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And it looks like it's about $3.1 billion.
It went up a little bit.
or a lot uh so the 2.7 is now 3.1 i'm not aware of that yeah it just came out
yeah i haven't heard that from anybody but it just came out
our notes had about 3.1 as well 3.1 3.2 this came from us yes i don't know who does that
you're including the martin renovation you just added you just had you just added in the third
building is what that is that's a third building it's a building that's being built no it's been
it was built five years ago we finished martin five years ago it's part of the overall work
so so we're going to take a look we're going to see what's happening uh and it's got a long way
Do you expect any more additional first-out runs?
Don't expect them.
We're ready for them.
But we have a little bit of a reserve that we may use.
But no, we don't expect to be finished in 2027.
I must admit, I saw a bunch of the clips on X and other parts of the Internet.
Never saw that part of the conversation.
Didn't realize he was calling out line items of the renovation to him in person.
Yeah, I, I, uh, I gotta say some of the best, whatever you think of Trump. Um, and there,
there's a lot that can be said about Trump. The man has delivered some of the most iconic political
moments of certainly this century. And I think that's, that's a top fiber for me without a doubt.
It's so entertaining. I mean, I've, I said before, uh, that I would have paid to see
Big Brother White House or something, like when Joe Biden was in the White House, just to see what
he was doing on a day-to-day basis. But I would probably pay more to see Big Brother White House
and just watch Trump all day.
Probably in Tim Scott as the muscle to be like, no, no, it's 3.1.
Yeah, right. Who, by the way, doesn't have a hard hat on. The hard hats really make the whole thing,
that they're standing there in these hard hats and Tim Scott's right next to them with no hard hat.
What's the what's the wardrobe choices like? I mean, the the theatrics behind it is, you know,
it's something to behold. What was the setup for that? Like they're like, OK, we're going to we're
going to put you on TV and just humiliate you in front of TV. So get ready here. Here it comes.
And we skip the part where he slaps his back at the end and says, this guy's this guy's about to
go lower interest rates um some some really you know some some middle school uh hallway bully
power games uh going on here well it reminds me of the one there was one where he was in the was
it was it the white house lawn where there was a lot of uh i think they were construction workers
hanging around the background and uh they were going after powell again or was that a different
Was that someone else?
Yeah, I got Lambat.
I think I talked about this.
I forget if it was here or RHR, but I brought it up.
We had cold open with it on RHR,
and I made the uncouth statement of why is Donald Trump asking
construction workers about interest rate policy?
It's probably not their core focus.
And I had a bunch of construction workers on the YouTube comments saying,
hey, I'm in construction, and I understand interest rates.
But yeah, that was a scene as well.
The fact that the fact that we can't even fully remember all the details of all the different times Trump has publicly lambasted or tried to humiliate or otherwise viciously critique the Fed chair, I think, shows is a good indication of where we are right now with monetary policy in the U.S. and its relationship to the rest of the government, the Treasury Department, et cetera.
Yeah, it's a.
And just the news cycle.
Right.
Because when was this?
It feels like forever ago.
Yeah, it was like three weeks ago.
We put out our artisanal alpha once every few weeks or once every month, or we'll just see.
But this seems like it was forever ago.
I know it occurred since the last time we did Bitcoin Alpha.
It was a few days or a week after the last episode of this.
And I remember being very frustrated because I knew as soon as I saw it, that's the ultimate cold open.
and we just missed the chance to do it on the last one.
So here we are back again.
And even though it's a few weeks old, I think it's still it stands the test of time.
It does. And John, I think you used the perfect word earlier theatrics.
And I think it's an incredible juxtaposition of the world that we operate in and why we operate in this world.
And many don't realize the global monetary system should not be beholden to the whims of the theatrics between a sitting president and sitting chairman of the Federal Reserve.
That is essentially what we just witnessed was bullying tactics.
For those who don't recall, they were there at the construction site because the government was trying to find a roundabout way to fire Powell.
and I think at one point they were trying to pull the technicality of the Federal Reserve
wasting money, taxpayer money with that renovation they were doing on the Reserve Building in D.C.
Theatrics. It's been happening between Powell and Trump since before Trump was even elected
and we're in the middle or tail end of the summer doldrums. I think this is like really
the peak summer doldrums, but it ends next week. We've got Jerome Powell and others in Jackson
Hole, Wyoming for their annual event. There will be no interest rate policy decisions made
this month outside of some very extreme market volatility, which doesn't look like
it's going to materialize, but it's a pretty boring week. I think markets are down,
Bitcoin's down. And I think it's just due to the overall uncertainty of the result of the
theatrics that we've been seeing play out over the last 16 months.
Yeah. I mean, it's the theatrics word, you know, to stick with that. Um, I do think is
relevant to just kind of consider, you know, the, the nature of where we are with the system.
I think it's in some ways like instructive, um, for, you know, you could say Trump is violating
norms. And many people have made that, um, that case both in this, in this term and his prior term.
Um, and he's not, you know, respecting the system and the way it's set up. Um, but I think it's,
it's interesting and notable that we, this pulls back the curtain a little bit on the fact that
this is a system where, you know, I think we have a, it's easy to have a view, especially coming from
say mainstream academia, from your college classroom, um, from working, whether it's on
Wall Street or corporate America, a bunch of different kind of white collar jobs. It's,
it's kind of very easy to imagine that the, the men behind the curtain have, uh, have it all
figured out and, um, you know, they have all the dials properly calibrated and, um, you know,
they're, they're sitting up there on, uh, you know, Mount, uh, whatever Mount Olympus or Mount
Mariner Mariner Eccles building as the case may be in this, in this situation. And, you know,
just passionately evaluating every, all the data flow that they're getting, um, and just making the,
the right decision at all the time or as right as possible based on the data they have with no
kind of personal dynamics getting in the way, no politics, nothing like that. And, uh, it's,
it's helpful in some ways instructive to have like the bull in the China shop of Trump come in and
just show like, this is a system that's, you know, based on a few people and their interpersonal
dynamics making kind of flying by the seat of their pants and having to jockey for position
and negotiate between many, many different dynamics, very few of which actually relate
to being data dependent and kind of dispassionately evaluating what's going on in the economy.
So the theatrics are new and different.
We haven't seen them from a lot of presidents, but I think it probably should help people
understand some of the, Marty, as you referenced, the potential pitfalls and frailties and downfalls
of a system that's governed by, you know, a few lawyers and bankers and politicians
arguing with each other and trying to intimidate each other and, you know, being reactive to
many dynamics that are not actually directly related to what's happening in the everyday,
the lives of everyday Americans. I think it's instructive to see it kind of play out this way.
Yeah. But be careful what you wish for. You may want to replace the interpersonal relationships and decision making that is incumbent in the system right now of Powell and his cronies with Trump and whoever he decides will succeed Powell.
I think it's meet the new boss, same as the old boss, different context.
And I mean, that's what you have next on the list.
There was an abrupt resigning on the Federal Reserve Board of Governors by Adriana Kugler last month.
And Stephen Mirren has been nominated by Trump to replace her.
And I saw a bunch of tweets about Stephen Mirren specifically as it pertains to Bitcoin.
Apparently, he has some tweets out there saying that Bitcoin fixes this.
and he seemed positive, but I couldn't tell if they were positive
or if he was trolling Bitcoiners.
I don't think he was explicitly trolling Bitcoiners.
I think he may just be aware of the meme.
If you look up Stephen Myron, Bitcoin fixes this,
you'll find a couple of these examples where he's responded.
But I think usually in situations where it's,
I can't remember the exact details of each one,
but Bitcoin presumably did not fix the thing that he was responding to,
so it's a bit of a joke.
but otherwise I don't think he's had a lot of public opinions about Bitcoin specifically.
