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- [00:00]
A
Welcome back to the hurdle rate, episode 59 for the week of May 25th, 2026. I'm Tim Kotsman. I'm here on the screen with Ben Workman, Jeff Walton and Matt Cole. In the past week, Strategy has completed the repurchase of $1.5 billion of its 2029 convertible notes at an approximately 8% discount to par. Strive acquired an additional 1,109 bitcoin for about $85.4 million. Strive now holds 16,500 bitcoin valued at over $1.2 billion. We had bitcoin buy announcements from several other bitcoin treasury companies over the past week, including ddc, Smarter Web, Farmhouse and West Main. Jeff, your conversation with Natalie Brunel in the brand new New York studio just dropped this morning. So what was that experience like? Natalie is obviously one of the best interviewers in this space. She has a massive audience. Are you sleeping these days? What's going on?
- [01:06]
B
Yeah, staying busy, that's for sure. I went back, back to back New York trips, was was there for the bell ringing on Friday, came home back on the west coast and then was back in New York on Monday evening to film both Bankless and then Natalie's show. And yeah, on a bit of a heater here, hitting the podcast circuit. And yeah, I feel like I'm in the zone. We got a lot to talk about. Obviously, the space is just moving super quickly and continuing to evolve and the stories are just getting bigger and bigger. We've been, we've been in the market purchasing bitcoin. We are going to be moving forward with the daily dividends here in under 30 days. About, about 20 days, actually. June 16th is when our first daily dividend will hit. So that's a exciting thing that we're all looking forward to. And we're watching how our instruments are trading in the market. And then I guess one of the other big news stories of today is strategy retiring $1.5 billion of convertible debt on their balance sheet. And I think that was a, maybe we'll start there because I think it was a fantastic move for the credit quality of the entire vehicle, the entire capital vehicle they had. It was about $3 billion of this specific convertible bond that came due. There was a put date in 2028 and the conversion price was something around $670. It was very far out of the money relative to where the common stock was trading today. So by retiring about half of that specific convertible bond that reduces that cliff maturity that's potentially on the horizon there for strategy. So thinking about what this does to the balance sheet, this actually if you're thinking about what val, what bitcoin value does are the assets worth less than the debt on the balance sheet. Prior to retiring this convertible bond, that number was around $9,500. So basically the price of Bitcoin would have to go down to $9,500 and stay there for an extended period of time for there to even be any issue of being able to repay the convertible bonds. If they needed to sell bitcoin to go do that. Now that number has been dropped to around 7,500. So it's around a 22% reduction in the price that Bitcoin needs to go down in order for the assets to be worth less than the debt. And just to put this into perspective, that's about a 94ish percent reduction from all time high for in the price of bitcoin in order for strategies assets to be worth less than the debt. So incredibly low probability that that would occur. In fact, if you go look back in historical bitcoin drawdown bear scenarios, it's never occurred in history that would be significantly further than Bitcoin's moved in history. So ultimately I think this is great for the credit quality. I think it's great for all of the preferred equities. Great for strc. They utilize the cash in order to retire the convertible bond. And I think ultimately it's a great move for the entire ecosystem.
- [04:05]
C
Yeah.
- [04:05]
D
What I like to see is that they're being methodical about the way that they're doing it.
- [04:09]
B
Right.
- [04:09]
D
You do realize over time that sometimes it's, it's less about the actual risk of the instrument and more about the perception of the risk of the instrument that's out there. So seeing them start with the highest conversion price instrument I think was a great move because that one was so deep out of the money that in investors minds, if they're just glancing at it, they see that, they see there's a 2028 put date and it starts to send off alarm bells. Regardless of how small that dollar amount is relative to their average daily trading volume and the amount of capital that they can raise in the market. It's just an anchor point for investors where over time as they've come up with better and better options, I think they no longer want to wear the weight of that perception. And so you're starting to see them take those actions to clean these up. And they've been signaling for a while that this was A desire of theirs. Right. I think at first it was really focused on just allowing these things to run their course. They would either equitize or they would pay them back in cash at the time when they were due. Now you're seeing them go on the offensive, say, we're going to clean up our balance sheet, we're going to get rid of this maturity risk that we no longer need, that's no longer serving us, and we're going to move forward with digital credit. And so I expect that as soon as they clean these up, you know, the other, the next closest one I think that they've got is one of the 2030 bonds that's got a 433 conversion price to it that has a put date also in 2028, March 1st of 2028. So, you know, I would expect that they would continue to pursue these in order of what the conversion price is on each. I think they probably are still optimistic on a lot of the other ones. You know, after that. The next highest is $232 with a put date in late 2028. So you may see some of those run their course. If it looks like they're getting momentum in the markets and you're starting to see the price nearing those, those conversion prices, then I think that it stops becoming a worry. But cleaning this up is just one less anchor point for people to focus on. The same way they used to anchor on the liquidation price of the secured debt they were holding.
