Latest / What Bitcoin Did / The Macro Shift That Could Send Bitcoin to $500K | Matt Cole

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The Macro Shift That Could Send Bitcoin to $500K | Matt Cole · What Bitcoin Did

• 0:00
  They're going to buy back loans.
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  They're going to try to effectively reduce the debt load by making the currency less valuable.
• 0:11
  You actually have the president and the treasury working for Bitcoin because they're working for a weaker dollar,
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  and that's one of the strongest determinants of where Bitcoin goes.
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  We actually think that over the course of the next, call it three to seven years,
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  that we will see the biggest decline in the value of the dollar as measured through the DXY index
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  in Bitcoin's history.
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  Sometime, I would say, in the next 18 months,
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  you see real meaningful intervention.
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  You see the dollar become the release valve explicitly.
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  It's hard for me not to think that this Bitcoin bull market
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  that I think we will be entering into
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  over the course of the next 18 months
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  will be substantially better
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  than the one we saw in 2024, 2025.
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  Like, when you hear this,
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  it makes me want to literally go on my phone right now
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  and buy more Bitcoin.
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  We've been talking about doing this for a long time, man.
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  I know it's been way too long. I'm glad to have you on the show. There's so much to talk about.
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  I want to get into a lot of things with you, but no, I don't actually normally do this,
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  but I'd be interested. I want to get into your background a little bit because I've read a
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  little bit about it, but tell everyone where you came from before you were in Bitcoin.
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  I came from traditional finance. You could say I was a suit, but I actually never wore a suit at
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  my old job, but I do wear a suit now that I'm on a Bitcoin trade company at times.
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  and an orange tie i know actually i i usually go go blue tie i i feel like the the orange tie i just
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  it's overdone doesn't work for me uh so so so i i think i've rocked it like one time and then i
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  put it in the closet but uh i came from the largest pension fund in america uh my my parents
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  they were law enforcement officers they had their pensions tied to calipers and so right when i
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  graduated college, it was at the start of the great financial crisis. And what you saw across
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  the world, but obviously in America, was pension funds became underfunded. And growing up in
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  Northern California, I saw the pension fund of my parents, my other family members, a lot of friends
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  become underfunded. And so it was a very personal mission to go there and try to fix the underfunded
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  pension crisis. And in a sense, a very similar thought process to Strive is how do we maximize
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  total returns at this pension, fix the underfunded pension crisis, and eventually got a job in the
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  fixed income unit there, which is for people that maybe aren't familiar with institutional investing
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  in fixed income versus equities, fixed income units within institutional investments are usually
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  where active management is most likely to occur so more active risk taking a lot of things similar
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  but in a different context to what we would talk about now in a bitcoin strategy uh and so i and so
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  i i rose up there i i rose up to be their youngest portfolio manager and managed about 70 billion
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  dollars so about half of that was structured products which is to structured finance which is
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  what i view our company today to be is to be a structured finance company the other half
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  was U.S. treasuries. And so it wasn't exactly 50-50, but let's just call it $35 billion in
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  each bucket that I was actively managing. And the treasury bucket was what was important for
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  the Bitcoin journey because obviously in the United States, in the world, there is a debt crisis.
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  I think one of the most important drivers of Bitcoin's success is the debasement trade of
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  fiat currencies and as i was talking to the treasury and the fed before i was a bitcoiner
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  it just became so clear there was no fixing this debt crisis there was no stopping the train name
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  your analogy that you want to use but whether you're a republican or a democrat in the united
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  states you cannot get elected on a fiscal conservative agenda you just can't do it and
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  And so the incentives in DC, and incentives matter a lot, and matter a lot in our space
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  as well.
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  Incentives drive behavior, and the incentives were just bad.
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  And so when you would ask the tough questions, there was no answer.
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  And so it just became clear as a large investor that it became very, I would say, unsatisfying
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  to work in fixed income into a debt crisis.
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  That when I first took the job, I didn't really realize what I was walking into, but it became
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  a challenge at the company. There was other challenges around mandates that I didn't like
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  and politicization working for effectively a government entity and a pension. So I ended up
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  leaving and going to Strive. But that treasury process and managing the large treasury portfolio
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  ultimately led me to Bitcoin after rejecting it for several years in late 2016, early 2017. I put
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  pretty much my entire net worth into Bitcoin. It gave me financial freedom.
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  know of us yeah and i was the only bitcoiner on both the fixed income and the equity desk
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  at calpers and yeah like one of us you know you talk about bitcoin and everybody thought it crazy but they actually would listen So I would show them me buying Bitcoin and just was like
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  fascinating in 2017 to showing people that. And a lot of debate. Late in my career there,
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  I actually looked into Bitcoin for the pension, just like how do you maximize risk-adjusted
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  returns if you were to add Bitcoin? I think their view at the time was that it was too
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  small of an asset when you manage half a trillion dollars um just the even now today with bitcoin
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  under a two trillion dollar market cap for an allocation at a pension fund that's now getting
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  close to a trillion dollars they would probably want to see bitcoin even bigger and so that's where
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  you know the the bigger it gets it actually does make it more likely for some of these institutions
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  to adopt risk in that direction i've got a lot of questions on that all of that um fascinating story
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  though. So when you say you were talking to the Fed and like they weren't willing to do anything
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  about the debt problem, and obviously politically, it's not a popular decision. They tried to do it
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  with Doge. It didn't work. They know the problems there though, right? Like everyone in DC,
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  everyone at the Fed, they know the problem exists. They absolutely know the problem exists. And
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  some people in DC actually want to fix it. I think they earnestly do. The problem becomes
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  if you actually fix it, what are you fixing? What do you have to do? And so it's actually
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  the fixing, it's more at the treasury. The treasury manages the finances with Congress,
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  and then the Fed, they manage inflation technically. But then basically, I think their
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  most important objective is to make sure the treasury markets actually don't collapse. Even
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  though it's not an official part of their mandate, I think it's the most important part, especially.
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  But I was talking to both of them, but I think the treasury part was more interesting there. So
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  treasury they are not elected officials they are appointed typically by the president the president
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  elects scott percent to run the treasury then there's career people within treasury but then
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  treasury ultimately fought uh does the budget that congress approves right and so that's kind of how
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  the the whole thing works and so treasury itself doesn't even have the ability to cut spending
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  It comes from Congress to give them a mandate.
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  And so I think Scott Bessent would love to cut spending.
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  He doesn't have the ability to.
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  I think he might be the smartest head of treasury,
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  at least in my lifetime that we've seen,
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  but it's not really the person.
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  And I think to your point on Doge,
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  Elon Musk is the best builder in the world in our generation.
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  He couldn't fix the problem because it's structural.
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  He also seems like the person that would be willing
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  and able to make hard decisions.
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  He seemed like a perfect fit for the job, and still nothing really happened.
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  Yeah, and I was very optimistic in the sense when Doge started
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  that if there was a way to fix the problem,
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  putting the smartest people in the world in DC in those seats
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  with that mandate was the best chance we're going to see,
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  and you saw how quickly it crumbled.
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  So that should give you so much confidence as a Bitcoiner
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  that this problem will not be solved.
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  I mean, unfortunately for the United States,
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  But I guess, fortunately, if you see the problem, you can invest in the solution.
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  Yeah.
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  And obviously, Vivek was a part of that originally, who's the founder of your company.
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  Have you ever had these conversations with him?
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  Oh, absolutely.
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  So when Strive was founded in 2022, we were not a Bitcoin company.
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  We were pushing back against ESG, against DEI, pushing for capitalism, for meritocracy.
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  And that was a mandate that still is very important to me, but I think is in a lot of
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  ways solved.
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  but in the early days so so my wife was actually part of the day one team at strive and the long
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  story short of this because it's it's actually interesting context is we were working on the
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  same idea independently as strive and we were talking to certain investors certain potential
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  business partners and one of those potential business partners introduced us to vivek and
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  just like hey he's working on the same idea and so we joined the company joined forces and
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  And she was running marketing in the early days.
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  She's now raising our family.
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  And so she was helping get Vivek out there on the talking tour.
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  And we were Bitcoiners.
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  And he was not a Bitcoiner at the time.
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  And we're like, hey, we think the Bitcoin community will love this pro-freedom, pro-capitalism message.
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  You should go talk about Strive to different people, to Marty Bent, to name your podcaster.
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  and initially it's like i don't know i'll try it once and so i think his first one was marty bent
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  um and he went on there and what's great about vivek's bitcoin journey and and i think we were
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  pushing him out there into it was that when he first did it it was very public it's like i have
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  bitcoin's not really for me but the government shouldn't shut you guys down you guys should be
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  able to compete but that's kind of which which is i think is a principled uh freedom stance yeah
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  But also, you don't have to like it.
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  But then what happened is that we were talking to him.
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  We were helping him.
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  But here what you should know about Bitcoin before you go on these podcasts And then he would go talk to some of the smartest bitcoiners in the world and he very publicly got orange billed um and it was it authentic it all like on the
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  record of him doing that and so then when he ran for president in 2023 he became the first
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  presidential candidate to speak at a bitcoin conference in 2024 when trump was running for
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  president trump called out a few people on stage and why he was there and vivek was one of them
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  And so that in a roundabout way, it directly contributed to the United States taking a more friendly stance on Bitcoin through Strive.
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  Obviously, there was other people as well, but I think we directly played a role in that.
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  That's very cool.
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  You know, one of my best predictions ever, Vivek came on the podcast, you know, in its previous iteration when Pete was still running it in probably 2022, maybe.
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  He came out to Nashville and we did a show.
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  and after we recorded me and pete just walked over to the coffee shop and on the way i was like he's
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  gonna run for president and then it was maybe six weeks later he announced he was running
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  that was my best prediction i'm still claiming that one that is a great one i internally at
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  strive in early 2022 i think everyone thought he would run for president i don't think people
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  knew he would be that cycle but i think it was clearly his passion yeah and he has a passion
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  which is truly great because I think sometimes people come down on a billionaire for running for
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  office and it is one of the worst financial decisions that you could make to take what I
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  would say is a generational talent in building businesses out of the game of building businesses
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  and in to try to fix public policy he has a passion for it and I mean I'm looking at it I'm
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  like you are an equivalent to a all-star hall of famer a kobe bryant type of talent in building
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  businesses and you're walking away in your prime to go do politics i was like that's not for me
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  but uh but but i appreciate that because it is he really does care about that and uh it's but you
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  know it is obviously a very tough system to fix as we saw as an example with doge yeah for sure
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  okay so i can't we can't not talk about the bond market given your background um give me your like
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  overarching view on on the the position it's in right now because like yields are high the treasury
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  stepped in with this not yield curve control yield curve control um what's your sort of overarching
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  view on everything that's happening the treasury and the fed will have to step in substantially
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  more and and so i guess to start with where are we right now the fed owns over 25 percent of the
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  entire supply of long-end bonds and i do think the long end is the point the place that's more
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  interesting to talk about right now, especially in a era of fiscal dominance, which just means that
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  the fiscal situation, the debt crisis matters more than inflation. Yeah. Can I just ask you a question
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  on that before we carry on? You say owns over 25% of the long end now. What would that be? Like,
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  give me some context. Say you go back to 2017. What would that have been then?
