Podcast Summary: TFTC #664 – MicroStrategy's Perpetual Preferred Strategy Explained with Jeff Walton

Podcast: TFTC: A Bitcoin Podcast
Host: Marty Bent
Guest: Jeff Walton (Strive)
Date: September 24, 2025

Overview

In this deep-dive episode, Marty Bent is joined by Jeff Walton to dissect the evolving world of Bitcoin treasury strategies, with a particular emphasis on the innovative perpetual preferred equity products pioneered by MicroStrategy. Jeff shares his personal journey from reinsurance into Bitcoin, discusses Strive's landmark acquisition of Semler, and together they explore the mechanics, opportunities, and criticisms of the burgeoning Bitcoin treasury company sector.

Key Discussion Points & Insights

1. Jeff Walton’s Transition to Bitcoin Treasury (00:38–05:04)

• Career Pivot: Jeff shares his move from reinsurance broking—focused on capital markets and volatility—to diving headfirst into the Bitcoin treasury space.
• Transferable Expertise: His experience in risk, structuring products, and capital allocation proved directly applicable in the Bitcoin world.
  • "Literally every single thing that I was doing in the reinsurance world was applicable to the what, what was happening here in the bitcoin world." (01:33, Jeff)
• Joining Strive: Jeff joined Strive after being added to their independent board to help grow their future Bitcoin treasury business.

2. The Macro Landscape: Why Bitcoin Treasuries Matter (06:33–09:14)

• Room for Growth: Despite thousands of banks, credit unions, and insurers, only a handful of US companies hold Bitcoin publicly.
• Product Differentiation: Companies can offer reduced-volatility, Bitcoin-exposed securities with unique operational “kickers” (e.g., healthcare).
• Vision: Long-term, Jeff foresees every company eventually holding Bitcoin, creating a fundamental shift in how risk is managed in capital markets.
  • "Ultimately, my perspective is every single company on the planet will eventually be holding Bitcoin on the balance sheet." (06:54, Jeff)

3. The Semler Acquisition & Strive’s Approach (09:14–12:52)

• Cashless, Stock-Based Deal: Strive’s acquisition of Semler was a fully stock-based transaction focused on maximizing Bitcoin per share accretion.
• Credit Synergy: The merger improved their combined collateralization rating by 200% on existing convertible bonds, allowing access to bigger pools of capital.
• Healthcare Angle: Leveraging expertise from key stakeholders like Vivek Ramaswamy, Strive aims to enhance Semler’s operating value, especially in preventative health.

4. Recent Criticisms and Market Performance (12:52–19:45)

• 2025 "Paper Bitcoin Summer": Performance woes led critics to question Bitcoin treasury strategies.
• Long-Term Perspective Needed: Jeff likens impatience to calling Bitcoin dead during its early price crashes.
  • "It's equivalent to saying, you know, I bought bitcoin at a hundred dollars in 2011 and then it goes down to $3 and it's dead." (13:44, Jeff)
• Optionality from Treasury: Even companies in trouble gain strategic options from holding significant Bitcoin.

5. Institutional Appetite & Market Dynamics (19:45–22:50)

• Equity vs. Debt Appetite: While equity capital is currently being lured into AI and other hot sectors, institutional demand for Bitcoin-backed convertible bonds and perpetual preferreds remains strong.
• IPO Buyer Dynamics: A portion of IPO participation is driven by arbitrage, with institutions flipping securities post-issue, while the retail buyer segment is still evolving.

6. Impact on Bitcoin Supply & Market Structure (22:50–27:21)

• Permanent Holders: Companies acquiring massive amounts of Bitcoin are becoming “permanent capital,” shifting coins from short-term “weak hands” to long-term corporate treasuries.
  • "Coins are moving from weekends to strong hands in these companies that are holding bitcoin as permanent capital." (24:42, Jeff)
• Financialization & Product Familiarity: These instruments provide mainstream investors with Bitcoin exposure in the financial vehicles they already use.

7. Comparing Products: Risk Profiles & Perpetual Preferreds (27:21–34:28)

• MicroStrategy’s Suite: MSTR and four perpetual preferred offerings, each tailored for different risk appetites:
  • MSTR: Amplified Bitcoin exposure.
  • STRF: Senior in capital structure, overcollateralized, perpetual $10 dividend (currently about 9% yield).
  • STRC: Marketed as a stable, high-yield savings alternative with dynamic interest rate and price pegging mechanisms.
• Novelty: First time perpetual preferreds are used as an offensive capital strategy, not defensive.
  • "This is a monumental idea. Has never really been done before...typically in the past perpetual preferred equity has been a defensive move and this is an offensive move by strategy." (27:57, Jeff)
• Digitally Backed Credit: Real-time, transparent 24/7 risk calculation is a paradigm shift versus traditional fixed income.

8. Liquidity, Refinancing, and Market Advantages (37:11–44:25)

• Reinsurance Lessons: The liquidity of Bitcoin-backed instruments could disintermediate traditional reinsurance markets.
• Refinancing Edge: MicroStrategy’s perpetual preferreds have built-in mechanisms for daily refinancing and at-the-market (ATM) raises.
  • "Now you can tap your cost of debt capital daily if you like the terms. And that's not priced in yet." (41:48, Jeff)
• Competitive Yield: These instruments offer superior liquidity and yield compared to corporate junk debt.