So that he's even aware of that meme and felt it appropriate or humorous to kind of go out on Twitter
and respond to random tweets with it for very little fanfare, to me, doesn't suggest that he's an outright Bitcoin hater,
certainly, and maybe is paying attention to some extent to the culture.
The more interesting thing about him, I think, is people may recognize his name as one of the authors
or the co-authors of a Hudson Bay capital paper that came out last year about, I think it's called
A User's Guide to Re-Architecting the Global Trade System or something to that effect. But
basically, Myron's one of the chief architects of many of the policies that Trump appears to be
following or trying to put into place with reordering global trade flows and capital flows.
Myron's been an advocate of certain targeted tariffs, I think maybe not as much of a blunt
instrument as Trump has kind of used them, not to the same degree, but targeted tariffs,
targeted capital controls, basically making the rest of the world, in his view, kind of pay their
fair share for the broader kind of defense umbrella burden that the U.S. has provided,
pay for the privilege. He's suggested a user fee on treasury holdings to make people pay for the
privilege of holding treasuries as their reserve assets. And notably, at the end of that paper,
He did make one reference right at the end to a reordering of that system being positive for neutral reserve assets like gold and, in his words, cryptocurrency.
So he doesn't say Bitcoin, but Bitcoin, as we all know, increasingly the only cryptocurrency, quote unquote, that really matters from a geopolitical perspective.
Um, so interesting, notable that that's the guy that Trump, uh, appointed to replace, uh,
Adrian Kugler, the fed governor who randomly, uh, resigned without any clear explanation a couple
of weeks ago. Um, so another, yet another interesting piece in the overall Trump fed
mosaic that continues to evolve. And I think is taking us in, in one particular direction.
and building on this theme it seems like trump is really trying to clear house and the board of
governors uh apparently i'm just being made aware of this due to the list that you put together john
but president donald trump on wednesday called on the top policymaker at the federal reserve to
resign after one of his allies alleged that she committed mortgage fraud in a letter oh i did see
this in a letter dated august 15 federal housing finance agency director bill pulte urged the
Justice Department investigate a pair of mortgages taken out in recent years by Fed Governor Lisa
Cook. Yeah. So, yeah, this is just to hit shortly before this episode, a truth social tweet. Trump
demands that Lisa Cook, quote, must resign now, exclamation point, exclamation point,
exclamation point in classic, uh, emphatic Trump fashion. Um, and it's similar to, you know, the,
what we referenced up on the top of the top of this episode, um, Trump's attack on Powell for
the renovation of the Mariner Eccles building, which is apparently over budget, which, you know,
very likely is over budget, but in both cases, like, you know, maybe that's over budget. Maybe
Lisa Cook, I have no opinion on this. Obviously this just came out and not, don't know the facts
of the case, but maybe had some sort of like impropriety related to a mortgage she took
out a few years ago.
But in both cases, like clearly looking for any excuse at all to on the margin point to
wrongdoing or something that, you know, you could use to get Powell or Lisa Cook or anybody
else to resign, I think just, you know, shows you it's on the same theme of Trump's.
I think this is going to be curious to hear your thoughts, but it seems to me there are all sorts of, you know, in politics, you'd call them dirty tricks, right?
And all both sides always pull dirty tricks of different kinds.
There are all sorts of dirty tricks and levers you can turn to kind of get the leverage that you want.
And it seems like we're driving to a world where for better or worse, as Marty referenced, Trump's going to get his way on this, you know, one way or another.
And he's going to get the Fed board that he that he wants and needs to pull off his agenda.
Yeah, I don't have much to add to that.
I mean, it seems like the tactics are becoming more out in the open
than they have been in the past and they escalating more than what we seen Like first it was jabs with you know competing press releases about Trump calling for actions from Powell
And then, you know, another press release that was sort of a response from Powell.
And now they're just putting it on video of them in the same in the same place and trying to intimidate him that way.
And, you know, either way, this is just showing how political the system is.
I think it's inevitable that when you see these tactics that it has some type of influence one way or another.
It either influences the people who are charged with making these types of decisions to do so more in line with what Trump is wanting or they're digging in their heels for their own political reasons and it's having an impact for that reason.
And I think it just highlights that it's kind of insane that it comes down to politics in the end anyway.
That there should be someone or some group that can have influence or some group that can have the power to resist influence.
You know, it's a double-edged sword.
Yeah.
And it actually reminds me of a great conversation on the Tucker Carlson podcast, funnily enough, that I listened to yesterday with Arne McIntyre.
And I think it really highlights one of the key issues that he was pointing out during that conversation, which is when you have a country, a nation state, whatever it may be, like it only works at a certain scale.
The American constitutional republic, as it was designed, was supposed to be extremely distributed, limit the federal government.
And states were were tasked to lead the way, make their own decisions.
But as time has gone on, 250 years have passed since the Declaration of Independence.
We've developed this massive empire.
And when you have empire, history has taught us that the only way to garner control and keep control is to consolidate power.
and as it pertains to the Trump administration
and what they're trying to achieve with this economic reordering,
particularly using the Treasury,
they have to consolidate power within the Treasury.
And I think this is a theme we've been talking about
in the last few episodes.
It seems very clear.
It's moved from somewhat implicit to overtly explicit.
They're trying to merge the Fed and the Treasury
to make sure that they can achieve their economic goals.
And I think this is a very important fact to realize,
just the scale of the U.S. federal government.
And if it's going to continue operating at this scale,
it needs to consolidate power more and more,
not only on the financial side,
but in the bureaucratic sort of administration side as well.
I think that's the big question of our time is,
Like, do we want to keep going down the path of empire or work backwards towards a more distributed system that is probably advantageous for the average American at the end of the day?
Yeah, I mean, look, like I fully echo all that.
And I think we're prepared to talk about a few topics today that may be more of a white pill on that front.
And certainly we're all here for the reason that we think we have found in Bitcoin and other distributed technologies, the ability to maybe help move the U.S. back more in that direction.
Um, but yeah, I mean, I would, I would just say too, it's like, you know, there was a,
there was a great chart that was going around, um, this week on Marty Deer point and kind
of fed treasury relationship of us interest expense this year broke year to date, uh,
a trillion dollars for, uh, the first time at this point in the fiscal year, we got a
couple of months left in the fiscal year. But even with the, you know, the surplus that we had
in June, thanks to some tariff bump, you know, we're still tracking to $2 trillion deficit for
the year. Interest expense is all time high, you know, year after year after year. We are, I think,
on a interest as a percentage of total receipts last month was like 130 percent something in that
range and we've been tracking 100 plus for many months so you know at the end of the day
if we're in a situation where the fiscal backdrop is getting more and more stretched more and more
challenging even with you know we're not in a recession we're not in a declared war an explicit
at war. Unemployment nominally is reasonably low. The economy is from, you know, the basic metrics
that you would look at on a macro scale, reasonably healthy, like this isn't a, you know, a crisis
moment. And yet here we are with this massive and parabolically growing interest bill. At the end
of the day, it's going to get paid. Like the sovereign is going to fund itself like one way
or the other. And I think the market has not fully digested yet that reality that for the last 50
plus years, we haven't, or really since World War II, we haven't had, we've been able to have
the Fed treasury accord that we've had. We've been effectively in economic peacetime, you know,
most of the time between the Fed and the treasury with a few blips, you know, you could argue maybe
not so much in the seventies. Um, but in general, like certainly since the Reagan era, we've had
this happy equilibrium where the Fed could kind of do its own independent monetary policy thing.
Treasury could do what it was going to do. Debt to GDP was much lower and manageable.
U.S. Treasuries were the de facto reserve asset of the world. The world couldn't get enough of
them as we were globalizing, as China, et cetera, were growing. And I don't know that
most people have yet considered what the world looks like when when that's no longer the case,
when you don't have that headroom and that flexibility for Treasury and Fed to kind of
happily coexist and do do whatever they both want. And at the end of the day, I just don't
think you end up with in this highly political monetary system that we're talking about.
