← THE Bitcoin Podcast
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- [00:00]
Joe Consorti
If we have another bout of high inflation as a result of the straightforward moves remaining closed for the rest of the year, you're going to see 10% inflation for the end of the year. And in that event, you see a huge recession. In that event you see everything sell off and then you see the Fed slam rates to zero. So the two scenarios going forward for bitcoin are. He said we are entering into an era of systematically falling prices, which is something that Fed chair has never said as far as I can recall. Strategy has proven they could sell a fat amount of bitcoin. Their biggest sale ever. Bitcoin won't care.
- [00:29]
Walker America
Is the the bottom in if the bottom's not in when is said bottom coming, if ever.
- [00:34]
Joe Consorti
The reality is, guys, a fixed income product going down in price simply means that the market wants a higher yield. That's the flywheel. And now the Ponzi argument is officially dead. Two years from now, three years from now, four years from now, and Bitcoin's at 350k, they're going to be awfully silent.
- [00:59]
Walker America
Joe Consorti, welcome man. We have done. You've been on my well, rest in peace, my rocksome streams. But you were on at least one of those. You've been a frequent guest on Bitcast as well with the boys. But welcome to the bitcoin podcast. Stoked to have you here, man.
- [01:16]
Joe Consorti
Yeah, thank you so much for having me, Walker. Always a blast. So happy to be chatting in this slightly different format where we don't have any commercial bricks.
- [01:23]
Walker America
No, no, no commercial breaks whatsoever. I even fewer filters than before, which I was never very good at filtering myself anyway. Perhaps that's part of the problem. But okay, bunch of stuff I want to get into with you today. You first of all, for anybody who's not following you, they should be doing so they should be doing it on x and on YouTube. We're going to get you on Noster as well. We just discussed that off camera so we'll get you over there on the sovereign web. But you put out fantastic analysis and I think it's really resonating with people. You typically do kind of mid length content. You break a lot of stuff down. You just had a video yesterday we were talking about off camera. You broke down like five different factors that are influencing bitcoin and macro environment and like it was all like within 10 minutes. Super nice, super tight, really approachable, well done on all that. I want to expand on some of those things a little bit. Want to talk about sort of the overall. Let's say vibe check on the bitcoin where bitcoin is right now, where it's going. Because I think the big question on everybody's mind is, is the bottom in? If the bottom's not in, when is said bottom coming? If ever is bitcoin dead? And then also on sort of the, the strategy front, that was another thing you broke down in your video around this bitcoin sale and you pointed out something very interesting about a similar sale that they made and what that sort of signified from a cycle perspective last time around. So maybe we can just start out like gut check with you on where you are feeling bitcoin is at right now because I see a lot of bearishness still. I also start, I'm starting to see I'm, I've never, I've never stopped being bullish. So I'm not a good indicator. Right. I'm just, I'm, I'm like, I'm always bullish. So it's not really telling you much. Where are you at? Has your sentiment changed? Has your perception of external sentiment changed? Where do you think we're at right now?
- [03:21]
Joe Consorti
Absolutely. By the way, that was. There's a fly in my room for some reason in my office. I literally saw.
- [03:26]
Walker America
I've got one in here too. So don't worry. I've been trying to read this thing for days anyway.
- [03:30]
Joe Consorti
Yeah. So where we are in the bitcoin cycle, that was hilarious. Someone's going to clip that.
- [03:35]
Walker America
The.
- [03:36]
Joe Consorti
Basically there are a couple of things going on here that lead me to believe we are in the bottoming range, but maybe not near the bottom. So first and foremost, like one of the biggest headwinds for bitcoin since February has been the war in Iran. So obviously the war in Iran has been raging. The Strait of Hormuz has been closed as a result of that until mid June when it opened. And now there's live fire in the strait again. We're sinking Iran vessels like it's battleship and as a result of that, it threatens the, the strait to close back up. So the Strait of Hormuz is responsible for transporting 20% of the world's oil supply. Now it's quite significant because it doesn't. When you when shut the straight of amuse, you're not just causing a 20% price spike in oil, you're causing a 50 to 80% price spike in oil. And you could actually see it. I'll share my screen here. You can see just before the war, as tensions were escalating, cli which is the WTI crude oil future for the front month, started elevating a little bit. The war kicks off. All of a sudden we go from where we were, which was $65, up to $120 thereabouts. So it had a 100% price increase as a result of shutting off 20% of. And it goes to show just how critical the straight is. Now, obviously it began actually trending down in advance of the straight opening back up. Obviously two reasons for this. Number one, these are futures contracts. So these are a way for people who deal in oil in any way, shape or form to hedge themselves. And so it was falling in anticipation of this trade opening back up. But more importantly, it began falling as a result of other countries dredging up oil more cheaply and more efficiently. So the United States, like the, the amount of oil fracking that we're doing is extremely high right now as a direct result of the Strait of Hormuz relatively being being shut. Now, when it opened in mid June, you can see it fell basically to pre war levels where we were prior to the war, more or less. And then Trump gets up two days ago like a baller and says on, on camera, for whatever reason, he says, we're gonna bomb Iran right now or something like that. Easy. Like the ball's on this guy, right? And so then like lo and behold, unfortunately, the price spiked from 68 bucks all the way up to 70, over $75. 76. And we're in the era of elevated oil again, as the straight now becomes a bit of a war zone. Now, that's not to say now two things here. So the reason this was a massive headwind for bitcoin is because obviously bitcoin and all other assets hate geopolitical uncertainty, even gold, right? The safe haven du jour hates uncertainty. At the very least, it hates when all of a sudden countries bombing each other. And so, number one, it's been a major headwind for bitcoin as a result of that. But number two, and most importantly, and this is why I always encourage people to think in terms of second and third order effects rather than what's simply presented in front of them, is that when oil prices rise, obviously oil is an input for basically everything in the global economy, not to mention, right, gasoline prices, diesel prices, but just about everything else too. And so when oil spikes, you have sort of this cascading effect of price increases that ripple throughout the global economy with about a 4 month lag all throughout the world, right? And so as a result of that you're only just now as of the June print. Remember, the war started in February, the Strait closed in February. You're only starting to see elevated inflation now. Why is that substantial? Well, elevated inflation, we're above 4.2% for the first time in like four years, drives the Fed the likelihood of a Fed rate hike up. And obviously Bitcoin doesn't like that. Bitcoin likes easy money when you're in a regime of tightening monetary policy. So interest rates rising or policy rates rising, rising rather, and the balance sheet being reduced, Bitcoin doesn't like that. In fact, Bitcoin topped in 2022 right around the time when the Fed began hiking interest rates and reducing the balance sheet, or at least attempting to. Bitcoin managed to do its massive run up from 16k only after the Fed stopped raising rates and it stopped expanding its balance sheet. That said, Bitcoin can perform well during tighter monetary regimes. However, now instead of continuing to cut, which was the initial plan, that was the initial forecast for this year, now rate hikes are back on the table as a result of elevated inflation. That said, there's so many layers to this. And so as a result, bitcoin sold off. The reason I'm actually betting on cuts this year, well, two reasons. I think the Straight is going to remain open, or at the very least people are still going to find a way to transport their vessels through the Strait. The reason it opened up in mid June and I said that there was a four month lag for price inflation. The reason it opened up in mid June is because the midterms are coming up and the Republicans, unfortunately expending what little goodwill they have with their constituents, are at risk of losing. They're at risk of losing the House, losing the Senate, all of it. And as a result of that, they need to really pull out all the stops. So one of the things that you can try to do is make it so that you have disinflation or falling inflation. And so the Strait of Hormuges opening up when it did was no coincidence. And for that same reason, I think at the very least vessels will remain transporting through it. The other component is I don't think the Fed is actually going to hike rates. And I said this a couple of weeks ago. I said this when Kevin Warsh went up there and started talking about how he wanted to bring more accountability back to the Fed and he wanted to, you know, repair the damaged reputation of the Federal Reserve. He was saying a whole bunch of stuff about how he was going to do that. And rate hike expectations soared. I was saying that there's no shot the Fed