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- [00:00]
A
Welcome back to the Bitcoin Treasuries podcast. I'm Tim Kotsman. I'm joined today by our guest, Grain of Salt Grain. Appreciate you joining us today. I want to jump right into the opposition to digital credit. In your view, what's the strongest business case explanation for why certain individuals and companies in the bitcoin ecosystem appear willing to risk their reputations, their relationships and their careers in an effort to discredit digital credit and bitcoin backed financial products?
- [00:38]
B
So, okay, I think it's because they don't understand it. And so if you don't understand something, your goal is just to discredit to make you make yourself feel better about it. That's it. They don't get it. It's that simple. There's only two companies that right now are in fact that there's only two companies doing digital credit strategy and strive. And both of them are capable of doing it. And right now Strive is doing great. So that's it. And so because if one company for four weeks, if it trades down, they're like, oh, this can't work. And that's just not true. It's working great for Strive. Congratulations to that team. They've executed incredibly well.
- [01:19]
A
What comes to mind when you think about the daily dividends from Strive? Are there a couple of like, very obvious to you benefits of having a daily dividend? I know Jeff has mentioned, you know, maybe you would call them a retail trader or just a retail investor or any investor could say, you know, I'm going to go into this product for one day. As Jeff says, you know, take the car out of the garage, put the car back in the garage. You could do it for one day and say, oh, hey, I got a dividend, maybe I want to do it for two days. Or it makes it maybe more approachable. What are the, what, what are maybe the top couple of like this is why it's so important or this is why it might be revolutionary, or is it just we're still in the a b test mode between bimonthly and daily.
- [02:06]
B
So it's an insightful question and I've already written about this on X and I don't think people understood this. If because SATA s a t a strives pref pay pays daily dividends each day, you have to make that decision. If I sell this position, I have to put into something else that's automatically going to earn me 13% a year. So that changes the whole mechanism for how that trades. Now as it trades down, right, it trades Back snaps back very quickly. So to algorithmic trading, SATA makes a lot of sense to the algorithms now stretch strc. The narrative around that was and when Michael Saylor spent a lot of effort on and which I think was is all legally true and makes sense from a narrative perspective is that he talked about rock dividends, return of capital and that because it's rock dividends, he had an effective based upon what state you're in, your effective return is based upon. Based upon that you're not paying taxes on it. So it's higher than the 11.5% that is true. Also what I think happened is there was a lot of retail that was in STRC and as the price dropped they decided to sell and then the algorithms went along with it and started dumping STRC SEDA because it's a daily basis, every day it pays. Even though the total amount for the month is still the same, it's still the same 13% that's annualized. The APY is up. The fact that it's daily causes the algorithms to trade that differently. So you have both. There's both a narrative that is true whether it's semi monthly or monthly and daily. But the cohorts that buy it react differently. One is algorithmic trading that's done like, like computers that try and arb this difference and the other one is the retail that was in it and strategy said this, something like 70 or 80% of STRC was purchased by retail. Retail gets shaken out. They just do. Even if they're down. If anything, this proves that retail cannot even handle being down. You know, it's now down. It traded, it closed below $90 today it's down. So if it's down 10% in one month, people can't handle that volatility. They just can't. But that's the reason why you were getting paid 11 and a half percent per year instead of 3, 3%. So that's what's happened. So can all of these narratives be true at the same time? Yes, but the competing forces may be much bigger. So on Stretch I think you had much larger retail playing it, that sold it off. Whereas on Seita it's a much smaller size compared to Stretch and it's easier to keep that at par and the algorithms like trading it better.
- [05:04]
A
We've seen reading the tea leaves that some non US companies are likely pursuing digital credit product, you know, referring primarily to smarter web company. But what happens here in the US when you have the third company, the fourth company, the fifth and sixth company launch digital credit. Are they going to need an interest rate that's above SEDA at 13%, especially if they're below the market cap, trading volume and liquidity of Strive? Or are there other factors that might make 8%, 9%, 10% something below what Strive and Strategy are at currently with their preferred products? How does that work in reality?
- [05:58]
B
If you're a bitcoin treasury company and you cannot maintain above 1.25m NAV if you don't have somebody on your team, I'm talking to all the bitcoin treasury companies except for Strategy and Strive talking to all of them. If you don't have a quant in house that analyze what took place in 2025, if you can't run your own numbers, if your M Nav is not above 1.25, do not launch digital credit. If somebody wants to call me, call me. Tim will have you give him my phone number. I already wrote a book on this in January. You cannot launch a digital credit unless your M nav is above 1.25. That is just one metric. Also, if you have debt, that's your second strike. You cannot launch digital credit if you're trading volume right? And specifically if your notional derivative volume is not greater than your market cap, you cannot launch digital credit. I can keep on going if you are, if you keep going, keep going. If you're, if you're a 30 day trading volume right is not pick a percentage 10, 20, 30, 40% of your market cap, you cannot launch digital credit. If your stock is in the toilet and you've lost 75% of your market cap, you cannot launch digital credit. I don't want to hear it. It's not that the, it's not that the framework is wrong, is that you have not been a good steward for your, for your own, for your own stock price. The other thing is, and this is where I also wrote this publicly, so I'm repeating my Republican. You could say whatever you can name your company is hey, we're an elephant company. Just made that up. But if you have Bitcoin on your balance sheet and that mark to market every quarter makes up all of your gains and losses, it doesn't matter what you call your company. You're a bitcoin treasury company. You could say you're an operating company, you could say that you're a real estate company. But if 90% of what you're doing is based upon bitcoin, not even 90%, but it's more than that, then it doesn't matter what you say, the market's going to treat you like that. And