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- [00:00]
A
Sam foreign.
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B
Welcome back to the hurdle rate episode 60 for the week of June 1st, 2026. I'm Tim Kotsman dialing in from London. I'm joined by Jeff Walton, Matt Cole and Ben Workman. Lots of news this week. Let's maybe start from the top with the headlines. We have lots of buying and selling going on in the bitcoin market. Try to make this quick. Strategy sold 32 bitcoin to fund preferred stock dividends and now holds 843,706 bitcoin. The bitcoin treasuries.net posts kind of make me laugh. The part at the end where it says Bitcoin 100 ranking number one. Yes, they're still number one. Let's see. Yeah, they sold.004% of their Bitcoin holdings. Bitcoin for corporations noted that in their report this morning. West Main Self Storage over the last week bought Some more Bitcoin. 0.129. Swedish public company Bitcoin Treasury Capital bought another bitcoin. Strive announced it expects to increase the size of both of their ATM programs by $2.1 billion each. Capital B announced they bought four more Bitcoin. Farmhouse bought point last week. Smarter Web announced I believe two buys. They now own 2,878 Bitcoin. Stacking Sats Inc. Bought an additional 0.21 Bitcoin. They now hold 28.93 Bitcoin. Matt, I enjoyed your post this morning. You said strategy sells 0.00% of their Bitcoin and we get blessed with an all timer. Jim Cramer tweet chess not checkers. And Michael Saylor wrote this morning along with a Sharpe ratio chart. Our goal is to make Stretch STRC the best credit instrument in the world. Jeff, maybe over to you. Last week's episode was called scale like crazy. Where's the signal and all of the noise here?
- [02:40]
C
Yeah, yeah. And you missed the biggest one of them all. And as of release of this we are announcing that we've purchased Strive has purchased 2,500 additional Bitcoin. We now hold 19,000 Bitcoin. So we have officially passed SpaceX and we are still top seven publicly traded holder of bitcoin. With bullish in Our sights at 24,000 Bitcoin I believe so a really big week for us. We we were pedal to the metal, very successful and we look forward to seeing how the capital markets continue to evolve. Sitting here recording on Monday post market we watched SATA have some really decent performance in the on the first day after the record date, we saw the price dip down to 98, but back up saw it float up to 99.70. And we will start paying daily dividends at the middle of this month. So it'll be really interesting to see how all of these instruments track over the next 15 days. There's a, there's quite a bit of, there's quite a bit going on. Right. So STRC just paid its monthly dividend. You also have the record dates for the other perpetual preferred equities that strategy holds coming up, the quarterly ones. That's on June 15th. So I would anticipate there's going to be some rotation out of STRC to go scalp the dividend on the quarterly dividends so you, you don't have to hold the instrument as long as to get a larger dividend on those particular instruments. So it'll be really interesting to see how this entire ecosystem is kind of changing and shifting over time. Obviously, the big news, people are running around with their heads cut off. That strategy sold 32 bitcoin, which is just a crazy. The, the people running around with their heads cut off, they just have zero understanding of the relative size and scale. For example, if, if, if you were to take that same size and scale, let's say you have one Bitcoin that is equivalent to selling $286 worth of Bitcoin. As of today, with Bitcoin at $71,500, if you sold 0.004% of your Bitcoin, you would sell $286 worth of Bitcoin. Just to put that in perspective, for, for normie terms, there's the, the size and scale of this is so small. And it's really a signal to show that this is a liquid instrument. We are willing to do this. And the fact is they made an SEC filing. They went and showed the entire market that, hey, we did this. Guess what? They didn't have to do that. They didn't have to tell the market that they went and sold 32 bitcoin, but they did. They're doing everything transparent, it's above board. We're showing you it's liquid. We could go do it. And I mean, I think we, we maybe have bought that 32 bitcoin. We'll have to go go see. But yeah, it's, I think the reaction in the market is completely overblown by the fact that they're just transparent and file SEC filings and the relativity and the scale and the comparison to the average daily trading volume and liquidity of all the instruments. It just pales in comparison. So we'll kick it over to you guys.