raises rates in any material way because they can't. And if they do, it won't actually matter all that much because ultimately the inflation that we're feeling now is as a result of oil. The oil shock that I just described and went through the charts on, as opposed to a ton of money printing that drove the inflation. So typically the monetary inflation leads to price inflation where rates get slammed down to zero. The Fed expands its balance sheet by printing money out of thin air. And then credit gets lent and money gets lent into existence because credit conditions are so loose. So every time consumers go to the bank, they're, they're creating new money. This inflation wasn't caused by that. And so therefore it cannot be fixed by raising interest rates and reducing the balance sheet. It was caused by a supply shock. So like believe it or not, for the viewers watching this live now, and all of you guys know this, like the Fed doesn't actually control the price of things, right? It only controls the price of money. It sets the rate at which banks can borrow and lend between one another and in doing so in influences the borrowing rates across the economy. And so when oil spikes in price, and Lyn Alden said this as well, the Fed can't do anything about that. They can't control the price of oil. The only thing they can do is they have two levers. They have their balance sheet, they have policy rates. Neither of those are going to fix an oil spike. The only thing that fixes an oil spike is opening the strait. That's why you saw it happen. And so when a lot of people were seeing price inflation come in at 4.2% in June, and then Kevin Warsh get out there and adjust his tie and say we're going to be responsible, I said no, it's not going to happen. Because the only thing that's going to happen if you raise interest rates is you're going to choke the consumer who's already choking. And lo and behold, rate expectations are now coming back down to earth. So we now only have less than one rate cut. Actually quite insane. I thought it was even more than this, but I suppose not. Originally it was three rate cuts between for this year and now it is just one rate cut this year. You can see the current target rate for the US Fed funds rate is 3.75%. This is the implied rate as of March of next year. So over the next seven months, nine months rather, we are only pricing in eight months. Excuse me, we're only pricing in one rate increase, one 25 basis point rate increase from 3.75% to 4%. This used to be like three or four a couple of weeks ago. So it's already coming in as a result of these strait of Hormuz opening at the margin, oil prices collapsing to where they were. I promise all of this is relevant to Bitcoin. Now, the reason this is also significant, right? The reason that oil price is collapsing is so significant and why it's still a bit of a risk to Bitcoin is obviously because I mentioned Fed policy rates being set. That matters quite a bit for Bitcoin's direction and whether or not we are actually close to the bottom. If the straight of Hormuz really closes up, right, if the sphincter really tightens, as it were. That's a very kind way of, of talking about the Middle East. If the sphincter really tightens as it were, then ultimately what's going to happen is oil prices may go back to where they were. And as a result, that disinflation that you would have otherwise experienced over the next four or five months, with inflation maybe going up to like 5, 5 and a half percent, then coming all the way back down to sub 3% and then foaming the Runway for the Fed to not do anything at all. And obviously assets will love that, Bitcoin included. All of a sudden you have the risk of the Fed needing to cut or needing to raise rates, or at the very least the risk of an inflationary recession, which we haven't seen since the 70s, where prices have just risen way too much over the last half decade. Remember, we had 9.1% inflation in 2022. If we have another bout of high inflation as a result of the straightforward moves remaining closed through the rest of the year, you're going to see 10% inflation for the end of the year. And in that event, you see a huge recession. In that event you see everything sell off and then you see the Fed slam rates to zero. So the two scenarios going forward for Bitco, either we just take one more leg down for the heck of it, into the low 50s, where there's just a completely insane amount of support. Such a huge confluence of not just buy orders on the order book, but also a ton of on chain indicators, like signaling that's the fricking bargain basement floor. We just take one more leg down for the heck of it and chop around till October. Or we have an inflationary Recession before the year is out, everything sells off. Because of that, Bitcoin goes much lower than expected. But then on the other side of it, the Fed cuts rates and prints into oblivion to salvage the economy and prevent massive deflation. So that's sort of the way I'm viewing the macro backdrop going forward. Iran is still the number one concern, but like always, keep the back of your mind between now and midterms. They need the stock market to go up, they need it to go up and they need price inflation to come down and they're going to do anything they possibly can to do it. One other funny thing is, like, if the street of Hormuz doesn't close, I'm betting on stimulus checks because even though it's totally counterintuitive, like what else are you going to do if price inflation is, remains where it is? Trump is already talking about like gas stations lowering their prices and taking a loss voluntarily. Right. So if they're willing to do that, if they're willing to subsidize gas stations so that Americans can see lower gas prices so you could buy some votes, like nothing's off the table. And so if the straight remains closed, I wouldn't rule out stimmy trucks.
- [14:39]
Walker America
Well, okay, bunch to unpack there. And I, I love the breakdown. That was.
- [14:43]
Joe Consorti
Sorry about that. I went for like 15 minutes.
- [14:45]
Walker America
Like I said, never any apologies for Rand's tangents, digressions or deep dives on this show, Joe. So put your saris in a sack, throw them in the river with a bunch of rocks, let them drown. I did see that. I just. Today I saw that. I forget what they're calling them, like Freedom stations or something like that. They are rolling out these, these gas stations that are. And I looked into this just a little bit. I haven't gone deep down the rabbit hole, but I looked in. Apparently they're privately owned. Still, there's an. Let me find what it, what they're called. It's free Freedom Fuel Stations. They're selling at like a 50% discount to prevailing market rates, which was interesting to me because I'm pretty sure the typical margin, the typical gross margin for a gas station operator is like maybe 30 cents on the gallon, like, you know, maybe. So I don't know how they're basically. And Trump, the administration is claiming there are no, there's no subsidies being given right now. I don't know how this could continue without some sort of subsidy, but okay, they're coming. There's no subsidy given right now. It's Owned by some private llc. I don't know if people are just doing it for branding and then they're trying to mark up the already higher margin items within their store. You know, they're going to sell snickers bars for 10 bucks a piece or something like that. I'm not sure what the plan is here, but it's interesting to see and I think that that really supports your point. Also sort of on the. I want to take a jump back to the Fed piece there because I think that a lot of people, when Warsh was coming in, the prevailing narrative that I never totally bought was that Warsh is actually pretty hawkish. You know, he's pretty. Pretty hawkish or he's a. Well, what was the one they heard? Like he's a balance sheet hawk, but he's an interest rate dove or, you know, or something, or the opposite. I forget exactly what it was, but I just never quite bought the narrative that Warsh was going to herald this even more like more hawkish administration at the Fed that just never quite sat right with me. And it sounds like you're saying the same sort of thing. Like, look, we know he was put in there to do a job. Yes, the Fed is of course independent. It's a public private institution. It would never be influenced by the, you know, by the administration. But of course I believe that. Yeah, but I believe that. I believe that Warsh has breakfast with besant like every week, which nothing wrong with that, you know, I think they're buds. But mean, it seems like that's just improbable that Warsh is going to herald this very hawkish Fed term here. It just doesn't seem like that is going to be palatable. And as you said, going into midterms, one of the biggest determining factors as to whether the incumbent party in power, which is already at a little bit of a disadvantage typically going into midterms. But what really puts them as a disadvantage is if people think the economy is shit, and if people think the economy is shit, they get smoked. Like, you can look back at this data. So I mean, do you think that, do you think that Washy, you talked about one rate hike now being sort of priced in. I mean, do you even think we see that or do you think it ends up being maintain, maintain, maintain, and then, oh, you guys, we gotta cut, we gotta cut, we gotta cut to save the American economy. And we're gonna change our. Because we've actually started looking at inflation differently. We're gonna look at trimmed mean pce or whatever that is. Maybe you can explain that one a little bit, but what's your read on that? Do we actually even see a cut out of warsh? 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- [21:36]
Joe Consorti
