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Blockspace: AI & Bitcoin
SpaceX Bonds Tumble, How Saylor Can Save Strategy, and the 3 Archetypes of Anti-Data Center Activism
01:02:52
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A
Foreign.
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B
What's going on, y'? All? Welcome back to Blockspace Live, brought to you by clean spark. Charlie SpaceX bonds are now trading after issuance and it has been a brutal first day of trading. Apparently reportedly from Bloomberg, these bonds are actually trading. There are paper losses on these bonds and the spread that traders are asking for the longer dated ones is actually up significantly in what some traders are calling one of the craziest debuts for a mega bond of this size. That will be our first segment right after we tackle the hash rate index update per usual. Then after that we have what else if not an update on Stretch and and specifically Thomas Brazile on to talk about what strategy could do to salvage the current situation. And following that we have Charlie's Curio corner for anti data center FUD across social media. It's going to be a little bit of a shorter show today, but we're going to come with some razzle dazzle on both SpaceX bond an update on Stretch and what the normies are saying about why we should cancel all data centers.
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C
Yes, I've been diving deep. I've been infiltrating trading Facebook groups across across the country. Yes, I've been doing. I've been knee deep in conspiracy slop.
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A
But also
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C
some good hot takes on data centers. But that's at the end of the show right now. Block Space goes live every single weekday at 1pm Eastern featuring quick hits on AI data centers, Bitcoin miners, Bitcoin, Bitcoin tech and markets. Make sure to like and subscribe. Hit that notification bell on YouTube so you get the push notification when this stream starts. It's a stream so if you miss it, it turns into a podcast right after. You can find that anywhere podcasts are found. And if you missed the podcast and the live stream, catch the newsletter delivered to your inbox every single day. Newsletter.blockspace media.com this show is brought to you by CleanSpark. Nasdaq listed ticker CLSK more on CleanSpark later on in the show. Colin, it's SpaceX again. I forgot to update the little graphic underneath us, so why don't you take this while I. I will get right to that.
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B
But first we have to throw our miners a bone and do a quick hash rate index.
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C
Time for a hash rate index
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B
4cp season. We're early in it but perhaps it is somewhat overstated or at least we're seeing a rebound after some heavy curtailment and or miners just shutting off because hash price is still in the dirt. Charlie, we're looking at $30.39 per per PETA hash per day hash price currently with bitcoin hovering at 60k 58k getting rejected, we're happy to see it at least at 60. I mean, that being said, we've covered the price as we've covered strategy this week, but it is worth noting that we have seen Bitcoin retest the 60k floor that it set in February and has revisited a few times this year, including this week. But right now, hash rate is hovering just below 1 Zeta hash. The next estimated difficulty adjustment is a plus 7%. Now this follows a brutal 10% previous difficulty adjustment. Not so brutal if you're still around in hashing, but just goes to show you how choppy hash rate has been over the last few months. And really honestly over the last year. If we go over here to the hash rate chart, I mean, it just looks like these relief rallies for hash rate continue to draw down into deeper troughs if you actually look at the slope. Again, we're just treading down on the year and as we've said multiple times when we've done this update, it's really hard to see a world in which hash rate meaningfully grows this year. In fact, it could retract. But a number of forces are conspiring against it. Both 4 CP season in Texas, hot weather curtailment happening all around the US depending on the day, and Bitcoin's hash price getting depressed by Bitcoin's price and transaction fees are really nowhere to be found.
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C
So yeah, pretty abysmal. Nothing happening on chain Texas. 4 CP season also not really doing anything this particular difficulty adjustment. It's hot outside in Texas. I'm in Oklahoma, which is nearby. It's also hot here. Apparently the data centers are staying on. That's pretty much the story we have this week on that.
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B
All right, with that behind us, Charlie, should we go ahead and cover SpaceX?
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C
We're an AI and data center live stream now. Bitcoin can take a sidecar seat until the price comes back or somebody capitulates.
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A
Yeah, exactly.
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B
Until there's something interesting to talk about again. Before we get into the specific news, we'll go ahead and get this price chart up here, Charlie, because SpaceX basically reverted back to the opening price that it had after it IPO'd.
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C
Now remember IPO? IPO shares are priced at 135, so IPO buyers are in the money, right? Doing pretty well, honestly, if you consider two weeks ago. But as I understand, the majority of Volume has come in above 150. So I don't know it's the actual current average P L is, but it
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B
really, it opened roughly around 160, right. And then I believe it topped out just above 200 and has since been reverting back to that opening price. But this, in a combination of other trading habits has really weighed on the bond raise that SpaceX just closed this week. In fact, it actually just settled today. But trading in the secondary market is showing signs of stress on this $25 billion bond sale that SpaceX just finalized this week. This is coming out of Bloomberg. Charlie, if you could get that story up when you have a second, and I have some notes here.
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C
Look at this. Bond traders stunned as losses on SpaceX's new debt keep growing.
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B
So, so SpaceX issued 25 billion in bonds this week. It was their debut on the bond market as a public company investment grade bond and they had nearly 90 billion in orders. Now what's happening so far is that the, the bonds are, according to Bloomberg, weakening so quickly in the secondary market that traders say they can't recall another recent deal that widened this sharply. Specifically, the longer dated bonds that SpaceX issued are seeing cracks or at least the traders in the secondary market are demanding higher interest rates. And so the bonds are falling in price because they're worried about a combination of things. One dealer was quoting the 2056 bond as as much as 28 bips wider than the 1.75 point issue spread over Treasuries. And this is pretty significant, especially for a date for a bond that just debuted. Now this is happening, the spreads on these longer dated bonds, we're seeing this in other investment grade big tech mega bonds as well. Nvidia had a 25 billion 7 part offering this month and it's 2046 and 2056 bonds widened, but only by about 8 basis points, so much smaller than that 28 basis point spread that we're seeing in the 30 year bonds tied to the SpaceX issuance. Same thing with Oracle. That's actually been, I think one of the biggest corollaries here for SpaceX in terms of investors and traders being a little nervous about these bonds. But one of the reasons why this is happening, according to Bloomberg from sources they spoke to, is that it's not really long term sticky, investors buying these things. There was a lot of speculation, basically people similarly to the IPO looking to make a quick buck flipping these and that may be leading to some of the weakening here. But there's also A host of concerns on SpaceX's ability to actually pay back these bonds or specifically the cash flow being healthy enough over a long enough term to support this debt load. There's questions about just the valuation of the company in general as we've covered. I mean it basically said that's a bunch of poor.
