 --> 01:05:54,536
metaphor analogy, but it's like, it's like, it's sort of like you're squeezing the volatility out

784
01:05:54,536 --> 01:05:58,456
of your stock, right? It's like, that's what their job is, is, you know, they're, they're

785
01:05:58,456 --> 01:06:04,216
gamma trading, which not to go into the weeds, but they're essentially like neutering the volatility.

786
01:06:04,676 --> 01:06:08,676
They're, they're dampening the volatility intentionally. Right. And so strategies,

787
01:06:08,676 --> 01:06:15,356
business model is like, we want to be hypervolatile. And so part of it is one, I think for the converts

788
01:06:15,356 --> 01:06:19,876
is there's a maturity cliff. So if your stock isn't high enough, then you have to come up with

789
01:06:19,876 --> 01:06:24,196
the money or, you know, refinance and do another convertible bond. So that's, that's annoying.

790
01:06:24,196 --> 01:06:28,776
It's like sort of a flood talking point. Two is the game, you know, they're, they're gamma trading

791
01:06:28,776 --> 01:06:32,836
it. So they're stripping the volatility and dampening the volatility. And then three is

792
01:06:32,836 --> 01:06:38,376
it sits senior to the preferreds, right? So, so there's a, you know, the strategies come out with

793
01:06:38,376 --> 01:06:45,016
risk model that says, okay, Bitcoin has a volatility of, of, you know, X and we expect

794
01:06:45,016 --> 01:06:50,476
the return profile of Bitcoin over the next 10 years to be Y. And, uh, you know, there's,

795
01:06:50,556 --> 01:06:53,976
you know, this much collateral, there's 10 times the collateral as there is the debt.

796
01:06:54,096 --> 01:06:59,196
And so what's the probability of, you know, your Bitcoin, your, your debt position being

797
01:06:59,196 --> 01:07:03,156
under collateralized. So if you own this preferred stock, what's your probability of us having less

798
01:07:03,156 --> 01:07:07,016
Bitcoin, you know, than we have of dead outstanding, right?

799
01:07:07,056 --> 01:07:10,756
Or, you know, not insolvent, but, you know, you're in a bad position.

800
01:07:11,256 --> 01:07:17,016
And so when you do the math now, those converts, you know, those $8 billion converts, it means

801
01:07:17,016 --> 01:07:19,796
that there's a lot less collateral left for all the preferred equities.

802
01:07:20,396 --> 01:07:25,236
So I think when they want to equitize the convertible bonds, because it basically allows

803
01:07:25,236 --> 01:07:27,516
their preferreds to be that much more collateralized.

804
01:07:27,516 --> 01:07:32,696
And, you know, essentially, it creates a more runway to issue more preferreds is really what

805
01:07:32,696 --> 01:07:38,296
what the unlock is there. That makes sense. Okay, cool. So then to kind of close out with this,

806
01:07:38,596 --> 01:07:44,036
what do all these products that strategy are now issuing mean for the other treasury companies? So

807
01:07:44,036 --> 01:07:48,876
like for you at MetaPlanet, do you see this as we have to do something similar or we get left behind?

808
01:07:50,176 --> 01:07:56,136
You know, that's a, that's an interesting question. I mean, I think what it, what it means

809
01:07:56,136 --> 01:08:01,016
is that if you know, for Bitcoin in general, is that the asset is maturing. And this is a way,

810
01:08:01,016 --> 01:08:08,816
You know, if Bitcoin is going to eat the world, and that's what kind of a lot of us came to the conclusion of five years ago, then it's not going to be everybody just buying Bitcoin on cold cards.

811
01:08:09,476 --> 01:08:12,516
There's huge pools of money that can't access the asset.

812
01:08:12,796 --> 01:08:18,556
And so, you know, common equity, just, you know, equity on the stock market was just the first pool.

813
01:08:19,116 --> 01:08:23,276
And, you know, really the bigger market in terms of exposure is the credit markets.

814
01:08:23,836 --> 01:08:29,656
Right. So the preferred equity, there's debt, you know, the sovereign bond market is much, much bigger.

815
01:08:29,656 --> 01:08:35,356
Right. And so if Bitcoin is going to entrench itself in the financial system, it has to get to all these different pools of capital.

816
01:08:35,476 --> 01:08:39,936
So I think that's the bigger idea in terms of like the competition between the treasury companies.

817
01:08:40,116 --> 01:08:52,656
I mean, the preferreds, not only just having preferreds authorized, never mind having them issued, but having them be issued liquid and a sufficient scale is a whole nother story.

818
01:08:52,656 --> 01:09:06,496
And I think that, you know, kind of circling back to what we said earlier, like that's the really the not the only true moat, but one of the strongest, right, is, you know, I think of preferreds as, you know, for strategy is in two ways.

819
01:09:06,616 --> 01:09:09,296
One, it's sort of it's offensive, right?

820
01:09:09,336 --> 01:09:10,776
We're levering the balance sheet.