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  2017, it likely would have been not a ton different, but in the early era of QE. So QE
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  basically played out through the great financial crisis but effectively nothing okay right and then
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  you have qe1 qe2 covid and it just kind of continues to go up but then the treasuries
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  also issuing more debt and so this era of post gfc is when it when it rose substantially yeah
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  and so that's the important part and obviously the debt crisis continues to get worse that does not
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  ever go down. And so you think about this and sometimes it's helpful to bring this back to the
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  concept of a company. Imagine a 25% owner of a company. That is your majority owner. It is the
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  biggest owner. It will, if a 25% owner liquidated, it would crash the price of the stock unless you
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  had someone that was interested to buy it at that price. And so there is already substantial
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  intervention in the rate of u.s government debt and i think this gets into i think an important
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  question where you look at not only the fact that the debt to gdp level in the united states is over
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  100 which is pretty common and it's also very common in other countries for massive intervention
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  but if you took out intervention you looked at the debt to gdp level and then you looked at the
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  trajectory of growth of debt right not just the current level but where it's growing and i think
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  when you combine all those, most models would say the fair market rate of the 10-year treasury
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  is over 10%. I don't think we'll ever get there. I don't think they will not let that happen,
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  but it's just important to think about intervention. How much is intervention
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  actually bringing rates down? So right now, the 10-year treasury yesterday passed 5.25.
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  We actually, I think this is actually really helpful for the context around your Bitcoin
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  treasury strategy but strife has an asset management business one of our funds is a bond
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  fund it's a total return bond fund it's what i used to do and i still run the highest level
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  decisions of that and i think it like it almost like exercise that keeps me sharp and also the bitcoin treasury strategy yeah but um and i made a long form post about this with regards to bitcoin about rates but yesterday that fund for the first time
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  in its history went started to go long duration so it bought 10-year treasury futures when it
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  passed 5.25 percent and it would potentially um increase that duration long position up to like
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  6% on the tenure. So basically like it just kind of legged in like, like a small leg into it. But
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  if rates go higher, it will continue to leg in more. And so you might say, well,
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  is that because you think it's reaching the highest the yield is going to allow the yield to
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  get? Yes. So it's, and it's important that you said the highest they will allow it to get.
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  Well, yeah. Can I, I do want to, I don't want to just like derail the conversation from there,
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  but I do want to ask like, why, why can't it get to 10%? I know that's a big number, but
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  we were over 10% in like the 70s, right?
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  Like, why couldn't they do that now?
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  What breaks?
• 16:32
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• 18:12
  So what breaks is the level of debt to GDP and the fact that they have no ability to roll back entitlements.
• 18:20
  they have no ability to roll back spending and so here's the things that don't break right now
• 18:25
  which is it is important so right now we have an ai boom yeah there is a lot of investment in data
• 18:31
  centers and that capital is actually not sensitive to interest rates and so if interest rates goes up
• 18:38
  basically these large companies like i don't care let's build the data center we want capital you
• 18:43
  know give me the give me the capital i'll pay 10 i'll pay 12 because they just need to put computer
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  compute online right now yes yes and so that part doesn't break down so i do not think that if rates
• 18:53
  go up we go into a recession but because of the debt level of the united states the united states
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  itself cannot support the debt level so it's not the economy it's the country and it's the fiscal
• 19:05
  dominance situation right the the fiscal situation is the most important thing for the fed and for
• 19:12
  the treasury and so what and and we saw this last week where the bond auctions were one of the
• 19:18
  weakest bond auctions in several years i mean there was very little demand for treasuries
• 19:22
  yields are moving higher and then you've seen actions from besent so besent saying i am the
• 19:28
  house and you know they have he has basically a trillion dollars to buy back bonds if he wanted
• 19:33
  to but he started with six billion which is six billion of effectively a trillion dollar pot of
• 19:39
  money is a very small amount but he said i will use this if i have to and then interestingly
• 19:44
  i was just gonna say i saw a tweet from luke groman when basent came out and said that saying
• 19:50
  anyone that tells you they're the house they're not the house i think he's implying that the
• 19:55
  market's really the house the market is the house i've said you know i believe basent and what i
• 20:01
  mean by i believe him is i think that he will deploy all of that money the question becomes
• 20:08
  how much pain is he willing to tolerate and i think something interesting happened yesterday
• 20:13
  that i think has not been really covered as much in the bitcoin community yet but yesterday um a
• 20:20
  long time head of macro at jeffrey's his name's david zervos i don't know if you've heard of him
• 20:24
  or not no but uh someone that in bond space uh bond nerds uh listened to him a lot uh and so you
• 20:32
  He used to come into Calipers a good amount and all of the head PMs watch what he would say very carefully.
• 20:40
  And he actually coined the term bonfire in the era of QE.
• 20:46
  And he was very supportive of it.
• 20:47
  It wasn't a critical message.
• 20:49
  It was...
• 20:50
  and he was talking about different countries and basically a soft default by making the value of
• 20:56
  the currency less and effectively doing a bond fire you're not defaulting but it's effective
• 21:01
  it's debasement and he he was a big proponent of that and he just got put in basically as the second
• 21:07
  person under percent interesting yesterday uh and and i found that fascinating because you have
• 21:13
  saying i'm the house you have someone that is on the record historically of not only calling but
• 21:18
  supporting basically currency devaluation going to the treasury and i think he's very smart i think
• 21:25
  it's good for the treasury i think unfortunately i think it's the best option that they have but you
• 21:30
  think about that and you pull it back to bitcoin what does that mean if someone goes there that you
• 21:34
  know that's their view of the world you have the sense in the house what do you think they're going
• 21:37
  to do they're going to buy back bonds they're going to try to effectively reduce the debt load
• 21:44
  by making the currency less valuable.
• 21:47
  And it's soft to follow.
• 21:48
  Buy Bitcoin.
• 21:49
  Buy Bitcoin.
• 21:50
  So when we say they're not going to allow it to go over 6%,
• 21:55
  whatever that number ends up being,
• 21:57
  how are they going to stop it?
• 21:58
  What tools will they use?
• 21:58
  Do you think we'll have a very explicit yield curve control in the US?
• 22:02
  I think we can get there.
• 22:04
  You see what they're doing right now.
• 22:06
  So what are they doing?
• 22:08
  They're starting small.
• 22:10
  And I think they're seeing what they have to do.
• 22:12
  Yep.
• 22:12
  Right.
• 22:13
  Like, so they would not want to go to explicit yield control unless it was a last option.
• 22:20
  I think they will take steps.
• 22:21
  So steps would be increasing the size.
• 22:24
  And I think because he's already signaled, I think he's going to have to deploy the full size.
• 22:28
  The market is in control.
• 22:29
  I think the question becomes-
• 22:31
  In terms of like treasury buybacks.
• 22:32
  Treasury buybacks.
• 22:33
  And help me understand this, because are they buying back sort of off the run long-term debt
• 22:39
  that's not, or are they buying like from auction brand new debt?
• 22:42
  Off the run, but my view is it doesn't overly matter when you look into a lot of institutions.
• 22:50
  So as an example, CalPERS, which would be similar to a lot of others, for their treasury portfolio, they own a lot of the on-the-runs, but they own a lot of the off-the-runs as well.
• 23:02
  They really just own a lot of duration, a lot of long-end debt.
• 23:05
  And so, yes, you're supporting liquidity by buying the off the runs, but you're really just reducing the amount of long term debt.
• 23:12
  And then you're pushing it in the front end where the front end, the Fed actually does have yield or control of the actual rate.
• 23:21
  Right. So I think that's what's going to happen is that they're going to push more long into the Fed's levels.
• 23:27
  levels and then over time I think the Fed will bring that down and that they won't potentially
• 23:32
  actually need to control the long end because they'll just push more and more financing to the
• 23:37
  short end where the Fed can control it. That's what they want to do. So before Bersent came in he was
• 23:42
  very critical of Yellen for issuing all the debt at the short end and he's come in and done the same
• 23:48
  thing essentially which like the only thing you can really derive from that is that they've got
• 23:54
  no other option. Is term dead? Like is long-term debt dead in the sense that obviously you have to
• 24:00
  have a take on the debasement rate inflation, but also when you add like AI into the mix,
• 24:05
  how are you meant to know what the world looks like in 30 years, therefore take the risk of
• 24:08
  buying 30 year debt? Yeah, I think that... Does that make sense? It does. It does make sense.
• 24:14
  and and i think that your framing was right in the sense that in 2020 i thought the united states
• 24:24
  should be doing 100 year bonds and and and but the reality is and it's easy sometimes on the
• 24:30
  outside to play quarterback to be you know you should be doing this you should be doing that and
• 24:35
  we hear this all the time as a company it's like well i know things you don't know and and probably
• 24:40
  what Yellen knew was there is no buyer. Like, yes, I would love to sell trillion dollars of
• 24:47
  hundred year debt, but you don't see that there's no buyer. And I think that's probably the lesson
• 24:53
  that Besant's learning. Is it a surprise that there was no buyer then though, when rates were
• 24:58
  significantly lower? I mean, there was still inflation, but is it a surprise that there was
• 25:03
  no buyer at that point? What does that signal about the market? I think it signals that it's
• 25:09
  that it's weak that that there's a that when you know the trajectory of your own situation
• 25:15
  and so like you could even in a very different way you can compare this to what we're doing where
• 25:20
  we want to have a high amplification ratio which means we want to issue a bunch of preferred which
• 25:25
  is obviously not debt but it's financing and and we have to look into the market to say how big
• 25:31
  how much demand do we see and so if they're looking at this and they see a very bleak outlook
• 25:36
  for demand then maybe they can issue the next 10 million or 50 million but maybe not the next
• 25:43
  billion or trillion for them right and so then they have to you have to look at the bigger picture
• 25:49
  of where things are going and so they then have to move move it to the short end and i do think that
• 25:54
  in a sense like you know to come you asked about yield curve control and i think this is important because I going to go back to QE So in the era of qe the fed and the treasury and this was part of what made me a bitcoiner is i would sit
• 26:08
  with them not with a microphone but like this and say you're doing you're doing money printing
• 26:15
  you're and say no we're not printing money and they would give you this long technical explanation
• 26:20
  that was true but from a first principled perspective the treasury was issuing debt
• 26:27
  And within a few days, the Fed had bought the debt.
• 26:30
  And so it's like, clearly, you are printing money to buy this debt.
• 26:35
  And I think if the Treasury, or the Fed, but if the Treasury is buying back long-term debt
• 26:40
  to then issue short-term debt where the Fed does control explicitly the rate,
• 26:46
  it's effectively your yield curve control, but it will never be called yield curve control.
• 26:53
  And I think that's probably the way this plays out.
• 26:56
  And so it'll probably look like yield curve control.
• 27:00
  It'll probably smell like it,
• 27:02
  but it very likely will never actually be
• 27:05
  explicit yield curve control,
• 27:07
  just like they did with QE.
• 27:08
  Yeah, it's funny.
• 27:09
  Like I've had conversations with Jeff Snyder over the years
• 27:11
  and he always will,
• 27:13
  like he always say that this isn't actually money printing
• 27:15
  and maybe like technically that's correct,
• 27:17
  but it's semantics.
• 27:18
  Like the reality is that they're creating new money
• 27:21
  to buy this debt.
• 27:23
  Yes.