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C
I would love to own SpaceX. I'm not gonna buy it at like $2 trillion.
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Yeah.
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At 111 times revenue, which is what it debuted at, which is absolutely crazy.
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Maybe I'm a non believer, I'm a believer in the big idea. Just thank man.
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B
Yeah, I mean at this, at this stage it, it, it's too frothy. And the last thing I'll note on this. So this impacts asset manager that Bloomberg quoted Tony Trezynkia called it, quote, likely a perfect storm of the stock shedding 600 billion since launch, weak technicals from the upside supply and investors still really scratching their heads over how to price its unique risk profile. I think that that makes a lot of sense. We've never really seen a company like SpaceX in the sense that it has its hands in a lot of different things. It's working on space exploration, it has starlink, which is a beautiful product, was the majority of its revenue. But that revenue will be dwarfed by its AI revenue which SpaceX is also deep in with Xai and the last thing I will note on this, I think this is telling us a larger story and the corporate bonds that we have seen suffered the long term one specifically are telling a larger story about bond traders. Inflation's expectations. The majority of demand for the Space X bonds came from the five year tranche, something that's much easier to model out into the future. But these 30 year tranches traders don't really know where inflation's going to be in 30 years. And there's a little bit of jitters about the train kind of running away on the tracks there. Also there are questions of what is the Fed really going to do this year. They're indicating that they're probably going to hike and we've seen this reflected in the way that Treasuries have been trading. But if you've been tracking the US Treasuries over the last year, they've been very schizophrenic. I mean bond traders are really struggling to price in uncertainty of a new Fed and also inflation expectations that span out into 10, 20, 30 years. So I think this is partially telling us a larger story about these traders. And investors are really uncertain about what the next few decades are going to look like for the dollar specifically.
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C
Yeah, I don't have a ton of takes here, but I will say if you consider that SpaceX is selling itself as a data center company and you consider that the bonds they've issued could be a canary for other bonds issued by other data center builders, that might be a little bit worrisome. I will say though, even though SpaceX brands itself as a data center company, it's very, very different than your irons applied digitals, your ciphers. So there's that. And then I'll also say this me as someone who doesn't really look at like, you know, bonds or stuff like this, if you were to tell me that we're off $300 million of a 25 million, a $25 billion bond, I'd be like, oh, okay, that's not very much. That's because, you know, I'm in a. I'm native to a more highly volatile world and so I. That kind of thing doesn't like, strike me, maybe that's my naivete and an unfamiliarity with your tradfi markets. But the traders who are experienced do find this interesting. I'll also comment one more. What were you saying?
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B
Oh, I'm glad that you mentioned that. I neglected to say that according to Bloomberg, the paper losses are 305 million as of late Thursday. I mean, again, like you said, that doesn't.
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C
What is that, like five bananas, Michael?
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Well,
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it is quite a few percentage points there. So like, you know, that is not great. It doesn't seem that bad, but in the grand scheme of things, it's actually pretty significant for investment grade bonds.
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Right. I think my last take on this, I think is like, call me unsurprised that it is retail traders flipping this product because this has look coming from crypto, everybody buys the ICO and tries to flip it shortly thereafter. It's like all the people who are going to buy your shitcoins in the world of crypto decided to move to SpaceX and just try to run the same game. But I think everybody's wisened up to that a bit by now, Right? Okay. We have Thomas Braziel, I believe that's how you say his last name, Thomas, in the wings here shortly. And we'll bring him up to talk about how we're going to save Michael Saylor. But before we do that, a word from our sponsor, CleanSpark.
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We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hash Rate powered entirely by self operated infrastructure across four states. This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy and bitcoin@cleanspark.com if Bitcoin's actually the best money and it's the thing that people should accumulate, it's the best risk adjusted asset. I lose zero sleep about whether or not that's gonna happen. I just ask the question of when
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is literally matrix math that you're running
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C
on large pieces of data.
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The bitcoin miners can absorb that energy
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and in many ways this feels like
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a second bite at the apple to
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build a new Internet.
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C
All right, we got in the wings, Thomas. We are going to bring them on up here. Fingers crossed our tech works. Thomas, welcome to the show.
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A
Hey. Hey, guys. Hey, Charlie. Nice to. Nice to meet you guys. Thanks for having me.
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C
Thanks for coming on. And I apologize, I didn't get your last name pronunciation. How do I say.
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A
You can say Brazil, like the country. I'm a good American. I don't actually know how it's. I mean, we always said Brazil. We'll stay with Brazil with a weirdy in there.
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C
Gotcha. Well, welcome to the show. Thanks for calling. I saw your tweets and a few people send them to me because I was trying to find a unique, interesting angle on Microstrategy and Stretch. You seem like the guy and you've been tweeting about how Saylor just needs to rip the band aid off. Can you walk me through the band aid ripping strategy for strategy?
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A
Yeah. I mean, I think he's only got really two strategies, which is one, just be a total holdout and stop paying the div. But the other one that a lot of people were talking back channeling with me about is why doesn't he just pull off the band aid, sell a few billion dollars of bitcoin, and then just show people that, like, he'll do capital market arbitrage on the other side of his balance sheet. Like, he's willing to put out these products. And now if he wants, like, sorry for the Chatfire reference, but like a Charlie Egan or a John Malone, there's no reason he can't go out. And I don't know what the converts are trading at, but obviously the press are trading a bit down. Why he can't get aggressive and try to buy back or tender for someone that converts. So the basic idea is, you know, everyone's, you know, there's the, the, the converts are being attacked. It's A very simple strategy of trying to blow out of a few billion dollars of bitcoin and just showing people that you have the liquidity to meet all the needs. And I know people say, oh, this is not interest security just because there's, you know, whatever $50 billion of Bitcoin. So you can't say that 15 billion or. I can't remember the numbers, but the. Of. Of converts and preferred or make a distress situation. But I mean, you do have a real problem here. I mean, it is a real confidence problem more than anything. And, you know, financial engineering requires confidence. You know, anyway.