Yeah, I don't think we see any hikes because, like, the only thing hikes will do is hurt the consumer. And ultimately at this point in time, the consumer is all that matters. The end user is all that matter. Every four years, every two years, rather, more importantly, every four years. But we're coming up on midterms now. The government pretends to care about you. What I've begun saying is I've evolved a little bit in my political thinking. I used to be like, oh, I don't really care. And then it's like, ah, both sides hate you. And now I've evolved to the reality that, like, you must play the game or you will get killed. One side hates you a little bit less. You know, both sides hate you, one side hates you a little bit less. So vote for the side that hates you a little bit less. And so, but ultimately, every two years of show, they pretend to care about you. And this is one of those times. And so you sort of. I like that you brought up like, Warshin Besant eating breakfast together every week because those guys used to work together for Stanley Druckenmiller and for George Soros. And so it's like, you know, George Soros, like on the, not on the political front, but on the investment front. But either way, like, working for Stanley Druckenmiller, working for Soros, breaking the bank of England, that was just, that was just best. And that wasn't worse. But either way, like, they know what they're doing and they're a good tag team and both of them know it. And so, like, ultimately, Besson's job is to make sure that it can fund the US government. But the secondary and perhaps more important job, the long run, is making sure that you secure US dollar hegemony. And one of the easiest ways to ensure that is making sure that the Fed chair that gets elected, the Fed chair that gets nominated, rather by the president, is one that will do your bidding. Right? We're in a situation now in this country where it is like the notion of Fed independence, it's something that, that everybody already knows is fabricated. It's like it doesn't exist anymore. It really never did. But now the mask has been fully off. And so like we're not even trying to pretend anymore, number one, that the Fed is an independent institution. But number two, and this is the more important reason behind it, is because we're at a state in our country now where our debt to GDP ratio is just so high, it's the highest it's ever been outside of wartime. The amount of debt that we have to roll over at at the current interest rate levels is completely obscene. You have the 30 year yield at 5% still, you cannot do that for a very long time. And so what you need is basically a new Fed treasury accord where the Fed decides to work with the treasury and make it so that policy rates are always accommodative of the US treasury so that yields don't drift too far high and it's much easier to fund the government that way. So why do I say this and how are they going to accomplish this? Well, it's quite clear that that is why picked the person he was going to pick. He said so many times that rates are too high, rates are too high, too late. Powell, whatever. Whoever he picked, and he picked Warsh, was going to cut interest rates and do his bidding. It obviously stands to reason that the person who gets nominated would pretend that they're going to be balanced. You're not going to go in there and then throw MAGA hat on and do the YMCA dance and say, yeah, I'm going to, you know, cut rates right now. Right? You know, the thousand year MAGA republic or whatever, right. And so it's like, obviously you're going to get up there, put on your tie and like Warsh does seem like a pretty balanced dude, but the reality is that like, you know, all of it's an act for the most part. He is working with Scott Besant. It's not even like remotely conspiratorial to suggest it because he's now come out and done two things. Number one, he is, he is sort of foaming the Runway to justify rate cuts, even if the inflation data doesn't really necessitate it. For one, he's talking about using a new measure of inflation called trimmed mean pce. And I'm glad that you brought it up. Basically, trimmed mean pce. What it does is it's like, it's like a rank order of all of the things, all of the price increases to the basket of goods that they set over the last month and then they strip out all of the edge cases. So all of the Stuff that massively inflates and actually impacts your life. They cut it away to make it so that they're cutting out the extremes. They can get a more accurate beat on inflation. Even if, let's say, for example, gasoline prices go to 15 bucks a gallon, guess what in trimmed mean PCE. And, you know, some might argue, I was on Mark Moss's show yesterday, some might argue that, you know, whatever did cause gasoline to go to 15 bucks a gallon was transient. It's temporary. Chances are a price spike like that will resolve very soon. And so it makes sense to remove the edge case. But regardless, like, what if it doesn't? What if gasoline prices remain elevated for a very long time and you have persistent, you know, 2% monthly inflation or something like that on gasoline prices, which would translate to a crazy amount of inflation on an annual basis, 30, 40% trimmed beam, PCE. Basically what it does is it would remove that entirely. So the argument is that it makes for a more reliable measure of inflation. But the counter, and this is sort of the one that I believe, is it simply makes for a measure of inflation that can say whatever the Fed wants it to say to do. Whatever the Fed wants to do. And what the Fed wants to do lines up with what the treasury needs to do. And what the treasury needs to do is cut rates. So that's basically all it is. So that's the first reason he gave, and then the second reason he gave to sort of foam the Runway and lay the groundwork to justify and rationalize rate cuts down the line is that he said AI is going to have a big disinflationary impact. Chances are we are in. He said, like, beat for beat. I think this is the exact quote he said. We are entering into an era of systematically falling prices, which is something that a Fed chair has never said as far as I can recall. But it's also the reason that the Fed has this dual mandate in the first place. The reason it wants inflation in the first place is because in their mind, in the Keynesian mind, all 70 IQ points of it, learning disability threshold, by the way, they basically are of the belief that if prices didn't go up forever at a reasonable pace, then people would stop buying things, which is like such a stupid thing to think on its surface. Like, let's do a thought exercise, everybody. Let's say a mother can't breastfeed if the price of baby formula is going down. Do you think the mother is going to say, oh, gee, I'll wait until next month to buy the baby formula, because if it's going down now, it's going to keep going down. So then she just never feeds her baby and the baby dies. Like, obviously not beyond a certain point. Of course people will delay their purchasing of some things, but it's like for mostly everything, no, if you see prices go down, you're actually going to buy more. Right. Anyway, that's the way that they rationalize inflation and that's one of the reasons that ironically they're trying to make it seem like inflation is actually lower than it is using trimmed mean PCE and then also justifying rate cuts by saying that AI is going to have a deflationary impact on prices. I agree with the second point. I actually do think that that's the case. Like, you know, just in my own work, like AI has been massively helpful in my day to day. In my mind, it will have a massive disinflationary and deflationary impact where it will drive the cost of goods and services in everyday life lower. But on the other side of that, as I mentioned, Keynesians can't have that and so they're going to use it as reason to print a crap ton of money. So, yeah, that's basically in a nutshell, the sort of the, the new Fed Treasury Accord being assembled. Why I don't think we're going to see a hike out of Kevin War. And if anything, we just see rates on hold until a crisis occurs and then you see them cut like every other Fed chair does.
- [28:46]
Walker America
Well, the one thing that's always guaranteed is another unexpected crisis. Right? That's the nice thing is that you always know there's going to be another completely unexpected crisis and it always requires some sort of extraordinary measures. That seems to be kind of the
- [29:01]
Joe Consorti
two weeks to slow the spread, everybody.
- [29:04]
Walker America
Dear Lord. Yeah, that digression. But I mean, it is just, I don't know if it's, it's incredible to me that there was never any like, admission of, you know what guys, maybe all of us who were like really freaking out about this and said that, you know, anybody who didn't follow our exact dogma was like the worst person in the world. Maybe we overreacted just like a little bit, but I don't think that that's possible. Like you, you know, in the modern political climate, I think it's, it is, is untenable to admit that you are wrong about something or were wrong, because then it's like, well, what if I'm wrong about this other thing now? No, no, better to Shut out those scary thoughts and I'll just keep doing what I'm doing, even though it's proven. It's like communism. Right. It's like you just. You try it again and again. There's a hundred million plus people dead over the last century, but you just. You just push those inconvenient facts away and you just. We. We're gonna do it this time because look at how good our new guy, our new commie is at social media. So it'll be fine now, guys.
- [30:00]
Joe Consorti
Don't worry.
- [30:01]
Walker America
It's. It's all. It's all good. It's all good.
- [30:03]
Joe Consorti
Exactly. Yeah.
- [30:04]
Walker America
This.
- [30:04]
Joe Consorti
This. Instead of being Asian or Russian, he's a Muslim now, everybody. Right? Like, where, you know, is the. The minute. Stupid, silly differences, like, oh, we threw the word democratic in front of it this time, which means, you know, rainbows and sparkles while we send you to the internment camp, you know?