- [06:15]
C
Yeah, I think the important thing here that you hit on there, Ben, is the perception versus the reality. And it's because the perception is, I mean, the reality is that this is investment grade, if not like AAA rated company from any material look at the risk here. I mean, Jeff's looked at this 100,000 different ways, Monte Carlo simulations, and it's near impossible to break it even. When you talk about the price going down to $10,000 a coin or $7,000 a coin. Right. Because it's not just going down there, it has to stay there. They don't have any encumbered Bitcoin. But perception is an important part of keeping the flywheel going. To be able to scale digital credit to the size that we want to, to also keep the common going. And so you think about this, that, and we've talked about this. When you have no debt, how high could you take amplification? I mean, how high can you take it before the risk model becomes seriously constrained? You could take it substantially, substantially higher than even we have it Right now. But, but you also have to say, well, where is the perception of the market? And I think the reality is that the perception of the risk on the convertible bonds is greater than what they actually have. And so retiring this, I think is a great move. I think it'll help them scale, stretch substantially higher, faster. And it's something that we went through. And retiring these convertible notes is not always easy. You have to negotiate with these investors. Some of them don't want to get rid of them, but that was a nice chunky retirement and bravo to them to be moving in this direction and I think ultimately will help the sector.
- [07:58]
B
Yeah, it's the transparency, the fact that they have this on their website, the convertible bonds are their website. And retail has got an understanding of what the balance sheet looks like. Almost the transparency is almost too transparent. Right. The fact that retail traders historically are never looking at capital structure. They're not looking at the convertible bond conversion prices or starting to wrap their heads around it. And just the fact that this capital structure is new and novel and incredibly transparent, it causes heartburn. When you can take the same perspective, you could go look at your bank or your insurance company. I've been pounding the table on this. Is anybody going to look at the capital structures of those financial entities that they're probably already using today and providing the same level of scrutiny on those instruments and their relative risk profile? I think that there's a big disconnect between the traditional financial realm and then these instruments. Just given that they're on a novel asset base and they're incredibly transparent. Everybody's laser focused on what these look like. And that perception seems a bit disconnected from the mathematical reality.
- [09:16]
D
Yeah, it's, it's one of those things that you contend with when you're running one of these companies.
- [09:20]
B
Right.
- [09:21]
D
You can do all the risk modeling in the background, you can understand the tail risks that are out there. But there's a certain point where you just have to respect what the market is willing to endure. And sometimes that means you have to scale back, you know, your risk approach beyond what you would normally do. Because you know, ultimately the market decides how you're going to be able to operate. So I think it's the right move. It's going to give them a very, very clean foundation. It probably greatly accelerates the timeline, you know, that they get to that debt free position where now they're just focusing on all the digital credit products. And in the meantime these products are going to continue to scale like crazy. And that balance sheet's going to keep growing. I mean, if we're, if we've seen one thing, it's that the demand for these things is pretty incredible right now. Turns out people are starved for yields. They do want these products. I think they're starting to understand these better and we're seeing that translate into the liquidity of all these products right now.
- [10:18]
B
Yeah. I've also been watching how the market's kind of contemplating the senior claim nature of these and it's been really fascinating to see that the preferred equity is kind of getting lumped in as a bond or a debt instrument as a senior claim on the corporate balance sheet, which I think is the inappropriate way to look at it. They're being treated the same mathematically when the reality is the perpetual preferred equity there is a senior claim from a liquidation preference, but there's no, you cannot default from having perpetual preferred equity on the balance sheet. So by having zero debt on our balance sheet, there is no event of default. We can't miss a debt covenant because we don't have debt. We have an equity based balance sheet. And so the market is still trying to figure out exactly how to weight these. But I think right now a majority of people are focused on, they're comparing the senior claims as if they're similar but they're materially different in the construction. So in thinking about like a default probability for like a drag calculation, you probably have to assume like a probability weight, a probability weighted distribution of default based on your assumption on the senior claim. So just something to be aware of out there. I think a lot of people are kind of hanging on to this senior claim in the event of a default and I think that's misconstruing the actual capital structure.
