← The Bitcoin Treasuries Podcast with Tim Kotzman
The Bitcoin Treasuries Podcast with Tim Kotzman
Why This New "Glitch in the Matrix" Will Force Hyper-Bitcoinization | Jon Willbanks
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- [00:00]
A
Welcome back to the Bitcoin Treasuries podcast. I'm Tim Kotsman. I'm joined today by John Wilbanks. John, thanks for joining us.
- [00:09]
B
Pleasure to be here, Tim. I'm a fan of your show. So fun to connect with you live and talk Bitcoin and Bitcoin Treasuries.
- [00:16]
A
Absolutely. For those who haven't come across your work before, can you tell us who you are, what problem you're solving with Arterra and yeah, just a little bit about your background.
- [00:28]
B
So I'm a serial entrepreneur with a background in E commerce in the consumer package goods space. But I'm also an avowed biohacker and dog lover and I fused those skill sets to build Arterra Pet Science. And we are on a mission to revolutionize and extend canine healthspan. We've got a few, we're starting in a few specific areas. We have a dog dental chew, kind of a greenies for the 21st century. That is the first and only dog dental product in the market to use dog safe nano hydroxyapatite as a fluoride alternative that can actually remineralize to help strengthen and repair dog teeth. And then we have the most advanced full body dog supplement on the market that is adapted from, you know, really the origin story of my company was biohacking my dog, an almost 70 pound golden retriever mix with a 10 to 11 year life expectancy to nearly 17 in outstanding health. So got him to the human equivalent of 117 for his breed in great shape. But I had to install an industrial pharmaceutical powder mixer in my guest room to make his formula to be able to do that. We work with board certified integrated vets to take all of that work out of the process and a lot of the cost and we're just getting started. So shameless, plug aside and I hope you all, if you have a dog will check out our website. There's nothing else like it on the market but I'm really a passionate bitcoiner and excited to nerd out here with Tim and talk latest and greatest in bitcoin and Bitcoin treasuries.
- [01:55]
A
Can you drop the website real quick while people are on that Note?
- [01:59]
B
Yes, it's arterrapet.com A R T E R R A P E T.com arterrapet.com
- [02:08]
A
Are you surprised that you're the first product to market in that category that you described or what's kind of been the journey? I, you know, was interviewing someone earlier this week and I said I think you're the only one publicly talking about this specific stuff in the Bitcoin treasury space. And so I was just kind of surprised with that example. Like, are you the first guy to publicly talk about xyz? And so whether it's a service or a product. Interested to hear more about that? Yeah.
- [02:40]
B
So I mean there's other dog dental chews. There's, you know, $1 billion brand called Greenies of a chew you give your dog. There's, there's dog supplements on the market. I think. I really, I founded Arterra because I couldn't find products on shelves, dog products that met my standards for what I wanted to give to my dog. And I worked my previous company. I built and scaled the first in house. Excuse me, I built and scaled the largest Amazon agency for natural better for you consumer packaged goods brands to up to about a half a billion dollars a year in gmv. And so I watched this space evolve and I just kept expecting it to improve. And in supp world, all the innovation was happening around packaging and brand. And there's, there's very noteworthy brands on the shelf right now that spend more money on their packaging than they do on the active ingredients in their product. The average potency, like the average active ingredient concentration in a, in a dog supplement is 13%. And so I have a background in product management. I did that for GE and their LED lighting category in a different era of my career. And so I kind of took that, I was able to take that mindset, roll up my sleeves and we solve some really challenging technical problems that frankly a lot of experienced manufacturers and consultants, they laughed at me and said it wasn't possible ton of work to be able to create a. I can show it to you a dog supplement chew. It looks like a meat flavored starburst. This is 55% active ingredients. So it's also slightly larger than the typical supplement. So we are delivering between 5 and 8x the active ingredient payload per serving and then doing that in a way that do dogs like that taste good to dogs? Because we've got bitter ingredients. We also have to address aroma because dogs are super smellers. And so we built a combination of AI and a very different R and D framework than I've seen anyone else in the space bring to tackle this problem. Bring it to market. And in the case of dog dental chews, most of those are basically glorified wheat cookies with some food coloring in them for your dog's teeth that rely purely on mechanical abrasion. I had been using nano Hydroxyapa. You can't give fluoride to a dog because it's toxic when you swallow it. You can't tell your dog not to swallow their peanut butter flavored toothpaste. I had been using nano hydroxyapatite toothpaste in my own mouth for about six years and haven't had a cavity since then. It clearly works. It works well. Was able to do the research and say this is dog safe. And so maybe that's how the Reese's Peanut Butter cup, the accidental origin story of tripping into the pot of chocolate with a jar of peanut butter or something. But we kind of stumbled into that innovation and I think so many humans are using NHA toothpaste and have seen how well it works that when we put it in a dog dental product, you know, it has immediate credibility. So we will continue to wash, rinse and repeat that pattern. But I could be retired right now after a previous exit. And I'm here because I love dogs. They're one of my favorite things about life on planet Earth. And I think that we, as their creator, species and stewards, can and should be doing better. And so I am on a mission to bring that caliber of products and innovation to dog owners everywhere to make it a lot easier for them than my DIY approach at times has had to be.
