Strategy MSTR 微策略的底層邏輯！融資工具最完整解析！比特幣暴跌！會被清算？市場極度恐慌！Jeff Walton【邦妮區塊鏈】

Worst case scenario for strategy, in order for the strategy model to break, I think something with Bitcoin needs to break.

>> What causes the price drop?

>> You got $5 billion of volatility junkies that are out there pumped that the price of the stock is going down and they're continuing to short it. There are

periods of time where it will underperform. And a lot of people are

underperform. And a lot of people are speculating like once these companies go below one MN like they're not going to be able to do things. Well, that's just false. It's false because there if

false. It's false because there if you're the 400th largest publicly traded company in the S&P 500 and you get disrupted by AI and your stock falls and you have no balance sheet because you

issued dividends and you did stock buybacks, what do you do?

>> You're dead.

>> I look at MSTR very similarly to the way I look at Bitcoin. And this is a duration asset. I I want to hold this

duration asset. I I want to hold this for forever uh because I personally believe this company is going to be the largest company on the planet. I'm going

to ask you a question. What's the point of holding an equity?

It's such a pleasure to have Jeff Walton with us. Um, I actually personally met

with us. Um, I actually personally met him at the sailor party. We can talk about that later. Hello.

>> Hello. How we doing?

>> We're doing great.

>> We're doing good.

>> It's so good to see you again.

>> Yeah, absolutely. Great to see you. So,

I remember we're at the party and we were lining up to take pictures and you and your lovely wife were behind me and my mom and we started talking. What a

small world.

>> Yeah, absolutely. Absolutely.

>> I met um David Lynn at that party and then we um later hosted two conferences together. Oh, I feel like people who

together. Oh, I feel like people who went to that party >> like they are just working on Bitcoin in so many different aspect and it was such a beautiful thing what mailor did.

>> Yeah. Yeah. It's it's really inspiring, isn't it? And uh I went into that party

isn't it? And uh I went into that party knowing that I was going to quit my job too. So, it was one of these like

too. So, it was one of these like amazing moments to be able to lean in and see this is what the opportunity is and and meet people and talk to people that are operating and working in the

space and yeah, it was an amazing event.

>> When you talk about quitting job, can can you tell us the story? What was the transition?

>> Yeah, so I was uh working in reinsurance. I was a reinsurance broker.

reinsurance. I was a reinsurance broker.

So, I sold insurance to insurance companies and I did that for 11 years.

Okay. uh so it's a very niche area of the capital markets. What I did is I I effectively looked at an insurance company's balance sheet and I identified

areas of volatility and I would sell those pieces of volatility to global diversified uh insurance companies, hedge funds and

capital providers. And it it was a slog.

capital providers. And it it was a slog.

I I I worked, you know, really long hours, late nights, did a lot of marketing and traveling, going to see different capital providers and uh you're really subject to the the

industry environment and the macro environment and it was really difficult.

I was just working harder and harder and harder and I wasn't going any like further in my career. Mhm.

>> I was finding new opportunities and working on interesting things, but I I saw a lot of issues in the industry in the capital space uh that could be fixed or addressed with Bitcoin.

>> Name one >> long duration liabilities. So, um health care costs.

>> If you've got uh a worker's compensation, somebody slips and falls and you've got to pay for their health care for 10 years. If your assumption on

the cost of that health care is off by 25 basis points, your whole business model is upside down.

>> And they the insurance industries themselves, they they hold assets to meet future liabilities and they have no ability to get Bitcoin

exposure. They they get zero credit from

exposure. They they get zero credit from the rating agencies if to if they hold Bitcoin.

>> Mhm. which is the the primary hedge that they need to protect against these, you know, long-term liabilities. So, that

was one of the big problems and challenges I was seeing in the industry, aside from the fact that most of the industry laughed at me when I brought up the concept of Bitcoin.

>> And uh I I saw a lot of opportunity in the space. So, I quit my job in February

the space. So, I quit my job in February and wanted to deploy my energy towards Bitcoin somehow. I didn't know exactly

Bitcoin somehow. I didn't know exactly how. I was like looking at different

how. I was like looking at different opportunities and exploring different things.

>> Luckily, my investment in Micro Strategy put me in a place where I felt comfortable taking taking time and observing the landscape and >> figuring out what was best for me. And

that was where the opportunity with Strive came up and now the VP of Bitcoin strategy at Strive. And

>> congratulations.

>> Thank you. and uh looking at running the strategy playbook and identifying opportunities in the capital space to keep you know pushing forward and uh in

this corporate adoption of Bitcoin and securitizing Bitcoin and uh operating a bitcoin treasury strategy.

>> Michael Sailor is such a genius. He he

came up with all these different products. You are very familiar with all

products. You are very familiar with all of his product. He used to use a lot of convertible bonds, >> but this year 2025, it's the year of preferred stock.

>> Perpetual preferred stock.

>> Exactly.

>> Mhm.

>> It sounds scary. It's like forever. You

got to pay dividends forever. Can you

break it down for us? How is that better than CBS?

>> If you just think about the concept of the debt, >> uh, a convertible bond has a maturity.

So, let's just say you take on $2 billion of debt. um at a future point in time, let's say the duration is four years, six years, or eight years, you've got to pay back that $2 billion maturity.

>> With the convertibles, they have the ability to convert into equity. So, you

know, there's there's a little bit less risk on on that side when looking at a convertible bond. But the really unique

convertible bond. But the really unique nature here of a perpetual preferred liability is that there's no there is no maturity. So, if you have a balance

maturity. So, if you have a balance sheet that's growing at, you know, 50% compound annual growth rate and you're lending out uh capital at 9%, there's a huge arbitrage opportunity between the

compound annual growth rate of the asset you hold on your balance sheet and the liability that you're paying out into the future.

>> The fixed dividend is about 8 to 10%, right?