- [11:55]
C
I agree. And it kind of reminds me of back when I was before I was a portfolio manager and I was just a trader at CalPERS and I had to prepare risk reports for all these different portfolio managers and there was four of them that all had amazing careers and they all looked at things completely different and they'd be looking at same portfolios but they was like, I don't want to look at it this way, the other one want to look at it this way. And it was just like their view and their view was how they captured alpha. And I think when you look at it from the default perspective and the senior claims perspective that's a. Obviously it's a mathematically correct view that you can create of the world, but that view could bias you to take certain actions that in my view would not maximize long term value for shareholders. And so you can. And one of the ways that I used to frame this when I was thinking about these, of like, what is the, what is the lens that I want to primarily focus on the world? Not to say that I wouldn't look over here or look over here and look at different viewpoints, right? But like, what is the main lens? If you look at it from a liquidation perspective, you could think about a scenario where it kind of breaks. Actually if Bitcoin goes down, like if bitcoin went down 50% from here, those models break because they would say that there's no value in the common equity because the senior claims are equivalent to the Bitcoin or even potentially more if you take it to like 110% amplification. And you think about that said, well, at that point, if I issued common equity or I issued SATA, what would that do to that calculation? And the reality is that it breaks it because it assumes the common's worth nothing, but the common is not worth nothing. And so I just think this concept, I think it actually has some use as look at it and see it. But where do you focus? And to me that focus is actually how we've, I still think it's correct on how we structured incentive compensation actually at strive, where it's like this twofold model. So on the short term it's driving a bitcoin yield and meeting all your liabilities. So paying or interest. So on a day by day, week by week, quarter to quarter basis, drive a positive bitcoin yield, pay your liabilities and then over the long run you're compensated by outperforming Bitcoin. That actually gives you the flexibility across different markets to not only be looking at it from a liquidation preference perspective, because as a former fixed income guy, one of the biases of fixed income investors, which I obviously am one and have been one, is to look at the glass half empty. You're always like, what happens if things go wrong? What happens if things go wrong? And I think as an equity investor, when you're thinking in probabilities around Bitcoin, you actually have to think about what happens if things go right. Like, like from an ev, from an expected value perspective, looking in that direction is most likely going to lead you to optimal total returns. Right? Like everyone will agree, I think that over the course of 10 years or 15 years, we're going to be judged on total returns and making decisions that will drive total returns, at least on the common side. And then on the pref side, it will be about more Sharpe ratio volatility minimization. And there's a trade off. This is a big trade off in investing. If you want maximum total return, you often have to give up Sharpe ratio to get it. You can't look at the volatility because Sharpe ratio is a volatility metric. It's not the only metric of risk. It's just one metric and that metric is volatility. You have to give that up to focus on maximizing total returns and then you can give the volatility reduction to the prep. And I think that optimistic viewpoint, kind of like intentionally biased of like always looking. We're going to always underwrite a positive rate of return to Bitcoin as long as we think structurally it's still intact. And obviously we do. And I think that is, if you're not doing that, I think you will underperform those that do that over long term.
- [16:17]
B
I think you hit the nail on the head there in thinking about like equity value. Just going back historically, if you, if you subscribe to that theory. Right. Looking at strategies balance sheet in 2022, November of 2022, they were 120% leverage. They had more debt on their balance sheet than they had assets by 20%. Yet the market cap of the company was still valued at $2.3 billion. And I think at the time, I think they held about, I think it was about $2 billion of, of bitcoin on the balance sheet. So it's the, in history. It doesn't play out that way either. So it's, it's a directionally interesting model. I think it has some flaws in the reality and the perception of the actual capital structure. Matt, you said it very well. Thinking about the probability of it going right on the, on the equity side.
- [17:10]
C
You know, you just told your, your story on Natalie Brunel is one of the short clips I haven't had a chance to listen to the whole thing of what went. Right. Right. Like when that happened to strategy, like a big part of your story was basically seeing when everybody else would have been focused on the liquidation preference model. You saw something completely different and you went all in.
- [17:32]
B
Right.
- [17:33]
C
Like a theoretical thing for you. Like it's like actually like your personal story of, you know, financial, initial financial success.
- [17:41]
B
Right, Right. Yeah, no, I saw it exactly.
- [17:45]
D
Well, and you're seeing a recent example of that play out as well.
- [17:48]
B
Right.