- [05:54]
A
Well, I'll throw it out, thank you for asking. I am a dog lover. So this is a very fun conversation for those that are listening and maybe they're taking a walk, going for a light run, hopefully being safe. If it's summer temperatures, they're in the car, they're thinking, I thought this was the Bitcoin Treasuries podcast. Tell us about your view on bitcoin, maybe how you were introduced to it. The corporate adoption of Bitcoin digital credit is something that you've commented on. How does, how do these worlds collide, so to speak?
- [06:32]
B
Sure. I mean I think, I think bitcoin collides with, with all worlds and that, that, that collision is inevitable and people, you know, there's a lot of people haven't realized it yet, but that's coming. I can tell you my, my bitcoin origin story. So I was active in Students for Liberty and was a, volunteered for the Ron Paul campaign in, when I was in college. And that exposed me reading End the Fed. That exposed me to really understanding the problems with the Federal Reserve with our monetary policy. I went through the Institute for Humane Studies curriculum program and I was reading Hayek and Mises and Rothbard and would come to blows with some of my econ professors because they didn't like some of my conclusions. Very Keynesian, dominant Keynesian schools of thought there. And so already had a conceptual awareness of the problem as kind of the 2008 financial crisis happened. But I can't say I was. I was bleeding edge to bitcoin. It really first hit my radar around 2011. I thought it was interesting. I kind of immediately understood it as a. Okay, this is. This could be like a digital goal that could overcome some of the limitations of gold as money from the past. But it also seems like a shady Internet magic money program. And if it does work, if it does get any traction, I'm sure the system will stamp it out because it would be too threatening to them. And that was naive because decentralized. But I do think bitcoin was more fragile and vulnerable in those early days. But I was also a poor college student. I was working almost full time to get through, help put myself through college. And so I didn't have a lot of extra money to invest. But I did buy my first bitcoin finally in 2013. Um, and I bought it when it was having. It was kind of one of its. More, as I recall at the time, one of the first kind of public kind of entered the mainstream conversation a bit. And I, and I bought it high. And, you know, it went up a bit and I thought I was a genius. And then it crashed really badly. And I thought, oh, I'm, you know, I have no business. You know, this is money I can't afford to lose. Like, I was probably silly to buy this, didn't think much else of it, and then repeated that again a few years later. Bought high, sold low. And then the third time, fortunately, it stuck. I realized around 2018, 2019, that it was not going anywhere. And I started. And also at the time, I was further along in my career, so I had the resources to start dcaing into it. And I just set a steady daily DCA buy now for the past six, seven years. And I really ramped that up around 2020 when it was clear in Covid it was clear that they were going to print ungodly amounts of money. That strengthened the thesis, but I think it was, you know, I was busy scaling a company, starting a family, and it was always kind of in the background and part of a broader portfolio investment thesis. But I think in my mind, it was still occupying a pretty narrow conceptual box. As you know, this is digital gold, and it's kind of. It's my apocalypse money. If the whole system, you know, blows up, we hit the hyperinflationary scenarios. You know, it's the, it's the fallback but you know, high conviction and, but just didn't have that spark or soul level excitement or recognition until something happened to me about a year ago. I kind of looked up at the playing field and realized, you know, genius act had just been passed and realized we have, okay, now we have a pro crypto president. Almost every member of the cabinet is pro crypto. We have, including the treasury Secretary. We have a. Bitcoin's price has obviously done its thing and had appreciated greatly since then. But it felt like bitcoin was being vascularized into the inner plumbing of the financial system in a way that even a hostile administration would have a difficult time removing. And also we had seen a sustained assault for multiple years of the Biden administration doing everything they possibly could to stamp out or suppress slow roll the growth of bitcoin. We saw states like China try to ban it. We saw the Russia Ukraine conflict that the US government was able to freeze oligarchs dollar accounts but the ones that stayed rich were the ones who kept their bitcoin. And I think those were all incredibly strong signals. And there was just a sense of, and also kind of a growing sense of civilizationally we're heading, it feels like we're at the time heading into the gravitational well of the singularity. I think we're clearly in it now. And it felt like the intersection of these, these two lines felt very meaningfully to me and it was almost at a spiritual level, felt an activation that, okay, now, now is the time to really go deeper, pay attention to this. I think Jeff Booth, I give a lot of credit for really rewiring my brain. You know, that one line that he has that I think is so profound and self evident, but also, you know, confusing to hear at first is that deflation is the natural state of the free market. It really, I pulled at that thread and really began to understand Bitcoin as something, not just a utility, not just a store of value, but really a technological discovery that I think is more analogous to electricity or fire or the Internet. And I think it's incredibly profound. And I think for the first time in this kind of macro civilizational cycle, whether you want to consume in or out, if we're in the fourth turning or