>> Yeah. So, the perpetual preferred equity instruments themselves have a fixed dollar denominated dividend. It's not a percentage dividend when when they were

issued. Uh they're issued at at a

issued. Uh they're issued at at a percentage, right? So at par, um STRF

percentage, right? So at par, um STRF pays $10 per share. PAR is $100. So it's

effectively 10% dividend. Now

that it it's $10 per share. So to the extent that there's debasement of the currency, that $10 per share is actually uh it's becoming less and less valuable

over time and into the future. This is a this is a onedirection trade. This is uh USD for Bitcoin swap sort of thing. Um

the the biggest innovation in these instruments is that they are they're using the position in the

capital stack as collateral. Okay. What

does that mean? That means uh the the seniority of where the capital sits within the capital stack is a function of the risk profile of it.

>> Mhm.

>> And this is this is a a concept, right?

This is a this is a broader concept. So

in the event of a bankruptcy or liquidation, this is what this whole thing kind of relies on. In the event of a bankruptcy or liquidation, those

holders of equity or debt get paid out first. So if you think of convertible

first. So if you think of convertible bond holders are most senior. So if

there's a liquidation the convertible bond holders get paid out their their m their notional value.

>> Uh the next person in line for money is STRF holders. They would get paid out

STRF holders. They would get paid out next and then STRC and then STRK and then STRD and then M if there's any money left it goes to the MSTR shareholders generally in like

bankruptcy situations.

um the equity is generally worthless >> and the capital is really just going out to the bond holders. So the innovation here is that they've

collateralized different risk tunches within the capital stack and and this is just theoretical right the if the the STRF product is the most senior product.

So this you could think of this as the investment grade product meaning it's the furthest away from risk. M

>> and so that that positioning has created this effective like risk curve of getting Bitcoin like exposure >> but understanding that you have the

protection of seniority in the capital stack.

>> It has nothing to do with Bitcoin though. I'm I'm expecting a fixed pay

though. I'm I'm expecting a fixed pay payout, you know, annually. How how does that you know how do you call that Bitcoin related?

>> Yeah. So the the the unique thing here is any capital that's coming in the door on any of those instruments is going to buy Bitcoin immediately. They're adding

Bitcoin to the balance sheet. So So

you've got this Bitcoin balance sheet that's continuing to grow, >> right?

>> Okay. So that that is collateral like >> that is the collateral and the value that is backing uh any of these instruments that they have within the

capital stack. Mhm.

capital stack. Mhm.

>> So what what gives you that Bitcoin like exposure if you buy any of these instruments? The Bitcoin-l like exposure

instruments? The Bitcoin-l like exposure is the fact that they are paying a higher yield than any other product product in the market. They have less risk than any other product in the market. They are more liquid than any

market. They are more liquid than any other product in the market. And when

when you start to put all of these components together and you compare it to other fixed income instruments in the market, these become an outlier very

quickly and they become too good not to hold.

>> Yeah.

>> And and that's one of the things that's just so incredibly appealing to me.

These are these products are so good.

>> Yeah. that they are going to be in every pension fund, every insurance company, every fixed income holder at at a future point in time because they are they they

are so productive uh in a portfolio.

>> Help me understand this. When when it was CBS >> um MSTR actually has to pay close to no no interest >> and basically it was free money to buy

Bitcoin. But now this sounds very

Bitcoin. But now this sounds very expensive.

>> Yeah. Why

>> the the relativity? So, uh that that's a that's a really good question and re really they were they were given 0%

interest rate debt but the interest rate was priced into the conversion premium.

>> Oh.

>> So, so interest rates and the conversion premium those are those are two levers that you can pull to uh to create a transaction. So it it was more

transaction. So it it was more accreative for strategy to say I'll give you a higher conversion premium just give me 0% interest. So that that was a great opportunity for them.

>> Um but you you look at some of the conversion premiums I 45% or 55% and that becomes that's >> that's an that's an expense that's another way to look at it. Whereas if

they were to take you know six seven or 8% interest maybe the conversion premium would be 35%. M

>> so those are two those are two mechanics that can work uh opposite direction of each other. So really when you and the

each other. So really when you and the other the other component that's interesting with convertible bonds and one of the reasons I think they've kind of fallen out of flavor a little bit it's it's a capital market that's open

for um these types of transactions. The

market is relatively small though.

>> I think it's a under a trillion dollar market. if you needed to go raise

market. if you needed to go raise capital cheaply, quickly, and easily, like that is a market that you can go to.

But the uh the bigger unlock here is unlocking a much larger pool of capital.

So, how do I attract, you know, the $300 or $300 trillion fixed income market, >> you need to go fishing with the right hook, >> you know, you need the right lure and

the the fixed income market isn't going to buy the convertible bonds. you need

to give them a product that they can consume that looks like everything else that they have in their portfolio.

>> So when when you think about the this this concept of of expensive, it's it's not very expensive when you look at the productivity of the asset that you're

acquiring in exchange for that.

>> So and if you look at the entire capital stack too, right? I mean to put this in perspective and this is something a lot of people aren't aware of. I mean,

Strategy is holding $70 billion worth of Bitcoin. Maybe 75. It's between 70 and

Bitcoin. Maybe 75. It's between 70 and $75 billion worth of Bitcoin. The

dividend liability that they have annually is $600 million.

So, uh, one thing that I I like to do and try to put this into perspective because these are huge numbers. They're

like hard to wrap your head around for for most people.

>> And, um, one way I like to look at it is I like to, you know, chop some zeros off. Okay. So

off. Okay. So

the the one of the reasons this entire thing works is because strategy has so much financial strength that they have a continuous ability to go raise capital

in different markets and going to raise capital in different markets helps pay off these dividends or you know go buy more Bitcoin or the flexibility to move

however they need to. And I like to put this into perspective. Imagine you're a um you you have $7 million of assets in

your investment portfolio and you need a $60,000 loan to go get a house.

>> Easy.

>> If you're an underwriter, you'd say, "Absolutely. I'll underwrite that risk

"Absolutely. I'll underwrite that risk all day. That's a great risk. Let's take

all day. That's a great risk. Let's take

it further. Let's say the Bitcoin falls 50%. Now you've got $3.5 million

50%. Now you've got $3.5 million relative to a $60,000 loan. Would you

underwrite that loan?"