- [17:48]
D
I mean, the treasury cycle kind of went through its, say it went through its full Bitcoin cycle well before Bitcoin got there, but you had all these companies that came out pumped really hard on announcements. You know, there was a lot of speculation going into the vehicles that these companies were going to merge into. And then you saw the blow off from there and these started trading well below their net asset value. Investors were convinced that it was over, that the model could never work. It was done. Strategy was going to be the only one in the market. And you saw a lot of people sidelined by that. Right. Which was a perception thing, ignoring the work that's happening behind the scenes to build that structure that puts these companies in place to generate value over the long term. And I think that that's the part investors, particularly in and around bitcoin lose sight of. Because while with bitcoin we've all become very conditioned to focus on long term outcomes, low time preference with equities, it seems we've gone the exact opposite way. There was this period where if these stocks weren't going up by double digit returns every week that they were failing and people were losing interest. And I think that's interesting because these are being structurally built for long term outperformance. Doesn't mean it's going to happen on a weekly basis, a monthly basis, quarterly basis, but they're being structured so over the long term you can deliver that value to shareholders. And you have to remember that if you're going to be an investor in these, if you're going to be a trader, then you're trading around the volatility. These are great instruments for trading. People love them. The volatility is incredibly high, they move a lot. It allows people to deploy a lot of different types of strategies. But if you're going to be an investor and hold it as a part of your portfolio where you're trying to maximize bitcoin exposure, that's a different risk reward mechanism you have to have in place for yourself mentally. Now, these companies are also becoming very interesting because we occupy both spaces, both sides of the investing world. The highest of volatility that we can possibly create and the lowest of volatility that we can possibly create. And smack in the middle of those two is Bitcoin. So it's very complementary to what bitcoin is natively from its own characteristics. And we're amplifying both versions of it. We're stripping out the volatility, we're stripping down the risk, we're delivering a very stable instrument for people that are cash flow focused. And then we've got the high octane, high volatility version of the commons where people are either trading or allocating for the long term. And I think it's, it's got to be an interesting dynamic for investors to grasp when they first look at this because you're looking at one product going well, this is very stable. I like this product for its stability. And on the other side of the house, you know, you've got the wild child out there moving around 120, 130 volume all the time. And it took a while for the market to rationalize that and understand why those are such complimentary products to each other and why they both work under the same corporate wrapper. And I think it's really powerful once they do understand the value that that brings. Ensuring that you've got something appealing to all aspects of the market and it's what's going to allow these companies to draw capital in from corners of the markets. People never expected it to come to Bitcoin. And it's all that planning and careful designing of the products and making sure you're bringing the best characteristics that traders, that long term investors, that income investors. You're maximizing and amplifying the characteristics that they're seeking in products that are only made possible by bitcoin. And I think that's a really powerful development out there.
- [21:26]
B
100%. Let's shift gears. We had a big week last week. We need to talk about it. We purchased 1,109 Bitcoin. It was our largest single week excluding IPOs and our acquisitions. And a lot of energy starting to build around here. So we are now the seventh largest publicly traded holder of bitcoin. Space X is slightly above us but they are in the process their ipo. So I'm not counting them yet but I look forward to passing them in the future. And it was a high energy week and we had a lot of success with SATA. So the just looking at some statistics, just internally we've got this a 30 day sharp ratio of SATA on SATA of 3.74. If you look on the Bitcoin quant website, you're seeing that our Sharpe ratio has flipped strc, which is interesting. That was something that a lot of people were very focused on for quite a while. So again Sharpe ratio you're looking at price volatility relative to yield thinking if they're both trading around a hundred and they both have the same volatility and we have a higher yield that that Sharpe ratio would theoretically be higher. So some, some things are trending very well. Our, our days to turn over the market cap, the relative volume relative to the market cap is, is trending. Days to turnover, market cap is trending lower. So the, the volume relative to market cap is increasing and yeah, the volatility is remaining very low. So you guys have any, any additional points you want to make there?