I don't think you can sustain independent monetary policy in a world where the sovereign
is coming up on, you know, a funding crunch. Um, one, one of those two things is going to
ultimately get sacrificed. And I just, you know, no, no government history has decided to lay down
and let itself, uh, default or radically retrench its obligations, um, and get its fiscal house in
order until it was absolutely, you know, essentially required to buy, you know, a change of, of the
form of government or the change of state. Um, and so I don't think this time's gonna be any
different uh the political system that we have i think suggests um anyone who's still banking on
independent monetary policy needs to uh ask themselves what time it is
yeah the only true independent monetary policy in the world right now is bitcoin's monetary policy
yeah absolutely math physics um it certainly seems yeah
what a time to be alive.
So what do we think is going to happen?
We've got Trump calling for rates,
thinks they should be 1%,
Scott percent,
a bit more hawkish,
saying he thinks they should come down
150, 175 bips,
which would be, what,
175 to 225 range?
Yeah, I think it'd be,
what I would like,
sub three, like two and a half
off of current FFR.
So like call it 3%.
So, you know, comparatively restrictive versus Trump.
But yeah, I mean, I think that's, you know, there are a lot of people who, you know, on
Wall Street or in corporate America that just based on how long we've kind of been in this
this Goldilocks zone. I think most people and myself included, everyone on this call included,
a lot of our listeners probably like, don't really remember a time when anything that I'm
describing like prevailed, like you could have had a full career. Like if you came into the
workforce and like the early eighties, like, you know, like a lot of our parents did, let's say,
you know, you could have had a full career and be, maybe you're on the point of retirement now.
And all you've seen really in your working life is the Goldilocks zone that we've been in.
And I still think there's a lot of resistance to the idea that that's not something that can last forever or is going to last forever.
But as you said, fortunately, we have immutable monetary policy that can't be pushed around and can't be shoved in a basement and forced to wear a hard hat and play the stooge.
television yeah i mean and just building on this theme moving from like the fiscal
side and the fed treasury side to industrial policy like it seems like there is some
desire to consolidate influence on the industrial side of things too i mean that was the headline
earlier this week the u.s is considering up to a 10 stake in chip giant intel which has been
how would I how do I say this as politely as possible it has not been faring as well
as it was when Andy Grove was alive and at the helm yeah it's uh it's it's been a rough one it's
been a rough what 20 years pull up an INTC chart um yeah it's it's not been super pretty uh there
was a glimmer of hope maybe 10 years ago but uh especially in the last you know five years with
the ramping of competitors, AMD, and then Intel's kind of failure to participate in
the massive kind of AI surge in the last few years. Certainly not a great situation for the
company to be in. Got rid of the CEO last year. But, you know, whatever your view on the Intel,
Intel as a stock, Intel as a company, you know, I feel like this headline is kind of like,
It's been on CNBC. If you've watched, it's been on the Wall Street Journal. There's some headlines about it. But I feel like from my perspective, mainstream news is still kind of underrating what a notable shift this is and shift this would be.
Like we talked last week about or last episode a month ago about the Pentagon becoming the largest shareholder in MP materials, which is the one of the leaders in kind of rare earth production in the US, given the constraints on the China rare earth side.
And I think you could maybe brush that one under the rug and say, well, that's still kind of a small company.
Like that's this one like niche area of the economy.
Yeah, it's like it's this strategically important asset.
And especially with the choke point of kind of Chinese materials, like, yeah, maybe there is some one off case you could make.
The Defense Department should have more like a heavier hand in a company like that and securing the supply lines like, OK, you know, one one example of something doesn't make a trend.
But Intel is like, you know, it's a fallen angel, but it's like one of the great American companies of the last hundred years.
One of the, you know, exemplars of ostensibly, right, like, you know, free market capitalism, the free market system of, you know, the original effectively like Silicon Valley company.
and, you know, despite its recent status, like a real industrial giant of this nation's history
in the last hundred years. And the government is talking like fairly casually about taking a 10%
stake in the company and becoming its biggest shareholder. You know, again, like that's,
that seems extremely noteworthy. And I think is to our conversation on the prior topic, like,
you know, a sign that you need to check what time it is. Um, it, this feels increasingly like,
you know, the wartime economy playbook, um, is, is alive and well. And, um, we can talk all day
about, you know, whether that's a good thing or a bad thing and how the government's questionable
track record, not just the U S government, but all governments questionable track record on,
um, you know, running companies or being kind of, uh, having a hand in the direction of
industrial capacity and the means of production. But I think it's these two topics tied together
to me to say like maybe we're not really in Kansas anymore. Yeah, I mean, those are all
really good points. The one thing I've been thinking about, just like the interesting
dichotomy between this situation and a topic I know we're going to get to in a second on
the strategic Bitcoin reserve?
And is the U.S. government going to continue to pursue that?
How might they fund acquisitions of Bitcoin?
But the comparison that I think is really interesting is
they can make these announcements about potential intentions
to take a stake like this in Intel.
And it doesn't necessarily have the same type of consequences as perhaps it does in the case of Bitcoin.
I think with Bitcoin, they need to be very careful about what they say they're going to do, how they go about executing a purchase of Bitcoin, because it directly influences the price that they get.
Whereas like with Intel, you know, they could make an announcement like this and sure, like the stock could run.
Like I tried to look at the stock price and there was a bump at one point.
And I don't know if it's come down since then.
But but theoretically, right, there's a there is a central party here and the White House could do whatever deal it wants to.
They could even force a deal that maybe doesn look economical for Intel shareholders just out of national interest Compare that to Bitcoin where they start making certain announcements
or some of their plans start becoming public.
They can't bully their way into a Bitcoin position.
There's no Bitcoin CEO, there's no Bitcoin board to go talk to and say,
you know what, well, the U.S. government really needs this position
and this is the price we're willing to pay.
It's not going to work that way.
They have to pay the market price that some seller is going to be willing
to transact with them.
So I just think that's kind of an interesting dichotomy between those two.
I know what Marty's thinking.
Well, if we're going to be nationalizing the Fed industrial policy,
there's a company out there with a large chunk of Bitcoin on their balance sheet.
And if they were going to continue down the trend of nationalizing industries
and they wanted to acquire a strategic reserve in an advantageous way
that doesn't really lead the rest of global markets to understand
that the U.S. government has to accumulate Bitcoin actively,
they could print a bunch of money and just nationalize micro-strategy,
pay out shareholders, pay out all their pref stock,
and say this 700,000 Bitcoin is the U.S. government's now.
Wild theory.
But if this trend continues,
I mean, they're showing the willingness to be bold.
Yeah.
I mean, I think, so to take the one side of the point,
I think it's a very good point as it relates to like,
one of the beautiful things about Bitcoin
is when you think about nationalization attempts
or let's just, you know, for running back the FDR playbook in general with industrial policy
and the wartime playbook, you know, a 6102 type order. Um, it's fundamentally a lot easier to get
that off with the, you know, analog gold, the original gold. And even in that case, in the case
of FDR's 6102 attempt, um, you know, uh, outlawing and confiscating, outlawing private gold ownership,
up confiscating private gold owners holdings. Even that didn't really work like that well,
right? They didn't get all the gold. They didn't really eliminate it from circulation.
Even though, despite the fact that relative to Bitcoin, it's much harder to custody meaningful
amounts of gold by yourself. You certainly can't, you know, distribute it geographically in like a,
you know, multi-sig quorum or using mini script or something to have different conditionality on
its spending, right? So it's analog, it's physical, it's got to be somewhere, it's heavy,
bulky, hard to transport, that tends towards centralization and thus much easier 6102 type
attacks. So I think it's a fair point, like Bitcoin is in a much different position than
gold or any other asset as it relates to individual holders being, you know, attacked in that way.