if you're a bitcoin treasury company, you were founded on the principle through capital formation that you will continuously be able to go to the capital markets. And by going to the capital markets, you can continue to issue, whether it's equity or digital credit in order to to acquire more Bitcoin and merely the yield that you pay out. The annual percentage rate is your cost of goods sold. But if you're trading below a 1.22m nav or 1.25, pick a number. It's not one. Why is it not one? Because if you go to point, if you say one is your break even point, 1.00, you have 0.99. The haters come out immediately. And so you got to pick a number higher for any reason. Strategy came out their number saying it was 1.22. I could tell you for the past 18 months, everybody thought it was 1.0. It wasn't 1.0. And they shocked the market by saying that. So to all the people that have, the majority of our company is built on Bitcoin. Do not launch digital credit. If for some reason your investment banker thinks it's a good idea, maybe you should have me come there and run some numbers for you. Or don't even come to me. Just ask them how could this go wrong? Not whether or not whether they're willing to take you to market. That's not the question. Question is they may not care. So what I'm saying here is there's only two companies that have done this effectively and what Strive has done, and I want to be very clear, what has Strive done? Strive basically went public in September of last year. We're not even a year in. Tim, there was an event and you did a post about this on X. And at your event, they decided to buy Semware Scientific. Right. Ringing a bell? Right. What did they. They said they're going to do it. They acquired it. The stock price had traded down. You know what they did? They not only announced the acquisition, they completed the acquisition. What did they then do? They then did a reverse split to get their stock price back up. Why did they have to do that? Because you can't have a stock price trading below a dollar. What most people say is that doesn't change the percentage of ownership. That is correct. It does not change the percent of ownership. But what it did is it raised the stock price up to attract institutional investors. What does it do? It changes the daily Liquidity that goes up, it changes them. They're able now to write puts and calls against the stock price in order to hedge a multimillion dollar position in it. Their daily trading volume is high. There's liquidity in it. It's just not one metric. So they trade at a higher M nav. Then what do they do? They pay off all their debt. Not some of their debt, all of the debt. They now have zero debt. So now you have a company that cannot be forced into bankruptcy. Well, what do you mean? Well, because it's stock, which is an equity, and they have no debt. So there's no debt holders that can say, you didn't pay us. They don't have to pay because it's a pref. Could they suspend the pref? Sure. Would it kill the stock price? Yes. But they cannot be forced into bankruptcy anymore. There's a word that people don't use. It's called durability. Is your strategy, for lack of a better term, is your plan durable over time? And that's what STRIVE has done in a very short period of time. They were proactive. They said they require Semler. They did the acquisition, completed the acquisition, then they proactively did their reverse split, got the stock price up, attracted institutional capital, launched their prep, then they changed the game by being proactive, by going to daily dividends. So they have executed incredibly well. And SATA has come back up to its par level. I don't call it a peg. I call it par. And it's trading over $100. Now. If you're at a bitcoin treasury company, and if you don't want to say it, if you're. If you're a company that owns more than, I don't know, a thousand bitcoin, and you don't understand what I just said, and you're publicly traded and it's best for you to do nothing right now and just sit on the sidelines and wait for bitcoin to come back up. If you want help with that, contact Tim and he'll contact me.
- [12:45]
A
So at the risk of pointing fingers, why do you think so many bitcoin treasury companies either reverse merged, went public, however they came into the capital markets, they. They just bought the top. They just took the majority of their cash and just bought bitcoin. Was that because of the example of strategy? Buying the top because they had to? Because that's when they had access to the capital markets and what, you know, could be constructive and positive? I'm saying that to myself. How. What what is the lesson learned there? Because you have a company like Strive that has a cash us, you know, a USD reserve sort of strategy. You know, they have some digital credit also. Markets go up and down. There's these cycles, there's fancy words like capital rotation and arbitrage. What would make a publicly traded listed company executive think, I need to take a billion dollars and smash buy Bitcoin because it's going to go to a million dollars. There's not going to be another. This is the super cycle. What do you think the factors were that led to that? What's the lesson learned and what can we do moving forward?
- [14:14]
B
Sure. What I'll say is this. Kudos to Michael Saylor, Fong Lee. Both of them are MIT graduates, both of them are incredibly intelligent. They've now done 113 transactions over six years. Saylor started the company, I don't need to repeat that, he was the longest running CEO. Really, really smart people that are able to execute well. And I believe they have and I believe they will execute well. A lot of people will look at and be like, oh, I could copy what they did because it does not look that difficult. And I'm like, you know, sometimes you, you I think you're looking at with athletics, you know, sometimes you. Why do we pay people that can throw a basketball or a football or baseball, whatever it is, why do they get paid millions of dollars? It's like because they have a skill that you don't have. They truly do. And if you could do that skill better than them, then maybe you should get paid more than that. But you don't have that skill. Right. And that's just the way it's rewarded. So I think a lot of companies looked at what Saylor did. They're smart people and they're like, oh, on the surface this looks relatively easy. The mistake they made was this. And this was in the book that I wrote. I wrote a book, the Rise, Fall and Reemergence of Bitcoin Treasury Companies. In January of this year, Tim and I did a podcast. We talked about it. So what happened? What they did not realize is that they're all balance sheet companies. So I'll explain. If you look at the Mag 7 or all companies, Nvidia's revenue is fundamentally different than Amazon's. It just is. Nvidia makes a revenue off of hardware that they sell in chips. Amazon basically has multiple business streams. One is it delivers goods to your house. Right. And it has 800,000 employees that does that. And then it has a group called AWS, Amazon Web Services that makes something like 70% of their profit. Right. And it's like 30% of the revenue. So