- [22:56]
C
Yeah, I would say that the Sharpe ratio is obviously an important metric for people that don't want to have to deal with any price volatility. It mathematically should be the case and obviously daily dividends haven't started yet. They don't start till mid June. This week is the last record date for the last monthly payment of seda. And so I think right now we're just seeing really just a lot of demand into SETA for daily dividends. Right. But the event driven nature of daily dividends haven't started yet. Right. And don't start for a couple more weeks. But you would think that once they're implemented from a Sharpe ratio perspective of volatility, that when you take away the dividend event, I mean this was the whole concept behind doing this, right, that it should reduce the volatility. And so it's nice to see that theory start to show potential signs because it's obviously we haven't implemented daily dividends of playing out right on one hand and on the second hand that there is a lot of demand, right? And there's demand in the volume and the volume increasing, pegging to par for the last several days. Obviously every tracker estimating how many bitcoin we may or may not have bought like every second, which is some people are really making Ben Workman and Ben Pham's job difficult here with how many bitcoin they're estimating. But I think it's obviously working. And then obviously perspective conversations that we're having in both the traditional finance space, also the crypto ecosystem of just excitement to build on top of this. And you just get really bullish on where this could go. And it's nice to see kind of the thesis playing out in real time and I think that's where we are. Obviously it's great to post a big bitcoin buy. Jeff, I got some bad news for you on SpaceX that apparently SpaceX and Tesla might be merging, so we might have to climb even higher to pass Sir Elon in the near future. But I mean, oh my gosh, what a cool company that's going to be topic for another day. But just as a company that's doing something cool, we Spend a lot of time about companies that are not doing cool things and are just like sitting ducks in the S&P 500. Or when Jackson posts the companies with the market cap around Strive and you're like, what are these companies? I've never even heard of these companies. SpaceX and Tesla together. That's a cool company. Cool that they're going to have a lot of bitcoin as well. And it'll be fun if we get the opportunity to pass them. But I think as far as our week, banner week for us and the flywheel is working, amplification is 45% with no debt. I feel really good with it there. I think from a risk perspective, it could go much higher before we see any risk. But obviously our managing kind of perceptions in the market on that as well.
- [26:01]
D
Yeah, I don't think any of us could have expected this soon after the announcement to see the ramp up in the liquidity that we have. It's been a clear signal that there is demand for these. The markets received the daily dividends incredibly well. Obviously we have the nuance of coming into the last record date for the final monthly dividend before we convert over. But today I believe we traded more than $130 million in volume on the common stock and we traded about $60 million in SEDA, which is just a massive, massive day for both products. And so that's the market speaking. I've said it on here a few times. A lot of people confuse demand with price. They look at the price and assume that that must be the only indicator for the demand. But you see the demand in the volumes and when you start doing comparative analysis across the liquidity that you see in the sector, you can see the excitement that's out there for the issuers of digital credit. And the market's starting to digest what that means for the prospects of being able to increase that bitcoin exposure for the common shares. So it's been incredible to see that ramp up happen so early. A lot of times you get into the last week. If you looked at the last several cycles that we went through, you know, it was normally that you would get to the last couple days before the record date and that was when the demand would really start showing up. Stretch was behaving very similarly this time we've seen, you know, two weeks of this demand already coming in. Right. Last week, this week we've already seen it. And so we're just seeing a shift here. You know, we're seeing a shift. And as we move into the daily dividends, we think that that's going to provide a lot of value. It enables a lot for people building businesses on top of these products, which I think is overlooked right now. You've seen some of the impact out there from some of these defi protocols that are building and issuing tokens that are using the dividends of these products to really garner market share out there. But when you start having products that pay daily, it helps enable that business model in a way that monthly would not. Right. It's more liquidity coming in there. They can issue these out faster, they de risk themselves. So I think it's going to be really interesting to see not only how much demand comes in, but, but where it comes from. You know, this is the first time daily dividends have been unlocked. And so we are in uncharted territories here where while we look at it and go, well, this is broadly applicable to everybody, right? In the age of modern finance, why should you have to wait to receive your dividend payments? It just seems antiquated. And now that we're going to daily, this is the first unlock in that and it won't be the last. I have no doubt that there's going to be several companies that try to follow suit on this over time just because it's going to start conditioning investors that there's a better solution out there. So I think what we did is going to fundamentally change finance and change markets for the better. Right? It's going to speed things up the way that you would expect the modern world to operate. But we're also going to see how that applies to people that are building the businesses out there where they are being built natively for modern finance, where they're speeding things up even beyond what we're doing with the daily dividends on business days. You'll see accelerations in that too. So I'm fascinated to watch this unfold. You know, I can hardly wait. We still got a couple weeks here before we get to that first daily dividend, which is just going to be such a fun and historic day. I'm definitely not going to sleep for a while leading into that, but it's just going to be so cool to see that finally launch and then to watch the market develop around it and see where that draws capital in from. Because I think it's going to exceed all of our expectations.