And certainly, I think, with the administration that we have right now, I don't think that's
super likely and would undoubtedly alienate a meaningful voting block that arguably kind of
got this administration into, you know, the position they're in. Um, so I think that those
are all great points, but yeah, Marty, the flip side is the much, much easier thing to do as it
relates to not pissing anyone off nearly as much, um, any of your voters not creating a true, like,
you know, constitutional nightmare, um, and not creating a massive, like enforcement nightmare
of having to go knock down doors of every person in the world to see if they have, you know, 24
where it's written down on a piece of paper. The much easier path, if you wanted to do something
like that, is walk down the road not too far outside of DC and knock on the door and see if
the company is interested in selling at a nice premium to the underlying, by the way.
The shareholders, if they got paid out, if you woke up on your Vanguard and Fidelity accounts,
you know, you had a cash settled, um, you know, swap for your, your MSTR shares, you know, you'd
be, you'd be up right now today relative to the underlying Bitcoin that the government would be
getting. Right. So you could even make an argument that, uh, the, the imminent domain would, um,
you know, end up, uh, in a positive result for those who are on the receiving end of it,
which is usually not the case. Um, but these are just wild conspiracy theories that, you know,
I don't think have any merit to consider, but it's a it's it's certainly an interesting scenario if you're looking at a government that's getting a lot more handsy with company property.
Yeah, no, it's just a theory. It's just a theory. Not even it's just a theory. It's not even a conspiracy theory.
I'm not saying that there's any conspiring going on.
I'm just saying if you wanted to do it the painless way, you just print the money, pay out the shareholders, they'd be happy.
the meme, this is mine now. And, uh, and boom, us. I don't know that they would be happy, but,
and I don't know that it would be a good outcome, John, to your point, it depends.
Yeah. It depends in that, in that theoretical scenario.
Yeah. In the theoretical scenario. Yeah. I, uh, in the theoretical scenario,
I'm just making the argument that someone on the other side of, of writing that order to make that
happen might make the argument that if you're getting bought out at a premium to underlying,
you should be quote unquote happy. Well, yeah, but that's, I mean, you're already assuming that
in this theoretical scenario, they would be getting bought out at a premium to underlying.
Maybe they would not, maybe it would be at a discount. Maybe it'd be at a discount to MNAV.
Yes, that's certainly possible. That's another discussion. We can, we can maybe go there too,
or we can stop the, we can stop the inflammatory MSTR discussion here.
yeah this isn't a tftc uh we can get back on track but intel to tie the knot there like it
just doesn't mean like it seems like it would be a bad investment by the government like why go
make buy 10 stake in a beleaguered sort of dying institution like i mean i think this is
an important conversation for us to have too like just the life cycle of businesses generally
generational businesses too at that.
Intel crushed it, 70s, 80s, 90s, early 2000s,
but have not been able to compete with AMD, TSMC, Samsung.
It's pretty obvious that they got complacent, lazy,
and I don't think a 10% equity injection from the government
and some sort of quasi-arm's-length control
over the direction that Intel goes in in the future
by the federal government and is going to make it a better company.
Yeah, I mean, it's an interesting question, right?
And I like your point about the lifecycle of companies,
and we should talk about that more.
And I think with the Intel deal, everything's very vague,
and TBD, how it would actually look.
I think Commerce Secretary Howard Lutnick has suggested
that the way it would work would be the CHIPS Act funding that they've gotten would be basically
like that would convert to equity versus like some incremental cash infusion, though, who knows how
it would ultimately shape up. But it's a fair point that like, if the government's going to get
more heavy handed, they don't really need like, you know, they don't need to be like the top
shareholder on the cap table or on the shareholder register, right? Like, they can kind of, you know,
the, there's a lot of Intel industrial capacity here. The executives live here,
employees live here. A lot of assets live here. Um, I don't know that they need equity in the
business to, you know, dramatically control kind of its, its direction if they wanted to get a lot
more heavy handed. So that's, that's fair. Um, but yeah, I mean, it's, it's, it's definitely an
interesting point on, you know, the, the long-term life cycle of, of companies, um, and you know,
how we as investors think about the innovator's dilemma and the inherent headwinds that exist for incumbents
over after some amount of time, whether it's because of, you know, what Buffett called the institutional imperative
or many other factors, but it does, it tells you a case study and perhaps, you know, the businesses that ultimately
kind of reach their their natural endpoint um and you know that history is littered with with
examples of those and examples of companies then kind of coming in smaller you know more nimble
intrepid companies kind of coming in to um backfill the market opportunity that was left behind
certainly we see a lot of those in our portfolio but um yeah a lot of interesting themes there
broadly um across these different situations
I'm just looking up the data now
Intel has total cash
including short term investments
on their balance sheet
21.21 billion
interesting
you go to Apple
they're sitting on
how much cash
including marketable securities
55.37 billion
so you have these large incumbents
I'm picking on Apple too
because I think
with the AI trend
really taking hold and Apple really not participating
in any meaningful degree up to this point.
Siri is a terrible product compared to
ChatGPT and Claude and others.
You would think that Apple, being the innovative
consumer-focused company that it has been for decades,
would lead. They seem to be on the sidelines
deciding to buy back stock instead of leaning into research and development
that could catapult them to a category leader in the world of AI.
And I think that's another company that many would suspect,
considering that half the world has some of their devices.
I'm using two of them right now.
Are they in an innovator's limit, too?
Are we watching the back end of Apple's lifecycle?
Yeah, I don't know. It's tough. I mean, I'm still not ready to fully write off Apple and Google, the two kind of laggards in the Mag 7 that you'd think would have had some opening to benefit much more from the dramatic wave of new AI products over the last 24 years and kind of be leading that charge.
um so i'm not i'm not ready to call it on either of those either of those yet certainly i don't
think either of them are in anything like intel's position and i'm not even ready to say that they're
you know headed there in the next five ten years um i could see that i can see the bear case uh to
some extent um but definitely uh i'm not ready to put them in the same camp yet but certainly there
are a lot of companies uh you know every a lot of older companies every every year every decade
that are going to fall ultimately into that bucket.
But that's one of the reasons that we're, you know,
so bullish on, you know, what we're focusing on here
and why we do what we do to catch the next generation
of companies that we think can come and backfill
some of those gaps.
Yeah, it's very, very, again, interesting times.
May all your times be interesting.
just as interesting as the times that we find ourselves in now.
But moving on from the nationalization of different industries
and the wartime economy playbook that seems to be taking hold
here in the United States.
SBR, we got some news between the last time we recorded
and our recording today. Scott Pesant,
I believe he was on CNBC last week,
I think gave the first sort of official recognition
of an amount of Bitcoin that the U.S. government has.
I believe he said it was between $125,000 and $150,000,000,
which would put the amount of Bitcoin between $150,000 to $160,000 Bitcoin that they're holding.
I think that's right. I don't have the headline in front of me.
I'm going to take your word for it in that case.
It was a really broad interview with a lot of topics covered.
I'd have to go back and find the exact headline.
but it's something to that effect.
I pulled up this decrypt article.
Current Bitcoin holding, oh, between 15 billion to 20 billion,
which is between 130 and 1,175.
I mixed it up there.
Somewhere between 130 and 175,000 Bitcoin that it's holding,
which is less than what people were expecting
if we're going with those rough numbers that percent said.
But during that same interview, he mostly iterated that they don't plan on buying more Bitcoin.
And then a day later, sort of walked it back.
So it seems like the typical Trump admin strategy of sort of strategy via confusion and sort of testing the waters by saying something.
In this case, not bombastic, but just saying one thing and then walking it back, seeing how the market reacts.
I think this is what we were seeing here.
Yeah, there are a lot of trial balloons in this administration.
There are a lot of like, just kidding, but maybe not really kind of moments.
And yeah, I don't know, it's anyone's guess whether, so in the interview he said, you know,
it was kind of like a series of comments about the Bitcoin strategic reserve as well as like the,
whatever they're calling it, the crypto stockpile.
and he said, you know, we have the Bitcoin that we have now. We won't be buying that.