their income streams and even inside the company it can be fundamentally different. But all bitcoin treasury companies have the same income profile. What does that mean? Well, you take the price of bitcoin at the very end of the quarter of one quarter, at the end of the next quarter, and if bitcoin is up, then you made a profit or so called unrealized gain. And if the price is down, it's an unrealized loss. Right. And it's the same for all bitcoin treasury companies. They're balance sheet companies. They're not different. Now if the operating income. Right, right. Tesla owns bitcoin, but the bitcoin so small it doesn't matter in its operating income. But if you take, if your company, if most of it is made up of bitcoin, then you're a bitcoin treasury company whether you want to. You, like I said, you could call it elephant. Doesn't matter what you call it, that's what it is. And when they went public, they did not realize this. They said, oh, we're growing at a faster rate than strategy. That is true. Your bitcoin per share was growing at a faster rate. And you did some form of, whatever you had to do, whatever region you were, you did some exotic ways to do this and strategies grow last year I believe grew at 23% bitcoin per share and other companies were growing at 500% per share. And you're like, oh my God, I have to throw money into that because it's growing way faster. But then it comes back to the word I just said, was it durable? And it wasn't. I'm not telling anybody. Everybody should know this. That's not the interesting part. The interesting part, why wasn't it durable? And nobody seemed to answer that question. So I wrote a book about this and kind of nobody bought it. We did a pod about it and now six months later you've get people asking, what is, what's the definition of M Nav? Why are there two different M Navs, one for EV and one for the value of the bitcoin, or sorry, market cap versus ev. You're like, why are there two different metrics? Well, one takes into account the debt and the cash on hand and the other one does it. People are like, now they're like, I don't know why this comes up in June. I mean, we all should have Known this a while back. And by the way, the reason why I'm a little bit wound up about this, Tim, is because prefs didn't come out six months ago. Stretch was launched in late July, August of last year. And the first pref went out in January a year ago. So we're 18 months into this. So now we're having questions about what is mnav, what is accretive, what is bitcoin per share? Why are there multiple metrics? Oh, I need to ask questions about how this works. I get it. You're an individual investor. You don't get this. I totally get it. If you're an executive at a bitcoin treasury company, you have more than 2000 bitcoins and you don't understand what I just said, Bitcoin, then don't talk publicly about it. That's it. Just don't. You're not doing yourself a favor at all.
- [19:26]
A
But why did people buy the top? I mean, they didn't know it was the top. We didn't know it was the top. But why did they smash, buy bitcoin instead of saying, maybe let's take half the cash, buy bitcoin and just see how it goes? I mean, it was. Was it FOMO on a corporate level?
- [19:44]
B
It was. It was poor risk management. Was it fomo? Sure. We thought, everybody thought last year that bitcoin should have broken 200,000. Why would we say that? Because in the previous cycle, bitcoin topped out at 69,000. Make it. Let's say it was 70,000. Three times. 70,000 would have been a triple. It barely. It didn't even get a double. So we thought that in 2025, by the end of the year, it would have comfortably. You hit 200,000. And in the 2017 cycle, Bitcoin did a 20x. So you're like, okay, so we had a. We had it. It peaked at a shade under 20,000 in 2017. Then it barely gets to 70,000. So. So you basically got about a 3 and a 3.5x. And then in the next cycle, right, it barely got a 2x. You're like, with institutional money. The idea behind it was, oh, it should have gone higher. And it didn't. So why do we buy the top? Because we thought that 200,000 was a good number. The other thing that happened was, and I asked this, I won't say what CEO we. I was on a space and the CEO of a publicly traded bitcoin treasury company was on Remain nameless. And I said to him, I said, did you account for Bitcoin taking a 50% drop in your analysis? And he's like, no. And he said that publicly. And I was like, what do you mean? I didn't say that. I thought that in my head. So again, if you're running a bitcoin treasury company and you are not modeling at any given time that bitcoin will drop 50% in 60 to 90 days and you don't have your own in house person that runs that analysis, if you don't have that, please stop, please stop. Call me. Either call me or just stop. But if you don't have the capability to run a risk analysis, what's going to happen to our plan? If the price of bitcoin drops 50% and nobody in your team can break out an Excel spreadsheet and God forbid somebody says, oh, I could do this with AI now and I'll tell you why, I doesn't work for this. I know I sound wound up. Every time you prompt AI, you're not giving it structured data. What you're giving it is you're asking it, hey, update this, update this belief over. Update this belief on these prompts. If you plug in, when I make an Excel spreadsheet or I use Google Sheets, it's structured data. It's done over 113 transactions. This is what strategy is done. These are the transactions and I put in there and I do the percentage gain and nominal gain for Bitcoin and for the shares. Structured data, I feed that in the AI. The AI now is no longer inferring what I think it is not looking for information. I don't know where it's getting its information from. I don't need to go check it because I'm giving it the information for it now to then extrapolate upon this. So structured data is critical. So when I do that, I get a much different result than other people get. And if you don't believe me, three days apart, ask the same question to AI, you'll probably get a different answer. Why? Because it's probably going to go to different sources three days apart. It's not that it's lying to you, it's not that it's hallucinating, it's that it's not using a consistent data set. And that's why again, if you do not understand structured data and nobody in your team can make an Excel spreadsheet, then please stop, stop running a Bitcoin treasury company. Don't go to the conferences until you understand that. If you understand that Then you will model in a 50% drop every single time you do a capital raise. If what happens if we do this and bitcoin drops another 50%? And if your investment bankers or the hedge funds or your book runners, they can't answer that question, then maybe think twice about what you're doing. Do I think that strategy and strive could do this? Sure. But the other bitcoin treasury companies, I don't think they have the people in house to run those numbers before that, somebody wants to take a swipe at me, go do it. But I'm not the one that has a stock that's sitting in the toilet right now.
- [24:08]
A
So you just outlined where AI does not work.
