The Hurdle Rate Podcast

Episode 48 – Bullish Digital Credit
Date: February 18, 2026
Participants: Tim Kotsman (Host), Joe Burnett, Matt Cole, Jeff Walton

Overview

This episode dives into the rapid evolution of digital credit and the bullish case for Bitcoin-backed instruments amid market volatility and shifting regulatory frameworks. The hosts reflect on recent large institutional Bitcoin purchases, lessons from Bitcoin Investor Week, effective treasury management in bear markets, the misunderstood risk profile of digital credit, and the macro risks facing fiat money versus Bitcoin's emergent role as a new monetary base. They also discuss amplification through leverage, regulatory and ratings challenges, and the socioeconomic impacts of AI-driven disruption.

Key Discussion Points & Insights

1. Major Institutional Bitcoin Activity (00:00–01:57)

• Tim details several big Bitcoin treasury acquisitions:
  • Strategy: +2,486 BTC, now holding 717,131 BTC total ($54.5B at avg $76k/BTC).
  • American Bitcoin: Crossed 6,000 BTC in 6 months.
  • DDC: Added 80 BTC, now at 2,068 BTC total.
• Signals rising institutional conviction in Bitcoin's long-term role.

2. Insights from Bitcoin Investor Week & Market Sentiment (01:57–07:22)

• Matt: Bear markets are the best time for events and debates; fear leads many institutional investors to seek lower-risk, lower-return outcomes, often to their detriment.
  • Quote (Matt, 03:49):
    “Having these conversations...does not cause the same thing where people as a whole start to look for bitcoin minus returns because they're so afraid of the volatility because they don't understand what they hold. I think that would be a bad outcome.”
• The group discussed Fed policy, predicting a more “dovish” (pro-liquidity) tilt from nominee Marsh, contrary to popular “hawk” expectations.

3. Debates and Building Conviction in Bear Markets (07:22–09:48)

• Joe: Bear market debates are vital for conviction-building, help separate strong from weak arguments.

  • Quote (Joe, 08:29):
    “The debates that I've seen and experienced throughout countless bitcoin bear markets have only helped me rebuild conviction into why I think bitcoin is really important monetary technology.”

• Media criticisms of Bitcoin positions (e.g., Saylor on Fox News) often misunderstand the underlying strength of institutional holders.

4. Amplification, Risk, and Digital Credit Instruments (09:48–14:07)

• Jeff and Matt discuss how to underwrite Bitcoin “amplification” (leverage) in a treasury context:

  • Back-testing shows that 60% or higher amplification could be sound if risk is managed properly (e.g., holding sufficient “bitcoin coverage ratio”).

  • The risk math often supports higher leverage, especially at historical drawdown points.

  • Quote (Jeff, 12:38):
    “An amplification of 60, 70 plus percent could be supportable depending on different times in the market, different risk profiles.”

5. Historical Drawdowns and Positive Asymmetry (14:07–20:08)

• Matt:

  • At a 50% BTC drawdown, historical probability of higher price in one year is 89%, with a 125% avg. return.

  • At a 60% drawdown, win rate hits 98%.

  • Drawdowns are rare opportunities: poker analogy—any pro would “go all in”.

  • Digital credit offers a structurally different risk profile versus traditional margin—less forced selling, more ability to ride out volatility.

  • Quote (Matt, 16:52):
    “At a 50% drawdown in Bitcoin you have...an 89% chance that Bitcoin will be higher in one year than it is at that moment in time.”

6. Underappreciated Resilience of Digital Credit (20:08–24:57)

• Joe:

  • Digital credit instruments (e.g., STRC) have proved more resilient than most expected, barely moving despite long BTC downtrends.
  • The market (and ratings agencies) hasn’t yet grasped their underlying strength; a paradigm shift is slowly underway.

• Actuarial models suggest that the probability of the US dollar suffering from loss of purchasing power is higher than Bitcoin going to zero.

  • Quote (Jeff, 22:42):
    “The US Dollar faces structurally higher long term risks of severe purchasing power loss than Bitcoin faces of going to zero.”

7. Regulation, Ratings, and Basel Rules (24:57–30:54)

• Matt explains why ratings agencies (e.g., S&P) give zero credit to BTC on balance sheets—largely due to Basel rules and lingering European financial standards.

  • Changing U.S. regulatory stance to favor BTC as collateral could unlock vast institutional acceptance and usage.

  • Historic resistance to pricing transparency in tradfi (private credit) contrasts with BTC’s radical transparency.

  • Quote (Matt, 25:39):
    “Is it because they just don't comprehend it...or is there something...more structural...from Basel and Basel rules, which give no credit to Bitcoin?”

8. Store of Value: Bitcoin vs. Gold and Fiat—Monetary Evolution (28:29–34:26)

• Joe and Jeff draw analogies between gold and Bitcoin:

  • Gold survived centuries; fiat currencies trend toward zero.

  • Bitcoin as “digital gold” can upgrade/evolve (“software”) and has stronger, visible monetary properties.

  • Bitcoin’s 24/7 transparency is both a challenge (volatility) and a feature (real-time risk data).

  • Quote (Joe, 29:52):
    “If gold has survived for thousands of years and bitcoin could survive a very, very long time...then yeah, it would make a lot of sense to me that fiat money...those are likely going to trend towards zero or eventually reach zero, probably a lot sooner than bitcoin ever would.”

