← The Bitcoin Treasuries Podcast with Tim Kotzman
The Bitcoin Treasuries Podcast with Tim Kotzman
Strive & Strategy: The Race to WIPE OUT Corporate Debt
00:28:45
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- [00:00]
A
Welcome to the stream, guys. And I see we are live on X now. Just going to put out a tweet to get all our followers locked in. Big, big week. Tim, where do we start? What's the. There's no shortage of news in bitcoin treasuries this week. Strategies thrive doing huge things. We've got the Clarity Act. We have Kevin Warsh passing Senate confirmation, which is bullish for bitcoin and the surrounding ecosystem. I'll give you the first word. What's on your mind today?
- [00:36]
B
I think what we're seeing here is an industry with best practices coming to the forefront. A clean balance sheet, no debt, high speed, low drag, all the things that are buzzwords. But when it comes to capital markets and we're entering this new era of, yes, the person with the most bitcoin maybe wins, but also we're working together, but it's also go time for. We're in this accumulation phase, but what's next? And I think we're starting to see that huge congratulations to the Strive team just ringing the bell right now at NASDAQ. And Sailor this morning announcing the. He's retiring $1.5 billion of convertible debt. So it's just. This is just the beginning and I'm very excited to see where all this goes. You know, arguably or inarguably, it's probably the better word. No one has taken more criticism, a lot of it unjustified, than Michael Saylor. And the reality is bitcoin doesn't need anyone. So you think about Wall Street. If they can, you know, give you a product and charge a fee, then they're making money. But think about mstr. Think about these bitcoin treasury companies. They're not charging you a fee, so I'll just let that sink in and hand it back over to you.
- [02:04]
A
Yeah, yeah. Wild stuff, you know, and. And it is. It is, like, kind of surreal to realize this is just kind of the tip of the iceberg, you know, the, the addressable markets that are opening up to bitcoin and bitcoin treasury companies. It's going to blow our minds. What can happen and how we get there is the fun part of the ride. And it was just a week ago when Jeff Walton from Shive was talking about Coffeezilla and his take was that we're at the end of the S curve. But Bitcoin's 18 years old. Right. We're just in the early innings and seeing how it's been kind of captivating the mind of people in the bitcoin space, people in the bitcoin treasury space. And now it's seeping into so many parts of traditional finance and just seeing how it's starting to capture some of that fixed income money that we've talked about in bitcoin for years. And we knew we'd get here. And Saylor's kind of pioneered the way. And seeing a team like Shrive, Matt Cole's team over there, it's just gigabolish signal to see them ringing the bell at Nasdaq. It was a month ago, Saylor and Fong were talking about how they were going to be the first company to pay twice monthly dividends. And they had looked at going weekly with dividends daily, but there were restrictions that NASDAQ had in place. But Strive is like, hold my beer. We're going to move fast and break things and they're, you know, they're just light speeding into this daily dividend. So let's break that down a little for the audience. I think probably everybody watching probably has heard about it, but, you know, it bears repeating. You know, they're going to be paid daily dividends over, you know, 250 times in, in the course of the year on business days. You know, that that monthly 13% dividend that's currently on, on their SEDA digital credit product will be set every month just like it always has. But there's a record date every business day, so they'll be able to stream those, those dividends. What's, what's bullish about that for you, Tim, and what do you think this unlocks for investors?
- [04:22]
B
So in a lot of, a lot of capital markets, things happen on a quarterly basis. And that's been for, you know, basically the entire history of Wall street, let's say. So the, the news cycle is going to, like, not only is Bitcoin going to accelerate, the news cycle is going to accelerate when you have the record date every single business day. I think it's a huge unlock, yes, for the, the capital side of it, but also for the attention side of it. You know, we may get into at some point talking about, know, the digital credit and then the digital money on top of it. I think that would be very bullish for a lot of the quote, unquote, crypto news cycle of the next couple years to be things doing really well and things blowing up that are built on top of digital credit. And I think it's really, it's kind of funny to me that all this is so early that some people think it's kind of Mimi. And it's this new technology along with social media, along with public capital markets, and, and you really see the entire rainbow of, you know, suits all the way to guys that might be in suits, but they're saying what some people think to be ridiculous things. So there's no shortage of entertainment. But I think the education piece cannot be understated for everyone on social media saying that bitcoin's not doing anything. It's chopping sideways. You know, can have as many conferences as you want. Bitcoin's not doing anything. And, you know, I, I think there's a lot of people that are hitting, hitting the roads, dealing with travel, making a decision to take time away from their hobbies, their families, their, their other obligations to go and literally travel around the world to meet other bitcoiners, other bitcoin treasury executives, and really be at the forefront of all of this. And so I could not be more excited. Yeah, I mean, it's. When I keep tweeting that bitcoin Treasuries is going global, you know, it's going to be a big week. Well, this week is a big week, Tyler.