821
01:09:10,836 --> 01:09:11,936
We're buying more Bitcoin.

822
01:09:12,076 --> 01:09:13,496
We're increasing Bitcoin per share.

823
01:09:14,036 --> 01:09:16,496
We have the potential to buy back our stock.

824
01:09:16,496 --> 01:09:22,116
or it's Saylor said, hey, if MNAP gets to one or below, or maybe even above one, I'm not sure if

825
01:09:22,116 --> 01:09:25,556
he said that, but we can buy back, we can issue stride and buy back our stock. He said that,

826
01:09:25,596 --> 01:09:29,156
right? And so if you're a short seller and your thesis is, okay, well, they're just, you know,

827
01:09:29,156 --> 01:09:33,256
they're sort of dribbling in stock every day and let's just front run them and, you know,

828
01:09:33,256 --> 01:09:37,136
play this MNAP compression game. And all of a sudden, even if like, you know, strategy scale,

829
01:09:37,256 --> 01:09:40,956
even if Saylor goes and buys back a hundred million of stock, which is not that much for

830
01:09:40,956 --> 01:09:46,396
strategy's $150 billion scale, right? But all of a sudden those flows go the other way. And so

831
01:09:46,396 --> 01:09:50,996
someone like a short seller has to unwind and get out. Right. So it's, it's the, the preferreds are

832
01:09:50,996 --> 01:09:55,836
both like a offensive tool and it's defensive. Right. Like I, I think of preferreds as like,

833
01:09:55,916 --> 01:10:01,136
it's like an M nav defense mechanism, right. It's like, okay, well, if, if the, you know,

834
01:10:01,136 --> 01:10:05,736
the short sellers and the, you know, the, the arbitrageurs are really, really trying to short

835
01:10:05,736 --> 01:10:09,596
sell like, like Jim Chanos, right. His whole thing. It's like, if you listen to Jim Chanos,

836
01:10:09,596 --> 01:10:16,336
he's not, he's not just a belligerent hater of Bitcoin or sailor, far from it. He's just,

837
01:10:16,396 --> 01:10:22,876
saying that he's like, actually, I get Bitcoin or I don't know how much he, you know, quote unquote,

838
01:10:22,976 --> 01:10:27,576
gets it. But he's like, look, I get the trade. I'm just, you know, playing the spread game,

839
01:10:27,756 --> 01:10:31,856
right? And kind of like dancing in and out. And so with the preferreds, like it gives

840
01:10:31,856 --> 01:10:37,296
it gives sailor or, you know, the operator sort of an option to, okay, we're going to continue to

841
01:10:37,296 --> 01:10:40,556
stack Bitcoin every week because that's our mandate. And that's what we said we're going

842
01:10:40,556 --> 01:10:44,656
to do. And that's our business. But at the same time, we're not going to put the pressure on the

843
01:10:44,656 --> 01:10:51,376
common shareholders. You know, one of the kind of the misconceived notions that people had is

844
01:10:51,376 --> 01:10:56,756
the convertible bonds, right? Like people see the leverage as something that's positive for the

845
01:10:56,756 --> 01:11:01,456
common. And that could be true, right? You know, increase the leverage, you know, a billion dollars

846
01:11:01,456 --> 01:11:05,176
of Bitcoin, especially like, you know, a couple of years ago, makes a material difference in the

847
01:11:05,176 --> 01:11:09,856
market. So there was all these reasons it was supportive. But under the hood, you know, when

848
01:11:09,856 --> 01:11:13,356
they came out and says, okay, we're going to raise a billion dollars of convertible bonds,

849
01:11:13,356 --> 01:11:18,216
under the hood, you know, someone like myself a few years ago or, you know,

850
01:11:18,456 --> 01:11:22,316
analysts or commentators would be confused because the stock would drop. It's like, wait,

851
01:11:22,856 --> 01:11:26,576
they just raised a billion dollars to buy Bitcoin and the stock went down? I was like, well, yeah,

852
01:11:26,636 --> 01:11:32,656
that convertible bond desk just shorted 500 million of stock after trading, you know? And so

853
01:11:32,656 --> 01:11:36,856
the reality was like a sort of paradoxical. It's like, okay, well, we're going to lever up because

854
01:11:36,856 --> 01:11:41,376
we don't want to sell some common, but it's essentially, it's like you're selling 50% of

855
01:11:41,376 --> 01:11:44,436
the stock. You know, it's like, it's like a, you're selling, it's like, it's like half the

856
01:11:44,436 --> 01:11:48,496
sell pressure as you would get by just selling a straight equity. So the preferreds are totally

857
01:11:48,496 --> 01:11:53,136
different. It's a, it's basically, it's a completely different profile of investor,

858
01:11:53,376 --> 01:11:57,716
right? And so, you know, they're, they're on the journey with you. They're, they're, you know,

859
01:11:57,756 --> 01:12:02,636
contributing, they're aligned with your, you know, your worldview and, and, you know, the,

860
01:12:02,656 --> 01:12:07,676
the 20 year vision, the convertible bonds are not the same. So I think the preferreds, you know,

861
01:12:07,676 --> 01:12:10,656
how I think of them, you know, in the treasury space,

862
01:12:10,656 --> 01:12:14,856
I think it's definitely, you know, the credit market,

863
01:12:14,976 --> 01:12:18,776
Bitcoinizing the credit market is a much, much, much bigger,

864
01:12:19,276 --> 01:12:22,716
you know, bigger fish than, you know,

865
01:12:22,816 --> 01:12:25,516
Bitcoinizing the equity markets, right?