- [24:13]
B
But okay, let me explain, let me explain why AI work. There's again, there's two different ways to use AI. If I want to find out research on something that I don't know, AI is phenomenally help. Look, if I have a problem with my car, I will ask AI and I'll prompt it very well. I've got such and such code on my car. This is the year of the car. This is the, this is the symptoms. This is what's happening. Go search the forums to find out what is the typical fix for this. Now I could go do that on my own on a search engine and that'll take a half an hour. AI will give me the answer back in one minute. So that's great. AI is very helpful for this. What we're doing here is that for what strategy has done, they have 113 transactions. What they have done is that they have all, they've gone to the market so many times, they know how things trade. If you've only done one, two or three transactions, I don't know why, you're good at something. Right? Look, if I'm going to go run a marathon, right, the marathon, do I know what's going to happen a marathon day? No, I don't. But what I do know that if I train for a year and I'm running seven miles a day, so it's almost 50 miles a week, I'm pretty well prepared. I don't know what's going to happen a marathon day, but I'm probably in pretty good shape. That's the hard part. What's happening with these Bitcoin treasury companies is that they're not analyzing both what strategy did and looking at their capital structure to say if they can replicate. They're saying, oh, we could just do this. And I'm like, why can you do this? Your Structure is not the same as theirs. So I want to make sure that I'm answering your question. Tim. Is AI helpful? AI is incredibly helpful. If you feed AI structured data, we have this amount of shares outstanding, we have this amount of Bitcoin. We got here because we did seven transactions and over time we could see how the levels happened over seven transactions. That makes total sense. But if you just say the end result, oh, we have, we have 40,000 bitcoin and we have 1.2 billion shares. Is that good? I'll come back. Oh, well, it'll give you some answer. But then if you say compare 40,000 bitcoin 1.2 billion shares with 850,000 bitcoin and 350 million shares, which company is more efficiently accruing Bitcoin per share? That's a much different question to AI. You see, when you leave out that context. When you leave out that context, it doesn't get it. I'll give you one other example. Maybe people play baseball. I'm not a baseball guy. I wrote this in my book, Going to College. I meet this guy and anyway, we're there. It's great. Junior year. So we're at the bar drinking college, and everybody tells me that this guy, he was a national banding champion in high school. I'm like, congratulations. I'm like, so? And they're like, oh, this guy's great at baseball. And we're at a third tier college, Division III college. Anyway, we're at the bar and I'm sitting there, we're drinking, and he goes, he says to me, mike, you know, I gotta admit something. I'm like, what? He goes, I shouldn't be the national batting champion. I'm like, did you, did you lie? No. I go, okay, what was your batting average? 7 11. I'm like, dude, you had a.700.711 batting average. He goes, oh, yeah, I had.711 batting average, right? And so I, I became the national batting champion in high school. And that's how I got a scholarship to go to college. And I was featured in Sports Illustrated. I'm like, so there was no lie and the math is correct. He's like, yeah, but I don't deserve to be the national batting champion. And I'm like, why is that? And he goes, well, the guy that came in second place, that had a 620, he had twice as many at bats. And I was like, oh, God. And so what happens in baseball now for the math people? The people that are just listening to me, right? Now know the value of what I just said right there, right? So the guy that was in first place had half as many at bats. That's the whole thing, right? And there's no way that that would extrapolate out linearly. So for the math people, they're going to get this. And if you don't get this and you're running a bitcoin treasury company, please stop right now. Do not. Do not pass go. Do not try and collect $200 to go buy bitcoin. Please stop. If your investment bankers don't understand what I just said about the baseball analogy. Stop right there. And the reason why I know my math is right is because I said the same story to Josh Mandel. And I said to Josh, I said, if you want to have the highest batting average in professional baseball, he's like, yeah, if you get up one time and you get on base, what do you do? He goes, I retire. Josh Mandel understood. And this is important part. Josh Mandel instinctively understood this because if you're not, the amount of transactions that you do, each one has to accrete and be good. And once you fall, once you fall below that and getting back up is the hardest thing to do. Hopefully that made sense. Tim, I don't know.
- [29:45]
A
That makes sense. So let me paint a picture. We had some zombie companies that became bitcoin treasury companies.
- [29:55]
B
And that's okay. That's keep on going.
- [29:58]
A
Some of them did very well, and some of them are now maybe going to be zombie bitcoin treasury companies. Have you seen the first actual, as Ben Workman would say, bitcoin treasury company, that is a growth company on the operating side. And are there themes in the market, regardless of whether you've seen it yet or not, that you think are kind of inevitable? I'm thinking of a recent post from Anthony Popliano where he said one of the. And I'm paraphrasing, I don't have it in front of me. He said, one of the things that people don't understand about Pro Cap is that it's not a bitcoin treasury company. It's an AI company with bitcoin on the balance sheet.
- [30:47]
B
You could call it elephant. If the majority of the quarterly income, whether it's a loss or a gain, is from the bitcoin, it's a bitcoin treasury company. It doesn't matter what you call it now. If he acquires, if, let's say, let's say the bitcoin, let's say Bitcoin loses $10 million a quarter. Right. And the AI part of the business makes $10 million a quarter. Right. I would tell you he's 5050, but in that case his profitability is still zero. Right? You made $10 million on AI, you lost 10 million on Bitcoin, so therefore your profitability is still zero. At that point you could say, well, you're 50. 50. I am unaware of him showing a revenue stream from AI that's greater than his Bitcoin. I'm unaware of that. If that exists, then great. Excuse me. So that's the way I would look at it. You could call yourself whatever you want to do it, but it comes down to the economic reality. Where does your money come from? That's it. I don't make this up.
- [32:05]
A
Have you seen a bitcoin treasury company that you would consider a growth company on the operating side or.
- [32:12]
B
Yeah, there's two. There's two.
- [32:15]
A
What are those?