• 27:23
  does whatever happens next in terms of how the government try and protect markets in the economy
• 27:30
  is it going to come from the treasury not the fed is that like with the fiscal dominance is the
• 27:33
  treasury now at the driving seat they would like that to be true okay and and so i think there's a
• 27:41
  a reasonable chance that if the treasury deploys the full tga trillion dollars that that could be
• 27:50
  enough for the next couple years but there's not another trillion dollars behind that it's a
• 27:56
  it kind of it kind of eventually ends but i guess what the treasury could do the treasury could issue
• 28:02
  more and more short-term debt that the fed controls the rate on and then kind of pump up the amount of
• 28:08
  money they have to basically do bond buybacks and do a a twist operation at the treasury that is
• 28:14
  that is possible um to me i view it as in times of crisis i kind of view the treasury and the fed
• 28:21
  is the same thing in times where things are working they are two distinct bodies with
• 28:26
  different mandates one's independent one's you know not independent but it's kind of the independent
• 28:32
  yeah exactly they're they're the same thing yeah so it's um with the treasury general account
• 28:40
  there's a trillion dollars there at the moment they're likely going to spend all of that
• 28:44
  where does that money initially come from and how does the treasury general account get filled back
• 28:48
  up so money's fungible uh they would probably tell you it comes from tax receipts or something
• 28:57
  along those lines but we know that we have a situation where the government is spending
• 29:02
  more than it actually gets in and so whether it comes technically came from issuing bonds that
• 29:10
  they just held back a little bit of cash, whether it came from tax receipts because they're issuing
• 29:14
  bonds to pay their expenses. I don't think it really matters. They found a way to get a trillion
• 29:21
  dollars in the bank account. And I think that's true for any company, any government, that money
• 29:27
  is fungible. But they have a trillion dollars and they could top it up by issuing more debt. But
• 29:34
  clearly they will not be topping it up through tax receipts. Yeah, that's clear. So the
• 29:40
  The kind of long and short of it is we're just going to have more and more intervention going
• 29:43
  forward in one way or another. It is a ball rolling down a hill that picks up steam that
• 29:50
  unless you fix the debt crisis, the spending, and I am very optimistic on what AI can do for the
• 29:58
  economy for abundance. I'm not optimistic on what it will do for tax receipts. Okay. That's worth
• 30:04
  getting into because a lot of people will talk about AI as the kind of the potential savior here
• 30:09
  in the sense that they can maybe grow their way out of debt with this.
• 30:12
  Why don't you think that's the case?
• 30:14
  I'll start with saying I do think that we should be trying to grow our way out of it.
• 30:19
  There is not a good option.
• 30:21
  The best option would be fiscal conservative, rollback entitlement,
• 30:24
  but this is not going to happen.
• 30:26
  So you have to live in the world that exists, not the world that you wish would exist,
• 30:31
  which I think sometimes people spend too much time on the world they wish exists.
• 30:34
  And that's, you know, I guess fun to pontificate about, but it's not reality.
• 30:38
  so with reality the best solution is to try to grow your way out of it that is the rational
• 30:44
  solution um so i am fully supportive of besant saying that doing that being the salesman to go
• 30:52
  out and try to sell treasury debt as an american uh he also knows there's no way that's going to
• 30:57
  happen he knows there's he knows yeah definitely he knows he's not he's one of the smartest guys
• 31:01
  probably that's ever been in the seat he knows yeah but um it's the best solution and and so
• 31:06
  If you look at what does failure look like there which I do think it be failure and I get to why failure there looks like you went all in on AI You created hopefully a world of abundance You drove technology forward for the benefit of people
• 31:23
  And the dollar potentially is the release valve
• 31:25
  because it didn't generate the tax receipts you wanted.
• 31:28
  I would rather have that be the world in five years
• 31:31
  than if you can't cut back entitlements,
• 31:34
  we don't do anything, we don't have technological innovation
• 31:38
  and it still breaks.
• 31:38
  i would say lean into innovation and make the world make the us the best you can before it breaks
• 31:43
  yeah it sounds like the best option to me um but you think about what drives tax receipts ultimately
• 31:50
  what drives tax receipts is corporate profits and what i'm what i'm not seeing is how do we
• 31:58
  i mean when you look at the debt crisis how do you 2x 5x 10x corporate profits what is the actual
• 32:04
  driver of that and i think the era of abundance in ai is actually it's not even clear that some
• 32:10
  of these of these frontier models will have massive profits i mean they're offering it they're
• 32:15
  operating at massive losses right now open source which hopefully never gets banned in the country
• 32:21
  is whatever six months a year maybe it'll be a week i don't know just a little bit behind but
• 32:28
  at what point does that also become good enough for you know me you know and that distance behind
• 32:35
  is shrinking rapidly like the open source models are very close now and so will frontier models
• 32:42
  be potentially a very profitable business i think yes but will they solve the debt crisis
• 32:47
  i i don't i don't see that and then this era of abundance you think about a lot of corporate moats
• 32:53
  a lot of corporate moats are going to be really challenged and so what already have been
• 32:58
  in a lot of cases yeah and so and then you think about jobs i think the honest truth is that ai will
• 33:05
  challenge many jobs um i actually and this will be i'll tell you something i think could be
• 33:13
  controversial for some maybe not for bitcoiners but i actually think that we have too many jobs
• 33:18
  in this country and this is a a fundamental life view that i think that if you were to go back
• 33:25
  50 years 100 years what you would find is that typically there's one person in the household
• 33:30
  that makes money one person might stay home they raise a family and that model does not work
• 33:37
  anymore yeah actually because people can't afford it and so now both parents have to work and then
• 33:42
  they have to delay having kids and i don't think that that is and we have to train people growing
• 33:46
  up that go to college both you're going to work both you know and i think that's not because that's
• 33:52
  what most people, some people want it and even freedom, but I don't think that's what most people
• 33:56
  want. It's definitely not what most people want in my experience, at least like, so we're in that
• 34:00
  situation and I'm grateful, but really it's Bitcoin that's allowed us to be in that situation.
• 34:06
  We have like, we've got a young kid and another on the way soon, but all of our friends who are in
• 34:10
  the same situation, generally apart from one of them, like that all, both parents are working and
• 34:15
  going back to work, you know, six months, three months after having a kid, which is really hard.
• 34:19
  And like, realistically, all of them would rather stay at home and raise their kid.
• 34:23
  Like who's better to raise the kid than the mother or the father, however the family works.
• 34:27
  But people definitely want that.
• 34:29
  They just can't achieve it right now.
• 34:31
  And if AI led to huge abundance and made everyone's cost less, like I think most families would pick that.
• 34:37
  Yeah, I think so.
• 34:38
  And so then that means what does that mean for the economy?
• 34:40
  That means less people working because they're able to achieve what they need to live a life that is acceptable to them.
• 34:48
  and i actually think so a lot of this is in a sense this is i think actually a positive part
• 34:53
  of where i think this could go i think we're talking a lot about doom and yeah failure of
• 34:57
  the dollar the debt crisis and what happens if the dollar fails well if we actually try to grow
• 35:03
  our way out of this and we move to this era of cheap everything abundance i don't actually think
• 35:09
  the failure of the dollar will be painful in a sense but like i don't think that's the most scary
• 35:14
  thing if we could actually move to that future i think it's actually more of a right now we are
• 35:19
  living in the dark times a lot of our generation obviously now running a public company financially
• 35:26
  i've never been doing better but i didn't grow up in wealth and pretty much all my friends i mean
• 35:31
  most both people work the mom and the dad work and they have to you know have someone help raise
• 35:37
  their kids but it's not the ideal situation and and most people my friends it's hard to own a
• 35:42
  house housing's very expensive yeah that i would rather move to this era of abundance and even if
• 35:48
  people weren't bitcoiners i think they would say give me that future and i don't really have very
• 35:53
  many dollars to begin with so if the dollar became worthless i don't care but but the trade-off in
• 35:58
  that scenario is that the dollar becomes worthless there's no good answer really there's no good
• 36:05
  answer but you think that's a better outcome it's a better so so right now you hear a lot of talk
• 36:10
  about the K-shape economy, right?
• 36:11
  The average person is not doing well.
• 36:14
  The elites are doing really well.
• 36:16
  And it's so clear.
• 36:17
  Like you walk around, it's so clear that exists.
• 36:19
  Yeah it so clear so obvious that I think that that future will be a substantially better future for the average person It may not be a better future for the average billionaire but I think they be fine
• 36:38
  Yes, I think they'll be fine.
• 36:40
  It's kind of, I don't know whether that's bleak or not, because it sounds like a better future.
• 36:47
  But I just I wonder what what happens in both the economy and society if the dollar does significantly devalue.
• 36:54
  Yeah, and I have not called actually for the failure of the dollar. What I've called for publicly is a massively devalued dollar. So that's core to our thesis on Bitcoin is that we actually think that over the course of the next, call it three to seven years, that we will see the biggest decline in the value of the dollar as measured through the DXY index in Bitcoin's history.
• 37:19
  not in historical history um it might go to the lowest levels but if you look at the dollar over
• 37:26
  the course of the last 50 years or so what you'll find is that the dollar has actually structurally
• 37:30
  been getting weaker on average and then since the great financial crisis in the era of bitcoin
• 37:35
  it's generally been flat to moving up but in bitcoin bull markets it's kind of gone down
• 37:42
  within that trend in bitcoin's history but then if you zoom out it's actually being devalued over
• 37:47
  time. And if you think about what the president wants, President of the United States, Trump wants,
• 37:53
  what J.D. Vance wants, what Besant wants, I think a lot of them have called for a weaker dollar.
• 37:59
  And so the structural forces would support a weaker dollar. They want a weaker dollar. They
• 38:05
  want to lean into growth. And so I don't see why we won't get the weaker dollar, which kind of
• 38:11
  means in a sense, you actually have the president and the treasury working for Bitcoin because
• 38:16
  they're working for a weaker dollar and that's one of the strongest determinants of where bitcoin goes
• 38:20
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• 38:26
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• 39:09
  Recent hardware wallet vulnerabilities
• 39:10
  have definitely made me rethink my entire security setup,
• 39:13
  as I'm sure it has for a lot of Bitcoiners.
• 39:15
  And the uncomfortable truth is that no single security product
• 39:18
  can promise there'll never be a problem,
• 39:20
  which is exactly why the design matters.
• 39:22
  BitKey is a self-custody hardware wallet
• 39:24
  that uses three keys created in three separate environments.
• 39:27
  There's one on your phone, one on the BitKey hardware itself,
• 39:30
  and one on a secure BitKey server.
• 39:32
  Two of those three keys are required to sign any transaction.
• 39:35
  So a problem isolated to just one key
• 39:37
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• 39:38
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• 39:43
  The hardware looks great, the app and the user experience is second to none, backing up and restoring your wallet is seamless,
• 39:49
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• 40:05
  So maybe this is me being impatient, but how long has Trump been in? Like just over 18 months,
• 40:11
  something like that. And both him and percent have been sort of signaling they want a weaker dollar
• 40:15
  the entire time, and it's not really happened. Why is that?
• 40:19
  So the trade-off here is if yields are moving higher, long-end yields, that's generally going
• 40:26
  to be positive for the dollar. And so you see Besant saying, you know, I will use the full
• 40:32
  treasury general account oh you i'm the house i'm blah blah blah but then he hasn't done enough
• 40:37
  and so yields are moving higher so the dollar is strengthened with that at some point if that thesis
• 40:44
  if they can't take the pain anymore and you know whether i'm right that call it like they can't let
• 40:50
  it go above six but even if they let it go to seven but if they ultimately step in the trade
• 40:55
  that i'm talking about on the fixed income side will still play out fine we're just saying this
• 40:59
  will be a higher than average rate because of the pain that we don't think they'll take and because
• 41:04
  ai is likely going to be a deflationary force so they'll ultimately bring rates down that when they
• 41:11
  take that action the dollar will move lower but until they take that action it actually the dollar
• 41:17
  should be moving higher rates will be moving higher what i think's been interesting is that
• 41:20
  bitcoin's held up remark remarkably well through that yeah and i think that and part of i mean i i
• 41:27
  was writing about this when the 10 year was still like about 4.6 or so.
• 41:32
  And I was saying this is what I think is going to happen.
• 41:34
  Rates will move up higher.
• 41:35
  The dollar move up higher.
• 41:36
  At some point, they will reverse that.
• 41:38
  That will be the start.
• 41:39
  of the real Bitcoin bull run.
• 41:42
  And right now, what I think has been encouraging for Bitcoin
• 41:45
  is that I think people are seeing that.
