← The Bitcoin Treasuries Podcast with Tim Kotzman
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- [00:00]
A
Welcome back to the Bitcoin Treasuries podcast. I'm Tim Kotsman. I'm here with Chase Furey. Chase, thanks for joining us today.
- [00:08]
B
Thanks for having me, Tim. It's a pleasure to be here.
- [00:11]
A
Let's start with digital credit. How do you view digital credit and do you agree with Michael Saylor? His new pinned post in part Sundays quote, the four year cycle is dead. Price is now driven by capital flows. Bank and digital credit will determine Bitcoin's growth trajectory.
- [00:33]
B
I think that's probably right. It might be a little premature to say that just because I thought that would happen last year and then it kind of Bitcoin did at least temporarily top at the time where the cycle people said it would. So they got that right. But to me it looks like it probably. Bitcoin probably, probably bottomed around 60k or 60k in February and MSTR bottomed at 100 in February. So that would be. If that does in fact hold, that will have been a shorter bear market and different than the cycles. And it does make sense that it should be driven by digital credit and inflows because as the having cycles go on every four years they matter less just because this keeps it's half as important the new bitcoin that are released. So I think that's probably true, but I guess we'll have to see before. I don't want to say for sure because bitcoin could theoretically go lower over the next five months and then bottom at the same time. But eventually the cycle will be broken and probably this time. But I guess we'll have to see.
- [01:45]
A
Matt Cole has stated that the next opportunities in his view are Bitcoin, AI and energy. Do you agree with that and how would you rank those three?
- [01:58]
B
Yeah, well, I think bitcoin and AI. Bitcoin's probably the best, best investment going forward or there'll be certain things that beat it, individual stocks, but as a whole sector it's going to be hard to beat Bitcoin AI. I think AI will change our lives over the next 20 years more than any individual technology. People who learn how to harness that can obviously become very successful and there'll be good investments inside of AI and then energy, it seems like energy. I'm not as much of an expert on energy, not really an expert on any of these, but energy, I'd say it's important because it drives both bitcoin and AI like you can't. Bitcoin and AI are only as powerful as the energy that they use. To power it. So bitcoin is backed by energy. It can't be printed or faked. AI meanwhile takes incredible energy to power it and grow the artificial intelligence over time. And I guess it can be limited by how much energy you can produce. So energy is very key for both of those. So yeah, that's what I'd say.
- [03:09]
A
Morgan Stanley launched their own Bitcoin ETF last week and they had over $100 million in inflows. 139 million actually after the first nine days. They have a lower fee than BlackRock and these other ETFs at 14 bips, I believe. There's no fee on the first 5 billion. And this is two and a half years after the first ETFs were approved and came to market. Right. We remember the blackrock, the Fidelity, the Bitwise and the trail of, of other ETF products entering the market. What does this say to you about where the banks are kind of evolving their positioning to. Because Morgan Stanley is one of the largest US banks. I think if you would have told anyone five years ago that this, that the big banks would be entering the picture, people would have maybe paused and half the people would believe you. Half the people would say that's a little far fetched.
- [04:14]
B
Yeah, I mean this is just more continuation of the same development that's been going on the last couple years ever since BlackRock filed for the Bitcoin ETF. They opened up basically retirement capital to flow into bitcoin in a traditional sense. I know most bitcoiners are kind of crazy, they want to do cold storage bitcoin. But I for one, I'm in the other camp where, and I think most people are, they just kind of view it as a stock. I'll put it in my brokerage account through the ETF and buy it or you can use it through a retirement and it's much easier to understand. And having Wall street basically adopt bitcoin in and take it from this far fetched lunatic idea where only crazy people on the corners of the Internet know how to buy it versus the average guy on the street who just wants to buy the next good stock and put it in his brokerage account. That's obviously massive. And it's part of the reason Bitcoin rose From I think 30k to 70k, then ultimately 120 and then it's now back to 75. But the wall street will continue to adopt it because there's growth potential. BlackRock, I think it's their most profitable ETF. So these people want to make money. And if bitcoin does what I think, and we think it's going to do over the next 10 years and depreciates by say 10 times, then not only will the ETF inflows continue to rise and they get a portion of that, but the actual underlying asset could go up 10 times. So their profit margins could go up 10 times because I don't know what their fee is. But a 0.5% fee on, when you multiply that by 10, not including the new inflows is much more profitable. So I think we'll continue to see it. And I mean, that's one of the main growth drivers for bitcoin. It needs to have. There needs to be new people buying in order for the price to appreciate. If the same people who buy the last 10 years are the only people interested in it, then it won't continue to grow.
- [06:25]
A
So Strategy purchased over $2 billion of Bitcoin last week and passed BlackRock as the largest institutional holder in the world. Do you think anyone can catch up to Michael Saylor at this point?