- [32:17]
B
SpaceX and Tesla. So SpaceX, think about what I just said right there. And people are like, what do both those companies own? Bitcoin?
- [32:30]
A
SpaceX has 6% of their corporate treasury in Bitcoin. So is it a bitcoin?
- [32:35]
B
And what about Tesla?
- [32:38]
A
What happens when they merge? And is. Is the fact that it's only 6% of the corporate treasury on SpaceX the reason that you've had zero mainstream media cover the Bitcoin computer?
- [32:49]
B
They don't care about it because it's not enough to affect all the other multiples. Dwarfing, right? It's revenue, it's profit and loss. It's immaterial. People are buying it based upon the future value. Those companies are not valued for the most part on their PE ratio. Tesla's PE is approximately like 150, so it's five times higher than most of the MAG7 stock. That stock is given a premium based upon the future value. Right. There's two types of PE ratios. People are like PE ratio. Why are there two? Well, there's one that's the current pe, that's based upon the historical. Then there's forward pe. Do we think the company's, you know, based upon what do we see happening? And this can happen with Medicare, with drug companies, they come out with a new medication, it's going to pass trials, it's going to go live. And then what they've been working on for 10, 20 years, they were able to monetize it and then they make all this money from the new drug. And so it trades at a current PE and a future PE and Bitcoin you could say, why do we buy bitcoin? We buy bitcoin based because we think in the future it's going to be worth significantly more than it is today. That's why we buy it now. Do we want to go down? No. And then you make a decision, you want to buy more. So Tesla and SpaceX are valued. They have very, very high multiples. But the reason why they're given those multiples is because people specifically with Tesla and SpaceX have seen that Elon Musk has executed on that. You can go hop into a Tesla and it will self drive. I've been in Tesla. I don't own a Tesla. I'm a car guy. I like to drive my car. I get it. I'm Gen X. I'm not a boomer. I like to shift gears. I like driving stick shifts. Tim, you know that I'm a car guy. I like to get in a car and drive it. There are other people. Driving is too stressful for them and if it could drive them to work, that's fabulous. You know what? Good for them. They are not a driving enthusiast though. They might be a car enthusiast, but they're not a driving enthusiast because they're not enthusiastic about driving. Think about the words. So they get in the car and it drives them. So somebody's like, why do they, why does Tesla have this premium? And I would say to them, have you ever been in a Tesla and had it self drive? And they're like, no. And I'm like, cool, let's go. I'm going to go grab a Diet Coke. Once you're in there and then you could see it work for yourself, then all of a sudden it changes how you think. And that is true with most people with everything. Until you show them that it actually works and it works for you, they will not change their mind. Right. And I think that's what Elon Musk has done now with SpaceX. He launches up rockets and Fred Krueger made a comment. He's like, look, I have Starlink at his chateau in France and it works great. So Starlink is awesome. But at his house in Beverly Hills, does he use Starlink? No, he uses whatever his cable connection. That works great. So it's not that he's not a believer in Starlink. Do you using the right tool for the job. Does he get that valuation?
- [35:55]
A
Sure.
- [35:56]
B
Does he want to invest in SpaceX? I don't think so. But does he believe that the technology works? Yes. And so what I see for most people is that until they see something work, then they're not going to be enthused about it. So let's get back to where we are with this. You could say whatever you want about something, but at some point it needs to work. And what I could tell to a bitcoin treasury company, if it's one year or 18 months after you've gone public, don't think that going into digital credit is going to save you. If you didn't understand why you got to where you are today and if you did not, this is very important. If you don't have a person on staff that can do a post mortem analysis, this is something that an entry level product manager does in Silicon Valley, a post mortem analysis of why your company is where it is today, then you should not be entertaining doing something new. And until you get that back, maybe you should buy my book for $10 or call me, call Tim, I'll give you a copy for free.
- [36:54]
A
When we look back, say 2036, we look back 10 years from now, how do you think we'll describe this period of time? And let me give a little bit of framing. We had retail take Bitcoin from 0 to $100,000 were arguably stepping up to the plate to begin the first inning of real corporate and institutional adoption. We've had one, a total of 1m and a transaction in the, in the public market. Well, we've had two and a half years now of spot Bitcoin ETFs and ETPs. We just witnessed and we talked about it. The biggest IPO in history. Is digital credit. The biggest idea in bitcoin says bitcoin itself. And how do you think this time, this period in time will be described 10 years from now?