>> Absolutely. you you'd say absolutely. So

that their their ability to raise capital is a function of their financial strength which is which is how this whole thing continues to work. They're

able to raise additional capital at terms that are attractive and accreative that they can go buy Bitcoin or you know do other treasury operations that they deem and see fit

>> from what you're saying. So, I thought the reason why they kind of paused this CB um route is because they don't want to dilute their shareholder too much, but it's because they want to access

their a different pool of capital.

>> It's accessing a different pool of capital. It's also accessing a different

capital. It's also accessing a different holder.

>> Uh so, the convertible bond uh sellers, the people that are selling this product, >> they don't care about the stock at all.

>> They they are volatility junkies. So

they want the opportunity to arb the delta between the convertible bond price and the value of the equity that sits beneath it. So there's infinite

beneath it. So there's infinite arbitrage opportunities back and forth between uh the inefficiencies in the convertible bond market and the equity market and how they're priced. So

they're constantly shorting the stock, they're constantly buying the stock, they're constantly shorting the stock.

Additionally, the the convertible bond sellers when strategy issues the convertible bond, they sell about 70% of the notional value short immediately on

day one to hedge their position.

>> So, you could think about the dilution uh the the dilution impact happens on day one. It occurs on day one. Now you

day one. It occurs on day one. Now you

think about the difference in these new perpetual preferred instruments and if if they need to issue MSDR common stock in order to pay the dividend now that dilution is is happening over time.

>> You you know it's a it's a different horizon. Additionally the the people

horizon. Additionally the the people that hold those instruments they want them for the yield and the risk protection not for the volatility. They

want it for the lack of volatility. So

the the buyer of those in of those products, >> who are they?

>> Uh it's retail, it's institutions, it's insurance companies, it's pension funds, >> they're they're long these instruments, not long volatility. Mhm.

>> And and that's a a fundamental difference and a more beneficial uh person to have in your capital structure than somebody that's, you

know, taking advantage of the volatility of your common stock. So there there's and a $300 trillion pool of capital, right? It's it's an enormous pool of

right? It's it's an enormous pool of capital and they have the ability to um create products that are attractive in that in that marketplace. for a regular investor. I don't I don't think most

investor. I don't I don't think most people understand every bit, you know.

>> Yeah, it's complicated.

>> It's super complicated. They just hold MSTR >> and if you go back and you look at since they started the Bitcoin Treasury Strategy, >> they are they are, you know, three to

four times uh levered the return of Bitcoin. There are periods of time where

Bitcoin. There are periods of time where it it will underperform and you could see this in the marketplace where there are now new people that are coming into the market saying I'm shorting strategy

because I don't think this premium should exist or you know that there's a lot of people that are using this instrument to trade in different directions in different different ways

and different places over the long term.

I think the most important and valuable metric here is Bitcoin per share. Mhm.

>> It's like, well, if you're using fiat to to denominate the the return of this instrument, you're you're taking a fiat

lens to this um this instrument to begin with. So, the way I look at it, I look

with. So, the way I look at it, I look at MSTR very similarly to the way I look at Bitcoin, and this is a this is a long this is a duration asset. I I want to

hold this for forever.

uh because I personally believe this company is going to be the largest company on the planet and I don't want to be in a position where I have to tell my grandchildren that I sold MSTR at,

you know, $400 >> uh when, you know, 10 20 years from now it's $20,000 or $30,000 a share or something like that. And um I I've had

many of these experiences in in my life with family members saying, "Oh, I could have bought Apple at 89." And well, it's like, well, you didn't you didn't buy Apple at 89 cents and you wouldn't have had the conviction to hold it anyway.

So like >> uh the >> it's and there's this Sailor interview where he's uh talking about his friends that are talking about buying and selling Google between a dollar and

a$150 and he's like shaking was like what are you doing? like uh this is this is all this is fundamentally changing humanity and this is changing the world and uh you've got to take a long-term

view view on these um specific products and instruments. So there's a lot of

and instruments. So there's a lot of people, you know, making a lot of noise about this stuff because the stock, you know, had this epic blowoff top. It hit

$543 in November of last year. uh just

straight parabola in you know a month of time and since then has gone through this like choppy chop consolidation period where there's a a new floor being

set on the >> is it because people lose conviction or what what causes the price drop >> it's so many things I mean there there are so many people trading in the

marketplace it's a function of the underlying uh bitcoin being held it's the convertible bond holders I mean there's five $5 billion of convertible bond that are not trading like equity in the market. So you've got $5 billion of

the market. So you've got $5 billion of volatility junkies that are out there pumped that the price of the stock is going down and they're continuing to short it.

>> I see.

>> So they are making money by shorting the stock.

>> Yeah. And that that's that's I I think one of the reasons that uh strategies kind of pivoted on convertible bonds because they they've seen the um the

effects of issuing that much of this type of instrument in a in a very short time horizon.

>> When we talk about perpetual preferred stock, can they ever buy it back? Like

stop paying the dividend >> on all of the instruments right now. I

don't believe there's a call on on any of them.

>> That is crazy. Like think about investing $10 and get $1 every every year. Like that is insane.

year. Like that is insane.

>> Yeah. But if if your if the value of your dollar drops 90% in 10 years, then I mean >> true.

>> Well, it's like you're getting $10, but well, $10 is going to be equivalent to $1 10 years from now.

>> So, do I >> it's a great instrument for now. And

where where I think these products have a really good opportunity in the marketplace right now is like retirement accounts. Mhm.

accounts. Mhm.

>> So, you've got people that are near retirement and they they want a little extra juice in their income that they're making uh to help, you know, to help them manage their retirement. These

products are really really appealing.

>> Yeah.

>> Uh and if the horizon of your life is another 20 years, >> you're not too worried about >> you're not too worried about it, right?

And you're not too worried about the debasement of your currency for the rest of your life. you're you're more worried about just enjoying your life for the last 20 years or or whatever that may be.

>> For me, I'm interested in the perpetual preferred instruments >> from the understanding that I think they're mispriced and I think they're going to be repriced.

>> And there are other people that are buying it for the yield. There are other people that are um you know, speculating on you X Y or Z. But um I'm not buying

it for the reduced volatility.