- [06:39]
B
I think nobody will catch. It's not just Michael Saylor, but just Strategy as a whole. He's the, he's. He runs strategy. But yeah, I don't think anyone or any entity will catch MSTR. Maybe like an ETF, BlackRock could have more in total. Probably not. But I don't really view that as them passing MSTR because they don't actually own the bitcoin.
- [07:04]
A
It's.
- [07:05]
B
They own it for their clients. So I mean, obviously they have a massive head start. And I'd say the interesting thing on MSTR is just the rate at which they're scaling. Two years ago, April 2024, they had about 200,000 Bitcoin and the price was almost the same as it is now. It was around 70k. And then two years later the price is just barely above, I think it's 75k right now. And they have 800,000 bitcoin. So for two years of the price going flat, they forexed their stack. So and that's very interesting because that's growing exponentially and there's only 21 million Bitcoin. And if they have a bigger stack to, to, to use to buy more, their buys over time will go up not only in dollar terms but also in bitcoin terms. So Michael Saylor and Strategies buys will have a bigger and bigger impact on the price of bitcoin going forward because they're scaling faster than bitcoin. So the fact that they four times their bitcoin stack in two years while the price remained flat, let's say the price goes up over the next two years by a hundred percent. They might even be able to scale more. Because the thing about strategy is people think, oh, their buys will get smaller in bitcoin terms when Bitcoin goes to a million dollars in 10 years. But that's not actually true because they are levered. They're leveraging Bitcoin through long term leverage, through the digital credit and they're using the atm. So theoretically they should rise at a faster rate than Bitcoin. So if bitcoin goes up 10 times over the next 10 years, they should, they could be able to. Or they should be able to rise by 20 times. So their buys will get. Instead of buying, I think they bought, they're buying about, I think through the first four months, they bought 150,000 Bitcoin. So they're on track for 450,000 Bitcoin this year. And down the road, especially as bitcoin appreciates, maybe they'll be able to buy a million Bitcoin a year eventually. That has to cause us. It can't keep going forever because there's only 21 million bitcoin. But at a certain point their buys will become so big, there's no way it doesn't affect the price of Bitcoin, which will then affect the price of their stock, which will then allow them to buy even more Bitcoin. So we haven't seen that effect yet over the last three years. But I think eventually the story is strategy is buying so much Bitcoin that it does affect the price.
- [09:44]
A
We're at a point now where we have corporations, ETFs, we have the beginning scene of the big banks coming out with bitcoin products. Goldman Sachs, Morgan Stanley, Charles Schwab. Charles Schwab saying to allocate up to 7% of your portfolio to Bitcoin. There's a phrase gradually, gradually, suddenly. Are we in your view potentially approaching that suddenly moment, or is it more nuanced than that? I mean, what's left after the big banks come in nation states? What's your view there?
- [10:21]
B
I think, well, Bitcoin does have a history of it can go sideways for a while and then go up 10 times in two years. So there is that portion of l could go up suddenly a lot, but it also could just go sideways for a while. I think that Bitcoin will grow steadily over the next 20 years. I don't know if there'll be a single moment where it's oh, it's all sudden, I think we'll probably go up a lot. Everyone gets excited about it, then it goes sideways or down for a couple years and the story will remain the same, I think as it has the last four years going forward. The numbers will just get bigger and trying to think, but yeah, there could be a suddenly moment with the price. But I still think that bitcoin itself will not be accepted as mainstream for 20 years just because it is such a hated asset. And by the vast majority of people that, I mean, if bitcoin were to go to 500k over the next three years, the vast majority of people would say it's still a scam, it's still, I would never buy that. So I think the point at which bitcoin is accepted as mainstream on the part of Apple and Facebook and all these different investments, it's probably 20 years down the road, but it could see drastic price movements like it has in the past.
- [11:42]
A
STRC and SATA, the two digital credit products from Strategy and Strive, are performing well to maybe make the understatement of the year during this current bear market. What's your view on what happens during a bull market with these digital credit products?