- [38:01]
B
I think it'll be forgotten and I'll tell you why. And I know this to be true for this reason. It'll be forgotten. The people that have lost money on it, they won't forget. They'll remember for the rest of their lives, but everybody else will forget. And the reason why is that when, if anybody, I live in San Francisco, if I go to the San Francisco Cable Car Museum, there was like eight or ten different cable car companies and lines. They were all independently owned and through private business funded that delay tracks and charge and go do that. And then eventually they all got consolidated and bought out by the, bought out by the city. And the same thing happened in the automobile industry. There was all these little car companies that existed and those were the hype stocks of the 1920s. Right, right. Before the great crash of 29. And so we have seen this time and time again during the Internet bubble. There's all these companies that came out and then you get an old timer like me, talks about pets.com, oh, we'll deliver 40 pounds of pet food for you. And of course, there's always one person that wants the £40 and will deliver to you for cheaper than you could buy it at the store, driving yourself to get it, which is mathematically unsustainable. I think that these companies will be forgotten. I think they will. I think because people will have gone on to be like, why bother talking about it? I think you'll have maybe two or three companies left. Strategy and Strive will be there. They'll be huge. I think the other companies do. I think other companies could figure it out. I think that if the price of bitcoin rockets up over the next five years, let's say it does go to 500,000 a coin or $1 million a coin. I think what does happen is that a company like SpaceX or Tesla, they'll do digital credit, but the digital credit will be based on them having the operating income to pay against the bitcoin collateral. It'll come from. The payments will come from a different place. What Strategy has done here is to pay the dividends out of the capital formation. Again, if you're a bitcoin treasury company, you do not understand what I just said right there. Please stop. Strategy is able to pay the dividends based upon the capital formation through 113 transactions. They're able to acquire more bitcoin trade at a positive M nav, strip off some of that. Some of that equity that they sell for cash to pay the yield, and then they're able to pay this. What will happen in the future is that there'll be companies, SpaceX and Tesla, and it'll come about when it's big enough to be like, hey, we want to rate. We want 10 billion for a project or 20 billion or $50 billion for a project. And they don't want to put any. What they can do is they can leverage the balance sheet right there. Hey, we'll post this bitcoin as collateral here and we'll float a bond on it so we'll get the money for it. And hey, we'll make the payments out of our normal cash flow. That is an operating company with bitcoin on the balance sheet. And those companies, Elon Musk will turn around, be like, how did he end up winning doing this? That's how I see this plays out. And I do think that, again, that's where it is. I want these bitcoin treasury companies to be successful, but the way that they're currently structured doesn't look like that. And if they disagree with me, that's okay. But I'm not the person you have to convince. You have to convince institutional investors to buy your stock to get your stock price up. Because if retail already bought your stock and they've already lost money, they. They have two choices. They can either wait for it to go back up, or they could sell it and book the losses and move on. So, I mean, that's where we are in the industry. Tim, I said something to you privately, which I'll say publicly now, is that I wrote the book in January, I published the book in January, I started writing the book in November. It's June 17th. I thought that we would have been. Wait. I thought that not understanding what happened, I thought that would have like trickled through, but it didn't. Kind of surprise to me. I'm kind of surprised about this. And then nobody has said a post mortem. Nobody said, hey, what went wrong last year? And we're doing things different. You would not admit that if you're running a bitcoin treasury company because that could open you in a lawsuit. But what I have heard your premise is, oh, should we do digital credit? You should do digital credit. If your capital formation is great, that means your stock price is over 1.25m nav and your. All the other metrics that I said before, if it's not, it's not going to. Doing digital credit is not going to fix a weak stock. Anything will make it worse. Strive doesn't have that problem because trading at a really great M. Navy and they have no debt.
- [43:04]
A
Several individuals in the industry are coming out and saying that MNAV is based on sentiment. They're doing sentiment analysis. Is MNAV purely based on sentiment?
- [43:20]
B
It's partially based upon sentiment. That's okay. Look, SpaceX has 40 million followers. Elon Musk has 240 million plus followers. Okay? There's many people that think because Elon Musk is the richest man in the world, therefore I'll buy his stock. That's pure sentiment. Now SpaceX as a company has 40 million followers. Michael Saylor only has 5 million followers. Okay, that's sentiment. What I can tell you is that. Yeah, and sentiment can switch very quickly. Is that sentiment analysis? Yes. But again, M Nav is a snapshot. M Nav is a Sentiment analysis right now and tomorrow it will be different. The day before it's different. And everybody's like, wait a second. M Nav is a calculated metric. It's the, it's the stock price versus either your enterprise value or your or your Bitcoin value, right? So that changes on a daily basis. The most important thing is, is what you're doing, is it durable? What is your path? A path is did you. Strategy has done 113 transactions, right? They've done all of these transactions over the course of five and a half years. So that is their path analysis. If you're a bitcoin treasury company and you've done between two and seven transactions, right? And the majority of your transactions have all been when you first went public or sometime in the middle of 2025, and then for the past year your stock has just gone down by 80%. Your path metric is terrible. M Nav is a snapshot at one moment in time. When you look at the dashboard and it just shows all the numbers, that's a snapshot one moment in time. When you go to strategy's website and it shows you all of their purchases and literally the page is called purchase purchases and it has 113 purchases. That is your path metric. Those are two different things. And I don't know why that's hard for people to understand. That is the most basic thing. Good example. Hey, I win the World Series this year, okay? You're going to win it next year. Don't know, the snapshot is looking pretty good next season. You're halfway through. You're, you're, you know, you're, you're leading your league, looking pretty good now you win it two years in a row. Oh, you know, and the Bulls dreamt up this term. Three, Pete, you won two World Series. That's your path, right? Your premium value is incredibly high, right? Are you going to win in the third year? I don't know. If your team is healthy and everybody's playing good and nobody lost their contract and whatever, you might win it three years in a row. Don't know. That's a path metric. Now I don't know why people didn't understand this, right? And from my view is I did not do enough research myself in 2025. But what I misunderstood was I thought that they had enough people in house that could run their own analysis. And what I found out is that's not necessarily true. And so what I found out is the companies that execute well probably have their own in house analysis and the companies that don't outsource that. So hopefully I make sense. I mean, the path, the path versus instant. I think it's kind of obvious, but apparently we found out this past week that it isn't.
- [46:49]
A
What is path verse instant?