9. Broader Financial System Implications (44:25–50:37)

• Bitcoin’s Infiltration: Rather than suits “taking over,” Bitcoin is rearchitecting financial infrastructure.
  • "Bitcoin's taking over financial infrastructure, which is a good thing. Beginning to recap the whole financial system with Bitcoin, which is something that you should want." (44:25, Host)
• Soft Landing & Capital Migration: As legacy institutions struggle to manage risk and returns, capital will flow to managers using Bitcoin-backed products.

10. Mainstream Adoption: When Do “Normal” Companies Join? (50:37–54:59)

• Case Study—Figma: Figma’s IPO revealed a significant Bitcoin position, seen as an inflection point for tech company adoption.
• Incentives: As the risk-reward gap in traditional equities widens, and pitches become more compelling, even “non-Bitcoin” companies will turn to these financial instruments.
  • "If you go issue this security and you've got the security of your balance sheet to cover it, there will be pitches to those companies that just makes so much sense that they can't nod to it." (52:11, Jeff)

11. Market Mispricing and the S&P 500 Debate (54:59–64:30)

• Equity Market Risk: Jeff argues that equity risk is globally mispriced, particularly given companies’ reliance on future cash flows versus actual capital held.
  • "I truly believe that risk is mispriced globally across equities and fixed income." (52:11, Jeff)
• S&P 500 Inclusion: Despite MicroStrategy’s massive Bitcoin holdings, they remain excluded by committee decision, while companies like Coinbase, Block, and Tesla are already included.
  • "There's a committee. There's people that have to make a decision onto, onto whether or not a company gets included or not. Which is so funny and ironic for the S&P 500." (61:36, Jeff)
• Reflexivity: Being added to the S&P 500 could dramatically amplify passive flows and credit quality for these companies.

12. Market Psychology & The Hated Trade (66:31–68:32)

• Cultural Divide: The strategy is “hated” by both traditional finance (who don’t understand Bitcoin) and many Bitcoiners (who distrust leverage and “Wall Streetification”).
  • "This is so hated because people don't understand. So many people don't understand bitcoin in the traditional financial world, but they understand leveraged finance. And then so many of the bitcoiners don't understand. They don't understand leverage finance." (66:47, Jeff)
• The Repricing Ahead: Walton foresees a slow, then sudden risk repricing as education accelerates and more capital moves in.

Notable Quotes & Highlights

• Macro Bullishness:

  "Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for bitcoin."
  — Jeff Walton (00:22)

• Strategic Imperative:

  "We're aiming to be the meta planet of the United States with a clean balance sheet offering what is an amplified equity product today and in... the future."
  — Jeff Walton (08:02)

• Risk Repricing:

  "Risk is mispriced globally across equities and fixed income."
  — Jeff Walton (52:24)

• Paradigm Shift:

  "These typical fixed income instruments are very illiquid because they're not like digitally traded, they're over the counter. And I think that will start to change and evolve as capital structures of corporations evolve over time."
  — Jeff Walton (43:33)

• Critique of Market Inclusion:

  "The S&P 500 is supposed to be a passive inde and then you have people that are actively making decisions about what goes in and out of the index."
  — Jeff Walton (61:44)

• On Buybacks vs. Bitcoin:

  "Alternatively, they could be buying bitcoin, which is effectively buying bitcoin and derisking their future balance sheet with something that has significant growth potential."
  — Jeff Walton (55:30)

Timestamps for Important Segments

• 00:38 — Jeff's personal journey from reinsurance to Bitcoin
• 06:33 — Macro landscape and the proliferation of treasury strategies
• 09:14 — Strive's cashless acquisition of Semler; strategic rationale
• 13:44 — Addressing criticisms of the Bitcoin treasury model
• 20:14 — Institutional investor appetite for perpetual preferreds and related offerings
• 24:42 — The effect of large-scale corporate Bitcoin accumulation
• 27:57 — Deep dive on MicroStrategy's product suite and risk structures
• 37:11 — Liquidity advantages: Real-time refinancing in the Bitcoin era
• 44:25 — Philosophical implications: Bitcoin as the new financial infrastructure
• 50:37 — When will mainstream (non-Bitcoin) companies adopt these strategies?
• 54:59 — Risk mispricing in equities and prospects for S&P 500 inclusion
• 66:47 — Why the Bitcoin treasury trade is "the most hated rally"

Takeaways

• The Bitcoin treasury movement is still in early days, with significant learning and maturation ahead.
• Perpetual preferred equity structures are transforming capital markets and providing new vehicles for both retail and institutional exposure to Bitcoin.
• Legacy finance and "Bitcoin purist" camps both struggle to appreciate the innovation at play.
• The eventual mainstreaming of these strategies could dramatically shift risk pricing, market structure, and Bitcoin's role as collateral in global finance.

This episode is a must-listen for anyone interested in Bitcoin’s integration into institutional finance, the evolution of capital markets, and the structures underpinning the next wave of financial innovation.