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Are Bitcoin Treasury and AI Companies Running Ponzi Schemes?! | Bitcoin Simply · Simply Bitcoin

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  A Ponzi scheme is playing out in the AI space right now.
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  Check this out. On the 25th of September, Core
• 0:06
  Weave signs a $6.3 billion deal with Open AI, bringing their
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  total contract together to $22.3 billion since March.
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  Follow me here. A week before, Core Weave signs
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  a $6.3 billion deal with NVIDIA, who says that they will buy up
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  any unused compute space that they don't sell, which sent the
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  stock booming. But you dig a little deeper and
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  you understand that NVIDIA owns a 7% or more stake in both Open
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  AI and Core Weave. In fact, NVIDIA invested into
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  Core Weave back in March of 2023.
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  And as far as Open AI, NVIDIA is investing $100 billion into Open
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  AI. Who is required to buy their
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  chips? So wait, NVIDIA gives money to
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  Open AI? Who gives money to Core Weave?
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  Who gives money back to Open AI? Who gives money back to NVIDIA?
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  Who gives money to Core Weave? Who gives money to NVIDIA?
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  Smells like a Ponzi scheme to me.
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  They're raising money from investors in public markets and
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  through the bond markets, and they're striking circular
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  revenue, new agreements, and partnerships with people who
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  have to buy their chips. And this is all being funded
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  with either our money or debt as tech bond issuance is set to
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  cross $200 billion this year, the highest number ever.
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  Looks like a bubble waiting to pop to me.
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  And what happens when the market's correct?
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  What happens when there isn't demand to sustain these
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  infrastructure investments into AI?
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  But this is exactly what people are saying about MicroStrategy
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  in Bitcoin treasury companies. They're calling them Ponzi
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  schemes. A situation where past investors
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  are paid money, paid return from proceeds of new investors money,
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  and that's all it really is. And So what I'm referring to
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  isn't the NAV. The NAV isn't a Ponzi scheme.
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  A a ETF isn't a Ponzi scheme. You get, you take the money from
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  investors, you go buy the asset, all good.
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  No Ponzi. What is a Ponzi is when you have
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  interest that you're paying and have no income to cover that
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  interest. Literally no income.
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  That's why I also asked when's the income coming from.
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  That's not appreciation. So there is no hope.
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  Again, This is why I said what's the future income of the
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  treasury company? There is no hope of paying the
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  preferred dividends without new proceeds from issuance, and
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  that's a Ponzi scheme. Phones.
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  That's it. There's no way.
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  Two ways. About it Today we're going to
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  talk about potential Ponzi schemes that are playing out in
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  the AI space, in the Bitcoin space.
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  What are the similarities? What are the differences in
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  which bubble will pop first? This is Dante Cook with Bitcoin.
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  Simply, let's go. Yeah, so, so this is one of the
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  most impressive cases of fake it till you make it from Silicon
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  Valley. That's that's a, a, a well worn
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  tradition in Silicon Valley to make big promises and hope that
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  you can fulfill them. And that's what Open AI is doing
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  here. Again, as a baseline, a company
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  that's going to have $12 billion of revenue this year, lose 10s
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  of billions of dollars and is making commitments that they, by
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  their count, are now half a trillion dollars, $500 billion.
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  The likelihood that they'll be able to live up to those
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  commitments is quite low, which is to say, it's not 0 CHA.
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  GPT does have a head start. It's very popular, it's very
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  useful. But they're betting that they
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  can make all these compute commitments, secure that
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  compute, and that will somehow crowd their competitors.
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  Not sure that necessarily can be the case since their competitors
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  are Google and Meta and Anthropic which is backed by
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  Amazon and Elon Musk's X AI also very well funded enterprises.
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  While on the other hand, Open AI now needs to go raise this $500
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  billion that they've promised and and that's not trivial.
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  Again, they may be able to do it but for now it just looks like a
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  fake it till you make it situation fake it.
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  Till you make it sounds like a Ponzi scheme is playing out in
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  the public space right in front of us and Core Weave is the
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  poster child. Core Weave is ballooned to a $60
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  billion market cap on hopes and dreams, commitments, future
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  contracts, partnerships and debt far exceeding their real
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  revenues. Core Weave CEO Michael Intrader
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  has ridden the AI wave and this Ponzi scheme to a personal 6.7
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  billion was worth of wealth. Publicly traded companies are
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  quietly taking on more debt and more leverage to acquire this
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  scarce AI infrastructure. Companies like Oracle have a
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  550% debt to equity ratio, with companies like Apple and IBM at
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  200 to 250%, not far behind. Don't worry, you and me have the
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  funds to pay for it. We're going to be able to
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  sustain demand for this from now until Infinity.
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  Or maybe we won't. You were talking about the CapEx
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  in the data centers. You obviously see something on
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  the other side of that that will warrant that being worth it.
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  But I'm wondering, do you ascribe to these, these bubble
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  fears at all that people are talking about that we're in this
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  massive overspending, getting ahead of the skis bubble and
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  then maybe a company like Metal will be OK because you guys do
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  have a core business that makes a lot of money.