- [46:51]
B
This is a snapshot what this is showing you right now. And the m nav is 1.15. And this number will change literally every 15 seconds. Provide the stock is trading. So this is your M Nav right here. And it's telling you right over here, this is a path metric Here they have 7.7 months of dividend coverage. It's telling you it goes out seven months. But the human brain doesn't think like that. But these are all a snapshot in time showing you what the price is here. But now I'm going to change this page here and I'm going to show you a path metric. This is a path metric. There's 113 transactions that's on this page going all the way back. And what you can do is you can look at every one of these and you can see right here at the very top. I'll move my pointer over. You can see right here, The BTC yield per quarter is 9.3%. And the BTC yield year to date is 12.5%. That's showing you the path of this quarter. Year to date is the path on the year. They're at 12.5% for the year and that's starting on January 1st and quarter to date, starting on April 1st, they're at 9.3% for the quarter. Now people are like, that is a path metric. It's showing you the change over time, right? And strategy not only breaks it down by quarter to date to year to date. Now what's very interesting, if you go back and you look over here, you see this 2.5%. It's got parentheses around it. So for quarter to date in 2025, in that quarter, the BPS went down by two and a half percent. You're like, well, why that happened? Well, because they accrued $2.25 billion in cash. Now it does not say that here. You're like, wait a second, BPS went down. This is the part that drives me insane is that this metric has been on their website now for, for six, for five and a half months. And people are like, what do you mean BPS can go down? It's always going to be BPs accretive. Well, this metric over here doesn't show that they acquired cash, right? And this metric here on this page doesn't show M. Nav. So what's happening here is, is that they lost 2.5% in that quarter because they raised cash. Like, oh, well that, that's horrible. Yeah. But for the year, strategy increased the bitcoin by per share by 22.8% by a quarter. Right. So if you had 10 bitcoins per share right after this, you'd have 12.5. You, you went too fast. They, on a per share basis, it went up. Well, it'd be 1.2. Sorry, it'd be 10.12.28. But the point is, is it went up that amount and people are not seeing this. And it's like, but this metric has been on their site since, since whatever January. And people now are waking up to this. Like, what do you mean? On any given transaction, could BP come down a bit? It's because, yeah, they started with this cash and then they started doing the stock buyback. It's not just one metric, it's multiple metrics. And how they all interlock to each other and affect others is the important part. So this is what I'm trying to say here is that this is the path strategy is done. 113 transactions for billions of dollars. The other bitcoin treasury companies were like, oh yeah, we'll go public, we'll raise a bunch of money, we'll buy bitcoin. Great, I'm glad that you did that. Were you able to follow on with acquiring? Was your plan durable? Did you have ability to continue your capital formation? And that was. No, it did not exist. It didn't exist, didn't happen. And that's why Saylor made it look so easy. Okay? And this is why Strive is doing so well right now. They have a prep that's out, they have no debt. SATA is now, it's hitting, keeping its in its PAR range and it's acquiring bitcoin. And they could buy bitcoin because they're at a high end. The M. Nav is just the conversion price. That's all it is. So we gotta wrap up, Tim. But I want to, I want to make sure that I'm trying to make sense here. And look, the important part here is if you're running a bitcoin treasury company and you're like, I don't understand what this guy. Grain of salt or Mike, whatever, I don't understand what he's saying, then please stop. If you're listening to me and you think that I am wrong and you have Math to back up why I am wrong, that's great. Then you should continue going forward. But if you don't like my narrative and you don't have any math to say why I'm wrong, then please stop. Wait for the price of bitcoin to go up. Do no more damage. I mean, that's a Hippocratic oath for a doctor. Do no harm at this point is just wait it out. And if you don't have that, time is on your side for whatever reason, because you're pledged a lot of bitcoin as collateral, you did something that you shouldn't have done. Again, that's a different problem. There's a difference though, between being proactive and reactive. That's the other thing, Tim. Sometimes you have to do something ahead of schedule because you know it's going to hit as opposed to waiting to the very end. Like, maybe you shouldn't pull an all nighter, study for the test. You should study for a few weeks before it and get ready for it. But I want to wrap up. Do you have any questions at the end? Again, if people don't understand what I'm saying, I totally get it. I totally get it. Give me a call. If you don't try and do no harm.
- [52:50]
A
Can you break down why strategies, M nav, break even or whatever, however you want to term it is 1.22 and not one. Can you walk us through that?
- [53:03]
B
So I have this saved on my desktop, but if, if I don't, what I would do is I would go to company. Sorry, go to company, go to investors. You go right over here and you go to the earnings presentation. First quarter, you scroll through, right? So you can see this. And they had this in the presentation. And this caught. This is what caught people off guard. Let me find the right slide.
- [53:35]
A
Where was it?
- [53:38]
B
Hope I didn't pass it. Give me a second. There's only like a hundred slides in the deck. Here it is. So. So this, this is problematic for a little bit of a reason. Let me tell why this is problematic. This is. This is somewhere. It's slide 59. So that's problematic. Okay. Because most people just don't listen in to this far in. So it's slide 59. So I had to make the slide. It's strategy slide. And what they're telling you here is that the BTC reserves at the time of this were worth $64 billion. You're like, okay, that takes the amount of bitcoin times the price of Bitcoin equals $64 billion. Everybody's like, cool, totally got that number. Then there's the enterprise value, which you take the net debt plus the prefs and the basic market cap. So the basic market cap is the basic shares outstanding and the MSTR price. So you multiply that out and you get $59 billion. They do all the math for you. Then they have the net debt plus the prefs is $20 billion. You add these two together, right? And that will get you to 79. And then you have over here the ADSR market cap, assumed diluted shares outstanding times the MSTR price. And you get that here. So when you combine all these figures together, the M nav is 1.22. And you're like, oh my God, this is. This is confusing. I'm like, it's not confusing. It's complex. There's a difference. It's just not one number. And Adso assume diluted shares outstanding. Why is that an important number? Give me a second here. I will show this up. So I will go, I'm going to switch to. Oh, and already switched that. Assume diluted shares outstanding. If you look here, here's your basic shares outstanding. It's 356 million, 320. It's right there. And then here's your assumed diluted shares outstanding. It's off by about 10%. And this takes into account all of the converts. And the only pref that's listed here is strike. Okay. Because that one can convert into shares the prefs can't. And then the prefs are listed here under credit. Oh, sorry, I have to go to this page. So this is where you get the other number. This is where you get the $15 billion. So what they're saying is this is where they get their prefs and they get the converts. So these are all different. These are all different metrics. Their capital stack is complex. It's multi layered. They built this over time. Right. And what they have chosen to do to be more durable is to buy back some of the converts. And what I will show you what they did is. And again, this is all on their website. And let me find the. Make sure this is the right one.