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C
And when you say confidence, what exactly is the confidence problem? And is it because Saylor's made a brand out of never selling your bitcoin? Buy, buy, buy. Is that the existential confidence or is it more in just that he's able to leverage the financial engineering available Again? A lot of this is kind of mystifying to me, but, like, what's the confidence in.
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Yeah, I mean, look, y' all are in the crypto space, so maybe you have some ideas, but from my perspective, you know, the narrative doesn't have to change, but, you know, like a brand. Okay, you said he had a brand. Okay? Coca Cola was a brand for a hundred years. Like, there are times when, you know, you're evolving as a brand and trying to figure out what you are actually to your holders. I don't know that he's. I'll never sell bitcoin. I know he says that a lot of. In the past. And again, I'm not like a sailor addict, so I don't know every single scrap of. You know, because he's a. You know, he's pretty prolific with his media, but I think that. I think that needs to evolve. I think people have kind of suggested it and he's maybe kind of hinting at it, but I don't know why he has to be so holding that. Why can't he take advantage of cycles? I mean, I'm not saying I want him to time every cycle, but, you know, when. When the money's cheap, he should be borrowing. Not to the hilt, but he should be borrowing and getting good terms like he did with the converts and like he did with the. With stretch and in the press. And then he should turn around and take advantage of that. You know, like a Harry Singleton. Again, another tradfi reference. Harry Singleton famously issued a bunch of stock when the market was expensive, and he. And he basically was able to buy a bunch of companies, and then when his stock was cheap, he was like a buyback machine. So I don't know why Sailor can't do that. And I think it's just as accretive as not ever selling your bitcoin. So I don't want to, like, you know, knock what he said, but I think he can evolve. Like, you know, I think people. I think one thing I don't want to be accused of is thinking that the strategy is static. Like, obviously, he's going to respond to this. Mark the market prices.
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C
Yeah.
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And, I mean, it would have been great if he would have had that evolution of thought. When bitcoin was at 120 instead of buying at the top, now it's cut in half. You mentioned that, really, the two band aids that could be pulled here is you just pull the dividends for the preferreds and. Or you sell bitcoin. I honestly think you kind of have to do both with where he's at right now. And part of the reason I say that is, like, let's say he does just pull the dividends. Okay, you have a $1.4 billion cash cushion. But that doesn't even eat through all of the puts that are coming for these converts. So shy of bitcoin actually ripping, it seems to me the really immediate threat for him is actually being able to cover those notes should those puts be exercised. Does that make sense to you? Is there something that I'm.
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It does.
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What do you.
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I mean, those are rough pencils. I kind of see it as, like, I can't see even at 70, 75. I mean, Adam Back was responding to not that tweet, but a different one about. About the cost of capital for owning the preferreds just recently, today. So I saw that, like, literally while y' all show was going on, and I was like, whoa, all right, this is getting real. You know? And look, I agree with you that probably both of those things have to give. I guess for him, he has to decide as a brand is actually good that we talk about as a brand, because the whole concept of dads and this brand and this kind of strategy that he's invented, whether it makes more sense for the brand to get more aggressive and keep the cash in, cut the div, Let the guys, like, kind of take a bath and then try to buy them back for 50 cents on the dollar, or does it make sense to say, hey, let's not take such a crazy approach to that because it hurts the brand longer term? So I think that's probably internal calculus. I know people joke about with him making decisions using ChatGPT, probably with the aid of AI, but he probably needs to think through that math, right? It's like you think about, y' all run a company, I run my company. You're making these decisions like, hey, contractually I can do this, but like, is that like, is that kind of short sighted? Like maybe we maybe want this person as a partner. And even though, like they didn't really understand, like we don't want to necessarily give them a total bath. So there's, there's like, you know, obviously the stuff that's contractually obligated and then there's the whole like longer term story that he has to, you know, watch.
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C
So let's say he follows your playbook, rips the bandit off, builds up an arsenal of cash and, and cushion. What does success look like in like 12 months?
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Six.
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Six to 12 months where he's done this. And maybe bitcoin has. Maybe it's not recovered, but maybe perhaps it's stabilized. What happens in. What does success look like?
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I think that is success. I mean, if bitcoin stabilizes and he's able to, to basically have a few billion dollars of liquidity, okay, you can't keep accumulating bitcoin, so stop buying bitcoin. It's like someone as his friend needs to take away the beer. Take away the beer. But some, you know, but if he can just stabilize it, there's no reason why this can't exist. I mean, okay, like the larger dad community is like a whole nother conversation you have. So you guys probably know this, but, right. They have the levered DATs and kind of the unlevered ones. And they all have what are called AB share structures, so that they have super voting and they all have staggered boards or a lot of them have staggered boards. So all you can do is really shame them into doing the right thing if there's big discounts. But I don't know. Saylor is kind of ideological. I know he still has a B structure. I don't know if they have a staggered board, but it'd be impossible for someone to kick him out. I mean, I would say impossible, but it'd be very, very hard under sort of the Delaware corporate code to do that. And I think that, you know, I think that is success. He just needs to get through this patch. This is a rough patch. You know, maybe in hindsight, like if you look through the history of, well, the history of closed end funds are kind of interesting. So a good parallel for, for, for the dats and then also the. The. The history of prefs, like, in the real estate market. They're like mortgage rates and the use of press. And there's a guy, I'm, like, stealing all this work from other people that have said really interesting things, like the whole idea of ripping the band aid off. I saw a guy commenting on it and then he was like, and he should just grab it and just pay off all of the converts. I was like, why would you pay off the converts? Like, just let them sit out there, tell them, look, you want to sell at 85 cents, great. If not, like, put it to me in a year and a half. Bobby, I'll see you. See you next December. So, like, why would you. You know, I think. But having the cashing balance sheet makes for a huge, you know, cushion and also just like a signaling that you're going to. You're going to make it happen. Even though he's got a lot of cushion now, I just think, rip it off.
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B
But anyway, so you mentioned in this tweet here in Mastermind Playbook for Strategy, that quote, I think Saylor pushed the financial engineering too far. Maybe it ultimately works, maybe it doesn't. But as you've made the case here in this interview.
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C
But.
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B
But I think it's fair to say the original MicroStrategy playbook is effectively over. What part of the stack do you think was. Or at what point do you think it was overly financially engineered? Do you think the preferreds are where he really flew too close to the sun?
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Yes.
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C
Okay.