- [06:47]
A
Yeah, this is. Yeah, I, I think this is going to be one we remember for, for a little bit. But, you know, maybe it is dwarfed in the, in the coming years, Tim. You know, it is, it is really cool to see these guys. You know, you've rubbed shoulders with them for years now and, you know, they are the pioneers at these bitcoin treasury companies who are laying the framework for what's to come. Because there is going to be a race into bitcoin. There is going to be a race to collateralizing balance sheets with bitcoin structured products, other interesting products that we probably haven't even thought about yet that can be delivered. You know, when you have an asset that is scarce like bitcoin and that is, you know, digital money that is, you know, just so well put together in and, you know, kind of a counteracting force against, you know, governments that are spending trillions and trillions of dollars, deficit spending every year that, that's ever increasing in a fiat world and being able to collateralize your balance sheet, being able to collateralize profit products. With Bitcoin, there's going to be so many new and innovating things. I'm excited to see what the current bitcoin treasury company do in the future. I'm excited to see the new players who come into the space with new ideas, both from the traditional finance background and people from a Bitcoin native background who are going to have some interesting value props for all of capital markets. Um, this was a huge week for sdrc. And you know, I, I think it was earlier this week. I was like, oh, this will probably be a little bit more tempered compared to the last couple months. You know, I think I'm like, oh, I don't think we're going to repeat that again this, this month. But we sure did. You know, Stretch just this week raised $2 billion in four trading days before their ex dividend date. You know, we, we had Apex announcements. They're the Defi protocol that has a stable coin, essentially a yield coin backed by Stretch, that, that's collateralizing that and they're offering a return and they also have some SATA exposure, but they, but they've bought $280 million plus of STRC. And I remember bumping into them at Strategy World when they were just getting started. I was like, oh, that's a cool, cool little project. And to see how that's exploded, they're, they're sponsoring the stream as well. And you know, just seeing how quickly that product has scaled in, in a, you know, we're, we're still what, 30, 35% off, 40% off all time highs in Bitcoin. We've got the Clarity act that's, you know, passage is going to come through so there's only going to be more dollars flowing into the, the stablecoin ecosystem and people looking for yield. Especially with the Clarity act, you know, not allowing US based stable coins to offer yield. So, so, you know, if people are in that ecosystem, I think Stretch and products that are collateralizing it are going to be very attractive. Sailor, Sailor tipped us off to this, but I'm still shocked at how Stretch has performed. Has it surprised you, Tim?
- [10:07]
B
Yes and no. The mechanics of it are such that, you know, the sheer dollar amounts surprise me. The fact that it works doesn't surprise me, I guess is the simple way to put it. Yeah. And you know, on the advisory side of, of some of the conversations I'm, I'm having, you know, people are looking, you know, whether they'll actually, you know, execute on it or not, you know, I don't know. But you know, there are companies looking to raise 10, 50, $100 million and, and get it, get into the market or get more into the market. And I mentioned that just because, you know, if it's just one guy out there acting crazy, dancing, you know, they're like, all right, well I hope that Works out for that guy. But at the point that, you know, there's so much conversation with, with dozens and then hundreds and soon to be thousands of these bitcoin treasury companies, I think it's just a very, it lends credibility to the space. I don't think we necessarily need to wait for Apple or Google to put bitcoin on their balance sheet. It's more of a. Literally everybody's talking about it and the taxi driver, the Uber driver is talking to you about, you know, Strive and you're like, okay, either this is the top or I need to look more into this. And the more that that goes on, the more attention, awareness and ultimately, hopefully education kind of emanates from the space.
- [11:50]
A
Yeah, yeah, really well said. I want to bring up strategies, debt metrics here. Just taking a look. Can you see that on your screen here, Tim? Yeah. So as you mentioned, Strategy is retiring one and a half billion from these 2029 converts. That's going to leave under $7 billion in convertible notes left of debt on their balance sheet. And that's how they're. We estimated that they were able to basically turn on the ATM on stretch for little over $2 billion this week. So I think the bitcoin buy is probably going to be in the 6,000 to 10,000 range, depending how much strategy raised on the MSTR common this week. But being able to retire that debt three and a half years ahead of time is something I didn't really have on my radar. And this is just a week and a half after Saylor has said, oh yeah, we're going to consider selling some bitcoin. In defense of mnav, obviously they're still, the goal is to acquire more bitcoin per share and more nominal bitcoin on the balance sheet. But they, they're, they just added another weapon to their toolkit by, you know, being able to say, hey, we can sell some bitcoin to, to fund dividends to, to harvest a, a tax loss and all that. But Saylor and Fong had previously said, you know, oh, the converts, that's something we'll have a discussion about six to 12 months ahead of time. But the, to see them retire it early is really interesting. You know, a billion and a half dollars of that in a week where Strive, who is really innovating in this space so much, retired the rest of their debt. So Strive has a completely pristine balance sheet with the only obligation on it is the dividends on seda. How important do you think this is going to be for bitcoin treasury companies by and large, you know, wiping their balance sheet clean of, of debt. You know, certainly the debt is a risk in the dilution overhang is something that, that weighs on the mind of investors. But it, but it's been really interesting to see how quickly both strive and strategy seem to be with their aggression in retiring debt now.