- [05:42]
D
Yeah, I think what we're seeing on X today is people that aren't fans of strategy for whatever reason, maybe they don't like bitcoin, they're gold bugs. They think bitcoin's going to fail. Or you have the other side that thinks that people should only have bitcoin and nothing else should ever be built on top of bitcoin except for people buying bitcoin directly that are trying to take their shots here. But just, frankly, they look really stupid. That's why on the post I put, I put chestnut checkers on the Jim Cramer tweet that talked about how he might have to reassess bitcoin because strategy sold 32 bitcoin 0.00%. And you think about this and why would Saylor do this? And I think this is a common mistake that you see from people that aren't actually building in the space but are kind of watching it. And oftentimes if they're watching it from the perspective of they're not even fans of these companies to be with, is that they don't understand the game theory of what's happening here. Strategy is positioning themselves to be the largest company in the world. That's the game theory. How am I going to become the largest company in the world? You have over 800,000 bitcoin and you have to start thinking like that. And part of thinking like that is looking at the institutional gatekeepers that are watching strategy. And for them, a risk is that strategy would be unwilling to sell bitcoin ever. And so what is the smallest number that someone could put out there that is immaterial to their balance sheet? They didn't have to do it. But just to prove the point, it's 32 Bitcoin, I think is 0.00%. Forget the actual number of Bitcoin. 0.00% if you sell 0.00% of your Bitcoin. And by the way, you also sold multiple times more in the common equity in the same week. Oh, and by the way, also, you bought over 20,000 bitcoin in the month of May net. Even when you factor in this 32 Bitcoin sell, I think in every single dimension from anyone actually evaluating the balance sheet, that this is a non issue. And the only way that you could criticize this would be from the perspective of not understanding it or because you want the company to Fail. And I think that there's obviously those people out there. But the reality is there's a lot of corporate balance sheet reasons why frankly, even larger cells could make sense. Tax loss, harvesting purposes. There is no wash cell in Bitcoin. And so these things are things that corporations need to factor in. And one of the things that I'm sure we'll talk about today is amplification ratio and kind of some of the stuff there. And the bottom line is that companies will make the most money to the extent that they can unapologetically just follow the math. When you think about constraints and optimization formulas, just to go to tease out part of that math, that when you do an optimization, you can only optimize for one thing. And so you want to maximize total returns. Well, then you can have all these different constraints. You put all those constraints in, you want to maximize total returns. Well, one thing that from a math perspective makes sense at times is to tax less harvest if Bitcoin is down. And so as long as the constraint is that you can educate the market and the market can understand what you're doing, that is a balance sheet move that can actually increase the total returns over time for an investor. And it also increases confidence in places like S and P. So I think that's what were clearly seen from strategy. Smart move. And the reaction by some, I think is pretty funny, actually.
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A
There were plenty of people that were never going to take this for what it was. Right? This has been a telegraphed move for a very long time. To be honest, it was even a lot smaller than what I would have expected that they were going to do. When you get all the noise going around, I mean, you just come to expect that at this point, people love to jump on anything that they can. They love to go pull up old clips.
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D
Right?