I where I'm at in my life, like my age, like I want full V right now. I I want all of the volatility because I have supreme conviction and I know where this is going directionally. So that's the

way I I view it.

>> What about all the other Bitcoin treasury companies? They're are copying

treasury companies? They're are copying the same strategy, but are they going to perform the same? I think that's a that's a great question and and I think there's a lot of opportunity for these

Bitcoin treasury companies in this space uh to continue to grow and buy more Bitcoin perpetually into the future whether that be through cash flow or capital markets opportunities uh that a

lot of people are speculating like once these companies go below one MV like they're not going to be able to do things. Well, that's just false, right?

things. Well, that's just false, right?

>> Why is that false? It's false because they're sitting on capital >> and it depends on the value of that capital, the leverage on the balance sheet, how they're managing the leverage

on the balance sheet. But you can always get a deal done like if if you needed to um let let's just say let's just say to make the numbers easy, let's just say you're holding a billion dollars of

Bitcoin and you've got um you know hund00 million of leverage. So you're

10% leverage uh but the value of your stock is trading at like $700 million market cap or something like that. So

like a.7 M&A, you can go to the capital markets with your billion dollars of Bitcoin and go like identify leverage opportunities to go leverage up your balance sheet a little bit more and buy more Bitcoin.

>> Um alternatively, you could be in a situation where it it may make more sense to sell a little piece of your Bitcoin to buy your stock back.

>> Do you think strategy would ever do that? because that's more like a

that? because that's more like a conviction like fake. You're not

supposed to.

>> Yeah. I It would be a break glass scenario. I I think it's incredibly

scenario. I I think it's incredibly unlikely. Yeah.

unlikely. Yeah.

>> Um but the another reason this entire thing works is because the threat is there, >> right? Like Bitcoin is the most liquid

>> right? Like Bitcoin is the most liquid instrument on the planet. You could go you you watch Nakamoto went and bought a million dollars a minute to buy $750 million. You you can do that. Like the

million. You you can do that. Like the

market is incredibly liquid. they could

go buy and sell as much as they need to and like get pretty efficient uh settlement and efficient pricing with it because it it's just so liquid. So that

that threat to be able to do that is always there. But that there are so many

always there. But that there are so many other things you can do, right? You can

you can sell covered calls, you could go access perpetual preferred debt, you could go get straight debt, you can go get convertible debt and and it's all a function of your the under underlying collateral that you have in the balance sheet. It doesn't like whatever the

sheet. It doesn't like whatever the stock's doing. It doesn't really matter

stock's doing. It doesn't really matter if it's trading at a premium. You can

access the equity market and you could go issue ATM to raise capital that way.

But uh in in distressed situations, distressed, it may be more efficient to go tackle capital in different places or just wait.

>> You could just wait. If you are directionally long Bitcoin and you think the the the market is going to move favorably with you and you understand the landscape, you're like, "Okay, strategy is working for me. Semilar's

working for me. Uh MARA is working for me." like all you go look at all of the

me." like all you go look at all of the Bitcoin treasury companies that are look their whole goal is to accumulate as much Bitcoin as humanly possible. You

could just wait >> because the the likelihood that all of them are are not doing anything is zero.

Uh so I I think it's imperative uh I I think having Bitcoin on your balance sheet is going to be imperative for the future. And if if you look at

the landscape of u like equity mark equity capital markets and like all of these companies that are trading on these different exchanges, they're significantly exposed to AI disruption.

>> Mhm.

>> And if those companies get disrupted by AI, what can you do?

>> Explain that.

>> So, so like I just mentioned right here, right? Like if your equity falls and you

right? Like if your equity falls and you still hold this Bitcoin, at least you hold the Bitcoin. You could go do something with it. you're like, I could go leverage it to go buy a company or I could go do X or, you know, go issue debt and go buy more Bitcoin. Like,

what? You could do so many things.

>> But if you're a if you're the 400th largest publicly traded company in the S&P 500 and you get disrupted by AI and your stock falls and you have no balance sheet because you issued dividends and

you did stock buybacks, what do you do?

You're dead. You're dead. Unless you had Bitcoin on your balance sheet. So I I I truly believe that there's going to be a huge turnover in the S&P 500 and these

other large indices as AI does disrupt and a lot of these companies are dead in the water without any without a strong balance sheet to be able to operate in the marketplace. So, it's kind of a a

the marketplace. So, it's kind of a a fiat problem. Like the one of the reason

fiat problem. Like the one of the reason one of the reasons we're in this situation is because uh everybody's been like chasing this like cash dividend stock buyback cash dividend stock

buyback and there's been less emphasis on uh balance sheet strength and ability to manage different market environments and and I think I think that will change drastically. But the counterargument

drastically. But the counterargument would be the other companies, the tech companies you talk about, they are producing a product that's helping humanity, but what are you guys doing,

right? You guys are just buying Bitcoin,

right? You guys are just buying Bitcoin, blah blah blah. What would you say to them?

>> They're producing a product that's helping humanity or they're they're improving the value of a product that's helping humanity. How many people hold

helping humanity. How many people hold Bitcoin?

>> I don't know, like 30 30 million. 30

million people hold Bitcoin. M

>> seems like a pretty good product with a lot of people that that hold it and you've got a huge total addressable market of people that could hold it too.

>> Uh additionally like the the instruments and the securities that strategy has created and these other Bitcoin treasury companies will create will help humanity

>> like this is solving a a huge retirement gap in the United States and and other places on the planet. it. This will

provide a significant low volatility return instrument for people that need it. And that's

the biggest market on the planet. The

like the the total addressable market of the space is like $600 trillion.

The total addressable market for Apple is like I don't know three trillion, four trillion, five trillion maybe. And

they're like bumping up against that that valuation right now. They're like

$3 trillion company. I think it's a bit misunderstood.

>> Uh the equity product itself is also a a valuable product. Like if you think of

valuable product. Like if you think of these different countries like MetaPlanet like I wasn't able to get Bitcoin exposure but now I can get Bitcoin exposure via an equity in my

pension fund >> uh in Japan. that's a product.

People are lost by not recognizing that's also itself is not a problem.