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I think the preferreds were a mistake because even if it works, it doesn't. It doesn't work from a brand standpoint. This is like. It's funny that you brought it up, Charlie, by the way. I'll get you guys a little confused because we just met, so.
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C
Oh, that's okay. Oh, yeah, we both have long hair. We chose the same color shirt today by accident. So, yeah, I love it.
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A
Well, anyway, okay, so the brand is back to brand. Like, you know, you could. Just because you can get away with something doesn't mean you should do it. Like, it can tarnish your brand. Like, I don't know about the converts. I. Or, sorry, I don't know about the press, because, you know, you see a lot of retail hate on Twitter about it. And yes, okay, you shouldn't tell people, oh, I'm gonna make. I'm gonna pay you a dividend while you wait. Getting rich. It's like, don't say stuff like that. Like, you know, clearly people are Gonna try like all the clash action lawyers are going to come out of the woodwork, you know, and honestly, you know, I don't want to beat them up too bad, but this is not. They're not going to be able to actually do anything. Maybe they're able to cough up 100 million across the whole claimant pool, but you're talking about billions of dollars of prep. Plus the lawyers are going to want a third of it. So it's like, you know, okay, it's not nothing, but it's not a lot. And I just think you pushed it a bit too far there. The converts are fine. I mean, I get it. It was, hey, convertible guys want a lot of volume and they basically. I don't know what it's called, it's not called delta hedging, but they basically sell the stock against it and they capture that ball or sell options against the underlying bond. And that's fine. That was all fine. But I just think it's such a volatile asset and I do think that having a levered instrument for bitcoin, obviously before ETFs was interesting. And I think Saylor could, as long as he doesn't get in a distress situation here, a serious distress one where he hits the wall. You know, it could be a thing that still exists. And I think for the other dads, it's kind of different because a lot of those don't have debt, but they really don't have much of a raise on debtor and they'll probably just kind of fade into obscurity. They won't blow up spectacularly. I mean, he's such a big part of the market. That's why everyone obviously is talking about it. And I don't know what is the volume weighted amount of the, of the debt space, but someone told me like 75, 78% or something, which makes sense at least.
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B
I mean if we're looking at like maybe that's including bitcoin miners, which I kind of don't see them as stats.
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C
Right.
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B
Like they actually have a business Marathon's one of the largest holders of bitcoin outside of strategy. But if you look like pure Play dats. I mean he's easily 90%. I mean strategies.
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A
Oh, is he that pie?
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B
It's, it's, I mean, it's, it. The, the, the difference is pretty crazy. Maybe it's not 90, but it is.
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C
It is. It's up there. It's super high.
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A
Well, I guess what I would say guys, is they. I've had people say like, oh, this is such a huge overhang on the market until this is fixed. Like, it's an overhang on the market. I don't know, man. Markets climb walls of worry all the time. And I think obviously this is the current wall of worry. You know, lower prices is great if you can accumulate. Obviously it hurts the actual infusing leverage. I just can't stress enough. Like, I, you know, I think you have to be so careful using leverage with something like bitcoin or really anything, you know, you can just, you know, it's a million, you know, every. I assume people watch your show if it's crypto focused, million dollar bitcoin one day, yeah, let's go. But I'd be a believer in that, but not where I had to time it perfectly.
- [27:57]
B
Yeah. There's a former bit refill executive and now he founded this company called Synonym, which is a kind of like highfaluting layer to re envisioning the Internet. I don't really understand if it'll actually work, but his name is John Carvalho and he's tweeted a few times. It's like, are the returns in bitcoin not enough that you guys have to go out and lever up on this trade? And is the volatility already not enough? And that's what I keep coming back to with strategy when you're saying, okay, post etf, maybe there's still demand for a highly levered play on Bitcoin. But I honestly, with this and with all the Bitcoin treasury companies, I really can't look at it as any more than just gambling the stock or speculation the stock. And I struggle to really see a reason outside of that why they would exist. Honestly.
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A
Yeah, for me. I'm sorry, go ahead.
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C
Oh, yeah. I was gonna, I was gonna talk. I was gonna like jump in on that because this gets on kind of like the last angle I wanted to throw at you, Thomas, which is like, okay, what Colin said, which is the volatility and the returns of bitcoin not enough. I think it assumes, because I've had the same criticism, I think it assumes that you're talking about the same audience, the same person you're pitching to. Because when I see Saylor's been marketing his products almost to retail investors. But you make this point that maybe the marginal buyer of Stretch and some of the products, he's financial products is different. It may be like, it may be a different type of marginal buyer. Explain this to me. And like this, this thesis you have.
- [29:44]
A
Sure. And Let me, let me just comment really quickly before I answer that. So on I look all professional investors always trying to find an edge that's like almost what you're paid to try to do. Obviously you're not always successful, you know, but I put out a tweet about this, but it really wasn't necessarily at MicroStrategy so much as like general investment philosophy I have, which is you're always trying to find intelligent leverage. Like if you can find things that are intelligent leverage, that's great. But generally for myself as a distressed investment person, it's, you're, you're getting it through price. So if you buy, like for instance, when we buy mount, we used to buy Mount Gox claims. So it was an early crypto exchange I'm sure you guys heard of. You know, we would buy them for at the beginning like a fifth of the workout value or like a third of the workout value. So we're buying bitcoin at a third of the market price. It's hard. It's a lot of work. It tapes sourcing. And obviously you can still have claimants, you know, potentially, I don't know, screw you, walk off with your money. So there is, there is risk and there's duration risk because you're stuck in the claims. The point is like, you're getting inherent leverage, you're getting kind of 3 to 5x leverage on Bitcoin, but you're doing an intelligent way where you're not going to get stopped out because your options expire in a market maker tried to screw you. So like, I, I definitely think leverage is okay. I just think is if you, if you're, if your main job is you're a doctor, lawyer or a podcaster, you just be really careful. It takes, you guys probably know, very smart professional traders. It takes so much effort to like trade like sudden death securities, you know, and that's kind of what you're engaging in when you do some of these kind of like, kind of not unintelligent, but just kind of like you're just adding risk. Like that's not interesting. Like adding risk where there's, you know, needs to be intelligent. But to your point, we were talking about cohorts. All I was saying is like, this is marketed as a retail product. Thank you. And the problem with retail products is there's a big delta between a retail buyer and a more institutional buyer when you comes to credit securities. I mean, this is a kind of a credit instrument, a quasi credit instrument. It was sold to retail and I mean, you can just look at the history of these things that don't have to be in crypto. The prefs, I mean, I want to say they're kind of schmucky products, but they're generally sold, you know, read the thing. It's like you. I don't even know. They don't even get board seats. I think if they're not, if they don't pay the coupon, it's just like there's no maturity. It's cumin on prep. You know, it's cumulative. Sure. But, you know, I've seen. I remember once I got involved in a bankruptcy where we bought cumulative, Cumulative Press. And I think we bought them for, I want to say like $1. And they had like $25 of cum pref plus the dot. So it was $50. Fate par. And we were buying it for a dollar in the bankruptcy. We still lost money on the deal, you know, so the point is like, these things, it's, you know, you can't. Like if it walks like a duck and quacks like a duck, it is a duck. This is kind of like a quasi equity. And I feel like they are kind of overly sold to more retail. Call it like Ria. It's not dumb money. It's just people get in trouble, like trying to chase yield. I mean, it's funny that we're having this conversation because I was, I was looking back Larson, this guy who's like a big podcaster out of Sweden, he was saying, I did a big podcast with him, or I did a podcast with him a while ago, but he has like a huge audience in Sweden and on Celsius. And the same thing with Celsius, everyone jumped into yield products there. That's what, that's. That was the whole charade that kind of Mashinsky was running, and I want to call it a charade, but the whole gag was like, oh, we're a bank, give us money. It's going to be 10%, 15%. Why make dog poop, you know, yield when you can make 15, you know, 12% with me, of course, you know, so I'm not saying it's the same thing. Obviously, Machinsky was another level of fraud, but.