9. Bitcoin’s Volatility, Transparency, and CAGR (34:26–40:58)

• Joe:

  • Bitcoin’s volatility is a function of its fast growth/maturation, not fundamental instability.
  • CAGR remains attractive across all periods; volatility reflects the market “trying to figure it out.”

• Matt critiques traditional financial games (e.g., private credit “accounting alpha”)—opaque asset valuation is “not alpha, just closing your eyes”.

  • Quote (Matt, 37:03):
    “I know that $10,000 a Bitcoin or $100,000 a Bitcoin, it's the wrong price. It's either worth millions or it's worth nothing. And we're just on the bitcoin maturation journey.”

10. Digital Credit, AI, and the Future of Work/Society (40:58–52:08)

• Jeff: AI and real-time market computation will demand transparent, observable assets and risk, making traditional opaque financial instruments obsolete.

• Discussion of massive macro imbalances: U.S. federal debt to GDP (compounding at 3.6% since 2008, reaching potentially 172% by 2036).

  • “Basic consumer goods going up at 2% a year is, by design, the best case for USD holders” (Joe).

• Societal implications: “K-shaped economy,” AI/automation, widening disparities, and the need for hard stores of value.

  • Quote (Joe, 46:56):
    “If AI continues...the disconnect between different parts of the world...is perhaps just going to get wider and wider...you need some sort of economic certainty...that’s bitcoin.”

Notable Quotes (with Timestamps and Speaker Attribution)

• Matt Cole (03:49):
  “Having these conversations...does not cause the same thing where people as a whole start to look for bitcoin minus returns because they're so afraid of the volatility because they don't understand what they hold. I think that would be a bad outcome.”
• Joe Burnett (08:29):
  “The debates that I've seen and experienced throughout countless bitcoin bear markets have only helped me rebuild conviction into why I think bitcoin is really important monetary technology.”
• Jeff Walton (12:38):
  “An amplification of 60, 70 plus percent could be supportable depending on different times in the market, different risk profiles.”
• Matt Cole (16:52):
  “At a 50% drawdown in Bitcoin you have...an 89% chance that Bitcoin will be higher in one year than it is at that moment in time.”
• Jeff Walton (22:42):
  “The US Dollar faces structurally higher long term risks of severe purchasing power loss than Bitcoin faces of going to zero.”
• Matt Cole (25:39):
  “Is it because they just don't comprehend it...or is there something...more structural...from Basel and Basel rules, which give no credit to Bitcoin?”
• Joe Burnett (29:52):
  “If gold has survived for thousands of years and bitcoin could survive a very, very long time...then yeah, it would make a lot of sense to me that fiat money...those are likely going to trend towards zero or eventually reach zero, probably a lot sooner than bitcoin ever would.”
• Matt Cole (37:03):
  “I know that $10,000 a Bitcoin or $100,000 a Bitcoin, it's the wrong price. It's either worth millions or it's worth nothing. And we're just on the bitcoin maturation journey.”
• Joe Burnett (46:56):
  “If AI continues...the disconnect between different parts of the world...is perhaps just going to get wider and wider...you need some sort of economic certainty...that’s bitcoin.”

Timestamps for Key Segments

• 00:00–01:57: Institutional buying highlights, episode agenda
• 01:57–07:22: Bear market investing, event insights, amplification
• 07:22–09:48: Conviction-building through debate, legacy media criticism
• 09:48–14:07: Risk math & amplification, digital credit underwriting
• 14:07–20:08: Drawdowns, statistical asymmetry, digital credit vs. margin risk
• 20:08–24:57: STRC resilience, actuarial risk of USD vs. BTC
• 24:57–30:54: Ratings, Basel regs, US vs EU standards, transparency
• 30:54–34:26: Gold, fiat, and Bitcoin as evolving money; transparency as feature
• 34:26–40:58: Volatility as growth symptom, opaque asset games critiqued
• 40:58–52:08: AI, the future of work, digital society, inequality, and Bitcoin’s role as an economic anchor

Memorable Moments

• Poker analogy for Bitcoin drawdowns:
  “Every poker player would go all in every single time for an 80% chance of winning...At a 50% drawdown, you have an 89% chance [BTC rises next year]” (Matt, 16:52).
• Lightning critique of private credit opacity:
  "The lack of pricing transparency [in private credit] is called accounting alpha...that is actually a grift because that's not alpha." (Matt, 37:37).
• AI’s impact on finance:
  “Nobody's going to want the opaque thing. The computers don't want the opaque thing. The computers want something that they can calculate.” (Jeff, 40:58).
• Macro warning:
  "This train has no brakes." (Referencing Lynn Alden, on US debt trajectory, Joe, 42:52).

Conclusion

The hosts converge on a bullish outlook for both Bitcoin and digital credit, seeing volatility as a sign of growth and transparency as a coming competitive edge. U.S. regulatory changes, if realized, could propel BTC into the heart of institutional finance, while rising macro instability is driving the search for absolute scarcity and certainty—qualities Bitcoin increasingly embodies. Amid mounting uncertainty, the hosts argue, economic survival will depend on understanding and embracing these rapidly evolving tools.