Unclear if he just meant like, well, that that doesn't need to be bought because it already
exists or something else. But in any case, it definitely came off as, you know, the there's no
incremental addition coming to the to the SBR. And then later that day, tweeted that tweet that
Logan put up. And so you wonder if he got some frantic phone calls from big donors or, you know,
relevant, um, policy people that want to keep the Bitcoiners happy. But in any case, it seems like
maybe, uh, budget neutral accumulation is, is still, is still back on the table. Um,
so what, you know, we'll see. We also got, you know, the announcement that, um, Bo Hines, the
special advisor for digital assets or something to that effect, his title in the white house is
leaving and going to work at tether Um but on his way out said that the uh the SBR plans will quote continue and accelerate in his absence So ultimately talk talk is cheap and Bitcoin is not So we we we see what actually happens with that Um unclear if there
you know, I think Grant, you referred to this earlier, but if I'm the government, I don't really
know that I have any incentive at all to make it clear, like what I'm doing until I'm fully sized
in my position. Um, I don't really know how it helps me to tell anyone like, yes, over the next
year, I will be accumulating a hundred thousand Bitcoin. Um, cause you're almost definitely gonna
end up with materially worse prices and doing that. So my sense is if, if, and when it happens,
I, I do think like there's all the incentive in the world for the U S to want to do it,
especially as it, you know, moves to this wartime economy. Um, if there's any strategic value at all
in Bitcoin, like they're going to want to be involved, but there's also no incentive to,
to telegraph to Bitcoin Twitter, you know, what their, what their plans are really.
yeah i don't read too much into it i mean i think he often is just sort of flying by the seat of his
pants and he's he's it doesn't look like he's rehearsed certain answers on tv so i think he
he said some things uh he then later was told that he screwed it up and he quickly
fixes that and i don't even take much in the like the comments around the amount of bitcoin because
It sort of depends on are they counting the Bitcoin that ultimately is due back to Tether?
Because if Tether is going to get that Bitcoin back, which is over 100,000 Bitcoin,
I think those two things can't both be true.
Because what he said implies that they have a pretty significant amount of Bitcoin,
but it wouldn't be possible based on what we know about
or what we've been told about the strategic Bitcoin reserve
and what they have under their possession from prior seizures.
So I don't take it as any type of audit.
I mean, once they reveal addresses and post a mempool.space website address
where we can see it. I mean, I don't even, I don't really believe what he said about the Bitcoin
position. No, no. Yeah. It seems like it's all pandering to a base that helped them get elected
and no string along. And as a Bitcoin, honestly, I've said this, I think we all believe this,
like a Bitcoin strategic reserve at the federal level is a nice to have. It's not a must have for
me as an individual, for us as investors. I think if you're looking at the fiscal crisis and the
out-of-control interest expense on the debt and you're trying to think strategically and creatively
and boldly about solving that problem in the long term, strategic Bitcoin reserve, I honestly
and earnestly believe that it is a creative, bold, and worthwhile endeavor to try to solve that.
if you actually want to solve it, I think that's the bigger question is do they actually want to solve the debt problem
or they just want to keep printing and
just send this thing on turbo until the currency is completely debased, maybe.
But at the end of the day, it really doesn't affect me as an individual Bitcoiner. Us as
investors looking at companies building out infrastructure
for individual Bitcoiners like ourselves. That is a government
decision and I think
as long as the free market's able to operate.
Businesses are able to set up and build what they need to build
to facilitate Bitcoin adoption at the individual level.
That's all that matters.
And it's certainly been more positive than it was in the Biden administration,
but yeah, we shall see.
But there have been some interesting conversations around gold revaluation.
There was two events that happened almost simultaneously.
One was Trump tariffing an unexpected tariff on Swiss gold bars.
Again, another one of these, what do you call trial balloon instances where we sort of threw out, we're going to tariff the one-ounce Swiss gold bars and then stepped it back.
and it's still unclear what's going to happen there exactly.
But around the same time, the Fed quietly released a memo
about the historical gold revaluations throughout the last century,
which is signaling like, hey, maybe we'll do this again
at some point in the near future.
Yeah, and I mean like, you know, it's one of those like just,
you know, we mentioned conspiracy theories
And we mentioned kind of it's very easy to to dive down certain rabbit holes and artificially connect, you know, different disparate events that are happening in the world and think that it you know, you have the confirmation bias that it suits the thesis that you have about how things are going to play out.
But, you know, it was certainly funny to see both of these things happen in quick succession like that.
To be fair, like this memo doesn't say like the Fed is considering doing this or the Fed and Treasury, whatever the U.S. government, you know, there's no implication.
that this is coming. But it is the first ever, you know, official memo that they've put out kind
of on this topic. There's a footnote at the bottom, which I didn't realize at first. But if
you scroll down, there's a footnote at the bottom that says like something like this is one way that
has been floated by certain parties to help the U.S. accumulate Bitcoin in a budget.
The ideas come up in the context of helping to establish a strategic Bitcoin reserve or sovereign
Wealth Fund, and the use of revaluation proceeds was proposed in a recent legislation by Senator
Lummis in Belgium. The press reported the governing coalition was considering financing
additional spending partly through monetization of some of the National Bank of Belgium's gold
reserves, with the National Bank of Belgium commenting on the idea in a recent press release.
Yeah, exactly. So it's the kind of thing where like, does that mean it's happened? Any of this
is like, you know, being planned, um, explicitly. No, does it mean that this is happening like
tomorrow or next month? No, but it's, it's interesting because like, this is exactly what
you would expect to see this kind of like slow, subtle, like dribs and drabs of like pieces of
information or memos or think pieces, right. To kind of like directionally normalize an idea and
like vaguely shift the Overton window and add some veneer of like academic prestige around it.
you know, that you would do that kind of a year in advance, right? You'd slowly like let this stuff
leak out to kind of test the waters and get people maybe a little more comfortable circulated
in certain circles. So not that any of this means that it's definitely coming. But I think if it were
to be coming in like a year or something, two years, whatever, this is exactly the kind of stuff
that you would expect to kind of see under the hood
being slowly leaked out to normalize it.
It's kind of predictive programming in some sense.
Yeah, or it's a classic case of nothing ever happens.
Could be that too.
It's just an info drip to get people running down
these speculative theory paths,
and then nothing will ever happen.
Yep.
That's the base case until proven otherwise.
Something is happening though
There are things happening
Not at the government level
Nothing ever happens in the government
Meet the new boss, same as the old boss
You're going to print
But we in the private market
As actors can do things
Harvard
An institution
Been under a lot of fire in recent years
Caught up in the woke
Debacle
People coming out their president
There's some questions about
whether or not they're
they're
what do you call it?
They're
They're tax-exempt status.
Tax-exempt status, but when kids enroll, their enrollment
sort of procedures and
the preferences they may show, the
illegal preferences they may show for certain demographics over others.
But nonetheless, they have a large endowment.
And it disclosed this first Bitcoin ETF position, a pretty material position of over $100 million, which you're describing.
I'm looking at the show notes, John.
You're describing it as a fairly seismic signaling shift for institutional asset managers and endowments.
Seismic.
It seems seismic to me.
You know, certainly there are other endowments that have either publicly or, you know, non-publicly taken Bitcoin positions.
And so, you know, it's not the first endowment.
We've seen Brown and a few others kind of publicly file their IBET positions.
So not the first, but, you know, Harvard is say what you want about Harvard and different things that have happened in higher education in the last 20 years.
You know, probably the most respected kind of educational brand in the world.
So right now it's, you know, Harvard, MIT, Yale, you know, Stanford, maybe.
And even more than that, Harvard and Yale have been, you know, pioneers in the endowment investing space.
And there are a few other big endowments that have been kind of significant in moving like the quote unquote endowment model forward as well.