- [30:20]
Walker America
Yeah. It's like, you know what? That democratic socialism might just lead to a little more national socialism if they're not careful. But, you know, they probably don't even know what that means. So, you know, it's okay.
- [30:29]
Joe Consorti
We can.
- [30:30]
Walker America
We can make jokes about it.
- [30:31]
Joe Consorti
They have no idea. They have no idea that that's. Yeah, they've never heard of national socialism before. They may use the word Nazi every other day, but they've never heard of national socialism before.
- [30:41]
Walker America
Books are hard, though, so. They are really hard. You have to read.
- [30:45]
Joe Consorti
Well, actually, adult literacy is. It's only 30% these days. Excuse me? 70%. 30. I had the stat. Yeah, it's still crazy.
- [30:55]
Walker America
Illiteracy is 30% in adults.
- [30:57]
Joe Consorti
Yeah, dude, that's.
- [30:59]
Walker America
If you look. Oh, this is. We're taking this digression because it's too interesting. First of all, that's like. That's just insane.
- [31:05]
Joe Consorti
Right?
- [31:05]
Walker America
Like, we. We got up to a point where basically everybody was literate, and then now we've just been on a decline.
- [31:11]
Joe Consorti
And guess what they get.
- [31:12]
Walker America
Childhood. Oh, I know. That's the crazy thing. See, this is the fundamental problem with democracy. Like, democracy is kind of like communism in that it sounds really good in theory, but then it's like you're like, well, maybe the whole. Maybe the Athenians had, like, had something. Had something right in terms of how they structured their democracy. You don't just let anyone vote because, like, some people are really dumb and shouldn't probably be trusted with these sorts of things. But that's the problem with democracies. It's like, it doesn't matter if you are a, you know, 160 IQ or if you're a 40 IQ, like your, your vote is still your vote. Like you're, you're all equal in the eyes of the ballot box. And by the way, those ballot boxes can be stuffed. But I, I digress. I, I want to, I want to shift gears slightly because I want to make sure that we get into this. And this is another thing that you covered in this video from yesterday and people should go check it out if you want the very much TLDR on this show. You should keep listening to this one, of course, but go check out Joe's channel as well. Joe Consorti on YouTube. Yeah. After this to make sure you understood the concepts. Use it as a quiz for yourself. But you were talking about the strategy sale of a pretty good chunk of bitcoin. I've seen a lot of different takes on this. The primary take that I've seen is a lot of like, like teeth gnashing and saying, but, you know, but he said never sell your bitcoin. And now he's. The strategy is selling the bitcoin. Yeah. And it just like, it just feels really like very reductionist. And I, I, I, I get it but like I don't understand how that people don't have a concept that like his, he has a fiduciary duty to his shareholders. Now granted, the share price may not have been performing super well lately, but like everything he does needs to be in service of that.
- [32:51]
Joe Consorti
Right.
- [32:51]
Walker America
It's not in service of your opinion of what you think you should do. That being said, everybody should let me clarify this again because I've been called an MSTR shill a lot recently because I do own some mstr. I would never recommend that anyone else buy anything but bitcoin. So I will recommend that again, don't buy anything else but bitcoin. Or do. I don't care what you do with your money, but that's all I'll recommend. Not financial advice, just monetary advice. Now that we cleared that up, can you unpack what you think is the biggest misunderstanding around what strategy is doing right now?
- [33:21]
Joe Consorti
Yeah, it's a really important thing to discuss. And look, here's the thing. I don't even own an emstr. I don't own an astrc. I'm in a really high growth phase of life, so I could stomach mstr. But the thing is I like, I have a pretty fat bitcoin stacking goal that I'm about to hit and I'm not going to buy anything else until I do. And it's like, you know. And so for me, the reason I don't is own an ASTRC is like I'm in a really high growth phase of life. I am not a fixed income person. As of right now. I was even talking to Mark, I just mentioned a Moment ago, he's 51, 52, he doesn't even own any strc even. He is not in the cash flow phase of his life. And so it's like, but why am I staunchly defending these instruments? Well, it's like I just am allergic to retarded stuff. Pardon my language. And when people are coming out, really prominent bitcoiners who I respect are coming out and saying things like oh my gosh, guys. So the argument vary, right? Some people say it's either microstrategy or strategy is in a death spiral, which we'll talk about in a moment. Why definitionally that is just completely demonstrably false. Number two, they're going to be a forced seller of bitcoin and that's going to create a ton of systemic risk to bitcoin. And then number three, they're marketing shitcoins at bitcoiners. So let's attack all three. Number one, the whole strategies in a death spiral notion. Basically what a death spiral is. You've had James Lavish on before. If you haven't you obviously spoken to him, most people have talked to him. Death spiral has been a term in markets for some time. James Lavish is the guy who sort of introduced it into the like bitcoin macro space lexicon. Basically what it is, is when and it, this is specifically about the United States Treasury. We have a ton of funding needs. All of a sudden when rates are as high as they are, you have an in a really big interest expense on your outstanding debt. So to finance that, what do you need to do? You got to issue more debt. But then guess what, with rates staying where they are, that's an even bigger interest bill. And so it's an exponentially worsening SP where you have to accelerate your debt issuance, right? And so you're basically eating yourself. And then the marginal buyer of that debt becomes the Federal Reserve. So the debt, debt spiral, that's what it is. You're basically a snake eating its own tail. You issue this thing into affinity to fund your own obligations. Right now it doesn't make an ounce of sense for the MSTR complex. Speaking specifically about stretch. So for one, stretch is a perpetual preferred word, equity, perpetual keyword, meaning there is no due date. There is no maturity date, There is no convert by date. Right? So the debt never comes due. Number two, it's an equity, so it's not debt. Right? It functions similarly to fixed income in that there is a dividend yield. Dividend yield. Not a rate, but a dividend yield. And guess what? Because it's an equity, that dividend yield can be set by the committee. It can be brought all the way down to zero if they needed to, but they won't need to. And I'll explain why in a moment. So because of that, they're not actual obligations that they are entitled to make. They will continue making them, but God forbid, if anything happened, they could suspend them. And then, most importantly, they are perpetual, so they run forever. Right now, what has happened over the last couple of weeks is pretty standard, right? So STRC spent most of its life around 90 bucks. Literally most of its life. Go back and look at the chart if you're one of the death spiral people. Most of its life around 90 bucks. Guess where it is now? Right around 90 bucks. Something happened over the last couple of weeks. If you were sleeping, if you were in a coma for the last few weeks, you wouldn't know. But to clue you in, basically what happened is as bitcoin massively crashed, strc sold off quite a bit. It sold off from 100 all the way down to 72 bucks. Oh my goodness, it cratered. But for those of you who are not in the know about how fixed income products work, price and yield are inversely related. When the asset sells off, the yield rises. It is simply the market telling you they want a higher yield. Now, there are two reasons the market could want a higher yield. Number one, they think that you are no longer credit worthy and they want to be compensated for the associated risk with your company. Or number two, the asset that you're buying using the proceeds from this fixed income instrument is going to have higher forward returns and they want a higher yield as a result of that. It's number two, the market literally is just saying, as is the case with any fixed income product, that it wants to be compensated more. Why does it want to be compensated more? Well, did strategy suddenly get less credit worthy? No. Bitcoin is down 50% from its high. And so instead of its forward returns being like 25% a year, 30% a year till the next cycle high, chances are since we're near the bottom, the forward annualized returns between now and the next cycle high are going to be like 50%. And so obviously, if the fixed income product is going to be used to fund bitcoin proceeds and then bitcoin will be sold to fund the fixed income product obligations. You want to be compensated more than 11 and a half percent. So the market sold off to 13%. Roughly speaking, strategy said, hey, we're going to increase the dividend yield all the way up to 12%. Boom. It rises from 72% all the way up to 92%. The death spiral. People go silent like it was crazy. I went on a crypto show just to be like the MSTR person. How dare you? Yeah, right. Oh my gosh. Cross pollinating. No, I think it's good because there are a lot of people over there who need to know this stuff. And the guy that I was like debating with, he, he just, he, he, he ignored every, all of the stuff that I was saying. And like literally within four days, stretch was all the way back up to 90. And on the show he made ridiculous claims