- [33:27]
B
No, but you're basically saying retail doesn't know how to price these. Price these risks.
- [33:31]
A
Right.
- [33:32]
B
And that's, I think, what's been so upsetting about, I think on credit side.
- [33:36]
A
Yeah, yeah.
- [33:37]
B
And, and what's been so unfortunate about this whole thing is like, so you already have Bitcoin Maximalist, where it's like 99% of their net worth is in bitcoin. But with strategy, you built this, like, strategy financial stack where people were buying into the preferreds, using them for income, and also longing strategy at the same time when they already had bitcoin as well.
- [33:57]
A
Right.
- [33:58]
B
And so the overexposure is honestly kind of almost like, if not baffling, totally anathema to like most rational investors, I would say.
- [34:09]
A
Right. Even, look, I'm such a bitcoin bull, but I just think I've seen it so many times. Maybe it's because, like, you know, like, you. You start to look like your dog. People say, oh, you. If people didn't hang you, you know, maybe it's because I hang out so much in bankruptcy court and things like that. I'm so used to seeing, like, just the things go wrong that people think, how did that happen? You're like, I don't know, but I just used to seeing it. But. But for me, the yield stretching is where you really get in trouble. And I'm blown away at the exposure people have. They kind of like went from being 100% bitcoin or like a huge percentage of their net worth in bitcoin to being like, oh, I'm in strategy with like 50, and I'm in with. With stretch for like 25. I'm like, wait, what? Like, that is crazy. Like it's along the same security. Yeah, it's unfortunate. It's unfortunate. And look, there's a lot of chatter and I'm a few like, telegram channels with some, like, I'm not big, but they're some big people. And they, they were like saying like, oh, crypto's going to be better with sailor kind of like out of this picture, and we just need to get them out. I'm not necessarily totally in that camp, but it will be good for like some of that financial engineering to be checked a little because we don't need it. Like, I think the crypto can exist and bitcoin can exist without it, you know.
- [35:22]
B
So, Thomas, maybe as a closing question, Charlie, unless you have anything as, you know, a distressed asset investor yourself, not financial advice, not saying you're going to do this. If you were to capitalize on the current situation and you were any sort of investor with either, either you're holding the converts or like, you're looking at ways to capitalize on the preferreds, what would be the obvious? Or maybe not obvious, there's obviously risk. But what would maybe be the avenues that you would look at, at this if this thing were to turn around. Like where are the obvious?
- [35:55]
A
So, so the structure is interesting, right? I think that. Well first of all there are a lot of dats out there that are trying to do creative capital market solutions. So there's a, there's a whole nother. You know, if you want to get micro looking bottoms up there's probably some stu to do on micro strategy in particular. I think that right now there are people talking about and I know it's a little late to the trade but you could be short the common long bitcoin itself. Obviously this requires like, you know, whatever you call that like rebalancing and like really watching the position. I do think that if, if, if things transpire and the press get cheap enough I think they'll be super interesting. Obviously they'll be super interesting. I feel bad for obviously the original holders but I mean that's, that's a market and it's, it's, it's, it could get there. And you know also like if you see him sell a bunch of bitcoin and he and the pref gets, you know, I don't know, 50 cents on the dollar or the pref. Some of the prep stacks get to 50 cents on the dollar, you know he could start buying them back and that would be you've got the dividend plus the buyback. I mean it could get really interesting. So I would just watch for me it's like a watch and see if the press get cheap. Obviously there's like the whole explosion where the thing files for bankruptcy in 20, 27, 28. I don't see. I mean it could obviously happen.
- [37:09]
B
Do you think that's unlikely?
- [37:11]
A
Do you think that's pretty unlikely? You have to see a pretty aggressive move in bitcoin. I think the problem for the common of being long any of this stuff right now is there's going to be so much like bleed and dilution. You know he's going to be juking and jiving trying to deal with his capital structure and why would you want to be long that at one mnav to me that needs to trade at a big bigger to make it worth my while to say okay I got this capital structure but I think he's going to pull it through. And I'm watching the cycles and we're hitting having or whatever. And so you can take the macro view of the cycle theory and then you can layer it on this capital structure but I don't think there's anything right now, unless you're going to like, I don't know, you can't short the press the div. If he still pays the div, you're going to be, you're going to really, it's going to really be a painful trade. You could short the common long bitcoin right now, but I just think it's more of a wait and see and see if the press get cheap enough. And you know how y' all are watching the news, y' all must even report it. I didn't see those segments. I only saw the SpaceX one. But you must see stuff where like the guys are like, I sold all my bitcoin. It's like, yeah, this is, this is what you want in some sense of our bottom. This is what a bottom looks like. So, you know, maybe we stabilize at 60 and maybe the prefs sort of stabilize and maybe, you know, he doesn't sell, but maybe news comes out that changes it and then you can react like so much for me about investing is just reacting right now. I really don't know what to do. And you don't always have to have an answer, but this is an interesting capital structure. You should keep an eye on where the press trade and even the common. You know, if he's able to, if, if the market pulls up and he's able to start printing a bit more common and he has more cash cushion, the common could get very interesting. It's a little self reflect. It's a little like reflexive on the, on the common more so than the others. But I definitely. The capital structure is interesting.