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That's. That's all well and good on the Internet, but I think you're right, Matt. And I do think that there's probably another component where they need to show that this is an asset that they have that they are willing and able to use at a moment's notice. And it's liquid. And I think that's important for rating agencies ultimately to show that, no, this isn't just about capital markets activities with the different equities that we've got out there in the market. We've got this war chest of an asset that's liquid to the tunes of tens of billions of dollars every single day out there. We can sell in and out of this as we need to to meet whatever obligations we have. And I think that's a really strong message to send, because I do think that the narrative that started spinning around was, well, there's nothing they can do but sell equity at any time ever. That was starting to become the prevailing message you were hearing from people. And Saylor's doing exactly what he said he was going to do. He's going to inoculate the market with these sales. To be honest, I actually won't be surprised to see these become frequent, where it just becomes a regular part of them running this business, where you constantly see these little cells. To his point, they're always going to be a net accumulator of bitcoin, but they're going to make this such commonplace that it stops being talked about. It is an asset. It is liquid. You can use it for whatever you need for business purposes. And if it maximizes returns for your shareholders, it's the right move. And so I think this is one of those periods in time that it's going to be noisy for a few days here. But the math is on his side with this one, and he was very transparent that this was what they were going to do, why they were going to do it, and there really shouldn't be any surprise that this occurred. But to Jeff's point, the fact that they specifically decided to put out an SEC filing that would call this out, if they'd done this throughout the normal course of a market, I think I remember was it back in 2022 when they sold a couple hundred bitcoin and nobody even really caught, wasn't called out in this much clarity. And now he's doing it to serve a very specific purpose. But he could have gone on and made a big buy next week and it would have just been washed out in that, and they would have been a net accumulator, and, you know, nobody would have thought anything of it. But he's making a point. And that point is bitcoin's one of the most liquid markets in the world. It's an asset at our disposal. We will use it for the benefit of our shareholders.
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C
It's almost like strategy is using bitcoin as digital money or digital capital. Right? Exactly what it was created to do. And they're out in the market and they're using it how it was created to be used. A couple crazy statistics, because the. The price action here on strc, I think, has had some people worried because over the last couple of days, I think STRC is trading down in the lower 98. It's like $98 and 10 cents. Now, I, I want to bring up some relativities because I, I think it's interesting to think about the comparison of where we're at today compared to where they launched STRC. So, for example, when they launched STRC in 2025, July 2025, strategy held 597,000 Bitcoin. The amount of assets that they held on the balance sheet was $66 billion in USD. The price of Bitcoin at the time was around $111,000. Okay, fast forward to today. Strategy has 246,000 more Bitcoin than they had when they launched STRC. The price of Bitcoin is 71, 500. And the assets priced in USD, it's around, it's worth around $60 billion. So the amount of Bitcoin that they have has increased 41%. The US dollar value of the assets held on the balance sheet has gone down 9%. The price of Bitcoin has gone down 36%. Okay, so they're continuing to grow the balance sheet. The balance sheet's bigger. Okay, well, what else, what else has happened? So they reduced the debt on their balance sheet by 18% by, by reducing $1.5 billion of convertible debt. Okay, so that actually improves the balance sheet. They added a USD reserve. So they have $871 million of USD reserve that's now on the balance sheet that they didn't have when they launched sdrc. And, and the balance sheet is effectively getting better. And they've increased the interest rate of SDRC like 200 basis points over the same time horizon. I think they IPOed at 9. It's trading at 11 and a half. So the comparison, like if you liked it, In July of 2025, the relative risk return profile, I think you can argue, is improved today with the price of the instrument trading where it's at the balance sheet, trading where it's at the relative control of the network. Everything that's changed in the entire marketplace. I mean, us being in the market, the regulatory clarity, you know, everything else that's on the horizon. So it's just interesting seeing the narrative that's pushed online without necessarily looking at the mathematics and looking at the price history and how these things have traded over time and the relativities between all of these different instruments. So, I mean, Strategy is going to continue to pay the dividend. They've shown that they're going to now potentially sell Bitcoin to do it if they needed to, and that they're going to continue building that track record over time, ideally with semi monthly dividends here on the horizon. And that continues to improve. Matt, I think maybe it makes sense to jump into some of the math thinking about amplification and what we've got with our balance sheet and how this, how this is evolving, if you want to kick it off.