>> I think people are so focused on the story the reason why they convert themselves into a Bitcoin treasury company. They're like, "Oh, it's just

company. They're like, "Oh, it's just because you you were trying to save your company. This is just a method for you

company. This is just a method for you to save your company instead of thinking how this product could benefit me."

Right. As an investor.

>> Yeah. So, so I'm going to ask I'm going to ask you a question. What's the point of holding an equity? Any equity.

>> To keep my purchasing power.

>> Bingo. Store of value.

>> Mhm.

>> Okay. Well, what's a better store of value than a company that has value?

Like what what's a what's a better store of value than a company that holds more store of value than any other company on the planet?

>> Mhm. What about the smaller Bitcoin treasury companies? They have supposedly

treasury companies? They have supposedly a bigger upside because they're small.

>> Yeah.

>> How should people look at it?

>> That they all have a different risk return metric.

>> So, so different different risk return profile at different points in time too, right? And this this conversation is

right? And this this conversation is evolving and everybody's trying to figure it out at the same time. Like one

of the couple of the metrics people are looking at is like >> Bitcoin yield, what is MNAV? What is

months to cover MNAV? They're like

people are creating these new metrics uh that are trying to wrap their head around like a a new risk return profile for these instruments because at any point in time one of uh you know one of

the smaller Bitcoin treasury companies may be may look more risky relative to a different one.

>> Yeah.

>> Maybe the MNAV is high. Maybe at that point it's ris it's more risky than a company that's got it a low MNAV and maybe they flip >> and you know there's different points of time where things have

>> may look a cheap or maybe look rich relative to each other. So there's this new risk profile that's being created on all these all of these different instruments, but they all provide different risk return upside. So I I see

the world in in terms of like probabilistic distributions and uh like risk curves. So uh there is a there is

risk curves. So uh there is a there is an efficient frontier of having any one of these different instruments in in a diversified bundle of baskets to to

maximize your return and minimize your risk. Obviously, strategy is the

risk. Obviously, strategy is the enormous player in the space, and I don't think anybody's going to catch them, which puts them in a in a whole new echelon of risk return, right? It's

it's the lowest risk out of all of the other uh companies because they have the biggest balance sheet and relatively small amount of leverage. Where there's

other companies that may be leaning a little bit more heavily into leverage, >> which is risky, right? If the if the price of the Bitcoin falls and they're unable to meet their liabilities, they may be in a point where they have to get

liquidated or somebody buys them or you know you are taking different risks on any of these different companies.

>> What's your thought on Ethereum Treasury Company?

>> Would you rather build your house on sand or build your house on a rock?

>> I don't know. You tell me.

>> Uh look, look, I I think Ethereum's going to be around for a long time. Mhm.

>> There are going to be companies that are going to capitalize their balance sheet on Ethereum rather than Bitcoin.

When you're operating in the capital markets, I think if you're going to raise capital, whether it be equity capital, debt capital,

it's much easier to explain the story of Bitcoin as a $2.5 trillion asset rather than the story of Ethereum, which is a $500 billion asset on your balance

sheet. So,

sheet. So, >> I I think companies that are going to succeed in the digital asset treasury space, I think they're going to have a a

lot easier of a time interfacing with traditional capital with a Bitcoin treasury than any other digital treasury.

>> So, you're looking at it from like a numbers perspective, but a lot of people are looking at it uh they're they're talking about POS versus P.

>> Yeah.

>> Yeah. Yeah. the pro proof of stake, proof of work. I mean, I I'm a I'm a proof of work maxi. I'm a Bitcoin maxi.

Uh, you know, I I explored NFTTS on Ethereum just because I I thought it was interesting and fun and and like that space is going to exist. Like there's a there's a different utility with

Ethereum than there is for Bitcoin. And

for me, I I again coming from a finance background working in the reinsurance market and seeing like the world of capital and how it works, the companies that are based with a Bitcoin treasury

are going to have a easier time in the traditional capital markets, which is a much bigger pool of capital. At the

moment, there are no Ethereum treasury companies that have perpetual preferred instruments that they could go offer to the market. I mean, you go look at Bit

the market. I mean, you go look at Bit Miner, Tom Le's deal. I think they've got a $6 billion market cap. If they

were go to go issue perpetual preferred equity to the market, they would be able to issue maybe two billion >> if they could find it. You'd have to go convince somebody that it's a good idea

and then you got to go find the capital and then get it. So, all right. Now, the

company's a $6 billion company goes to an $8 billion company. The scale like the numbers the numbers aren't in favor of an Ethereum treasury company. The the

numbers are in favor of Bitcoin treasury companies and their their ability to access different pools of capital. Let's

go back to Bitcoin companies. People

talk about if you want to buy a stock, you look at the founder. That founder

has to be a true Bitcoiner and promise not to sell. But there are a lot of people here just for the hype. How do

you tell?

>> Yeah. I guess the question is what what is a what is a true Bitcoiner? I mean,

Bitcoin's for everyone.

>> That's a good that's a good answer.

>> Like what is a true Bitcoiner? Like you

could anybody could do anything.

>> I can say, okay, let's say I start this company and I claim to be a Bitcoin treasury company. I tell the world that

treasury company. I tell the world that I'm going to follow strategy strategy.

However, I exit once my stock pump. That

is not a true Bitcoiner.

>> Yeah. No, that that sounds like a fraudster just in general. But uh but there's always break glass scenarios like that. There's again I see the world

like that. There's again I see the world in probabilistic distributions and I I think there there could be a point in time where you may strategically look to sell covered calls on Bitcoin or uh you know sell a sliver to buy the stock

back. It's an optionality like having

back. It's an optionality like having this asset on your balance sheet is providing you know maximum optionality.