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  But yeah, how do you think about this bubble talk that has been
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  going on for the last few months especially?
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  I mean, I, I think it's quite possible.
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  And I think basic, if you look at most other major
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  infrastructure build UPS in history, you know, whether it's
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  railroads or fiber for the Internet, you know, in the.com
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  bubble, these things were all chasing something that ended up
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  being fundamentally very valuable.
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  In most cases, it ended up being even more valuable than the
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  people who are kind of pushing the bubble thought it was going
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  to be. But in, in each at least all
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  these past cases, the infrastructure gets built out,
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  people take on too much debt and then you hit some blip, whether
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  it's some macroeconomic thing or maybe you just have like a
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  couple of years where the demand for the product doesn't quite
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  materialize. And then a lot of the companies
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  end up going out of business and then the assets get distressed
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  and then it's a great opportunity to go buy more.
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  So I think that it's not, it's obviously impossible to predict
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  what will happen here. There are compelling arguments
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  for why AI could be an outlier. And, and, and basically just,
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  you know, if the models keep on growing in capability year over
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  year and demand keeps growing, then maybe there is no collapse
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  or some or something. But I do think that there's
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  definitely a possibility, at least empirically, based on past
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  large infrastructure build outs and how they led to bubbles,
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  that that's something like that would happen here.
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  We've seen this before. There's a fundamental issue in
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  the business model. These labs will spend $100
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  million back in 2023 in order to train these AI models, and they
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  charge $20.00 a month. But now the cost to train the
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  same models cost a billion 10s of billions of dollars, and yet
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  the cost stays at $20.00 a month.
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  Yet they can't increase the cost from $20.00 a month to $50.00 a
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  month because the demand won't be able to sustain it.
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  The people won't be able to pay for that level of compute, even
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  though that's the level of revenue that they need to exceed
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  their cost of buying this infrastructure.
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  There's no way out. You can't increase the cost
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  because your competitors will undercut you.
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  And the cost of this infrastructure and electricity
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  continues to skyrocket. The model is bound to collapse.
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  And the same criticism that's happening for AI is happening to
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  Bitcoin right now, Bitcoin Treasury company specifically.
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  They're relying on unsuspecting, whether in the bond markets or
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  the public markets, in order to give them cash and money to buy
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  Bitcoin and hopes that it will go up forever.
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  The poster child who gets attacked the most in this space
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  because they created this space is the first Bitcoin treasury
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  company is MicroStrategy and their CEO Michael Saylor.
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  But it's not just MicroStrategy. There are 195 publicly traded
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  Bitcoin companies who hold over 1,000,000 Bitcoin, or almost 5%
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  of the total supply. The leader on that list,
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  MicroStrategy, owns 640,000 and 31 Bitcoin, which they acquired
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  for about $47 billion. That's worth about $75 billion.
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  But their business doesn't earn even a billion dollars in
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  revenue, not to mention operating profits or cash.
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  And this is what's causing people to call it a Ponzi scheme
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  like Adam Constant usually come to some degree of obfuscation,
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  secrecy, fraudulent assumptions with it.
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  And that's the part I would say, of course, there's not any of
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  that here. It's it's a SO.
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  I disagree with that. I think you look at strategies
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  most recent marketing document where they talk about the their
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  PE and where they talk about their earnings relative to
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  everyone else. That is deceptive completely
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  100% fraudulent. Just because it has recently
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  become gap to consider earnings as appreciation of Bitcoin
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  treasury assets as earnings doesn't mean when you say, hey,
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  I am the biggest earner in the OR whatever the top whatever
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  earner in the S&P 500, that that is not a fraudulent statement.
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  Because if the market falls, they will be the biggest loser
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  in that quarter in history. And they are marketing it as as
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  this one off mark to market. They are marketing to investors
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  as recurring earnings that deserve a multiple that is
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  fraudulent. I'm not a shareholder
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  MicroStrategy and I do agree that MicroStrategy does not have
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  the business model to sustain the revenues or the income
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  necessary to pay off future payments, dividends, preferred
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  stock owners and people into the future who are investing into
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  these short or longer duration credit instruments.
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  They need future funds. But the one thing that Andy
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  constant in people who are calling MicroStrategy and
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  Bitcoin treasury companies a Ponzi is the fact that they
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  don't realize that Bitcoin is a once in a generation asset, one
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  that you can't create more of. It cannot be replicated, copied
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  or reproduced. You know, I think the Bitcoin
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  white paper is one of the most Seminole works of computer
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  science in the last 20-30 years. It's it's poetry.
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  Beautiful thing about it is there's no one person setting
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  the direction and there's no one person on the other side that
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  can stop it. So we have something that is
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  pretty organic in nature and very principled in its original
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  design and the underlying principles behind it that went
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  into it, even to the point of releasing it under a pseudonym.
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  I I think that's a a very, very powerful statement.
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  The timing of when it was released is powerful.
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  It, it was, it was a total activist move.
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  I mean it, it's, it's moving the world forward and in a way that
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  I think is extremely noble and honorable and enables everyone
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  to be part of the story. This is the thing that's
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  fundamentally misunderstood and MicroStrategy would be a Ponzi
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  if Bitcoin were in fact going to 0 or a 90% drop from these
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  levels that it would continue to be at forever.