we're in the kind of repeat of the fiat cycle collapse or even on a grander stage, I think when we've reached these Tipping points in cultures before, from ancient Rome to more contemporary examples where the board gets reset when the currency dies. It's usually the average person who suffers. And that concentrates wealth in the hands of powerful people. And I think this is the first time in our history where we've actually had an arc and an off ramp that not only allows for the possibility of a smooth and prosperous transition for everyone who owns Bitcoin, but I think also the people inside the existing system and power structures who also have a lot to lose from everything blowing up. And I think that's also why I'm so excited about digital credit, because I view digital credit. I view Bitcoin. I think Bitcoin's success is inevitable to me, whether that takes a decade or 50 years. I think just the math and physics and economic physics of our civilization will have that outcome. What I think digital credit, why I think digital credit is so important as something more than just some cool financial engineering is that I think it provides a potential bridge from the fiat monetary paradigm into a hard money, sound money standard. In a way that really gives us the potential to have a smooth transition and a smooth landing. In a way that it actually aligns incentives with the current fiat system and current power structure to gradually, but in an exponential flywheel loop, voluntarily convert more and more of the thermodynamic heat waste from the melting fiat ice cube into Bitcoin's thermodynamic system. And I think that's very profound. And I do whatever I can as call it a hobby or passion. As far as activism goes, I think that helping educate people around Bitcoin and also helping people understand problems with the fiat system, because many are still very oblivious, despite the fact that they're working harder on the hamster wheel and doing all the right things, but having a harder and harder time getting ends to meet. But also try to be an advocate to digital credit to individuals, and then also within the startup and small business community, where I think it can be uniquely attractive for early adopters in those spaces.
- [14:27]
A
Something you said reminded me of Satoshi saying something to the effect of, you know, this is a sly, roundabout way of coming up with a solution. Do you think that in the same way that he thought of Bitcoin as this decentralized answer that Michael Saylor has kind of built on that with digital credit as a sly, roundabout way to increase adoption through the traditional corporate and Wall street channels, or do you think about that in a different way?
- [15:08]
B
Yeah, I think strategy is one of the most fascinating structures I've ever encountered. I'm not an engineer by training, but was product manager and have a great appreciation for engineering minds. And I think strategy structure is something that only could be built by, you know, the MIT engineer who is Michael Saylor. But I think it's a different, that object of MSTR is something different depending on how you, what perspective you look at it from. I think one of the most amazing things to me as just a student, a nerd of monetary history is he has essentially created a private central bank that can issue its own issue and back its own currency with its own reserves that being stretched digital credit. And I think that is profound. And a glitch in the matrix. It feels like a glitch in the matrix, but the good kind. And I think as I'm a power law guy for the most part with Bitcoin until somebody, until reality gives me a reason to believe otherwise. And so you don't have to extrapolate too far out on that curve until strategy starts becoming a financial death star super weapon again, the good kind, but where they start rivaling small sovereigns and nation states in the scope of the capital that they control. And then I think the most important function for strategy kind of in that picture is it is a conversion engine. Digital credit is a bridge, but the broader structure of strategy itself is a conversion engine to I think speed up and facilitate the transition from fiat into hyper bitcoinization and a bitcoin standard. And I think it also happens to be incredibly lucrative for shareholders who are willing to take the time to understand its structure, its mechanics, who are level headed and willing to weather extreme volatility. I think the asymmetry that strategy presents is really a generational investing opportunity. There's a few other companies, there's other things besides Bitcoin that I'm passionate about and invest in and believe in. But bitcoin is overwhelmingly and the quality blue chip treasuries being strategy, MSTR strive ast. I think Meta Planet is very interesting, although slightly less dialed in on that one. I think that the opportunity to own amplified Bitcoin, or as I kind of call it self accumulating Bitcoin, there's bitcoin on chain and then you have myself accumulating Bitcoin where yes, there's a wrapper around it, there's counterparty risk, but if I trust that team and they're probably one of the radically transparent companies I think in history, that bitcoin goes to work to compound and add more bitcoin per share to itself. And that gets really exciting when you understand where bitcoin is heading from a fiat denominated lens.
- [18:09]
A
How do you see this?
- [18:10]
B
Did I answer your question?
- [18:11]
A
Yeah, yeah, yeah. I'm just, I'm just riffing on the digital credit piece of this. As far as what do you see with the, the current structure of digital credit and the fact that it's trading below the hundred dollar par price, there's been a lot of discussion around that. And that effectively increases the yield that someone could receive from those products. Is it just super early? Is it totally broken? Do we just need to zoom out because this stuff isn't even a year old or something else?