Now in terms of being able to identify whether somebody's a true Bitcoin maxi and willing to uh and not going to run away with your cash or do anything like that I mean that's just the risk of buying equity. There is an element of

buying equity. There is an element of trust >> in buying any equity buying any other security or any instrument. There is an there's a huge element of trust. So, you

got to be able to trust the people that uh are operating the business that you're like buying buying stock in. But

ultimately, I think everybody should self-custody Bitcoin. And we we we

self-custody Bitcoin. And we we we preach that all the time on True North and in the with in the people that I talk to. It's hard to have conviction in

talk to. It's hard to have conviction in any of these equities unless you self-custody Bitcoin and you see the true power of, you know, having sovereignty with assets, being able to like walk around the block with $10,000

in your pocket, right? It's a huge innovation and I think that's foundational in anybody's portfolio is to have this you know Bitcoin and self-custody before before you start exploring any of these other things

because if you go dump all your money into a Bitcoin asset or Bitcoin treasury company and they the founder goes and runs away with all your money it's like well if they did that you better have some Bitcoin

>> right so that that's kind of that's kind of how I view it and a a lot of people are mad at strategy because the stock hasn't gone up Mhm.

>> And it's like, well, how long have you held it?

>> How long should I hold it?

>> I I I think everybody should look at uh these companies as longterm uh long-term holds, like fouryear fouryear plus holds. If you look at

Bitcoin itself, if you look at every single four-year compound annual growth rate period of Bitcoin, they're all positive. the 99.5 99.5 percentile of

positive. the 99.5 99.5 percentile of four-year Bitcoin compound annual growth rates is something like 26%. So

that's like the the worst point4%. If

you bought Bitcoin on the worst possible day and sold it on the worst possible day four years later, your the worst compound annual growth rate is like 22%.

Like that's, you know, like you you gota you got to be willing to sit on these things and and I think that concept is really rewriting corporate finance in general. Like strategy just posted a $10

general. Like strategy just posted a $10 billion net income in Q2.

>> Huge just like just blowout net income.

And you compare it to like any of these other companies and it's just like >> all these other companies are tiny. But

the commentary in the market is this is a one-time game.

M >> but when you when you actually zoom out and you take a look at it and let's just say you averaged their net income over the last four years. Well, their average net income over the last four years

annually is like $5 billion per year.

>> Insane >> on on average, right? And you start to compare that to like these other companies that are averaging, you know, $2 billion of net income annually and like the numbers start to get pretty

wonky really quick. And there's a lot of short-timerism in the existing equity markets which I think is a function of fiat where like every every analyst,

every equity market, every algorithm is like quickly trading based on uh quarter overquarter results and guidance and year-over-year results when I think more

broadly companies should be looking at like long-term trends and investors should be looking at long-term trends, four-year trends, uh AI trends, computer trends, uh data and information trends, those

kinds of things.

>> Um especially if the whole goal is to store value like as as we talked about it's the point of equity >> uh to store value and uh so I think a long-term perspective on any of these

things is uh the most efficient and appropriate way to go.

>> There are two different ways to you know accumulate Bitcoin. One group of

accumulate Bitcoin. One group of investors they want to time the market.

They want to buy when it's low. And the

sailor group or I assume you do that too is DCA. You you don't time the market.

is DCA. You you don't time the market.

You always buy the top because like you said if you look at long-term it's not going to be that much different. Which

strategy should I use to buy strategy?

Is it the DCA method or because it's so volatile should I time the market?

>> Yeah. I I don't see why you wouldn't look at it very similarly to Bitcoin. So

DCA >> I I I think ultimately for for 99.9% of people the answer is going to be like DC DCA a way in or or like get get some

like greater than 0% exposure. If if you don't have any exposure to these Bitcoin treasury companies, you're short Bitcoin treasury companies.

>> Same as Bitcoin, right? Like if you don't have any exposure to Bitcoin, you're short Bitcoin.

>> I don't want to be short Bitcoin.

>> And uh that's that's kind of the way I I look at it. It's like having greater than 0% exposure is what I what I want to have and uh lean into that.

>> Why wouldn't you just hold Bitcoin then?

Because that is the fundamental of the whole strategy.

>> Yeah, that's an answer for a lot of people may not have conviction in the space or they just want exposure to the underlying commodity like that is a that

is a great answer for most people. Now

other people want more high octane exposure. So you can get more high

exposure. So you can get more high octane exposure by buying a leveraged Bitcoin equity like strategy or any of these Bitcoin treasury companies. Or you

can get lower octane exposure uh like buying strike or strife or stride or any of these you know perpetual preferred instruments. And again, I I see that

instruments. And again, I I see that there was this there was this foundational um innovation in finance called Marowitz's

modern portfolio theory. And I I hit on this a little bit earlier, but it won the Nobel Prize in economics actually.

And the the concept is uh if you have a diversified portfolio with various different risk return metrics, you can increase the return of your portfolio and reduce the risk of your portfolio.

So, Bitcoin has a different risk return metric than strategy.

>> Uh, you know, any other Bitcoin treasury company has a different risk return metric as well. So, if you have greater than 0% exposure, it should elevate uh elevate the return and reduce the

risk of the portfolio. Now, that being said, if you have everything in your port portfolio correlated to Bitcoin, that is that is a risk in and of itself.

But personally for me where I see Bitcoin's future and where Bitcoin's going in the uh in the long term I'm okay personally that uh that level of exposure.

>> You hold a lot of MSTR, right?

>> Yes.

>> Worst case scenario, I'm trying to think of the worst case scenario. What

happens? What would happen and what would that scenario look like?

>> Like worst case scenario for strategy.

>> Mhm. Nightmare.

>> Yeah. I I mean a lot of people are trying to conceptualize this as well and I I made a post about this last night actually funny enough in in order for the strategy model to break I think something with Bitcoin needs to break >> for example

>> hard to hard to conceptualize but like global EMP >> oh >> you know the internet like >> the internet should >> but it's not a strategy problem anymore if that happens

>> right and and so when when I think of like these probabilistic scenarios of a of a situation where the fundamentals of Bitcoin breaks or all of a sudden all of these companies

don't start buy like stop buying Bitcoin for whatever reason.

>> Uh are they determined that another asset is a stronger store of value?

>> I think that's incredibly unlikely. If

that happens, then you know there are a lot of people that are in the Bitcoin space. They've got to figure out

space. They've got to figure out something else and go go do something else. And um I think that's that's kind

else. And um I think that's that's kind of what it looks like. I I think there's a higher probability of the Yellowstone Caldera exploding uh than like Bitcoin breaking.

>> I see.