Um, but, you know, this is undoubtedly, you know, one of the top like few, uh, that have,
that pioneered like all of the strategies that go into, you know, what we now think of as the
endowment model, which I think frankly has gotten, you know, is now very diverse and can mean a lot
of different things. But all that is to say, um, you know, this is something like, uh, I think
within the endowment world, and I don't want to speak for them too much, given that I'm not, uh,
fully in that world. But having an actor like that take a position like this, and granted,
it's a tiny piece of the total endowment, but it's also a massive slug and makes them one of
the bigger holders of iBit to have them move in that direction is, I think, comparable to
BlackRock giving the imprimatur to Bitcoin that we're the leading ETF administrator in the world
with the leading ETF provider. And yes, we're going to say that a spot Bitcoin ETF is worth
fighting for and pushing through and getting through the regulators and then marketing
aggressively and saying, this is something that you should have in your portfolios, adding it to
our model portfolios, all that. The kind of brand cachet that BlackRock brings kind of on the
general asset management ETF side, I think is analogous to what Harvard brings to kind of the
endowment investing world, right? So for them to take this position, I think is quite significant,
particularly given there are still, I think, are a lot of, in academia, even probably more so than
Wall Street, a lot of legacy biases against Bitcoin for various reasons, many of which relate
to energy expenditure. And famously, Harvard economist Ken Rogoff said that Bitcoin was
more likely to go to 100 than 100,000 and has now had to kind of walk that back and talk about all
the reasons why that didn't play out. But I think he's emblematic of the type of viewpoint that you
still see a lot in higher education. And so against all that tide for Harvard to put its reputation to
some degree in endowment investing behind Bitcoin, yeah, I'd call that fairly seismic. I think that's
a pretty significant perimeter to have for Bitcoin.
Ken Rogoff, very butthurt.
I don't know if this tweet was a response to the endowment of the school
that he's the professor at taking material position in Bitcoin.
But I had the pleasure of watching Seyfidina Moose debate Ken Rogoff
at the Soho Forum, I believe in 2018 or 2019.
and it was on the legitimacy of negative interest rate policy,
which Ken Rogoff is a very big advocate of.
He actually wrote, I think, the official paper
on negative interest rate policy and how to implement it.
And it's just an incredibly stark juxtaposition
of academic economists, how they think money works
and the economy works and their concananny ideas.
Basically, we should have negative interest rate policy
bailing governments and institutions in versus just letting the free market
create the hurdle rate and solve things by adopting a Bitcoin standard.
The other interesting thing I thought about this announcement was,
I mean, as John said, it's a tiny piece of the overall endowment, right?
And we don't really know the rationale behind why they did it.
we can make some assumptions on why they might be dipping their toes in,
particularly given that they also did so with the gold ETF.
But I thought it was interesting that they actually took a bigger position
in the Bitcoin ETF or in one of the Bitcoin ETFs than the gold ETF.
Some people, you would think in a legacy, traditional-minded category,
capital allocators, particularly based on just market cap, like market cap of gold versus market
cap of Bitcoin, you might see an allocation suggested that's less than 50%, but less than
50% to Bitcoin relative to gold. But this is a greater allocation to Bitcoin than gold, which I
just think is an interesting directional perspective given where Bitcoin is relative to gold overall
today. Yeah, and it actually ties into the newsletter I wrote on Monday. This report from
Bank of America came out last week. Zero Hedge wrote an article on it on Sunday, sat down and
read it. But I think to your point, Grant, Bank of America sent out a survey to fund managers
and 75% of the respondents responded that they have zero allocation to cryptocurrency.
We'll just use that as a proxy for Bitcoin.
And here's the stats.
The survey revealed that just 9% of fund managers have exposure to crypto
with a weighted average allocation of 0.3% of AUM.
48% of those same respondents have exposure to gold,
and there is a 2.2% weighted average allocation
to gold across the managers that responded
Bank of America survey
and to your point too, I wrote this in the newsletter
like I think
if you're an institution
weighing
the opportunity cost of
allocating one hard asset
or another, particularly between
Bitcoin and gold, depending on your
risk appetite, I think
an over weighting towards Bitcoin makes sense
if you're like risk on
it just makes sense. Gold's
been monetized over the course
millennia, Bitcoin is still in the very early stages of its monetization phase. And if you want
to ride some relatively high upside, you got to ride the Bitcoin horse, not gold.
Yep. Yeah, for sure. I think it's a great point, Grant. Just the relative weightings there. And
the caveat that I'll throw in here is you never really know what different investment managers
are thinking or doing and what plans they have for their allocations. So, you know, would it
surprise me? Like we've seen in the past, like I think Wisconsin's biggest state pension fund,
you know, took a big I bet position. And then a couple of quarters later, I think they sold out
of all of it. I can't remember if they, you know, likely sold out at a loss or a gain, but in any
case you would have, I think it would have been fair to say like, oh, a pension fund's taking,
you know, making this bet, making this allocation, that's very likely, you know,
chunky capital that they'll, uh, add to over time. And, you know, they have a kind of a long-term
view on it, but, you know, they were out within, you know, a couple of quarters. So, um, not trying
to, not trying to suggest that, uh, Harvard is about to become, you know, the, the biggest Bitcoin
bull in the world on a sustained basis. You never really know what anyone's thinking, but yeah,
collectively, I think all those, those points are irrelevant. And it's, it's even more notable
against the backdrop that like, if you, if you Google this, like if you Google like Harvard
endowment, Bitcoin, um, you're not going to find like a lot of mainstream coverage of this.
Like, um, you know, there's an article in pensions and investments. There's like, you know,
the article that we had linked in the Harvard Crimson, um, and maybe one or two others, but,
um, it, it, it seems much more meaningful, even if it's not, even if there's low duration to it,
even if it's only a few quarters that they hold it much more meaningful than I think the coverage
that it's gotten in mainstream press.
So definitely one worth watching.
Yeah.
And I know we've got a call at the top of the hour,
so we're going to jump around the list
to what I think is probably the most interesting thing,
especially as it pertains to what we're doing here,
to the crypto IPOs that we've seen.
There's been some S1s that have been released
in the last couple of weeks,
bullish, which is a large institutional
exchange, announced that they were going public
and I believe they did IPO last week
on the NYSE and then Gemini
filed an S1. Looks like they're prepping
the sales to go public, which is much expected.
They've been around for 12 years now at this point.
So it makes sense that they would be getting ready to go public
but Grant, you are our resident
S1 sleuth.
What did you find that stuck out to you?
A couple things.
Well, first of all, the BLSH as a ticker, I think, is great for memes
because they're a crypto shitcoin business and their ticker is bullshit.
But I wasn't very familiar with their business.
I'd seen them at conferences, big sponsor of the conferences,
like large square footage on the floor.
So clearly we're throwing a lot of money around
trying to build their brand.
But it turns out they do quite a bit of institutional volume.
I think it was rivaling close to a trillion dollars
worth of institutional trading.
And they were claiming that they do around 30%
of spot Bitcoin, spot ETH.
They trade all the shitcoin pairs.
But they do have quite a sizable Bitcoin position, I think 24,000 Bitcoin on their treasury.
And some of that I think probably was associated with some of their founders and who ceded the capital initially.
But they have built a business that generates about 50 million of adjusted EBITDA.
So it throws off real profits and cash flow.
But interestingly, the stock just went wild right after it listed.
I mean, I think this was last week.
It traded up a couple hundred percent, I think.
Now it's trading around a $9 or $10 billion market cap,
which even if you give them some premium to the Bitcoin treasury,
it's about $3 billion worth of Bitcoin on their balance sheet.
So even if you assume there's a premium to that, it's still implying quite a significant value to this operating business.