• 41:47
  Because if you don't see that,
• 41:48
  and you just see rates moving higher, dollar moving higher,
• 41:51
  Bitcoin should be moving lower,
• 41:52
  unless the markets are actually being forward-looking
• 41:55
  and saying, you know, Bitcoin may kind of struggle
• 41:58
  a little bit throughout this and be choppy,
• 41:59
  but it's kind of getting bulled up
• 42:01
  for what they think might happen.
• 42:03
  Yeah, and I think Bitcoin did well
• 42:04
  when it started seeing the intervention too from the Treasury.
• 42:06
  I think the writing looks like it's on the wall.
• 42:09
  It is kind of a matter of when, not if.
• 42:12
  There's a few things that have happened recently,
• 42:15
  which is people have called for like oil,
• 42:18
  if it got to say 120 or whatever it was,
• 42:20
  when the Iran conflict started,
• 42:21
  that was gonna be the pain that they can't take.
• 42:24
  And yields getting above 5% was like the pain they can't take.
• 42:27
  And so far they've taken the pain
• 42:28
  and like nothing has significantly changed.
• 42:31
  What is the level that you think, okay, that's it.
• 42:34
  They can't go higher from here
• 42:35
  or they have to step in and do something.
• 42:38
  So there is, on a short-term basis, no level that breaks them.
• 42:42
  It's just like on a first drive.
• 42:45
  There is no level that Bitcoin can go down that breaks us.
• 42:47
  We have no encumbered Bitcoin.
• 42:49
  Things get harder.
• 42:49
  But there's clearly levels that if it goes down and then stays down there,
• 42:54
  would be very hard for us as a company.
• 42:56
  And the same concept is true for the Treasury.
• 42:58
  And so the 10-year yield could go to 10% tomorrow.
• 43:01
  It doesn't break them, but they clearly can't sustain it.
• 43:03
  And so I think what is part of the unknown and part of the part that you have to forecast is that Besant clearly is willing to deploy that full trillion dollars.
• 43:14
  I think he knows he's going to have to.
• 43:16
  But there's a lot of stakeholders in that conversation.
• 43:20
  There's Congress that if he just deployed it too early, they'd be like, what are you doing?
• 43:24
  You wouldn't have to do that.
• 43:26
  Who knows what the president's influence is in on that decision.
• 43:29
  and so ultimately will be the the collective group when they say okay like we need you to step in
• 43:37
  and there is no number that's too high what we know is that i would say at the current level and
• 43:44
  above it's a ticking clock they cannot allow it to sit at that level for a sustained amount of
• 43:49
  time and when i say sustained what i really mean is several years okay but but when because they're
• 43:55
  able to model it, I think they will see it. And at some point they're going to capitulate.
• 44:00
  And that's, that's when it changes. So the government needs to go through some time pain.
• 44:03
  What happens if during the midterms, you know, the Republicans lose, which is like looking likely,
• 44:10
  does that speed up how President Trump now deal with this?
• 44:16
  I don't know that it really matters. My general view in DC is it's just dysfunction. And unless
• 44:23
  you had dc with such a overwhelming majority of republicans in power or democrats in power
• 44:32
  if it's 51 49 in the senate or something like that it doesn't move the needle we saw this
• 44:38
  with the struggles with clarity that you're able to effectively play political games to to kick the
• 44:45
  can down the road and so if the if the democrats win i mean they're probably gonna start to try to
• 44:53
  investigate trump on who knows what and if you had a democrat president and republican congress
• 44:58
  they would start to investigate whatever the democratic president will do and i just i just
• 45:04
  don't think that there is a there is a a urgency until things break but i think that they do know
• 45:12
  that you can't support rates at this level and so i think they'll ultimately bless if that's
• 45:18
  and taking action. Buy Bitcoin. Yes. What do you think is going to be the sort of near-term
• 45:25
  projection for inflation? Because I had a show with Lynn Alden recently, and she was talking
• 45:29
  about how rates going higher can also be inflationary. So they are in the sense that
• 45:35
  they increase the cost of capital, and you have a situation, especially with AI in the data centers,
• 45:43
  where they're not sensitive to, because they see this, so they're just going to keep spending
• 45:48
  And so that will increase kind of the velocity of cost increases across the economy.
• 45:55
  And so that kind of gets into the challenge for the Fed is they, in an era, and I think
• 46:01
  Lynn does this better than anybody, is in an era of fiscal dominance, if you raise interest
• 46:08
  rates, it actually causes inflation.
• 46:10
  And if you lower them, it probably doesn't have a lot of impact on inflation.
• 46:14
  And so what's the optimal solution?
• 46:17
  Well, it is to realize that and to stop raising rates.
• 46:21
  But the Fed, I think, if that's the stance that they take, the whole model that they've
• 46:27
  tried to build trust on breaks.
• 46:30
  And so I see the challenge for them.
• 46:33
  It's like they probably, at least some of them probably see that.
• 46:36
  I think some of them are probably too academic.
• 46:37
  They may not be seeing it yet.
• 46:40
  But I think that is the challenge.
• 46:42
  and it will be a major trust breakdown.
• 46:46
  And so I think when there is a major trust breakdown at these large institutions they try to do it in a way just like they did with Huey It not money printing It not yield curve control Try to keep the trust up
• 46:57
  in their institutions. It's like when you hear this, it makes me want to literally go on my
• 47:04
  phone right now and buy more Bitcoin. I think I might have some cash left. But do you think
• 47:10
  we get to a point in the next couple of years where Bitcoin does become the fastest horse again?
• 47:15
  Because over the last few, it's definitely not been.
• 47:17
  Like AI has dominated gold, even outperformed Bitcoin for a period of time.
• 47:23
  Bitcoin is looking strong now.
• 47:24
  But do you think we get a real growth in Bitcoin again in the next few years?
• 47:28
  I really do.
• 47:30
  And I'll say that because obviously a lot of Bitcoin bulls would always say that.
• 47:36
  I generally do not go out publicly with a very high Bitcoin bull target.
• 47:43
  I'm kind of more in the camp of, I think that it's going to outpace monetary debasement.
• 47:48
  I do think generally it would be the fastest horse.
• 47:51
  And I generally kind of underwrite around a 30% CAGR, but sometimes even like a 20% CAGR
• 47:56
  when you zoom out.
• 47:57
  But right now, with everything that we talked about, and you keep saying it makes me just
• 48:01
  want to buy Bitcoin, that is our internal house view as well.
• 48:04
  That when you see the potential and the need for intervention in long-term rates that maybe
• 48:10
  happens this year, maybe it's next year, probably not beyond that. It's hard to see it going beyond
• 48:15
  that. But sometime I would say in the next 18 months, you see real meaningful intervention.
• 48:20
  You see the dollar become the release valve explicitly. It's hard for me not to think that
• 48:26
  this Bitcoin bull market that I think we will be entering into over the course of the next 18 months
• 48:32
  will be substantially better than the one we saw in 2024, 2025. And I think that was a very
• 48:39
  disappointing bull market for any Bitcoin bull. I mean, Bitcoin did not break out to new all-time
• 48:46
  highs versus gold. It basically got to the previous level that it had in the 2021 bull market,
• 48:52
  and then it failed to break out. And so the fastest horse theory for Bitcoin did not play out.
• 48:57
  And Bitcoin should be the fastest horse. It's an emerging money. It's the best form of money we've
• 49:01
  ever seen. And I think as Bitcoin bulls, how could we not authentically say that if it's not the
• 49:08
  past this horse versus gold that in a sense our thesis was incorrect yeah that's just that's just
• 49:14
  the truth and i think that's the truth of the last uh bull market but i think some of the game theory
• 49:19
  in bitcoin and in the hunt for scarce assets is such that there's just substantially less bitcoin
• 49:27
  there's less supply of bitcoin into the future than there is of gold i do think that technology
• 49:33
  puts some pressure on potential inflation and gold over the course of the next few decades
• 49:38
  and I think that trust in Bitcoin is rising.
• 49:43
  And I think from a US perspective,
• 49:45
  I think the US is actually incentivized
• 49:47
  to push Bitcoin over gold
• 49:49
  because most of the gold has moved across the world.
• 49:54
  China has been stacking heavily.
• 49:55
  Yes, and a lot more of the Bitcoin is in the United States.
• 49:59
  And so I think the number one goal would be
• 50:01
  preserve the dollar as long as you can.
• 50:03
  That makes sense.
• 50:04
  If that fails, what's the best solution?
• 50:06
  And in the US, it's Bitcoin.
• 50:08
  In China, it probably is gold.
• 50:11
  And that's not just because they're a communist nation
• 50:13
  or a capitalist nation.
• 50:14
  Just where does the actual capital sit in each country?
• 50:17
  And I think the US, it's Bitcoin.
• 50:19
  And it's not just like the number of Bitcoin held in the US,
• 50:22
  which I would imagine is the highest anywhere in the world,
• 50:24
  but it's also where all the big Bitcoin companies are.
• 50:27
  Like it is where the US has the most to gain.
• 50:30
  Obviously, modeling Bitcoin is really important
• 50:32
  for your company.
• 50:33
  Do you think the idea of cycles is over?
• 50:36
  uh over maybe too strong of a statement but i do think that right now we are more in what i would
• 50:43
  coin a super cycle but it's important to how to define that right like we can talk about all these
• 50:48
  different concepts and terminologies in our space and and and the nuance and the conversation is
• 50:54
  actually critically important and so i've always viewed a super cycle as a cycle where basically
• 51:00
  you have 30 to 50 drawdowns not 80 drawdowns and this bear market we saw basically a 50 drawdown
• 51:07
  yeah it was a very mild bear market for bitcoin obviously for many companies that levered bitcoin
• 51:16
  you know maybe not but like that's their problem not bitcoin's problem yeah for bitcoin it doesn't
• 51:21
  care right so bitcoin was a very mild bear market it was a very emotionally taxing bear market for
• 51:27
  og bitcoiners with self-custody and and vulnerability so it was a emotionally challenging
• 51:33
  one but from a return perspective it was very mild and ultimately that's from like a super cycle
• 51:38
  perspective what matters and and so if we did have a a mild bear market um that would be and and then
• 51:46
  we're moving into potentially the best macro conditions or one of the best macro conditions
• 51:51
  bitcoin's ever seen which means one of the worst macro conditions yeah one of the worst macro
• 51:56
  There's no conditions for the world,
• 51:57
  but that what Bitcoin is It an opt out from the system It understanding the world that exists not the world you wish existed and taking advantage of it for your own situation your own family right
• 52:10
  sovereignty and and so i do think that that's the situation we're in and and so it would break down
• 52:16
  the theory of four-year cycles i think the the four-year cycles partially was driven by the
• 52:23
  havings which obviously every having the amount that it decreases just matters less and less that's
• 52:29
  just the math but then it also is driven by macro and business cycles which also have tended to run
• 52:35
  in bitcoin's history and basically four-year cycles when you look at financial conditions
• 52:40
  and monetary conditions and that doesn't have to be the case and so i think that
• 52:45
  one the fiscal situation but two the era of ai that we're entering into the growth era i think
• 52:52
  they both support less of what we've seen from a four-year cycle perspective before. Which does
• 52:59
  make me very bullish that Bitcoin could do really well for the next decade or two. Although our
• 53:07
  thesis on like a 50% Bitcoin CAGR through 2030, which effectively would be one year over an
• 53:14
  average four-year cycle. But I like to give myself a little bit more time to be right in
• 53:20
  in projections, which is why our focus is on,
• 53:25
  and I think we just got through a bear market.
• 53:26
  Everyone's concerned about cost of capital,
• 53:28
  blah, blah, blah, all these, how do you do this?
• 53:30
  In a bull market, it's,
• 53:32
  can you have a high amplification ratio
• 53:34
  and can you sustain it?
• 53:35
  And I think that's going,
• 53:37
  it's moving from fear to greed.