>> Like uh so when I think of that scenario like Yellowstone Caldera, it's like okay well I'm dead anyway. So that that outcome is zero.

>> Um and you think of a probability scenario where Bitcoin breaks think of that's a low probability and the outcome is zero. Like that's also zero.

is zero. Like that's also zero.

>> So uh >> nothing related to strategy. It's all

Bitcoin. Yeah, I I I really I really don't think so. I mean, there there are tail scenarios that are they're black swan tail scenarios that people can't think of uh that that exist like black

swans always exist. Um is there keyman risk a little bit? Yeah, there's

probably a little bit of keyman risk with Sailor, but that they're already working on like Fong is incredibly powerful and strong, very great communicator. He's getting out into the

communicator. He's getting out into the market a bit more. M

>> um even even if Sailor were gone, >> the the company's still got $70 billion worth of Bitcoin. They've got 3% of the network. Like the the company will

network. Like the the company will continue to operate uh into the future, >> right?

>> Um not being able to pay your liabilities at some point in the future.

Again, >> you look at the balance sheet, they've got 10% leverage. uh they're incredibly strong relative to their interest that they they could pay 120 years of the

dividend liability with their Bitcoin right now, >> right? So like most of the market is

>> right? So like most of the market is asking them to take on more leverage, you know, and so they're trying to add it on as quickly as possible. So like

with where they're at right now, I have like the least amount of concern >> for the longevity of the company and the ability for them to continue to operate.

>> Let's talk about you. What do you do at Strive? Yeah. So, Strive, I I am the VP

Strive? Yeah. So, Strive, I I am the VP of Bitcoin strategy. So, I am >> helping think through our Bitcoin strategy.

>> I'm gonna wear a lot of hats. And this

company is is going to be flexible in the in the capital markets, going to identify different pools of capital and different opportunity to add Bitcoin to the balance sheet. Some of the things

I'm thinking about right now are um how do we communicate to the market and and how do we identify and structure our leverage, our future leverage? Um what

we want to do is we want to buy Bitcoin and we we want to leverage the Bitcoin to buy more Bitcoin. That's the general theme of most of these Bitcoin treasury companies. So I'm thinking about how do

companies. So I'm thinking about how do how do we leverage how do we communicate leverage? Um how do we communicate that

leverage? Um how do we communicate that story to the capital markets too? And

and I that's where I I think I can take some of the background that I've built with the True North team and be able to relay that same type of message into the

larger broader capital markets similar to what I did in the reinsurance world.

Like when I was in reinsurance, I sold volatility to uh risk-taking investment managers. Now that's the same exact

managers. Now that's the same exact thing with Bitcoin. I'm going to go sell like reduced volatility instruments to capital providers and I've got to be able to tell that story. Why is it a good product? It's a good product

good product? It's a good product because it's got lower volatility than Bitcoin. Um, it's got higher liquidity

Bitcoin. Um, it's got higher liquidity than Bitcoin. What is the risk? Kind of

than Bitcoin. What is the risk? Kind of

outline the risk profile. So, taking a a risk lens and being able to communicate that to the broader capital markets and like the retail market and continue to, you know, help that help that story.

Additionally, it's finding opportunity within the different capital markets and and thinking through, you know, that that broader just general general Bitcoin strategy. The company is full of

Bitcoin strategy. The company is full of uh financeers, so people with different diverse backgrounds. I mean, led by CEO

diverse backgrounds. I mean, led by CEO Matt Cole, who ran a $70 billion fixed income portfolio at Kalpers. Kalpers is uh the pension fund for California which is

like the largest pension fund in the planet. As you can imagine having it

planet. As you can imagine having it somebody with a massive fixed income background going into the market and looking at you know issuing fixed income bitcoin backed

fixed income securities. There's there's

a lot of benefit and things that we can think about and creativity that we can use in that marketplace. Uh

and be a little bit more nimble than strategy. Like Strategy is uh

strategy. Like Strategy is uh again like the the 600 pound gorilla in the space, right? They're enormous. And

Strategy's goal is they they want to bring in $3 trillion of capital into Bitcoin over time in the fixed income market. If you're going to bring if

market. If you're going to bring if you're going to bring in $3 trillion of capital, you need to be so incredibly transparent and like your story needs to be so incredibly clean. The market needs to trust that you're going to be able to

manage and hold that amount of capital.

the smaller companies can be a little bit more flexible and nimble and they're going to be like operating around the edges and finding opportunity that may be a little too small for strategy.

>> Um, and it might be opportunity for us to be like the Lamborghini within the Bitcoin treasury space that maybe maybe moves a little bit faster in both

directions. Um, but because we can be a

directions. Um, but because we can be a little bit more flexible with our our capital structure.

>> How do you come up with different strategies? Do you sit in a meeting room

strategies? Do you sit in a meeting room and everybody just starts, I don't know, throwing out ideas? How does that work?

>> Yeah. Yeah. Well, uh, late night phone calls, uh, like, um, you know, sitting on sitting on the couch going for a walk. Uh, there's multiple times where

walk. Uh, there's multiple times where Matt Matt Kohl's called me. He's like,

"Hey, I'm out on a walk. Like, what what if, you know, what if what if you think about this? Like what if you thought

about this? Like what if you thought about that?" And uh, and then we'll sit

about that?" And uh, and then we'll sit there and we'll chat for an hour. Right.

Just a week ago, I chatted for an hour from like 9:00 p.m. to actually 9 to 10:30 p.m. West Coast time. that was uh

10:30 p.m. West Coast time. that was uh in central time and just thinking about strategy and how we how we communicate and what what things we can like little

tiny levers we can pull and yeah >> the individual logistics that go into each one of those different things which there's there are so many logistics behind the scenes and I think that's you

know I wish we could communicate more but we we can't uh but we've got a lot of things that we're interested in working on and I'm really looking forward to it. Do you use AI to help?

>> Yeah, absolutely.

>> Yeah, like Sailor.

>> Uh, yeah, absolutely. The the really the really neat thing with AI is it just gives another it accelerates thinking.

>> Mhm.