- [18:50]
B
Well, so I'll cross option B off the list. I don't think it's broken. I think we are. The stretch is the oldest. It's 1112 months old at this point, has spent its entire life in a bear market. Prior to July, I think the biggest dip it had was in February. In early February, we saw the largest nominal price drop in bitcoin's history. And I think it dropped to like $88 and rebounded back to par within a week. And I'm not sure for the people who aren't following this and like, we're kind of inside baseball here, but I think your audience probably wants the inside baseball. And so I was surprised. I mentally and frankly, I had a lot of my liquidity, right. Like stretch was my liquidity sleeve. I had money allocate set aside for SpaceX IPO that was parked in stretch and it actually started breaking par prior to the kind of mini. The panic that we saw a couple of weeks ago. So I think a lot of other people had the same idea. But in my mind I'm like, okay, well I'm getting, you know, 10, 11, 12% yield on this. In my, my worst case scenario, you know, if it's early in its life, we had the largest nominal price drop in bitcoin's history and it dropped to $88. I'm like, okay, well that's probably a pretty good barometer of kind of what that volatility would look like in a black swan type event. And I'll kind of pencil that in as my floor. So I was really surprised a few weeks ago when it dropped into the 70s, I think briefly into the low 70s. And I think that this was entirely a psychological phenomenon. I think that a lot of retail rushed into the product without understanding it. I think you had attacks from, I think Coffeezilla's video that accused it of being a Ponzi scheme and missed some like really important details of how the structure and the engine works. And then I think a lot of like very clearly coordinated FUD on X caused a stampede that was fear based and had nothing to do with the underlying the structural integrity of the product itself or strategy's ability to service the dividends. And then I think if I being, you know, it's easy to armchair quarterback this when a company like strategy is at the front kind of innovating all this. But I do think strategy there are probably a few things, a few missteps along the way. I think the heavy marketing as kind of a money market alternative probably was reflected in overconfidence, in its self healing mechanism. Back to par. I think we all fell into that trap. I think the mistake was rationally it should and I think that those arguments were made in good faith. But I think the people who took that side of the argument underestimated the herd mentality and frankly sophistication of a lot of retail investors. And so, and I say this, I think a really interesting illustration's happening right now is oh, and then also at the same time strategy I think pulled too many levers. I think when they used the USD reserve which as I had advocated Stretch and pitched this to people, the 24 months of USD dividend coverage was a really important psychological safety net. Even though we understand in Bitcoin treasury world, you know, the 0.01% of the population that understands that that was a psychological security blanket and did not improve their ability to actually service as dividends, it mattered a lot to retail. And then I think even, and even though retiring the convertible debt was like accretive on a, on a CBA basis, like the math made sense. I think selling that first test sale of Bitcoin and I think and reallocating using cash reserve to pay down the convertible bond, all of those levers at the same time. Right. By the way, SEDA had recently launched right before that with daily dividends and kind of one upping MSTR or Stretch's product all while we had war risk with Iran and the SpaceX, the largest IPO in history was happening. It was maybe trying to pull too many levers at once. And I think that's the. Sometimes the Achilles heel of really smart engineers is that it can be too clever for their own good sometimes or overestimate the rationality of the other humans that they have to live with. And I think Michael Saylor's brilliant mind might have had a couple Blind spots there. But again, it's easy for me to armchair quarterback this in hindsight, but I think we can learn a lot right now from what's happening with Stretch and Seda. I don't check it up to the minute, but I last when I looked this morning, stretch was like $86, supposed to be at $100 par and SATA was like 96. I think yesterday it got almost back to 100. And so the, you know, right now like really you look at which of those two is the riskier product. I think they both have an amazing risk profile. But it's, it's Seda right much. It's a smaller company. And the effective yield on Stretch right now is higher. And I think my theory on the biggest, I think daily dividends were a part of that. Like SATA pulled in a lot of capital. People do like those daily dividends, great innovation. But I think the biggest driver of that is that by being kind of the fast follower to the number two to hit market in a perpetual preferred digital credit product that SEDA attracted more sophisticated, more leaned in investors. I mean asst Strive is their, their positioning or their differentiation is that they are more, more highly amplified Bitcoin. So it's, they had already attracted this very like leaned in investor base who had already understood that higher volatility comes with the ride. I think it probably had a cleaner understanding of how the structure works and therefore were less likely to panic and, and sell and lock in those, those losses. And I think it might, you know this, I think all this goes away. Bitcoin has its next bull run. We don't know if that'll six months. But I think over time the most important thing is that strategy and strive continue paying their dividends and never miss a dividend. And as we zoom out with enough track record, I think when the market realizes that they can take these dividends to the bank, it will begin to behave a lot more rationally. And I look at the situation, I think it's like a reasonable criticism or critique of these is that the companies can skip dividends. They're not legally obligated to pay them on these products, which I do think is an important kind of survival feature. But it is close to a self destruct button for these companies. Because if you look at their incentive structure, I say okay, do these companies have the ability to service and maintain dividends even under really the most bearish conditions that I can reasonably model? The answer to that is yes. Their incentive to doing so is that they unlock an effectively infinite flywheel of potentially trillions of dollars of net new credit to allow them to buy and accumulate bitcoin and grow and outperform. I think define set a generational hurdle rate. Maybe Elon Musk might have something to say about that hurdle but the upside's incredible. But the minute they miss a dividend I think that all of that goes into question and you know, is it a death blow? Would