• 53:39
  And right now we're still at fairly low Bitcoin prices
• 53:43
  and people are, they have PTSD and those things.
• 53:46
  But I think we're gonna start to move
• 53:47
  towards the greed era,
• 53:48
  which will have a mindset shift in what it means to be successful in our space.
• 53:53
  Yeah, I think, so you obviously mentioned Bitcoin only fell 50% this cycle, this bear market.
• 53:59
  I think people are underestimating how important that is.
• 54:02
  Like the difference between 50 and 80% is once it's dropped 50%, you drop another 50%.
• 54:06
  I've said that over and over again, but I don't know if everyone understands like how big the difference is.
• 54:10
  You obviously speak to a lot of institutions with your business.
• 54:14
  like are they seeing that as a real game changer and looking at bitcoin differently now
• 54:19
  they are and and i think that what's interesting is that bitcoin dropped 50 percent it still
• 54:26
  dropped to its 200 week moving average and so part of that was because you had a pretty uh
• 54:32
  unattractive bull market so bitcoin didn't go up as high and so it didn't have to drop as far
• 54:39
  to get to its 200-week moving average.
• 54:41
  And so you had a mania, or less of a mania,
• 54:45
  so less of a need for a correction.
• 54:46
  And I do think that part of that
• 54:47
  was the institutionalization of Bitcoin.
• 54:51
  But you do have, I think, long-term allocators
• 54:54
  that viewed Bitcoin at its 200-week moving average
• 54:58
  as attractive and started buying the dip.
• 55:02
  And so I think that we saw that.
• 55:05
  I think we also saw macro conditions start to change
• 55:09
  and give more reason to be optimistic about Bitcoin into the coming years.
• 55:13
  And you're starting to see the momentum build towards optimism around Bitcoin.
• 55:19
  But Bitcoin's still at $84,000.
• 55:22
  It's still pretty far off its all-time high.
• 55:25
  And importantly, even if you look at it as an example,
• 55:28
  our 50% CAGR for Bitcoin, which will not be linear.
• 55:34
  If it was a 50% CAGR, you're basically talking about Bitcoin
• 55:37
  being back at its all-time high late next year and i think sometimes what i think happens in the
• 55:41
  space is you people think too short-term they get too euphoric maybe and this could happen but
• 55:47
  bitcoin's gonna go back to its all-time high this year could happen i have no reason to believe it
• 55:52
  will happen or won't happen but then it's like oh well 50 all-time highs but into 2027 oh that's
• 55:58
  too bearish but then but then you zoom out and said i say i think bitcoin might be 500k by the
• 56:04
  into 2030 and i think the average is like that's actually higher than people would think because
• 56:10
  they're starting to think return diminishing returns maybe bitcoin would only go up to 250k
• 56:14
  over the course of the next few years and and i think that the short-term versus long-term nature
• 56:19
  just compounding people struggle with compounding they think too much in the short-term and less on
• 56:23
  the zoom out i think you're probably describing me like because like i don't think we'll probably
• 56:28
  get all-time highs this year and the next year i could believe that but then 500k by 2030 seems high
• 56:33
  I'm going to take it. I hope it does. It doesn't change how I behave, but it seems high. But I hope you're right. Do you think it's important that Bitcoin decouples from things like the NASDAQ? And it looks like it has done to a degree so far. But again, when you talk to institutions, is that a problem for them if it's just behaving exactly like the NASDAQ?
• 56:56
  It isn't if they actually are underwriting of both uses.
• 57:02
  And so when you look at, so institutions think differently than Strive.
• 57:07
  So Strive is all in we talking about maximizing amplifying focused on total returns Institutions tend to think about risk adjusted returns So they thinking about modern portfolio theory this is what i did when i was at calpers i was on the
• 57:23
  stage yesterday with rick edelman one of the largest raas in history and you know putting
• 57:27
  bitcoin in a model and how much bitcoin is the optimal amount of bitcoin to maximize risk adjusted
• 57:32
  returns and rick's i think started came out with a recommendation of 10 to 40 for bitcoin
• 57:38
  for a lot of investors and that's very different than a lot of advisors that might focus on
• 57:45
  maybe a one percent or a three percent five percent allocation which i think you hear a lot
• 57:49
  from advisors and what's interesting is getting the math on that and i've done all the math on
• 57:53
  this and so what happens is that if you don't believe in bitcoin you're you haven't done the
• 57:59
  work then you pretty much have to start at like a one or three maybe five percent allocation
• 58:04
  because you can't handle the single asset volatility of bitcoin yeah you don't believe in
• 58:08
  it so it crashes 50 you want out even if the whole portfolio would do better with a 10 or 40 allocation
• 58:15
  because you can own less risk because your risk is in bitcoin uh rick just says if you want to
• 58:21
  maximize risk adjusted returns the mass is 10 to 40 that's what it says and so he's then out there
• 58:25
  trying to educate orange pill people and get people comfortable with that volatility and and
• 58:30
  And why this matters is that ultimately from an institutional perspective, the more you educate yourself, the more you can actually move to what the mass says.
• 58:40
  And the less you do, you have to go based on emotions.
• 58:43
  And ultimately, this goes back to is your goal to get off zero?
• 58:47
  And basically, which I think is kind of the BlackRock approach, which I do appreciate.
• 58:52
  And I actually do think it's the right approach because they have a broad base of clients that do not understand Bitcoin.
• 58:58
  of just put it in your portfolio in a way that doesn't matter watch it and then ultimately if
• 59:03
  you're trying to maximize risk register returns effectively replace bonds with it which is the 10
• 59:07
  to 40 percent and you think about 40 percent in a 60 40 portfolio and then if you are a sicko that
• 59:14
  just has pure conviction in bitcoin then you either put your whole net worth in bitcoin which a lot of
• 59:19
  bitcoiners do or if you're like strive you're like i actually want to amplify bitcoin's returns
• 59:23
  because I have even more confidence in that.
• 59:26
  And it really just comes down to conviction
• 59:29
  and the ability to concentrate versus diversify.
• 59:32
  Okay, so let's get into Strive.
• 59:35
  Maybe it's going to be obviously centered around Strive,
• 59:37
  but maybe treasury companies more broadly.
• 59:39
  So you're saying you're predicting a 50% CAG by 2030,
• 59:43
  until 2030.
• 59:45
  Why should people own a treasury company over Bitcoin?
• 59:48
  So let's just assume that that bull thesis is true.
• 59:51
  And really, actually, any bull thesis, if you're saying over about a 20% category for Bitcoin, that if anything above that's true, the number one determinant of total returns over the course of a bull market cycle will be the amplification ratio.
• 1:00:08
  And so right now, Strive is 50% amplified.
• 1:00:12
  What does that mean?
• 1:00:14
  It's basically leverage.
• 1:00:15
  And so we use amplification to note that SEDA is a preferred equity.
• 1:00:20
  It is not debt.
• 1:00:21
  which is very important for the downside and so if you think about this as and and i don't mean this
• 1:00:27
  in like the sense that we are a rocket ship but like if you think about it like you're trying to
• 1:00:31
  build a rocket ship what you want to do is you don't want the thing to blow up and you want to
• 1:00:35
  get to the destination get to the moon or whatever and and so if you have debt and bitcoin's volatility
• 1:00:42
  happens you blow up and we saw a few examples of that i think there were other examples that were
• 1:00:48
  extremely close to actually blowing up but didn't blow up um and thankful uh for those those those
• 1:00:56
  companies that did not blow up i'm glad they didn't blow up but um but we would say that we
• 1:01:01
  do not encumber any bitcoin which is important bitcoin can go to a penny it's kind of like the
• 1:01:06
  conversation earlier how high could the the u.s treasury go it goes as high as it needs to go it
• 1:01:11
  doesn't really matter but it just can't sustain at that level and so you're really thinking about
• 1:01:15
  more calculus like area under a curve how low could it go how could it sustain where i actually
• 1:01:20
  would i don't think this happens but i would love for bitcoin to make a new all-time low because i
• 1:01:26
  was what i think would have to happen for that to be true i think if the treasury was too slow
• 1:01:32
  and the 10-year shot up to 10 i think the dollar would go up i think you would see bitcoin make
• 1:01:38
  new all-time lows in that scenario but then what would happen would be the mother of all
• 1:01:44
  interventions in the market which would be the most bullish thing for bitcoin ever so it would
• 1:01:48
  be like a flush it'd be like the covid dip yeah exactly and and so i don't think it happens but
• 1:01:54
  if you could give me the scenario that i would actually want to happen even though it would
• 1:01:57
  not be fun for a few months it's like give me that scenario like like bring it on let's let's
• 1:02:03
  do it because of the the reaction function um so why own a treasury company if a treasury company
• 1:02:09
  is not very amplified and they don't have cash flow,
• 1:02:15
  then I don't think there's a lot of reason
• 1:02:18
  that I could see to own a treasury company.
• 1:02:19
  Because if you're not very amplified,
• 1:02:22
  you don't really have a levered return profile to Bitcoin.
• 1:02:26
  If you don't have some sort of a cash flow generator
• 1:02:28
  to buy more Bitcoin,
• 1:02:29
  then really your model is very dependent on a premium to be able to sell in a creative manner,
• 1:02:36
  which obviously is valuable to do when that exists. But I view that as more of like
• 1:02:42
  a cherry on top thing than a foundation to build a business. If you're underwriting a Bitcoin
• 1:02:48
  bull thesis, well, an institution, a corporation has access to financing that individuals do not
• 1:02:55
  have and i think this is is very important for leverage concepts because i do think that there's
• 1:03:01
  a lot of bitcoin companies that are really working hard to bring better terms to individuals and i
• 1:03:07
  think that's a good thing but it's very hard to do it's very hard to get that underwriting for
• 1:03:12
  individuals and so then they run the risks of risk of being liquidated if bitcoin goes down
• 1:03:19
  either in a single night or over the course of a month or two months basically their ability to
• 1:03:25
  maintain and not not blow up if bitcoin goes down is very challenged where our company we have 18
• 1:03:32
  months of dividend reserves and then we also have a lot of bitcoin but if bitcoin dropped to a penny
• 1:03:38
  we could just say you know what we have 18 months of cash like we'll pay it and we'll see what
• 1:03:43
  happens we and obviously that's not going to happen but but just point being is that no individual
• 1:03:48
  could do that and so then we have effectively a 50 amplification which you could just think of as
• 1:03:54
  a leverage ratio right that if bitcoin goes up we are 50 levered exposure to bitcoin and so then
• 1:04:00
  the question then becomes can a company maintain a reasonable degree of amplification if bitcoin
• 1:04:07
  starts moving up because if bitcoin doubles and we did nothing the amplification ratio is gone
• 1:04:13
  half yeah right and so there's a and so if bitcoin goes to 500k you also need the engine to be able
• 1:04:18
  to continue to issue and be at the size to be able to issue that and maintain a reasonable
• 1:04:23
  application ratio which is why i'm very bullish on what we're doing because we have the best liquidity
• 1:04:29
  both on our common and on on our preferred equity in the entire capital markets i think we're the
• 1:04:35
  right size and what i mean by the right size is that to get institutional investors you need to be
• 1:04:40
  you could be a little bit smaller than strive but not a lot smaller than strive otherwise a lot of
• 1:04:45
  them it's just too small for them to matter and then if you're too big it's not that it's impossible
• 1:04:50
  job but you could be too big for the markets to actually be able to sell enough preferred equity
• 1:04:57
  or debt to actually maintain amplification as bitcoin potentially moves to five hundred thousand
• 1:05:02
  dollars and so now i've when i was at calipers i managed 70 billion dollars i know what it's like
• 1:05:07
  to be the cruise ship to be one of the largest investors in the space and what it's like is
• 1:05:12
  when you're that big when you're huge you see a bunch of investment opportunities that are too
• 1:05:19
  small for you yeah and i saw that when i was at calper i mean i outperformed my index every single
• 1:05:23
  year while i was there but i had to ignore a lot of the best opportunities because they were too
• 1:05:29
  small for my portfolio and i had to find things that were massively big it's achievable it's just
• 1:05:34
  a different game where we're big enough for institutions to care we've built the liquidity
• 1:05:39
  we have over just over 50 amplification which is for someone that can't be liquidated the highest
• 1:05:45
  amplification ratio in the space so i think we're ideally situated and i think the market has
• 1:05:50
  recognized that which is why we have a leading premium in the space is that we kind of have the
• 1:05:56
  the engines humming and we've actually bought bitcoin throughout the entirety of the bear market
• 1:06:01
  I mean, if you look at our common equity as an example, when we announced the strategy to now, we've outperformed Bitcoin.