- [15:34]
D
Yeah, yeah, it's been on my mind a lot lately. So with our 2500 Bitcoin buy largely fueled by the demand rise in SATA, what we're seeing is the amplification ratio for strive go up. And in my view this is a dream scenario for the common equity to have that be happening right when you have bitcoin around the 200 week moving average. Like if you could dream up a scenario of what I would like to see, it would be this. And it gets into the post that I made this weekend, which is how do you even think about the framework of risk? And Jeff will get into all the math because he's really been, you know, as our chief risk officer, the expert in looking at the risk of the company. And so you can think about risk on one hand of the risk of failure, the risk that you permanently impair the balance sheet. And on the other hand you can think about risk as you don't maximally participate in the upside of bitcoin. We're underwriting bitcoin risk. Those are both risks. And so how do you take that high level thing and put math behind it and know how much risk that as a company you're optimally reducing before you just go pedals to the metal on offense? And so one of the ways I was talking about it just at a high level is that if you're talking about risk of permanent impairment going from like 10% to 1%, that is a significant and an important risk reduction. If you're talking about something that goes from like 0.002 to 0.001, that's 50% reduction in risk. But it's immaterial. You're talking about something that's basically negligible and also ending with something that's basically negligible. And so you have to really think about expected value. And so we all come from different backgrounds. One of the things that I talk about less on this is that I largely put myself through college from a financial perspective. But playing poker. I love poker. I love the game theory of poker. And if you're a excellent poker player, you always frame your decisions in expected value. You don't frame them in the actual outcome, like did the outcome work or did the outcome not work? It was. Was this a good decision from a mathematical perspective? And so the question that questions that we're asking ourselves is what is permanently impairing the balance sheet? Well, if you have to sell a substantial amount of Bitcoin when you don't to because you're forced to, or you basically have to to fund obligations, well, that's somewhat of a permanent impairment. And so one question would be, okay, let's look at strive's balance sheet. We've been very intentional. We've cut off some of the major sources of, call it big time failure. So we have no debt. Right. We have no maturity cliff into the future. We have no encumbered bitcoin. Our Bitcoin can't be called. Those are things that can become out of your control and can cause a really bad outcome to a company. We've eliminated those risks. We obviously have a lot of preferred equity outstanding through seda. It's cumulative dividend. But we've also been very intentional about having a dividend reserve. And in the depths of a bear market, since we IPO'd SEDA in November, we started at 12 months. We've actually increased it to 18 months. And we've been holding it steady at 18 months as we've been increasing SEDA issuance. So right now as we're recording this bitcoin, it's Monday post market. Bitcoin is down on the day at $71,000. Our amplification ratio is somewhere around 55%. We still have 18 months of dividend reserves. And so maybe I'll kick it over to you, Jeff, of kind of just what does some of these stress test scenarios look like? What does reality look like?
- [19:31]
C
Yeah, and there's so much here. We've got an extended dashboard behind the scenes where we're looking at several different variations of downside risk. So what? One of the variations of downside risk that we're looking at is duration. Okay, so let's think about duration over different historical bear markets. What is the. What is the duration that existed in 2014? What is the duration that existed in 2018? What is the duration that existed In 2022? And what would our balance sheet look like coming out of all of those periods? The a couple interesting data points. 2022 was the largest, largest drawdown relative to the 200 week moving average. There was a period of time where the price of bitcoin was trading significantly below the 200 week moving average for several months. And I think that's an interesting framework when you're looking at, you know, managing to, managing to downside risk. But what was the duration? So what we've done is we've looked at, so right now, as of today, and we're in June 1, 2026, we're 238 days from the all time high in the price of Bitcoin. Looking back historically, you could go look at other periods of time where you're 238 days from all time high. And in the 2022 bear market that's equivalent to around July of 2022. So thinking about if we were to take our balance sheet as of today and put it and overlay it on that bear Market in 2022, what would the balance sheet look like and what would be the period of time in which we recovered to where we are today based on the continued, you know, bear market? We also make that assumption with the fact that we would have be, we'd be completely locked out from the capital markets. So zero access to assD ATM, zero access to the SATA ATM. And on that horizon, looking back at 2022 for example, there's 15 months, 15 additional months from today. If you were to mirror the exact same bear market to getting back to where we're at today, from a bitcoin coverage ratio perspective, we have 18 months of dividend reserve. So just looking at that scenario in 2022, we would come out the other side of the 2022 bear market not having sold any, any bitcoin at all, utilizing 15 months of our cash reserve, assuming we had zero access to the capital markets, 0 access to the SSD ATM, 0 access to the SATA ATM assuming no additional demand, no derivatives sold on top of