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  And I don't think that's the case.
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  Michael Saylor has a completely different idea for what he's
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  building and why he believes that there are trillions of
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  dollars more coming into digital credit or these types of
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  instruments that he's building in MicroStrategy and strike and
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  strive and strive. But before we get into his
• 11:59
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  Joining us now, I'm pleased to say we have Strategy Executive
• 13:00
  Chairman, Michael Saylor. Michael, great to have you with
• 13:03
  us. This is Bloomberg Television.
• 13:05
  So we're going to go into all the financing strategies, but
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  let's talk a little bit first about Microstrategy's premium to
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  its underlying Bitcoin holdings, the M NAV, if you will.
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  So it's interesting if you take a look at the past few months,
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  MicroStrategy or Strategy shares have actually been
• 13:21
  underperforming Bitcoin that has taken your premium down to about
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  1.4 times. And I would love to hear your
• 13:27
  perspective on why that dynamic exists.
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  Is it something about the market?
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  Is it the fact that you have all these digital asset treasury
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  companies coming to the fore? Or is it something else?
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  You know the market's still working to digest a new business
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  model. The the Bitcoin Treasury Company
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  is an idea that's only come to the forefront in the past year
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  or so. For 300 years or so, the world
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  revolved around gold backed credit instruments.
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  People issued bonds and credit based on gold.
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  We've discovered the killer app in the Bitcoin world is Bitcoin
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  back credit. I'll call it digital credit.
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  You know, in the 20th century we had bank credit, we had mortgage
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  credit. We've got commercial corporate
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  credit, you've got sovereign credit.
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  Well, digital credit is a new creature, and Bitcoin treasury
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  companies exist to issue digital credit.
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  So the reason there's a premium in the equity is because we can
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  create digital credit instruments.
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  If we were just an ETF, we wouldn't be able to create
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  credit instruments. The credit itself is an
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  extraordinary new asset class. Well, when we talk about the
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  premium and it's been at lower levels, but you think about the
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  premium coming down, I think it was closer to two a couple of
• 14:44
  months ago. Is that something that concerns
• 14:47
  you as you look at these different types of financing
• 14:49
  vehicles that you have? No, I'm not really concerned.
• 14:54
  What happens is the premium will expand as our leverage increases
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  and as the volatility in Bitcoin increases.
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  The when the volatility falls and our leverage falls,
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  sometimes the premium contracts. But the real key key here is the
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  digital credit we're issuing like stretch that represents us
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  stripping away the volatility and the risk from a commodity,
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  from Bitcoin, the digital capital instrument, and then
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  distilling out a particular currency, USDA particular yield,
• 15:29
  say 10% on stretch and then a certain duration for that yield.
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  And we offer those to the credit market.
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  So we don't really need a premium to issue digital credit.
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  Our business model works fine whether or not the equity trades
• 15:43
  out of premium or a discount to the underlying Bitcoin.
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  The the equity will have value because people understand the
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  value of the credit instruments. And we've launched 4 credit
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  instruments this year, $4 billion product lines and the
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  year's not even over yet. So that's a lot for the world to
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  digest since they didn't see a new class of credit for 100
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  years before us. Like the biggest tech companies
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  in the world are predicting AI will have insatiable demand
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  moving forward. That there will be an unlimited
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  supply of buyers and that this data center capacity and
• 16:17
  infrastructure is a fixed asset. That we won't be able to find
• 16:20
  more and cheaper energy. That somehow we need to build
• 16:23
  all of these right now at exorbitant cost in order to win
• 16:27
  in this AI race. Well, in the same way people
• 16:30
  believe that Bitcoin is a rare, scarce, desirable asset in
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  cyberspace. Michael Saylor has said this
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  many times. And the difference between
• 16:37
  Bitcoin and whether we're able to create cheaper, more abundant
• 16:40
  and more cost effective sources of energy is that we can
• 16:43
  actually create more of Bitcoin. We know that there will only be
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  21 million. And so the race to start
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  acquiring this scarce, desirable cyberspace asset is now.
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  Both of them have future promises that they need in order
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  to work. AI being that we're going to
• 16:57
  want AI for everything in our computers and our microwaves and
• 17:01
  our toasters, and that we will want to pay for this sort of
• 17:04
  asset for the convenience of having all of our data sucked
• 17:07
  and siphoned out and used against us in the future.
• 17:09
  The other promise of Bitcoin is that we're going to need a money
• 17:13
  that is global, that is digital, that is unconfiscatable, that is
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  out of the reach of central bank governments, that is a fixed
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  supply of 21 million that is going to have demand from now
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  until Infinity and that everybody has access to.
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  The question is what future promise do you actually believe
• 17:29
  in? I'd love to see the debate in
• 17:30
  the comments. Which one is the Ponzi in which
• 17:33
  bubble will burst first? Hey, before you go, I want to
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  And in real life, what do you think?
• 17:55
  Ponzi or not, this is Dante Coke with Bitcoin.
• 17:57
  Simply happy stacking.