- [56:53]
A
No.
- [56:54]
B
Oh, here it is. Sorry, under info. So this is the one right here. This is the important slide. If you see, over here, if you see the 2029 converts at $672.40 on this row, this is the one they bought back. Why'd they buy it back? It was because it was relatively early 2029. It's not the farthest dated one 2030. It had the highest strike price, so least likely to convert. And they bought it back at a discount. And you're like, okay, so how do I know that it worked? If you look over here, if you look at the end at 331, it had 4.0462 million shares. It's right there. And they bought back half of it. So that number got cut in half to 2,231. But these are million, so it's 2.231 million shares. So the share count got cut in half. So they reduced their denominator by cutting the share count. Now, was that accretive for them? Sure, but they kind of paid up front for something that they didn't dribble it out over time. So I think from that perspective, it was a little bit too much at one time. The only thing that I could fault strategy on is for sometimes doing too much too much at one time. The joke is like, Ryan Cohen, half in cash, half in stock, or it's all on the website. If Saylor asked me for advice, I'm like, Instead of retiring 1.5 billion of it, I would say 2.75 billion. Do half of it, keep the rest in cash, see how it goes. And then two weeks or a month later, do the other 0.75 billion. It's still the same 1.5, but I would have broken it up into two transactions. But I don't run a Bitcoin treasury company. What would my advice for all Bitcoin treasury companies? If you think you're going to do a giant purchase at one time, try and break it up into four, into four equal purchases to test the market and see the reaction. See the sentiment in your M Nav. Your M Nav will reflect what you did, right? I can explain the math here for two hours doesn't fix anything. If your sentiment is. If your sentiment goes down, if you do something and your sentiment goes up, your MNAV is your sentiment that goes up. Then I would then follow up and do it again. But if you can't follow it up, it wasn't durable. Oh, we did it one time. A month later, people lose faith in you. They're like, oh, and then the sentiment drops, right? You got to do well through the whole season, make it to the playoffs, win the playoffs, and then get to the World Series.
- [59:41]
A
Said so is the takeaway from today's conversation to both acquire and divest thoughtfully? Maybe you don't have to do it all at once.
- [59:52]
B
It's not Divest, you can continue to invest in bitcoin. If what you're doing has positive mnav, it's probably not 1.0 for your company. You have to figure out what that number is. And by the way, if Your company has 50% of your Bitcoin pledged as collateral, then that means your company has half the bitcoin just the way it is. If Your company has 10,000 bitcoin but 5,000 is pledged as collateral, all your analysis should be done at 5,000 bitcoin. It should. And as soon as somebody says no, it doesn't work, it's debt. As long as we make payments. No, your M Nav will be automatically hit because of this in the public markets. Now if you had a private company, then what I just said does not matter at all. See, that's the part they missed. If I have a private company and I have 50% of my assets pledged as collateral, then your valuation can be based on whatever you want. Because you're not asking the public sentiment to gauge what you're doing right? Even though you should value it at half because half is pledged as collateral. But in a public company, as soon as you pledge a certain amount as collateral, that's no longer immediately in the bitcoin treasury space we value is that you don't have that Bitcoin anymore, you'll automatically be margin called even if it doesn't happen. So therefore all your analysis needs to be done with your unencumbered bitcoin. So it's not about divesting, but people did not put a thought into durability. And it's a bummer that we're in June. We did not get a really big blow. Look, I think that if we had a blow off top and we would have went to 2, 250,000, I think we still would ended up in the same place. We would have had a higher peak and a lower low because their structure wasn't durable. Except for strategy and strive. Because assuming they would have, assuming everybody would execute the same way they did in 2025, the top would have been potentially higher. But most of them had already dropped before the second all time high on October 6th. Most of the bitcoin treasury companies were not going up at that point anyway. So that's when we knew that their structures were not durable. So it's not about divesting. Do I think, look, I think that Bitcoin is the best collateral, it's the best asset in the world, but it will humble people do not understand how to harness it. And whenever you acquire it, you always got to assume that it can lose 50% of its value in 90 days. If you don't, and you cannot model that, then you do not deserve to be in the public market. In the private market, go right ahead and do whatever you want. Your investors may not like you there either, but if you only do in your own money, that's fine. But in the public markets, the results are all public. I don't need to beat up on any of the companies.
- [62:55]
A
Where can people reach out to you and start a company?
- [62:59]
B
Grain of salt at Z06Z07 on X. That's the easiest way to contact me if somebody needs to get a hold of me. Unless I follow you, you can't DM me, so I'd have to follow you. If you want to reach out, if you're an investment banker, bitcoin treasury, company executive, you don't have my number and I don't follow you. Then reach out to Tim. Tim, if any of them contact you and they want to talk to me, you can give them my phone number and I would be happy to talk to them and see what to do. Look, I wrote the book. I want to recap. You know, when I wrote the book, Tim, that I didn't. I never wanted to write that book, but I wanted to figure out what mistakes I made as an investor. And I told you that in the last space. I didn't write the book for the individual investors. I wrote it for the executives at these companies so that they would do well and their investors would do well. And what happened in the past week with questions about what's MNAV and what's bps. Those are great questions to have a year ago, not now, and now that now this is coming up and you're like, for goodness sakes, no, no, it's not the time for it to come up now. You should have known that a year ago.
- [64:14]
A
Grain, thank you for your time. Always appreciate you joining us here on the Bitcoin Treasuries podcast.
- [64:20]
B
Thank you, Tim.