the Bitcoin that we held, no zero capital markets activity. So that provides an, that provides a foundation for how we look at things moving forward into the future as well. And just some additional data here. So we saw a significant decline in the price of bitcoin going from October 7, 2025 to February 24, 2026 and the price of bitcoin went down 50%. Since then, Strive has raised, what's the number? $540 million of capital. So just to prove that we're in a bear market, we're 50% off all time highs. However, we've been averaging $8.1 million of capital raised every single business day. Moving forward as of today, with a 55% amplification and what is it, $751 million of SATA outstanding. Our daily dividend obligation once we start moving to daily dividends here is $390 $723. As I mentioned, since the bear market and Bitcoin being down 50, we've been averaging $8.1 million of capital raised per day. Per business day we're averaging roughly 20 to 21 times our daily dividend obligations in capital markets activities in a bear market after the price of bitcoin has been down 50%. So we are looking at downside risk as if we are completely locked out of the market. Yet the market is also showcasing to us that the capital markets are continuing to be open despite the price of bitcoin being down. So we are, we are taking a very conservative view of downside risk and what the balance sheet looks like into the future. Looking at every single bear market in history, looking at as if amplifications across different points in time. And Matt, to hit on your, your main point here, when bitcoin is down near the 200 week moving average, the math would start to show that you would want to be max amplified near the 200 the the 200 week moving average. Understanding that the depth and duration doesn't last. The depth and duration of bitcoin drawdowns doesn't last forever and there's going to be, you know, more energy moving into the future that would push the balance sheet higher. So you would want to be max amplified near the bottom of the bear market and identifying what that number is. It's really difficult to find a mathematical limit. A mathematical limit to how much amplification would start to permanently impair the balance sheet. You start running the numbers incredibly high. It's really difficult to wrap your head around. Based on all of the data I have and all the information I have, it's difficult to identify a max amplification number.
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A
Yes.
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D
So, so the key, I think a key couple inputs in there is that your numbers assume no debt on the balance sheet which strive has no debt. Right. If you have debt that would be a substantial risk especially if you had to post margin but we have no debt. And then second that there is a cash dividend reserve set aside. And so that cash dividend reserve is a driver that with that 18 months of reserve with where bitcoin is both in the depths of the duration of the current bear market but also if it were to kind of repeat 2022, which by the way I think is a bitcoin would be a bitcoin low price of around $40,000 that you would have to assume and then not have it come back up here until very late 2027. Just to think about that. That is a stress test scenario. That is not my base case. My base case is that we are in the bottoming process. We probably bottomed. But whether we bottomed or not, Bitcoin is in my view unlikely to go down to 40,000. So I already think that that's a pretty stressed case to begin with. And it gets down to at a certain point, what are we trying to do? We're underwriting a permanent bitcoin bull thesis. If you're not a bitcoin bull, don't buy bitcoin. And if you're not a bitcoin bull, don't buy amplified bitcoin. Right. You should have a bull thesis on bitcoin and be concerned that this bull thesis plays out and you don't have enough upward risk to put to work to actually outperform Bitcoin enough. And I think that that is, I think what we're seeing sometimes in the market, this fear that when others are fearful, you want to be greedy. And so when you say it, with an 18 month dividend reserve, I can withstand even a 2022 repeat type scenario. And even if it was worse, by the way, you still have multiple years of dividend coverage on the bitcoin. If you were locked out of capital markets, then the optimizer would say get the maximum amount of amplification that you possibly can do. I think that that's a scenario that actually plays out in reality. Probably not. We're not going to be able to just push amplification up to infinity. That's not going to be what the capital markets will be. But the capital markets have been very open to strive to maximize value. It's not, I don't think it's prudent enough to just say, well, we have more amplification than other people, other players in the space. We have a substantially different balance sheet that allows us to take a different look at risk profiles. All that to say is that this 55% amplification I think is very conservative with what the mask would suggest. We could take this because of our dividend reserve and because we have no debt. And I think that that's important. Now the good news also is the last thing I'll say is that a few months ago I put a poll out there on X and said, for a company with no debt, when bitcoin is cheap around the 200 week moving average, what would you want to see? The amplification ratio be and the majority of people wanted north of 60%. And so I think the market seems to be speaking. Since I put my post out on the weekend, I got a few DMs from people that seem to be pretty large holders being like, take this thing to the max. And so I think the bottom line is the community, I think, understands this and they understand the position we're in. But I think a constraint, I think is education. We care about what the shareholders think, we listen to shareholders. But the mass says higher.