And I just think, given what we've seen over the last couple of months with the Circle IPO, that it's not just a reflection that the IPO window is open and that the public markets are perhaps more open for business than they've been historically, but also that there's an interest in just, let's call it the broader crypto story, given how Circle is traded and given how, you know,
where bullish or bullshit is positioned itself.
So I think that's an interesting dynamic at play.
And then on the Gemini side, what I found most interesting about that,
I mean, we know they've had their issues in the past with the hypothecation of Bitcoin
and going underwater on lots of these loans to the degen market makers.
And I think they still have quite a bit of outstanding debt that they're trying to deal with
in this IPO. I think the IPO, they're targeting around 400 million raise. And some of that may
be to pay off debt. I don't know when the listing is expected. I would assume sometime next month.
So there hasn't been any chatter about where this business will price and what the valuation will be.
I guess it looks like they have a lot less Bitcoin on their balance sheet than bullshit.
But what I found was most interesting is that they generate, I think it was around $130 million
or million of annualized revenue but are operating at quite a significant loss I think just based on headcount costs they were spending million
just on compensating employees
and were operating at something like $100 or $200 million loss.
So I found that very fascinating
since it goes really against the philosophy
that we have at 1031
One is backing teams that can build sustainable business models on top of Bitcoin, can actually generate profits, can operate lean and don't have to have bloated cost structures, whether it's through headcount or otherwise, and build Bitcoin on their balance sheet in a sustainable way.
And so despite the fact that Jim and I is operating what seems like very significant loss, I think it's going to be really interesting to see how like what is the interest in this business?
Because to me, the bullish trading or the positive trading dynamics of Circle, how we've seen bullish trade, certainly to me would imply that there's quite a lot of value that investors will put on businesses that can actually operate profitably or are operating in the Bitcoin space.
and benefit from some of the same tailwinds
that the market seems to associate with these businesses.
Yeah, it's really astonishing that a lot of the incumbents,
I mean, that was when you brought the SG&A cost
or just like the overall administrative costs
in terms of salaries up in our group chat.
It was astonishing to me
because we see it in the mining industry too.
A lot of the mining companies have insane SG&A costs, and you'd think that people would recognize that this is something that is going to be a problem if you're looking to grow a profitable business.
There's way too many publicly traded companies, particularly miners out there with bloated SG&A lines on their financial statements.
And it's crazy to see that Gemini is spending this much on salaries and not yet profitable, having been 12 years old.
And we were saying this, they're one of, I believe, three operators with a BitLicense in New York, which is one of the largest markets in the world, not only the U.S.
And so they have a somewhat of a competitive advantage and somewhat of a regulatory boat in one of the biggest markets.
And they're about to go public and aren't profitable yet.
And you juxtapose that to a company like Strike.
In our portfolio, where Jack is very public, even though they're still private, he's been sharing some of their financials.
And it's a point to him.
They've built the business that they have with around 75 employees and their core focus as a business is how can we make as much money as quickly as possible, as efficiently as possible.
It seems like that management mentality is not not being yet widely adopted, not only across the space, but broadly speaking, I think.
when you compound the hurdle rate that is Bitcoin with the productivity gains that are entering the
market via AI, if you are not running a business profitably and cutting costs as much as possible
and being as efficient as possible on the expense side, I think you're going to start to get dinged
materially in public markets. Yeah, I mean, I'd love to say that I agree that the public markets
will be rational, rational enough to eventually that will be enforced. You know, the market is a
weighing machine in the long-term voting machine in the short term. Right. So, but eventually that
will be enforced. But yeah, I think it's, you know, it speaks to, in my view, like Grant,
you said it all really, you guys both said it all really well. Um, I think strike is a great
example of kind of a counterpoint that, you know, we like to draw and that we like to lean into,
um, uh, 1031 and, you know, Jack's been, um, more public recently about some of the results.
Um, and so people can go kind of look that up, but yeah, I think it's, it's very notable that
when Bitcoin is your North star and your goal is to accumulate as much Bitcoin for yourself
and your shareholders as possible, and there's a fixed supply and there's demand is only going
in one direction. And every day that you're not accumulating Bitcoin, every day it gets harder to
accumulate more Bitcoin on the margin. Right. And so if you have that as your North star, as a,
as an entrepreneur, as an individual, an entrepreneur, and then ultimately as a business,
it really just radically shifts your mentality about the way that you want to operate and how
you want to allocate capital, how you want to expend resources and, you know, your interest in
and emphasis on squeezing, you know, the max possible productivity out of any given employee,
any given, you know, deployment of capital. And I think if you, you know, look at the way,
If, for example, Strike has operated the way that other companies in our portfolio have operated, you get a very different picture, right?
And you get a good sense of what it looks like when Bitcoin is, you know, truly your North Star.
I think it's clear that, you know, whatever you might say about Gemini, whatever you might say about bullish, you know, no strong opinion on either of them.
But certainly they are broader crypto companies, right?
They've catered to the broader crypto ecosystem.
They're not exclusively all in on Bitcoin, focused on Bitcoin. And it's interesting that you kind of you see the divergence, right? And not just the marketing, not just the product launches, but even the operating results.
it bleeds through every part of the organization.
We'll continue to focus on the businesses that make Bitcoin their North Star.
Not just for ideological reasons, but because we want to accumulate more Bitcoin.
The leading businesses that feel the same way
are going to be the best way to do that.
This is a good segue to the final topic,
which is on the list, and this is probably one of the
I mean, they're in the S&P 500 now.
Block, I think, is one of the few in public markets outside of treasury companies, even though Block does have a Bitcoin treasury.
I think they're an incredible example of a company that is focused on Bitcoin and Bitcoin alone.
And that is expressed across their different business lines.
Obviously, Square, they announced in Vegas earlier this year that they're going to be
rolling out the ability for their merchants to accept Bitcoin payments and to funnel some
of their revenues into Bitcoin directly on the back end using the Square stack, the banking
stack there Cash app obviously consumer app focused on getting Bitcoin into the hands of everyday retail consumers spiral open source initiative to support open source projects in the space most notably LDK
And now, BitKey, the hardware wallet to help foster self-custody.
And now this has been talked about and sort of teased for the better part of a couple of years now.
And they had their big sort of unveiling last week, which I was there for, Proto, which is their mining division.
And so they announced the rig, which I think is a pretty massive moment for the Bitcoin mining industry.
You had a bunch of ex-Apple Square designers, hardware designers specifically, really dig into the problems that exist on the hardware side in the mining space and try to come up with a product to solve a lot of the pain points that miners have run into.
just due to the fact that there's really been a duopoly
trending more towards monopoly in the Bitcoin mining hardware space
with Bitmain and MicroBT being the big gorillas in the room in that industry.
And notoriously, both companies have had a mindset of,
hey, we're going to build these things, you take what you get,
and we don't really care about your feedback.
This has been expressed with the inability to really tap into the firmware
and sort of customize your setup.
They've made it extremely hard to do that.
They don't really take feedback in terms of what the hardware should look like
and how it should be manifested in a physical end product.
They sort of say, hey, take our shoebox and plug it in,
and you'll have to figure stuff out on the back end.
So it looks like the Proto team has noticed that there's an opportunity
to step into the space and improve in these different areas.
And they came up with the rig, which is extremely impressive.
So it's a modular sort of Bitcoin mining device that is designed incredibly well.
You can take out the hashboards very easily.
You can replace fans and PSUs very easily.
And so the launch of the rig is really a statement by Proto, like, hey, we're taking feedback
from the mining industry.
We want to provide you with a product
that will be durable, modular,
and sort of enable you to easily run
your mining infrastructure
in a way that you want to and need to,
depending on your particular setup.
So it was incredibly good to see.
So they have the rig, which is a chassis.
Again, it's modular.