that be a death blow to digital credit? Probably not, but it's going to reset the clock and the risk analysis for the entire industry. So their incentive to pay those dividends and never miss them, even when it really hurts to do so is, is aligned and their, their means to do so is there and I don't see them skipping a dividend. And so while I'm a bit bummed that my, you know, what I, I think we all assumed was going to be a much more stable instrument in the short term is trading below par. I'm getting paid pretty well. I'm getting paid S&P 500 level returns plus tax deferred advantage of that ROC treatment. So I don't mind sticking it out and waiting for a while. But I do think the recovery without a big bull run or catalyst like maybe Clarity act passes in a few weeks and all of this goes away. I think it might be a bit of a bumpy road to recovery because I think as Stretch and SATA do get back to par, there's going to be a lot of investors that want to rotate some liquidity out and frankly I have adjusted my own mental framework where I'm going to keep a couple extra months of just USD dry powder and at least for a while think of digital credit as my medium duration capital instead of a purely money market, you know, savings account alternative. And I think that that's as bullish as I am on these products and I think as amazing as their risk profile is, I think it's probably responsible advice. That would be my responsible advice for, for people using these today. I think we check back in on that discussion in two or three years and it's probably, that's probably a different story. I actually do believe that the that these trading and maintaining at par even under really extreme conditions is very probable once the they have more history and the market begins to understand them. The STRIVE team has said repeatedly and those guys come from kind of a risk management, a lot of those guys come from a risk management background that three years of dividend history is really important, a really important signal to the market that makes a lot of sense to me. And so where does that put us? Late 28:29 Incidentally, we've got bitcoin halving between now and then and a number of interesting potential catalysts. So I'm extremely bullish on digital credit today. But I think the picture in I think the average finance world is going to be absolutely shocked at where we are by the end of 2028, 29, not just Bitcoin, but digital credit. And I think for a lot of the people who are hostile, there's bitcoiners who are very hostile toward Michael Saylor and the Treasuries. Some of this is irrational, some of this has. I get it. I always try to listen to people I disagree with and really hear them. The piece that I think is being missed by a lot of those critics is that even if you don't engage at all with MSTR or with digital credit, they are bringing these digital credit products are bringing already many billions of dollars and I think soon to be trillions of dollars over the next few years of net new fiat capital that otherwise would not have gone to Bitcoin. This is not competing. I don't think any reasonable person is a straw man to say that Stretch is taking away money from Bitcoin. They serve very different purposes in a portfolio. But it's bringing this huge net new pool of capital into the bitcoin base layer that not only you get a perpetual bid on Bitcoin's price to drive it up, but it's also going to be raising the floor because other than some kind of tax advantage and occasional rotation or monetization of their bitcoin reserves, those bitcoin are effectively being taken off market and locked in a vault forever. I think if strategy had not been buying bitcoin for the last few years, I think that this bear market would probably be much more painful and worse for us. And so as my point is, you don't have to like Michael Saylor, but you can benefit from. I think everyone who is a bitcoiner and holding bitcoin long term ultimately benefits from what these companies are doing.
- [29:58]
A
I heard a comment on Natalie Brunel's latest podcast with Lyn Alden and there's a clip going around right now where Lyn and I'm paraphrasing says that during the last all time high run up to 126,000, the positive M navs on some of the treasury companies, maybe that's money that would have flowed otherwise into Bitcoin. I still haven't wrapped my head around that. So I don't know if you have any thoughts there, but I just thought that was pretty interesting and Lynn's obviously brilliant. So I, I don't, I don't know how to really think through that, but just wanted to throw that out there in case you.
- [30:45]
B
So it might be dangerous to think out loud on, on the air here, but I hadn't heard that at that point. I think it's an interesting. That's. It seems, you know, intuitively look like there's something there. I mean also those, the, the multiples on MSTR also help fund. Help them hit that ATM like very aggressively. And so I think. Do you think how much of that I have to go back? That's a deeper analysis that I can't do with mental back of the envelope math, but certainly allowed MSTR indirectly to accumulate a lot more bitcoin than they otherwise would have. So you know, I wouldn't, I wouldn't necessarily call that a total, a total offset. And it is, you know, like I think about, you know, my portfolio strategy. I usually don't play with options. I'm like, I don't. I have a really good track record on, on macro trends of being right very early. I. But I just want to, I want to set my portfolio up where I just have to be right. I don't have to be right by a certain time. But man, I look at the asymmetry. So I've got some, a Fair amount of January 28th leaps on SST and December 2028 on. On MSTR. And one of the things I've given some real thought to is how that MNAV might behave and expand in the next bull market. I think like I wasn't getting to like over 4 in like 24 early 25. It was just getting like crazy expansion in a way. Like I think it's like absolutely the wrapper and the accumulation engine that is MSTR deserves a premium. I don't know if it's rational to pay 4x that. And so if we do, we know that Bitcoin when it does its thing can go parabolic. I think digital credit itself with that perpetual bid at some point is going to cause like a supply shock and some parabolic price discovery. So. And we also know based on the behavior of the last couple of weeks that most of the much of the market still does not understand these products. And so will history repeat and give us these like insanely high multiples or will will strategy keep them from getting overheated? By hitting the ATM more aggressively and issuing common stock into that, into that euphoria. I don't know. I think if I saw as high as my conviction is and as amazing as the entry point is, the 1 ish IM NAV on MSTR right now, I think if I go jump back to 4.0 I would probably take some profit, rotate into some on chain bitcoin and chill for a bit until it settled back down and then look for a good entry point to go back in.