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A
Yeah, I think one of the components of amplification that people haven't really grasped on yet is that it's going to be this living, breathing metric that's out there and it's going to be just as important for these companies to manage it when we're in a bull market as it is when we're in a bear market.
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C
Right.
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A
So right now we're talking about bear market scenarios because, you know, bitcoin's already drawn down. And so we've seen, you know, a 50% correction already. We've watched how these products have performed. It gives you a level of confidence in the ability to continue to access the capital markets. So people are looking at, well, what's the highest you can go when you're in a bear market? It's probably equally as important to figure out where should it be when you're in a bull market? Because you've got to prepare for the fact that bitcoin is volatile, that it does draw down. And so if you were max amplified and you're in the middle of a bear market or in the middle of a bull market, that's where you would start to get nervous. Right. Because bitcoin can turn at any time. We're not going to be able to time the market cycles of bitcoin. You're not going to know what it is. We've seen black swan events that can cause major drawdowns. Right. So there's a risk component to managing it on the high end as well. When you're in the bull market, that's when you should start to see amplification contract. But to your point, Matt, when we're in these bear markets and bitcoin's already drawn down, you start to see signs of the bottoming process. You're effectively loading the spring right now for what could happen when bitcoin goes back into a bull market. And as a common shareholder, I would want that spring loaded and ready to go when bitcoin starts to move. And I think it's why when you've seen days where bitcoin's had really good performance, you've watched ASST pretty regularly outperform on those days relative to peers in the US Market here. And I think that is a function of, of where our amplification's at relative to the rest of the market. It's sensitive, it's ready to move. And that's by design, right? You want it to be sensitive to bitcoin. That's the whole point of the model. That's the point of the amplification. The other thing I think a lot of people don't understand is, you know, the 18 months of dividend reserve is not random, right? That's not a random number that was selected in terms of figuring out what do we think is the optimal dividend reserve to carry. Effectively, it spans the longest bitcoin bear market that we've seen. There is a lot of logic that goes into selecting what is the right reserve that you could put in place to carry you through those periods where bitcoin's performance is lagging. When you do these stress tests out there in the market where you assume full cutoff from the capital markets, it does give you that level of confidence in having the ability to operate this at a higher amplification than you would normally think you could. My tune has changed on this quite a bit because of all the work that Jeff's been doing and running through all the models and things. I was probably of the group, the more conservative one, at the beginning, on where amplification could be. It's not until you take the stress testing to the maximum, where you assume you are isolated out of the markets, you are shut down, do you survive. Right? That's what you want to test and get comfortable with. And seeing that played out over a number of the different market drawdowns, even looking at deeper drawdowns and longer drawdowns, you start to build the confidence that, yes, there is capacity out there where you can run this amplification higher than what people would have traditionally thought. So putting numbers to this makes a huge difference. A lot of the market operates on feelings in the early days, and it's not until you really go stress test, the scenarios change the variables change the inputs, but then the last component is going to be receiving market feedback. The market's going to speak. When it feels like you're in a position where it's too much and it might show up on the credit side and it might show up on the equity side, you don't know yet. And so there's a constant feedback cycle that's out there as you're iterating on this model and feeling the different levels. And amplification is largely impacted by the price of Bitcoin. So you can start to hear and listen to those narratives and feel what the investors are feeling at the time to figure out where is the sweet spot for amplification. And I don't think we've got a concrete answer on that yet, but we're gathering a lot of data on that
- [33:43]
D