- [38:59]
C
Thomas, thank you so much for coming on the show, answering my cold DM on Twitter. So appreciate it. Would love to chat Mount Gox with you someday maybe we'll have you back. Otherwise, thanks so much for hanging out with us this afternoon, guys.
- [39:13]
A
Nice to meet y'. All. Happy to chat.
- [39:15]
B
Thank you, Thomas. Appreciate you, man.
- [39:17]
C
Cheers.
- [39:18]
B
Yeah, Mount Gox could be a whole episode. Yeah, I often thought that that would, you know, not that we need another bitcoin podcast, but honestly, like the untold stories behind some of the biggest news items, how these things actually played out, like the Mt. Gox bankruptcy and all of the distressed claims that were being purchased. Super interesting topic.
- [39:38]
C
Yeah. You wanted me to roll tape on this fun clip, right? I mean, Matt o' Dell posted. So here we go. Let's do it. This is a, this is a fun one. This is an Altimer all timer here. Let's roll tape, right?
- [39:58]
A
I mean, that's the engineering I give you the upside, you have no downside and I pay you a dividend while you wait to get rich. Okay, which is.
- [40:11]
B
There is no second best preferred. Stretch is the best preferred. There is no second best. I mean, how do you say this as a chairman of a public company and not get the SEC knocking on your door or something? I'm not a lawyer obviously, but you know, half of half of the media apparatus was up Elon Musk's ask when he joked about taking SpaceX or excuse me, Tesla private at 420. $69. Yeah, which was an obvious joke.
- [40:42]
C
Based, but also. Based, but also dumb tech. Yeah, based also. Okay, we got to keep going. We're going to talk about. I've been infiltrating your Facebook anti data center group. So we'll get into that in a little bit. But before that, a word from our sponsor, Luxor.
- [41:04]
B
This episode is brought to you by Luxor's Commander Bitcoin miner management software built for enterprise operation. Luxor Commander gives you real time fleet monitoring, bulk remote commands across your fleet. And intelligent miner, that's an automated profitability engine that runs every five minutes to adjust power settings to live hash rate markets and energy markets. ERCOT back tests show 10% improved profitability with intelligent mining versus binary mining. Commander Pro is $100 per megawatt or a 25 basis point pool fee adder and you can try it for free for 60 days. So if you would like to learn more, go to Luxor tech forward slash commander.
- [41:44]
C
All right, I'm gonna play this clip from Theo Vaughn and then we'll do Lygos and then I'll explain Facebook.
- [41:51]
A
Bro, we don't want any.
- [41:52]
B
Nobody wants a data center, dude. Nobody wants it. And the people that want them, to
- [41:58]
A
me, bro, they seem kind of evil.
- [42:00]
B
It's like what's gonna happen? You know, you, you fall down and you get a bunch, you know, a
- [42:05]
A
bunch of loose data flies out of
- [42:07]
B
the factory or something now. And your kids got, you know, he's
- [42:11]
A
got five episodes of of Dutton Ranch
- [42:15]
B
or whatever stuck in his neck or something.
- [42:17]
A
It's gotten crazy.
- [42:20]
C
And we'll continue on this after a word from our sponsor.
- [42:30]
B
Hedge funds are getting liquidated. Is your bitcoin safe? It's not just Bitcoin's price drying up. Hedge funds, lending desks, etc are reeling with bitcoin treading water at 60k. So it's more important than ever to understand who controls your bitcoin. Especially if you are using a bitcoin backed lending service. With Lygos, that is Always yourself. Do yourself a favor, don't be the next FTX or Celsius victim. Give Lygos a look. They are our preferred Bitcoin backed lender here at Block Space. They use Bitcoin native smart contracts to make sure you are always in control of your Bitcoin and no one else. No rehypothecation, no bridging, no wrapping, just competitive rates as low as 8.5 to 10% APR. Go to Lygos Finance to learn more. Okay, sorry. Just first take, first take, first take on Theo. The Dutton bit did not land the way he wanted to. I saw where he was going with it.
- [43:28]
C
It was a good attempt.
- [43:29]
B
Yeah, it was a good attempt. It could have just as easily been episodes of Theo Vaughan's podcast actually. And that brings me to my next point. Nobody wants data, as he so eloquently said. Nobody wants these data centers. Says the man who's living is predicated on those very data centers storing hours of him talking about various topics that he doesn't understand.
- [43:52]
C
Yeah, no, you're right. So, so this is kind of becoming a bit of like a weekly segment. I have spent months, if you, if you, dear listener, have not been paying attention. I spent months getting on Normie social media, getting off Twitter and X, going to where your local city protests are organized, which is primarily Facebook. And next door, if you're familiar with the neighborhood social media app and Facebook is ground zero for the coordination and reactionary movement against the proliferation and expansion of data centers across the United States. And it is cross party, it's cross ideology, it's cross socioeconomic, it is not rural nor urban. It is universal. And so one thing I've been kind of getting into these, I've been trying to. My entire Facebook feed is no longer my friends nor babies. So I have no idea what's happening in my friends lives. But I do know what is happening in the anti data center movement. And I've identified a few different, what I call like profiles of the type of people who do not like these data centers. And I've rolled the Theo Vaughn clip because it is viral right now, but it does showcase one common misconception. And it's almost like we bitcoin miners have, we've been here before because you don't literally go with a pickaxe and mine bitcoin. Similarly, a data center is not really just where data is stored. This is like one of the biggest foundational broad misconceptions. Now I know people use kind of the language a bit hand wavy, but it is generally believed that these big Walmart size, you know, three Walmart sized boxes hold all of your information. That's not really what's happening. There is no general understanding that the data centers building being built right now are filled with computers which do training and inference. These types of this, these things are not understood by the average person. They think that's where your data is stored. And so this from that springs a lot of the misconceptions.