- [33:13]
A
How do you think about short term? Might not be the right term, but short to medium term versus long term shareholder value. And maybe a near perfect example would be the atm. When you have an up market, your M Nav is going. Your book value is going from 1 to 2 to 3 to 4 like you just mentioned. If you and I don't. I'm not someone in the capital markets doing this, so I don't know the technical side of it, but you could maybe try to quote unquote hit the ATM to do what exactly what you just said and maybe not have that violent blow off top so to speak. And that would create long term shareholder value by accumulating more bitcoin. But someone that's more looking as a trader might not be thrilled that it goes from 1 to 2 instead of 1 to 4 on the book value. How do you think through that? Or how would you maybe explain that to someone?
- [34:23]
B
Obviously I have a personal bias and I can give you my personal lens. I'm not saying this is the only one or the only valid perspective on this, but my investment style, I'm a high conviction, high concentration, very low time preference investor. I want to obsessively, autistically absorb every bit of information, wrap my brain around the concentrated assets that I own so that I know what I own and I have the peace of mind and resolve to hold steady over a minimum five year horizon. I don't take a large position in anything that I'm not willing to hold for at least five years. I think there's a few layers to this question. I see so much talk about dilution from people who just, I don't think understand mstr. I understand the impulse superficially, but if you have the time and energy to go rant about it online, you should have the time and energy to do a little bit more work, especially with the amazing AI tools at our disposal built into X. And I don't think anybody should buy Bitcoin if without for under for less than a four to five year time horizon. Right now this entry point might be kind of a unique exception because we've been hugging the power off. It's very unusual but as a general rule I tell anybody if you're gonna start buying Bitcoin, dollar cost average, if you can and don't think about it, look at it for four to five years because it's gonna have extreme volatility. So why the hell would you expect a shorter amplified Bitcoin to give you more grace in that time horizon? So I think it's irrational. I don't have a lot of sympathy for traders that are just kind of trying to extract value from arbitraging. That said, there was a period where when the, the press had less frequent dividend cycles in the market understood them. I was arbitraging between Stretch and SATA and some of the quarterly prefs because there was an irrational mispricing and the kind of mechanical price drop we'd see post, post X date wasn't happening. So like I get it but I'm not too concerned about the, the, the traders short term traders perspective. But from a long term perspective of long term shareholder value, yeah my mindset aligns with that, that five year time horizon is that if, if it's ultimately going to be accretive. To me, the CEB framework, there's like nitpicks and there's some other flavors of it, but that's kind of what I mentally baseline to common equity bitcoin exposure for. Most of the people watching this podcast are probably familiar and anything to me that's going to be accretive under that framework over a five year horizon I'm pretty supportive of. But I do think there's something important about these traders which is MSTR's formulaic approach to the ATM on MSTR and also on Stretch has created I think some traps where traders can predict exactly what they're going to do and they can trade against that behavior in ways that are detrimental to MSTR common stockholders. And so I have a lot of respect and I think it's really cool to watch the Strive team because they so transparently share their work in public and they'll go on the Hurdle Raid and True north and basically tell you exactly what they're thinking. Matt Cole talked about doing a controlled burn for SATA to let it run up meaningfully over par for a while to send a signal to traders that they don't know what they're going to do. And if you go in heavy against these tools, you might get burned and saylor has said something similar. I don't think we've seen it yet but in a recent earnings call that they may let the IM nav run up and get a little hot. Do you say pull the wings off the shorts? Good. I think we've moved from this and they've owned it and said explicitly that we've now moved to this framework of active capital management. And so if that's what we're going to do, like I think be nimble and this is, you know, this is, this is kung fu. Keep, keep people who want to bet against long term success of these instruments on their toes so that they're never quite sure exactly what's going to happen next. I think, look, I think at this point the people who aren't don't understand MSTR and we're going to get scared off already have been. So if the company's going to reset it's kind of expectations, this is probably the best time to do it because if you're still here and standing like you're along for this ride and I would love to see and I understand, you know, strategy is a, is a, is a gigantic aircraft carrier and Strive is kind of is like the F35, F35, the agile fighter pilot or fighter plane. But when the market was panicking, the Strive team was out on the front lines directly engaging. They're very level, like, like level head, cool headed, sharing exactly what was going on, what they were looking at, what they were thinking about, what, what they were concerned about, what they weren't. That I think was really important and I think we saw that and whereas strategy was, was a lot more quiet and I think there's, there's no value judgment on that because I think there are probably good reasons for why they, they have to handle this a little bit differently. But I do think that, but what I think we saw though was that Strategies MNAV Premium collapsed and went back I think briefly below 1.0 and basically right now the market's not assigning was it 1.06. There's so many ways you can play with the definition but it's basically trading for the value of its bitcoin right now. And Strive maintained that M Nav Premium. And I think that is because of the relationship that they have with their investors and how they're leaned in and engaged and also that transparency. Also when Matt Cole went out and shared his thought process about doing a controlled burn, that was also communication to Shorts on the other side of the transaction. It was like fair warning guys of what you're dealing with and the potential pain that lies ahead. I'm zigging and zagging a little bit, but overall it's probably obvious. Tim, I know we are probably two peas in a pod on this, but I just think this is the coolest and most interesting product category I think I've ever scene. It's just so cool to watch it right now. I think there's a very, very few who understand the significance of what's happening. I think five, ten years from now, this will begin to be a lot more obvious and enter the mainstream conversation. But right now, from this seat, it is so cool and it feels like such a privilege to be able to watch it live and up close evolve in real time.