like, stretch is never going to go back above 90. It's never going to come close to a hundred. This thing's going to zero. Strategy is going to sell all of their bitcoin. When Strategy sells their bitcoin, the market's going to tank. Well, the reality is, guys, a fixed income product going down in price simply means that the market wants a higher gain yield. Chances are in the case of a company that literally has an 11% leverage ratio, meaning they have virtually no debt, they have a better leverage ratio than most of the companies in The S&P 500 right now, for your information. Right, so the risk of a debt spiral virtually non existent anyway. All it means is that they want a higher yield not because the company is at risk, but in this case because of their balance sheet, because the asset has higher forward returns. Right? So that's number one. Number two, Strategy is going to be a forced seller of bitcoin. I explained why they can't be a forced seller of bitcoin. Because of the preferreds. They're not technical technically debt. Bitcoin isn't collateralizing those products. But let's talk about their other debt. What other debt do they have? Well, interestingly enough, I do actually happen to have. I think I can pull it up here. MSTR Corp. Okay, perfect. We can look at all of their bonds right now and we can actually go ahead and see if any of them are at material risk of actually. Oh my goodness. How do I pull up the bond screen? This is not good. Hold on. Mstr. I'm a fake. Fan MSCR Corp. Okay, perfect. Let's pull up the bond screen and let's see if they're at risk of a debt death spiral, guys, where they're forced to sell their bitcoin. Let's take a look. Okay, let's look at the interest rate on all of these crazy, crazy outstanding bonds that are gonna make them forced to sell Bitcoin. 0.625%. 0%. That one got paid off. 0%. 0.625% 0.875%. 2.25%. Okay, well, even though they're, they're super low, they literally paid off all of their super high yield debt. Well, maybe they're due like tomorrow, so then they'll be forced to sell bitcoin. Guys, when's the nearest one to. Oh, it's not until September of 2028, 26 months from now. Interesting. So basically it boils down to this strategy only has about an 8% leverage ratio, meaning the convertible debt, the debt outstanding, which is all convertible, it's all on screen right now, is about 8% of their total assets on hand, the value of their bitcoin. So in order for strategy to be forced to sell bitcoin, you can see right here, the interest rate on their nearest maturing debt is 0.65%. It's not due for 26 months and there's only about $1 billion outstanding. They have a $60 billion balance sheet worth of bitcoin. So basically what would need to happen is bitcoin would need to fall by like 94% and then stay there for 26 months. Same time strategy would need to have already burned through its entire cash reserve at the same time. They would have not, basically they would, they, they would have not been able to raise a single dollar from capital markets between now and then. Then, and only then would strategy be forced to sell any of their bitcoin. Obviously that's not going to happen. Right now you can kind of see how ridiculous this forced selling of bitcoin thing is concerned. So that's number two. And then number three is that they pose systemic risk to bitcoin. And again, for those of you watching at home thinking I'm like some bag holder who to rationalize all this stuff, I don't own any mstr. I don't own any strategy. I've never told people to buy or strc. I've never told anyone to buy those things. But guess what, right? Like I'm still followed on X by Sailor and he's liked posts where I say I don't own any of it. And I just got followed by Fong after he liked the post where I said I don't own any of it. So, like, the question becomes, why on earth is all this happening? Why are you so staunchly defending them? Because it is such a stupid name notion to say that a company with an 8% leverage ratio where all of their debt is not actually collateralized by the bitcoin and their only existing obligations or obligations they could shut off if they wanted to. Oh, and by the way, there's still only a fraction of a fraction of a fraction of the value of their bitcoin. To say that they're at risk of selling their bitcoin or more importantly, they're at a systemic risk to bitcoin is ridiculous. Right. I'm in the business of telling my viewers and telling anybody, right? The viewers of this show like the truth. I want to equip you with the most, most accurate information. I don't want to lie to you. And so anybody who's been telling you, make note, at least mental note, of the people who've been saying this is a debt spiral is like two years from now, three years from now, four years from now, when Bitcoin's at 350k, they're going to be awfully silent. And then the third thing is there are systemic risk to bitcoin. I just pointed out how they won't be forced to sell bitcoin. But what if they do sell bitcoin? What happens when they choose to sell bitcoin? Well, they literally unloaded a clip of 3588 BTC on Monday or over the course of the prior week, whatever. But the point is they announced that on Monday and the market went up. The market didn't. Bitcoin didn't go to zero. So clearly bitcoin isn't propped up by strategy. Even that 3,588 bitcoin sale, which they did over the course of a week and a half, is still only like a fraction of 1% of Bitcoin's daily volume. So you got guys, strategy has proven they could sell a fat amount of bitcoin, their biggest sale ever, and bitcoin will actually go up. Like bitcoin won't care. And I just explained in no uncertain terms why STRC is not a Ponzi scheme, why it's not going to zero, and why strategy is not at risk of a debt spiral. They won't become a force liquidator of bitcoin it's ridiculous. Make a mental note of anybody who's chimping out over this thing.
- [44:19]
Walker America
Do you think and great breakdown. First of all, do you think the, the sort of. I know what Fong and I think Saylor has said as well, talking about inoculating the market against the idea of strategy selling. I mean that thesis seems to be playing out. The fact that we didn't see a massive sell off on the news that strategy sold a fat stack seems to be indicative of the fact that the market is at least somewhat inoculated to this. The market seems to have responded, responded positively to it. Which goes against again everybody, every doom and gloomers predictions that well when strategy sells it's all over man. Like and it just, it's like that's just, that's just not reality. Right?
- [45:02]
Joe Consorti
Yeah. So it's like, it's funny like we use the word inoculate. It's probably the only time in bitcoin circles you'll hear us use the word inoculate positively. Anyway, the, the, the whole notion of inoculating the market basically came around early this year. One of the major things, and it has to do with something that's much bigger than strategy. One of the major things that has been sort of a hang up as far as strategy is concerned is they're included in the Nasdaq because the NASDAQ adds big companies in the US automatically. The biggest 2000 companies get thrown in there. Right? Automatically based on market cap. That's it. But the s and P500 is a little bit different. Even though it tracks the 500 largest companies in the United States based on market cap cap, it can actually choose whether or not to exclude companies at just at their whim. There's a committee, not a lot of people know this, called the S and P Global Committee and they decided to not include strategy in the s and P500 despite being big enough to do it and profitable enough to do it because of the FASB accounting rule change last year, making it so that they can mark their bitcoin unrealized gains as profit. So then why weren't they included? Well there were three reasons that the S and P Global Committee gave for not including them in the s and P500 and also assigning them a B minus credit rating, making it so that a lot of the funds that might want to hold something like STRC cannot hold it. Now this is extremely significant for Bitcoin. Again, this isn't about strategy. This is about a one quadrillion dollar Global asset market having indirect proxy access to bitcoin via this company. The three reasons that S and P Global gave for giving them a B minus credit rating despite having $60 billion of Bitcoin on the balance sheet is threefold. I think I just said the three reasons is threefold. I gotta drink some more caffeine. Anyway, reason number one is that the S and P Global committee said that they don a strong US dollar reserve. Their reserve is only bitcoin. They want to see at least 24 months of dividend obligations in a US dollar reserve. Number two, they said that they have too much of an over reliance on convertible debt. And number three, this is the biggest point. They have a reluctance to sell bitcoin and specifically to sell bitcoin to fund the dividend. So basically, the moment S and P Global put out that report, Saylor and Fong hit the podcast circuit and started talking about, hey, we're probably gon to sell some bitcoin. We're probably going to sell some bitcoin. We're probably going to sell some bitcoin for literally three months straight. And they said, we're going to do this to inoculate the market. What does that mean? Inoculating the market simply means that we are going to slowly but well, the idea of a vaccine in principle, not in practice, unfortunately, they put a bunch of aluminum and other stuff in it. But in principle, the idea of a vaccine is they give you a little bit of the bad stuff so that your body becomes used to it and it doesn't have an adverse reaction down the line. Now this is great for stuff like polio and other stuff. Um, anyway, I want to talk about vaccines now, but I, I'll get into it.