• 1:06:07
  Year to date, we've outperformed Bitcoin.
• 1:06:10
  And I think that is because of the ability to have that amplification ratio to build trust.
• 1:06:16
  You know, bear markets are for building.
• 1:06:17
  And I think we've built the engine.
• 1:06:20
  So, you know, when you say you have no debt, you obviously have a lot of obligations in terms of paying the people that own SATA.
• 1:06:26
  is that almost semantics like the money printing thing we were talking about earlier where it kind
• 1:06:31
  of behaves like that even if it's not so we actually intentionally put investor protections
• 1:06:37
  in sata to make it as much like debt as we could without being debt and so it's it's semantics but
• 1:06:46
  it's important because of the downside risk and i think this is you know if you're in underwriting
• 1:06:52
  an investment thesis and say that it's preferred equity and preferred equity is a hybrid instrument
• 1:06:56
  and what's important about a hybrid instrument and preferred equity is that the terms of the
• 1:07:02
  hybrid instrument really matter actually because it's a spectrum something could be more equity
• 1:07:07
  like or it could be more debt like so you have no investor protections you could have non-cumulative
• 1:07:14
  dividends and a very low dividend it converts into equity that you know i don't know the exact
• 1:07:19
  number, that might be 99% like equity. You could have very strict investor protections that could
• 1:07:25
  make it 99% like debt. And so the details matter. Is that where you think you are? Obviously,
• 1:07:29
  this is a preferred equity, but are you on the furthest side towards debt possible?
• 1:07:33
  We are very far towards the terms that like debt I mean there could be additional terms that could make it even more like debt But I would say on the spectrum we much more like debt than we like equity and so i get into some of those investor protections which kind of give you a sense of why that would be true um and so let say that uh
• 1:07:55
  bitcoin dropped obviously we're talking about the bitcoin bull thesis which i think will be
• 1:08:00
  and cost of capital won't matter all these things will matter less but let's say the
• 1:08:03
  the credit protections bitcoin drops we put in an investor protection that we cannot lower the
• 1:08:10
  interest rate on sata so if bitcoin dropped to 40k and let's say sata was struggling we couldn't just
• 1:08:16
  say this was a failed experiment interest rates 13 now it's 12.5 and to basically just drop it down
• 1:08:23
  and stretch can do that can't it they could yeah obviously say there's done everything he can to
• 1:08:28
  bring stretch to par he's investing in billions but technically from an investor perspective he
• 1:08:32
  he could do that we could not do that we have to have the average price of seda over 99 for the
• 1:08:38
  month to lower the interest rate so we cannot lower the interest rate another protection we
• 1:08:42
  have is not only are the interest payments cumulative if we stop paying them there's
• 1:08:46
  actually a ratchet up in the interest rate so the amount that we would owe ratchets up if we stop
• 1:08:51
  paying them additionally if we stop paying them for over a year board seats are given to seda
• 1:08:57
  investors and then lastly if we miss a single dividend payment for the year zero zero bonuses
• 1:09:04
  are paid for anyone at the company and so we've tried to align incentives maximally that we have
• 1:09:11
  investor protections that it would be maximally painful for us to not pay a dividend as a company
• 1:09:16
  we could not you know we don't have the option to screw investors and if you have cumulative dividends
• 1:09:22
  where the interest rate's ratcheting up and there's a liquidation preference that's very
• 1:09:27
  painful those are very debt-like covenants that i put in there intentionally and the reason i put
• 1:09:33
  in there intentionally is that my view is that we are underwriting a bull thesis on bitcoin
• 1:09:39
  and that bull thesis needs to be right otherwise the entire structure of our company is wrong
• 1:09:45
  and so to underwrite risk and to say i want to build trust with investors through our actions
• 1:09:52
  or think we've done by maintaining cash reserves
• 1:09:54
  and all the actions that we've taken
• 1:09:56
  and we want to have a high amplification ratio,
• 1:10:01
  trust needs to be there.
• 1:10:02
  And I think that trust is there partially by,
• 1:10:05
  you know, the Bitcoin saying, don't trust verify.
• 1:10:07
  We have verifiable investor protections in SATA,
• 1:10:10
  but then our actions are also supportive.
• 1:10:12
  And I think that combination is why you've seen SATA trade really well,
• 1:10:16
  even though we've brought amplification ratio so high.
• 1:10:19
  In terms of the SATA investors,
• 1:10:21
  Do you have any idea what percentage of them are retail versus institutions?
• 1:10:25
  Yeah, probably a little bit higher percentage on institutions than STRC.
• 1:10:32
  And a lot of that's driven by the investor protections, which...
• 1:10:35
  Because they came out and said it was 80-20 retail.
• 1:10:37
  Is that right?
• 1:10:37
  They did.
• 1:10:38
  The data is really hard.
• 1:10:39
  So there's data when you start to get in there.
• 1:10:42
  So the data providers will lump some institutions and retail together, which we have a lot of
• 1:10:48
  experience looking into because of our ETF business.
• 1:10:50
  so there's some data integrity issues that not that anything's misleading it's just
• 1:10:54
  some part of it's unknowable so it's kind of an estimate but then importantly it's important to
• 1:11:00
  talk about what is retail actually because and this is very important so of our retail investors
• 1:11:06
  i can say confidently that the average retail investor is a multi-millionaire okay and i think
• 1:11:13
  that a lot of people think oh you're talking about the grandma that's investing a thousand dollars
• 1:11:19
  and when i'm talking about retail because i have met so many of these people and they tell me how
• 1:11:25
  much they've invested in sata is that the average one is someone that's around retirement age or
• 1:11:31
  older multi-millionaire typically is looking for cash flow has real estate investments comparing
• 1:11:36
  they see the debasement trade they don't love the volatility of bitcoin they often haven't bought
• 1:11:42
  bitcoin or own very little bitcoin and are either selling their their bonds or they're selling
• 1:11:48
  sometimes real estate properties to buy
• 1:11:51
  Seda in the order of millions of dollars.
• 1:11:54
  And that's retail.
• 1:11:55
  And I think that there's this connotation
• 1:11:58
  that you're taking advantage of the grandma,
• 1:12:01
  the retail investor.
• 1:12:01
  And I'm like, we're investing.
• 1:12:04
  Millionaires are, affluent millionaires
• 1:12:06
  are investing in digital credit.
• 1:12:08
  And I definitely don't think you're taking advantage of anyone.
• 1:12:10
  Like people, whoever wants to invest in this can.
• 1:12:11
  Like, I don't think there's any taking advantage here.
• 1:12:13
  But the reason I ask is,
• 1:12:15
  because if we're expecting, you know,
• 1:12:17
  again, to go back to your thesis,
• 1:12:18
  50% CAGR on Bitcoin.
• 1:12:19
  Why would anyone own SATA rather than own Bitcoin?
• 1:12:23
  Because I understand the volatility side of things,
• 1:12:25
  but position sizing fixes.
• 1:12:27
  I've seen you have a ton of debates
• 1:12:28
  with Parker Lewis about this,
• 1:12:30
  and you probably know his arguments better than I do.
• 1:12:32
  Yeah.
• 1:12:33
  So the average person, even affluent person,
• 1:12:37
  is very fiat-minded.
• 1:12:39
  It's really that simple.
• 1:12:40
  That they would not underwrite a 50% CAGR for Bitcoin.
• 1:12:45
  They would say, well, debasement's happening.
• 1:12:48
  I largely think Bitcoin is going to do well but I 60 years old I 50 years old I 70 years old give me 13 cash flow and i can live a great life for the rest of my life and and i don have to worry about the volatility
• 1:13:02
  about bitcoin i'll let you underwrite that risk and if you're right you can have the excess returns
• 1:13:08
  and i can get my cash flow and move about my day it's um it's really that simple and i think it's
• 1:13:15
  It's as Bitcoiners, and I'm very public about this.
• 1:13:19
  So I do not own Seda.
• 1:13:22
  I have many family members that actually are of retirement age that do own Seda.
• 1:13:26
  So it's not that I don't actually believe in Seda.
• 1:13:29
  I literally personally live this experience of these different investor profiles.
• 1:13:34
  Is this just because you can stomach volatility more?
• 1:13:36
  You want the volatility?
• 1:13:36
  Yes, volatility.
• 1:13:38
  It literally gives me no heartache at all.
• 1:13:41
  because I'm not worried about where Bitcoin goes
• 1:13:44
  over the course of years.
• 1:13:45
  I would not be able to sleep if we had a liquidation point,
• 1:13:48
  which is why we do not encumber our Bitcoin
• 1:13:50
  while we turn down those terms.
• 1:13:52
  But when you can actually zoom out
• 1:13:54
  and underwrite a multi-year thesis,
• 1:13:57
  which we can do because of our cash reserves
• 1:13:59
  and the way we've structured the company,
• 1:14:01
  I sleep very well with owning Bitcoin
• 1:14:04
  and Amplified Bitcoin Exposure.
• 1:14:05
  Those are effectively the only two things
• 1:14:08
  that we own still.
• 1:14:11
  because we obviously have a lot of common equity in Strive on a personal basis and then also have
• 1:14:16
  Bitcoin. I basically own nothing else. And I sleep really well with that. But a lot of other people,
• 1:14:23
  like I'll give you an example that I hear very commonly. People own multi-millionaire. They own
• 1:14:28
  one Bitcoin or two Bitcoin or five Bitcoin, and they just don't want more than that. And then they
• 1:14:34
  want cash flows to live their life. And so they're actually looking for Bitcoin minus returns,
• 1:14:39
  but with stability.
• 1:14:40
  But then they also don't love investing in debt
• 1:14:43
  in the midst of a debt crisis.
• 1:14:45
  And so they like that profile for them,
• 1:14:48
  which is to me, not surprising.
• 1:14:52
  I do totally get it.
• 1:14:54
  And like for my parents' retirement age,
• 1:14:56
  like have some savings,
• 1:14:58
  this probably makes more sense for them
• 1:14:59
  than buying Bitcoin in some scenarios.
• 1:15:03
  I'm trying to, what I don't necessarily understand
• 1:15:06
  is what happens to the common shareholder?
• 1:15:12
  Assuming you, you know, as we go into a bull market,
• 1:15:15
  you'd imagine the common stock is going to go up.
• 1:15:18
  It's probably going to go up more than Bitcoin.
• 1:15:20
  I can totally believe that.
• 1:15:21
  But over sort of cycles, bull and bear market cycles,
• 1:15:25
  is it just amplified in the bull market
• 1:15:27
  and amplified in the bear market
• 1:15:28
  where it gives back all the gains it made
• 1:15:30
  in the bear market
• 1:15:32
  and it kind of evens out as like a net neutral trade?
• 1:15:36
  So obviously to a certain extent, entry point matters, but that would be true in any business.
• 1:15:42
  So even if you're investing in Google or Meta, I believe Strive is a great company.