- [11:59]
B
Yeah, that's an, that's what you have to think about because strategies buying so much bitcoin this year in part through their stretch product. So it's overall bitcoin in the first four months of the year they've bought I think 150,000 Bitcoin. And Bitcoin's gone down I think around 10%, maybe it's 16%. It's down over 10% year to date. So Strategy is able to buy this much bitcoin while bitcoin's gone down. So you have to think if bitcoin rips what happens here, their buys can go up exponentially. And that's the crazy thing because they'll be able to lever continuously and scale as bitcoin rises. If bitcoin were to double, I think the, the flows into the stretch product would, would go up tremendously as well. And he can also use the common share ATM because the demand on the strategy shares will go through the roof and they will buy a ton of ton of bitcoin. And the stretch product is also interesting because it brings in a new pool of investors. People are buying that that otherwise wouldn't have bought bitcoin because bitcoin as although we think it will go up 10 times in the next 10 years. Let's say most people don't want to buy something that could go down 50% or 60% because it's not. Most people don't want that kind of volatility. So to get a product that beats inflation and yields at 11%, it's a very attractive product, especially when T bills are only 3%. So the stretch product will definitely allow them to scale their leverage with their Bitcoin stack. So if Bitcoin triples, they can use stretch to keep their leverage going and buy even more Bitcoin. So that is definitely an interesting dynamic that changes, I think three years ago or two years ago as Bitcoin ripped and MSTR ripped strategies, leverage went way down because they had to get convertible notes from large players and that the demand wasn't there, but the demand, it looks like, will be there to match the catapult in the price.
- [14:19]
A
How do you see AI intersecting with Bitcoin and MSTR over the next decade?
- [14:26]
B
AI is an interesting thing because I think most people are vastly underestimating it. I think that in 20 years, just about every job you can do will be done by AI or could be done. It will take longer for that to actually be implemented. But AI is going to get exponentially smarter and faster and basically drive productivity through the roof. And there's a couple of things in which this will impact Bitcoin and MSTR. For one, let's say in 20 years, 10 years down the road, 20 years, instead of humans doing work, it's AI agents and they're paying each other to compensate for their work. They're probably not going to use traditional finance because AI agents that operate instantaneously are not going to want to wait multiple days for a bank to approve their transaction and use their government name, which they don't even have because they're a robot. So they'll probably, probably use crypto or Bitcoin to make those transactions. So right there there's a use case for Bitcoin with the AI agents. And as far another way in which AI will ultimately affect Bitcoin besides the productivity raising, which should in theory raise the price of Bitcoin because all assets will rise is over the next 20 years, I think a lot of people could get laid off and lose their job because humans will no longer be as valuable as they are. Now. You can have a superhuman robot do 99% of jobs. Humans might not work as much because work is optional. And we could go down the discussion of whether that will lead to a chaotic environment like an apocalypse or if it's harmony and perfect, perfect lifestyle because no one has to work and we just do fun things all day. But the effect of that is if humans are no longer valuable and there's the unemployment rises faster than it has before and is the government will probably have to subsidize people through universal basic income. I think Elon talked about this just last week. I've kind of been reading about that the last three to six months and I think that will happen. And how does the government provide universal basic income to people? Well, they have to print money, so that should. Bitcoin can't be printed like that, so it should rise anyways. AI, the AI agents are technologically advanced and they're coming and they're probably going to want digitally advanced sound money. They're probably not going to want archaic systems like the gold and US dollar. They want something that's built for the future. And I think bitcoin will be that or crypto in general. Bitcoin is probably the most likely.
- [17:22]
A
How do you see the bitcoin Treasury's ecosystem developing? We've seen ETF products, we've seen quite a tale of companies launch. We've seen GameStop for example, put all but one of their bitcoin with Coinbase for some sort of covered call strategy. So when you look on bitcointreasuries.net, you see that GameStop owns one bitcoin that's in their custody. So different strategies, different operating businesses from in the beginning. Right. MicroStrategy with their business intelligence business, Semor Scientific with a healthcare business. Meta Planet with a hotel business. How important or differentiating is an operating business? And if bitcoin is going up forever, does it really matter at all? You know, could it just be people are throwing, you know, ideas at the wall? But if the operating business really isn't that profitable, does that even really matter as long as you have and keep Bitcoin as the main thing?
- [18:36]
B
I'd say it helps. I think strategy is in a different situation because they have a monopoly. So their operating business doesn't matter as much because they're the number one trusted bitcoin company and they will always be that. I think a lot of these companies that buy bitcoin on their put it on their balance sheet and don't really do anything else they're doing. Some of them aren't very trusted companies and I for one probably would rather own ETF than most of these companies just because I don't want to have to rely on a third party and a a company that's management's paying itself and I don't really know what's going on to the to the level. I trust MSTR strategy, the other companies, I think there are some good ones but there is some risks involved and if you don't truly understand the management and what they're going to do and believe in the company, it does have some risk. So it's up to the individual investors risk appetite and what they think about the company and obviously cash flow coming in is helpful, but I think it's possible to do what strategy did on a smaller scale. So I guess that would be my answer.
- [19:48]
A
Awesome. Chase, thanks for your time today. Appreciate you joining us here on the Bitcoin Treasuries podcast.
- [19:54]
B
Thanks Tim. It was a pleasure. Hope to see you again soon.
- [19:57]
A
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