- [47:54]
Walker America
We'll get into it.
- [47:55]
Joe Consorti
We'll get into it. Yeah, maybe another time. Um, but that's the idea of the vaccine. And so by inoculating the market, what Saylor means is sell a little bit of bitcoin so that the market can obviously have a crazy reaction and scream and go. But then get used to the fact that, okay, strategy sells bitcoin now, right? You pivot from never sell your bitcoin to, okay, this entity is going to sell its bitcoin and then all of a sudden you've made it to that one day down the line when you choose to sell a bunch of it to fund your dividend dividends. The market doesn't have an adverse reaction, but all of this is to get included in the s and P500. So what did they do? They immediately built a US dollar reserve. Then they retired all of their convertible debt. That is non zero rate. I just showed the highest rate, or actually they have one that's 2.25%, whatever, but it's due in 2032 and there's only $800 million worth of it. They retired all of their high yield convertible debts. They address point number two, point number three. Three. They have a reluctance to sell their bitcoin. What did they decide to do early June, early mid June, I think it was early June, they decided to sell 32 BTC. The market went crazy. I don't think it sold off because of Saylor, but regardless, the price tanked like 6 or 7% over the next week. Oh my gosh, mania. They sold 32 Bitcoin, which is literally like, you know, three seconds worth of volume for bitcoin. The market went crazy. And then after all of the dust settled, after everybody stopped screaming, and then as a result of that, MSTR collapsed in price. Price. STRC collapsed in price. Everyone, every strategy, doom and gloomer went out and adjusted their bow ties and tipped their fedora and said I told you so, everybody. And then all of a sudden everything's fine. A couple of weeks later, right, STRC recovers because they announced they're increasing the yield, MSTR recovers, bitcoin goes back up. And then what does strategy announce after it has formally inoculated the market and they've allowed the market to have their temper tantrum? They sell 3,500 bitcoin, almost 3,600, and the market closes, is green. So that's basically what happened here. All of this is very intentional in order to do two things. Number one, and this is why it's so important to bitcoin to show to the S and P Global committee that they've addressed all three of these concerns and increase the likelihood that they're included in the s and P500. And that STR or that strategy is a higher credit rating so that more people can own strc. But more importantly, right this, and obviously that's going to open up strategy if they do get included and if they do get a better credit rating, that opens the floodgates as far as capital is concerned. Imagine every bank, imagine every retirement account that allocates to an S&P 500 index fund, which is a lot passively allocating to strategy every two weeks therein, giving them the funding needed to buy more bitcoin. So they are indirectly buying bitcoin. So like every American retirement account, funding Bitcoin crazy thing number one, crazy thing number two, SCRC being the beneficiary of a higher credit rating from S and P Global would mean that all of a sudden instead of mostly retail investors holding this thing, all of a sudden, like massive fixed income desks, family offices, institutional funds that have fixed income mandates. Fixed income is a $300 trillion market by the way, more than double the size of the equity market. All of a sudden they could buy strc, they could buy the any other debt instrument or preferred stock instrument that strategy issues down the line. Then all of a sudden Bitcoin has its first major break into the global bottom bond market, right? That's why strategy did what it did. And more importantly, this represents an evolution in their business model. And this is something that I've been discussing, right? I've said for a very long time I want strategy to sell their Bitcoin. Why is that? Well, because of the business model I just explained a moment ago. Once the Bitcoin ETFs came out, MSTR sort of became relatively irrelevant for a lot of equity investors. They originally were kind of like a levered closed end fund for Bitcoin, but then the spice is kind of gone once you have like 20 Bitcoin ETFs that you could buy instead. So they needed a new funding mechanism. Funding mechanism became strc. There are other preferred equities to tap into the fixed income market instead. STRC specifically is now going to be offering a 12% yield, right? So your funding source has a 12% yield. The asset you're buying on a forward looking basis has anywhere between a 30 and a 45% compound annual growth rate. You use this to buy this and then you sell enough of this to fund this, right? And then you keep the spread. That is a carry trade, that is financial and engineering. That is what every hedge fund globally does. They're pivoting from just buying and holding Bitcoin and doing nothing to becoming an active bitcoin capital manager that is creating pseudo bitcoin backed bonds for a $300 trillion market. While a ton of the bitcoin OGs cry and get upset for some reason, despite this being a massive development as far as Bitcoin is concerned from a structured finance perspective. And look the, one of the main. And so that's basically the TLDR of why they did what they did and what, why it's so important. And I understand, like a lot of people, the, the other point of contention I forgot to bring up is that many people will Say, well, MSTR is not a bitcoin alternative. I know anyone with two brain cells to rub together knows anyone whose IQ is higher than the room and the temperature they're. The temperature of the room they're sitting in knows it was never marketed as a bitcoin alternative. Neither was strc. They're not shitcoins. They're targeting an entirely different corner of the market than bitcoin. I've never claimed it's bitcoin. Walker has never claimed it's bitcoin. Anybody who owns MSTR or STRC doesn't think it's bitcoin. Right. Like a lot of the people who are STRC detractors and MSTR detractors, like, beyond the death spiral garbage, they'll say, well, you know, people don't know what they own. People don't know what they own. Okay, wonderful. Like, do you think that they think they own bitcoin? Do you think that they're morons? I mean, potentially, but it's a pretty low likelihood. And furthermore, do you think that basically anybody who buys anything in the equity market every two weeks passively through their employer managed 401k, do you think they know what they own? Do you think it's more responsible for them to own a random basket of goods and that that's extremely overvalued right now, by the way, versus a fixed income product that's yielding an extremely conservative amount relative to the asset that's under underpinning it. Like, which is more responsible. You know, you could take issue with the marketing, whatever, AI generated ads, sure, fine, whatever. You take issue with that. But all of the other stuff, all of this death spiral forced liquidator garbage, like, it's just so silly and a lot of people are going to lose a ton of credibility over the next couple of years and we'll be awfully silent when it turns out that as I'm explaining now, strategy's fine, Bitcoin is fine. It lives to TikTok next block another day. Anyway, I digress.
- [54:28]
Walker America
No, I, I really do appreciate the breakdown because you're, you're speaking right to my soul there and I think to a lot of people who have actually been paying attention to this and have a couple of brain cells rubbed together who have thought that the criticisms have just been like, yeah, Luke, lukewarm on the IQ scale at best. Because the other thing, I think that people there, I think there's a couple of cohorts that have really been coming out hard against Sailor. Right? There's like the, the the, the tardfi. You know, excuse me, tradfi folks who just, like, don't like what he's doing because it's got bitcoin involved. There's the crypto people who don't like that Sailor just did financial engineering on top of bitcoin and created stuff that was way more successful than any of their, like, fraudulent financial engineering schemes where they printed tokens out of thin air. So they don't like it. And then there's the bitcoiner crowd of bitcoiners who are either confused because they think that people think that MSTR is bitcoin, which it's not. Again, Joe made that point very clearly. Here I am making it again. It's. It's not. Nobody thinks that it is. Guys, like, and if, if you do, like, I don't know, like, probably pretty dumb. But I think that a, A huge part of some of the bitcoiners getting really, like, hot under the collar about this has been they feel somehow the messaging has changed or he or sailors is not. He's not talking the way he used to. And what I, what I say to this is, it's like, first of all, you have to realize he's not trying to appeal to you, the bitcoiners who are just buying bitcoin anyway. He's trying to appeal. Bitcoin's a trillion, a little over a trillion dollar asset. He's trying to appeal to the other $999 trillion worth of capital floating around in the world. He's not trying to appeal to the trillion dollars worth of capital that's already in here that isn't going to buy MSTR anyway. That's not his goal. He's not trying to speak the bitcoiner language. He's trying to open up a wider network net. I also think to the people who are like, oh, he, you know, he's. He's clearly. He's clearly like, lost. He's not thinking like a bitcoiner anymore. He's like, insert whatever thing, whatever problem they have with his language, right? It's like, Sailor's a, like a very intelligent guy. Like, highly, highly intelligent. If you've talked to him for more than a couple of seconds, that becomes very clear. If you've listened to his anymore of the bajillion podcasts he's been on, you should probably know that when God made
- [56:44]
Joe Consorti
Sailor, he took all of his social skills down to zero and then ramped the intelligence up to 99 and stuff.