- [46:07]
B
So that's an interesting point to make. And I think to me it harkens back to one of the things that I find so frustrating in this is that a lot of the practices that they're criticizing in terms of data storage, in terms of how data centers are cooled are in some ways relics of an older mode of traditional data center that are. And that's not what's being built right now with the Capex boon. Obviously we're still building data storage, but like you said, most of these are AI data centers. And so none of these concerns existed when this was a phenomenon that was not hitting headlines. And I mean that's true with a lot of things, right? Like Bitcoin mining. FUD really kicked off in the US during the 2021 bull market because miners started coming here.
- [46:54]
C
But it never reached anywhere. The level of this, it was pretty localized and it was also actually almost exclusively a like a progressive reactionary movement. It was almost all yes, like the liberals, you know, the coastal elites, like finding two or three people in a small town in Texas who had a bad day. This is, and this is why I'm going to show this one here. This is actually almost more of an anti surveillance and an anti elite movement. So here is a page called Exposing the Elite Agenda where you can find all sorts of Pizzagate references and you know, lizard people claims. And here we have a post which says billionaires are building the data centers to power the artificial intelligence that will replace our jobs. And the US government is doing for mass surveillance and war. And they're building the data centers over farmland to reduce our food supply since their AI robots won't need food. Are you awake yet? Their plan is to replace millions of us with robots to usher in their AI techno capitalist dystopia. The best way for us to stop that is to stop the data centers that will power it all. What's it, you know, first of all, love this take.
- [48:18]
B
They're getting woke. They're getting woke to the evils of the techno oligarchs.
- [48:23]
C
This is kind of your fringe. This is primarily like a far right, like, anti elite, you know, you know, satanic child abuser like type narrative. And this is actually a very, very prominent view. This is not just in like the fringe, in the fringe Facebook groups. This is actually kind of echoed. And I've, as I've seen in like the average, you know, retired boomer mom who lives in, you know, some small Texas, Kansas. Exactly. And this is a pretty common thing that like, they believe that these data centers are primarily for surveillance. There's a lot of interweaving with flock cameras as well. The funny thing is, I don't, as a longtime bitcoiner, I don't think that is so incredibly directionally wrong. There is and should be a concern around the incredible asymmetry that AI gives our government to surveil and control and sift through the data study the asymmetric risk, you know, challenge and risk of like, surveillance versus, you know, privacy and the law of numbers. But this is like a, an archetype here of a major narrative in these Facebook groups. I have another archetype for you, Colin, if you want.
- [49:51]
B
Yeah, I do just want to say I agree with you that the surveillance aspect, especially like the flock cameras and with drones now being used with law enforcement, there's a legitimate concern there. I just, I hate to shatter anyone's illusions that if you're worried about that the government's building those capabilities already.
- [50:11]
C
They've already had those capabilities, and they've
- [50:13]
B
already had those capabilities.
- [50:15]
C
This just gives those, those capabilities more power and juice behind them.
- [50:19]
B
But yeah, I guess my cynical take would be they're going to find a way to build it regardless.
- [50:25]
A
Right.
- [50:25]
B
And like, may, you know, some of these data centers, like, might be used by government contractors or, sorry, might be contracted to the government for their, for their inference space and their training. But I would imagine that, like, if Uncle Sam really wants that rack space, he's going to get it regardless. So, like, you stopping a new data center like in Oklahoma for iron is probably not going to be the final blow against the Bilderberg elites that you think it's going to be.
- [50:57]
C
That's a great line. Okay, so the next archetype I have is like the, the resource and like NIMBY angle, but it's like a specific type of NIMBY poster here who uses AI and incoherent babble to post anti AI stuff. So here is a post in the Texans United Against Data Centers, my favorite Facebook group of all time from a. I won't say the name on air, but she says, Hi, all. Just wanted to introduce myself and share a photo I took. And the photo is a very clearly AI generated ground zero of what looks like kind of like a nuclear blast zone with different circles, concentric circles, of the damage that it would do with a data center in the middle. And it shows that if you are near ground zero of the data center, within the fence line, there's noise pollution and light pollution. This is true. Within a mile you have some more of that, but it's less loud. And then several miles away, you have water depletion and smokestacks, and it's not really.
- [52:18]
B
Well, the smokestacks are a few miles out from the data. It's like the data center grows tendrils and it just comes up from the ground, you know, a few miles out.
- [52:27]
C
I kind of. I interpret this as like they're built near power generation. But it's like, really unclear and it's really like, unclear what they're actually saying. But the title of the header of the image says, raises area temps 4 to 16 degrees. Hums, increases local power costs. Depletes water table aquifer. Just say no. But this is like a typical thing. Like, I can't tell if this is like the type of post that a. I would say, like an astroturf campaign, maybe, say by China would do. But the thing is we are. It's, it's. It's some law of the Internet, maybe it's Benford's Law, where you just. We're now at this post reality stage where you cannot tell if something is sarcasm, if it's astroturfing, or if it's a genuine belief of the person posting it. And almost like, I would say almost to say it doesn't really matter because.
- [53:22]
B
Because the effect is the same.
- [53:24]
C
The effect is the same. Yeah. And yeah, that.
- [53:27]
B
That's the first thing I thought when it said, here's a picture I took. It's like, okay, this is either a very. How should I say it in a way that's nice. Potentially neurotypical mentally. How should we say, mentally slow person who, like, actually is just using language wrong or it's like a language barrier thing from a agent. And there have been numerous reports of, specifically leading up to the 2016 election, Facebook groups being infiltrated by. By foreign actors to try to agitate. In fact, they would actually organize protests in the same cities for either side of an issue in order to just agitate the populace.
- [54:13]
C
Right. So, yeah, but. But the counterpoint Is, yes, these are. That happens. But does it represent, you know, a sufficient amount? Is it really representative? Is it more like the. The. The. Is it more like the vanguard?
- [54:26]
B
I think it's enough. It's probably more the vanguard. I think it's enough to poison the well, though. Yeah. In the sense that you have enough people who are going to be excited by these things. One last thing I wanted to point out from Dante's AI Inferno there that you just put down, because it literally looks like the circles of hell from
- [54:43]
C
that screenshot, Dante's AI Inferno.
- [54:46]
B
What this really shows me is the problem with the data center discourse is it betrays ignorance in a number of systems.