866
01:12:25,536 --> 01:12:26,536
Or equitizing Bitcoin.

867
01:12:26,716 --> 01:12:28,216
It's just a much, much bigger game.

868
01:12:28,316 --> 01:12:29,916
The pools of capital are huge.

869
01:12:30,376 --> 01:12:32,676
Nevermind long duration and short duration, right?

870
01:12:33,756 --> 01:12:37,236
And so, yeah, I mean, I'm a big fan.

871
01:12:37,236 --> 01:12:41,496
uh you know it's i think from a financial engineering perspective it's absolutely

872
01:12:41,496 --> 01:12:48,956
fascinating and historic um and i think that you know that's the real you know um yeah that's the

873
01:12:48,956 --> 01:12:53,436
real golden goose is uh can you get those figured out can you get those live can you get those liquid

874
01:12:53,436 --> 01:12:59,116
and can you hit a scale you know where whether it's your local market or globally that you know

875
01:12:59,116 --> 01:13:07,036
you can uh you know sort of really carve out a uh i don't know maybe a monopoly or a quasi monopoly

876
01:13:07,036 --> 01:13:09,836
in one of these markets.

877
01:13:10,496 --> 01:13:12,996
Because I think anyone, especially in the US,

878
01:13:13,036 --> 01:13:15,376
that's saying, okay, now we want to issue preferred stock,

879
01:13:15,916 --> 01:13:18,036
you're going to have to issue it at a spread to Saylor.

880
01:13:18,716 --> 01:13:19,956
Because Saylor has more Bitcoin,

881
01:13:20,216 --> 01:13:21,556
it's more liquid, he's more established,

882
01:13:22,056 --> 01:13:22,796
this seasoned issuer,

883
01:13:23,396 --> 01:13:24,956
he's been on the NASDAQ for 35 years,

884
01:13:25,476 --> 01:13:26,776
he's been at this game for five.

885
01:13:27,376 --> 01:13:29,436
So if you want to issue perpetual preferred,

886
01:13:29,436 --> 01:13:31,576
like a strife, and you're in the US on the NASDAQ,

887
01:13:32,116 --> 01:13:33,956
well, he did it at 10, you got to do it at 12.

888
01:13:33,956 --> 01:13:38,996
right so i think that there's like this is the benchmark this is like almost like the bitcoin

889
01:13:38,996 --> 01:13:42,836
risk-free rate if you will and you know obviously there's all those instruments are different but

890
01:13:42,836 --> 01:13:48,656
yeah that's sort of how i think about it um i think uh you know the fixed income markets

891
01:13:48,656 --> 01:13:56,396
in general um are you know definitely in need of a of a revamp um or uh you know kind of a

892
01:13:56,396 --> 01:14:03,036
revitalization um you know and japan notwithstanding so um it's an exciting time it really

893
01:14:03,036 --> 01:14:07,356
is that's really interesting i've not heard this described as like an m nav defense mechanism that

894
01:14:07,356 --> 01:14:12,716
makes a lot of sense um i think i've been mid curving the treasury plays to a certain degree

895
01:14:12,716 --> 01:14:17,376
uh this has definitely helped me um i've really enjoyed this dylan thank you for uh for giving

896
01:14:17,376 --> 01:14:22,356
me the time where do you want to send anyone to find out more about you and meta planet yeah you

897
01:14:22,356 --> 01:14:28,256
can uh well one danny i i appreciate you uh giving me the platform it's been too long um so

898
01:14:28,256 --> 01:14:35,856
it was great to catch up um we have to do it in person next time for sure but uh yeah you can just

899
01:14:35,856 --> 01:14:42,456
um you can find me on twitter um or x uh dylan leclair underscore um or uh you know for meta

900
01:14:42,456 --> 01:14:49,096
planet uh we also on x or you can just go to meta planet.jp uh japanese domain if you want to

901
01:14:49,096 --> 01:14:54,496
you know kind of see what we're doing um so yeah that's uh i think that's that's all i got

902
01:14:54,496 --> 01:14:58,236
all right cool thank you dylan and definitely in person next time i'm sure i'll see you around at

903
01:14:58,236 --> 01:15:02,796
one of the conferences at some point soon but i appreciate you man thank you indeed cheers