at the moment on that. And I completely agree with you. The feedback from the market's important. I think a core part of our job is to educate the market on the data that we're seeing to help improve the feedback loop of those feelings. Because like you, Ben, when Jeff first showed us through this analysis, it was better than I was expecting, right? Because I had models that I had been looking at, a mental framework that I had been looking at, but frankly, you just haven't seen. No company's been in the position of having no debt, preferred equity, no encumbered Bitcoin, 18 months cash reserve during a bear market. And so the scenario of even looking through this just hasn't existed. Historically. There's been no need to look at this exact kind of scenario that we're talking about here. And the data is really promising. It's almost counterintuitive how high you could take amplification with that type of a balance sheet, in my view. But once you actually go through it and you test and push every assumption in that model, it's very, very difficult to break to the point where now my mindset goes from just a pure math perspective, not a sentiment perspective, that if you do this the right way, there almost is no limit. Now, obviously, part of the limit will be how much SATA can be issued. That will be like a real constraint, right? Even though it's having insane demand, that'll still be a constraint in this type of a math analysis. And then second, the market feedback, right? And I think market perception, market sentiment can improve when it's backed by data versus backed by feelings, right? Like if you're just underwriting feelings, you're going to be way more nervous than when you actually look at data and you understand data. And I, I do believe that this audience has a lot of people that are math nerds like us. And the initial, I think, feedback is that I think a lot of people do get it, but it is a living, breathing thing that is a real constraint because SATA is our flagship product. We are going to do everything as an issuer to minimize that volatility, increase that liquidity of the instrument. And part of that is going to be driven by the market's perception of risk, even if that there's a divergence between per perceived risks and actual risk. But I think that that is something that is in our control to help improve.
- [36:25]
C
Yes, some of the numbers, Matt, have been uncomfortably positive. That's the, some of the, the verbiage you use. And just to put some of this into perspective, because I love the numbers and I think the psychology here is really interesting. The, the advent of daily dividends also changes the psychology of the holder. So the psychology of the holder, when they're thinking about getting a daily dividend, you're underwriting the probability that you get paid the next day. So it'll be really, really fascinating to watch the psychology evolve of a daily dividend and how the market reacts and he starts to utilize this instrument compared to where if you're underwriting an annual dividend or a monthly dividend, that risk calculus changes. And I mean we see this in defi, we see this in tradfi and we've been talking about it the last several weeks here. That risk, that risk changes. And just to put this into perspective, the amount of average capital, we've raised $8.1 million per day since February, like the drawdown in February 2024. So like in the midst of this bear market, we've averaged $8.1 million of capital. RA that, that pace, if you were to take that and turn that into a dividend obligation, that would support $15.5 billion of SATA issuance. So that would be equivalent to at Today's Bitcoin prices, $71,000 of purchasing about 175,000 additional Bitcoin which would 10x our total Bitcoin, that would bring us to about 195,000 total Bitcoin. Now that assumes again the capital markets activities remain constant. We have no increase in, you know, capital markets activities from the common stock or, or SEDA over and above that. So I think the, that conceptual framework is fascinating to start to compare is that that relative, relative capital raising, relative volume, looking at all these different instruments compared to each other, thinking about scarcity, our dividend reserve lasting us for 18 months, thinking forward to an 18 month dividend reserve, that brings us to December 1, 2027. That's four months away from the next bitcoin having. So right, you've got IBIT etf, Morgan Stanley, Charles Schwab, all of those guys are going to be in the market slamming, talking about the next bitcoin having, reducing supply. That entire narrative is going to start floating out into the market in 2027. That's what we're building for. We're building for that long term convexity,
- [39:14]
A