- [54:57]
A
So the.
- [54:58]
B
The smokestack, for example.
- [54:59]
C
Right.
- [55:00]
B
Unless that's a coal plant, that's not smoke, that's water vapor. If it's a nuclear plant taking our
- [55:07]
C
water, though, you just confirmed the.
- [55:10]
B
But that just goes back.
- [55:11]
A
It just goes.
- [55:12]
B
It goes back up into the atmosphere and it is evaporated, turns into stars. Anyway, if it's. If it's a natural gas plant or a nuclear power plant, what you see from the smokestacks is actually water vapor rising up.
- [55:27]
A
Right.
- [55:28]
B
And so my point in saying that is that's not like a unique insight, but the fact of the matter is these systems are so complex that no one actually understands how everything works in conjunction with each other. And this is why this is such a toxic topic. Because to be fair to some of the critics, there are externalities to this that could be negative. We've talked about them on the show. If you don't plan these things right, they can be very noisy. If you don't plan them right in terms of resource management, they might raise power costs. And there are things being done to address this, but there's. It's very hard for the average person to actually know all of these systems well enough. Right. To understand the whole.
- [56:14]
C
Yeah, thanks for the comment. Funny that this is AI generated. The person is trolling so hard. Okay. I have the third archetype, Colin, which I call the person who's actually putting in the work and doing stuff, but I feel is still pretty misguided. And this is. This post, there is an Aaron Brockovich who has a team, and they've basically taken the NOAA, like, drought data from across the US and overlapped and like, mapped over where the data centers are and kind of actually gone so far as to make a whole, like, interactive dashboard, which, as a prolific vibe coder myself, I can tell that this is vibe coded respect, though. But this Map. And I mean, here's the site. So I recommend everybody go. It's Brockovich. Datacenter.com Great resource, honestly. It's one of the most high alpha data center resources you can find if you want to get into trading these stocks. But it's visualizations like this where you identify where drought conditions are in the U.S. the U.S. is undergoing a drought. If you've been in the city and you haven't been talking to your local rancher, a lot of the US Is in drought. And so we now look at where the data centers are and we can see that. Are they causing it? Is it. Is it coincidental? Are they exacerbating it? And the answer, I would very definitively say is they're not causing it. I think there's some debate, there's a lot of debate over whether they're exacerbating it. And I actually don't. I don't make a comment on there. But that. But this is a type of. This is an archetype of like, a person in here who is, I would say, like the most legitimate of the, like critics who I still feel is kind of misguided overall about, like, how they're framing the. Like, how this industry is growing and the potential risks.
- [58:20]
B
So, yeah, I would find it pretty hard to believe that they're necessarily exacerbating drought specifically because do we know what the actual cooling systems are for all of these data centers? Like, it's kind of a foregone conclusion with these critics that they're all just guzzling water. Right. The other thing I would just point out, kind of a fun tangent here.
- [58:39]
C
This.
- [58:39]
B
This woman fancies herself a warrior for justice. And there's a kind of grandiosity with that because Aaron Brockovich is actually a 2000 movie with Julia Roberts in which she talks her way into this law firm and uncovers this, like, water contamination.
- [58:53]
C
But is that a pseudonym? Is Aaron Brockovich a pseudonym?
- [58:56]
B
Yes, I would assume so. Oh, I'm guessing maybe her name is Aaron Brockovich, but I would assume that that is a callback to that because specifically in the movie, she uncovers a water contamination scandal.
- [59:11]
C
So was the movie maybe inspired by a real Aaron Brock? This is. This is. We need to investigate more.
- [59:18]
B
No, I don't. I don't think so. It's a. Oh, never mind.
- [59:24]
C
Oh, wow. It looks.
- [59:26]
B
Oh, it's actually her.
- [59:27]
C
Okay.
- [59:28]
B
Yeah. All right. Show that entirely because it is a fictionalized account of a real story.
- [59:33]
C
Also, incredible haircut, by the way.
- [59:36]
B
So that may actually be Her. That's very interesting. That being said, you know, I think the one thing to pluck out of this that I would call maybe a legitimate criticism is that like yes, if you have like an evaporative cooling or a open loop water system for cooling a data center in an area with heavy drought, that is not ideal. And that's probably not good. But the fact of the matter is a lot of these data centers are going to converge on different cooling systems. Now the trade off here, people are not going to like on the climate left because part of the reason why they use evaporative cooling is because it requires much less power density. If they go to closed loop systems, they're going to need more power. And that means yes, drill baby, drill. So I think there's a certain archetype here that will not be happy on either side of the equation. Depending on what gets settled on. They're just going to want. I mean like I know people like this in my personal life who say we need to use less energy. And that to me is just an insane thing to say when we have technologies that assure us that we can use more energy without having a huge impact ecologically around us. You know, some people just are never going to be happy and they've been fear mongered enough to believe that anything that we do is going to be deleterious to our environment.
- [60:56]
C
So yes, deleterious. You finally got in your three dollar word. I think we're going to wrap this up. I do actually have some fun. Breaking news which I which happened. I got a DM as we were on air here. I'm going to show this to you. Colin, check this out. OpenAI apparently just announced a limited preview of GPT 5.6 Sol, our next generation Frontier model as well as GPT 5.6 Terra and then GPT 5.6 Luna. So we GPT just launched Terra Luna models unironically. This is going to be.
- [61:46]
B
And Solana.
- [61:47]
C
Yeah, so a lot of. We have.
- [61:49]
B
Maybe what Gort was saying the other day was real. All of the best ideas from the blockchain will just be ported to the traditional financial system.
- [61:59]
C
Yeah, we're going to take Terra Luna off chain and put it.
- [62:04]
B
Put it in AI Sam. In an AI It'll be the scam in the machine.
- [62:08]
C
The scam that the. It'll be an algorithmic, but the algorithmic will be an AI. Okay, that's enough for that. Thank you so much for listening to Block Space live. We do this every weekday. So we'll see you next Monday at 1pm Eastern for our daily live broadcast featuring quick hits on AI data centers, bitcoin, Bitcoin mining, Bitcoin tech markets, emerging tech. Give us a like and subscribe. Leave us a review Check out our newsletter newsletter block space media.com this show is brought to you by CleanSpark. NASDAQ listed ticker clsk I'm Charlie. I'm Colin and we will see you on Monday.