- [40:39]
A
Yeah, it's super interesting to just, even in this conversation, see that just hitting strategy and strive at a very high level. Mentioning meta planet, you're 20, 30, 40 minutes into a conversation. How do you see the progression of the Bitcoin Treasury's space to date? I mean, there's been one M&A transaction in total. And you could blanket and be pretty accurate in saying you've had a few treasury companies announce that they're going to liquidate and no longer pursue the strategy. And lots of the companies in the top 100, let's say, are kind of sitting on their hands. They don't necessarily have a lot of access or any access to the capital markets right now. And, and maybe that's okay longer term, but how do you see it and what would you need to see in a company to kind of catch your eye moving forward? Is it, you know, the next one to say, hey, we have digital credit, we're just like strive. And strive is just like strategy or would it be, you know, like a growth sort of engine on the operating side of the business or something else?
- [42:01]
B
So I think there's there's maybe two ways I would look at this or two criteria I'd want to see satisfied or either or. And so one is, I think that there's very obviously an opportunity for there to be one, possibly two or three blue chip Treasuries for each region anywhere in the world that has public markets and fiat currency. You've got smarter web in uk, you have Orange in Brazil, et cetera. We've got metaplanet in Japan, obviously. And so being able to launch products that are like really optimized for the regulatory frameworks, the market, the dynamics that can culturally tailor their marketing, their outreach and brand like that, to me makes sense. I have A small position in smarter. There's only so many hours in the day and I have family and a company to run. And so I'd rather be an expert on or go really deep on a couple things than spread myself around a bunch. So I don't have a super sophisticated take on Smarter Web other than everything I see about it. I really like it. It looks like it's set up for some amazing amplification, especially at this entry point. I feel the same way about Meta Planet. I have a much larger position in Meta Planet and I think that is interesting if it's well run like that. One criteria cool in the US which is where this is ground zero for this. For digital credit or for Treasuries. Right. Treasuries can work through. They don't necessarily need digital credit to work. You know, I think strategy and strive have a pretty big head start here. And so I think for digital credit issuance they're going to be pretty dominant. I think Metal Planet has it. You know, they bought sibo cibo. They looks like they're setting up the plumbing and setting up a US entity to launch some products here in the US and they have enough bitcoin to do it. So I think that's really interesting. And then I think 21 also has caught my eye. I have. So I think I like Jack Mallers, generally speaking. I think they have too much bitcoin to not do something cool with it. And he finally shared it at the Bitcoin conference in his keynote what his vision was, which was to build really the bitcoin bank to build products built on top of bitcoin and bitcoin lending. And there are other ways. When you have that much of the world's most pristine capital and an appreciating asset, there are other interesting, useful ways to monetize it. I think the thing that makes me. There's some other, maybe some drama there that's giving me a bit pause. So I've actually rotated a meaningful chunk of my portion of my 21 holdings into Meta Planet for this period where it's been trading at a meaningful MNAV discount. But I think the thing I would Worry about from 21's perspective is I fully expect strategy to do many of those things too. I think they're really setting themselves up to be the JP Morgan of the 21st century and maybe this millennium. So without digital anyway. But my point I think to sum that up would be I would need to see. I think we had a lot of. Me too. Treasuries that all just kind of launch and some of them really recklessly raised debt. I mean the Nakamoto disaster and others I think I would need to see something very differentiated right like for we all know strategy for strive it's that clean balance sheet, no debt, higher amplification. Super leaned in leadership team with Meta Planet. It's that they have a profitable operating business and they're. They're selling options against their. They're monetizing their bitcoin by selling options against it to fund to increase their bitcoin stack and have optionality they can use that to fund dividends. Plus the regionalization impact of offering high yield products in ground zero for fiat for melting fiat where their currency is melting faster than ours. I think there's interesting ways to kind of arb that trade in a global context. And so yes so for anyone new that I could come saying is sentiment you have to be doing. You can't just copy be the business model. I think you have to be doing something interesting and that might be stupid right. Like Mara has a ton of bit like maybe Mara wants to launch their own perpetual preferred and they're cool paying 15% and they've got enough bitcoin and backing. You know I'm making this up. I don't know if that's practical or if they have any interest in doing that. Like maybe that works like I don't know but I probably wouldn't be too excited about it without a unique lane.