- [14:08]
B
Yeah, I mean getting rid of all of the debt allows you to pump up your amplification ratio. And you know, I don't want to get into moon math here and I also don't do public math. Right. I made that decision a few days ago. But when you start running the numbers on bitcoin reaching new all time highs and how the numbers and mechanics actually work between the, the common equity and the preferred shares and how de amplified these guys are going to get in very short order and how much room they have to run, it's pretty incredible. And I don't know, just to myself when I'm sitting alone, I think all of the OGs can only sell once. If they sell all their bitcoin, they can only do it once. So there's going to be this inflection point where you know, it's a liquid market, there's always buyers and sellers. But I think as more awareness and education and corporate and institutional hodlers are in the market, the more interesting it's going to get. I'll leave it at that.
- [15:18]
A
Yeah, I think, I think it's going to be very interesting. And like you said, as bitcoin price runs, you know, strategy has been, strategy's been. Michael Saylor has been accumulating bitcoin like a drunken sailor, I'll say it, you know, this year and when bitcoin's price runs, you're right, there's going to be so much room to add amplification and we don't have to dig into the numbers per se. But do you, do you think either of those teams that have the digital credit products do run the risk of being too aggressive with increasing their amplification in a bitcoin bull market? Doesn't matter at this point. You know, can, can amplification run to 100% of the balance sheet? What's, what's realistic there? Timing.
- [16:07]
B
I think we're in a new paradigm now where in my view they almost can't be too aggressive. Because think about it, let's say you take your amplification up to 100% and then Bitcoin has a drawdown. You can sell your high basis bitcoin and it's actually an advantage in the same way that strategy and others have used the return of capital Rock dividend. They've taken a bunch of lemons and you just make lemonade. Then you take a bunch more lemons, you make lemonade. I think that's really what's impressive is the creativity. I know we have all of our AI agents helping us out, but at the end of the day, you can't borrow conviction. As Ben Workman says, you can't let AI do the thinking for you. Although if it's helpful, that's great. Right? Let's get all the information in front of us and make the best decisions we can make. But I mean, I think we're like, the sun came up this morning and it's a new day when you really just sit and think about, okay, what if you go to 200% or 210% amplification and then you have a little bit of a drawdown, you just sell your high basis. Bitcoin, it's actually a tax benefit. Like, I think this could get super interesting. And yeah, to the extent that I can even wrap my mind around all these different levers, it's, you know, it is financial engineering. And I think that's a really positive thing. You know, I think some of the companies that have operating businesses that do throw off cash flow is great, but I think, you know, getting, let's say half a dozen more companies in the market with a preferred, a publicly traded preferred product is really going to take it up an octave, as Sailor would say.
- [18:04]
A
Yeah, I agree. It's, it's going to be really interesting to, to see and I, I don't want to throw up predictions on what will happen because I'm always wrong on, on exactly how it plays out. But you're, I, I think you're right. You know, like, if Bitcoin does what we think it can do, the sky kind of is the limit here. And, and I think, I think it will be interesting as more companies enter the fray with some digital credit products, which is, you know, certainly bound to happen. There's going to be experimentation and we're going to see, I think people go out on the risk curve all the way. There's going to be some people going all the way out there and maybe it'll work out, maybe it won't, but it's, you know, that's a free market is we're going to get, you know, a lot of the strategies that can unfold. We'll head out there. I want to bring up Here strc's chart just today it did drop almost that that full dollar today, which is healthy to see. But I think the big news, and I'll pull up the chart here on on SATA is when they announced just yesterday, things move so fast. Was it yesterday Tim, they announced the daily dividends and they, they, it briefly hit par, you know, which just showed the sentiment was really bullish on this announcement. And the last couple months it's taking, it's taken a little bit longer for, for SATA to hit par because of course their, their ex dividend day is at the end of the month. So we've got another two full calendar weeks before they're at par. But they hit par early. They hit par on the same day sdrc, you know, the day before their ex dividend date. So we had briefly both digital credit offerings trading at par, which I think is extremely bullish on digital credit. I think the demand there is incredible. I do think someone else was talking about this on stream yesterday. It might have been Soleil with Jeff and Dan Hillary, but he was saying that something that I talked with with the guys on the one share podcast that you know, this may, the move to daily dividends may take out some of those arbitrage dollars that would have ordinarily come in this summer on SEDA as, as people trade around the ex dividend date. So on the short term it could, it could be, it could take out some of those dollars that would have otherwise come to SATA. But I think long term it's just so bullish because who doesn't want daily dividends? Who doesn't want to park money that they've got sitting there being non productive when they could park it Maybe in a 2%, 3% yielding account, a money market overnight if you can just throw it in Seda with low volatility. What a great product. I think the sky's the limit. I was on another podcast yesterday talking about this is nothing that's around the corner but you know, a decade maybe plus down the road I could see as banks white label SEDA as they white label strc if they're at a large enough market size. You could see, you could almost see like brokerages offering sweep accounts based on these products. You know, if stretch really becomes a trillion dollar product, why wouldn't banks sweep customer funds there overnight, pay them out at a high yield, capture a massive spread on that compared to what they they capture on money markets and Treasuries today is, you know, are there any other interesting things that come to mind with. With how daily dividends could. Could change the game.