• 1:15:50
  And if you're investing in a great company, over the course of a market cycle, any great company at times will be undervalued, at times will be fairly valued, at times will be overvalued.
• 1:16:01
  And it's actually incredibly difficult, even as the leader of the company, to confidently say at this moment it's overvalued, undervalued, or fairly valued.
• 1:16:11
  I think there becomes clear moments, like I would say in early this year, where effectively our entire management team bought our common equity, that we had a very strong belief that our common equity was undervalued versus what was reasonable.
• 1:16:28
  and a lot of our our employees basically put every penny of liquid net worth into the common equity
• 1:16:35
  which was awesome to see um but over the course of a market cycle underlying our company is a cost
• 1:16:42
  of capital financing right um we debate the semantics of debt versus preferred equity but
• 1:16:47
  it is an obligation that has a 13 percent cost of capital and so very simplistically as we grow
• 1:16:56
  our corporate expenses our our salaries i mean on an average year will represent less than a one
• 1:17:02
  percent cost of capital we've talked about this in depth and i think we've been a shining star in a
• 1:17:07
  in a trust issue around compensation philosophies but as we grow it'll likely go even if we do grow
• 1:17:15
  successfully we'll grow even less than one percent of like a cost with and and it will really matter
• 1:17:19
  is the cost of capital of the preferred equity if we can maintain amplification so if bitcoin goes
• 1:17:24
  up on average more than 13 across market cycles we will likely structurally outperform bitcoin
• 1:17:31
  if our m nav shoots to 10 and someone buys at a 10 m nav that individual might underperform
• 1:17:38
  bitcoin right like like you as an investor have to underwrite the amplification ratio the growth
• 1:17:44
  of bitcoin the ability to maintain it contrast that versus the valuation of the company and and
• 1:17:49
  which I think you would find is if any reasonable Bitcoin bull thesis plays out right now,
• 1:17:54
  and if we're able to maintain amplification at the current MNAV,
• 1:17:57
  you would likely still drastically outperform Bitcoin.
• 1:18:00
  What is the current MNAV?
• 1:18:02
  Current MNAV it depends on the way you model it And so there different different philosophies in mnav valuation and and what we tried to do is move away from the name of mnav because i think it was
• 1:18:14
  kind of a made-up term and to say how could you look at our our company i think right now it would
• 1:18:20
  be around a 1.5 on an ev basis which i view is the best basis but we actually provide three different
• 1:18:26
  numbers. We provide the EV number. We provide the number. If you take our Bitcoin, subtract
• 1:18:32
  all state of liabilities and get to kind of a net treasury asset value and compare that to the
• 1:18:37
  market cap of the company, which would be around a two. Or if you look at it versus the kind of the
• 1:18:42
  original, just ignore the fact that there's liabilities and just what's the value of the
• 1:18:48
  Bitcoin versus what's the value of the equity, then it's around a 1.2, 1.3. And so I gave you
• 1:18:54
  three numbers but i think it's actually important to just go into a conceptual point on this because
• 1:18:59
  in institutional investing any different metric there's typically three to ten different measures
• 1:19:07
  that institutions look at and so i think some people say there's three m navs this is crazy
• 1:19:11
  like what are you doing and and i'm like well in fixed income investing there's 10 different
• 1:19:15
  measures of duration there's 10 different measures of yield and and what i noticed was that
• 1:19:21
  different successful portfolio managers had a framework that would focus them on a couple of
• 1:19:27
  those different metrics as what they viewed as the most important then other successful portfolio
• 1:19:32
  managers would have a different set but the question becomes do you actually have a framework
• 1:19:36
  that then you take those numbers and put them together into an investment philosophy and if you
• 1:19:42
  do i think you could use any of those mnavs and come up with a framework that works uh and then i
• 1:19:48
  will have my own preferred way, but I, but I actually reject the notion that any one of those
• 1:19:53
  is the single right way. And it's the only way to look at a company. Okay. So for sake of argument,
• 1:19:58
  then let's use your preferred way of calculating the MNav at 1.5. Um, I, I'm under the impression
• 1:20:05
  that I don't think we're going to see MNavs blow out like they did in the last, like, like I,
• 1:20:08
  I've met a plan. I got to over seven, I think like that seems like it's probably not coming
• 1:20:13
  back. I could be totally wrong. And you might have a different opinion on that, but at what point do
• 1:20:17
  investors look at this be like m navs at 1.8 or two they're just going to hit the atm bring that
• 1:20:23
  back down and that's now like not an investment until they do that so i think that this space
• 1:20:28
  will continue to evolve over time and this is important because people are looking at the last
• 1:20:34
  cycle where there was very little amplification actually i think the strategy was around 1.2
• 1:20:41
  times levered in the last bull market meta planet i don't think had substantially different
• 1:20:46
  amplification ratio we're at 1.5 times and and so if you have no amplification and then you're just
• 1:20:54
  expecting m nap to go up an issue that's obviously not a sustainable model amplification ratio in and
• 1:21:00
  of itself if you can say it is more sustainable what would be most sustainable would be having
• 1:21:05
  high amplification ratio but actually being able to use your balance sheet like a traditional
• 1:21:11
  company so whether that traditional company is an insurance company whether it's a bank
• 1:21:15
  that that traditional finance would look at this company less as it has bitcoin and it has cash and
• 1:21:21
  instead it's it has a multi-billion dollar balance sheet and so that is part of the work of this
• 1:21:27
  industry that if you can get that done then you do have the opportunity to earn non-correlated
• 1:21:33
  returns or yields off of your bitcoin that is not selling options on bitcoin selling calls or
• 1:21:40
  selling puts which we have not done we do not like the convexity profile that that puts into
• 1:21:44
  our company um it's you know if we if you had to you if you had to do it you had to do it but
• 1:21:49
  but if you could do things in traditional finance like an example would be
• 1:21:55
  in traditional finance a lot of balance sheet companies maybe it's like an alliance
• 1:22:00
  berkshire hathaway did this a lot they would underwrite non-correlated insurance risk where
• 1:22:06
  you have basically a bell curve of hundreds of thousands of con of insurance contracts the
• 1:22:12
  risk is very known and you need balance sheet capital to put to work and you could earn mid to
• 1:22:19
  high sometimes low sometimes mid sometimes high single digit returns on capital that would be a
• 1:22:26
  traditional business that has existed for years the challenge is don't look at bitcoin and puke
• 1:22:32
  that it's bitcoin that's underneath there but it's actually a balance so that's the the work
• 1:22:36
  as an industry but but if that were achievable over time as bitcoin is more and more accepted as
• 1:22:42
  capital, which I do think is, let's say if that were true, how would you rate a Bitcoin treasury
• 1:22:46
  company that has amplified Bitcoin exposure, but is also in a non-correlated way to Bitcoin,
• 1:22:52
  putting that to work in a way that's similar to other companies? Well, then you actually should
• 1:22:57
  see MNAV expansion, right? Because a balance sheet company that has cash or fixed income,
• 1:23:03
  like an Allianz or something like that, that puts it to work, their balance sheet would trade at a
• 1:23:07
  premium because of their ability to generate a sustainable, non-correlated yield to their
• 1:23:12
  investments.
• 1:23:13
  And I think that sometime over time, I think that will happen in Bitcoin, whether it happens
• 1:23:18
  in this cycle.
• 1:23:19
  or if it's a future cycle tbd but i would agree with you that the you know m nav just goes to 10
• 1:23:27
  scenario uh would not play out other than something like that occurring at a fundamental
• 1:23:33
  level with a lot of the balance sheet put to work so you think generally there needs to be a
• 1:23:37
  maturation of like how people view a company with bitcoin on the balance sheet yeah and in in the
• 1:23:43
  traditional finance space and i do think that is a lot of the players in the industry we're doing
• 1:23:48
  this but a lot of a lot of the other treasury companies are also engaging with these institutions
• 1:23:54
  which most of these institutions now have real bitcoiners that sit inside them somewhere that
• 1:24:00
  also want to help shepherd this you see this as a very public example at marsh where you have
• 1:24:06
  garrett johnson that's helping trying to help push the best people to educate marsh about bitcoin and
• 1:24:14
  have them accept bitcoin more and more as a long-term source of capital that can be underwritten
• 1:24:21
  against and so i do think that we ultimately get there i think the the hardest part is over what
• 1:24:26
  time frame which is why you know i think you know i've been talking about how amplification is going
• 1:24:31
  to be the most important thing to drive total returns and i think that you could clearly look
• 1:24:36
  at strategy and say well they're they're so big they don't have a lot of amplification right now
• 1:24:40
  stretch, you know, what is the growth trajectory of stretch? But on the long-term basis, I think
• 1:24:44
  they're going to be the biggest balance sheet company in the world. And I think that's a,
• 1:24:48
  I mean, they've won. I think they're going to win. And these from a zoomed out perspective,
• 1:24:53
  I think are micro issues for what I think they'll mature into as, you know, one of the most
• 1:24:58
  successful companies in history. Yeah. I mean, they are so set up right now.
• 1:25:02
  There's been a lot of iteration in what a treasury company is since Saylor first did this. Like
• 1:25:07
  initially he was just putting excess cash into bitcoin and there was like the convertible notes
• 1:25:11
  and obviously now there's the preferreds what's the next thing is there a next thing or do you
• 1:25:15
  think you have the secret sauce right now uh i think you'll continue to see evolution i think
• 1:25:20
  you'll see building on top of some of the preferreds and so just very simplistically
• 1:25:25
  a preferred is obviously equity it never matures um it has and and when you look at as an example
• 1:25:34
  what an insurance company might want as an asset well they would actually want something that
• 1:25:39
  matures and so you could have bitcoin bonds bit bonds whatever that would go in there that are
• 1:25:45
  rated you could have structure on top of sata or stretch where you actually take sata stretch and
• 1:25:52
  you have a junior tranche that basically provides downside up to 20 or 30 it really you can pick
• 1:25:59
  your number that's required and then at the end of the term let's say you have a three-year term
• 1:26:03
  if sata is above 80 dollars a share obviously which we're maintaining at 100 but just because
• 1:26:10
  you have downside protection then the top tranche gets paid in whole the bottom tranche takes those
• 1:26:15
  first losses if there are losses and then you have a term you have structure to provide protection
• 1:26:21
  that top tranche very likely could be investment grade rated what then you have a term you have an
• 1:26:27
  investment grade rating you have structure that then becomes you transformed it into something
• 1:26:31
  that's investable with likely a very high yield.
• 1:26:35
  I mean, who knows what the yields are, right?
• 1:26:36
  Because you have to basically have two investors
• 1:26:39
  that want to invest in each of those tranches
• 1:26:41
  and come up with what the economics are.
• 1:26:43
  But let's say you had something that paid 7%, 8%
• 1:26:45
  that was investment grade rated.
• 1:26:48
  I think there'd be a lot of demand for that.
• 1:26:50
  And that unlocks a different pool of capital
• 1:26:51
  that has restrictions on what they can invest in.
• 1:26:53
  It needs to have like duration or a rating
• 1:26:55
  or whatever it might be.
• 1:26:56
  Yes.
• 1:26:57
  Interesting.
• 1:26:58
  And in terms of like the treasury companies
• 1:27:00
  that we have right now.
• 1:27:01
  There's obviously like, there's strategy
• 1:27:04
  and you guys who are doing the preferreds at the moment.