- [56:50]
Walker America
The guy's off the charts. Right. Like an outlier from an intelligence perspective. Now, people seem to think that somehow Sailor, like, changed. And like, I encourage you, go back, listen to his. When he was first getting into bitcoin, the way he speaks, was speaking about it then. Yeah. He's changed the way he speaks about it now because he's also trying to cast a wider net. But it's also the fact that he's created something that is very, very, very, very large now and very, I would say, significant and important. He knows that he needs to, you know, be mindful of his public relations. Let's say go back and listen to the way he used to talk about bitcoin. I guarantee you the way he feels about bitcoin and what he thinks it is going to usher in has not changed, changed. He's changed his messaging around it because he's smart enough to realize that you need to be careful of what you say sometimes. And you can't be out there being like, bitcoin is going to end the, you know, end the dollar and usher in a glorious orange revolution when you're the.
- [57:51]
Joe Consorti
He speaks with the same. But he's not. He's not going like, bitcoin's going to go to a million dollars tomorrow. And, you know, like, he's not saying that stuff.
- [57:58]
Walker America
It's almost measured, right?
- [57:59]
Joe Consorti
Yeah, exactly. It's like a lot of the people who are saying Sailor is not a bitcoin, like, after you watch this, type in hope.com, see what comes up. Right. Do you wonder who owns that domain? It's Michael Sailor. It is a bitcoin website. He pays for hope.com and I guarantee if you look up godaddy.com whatever, I guarantee it's like, you know, a million a year at the very least. So this guy is forking over seven figures a year at least in order to create a website that talks all about bitcoin. Hope Calm. Right? Like, it's. It's almost. It's very. Like his messaging on bitcoin has changed his intensity and the way he speaks about it is no different. Right. He's trying to cast a wider net. It's almost like, I don't know if Walker, if you remember the clip of Trump and there may be some libertarians watching. So I'm not trying to offend Walker. I don't know if you're a libertarian, but it almost reminds me of the clip when Trump went to the Libertarian conference and he was pining for votes and he was talking about Ross Ulbricht and all this Other stuff. And then he said something that upset them, and then he, like. Like, he snapped for a second, and he's like, oh, do you guys just want to vote for me, or do you guys want to keep losing? You know, like, you guys get. Do you guys want to get 1% of the vote every year? And it's like the same thing here, right? Like, Sailor is simply trying to cast a wider net. He's put on the suit. I mean, he always wore a suit for the most part. Sometimes you wore T shirts, but it's like, he's put on the suit. He's changing his messaging around because he's trying to cast a wider net. Right? Not everybody is going to listen to the cyber hornets, cyber Manhattan stuff, okay? Like, we might love that. We eat that up. You were watching the bitcoin podcast, after all. Like, we eat that up, you know, but most people don't. And so it's like the question becomes, okay, this guy's a bitcoiner, like, unabashedly a bitcoiner. There's really no argument there. So do you want to. Like, you could take issue with his marketing or whatever, but, like, do you want to win or do you want to be, like, principled? And then bitcoin, you know, never actually penetrates these markets. It becomes, I don't think anything bad will happen if strategy doesn't succeed. But it's like, why on earth wouldn't you get behind the guy who's at least attempting to do. Do this, you know, anyway?
- [59:58]
Walker America
Yeah, no, I mean, great points all around. It's like, I think that Saylor has been hugely positive for bitcoin. I think anybody who thinks otherwise has some sort of ax to grind. That's fine. You're entitled to your opinion. But I just. It feels pretty objectively clear. I'm curious, do you think. We didn't touch on this, but a lot of people also seemed very much thrown for a loop by the fact that, you know, Sailor was like, well, we're going to sell some bitcoin. You know, we might sell some bitcoin, but we'll buy more than we sell. And people are like, well, how does that work? And, like, do you think. Can. Can you. Can you. Can you explain that a little bit? How. How that could possibly happen? And do you think strategy, let's say 10 years from now, 20 years from now, is going to have more bitcoin than they do today?
- [60:41]
Joe Consorti
I absolutely will. I'll explain it for those who might not know. So this is a calculator And I'll go ahead and explain how they could be a net buyer of bitcoin forever. So let's just even assume, like bear case, bitcoin only does 20% over the next 20 years. That would really stink. But it would still be a desirable asset over the S&P 500. So let's do bear case. This is how strategy does it. Ready? Bitcoin's doing 20%. And in order to fund that purchase, strategy offers an asset, STRC. Let's just say it stays at 12% right now. It doesn't decrease, which it likely will during the bull market. Right? It likely will. But let's say it stays at 12% regardless. So Bitcoin's rate of growth is extremely low, historically speaking. STRC's rate of growth is extremely high, or its yield is historically high. So you've got a 20% asset on one side and a 12% funding mechanism on the other side. Now, I want people to look at that number there. You can see that there is no negative sign to the left of that number. That is what strategy would make in this scenario. And then guess what? You roll those 8% proceeds into Bitcoin purchases. Rinse and repeat. That 8% is the Bitcoin you keep. Right? That 8% differential is the Bitcoin you keep. So that's my demonstration on how a strategy could remain a net buyer of bitcoin forever. You could send donations to me. I know that was a very, very complex explanation. No, but to be in all seriousness, the way that this would work is sort of how I described. Um, and. And it all boils down to, like, if bitcoin continues doing what it always has done. And so, arguably, like, if you remove all of the corporate risk with strategy, of which there are unique corporate risks, because they're a public company and they're a company generally, Bitcoin is not. But if you exclude all of those, the risks to STRC and strategy's ability to buy bitcoin forever are the same risks to Bitcoin, which is that it drastically underperforms or does nothing. Right. Strategy. Strategy can only continue buying bitcoin so long as its CAGR outpaces the yield on STRC and its other products. Products. And even if it does underperform, they could always lower the yield. Right? You offer an instrument, you are funded in an instrument that has a lower yield than the growth rate of the asset you're buying, and then you sell enough of the asset that you're buying to fund the yield, and then you Keep the spread, right? So that's how they generate free cash flow. They've now moved into, like as Fong said, an active capital management company. I've described it as a bitcoin transmutation machine. You have people who either don't want to hold Bitcoin because they're older, they're retirees, they're fixed income, whatever, right? Or you have people who cannot own Bitcoin because they have mandates to hold fixed income or mandates to not hold commodities or Bitcoin or anything else. And so that's what STRC is serving. That's the market that it's catering to. And so effectively what they're doing is they're taking Bitcoin's high growth properties, transmuting them into a very high yielding but still a fixed income asset that is delivering a fraction of what this thing is doing. And then they're keeping the difference, right? They're selling enough of this thing to fund this thing and then they keep the difference. Then they sell more of this thing to fund this thing. They sell enough to fund this thing. Keep the difference, right? That's the flywheel. And now the Ponzi argument is officially dead. They have said that they want bitcoin sales to be their primary funding mechanism for the dividend. I don't know what Coffee Zill is going to make a video about. He interviewed Jeff Walton. I don't think it's ever going to show up in a broader video because the end is so painful to watch. Because he killed the Ponzi argument, right? He killed it, right? He has demonstrated and he has stated outright that he wants to sell Bitcoin. And that was my explanation of how they plan on doing it while remaining a net buyer.