- [29:41]
B
And people wonder what we do is that we have conversations with everybody that we could possibly have a conversation with all the time. And it's been really fascinating to see just the Development and the interest in some of these products coming from the international capital markets, particularly on the DEFI side. And really to hit on your point a little bit more Ben, is this all comes down to digital risk, like risk provisioning in a DEFI product. How many days of risk liquidity do you want to take on for a tokenized type yield solution? And if you've got an instrument that pays monthly, then you've got to take on 29 days of risk. If you have an instrument that pays every business day, you got to take on eight days of risk. So you're talking about a 70% reduction in risk provisioning on liquidity. That's monumental in how you can structure a business model that is completely rewrites how you can structure a business model around like a yield token or a yield bearing instrument. And there's, there's interest there. I think that's been really fascinating to see. A couple of other stats I wanted to bring up because last couple of days been great. Ben, you mentioned SATA liquidity. We had 30% the daily traded volume of STRC today, yet ASST has 1 50th the amount of Bitcoin of MSTR. So just a, an interesting relativity there on this, on the volume of the preferred of SEDA compared to strc. Number two, we hit a market cap all time high today at market close with the announcement of our 8K and the success we had in the capital markets last week. So we had a, a, at close, a 1.37, $1.37 billion market cap. And we are smaller than Wendy's, Kohl's and La Z Boy. So those are three bigger name companies that you can think about. But we have a market cap valuation that's smaller than all three of those companies. You could think about how much overhead, how much material and the capital inefficiency of those types of vehicles. I think that's just an interesting comparison. And then we pass Coinbase and I think this is a pretty monumental move to pass Coinbase. Coinbase has 4,250 people. If you think about STRIVE and our, the amount of people that we have, we have 31 people on the STRIVE team and then we've got the Semler team as well. But if you, if you take that bitcoin per strive employee, it's 3, it's 532 bitcoin per person. If you do that For Coinbase, it's 3.88 Bitcoin per person. So talking about capital and efficiency, capital efficiency, store value. However the capital vehicles structured. What's the purpose of holding those particular vehicles? It's just an interesting comparison. World's moving very quickly. A lot of data flying everywhere.
- [32:34]
C
Doesn't seem like it's going to be slowing down either, which is exciting, exciting times. One other thing I wanted to cover just a bit is since our last strategy had their, their retail Q and A and I thought there was a lot of interesting things from that. And one of them is I think it's important. I mean, daily dividends are obviously super exciting. They're groundbreaking innovation. Semi monthly is also great and it's never been done before. And I say that because strategy obviously has a vote going on right now. And having been through the process of having to secure a vote and helping both Semler secure a vote when we were doing M and A with them, helping asset entities secure a vote when we were trying to acquire them as part of our initial deal is a pain in your rear to secure a boat because retail shareholders don't vote. And so I have no insider information. I know nothing. You know, I have no idea how close they are to securing that vote. But I do know that data suggests that retail shareholders don't vote even when they would support something. And Stretch, I believe the last data said it was 80% retail owned. And so, you know, I think everybody owes it to themselves. You know, I'm guessing a lot of people that listen to this are our strategy shareholders, our stretch shareholders to not only vote, but go out there and whip the vote, get this thing done for them. I think it's going to be great for the ecosystem and it probably will be something that is like 95 to 99% of people are voting yes. You never can get 100%. There's always that one troll that just won't let, that will vote no. But it's going to be overwhelmingly supported. Almost. Almost for sure. And I can imagine that getting everybody to log in and vote is, is not, is not the easiest thing. So help make that happen would be point one. And then point two is just, you know, with all the excitement around Strive, you see, like I get tagged in these things about this, like strategy versus Strive. There is no strategy versus Strive. I just want to be out there. Like, I mean, I can't even tell you the amount of help that Michael Saylor, the strategy team, have given all of us, like since day one, since day one, before I even knew Strive was going to be a bitcoin treasury company. And I, and I went to Saylor with this idea to make Strive like the biggest wealth management company pushing Bitcoin. And Saylor just directly is like, that's a stupid idea. Like, and he was right. Right, like. And he's given us a lot of love publicly recently, but he's also given us a lot of tough love that oftentimes we need to hear and has really been pushing us. And I think, you know, at this point Strive has pushed some innovation that's probably been helpful to them too. And I hope that is a, you know, a two way street that continues. But, but I just want to reiterate to all the Twitter trolls out there that there is no competition. Like we're all working together to grow this ecosystem, to grow this pie massively together. And