>> One thing that I've been intrigued with is like I I could take all the perspectus from strategies, individual perpetual preferred offerings, and I could load them into like a chatbt. So,

I'll take all the perspectives and I'll load them in and I'll take um I'll take other bits of pieces of information like PDFs of different things that are interesting to me and I I use that as

like a project. So, I go create projects in chat chat GBT and then it's like okay I've got all of this information as my background. Now let's provide let's

background. Now let's provide let's think about you know based on assumption A B C D and um these these different things

what's the most efficient route or product that I can create to access this market or you know what are some markets that I can access and I mean I've spent

hours on chatbt just like pounding it >> identifying like different unique um ideas that's helped accelerate my

thinking and and helped narrow uh perspective. So that's

uh perspective. So that's where that's kind of how I've used it is like to to kind of take like these all these huge ideas and try to like narrow my focus.

>> Um it's not perfect. Like it's

definitely not perfect and it's not uh it assumes that there's no friction in the world.

>> So like you may come up with this great idea but you actually try to put it in practice and there's just a ton of friction in the market. Like

>> the lawyers hate it. the you know it's too complicated, I can't underwrite it, you know the all these types of things.

So there's got to be some sort of like rationality filter that you got to apply to some of the output that you get from AI. But I mean it's incredible tool and

AI. But I mean it's incredible tool and it's only getting better.

>> For a regular layman person that's watching this, all these companies, they can borrow money at a very cheap rate to buy more Bitcoin. But for a just a

regular person, I can only buy Bitcoin with my salary or my savings. Now, how

do I get ahead?

>> I will say I do believe this market is incredibly young and incredibly early.

So, I think if you're just remotely close to it now, >> 10 years down the road, I think everybody that's here is going to do fantastically well. Um

fantastically well. Um >> Oh, I love that.

>> I I'm I'm relatively certain of it. Um

this is not financial advice, but like Bitcoin is a two trillion two and a half trillion dollar asset. I think it's highly likely it goes to 10 trillion and then highly like it goes to 20 trillion.

And if you think about like what is a what is a company that's holding 3% of the network of the Bitcoin network look like when Bitcoin goes to tr 20 tr is a

20 trillion asset. It's like well uh that's a company that's holding $700 billion worth of capital at that point or maybe more like 700$800 billion of capital. Like there's no there is not

capital. Like there's no there is not another company in the entire market in the entire world that's holding that much capital.

>> So like what is what does the world look like then?

>> I don't know.

>> No, it's like well how much fixed income can you issue if you're holding 900 tr $900 billion of capital? It's like okay you could go you go issue a billion dollars a week.

>> Yeah. you can issue a billion dollars a week of fixed income at 9% interest or it's like the market the market should be there >> because the the risk profile of these

things is like going to be foundationally different.

>> Do you think countries can do that now?

>> Yes.

>> Right.

>> Yes.

>> Are they going to?

>> They should, >> but they're not yet.

>> Uh they're not yet. I think they can. I

think there's a race to do it.

>> Mhm.

>> Um >> there is a race. People talk about that, but like it seems like nobody's doing anything.

>> Why is the United States one of the most valuable countries in the world?

>> Why?

>> They hold the most gold. Money is

incredibly powerful and I think having control of like a monetary network and a monetary supply is going to be like crucial for uh future power of any country because you you have the ability

to like leverage that monetary base, right? I think

right? I think >> the US has eight times more gold than the next closest country.

And that has that has led to some of the US success. Like granted geographically

US success. Like granted geographically it's very valuable. You got two big oceans and you know you got all of those things. So geographically it's very

things. So geographically it's very valuable but another one of the main reasons it's valuable is because they have more money than anybody else.

>> Yeah. And I think they will continue to be in a position where they have more money than anybody else unless other powerful countries getting this monetary network before you

do and then controlling a majority of like how that's how that's used or deployed.

>> Wow. I I think people can take away this like we are still early. People look at Bitcoin price and um be like, "Oh my god, I can't afford one bitcoin. I'm so

so behind.

It's over.

>> Yeah. Nominal bias will always exist.

>> Yeah.

>> Nominal bias of of Bitcoin will always exist. So there's there's always

exist. So there's there's always opportunity to just get off of zero. And

I think that's my biggest recommendation to anybody is just get off zero uh and and have like greater than zero exposure to this stuff >> because it's mo like this market is

moving incredibly fast. You look at a company like Strategy in In 2020, Strategy had $500 million of cash.

>> Mhm.

>> They now have $70 billion of Bitcoin.

That's five years. Five years, they've gone from $500 million of cash to $70 billion of Bitcoin. Like, what does it look five years from now?

>> We don't know.

>> We We don't know, but it's it's likely going to be more >> a lot more. or it could, you know, two, three, four, five times um into the future. And they're not stopping.

future. And they're not stopping.

>> I'm not stopping. Everybody here is not stopping.

>> They're all plugged into the capital markets trying to siphon as much capital out of the traditional financial system as possible >> and shove it into Bitcoin.

>> That's a good that's a good analogy.

>> That's that's what we're doing here. And

we're not stopping.

>> My god, I can't sleep now.

>> Yeah. It's like, oh, it's happening right now 24/7.

>> It's it's happening. There's there's 150 companies that are operating on a Bitcoin standard today. Uh 5 years ago, there was one.

>> Five years from now, there's going to be 2,000.

>> What's the world like look like when 2,000 companies are vying for the same number of coins on the market?

>> Wow.

>> There's competition. It's speeding up.

But it's this like co-option, you know?

It's like co-optition. uh all of these companies are as the price of Bitcoin rises, the tide rises for all of them and they all get more powerful. So, it's

like you get more companies in here that are doing the same thing. And and props to Sailor, man. I mean, he's really written the playbook on this thing. And

I couldn't imagine sitting back and like watching 150 other companies just start doing exactly what you're doing. It's

just like incredible to see. And success

breeds more success. Like every

everybody wants to succeed in the world.

I think that will just continue to continue to permeate. Uh but it just takes time. It's like a virus.

takes time. It's like a virus.

>> That was such a beautiful conversation.

Thank you, Jeff.

>> Absolutely. Thank you.

>> Yeah. Thanks for having me. and

appreciate it.