- [64:21]
Walker America
Do you think MSTR ends up making it getting that S&P 500 inclusion anytime soon with these recent moves?
- [64:28]
Joe Consorti
No, I think they're going to keep moving the goalposts. So I think this was really huge. And I think if there was an ounce of intensity, integrity with the people at S P Global, then they would. Right? But I think they're going to keep moving the goalpost. I think at some point there will be a tipping point where it's like there's such a large company, they're like, you know, $300 billion in size, half a trillion dollars in size, five, ten years from now. And like they have to, you know, But I think they're going to keep moving the goalposts. And the reason I say that pretty confidently, despite strategy, fulfilling these three objectives is because these are the same people that gave, gave the banks who are yielding subprime mortgages in 2008, like AAA ratings. Right? They were giving all of these garbage fixed income products that was literally like, with shit layered on top of it and then smeared in between. And then they were giving those AAA ratings and like, yeah, there have been reforms, whatever, but it still winds up being a comm.
- [65:22]
Walker America
Reforms.
- [65:23]
Joe Consorti
Right. They bailed out the banks after all, and not you. There continue to be, um, you know, there's still a committee involved. There's still a committee that has the final say. And as long as they hate bitcoin, which is kind of the, you know, the popular thing still, I don't know how they're going to continue rejecting strategy. But you can only grow so large and be so successful for so long before the demand for it becomes so widespread that at some stage they will be included. I just don't know if it'll be the. This year or not.
- [65:55]
Walker America
No, it's, it's fair. We don't have a, a crystal ball and never underestimate the ability of, of fiat regulators and rulemakers to, to continue trying to protect their own moat as much as they can. Right. Joe, we're, we're getting a little close on time, so I do want to ask you kind of to round things out a little bit. I mean, you mentioned earlier sort of think that, you know, let's say we're either near a bottom or bottom is going to form sometime. I think you mentioned like October, December, December time frame. It's an interesting year. You know, we've got sparking, sparkling conflicts in the Middle east because of course they're not wars because we haven't declared war since World War II, so just sparkling conflicts. We've got midterms coming up. I think a lot of people are feeling uncertain right now, just broadly. I'm not even talking about bitcoiners. I'm not even talking about bitcoin price. Just on a, on a large, larger level, it seems that, you know, entropy is doing its thing right now. What's something that sort of grounds you? What, What? Because you're clearly someone who has a. Continues to maintain a high level of conviction in bitcoin. And I think you're a very, you're, you know, you're a very hopeful guy for the future. What helps ground you? What, what gives you that conviction? What do you look for as sort of that, that, you know, guidepost for yourself for sure?
- [67:14]
Joe Consorti
Well, I mean, I think from a bitcoin perspective. Like, I. I have such high conviction of this asset because I have done. I've done my 1,000 hours of podcasts. No, but, well, it's like, you know, this asset was sort of uniquely designed in such a way to hedge against the very thing that we can't prevent here in the west, which is the slow and gradual monetary debasement. The slow, you know, the. This financial repression of keeping interest rates artificially low to inflate away the debt, because that's the only thing we can do. Bitcoin, its monetary properties are such that it's designed to benefit from that more than anything else. And so as long as, like, the machine keeps humming, which it will, because it can't stop, then Bitcoin won't stop either, you know, so, like, as far as a bitcoin perspective, that's. That's sort of what grounds me is that reality that, like, the problem's never going away and nothing has killed the solution yet, and nothing can really kill the solution, us, other than the problem going away, and it won't. So that's sort of the way that I like to explain it. And then as far as, like, other stuff, like grounding myself generally, just like, an insurmountable faith in God, for those of you who might sort of be on the fence, I want to let you know that God loves you, and he wants to be in a relationship with you, and he wants to know you. He created you. He formed you. There's a reason you're here. Um, and it's. Part of it is to watch the bitcoin podcast, and part of it is to, you know, listen to this show. Um, but, like, you were put here for exactly, you know, you were put here for a reason, right? And so, like, he loves you. He created you for very, very important things, and he wants to get to know you. So, like, going to church every single Sunday, serving there, reading my Bible, praying relentlessly, like, that has been the major force in my life that's grounded me despite all the chaos, because I know that, like, if this world goes away tomorrow, right, so long as I, you know, I'm as faithful as I believe I am, you know, and obviously we're all sinners, then, like, if everything went away tomorrow, I could be fine. Like, if I was living under a bridge, tomorrow wouldn't be ideal, but I'd be okay because this is not my home, you know, so that's sort of what grounds me, right? It's sort of like the exact opposite of the nihilistic Stuff, the nihilistic stuff is like, well, nothing matters, matters. But then the Christian stuff is like, nothing matters. Right, because it's the same phrase but said differently because it's like we have an eternal home in heaven. We were sent here to spread the gospel. We were sent here to live like Jesus. And so it's like, come what may, I'm going to be all right. Because at the end of the day, all of this stuff, my flesh and bone is going to rot off my body within 100 years and I won't be here anymore. So you can either take that in a very nihilistic way or in any terms, internal way. So yeah, that's sort of, kind of what, what grounds me, I suppose. I don't know if that's what you were getting out the question.
- [70:01]
Walker America
It was actually on. On both counts. Well, well met there. Now, Joe, I really appreciate your time here. This was a blast. We're gonna have to do it again. I know you'll be back on, on bitcast. You're becoming, you know, a regular, regular feature there and the, the chat loves.
- [70:16]
Joe Consorti
Thumbnail, thumbnail there. Including me.
- [70:18]
Walker America
Okay.
- [70:19]
Joe Consorti
We really.
- [70:19]
Walker America
I gotta, gotta talk. Nathan's on vacation or something. Thinks he can just take time off. Absolutely ridiculous. There are no days off in Bitcoin, Nathan. But no, tell people where they can find you. I'm sure that there are going to be, if they didn't know about you already, hopefully some more people who want to check out your work. You don't. You know, you talk about a lot of stuff on your channel as well. So where can they go find your channel? Where can they like subscribe and follow and all that jazz.
- [70:43]
Joe Consorti
Absolutely. Well, Walker, thanks so much for having me. I really do appreciate it. And for those of you who want more of, of what we talked about today, minus the vaccine stuff, unfortunately, because I don't want to get demonetized.
- [70:53]
Walker America
We'll get into that next time.
- [70:54]
Joe Consorti
Take a look at. Just search Joe Conserv. If you're watching this on YouTube, just click that collab link that's down right there. Click on that, check out some videos and if you like what you see, hit subscribe. If you're watching this on Nostr, wait until the very end of the show and then just search up Joe Consorty and you can find my videos on YouTube.
- [71:12]
Walker America
That collab like thing is the most useful thing YouTube has done in a while. It's fantastic. Absolutely love it. Well, Joe, thank you for your time, man. Love picking your brain. Love the work that you do. So keep it up, man. We, we need, we need more of it. And guys, make sure to go subscribe to Joe, thank you for those who joined on Noster. Thank you for everybody who's watching this after the fact. I appreciate each and every one of you. Joe, it's been a pleasure, man. Hope we do it again soon.
- [71:36]
Joe Consorti
Likewise, Walker.
- [71:44]
Walker America
And that's a wrap on this Bitcoin Talk episode of the Bitcoin Podcast. Remember, remember to subscribe to this podcast wherever you're watching or listening and share it with your friends, family and strangers on the Internet. Find me on noster@primal.net Walker and this podcast@primal.net Titcoin on X, YouTube and Rumble. Just search Walker America and find this podcast on X and Instagram at Titcoin Podcast. Head to the Show Notes to grab sponsors links. Head to substack.com walker America to get episodes emailed to you and head to bitcoin podcast.net for everything else. Bitcoin is scarce, but podcasts are abundant. So thank you for spending your scarce time listening to the Bitcoin podcast. Until next time, stay free.