we all want to see each other succeed. And I think that's what's going to happen. And it was great to see Saylor talk about wanting to see us 10x and I think we are going to 10x. But if we 10x, we have 164,000 Bitcoin, what are they going to have? 1.5 million. We can rock it on yield. I think we can rock it on total return. But this is not some competition. This is something where a lot of people can win. I still want to see other issuers of great digital credit products. That is, I think one of the fun things about this ecosystem is how big this pie could be. And this pie will only get so big if we have several successful companies. And obviously like Strive is in its lane. Like we seem to be entering this like hyper growth period right now. It's super exciting. Like we're not sleeping because we're busy all the time. And that's fun and it's great. But like this is not ruthless competition here. And I think it's just, it's worth reiterating that as we kind of have this, this moment and all these data metrics that are showing, like I view some of this volume metrics that you were going over, Jeff, of like, you know, seda today being 30% of the volume of stretch and kind of pretty consistently being 20% or above on a lot of days since daily dividends have been announced. I think that's kind of pricing in kind of potential growth metrics to our products of this volume. This liquidity begets obviously potential capacity and energy to keep the flywheel going, buy more bitcoin and kind of amplify Strives bitcoin holdings and also potential returns into the future. But it's not done from a competitive perspective. I strongly believe that if SATA rockets massively, we grow massively. That will also be a positive thing both to strategy and to stretch and to the ecosystem.
- [37:50]
D
I think people quickly overlook the value of two issuers at the market. I think it would have been a bad outcome if strategy ended up being the only company ever able to issue digital credit and scale this ecosystem. There is a level out there, both from the regulatory aspect and the different attack vectors that can pop up, where having multiple issuers out there allows more people to start building on that ecosystem as well. Think about things like ETFs and the limits you have if you've got a single issue or security that's held in an ETF versus if you have multiple. Like, there's. There's reasons why this space can grow a lot faster with two of us than with one. And so I think that that's part of the reason why, you know, you've seen these companies be so complementary to each other. You know, one, obviously we respect everything Strategy's done, right? We focused years of our time to following nearly every move that they've made. You know, Jeff and I have been on live streams for years in the middle of the night covering every single 8k they put out and pivot in the strategy, and it's been fascinating. So to be able to do that in the public markets ourselves now, taking what we've learned is an incredible honor. And so having their support and their ability to coach us and sometimes, you know, give us the tough love is just a huge asset. Right? Having people that are willing to both foster your success, root for your success, and also, you know, knock you in the right direction, you know, if you're getting a little too excited is. Is such a good thing to have, you know, having them allow Cherish to be on our board was massive. Right? These are the guys that have done it at the highest levels. And so we've been able to be coached and avoid pitfalls that you might otherwise step into if you didn't have that type of guidance. So, you know, when people see it and see these companies being cooperative and supportive and rooting for the outcomes of the others, you know, that's real because it's just been a huge part of our development. It's part of the reason we have an ecosystem to build into is because someone else went first and took that first risk. And we get to take those lessons and apply it to what happens if you start this from the ground up with all the lessons learned. Right. How can you optimize this as A small business and it's just been an incredibly fun ride and one that, you know, we hope to be on and we hope to be scaling this space with them here for a very, very long time. We think it's the biggest addressable market that's out there right now. And as a company, I couldn't think of a bigger space to try to innovate in and make bitcoin the foundation of.
- [40:20]
B
We are all scaling the capital base, all of us, every, every company that's operating this space looking to acquire more bitcoin. We're all looking to bring more capital, more fiat based capital into the bitcoin ecosystem. That's, that's everybody, everybody long bitcoin. What's one of the coolest things about the entire bitcoin ecosystem? And one of the things I felt like very viscerally in working in the reinsurance market or working in the insurance world is everything was so cutthroat. All right? Like all of the, all of the insurance companies were all just totally cutthroat. They're trying to kill all of the other companies. They're all trying to find trade secrets. It's all about who your family was born into, the business that you got to work on and every single aspect of that I absolutely loathe. And it feels good working in this ecosystem because there is that a little bit of cooperation or just the incentive alignment. Right. We all want bitcoin to go higher and the incentives are aligned for everybody to move in that same direction. So it's just, it's been, it's been great to see. The support is fantastic.
- [41:32]
A
Jeff, did you want to hit on the new Fed chair?