- [46:19]
A
Got it. How do you think through for your own business and for kind of taking a pulse on the market and you know I guess education is a. Is a two way street social media. I see that you're on X. How do you think through social media? How do you use social media you know personally and professionally?
- [46:45]
B
Probably too much on X I think I've just been so fascinated by what's happening in bitcoin world. It feels so like such an important and pivotal time that I've been leaned in and focusing a lot of the writing on that. I I like talking about. I talk about functional medicine pro protocols for humans for animals. X isn't the best platform for that. There's people who enjoy that. So I like to engage on X for the things that interest me and build friends and and build community and and learn. I think it's a much like even if it's my comfort food it's got a much higher nutrient density than the other platforms. I I stay off of. You know we have. We have marketing efforts on Instagram TikTok Meta. I get very little of value from engaging with those those platforms and so don't spend a lot of time there. I think Reddit used to be something really special, but has just become an echo chamber. I got banned from multiple subreddits simply because I followed the Joe Rogan podcast subreddit and so apparently too racist to be allowed to participate in a conversation just by following the the most popular podcaster in the world. So kind of noped out of there. And I do like the free speech dynamic that X is the platform I can go to and actually interact with people who disagree with me and engage with those people instead of just hearing one perspective. And I think that that's really important for a lot of reasons. And I'm a multifaceted person. My role I think over the coming months will be as my brand matures, my role will shift from being the operator that is wearing all the hats to really zeroing in on pure brand evangelism and pure R and D product leadership, which will free up, I think increasingly more bandwidth. And so this space is, you know, some soul searching around this. But obviously I feel like, you know, on a spiritual level, feel called to this space and want to find out how I can be of service and integrate. And so, you know, this interview is the second time I've really talked about these things, you know, on camera publicly and want to get some more reps in and just explore and figure out where it goes. I think I'm entering a period of my life where I have the luxury of not needing to do anything for I'm always going to work because I'd be bored out of my mind if I didn't. But I can do whatever I want with my energy and focus right now. And I think this time around I really, even more than the last times, want to do that in something that will be of maximum service to humanity at this, I think really important time. And so one step at a time and figuring out what that looks like. But I'm sure social media will be a part of that because that is the town square. That's how we communicate. I think long form conversations like these are much more natural for me. So you may see me on YouTube or starting a podcast of my own. There's other lanes besides bitcoin that I have a kind of similar passion about and that in my mind lend themselves to an interesting synthesis. And so stay tuned if you've enjoyed this conversation, you might be seeing more from me. And know in the next six Months.
- [49:39]
A
I definitely hope we do. It's. This has just been a pleasure. I'll throw it over to you for any, for some final thoughts. And I'll ask you a question that someone asked me this week that I was like, oh, that's a good question. And it kind of, yeah, gave me pause in a good way, which was how do you feel? What do you do when bitcoin gets to a million dollars? And they were asking me, right, you just hang it all up and say. And just walk away. And I'm like, but it's one of those questions that it's not all about number go up. But I thought that was a thought and emotion provoking question.
- [50:19]
B
Yeah, I think I probably wake up, make my husband breakfast, work out and go about my day because I know it's gonna go a lot higher. I think a million is just the beginning. But of course that's an important psychological threshold that I think would be nice validation and reward for the, the risks. The investors who have taken that risk and absorbed that volatility and been willing to tell the extreme majority that they're wrong because we know what we own. And so yeah, I think it'll be a fun milestone and I think we may. It's not hard to imagine that we get there even potentially a little bit before 2030, but that's definitely coming in the2030s. I would be very, very shocked if that that didn't happen. And I think the question for me is what do those milestones, what is a million, 5 million, 10 million? What does that imply about what's happening in the world and society as evil as I think fiat system is in its not, not that all the people participating in it are evil, but in its, in its effect. I, I don't want to see the world crash and burn. I don't want to see Weimar style hyperinflation. And so there is a lot of scenarios that are great for bitcoin but, but terrible for everything else. And I would much rather I'm happy taking a while longer to get to 5 million, 10 million and up if that means a smoother landing for civilization. And I think bitcoin and digital credit are the best are the ARC and the bridge for us to do that. And so I am on board for the long haul and it's great to be on the boat with you, Tim.
- [52:00]
A
Awesome. John, thanks for your time and for joining us on the Bitcoin Treasures podcast. Well follow along and put everything in the show, notes and link everything and definitely check in with you from time to time, so thanks so much.
- [52:13]
B
Oh, and if I may, one last thing for your listeners. If anyone would like to check out Arterra's products for their customers, you can use discount code Tim for 40% off your first order.
- [52:24]
A
All right. That's Tim T. I m Super simple.
- [52:29]
B
Thank you. Thanks for having me on.
- [52:30]
A
Thanks, John.