You can sort of put up to nine hashboards
in this free chassis cube that they're selling,
take the fans off replace them very easily on top of that they have a software stack called fleet
which allows you to easily manage um your your mining machines as they're running uh in your
facilities uh and from a competitive perspective on performance it's not top of the line uh bit
mains hydro units are around like nine joules per tera hash they're air cooled units around 12 and a
half out of the gate, the rig will be coming with up to 14.1 joules per terahash in efficiency,
which is good enough for certain parts of the market. So I think it was a massive
day for the Bitcoin mining industry. I've talked very publicly on this show and many others that I
think one of the most centralized aspects of the Bitcoin network is the mining layer,
both at the chip level and the pool level and so i think with square stepping in putting their
design expertise to hardware expertise to work and launching the rig it was a great day for
competition in the mining hardware space which is desperately needed
yeah i mean it seemed it seemed massive um you know just from afar um and you know massive as
well to have just to bust up potentially like a, you know, decade plus, you know, duopoly,
or there was even a monopoly going farther back, especially with, you know, with increasing
geopolitical tensions with the, the country that is the source of the existing supply line for
miners to then have, you know, an option that's, you know, American based with American service
seems notable and meaningful just from a competition perspective and from a geopolitical
stability perspective. I'm curious how you and people you talk to there would weigh the,
you mentioned the relative kind of efficiency trade-off against, so you have some smaller
efficiency trade-off, maybe it's like good enough for certain parts of the market. How much of a
a, um, uh, needle mover relative to that is the modularity and, you know, the ability to have,
say, like, let's say higher touch, like, you know, American service that where like, if you're
operating in America, at least at Texas somewhere, like you can get on the phone with, you know,
potentially like, let's see how it actually works out in practice. But someone who is in your,
in your time zone, like generally is, you know, operates with like American business standards
relative to someone on the other side of the world who may or may not,
those kind of factors and the ability to potentially avoid
or at least minimize downtime.
How do you think miners will weigh those factors?
I think it would be massive.
And again, let's just run with the assumption that it works as advertised.
We really literally won't know until we know,
and we won't know until these things have been plugged in and running
for a certain period of time.
But if the chassis are really durable for up to 10 years and you really only have to replace fans and hash boards and the fact that you can replace individual hash boards and you don't have to unplug a whole machine and ship it either somewhere in the United States or there's still people shipping machines back to Malaysia or China to get repaired with a two month sort of round trip.
That's that's a lot of time that you're not plugged into mining.
So the time cost of capital has to be factored in there.
I think it really is going to be dependent.
The overall sort of cost benefit analysis is highly contingent on what the pricing turns out to be.
And I've heard anywhere from 16, 18 dollars a terahash to the low 20s.
If they're able to really anchor to that lower dollar per terahash number, I think they can be really competitive, particularly in hotter climates, because I think that's one thing that's pretty clear for bit main air cooled units and hotter climates.
they're not optimal and their hash boards crap out and people with air-cooled operations in
hotter climates tend to use micro bts because they're juggernauts in that regard they're
just beast that what i run in northern tennessee so they can compete in hot climates so they can compete on pricing I think the efficiency is good enough And if you can if they do truly the chassis
do truly last for 10 years, I think that they were marketing, like it's going to save you 20%
on having to refresh your fleet every five to six years, which is material amount. And so if that
comes true i think it is a a legitimate contender to compete with micro bt and bitmain and i think
it should be noted this this is only the first tape out of their asics there's no reason why
um with the design team that they have that i would not be shocked if they come out with more
efficient asics next year the year after they're really able to compete on efficiency at scale
I think there's going to be a 12- to 18-month period here
where they get their first orders in, get them shipped out,
get them plugged in, and people are validating.
If they can get past that hump and reinvest in more efficient ASICs,
it could really set the stage for them to eat
into a significant market share of Bitmain and MicroBT.
to me what i love about this is just like this meme that i i feel like has really gotten some
traction this year which is like you can just do things um like i i uh i posted this on nostr
but like you can just build a new bitcoin miner and the fact that there's a group out there you
spearheaded by Dorsey. But the stuff that Block is doing overall for the space, I don't think you
can understate it. They're truly breathing new things into existence for the benefit of Bitcoin,
things that a lot of people could just sit and complain about and talk about how
there's problems with Bitcoin
there's things that we need to fix
and that group out there
is doing it
all the things that you mentioned Marty
not just mining but
the BitKey, the open source work
they do, I mean the list goes on and on
Cash App
and integrating Bitcoin recently
on the payment side
so I just find
I find it very inspiring
to see groups like that
that don't just look at what others are doing
and try to replicate something else
that someone already is going after,
but they are trying to push the ecosystem forward.
That to me is one of the greatest things
to see about this release.
Especially with a group, an organization
that's very well capitalized with real budget,
you know, strategic vision, that's a real organization, um, member of the S&P 500 or
constituent of the S&P 500, um, you know, a large publicly traded U S company, like,
you know, we're invested in some fantastic, you know, smaller up and coming companies,
some of which are actually getting pretty big, but you know, they're, they're private. They're
still in, you know, first, second, third inning of, of really becoming, you know, breakout successes.
Um, and I think we've invested in a lot of companies that are similarly, you know,
doing a lot to push Bitcoin forward, um, both on the open source side and the product side and
different verticals of, you know, the market and the economy. Um, but yeah, to see all of that
happening at the scale that, you know, block can kind of bring to bear as a very large publicly
traded company with, you know, real revenues, real cashflow, a huge cash balance, um, and just
the resources of, of a public, the resources and the credibility of a public company. I mean, I
think that's that's massive as well so yeah very uh very bullish to see um for a variety of
dimensions yeah very ambitious and it seems like they're executing um at a high level it was really
i got to spend a lot of time with the proto team um and it's it's cool too because they have a lot
of um sort of cross-pollinating on the different teams so a lot of the people that worked on the
BitKey also worked on Proto in the rig and they are top notch hardware engineers and designers.
And it's really cool to see that level of design expertise coming to Bitcoin at the hardware level
specifically. It's desperately needed in mining. Every miner that I talked to there again,
we'll see what happens with where the cost comes out for these machines and how efficient they are
and how they actually run, but every miner was, I think at the very least,
extremely relieved that it seems like there's a hardware manufacturer
that is actually listening to them and taking design feedback
and implementing it into what they're doing.
It's like an incredible edge that they could have if they can execute
because Bitmain and MicroPT simply don't listen.
I don't know if it's a West-East communication issue
where they just simply don't care.
They're the only game in town.
It's just like, all right, you need our machines.
We don't care.
We're going to make them the way we make them,
and you're just going to have to buy them,
which seems to be the case.
I like that we started off with the government's going to nationalize
every industry.
Trump's going to appoint himself as Fed chair.
Your dollar's going to hyperinflate in two years,
and they're going to take over Intel.
They're going to take over all the strategically relevant companies.
And, you know, all the the potential, you know, Doomer blackpilling piece pieces of the episode we got out of the way early.
And we can we can wrap up here on something like this about that shows that that you indeed can just do things even against that kind of backdrop.
And that Bitcoin is increasingly intrepid, intelligent, well-capitalized, motivated Bitcoiners are finding ways to make meaningful improvements to the ecosystem on the margins,
kind of regardless of what the politicians and the Fed chairs decide to do.
Yeah, I've noticed that you've been observing how Matt likes to design a list.
You start with the doomer stuff and then you end on,
here's the actionable advice, the good stuff that's happening.
Never do it.
You got to learn from the best.
All right, we are officially 17 minutes late to this call,
even though I saw we were pushing it in side messages here.
So I think we should be respectful of the people we were about to meet.
And that was the alpha of the week.
I think we did a good job here, gentlemen.
Yeah.
Another, another batch of artisanal alpha successfully delivered.
Yeah.
We'll be back.
See you next time.
I bet we'll be around September fed policy decision.
It's probably a good time to bring some artisanal alpha to the table.
New, new, new fed chair appointed by the time we have the next episode.
Yes or no?
No, no, no.
All right.
I'll say no to them
alright
we'll see you guys then
see ya