- [41:34]
B
I know, New Fed chair. Yeah, new Fed chair. New new Fed chair. That starts. It's, it's official. Warsh has been sworn in. That happened last week and it's just, man, he's got a really tough job. He has got a really tough job. His first, his first meeting is on June 16th. So the day that we pay our first daily dividend. So a lot is going to happen here in June and then there will be a rate decision made on June 17th. So the market's trying to figure out is this, is he hawkish, is he dovish? I think the market right now is pricing in interest rates to remain flat. But James Lavish put an article out this weekend just talking about how difficult this position is to manage the interest rate in this environment. If you increase the interest rates, you've got a lot of debt that's coming due. They need to refinance at a higher interest rate, that increases the debt burden. The interest burden on that debt alone starts to balloon, and you're talking to the tune of interest increasing by hundreds of billions of dollars annually. And on a stagnant revenue base, that's tricky. And you talk about keeping interest rates flat. It's, I guess, business as usual. But the market is kind of wondering, which way is this going to go? And if you drop interest rates, the concern on inflation is there. You've got asset price inflation and inflation on. On your people. So it's a. I think of this as like a feather on a thumbtack. Right. If any gust of wind goes in any one direction, it's. It's tricky. You got to figure out how to balance and manage that. So it'll be just interesting to see how this, how this plays out. I read somewhere, I don't know if this is true. I haven't confirmed this, but war holds $100 million of Bitcoin. And if that. If so, it's just an interesting data point to, to throw out there.
- [43:24]
C
Yeah. I have not confirmed how much bitcoin warsh owns.
- [43:29]
B
Look it up.
- [43:30]
C
Yeah, look it up. But just the problem for the Fed is that when you start to drown in debt as a nation, the power of your central bank becomes less and less over time. You're basically left with options where there is no good option. In the earlier days of a fiat currency, and especially a powerful one like the dollar, the power of the Federal Reserve is massive. And I think that's part of this shift that the market is still getting into. Is. Yes. Can the Federal Reserve, can they do actions, quantitative tightening that'll tank the economy or push the economy up through massive quantitative easing? They can. The problem is that they can't fix the debt crisis in this country. And because you can't fix this, this gets into these scenarios that Jeff park writes about a lot of basically like, do you slowly kind of debase the currency over time and try to keep the dollars, the reserve currency and kind of just, you know, and this is what the administration and the Fed is trying to do, where the administration is trying to grow out of the debt. Ultimately, I think there's no chance that we can, but I do think it's the best strategy of all the strategies. I think it's the best strategy to just try to focus on hyper growth and not focus on, at this point, austerity. If you were to ask me before you get to the point of no return, I'm a Fan of austerity. I'm a fan of fiscal conservatism. I'm a fan of trying to control down the size of the government to the maximal degree. But once the cat's out of the bag and it's too far, then. And I think, especially when you're going through a revolution technology wise, which we are with AI right now, I think that you just have to hammer growth, which I think on the treasury side, on the government side, is what the administration's trying to do. But I think for Warsh, that creates an impossible situation. And it's why I'm telling you, with us and basically my entire net worth tied to amplified bitcoin exposure. I sleep so good at night, I literally sleep with out of care in the world. Which is why I get that some people are like, oh, your amplification ratio is 45%. What are you going to do? Did you look at the senior claims? I'm like, guys, this thing's going to the moon. There's no stopping it. But regardless, going back to warsh, it's just, just. There's nothing he can do. All he can do is make things difficult for a short period of time or he can ease and lean into growth. But ultimately, I don't think that, at least for the things that we talk about for bitcoin, I think you could put any single person in the world as Fed chair and it's not going to change the outcome.
- [46:48]
D
It's a runaway train, nothing stopping it. I did look, though, It's. He disclosed $100 million in assets. It wasn't all in bitcoin, but was. What was interesting was it looks like he actually has investments in bitwise as well. So, you know, he's been in the ecosystem, that's for sure.
- [47:04]
C
But I don't know exactly how much
- [47:06]
D
of it's bitcoin in there, but either way, you own those assets if you know something. And I think what he knows is there's no putting this, putting this back in the bag. They're going to have to print their way and devalue the debt.
- [47:18]
A
Sounds like we're going higher.
- [47:20]
C
It does sound higher.
- [47:22]
A
Thanks for watching episode 59 of the hurdle Rate for Ben Workman, Jeff Walton and Matt Cole. I'm Tim Kotsman and we will see you back here next week.