• 1:27:07
  And I don't mean this in,
• 1:27:08
  I just don't know a better way of framing it,
• 1:27:10
  but that like what I would consider like a pure play Bitcoin treasury company I don mean I know people take that term the wrong way And then we have the ones that are trying to be like operational Bitcoin companies that are you know buying Bitcoin businesses and doing things like
• 1:27:22
  covered calls on their Bitcoin. Do you think they are going to become two very separate
• 1:27:28
  like pools of Bitcoin treasury companies, essentially? Like, are they going to be
• 1:27:33
  viewed very differently within the market? They will. And here's how I think, I don't take any
• 1:27:38
  offense to the the pure play i think both of those are pure play bitcoin companies i think the
• 1:27:45
  return between them and the risk will be very different and so you take a 21 as an example of
• 1:27:53
  a company that has substantially less i think they have a convertible note but substantially
• 1:27:57
  less amplification they're focused on building bitcoin businesses and you've heard rafa say this
• 1:28:05
  that they want to focus on risk-adjusted returns and and so let's say that they're successful in
• 1:28:10
  maximizing risk-adjusted returns my view is that would likely be less returns than bitcoin
• 1:28:17
  but maybe more return per unit of risk than bitcoin okay and and so that will have a very
• 1:28:27
  large pool of capital that would want to invest in that risk return profile uh it will if they're
• 1:28:32
  successful they could be very successful businesses but because they're investing in cash flow if
• 1:28:40
  bitcoin goes up 30 40 50 that cash flow growth will just be less than bitcoin but if bitcoin
• 1:28:46
  goes down that cash flow goes really helpful right and so it's less risk but also for less return
• 1:28:52
  there's there's a there's a trade-off there's a likely break-even rate of return of bitcoin that
• 1:29:00
  will vary based on what they do based on what we would do where one company would be better off
• 1:29:04
  from a return perspective than the other but there's in all forms of finance there's a lot of
• 1:29:09
  people that care about sharp ratio yeah there's also a lot of people that care about just total
• 1:29:14
  returns i just say hey don't break the thing and just maximize returns right those are just
• 1:29:19
  different mindsets and so i mean i mean i've met with a lot of these people i i respect their
• 1:29:25
  strategy and i think that they can drive massive success is one a pure play is one not a pure play
• 1:29:30
  i i think they're both technically pure plays unless they're investing i think maybe orange
• 1:29:36
  juice might be doing this like non-bitcoin businesses yeah i think that would also fall
• 1:29:41
  in the the realm of risk adjusted returns cash flows plus biz plus plus bitcoin it's less of a
• 1:29:47
  pure play bitcoin company but it is a i would say likely a bitcoin minus return company but with
• 1:29:55
  less risk than bitcoin which i think that and actually i love those companies existing they are
• 1:30:00
  out there they are helping orange pill small businesses i'm very thankful that they exist i i
• 1:30:06
  and i think that they'll be super successful ours is the we are a bitcoin bull we are all in we are
• 1:30:12
  trying to outperform bitcoin explicitly that is our our mandate and and when you have that mandate
• 1:30:19
  and a bull thesis it became becomes too costly to invest in cash flow businesses now that's
• 1:30:26
  different than what i was talking about when i said if if a traditional finance business could
• 1:30:31
  underwrite our balance sheet and allow us to put that business that that balance sheet to risk
• 1:30:35
  that's not investing in a plumber or something like that right that's just that's just on top
• 1:30:40
  of what we would already be doing that would be additive for us that would be additive for an
• 1:30:44
  orange juice or 21 that could be additive for for both sides um but uh the return profile i think
• 1:30:51
  will be very different and and what do you think of the treasury companies that are trying to
• 1:30:54
  generate yield on their bitcoin and there's a few strategies i've heard of like there's people and
• 1:30:58
  i think this is generally smaller treasury companies that are trying to do like run lightning
• 1:31:01
  routing nodes and collect fees there i think that will go very quickly to zero if enough people do it like it doesn scale to your size and then there the other ones that are doing things like covered calls on Bitcoin which you just said you don like for your business But what do you think about it
• 1:31:15
  Why don't you like it for yours?
• 1:31:16
  And then what do you think about it in general?
• 1:31:18
  Yeah, I'm going to focus on the covered calls.
• 1:31:20
  To your point, the lightning things
• 1:31:22
  are just not a scalable thing.
• 1:31:25
  And so very small Bitcoin treasury companies
• 1:31:27
  would have inefficiencies of the cost or a strategy,
• 1:31:31
  and they would be looking for small opportunities
• 1:31:33
  generate yield like that to basically offset those things and so i think that makes sense for them
• 1:31:38
  not something that is even implementable for us or strategy uh the the the option stuff technically
• 1:31:44
  would be implementable for us we could definitely do that uh but it comes down to negative convexity
• 1:31:50
  and so simplistically if you sell a covered call we know that bitcoin's returns tend to be generated
• 1:31:57
  from five or ten trading days over the course of a year when you get the massive green candle
• 1:32:02
  and if you're selling calls into that you likely don't get the full return on bitcoin's biggest days
• 1:32:09
  of the year and in exchange for that you get a yield and so you're doing what's called a negative
• 1:32:15
  convexity trade and so if bitcoin is very non-volatile it does not have big days of return
• 1:32:21
  you actually probably get better returns but if you're underwriting a real bitcoin bull thesis
• 1:32:26
  you get a yield but you get less return right and we're trying to maximize total returns and then on
• 1:32:32
  On the opposite side, if you're selling puts, even if they're cash covered puts, then you
• 1:32:38
  have to hold more cash.
• 1:32:39
  Why do you want to hold cash?
• 1:32:40
  I want to hold as much Bitcoin as I can and as little cash.
• 1:32:43
  But let's say we have 18 months of dividend reserves and we started selling puts against
• 1:32:48
  it.
• 1:32:48
  Well, then when Bitcoin goes down and we need that cash the most for dividends, we are then
• 1:32:54
  forced to allocate to Bitcoin and potentially, I mean, if the put level was higher than where
• 1:32:59
  bitcoin goes we just lost a bunch of our cash trying to generate a yield and so we just don't
• 1:33:04
  like that risk return profile now if you talk to professionals that are implementing these strategies
• 1:33:10
  they'll tell you why you know they're different why they are not actually selling the upside or
• 1:33:15
  why and they'll they'll do collars or all these sophisticated things and what you'll find is that
• 1:33:21
  the average one of them are doing exactly what i said the best performer will actually be able
• 1:33:29
  to manage this. But then you're talking about selection of like, you're playing poker and
• 1:33:34
  there's 10 people at the table and one of them will be able to do it correctly, but there are
• 1:33:37
  nine won't. That's not a game that we want to play as a business. No, that makes sense to me.
• 1:33:43
  And, you know, assuming we are now in a Bitcoin bull market, last Bitcoin bull market, we had
• 1:33:49
  this sort of peak crazy of treasury companies where every single person was coming out. It was
• 1:33:54
  almost like one a week we were getting at a time. Do you think that is over? Do you think the
• 1:33:59
  the companies that have survived to this point will continue to do well and we're not going to
• 1:34:03
  see a crazy influx of new treasury companies popping up. Are we going to have paper bitcoin
• 1:34:07
  summer again? I think that there it's just like any startup so so any new technology what typically
• 1:34:14
  happens you see a good idea there's a rush of capital and 90 percent of startups fail in any
• 1:34:21
  industry. Yeah I think we saw that in paper bitcoin summer last year but in any industry
• 1:34:28
  but there's actually an opportunity a few people emerge as winners in the space and i think that
• 1:34:34
  you will see that i think strive has emerged as an early winner i think you will see a few other
• 1:34:39
  companies emerge as winners i think there's a lot of ideas and and have some hated rallies and i
• 1:34:45
  think you also have ones that do not emerge but i think the willingness to invest in this space
• 1:34:52
  and a new idea, the bar got raised substantially.
• 1:34:56
  And I think that will be true even in a bull market.
• 1:34:59
  I think that's a really good thing.
• 1:35:00
  Yeah I think that a great thing I think we saw a mania I think we saw a handful of companies and this is one one of the more disappointing ones of companies that i think viewed it as a get rich quick scheme
• 1:35:12
  that didn't even have a conviction in bitcoin and they just exited and good riddance uh then you saw
• 1:35:18
  others that never got their footing that maybe had a thesis or took bad debt terms i think that those
• 1:35:24
  are potentially learnable experiences i mean no one is perfect and and so they can learn they could
• 1:35:30
  not learn, if they do learn, then that could be an emerge from the ashes scenario, right? Where
• 1:35:35
  they took some pain and they reflected and they learned. And we've seen that in other businesses,
• 1:35:41
  right? A lot of businesses end up having a thesis and they pivot and they ultimately find success.
• 1:35:46
  Pivoting doesn't mean you'll find success, but I do think it is possible for some of these other
• 1:35:50
  players. And with the ones that are still around, do you think we'll see a lot more M&A going forward?
• 1:35:55
  Like obviously you guys have already done that with Semler. Do you think we're going to see more
• 1:35:59
  of that i think you should uh and i don't know if we will um so why say you should we're seeing right
• 1:36:06
  now some of the players issue digital credit instruments as an example with 10 million 20
• 1:36:12
  million 30 million and just don't have the scale it's it's no scale to drive any institutional
• 1:36:18
  interest yeah uh you probably need in my view a minimum of 200 million and that's like a minimum
• 1:36:24
  to get real institutional interest and we saw this when we ipo'd sata we started out we went
• 1:36:29
  with 125 million and this was a learning for us there was very little interest at 125 million
• 1:36:35
  we ended up selling 250 million notional and it was over two times oversubscribed and the reason
• 1:36:41
  was we heard consistent feedback no bid no interest at 125 i'll take 20 million 30 million 40 million
• 1:36:49
  50 million if you do 250. and and so then i looked back i look at companies that either have to or
• 1:36:56
  choosing to do a very small size and say what's your path to growth well your path to growth is
• 1:37:01
  basically probably start with your current investor base that wants to help you get off the ground
• 1:37:06
  which is reasonable and then pretty much the retail only try to grow that up but there will be no like
• 1:37:13
  i don't think any institutional support until they grow that up massively and so i say that to say if
• 1:37:19
  you consolidated a couple companies but now you take two companies that have 3 000 bitcoin now you
• 1:37:23
  6 000 bitcoin you start getting to that scale get to that scale faster so i think that's
• 1:37:27
  that should happen um whether where it happens and if it happens will be tbd but i think it would
• 1:37:33
  help accelerate the growth path for some of these people but it probably won't make sense for strive
• 1:37:37
  given where we're where we're at yeah it's interesting it's going to be really interesting
• 1:37:40
  to see how it all plays out because uh obviously it's been a really rough year for most of the
• 1:37:45
  treasury companies um probably like the bitcoin bull market saves a lot of things and i think it's
• 1:37:50
  it's going to save a lot of companies. Obviously you guys are positioned really well. Um, the
• 1:37:54
  performance is going to be interesting to watch. I don't know what to, what to expect, but it's
• 1:37:58
  going to be good. Um, thank you so much. I think it's been an awesome show. I really appreciate
• 1:38:03
  the way that you, uh, you know, you, I see you on Twitter fighting the haters and I think you do it
• 1:38:08
  in a really good way. Um, so I appreciate the help. Well, thank you. It's a, I do view the
• 1:38:13
  Bitcoin community as that we're all brothers and sisters that are almost all freedom minded.
• 1:38:18
  There's obviously always a few bad actors,
• 1:38:21
  but there can be vigorous debate
• 1:38:24
  where underlying the principles
• 1:38:27
  that people live their life by,
• 1:38:29
  I think, can be very similar.
• 1:38:30
  And so for almost all of it,
• 1:38:33
  I actually view the debate as healthy, as good.
• 1:38:36
  I definitely think it's good.
• 1:38:37
  These ideas need to be stress-tested to the maximum.
• 1:38:39
  Exactly. It's fun.
• 1:38:41
  Awesome. Thank you so much.
• 1:38:42
  Thanks for having me.
• 1:38:43
  That was great.
• 1:38:48
  Thank you.