- [21:58]
B
Yeah. Just listening to you talk about the daily part of it, you know, I think when you think about how everything's going digital and everything's based on attention and speed that you have, you know, some of them, some percentage of people are going to be more thoughtful about, oh, I have this cash. How fast can I get it into SATA? Because I could be earning money today and tomorrow, or I could just not do it. Right. It's like, well, might be rescheduling that coffee meeting, because I got some work to do here at my desk. I got to get some cash into seda. I mean, it's like, not free money, but compared to a traditional bank account, it literally kind of feels like free money. So I just think you think about that 13% number, and you think about traditional private equity, you can just look it up on Claude or Chad or your favorite, you know, little helper, and it's like, those are maybe giving you 15 to 20 returns, kind of similar to private credit. Like, it's just. It's quarterly, it's opaque. It's all these things. And that's part of my background.
- [23:13]
A
Right.
- [23:14]
B
So I'm also throwing myself under the bus there a little bit. But, you know, just looking at the world for what it is. And. And you now have this novel thing where I know Jeff Walton has said, you know, it's. It's too good to be true. You know, if he was at Risk World, and he was saying he's paying 8%, he would have had more. More interest, maybe. So I think there's a giant education curve. And to your point about Apex, you see the more of the defi players out in front, maybe you'll see traditional finance catch up once the Clarity act passes and everyone kind of realizes we're again in this brave new world. We actually have clarity around. What's a commodity? What's a security? What are the rules of the road? And then, I mean, it wouldn't shock me if, you know, today, tomorrow, next week, you see some product that's streaming, hourly streaming minute by minute, second by second, millisecond by millisecond. Because you can do all of that when everything's digital. Will it be on some decentralized protocol that you're not sure about? Maybe at first, but I think the rate of development in this market is just starting to accelerate. And I talked to Eric Semler yesterday. He couldn't be more excited. You know, he said he's A very happy board member at Strive. So, yeah, I mean, you look at the team at Strategies, you look at the team at Strive, you look at the team at Meta Planet, you know, just to name a few. And these guys are not stopping. When you see him post pictures, you know, I think Dylan LeClaire posted a picture a week or two ago and they're like, out. Out doing meetings, they're out traveling the world, educating people on what they're doing. And that's, that's the hard work that the, you know, someone just in their basement behind a computer is not maybe fully appreciating is that it's. It's taking these conversations about Bitcoin, about capital markets, about clean balance sheets, about really pushing the transfer agents and NASDAQ and the attorneys and to. To the limit. And it's not easy. If it was easy, Tyler, everybody would be doing it. And everyone's not a bitcoin treasury company yet, but everyone is an Internet company. So it's just a matter of time.
- [25:52]
A
Yeah. Oh, man, you got me. I got goosebumps, Tim, just talking about this stuff. You know, it is. It is really transformational and it's kind of like I said, like I alluded to earlier, it's this payoff that's kind of been promised in Bitcoin in the way that the digitization of money can really change things. And, you know, just, yeah, seeing. Seeing what's possible. Thinking about even more frequency than daily dividends is just crazy, but it's something that is inevitable in a digital world backed by digital capital and digital money, you know? Yeah. Giga Bullish, thanks for joining me today, Tim, on the stream. It's really exciting times and I've got to go get to my brokerage account and sweep every last dollar I have into STRC or seita. Not financial advice, but yeah, I can't have idle cash sitting there, Tim, but thank you so much for your time today. Let everyone know where they can follow you online.
- [26:54]
B
Yeah, thanks for having me. You can follow me, Tim Kotsman on X. And yeah, let's do this again soon. This is super fun. Thanks for having me.
- [27:02]
A
Sounds great, Tim. Take care. Stay orange, everybody.
- [27:07]
C
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- [27:41]
B
Hey everyone, quick heads up.
- [27:43]
C
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- [27:57]
B
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- [28:01]
C
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