Max exposure, daily dividends is going to be really interesting to see how it evolves around the capital raising activities. Because right now with the structure that's in place for all the instruments that are in the market, there's a lot of event driven liquidity that's out there right around these ex dividend dates. And when you have something that pays you every single day, it changes the psychology of the investor. Right, right now they're looking at a single day, a single point in time where they need to be an owner to qualify for the next dividend. They'll rotate capital, they'll move on to the next thing knowing they've got another call it 20 business days in front of them before the next one shows up. When you're holding an instrument that's paying you every single day, it fundamentally changes the behavior and it's not tending to be chunky capital that's rotating a lot. So I'm going to be very curious to see how that evolves from a capital markets activity in terms of what the profile is of each of those raises. The other thing I think is going to really get highlighted is the management of these products. And it's something I don't really think the market understands all that much. And it was getting highlighted a little bit when we were watching all these trackers, right. That are tracking how much bitcoin they think that we're buying. Right. And you know, Matt's pinging me, telling me I'm not buying enough bitcoin. And you know, it's, it's fun to watch those, it's, it's kind of the gamification of all this. But you know, when you're trying to build a product that you're trying to manage into a very narrow and stable range, you have to be very careful about how you manage it. So for instance, if the psychology in the market is that par is $100 and the intent of this product is to stick at $100, what that effectively means for us as an issuer in terms of how we would manage our own capital markets activity, it means I don't want to be the entire supply at $100. You're trying to create an ecosystem around this product and I Think that's misunderstood. People assume the minute that it hits $100, the issuer is the seller right away. And I think that's the way a lot of these trackers are looking at it. But what you're actually looking at is you want to create a bit of a liquidity buffer out there for all of the holders of that security to be able to operate in that security and to be able to transact around par. You want people to be comfortable buying at par. You want people to be comfortable selling at par. And if I was in the market competing with them for dollars at par, and I was becoming the large seller in the market at par, what that would do is drive pressure down on the price and likely continue to push it below that par value. So people would have to be selling those shares below $100. And so when you think about it from our perspective as an issuer, what we effectively want to be is the absorber of the excess demand. You're trying to reach equilibrium in the market around that par price. And when the price rises up, you're absorbing the excess demand above the par value, which means other people have the opportunity to sell at par before anything would make it to me. And I think that's important for people to understand and it's going to become more important as we move into these daily dividends. Because when you've got daily dividends and you have a product that people can trade in and out of and they're using as a temporary holding place for cash that they may need even on a short term basis, being able to foster that economy around your product, to be able to allow liquidity to happen on a constant cycle, is something that you have to manage and make sure that you as the issuer are not getting in the way of. So I just wanted to put that out there because I still don't think that these products are all that understood in terms of the management around them and how careful you want to be to make sure that you're not influencing that price action and pushing your own product down below par because you want to other people to be able to transact at par. Meaning I don't necessarily have to. I can absorb the excess demand beyond par.
- [43:18]
D
As we move to daily dividends. Obviously the hope here is that it'll be spending a lot more time at par as the dividend doesn't become an event. And so these tracking devices, I mean, it's a tough job to sit on the outside and try to assume what the company is going to do. I think it should happen. I think people should be having fun with it. I know I would be having fun with it if I was watching people. On True north, we have a tracker of strategies, Bitcoin buys and stretches at par. Right. It's a worthy endeavor, but I think to the extent that we can help give a sense of how we think about it, our hope is that they can become good, because it's something that obviously we can't really comment on when we're in the process of issuing shares and buying Bitcoin. So I hope that's helpful. Some pretty good alpha from you. A couple weeks ago, you told people to watch Nevada filings, and I saw now that there's a tracker on Nevada filings. Now we're giving some insight into the workman issuance machine.
- [44:26]
A
It's always fun to watch how the market reacts to those statements. You start to figure out who's really serious about tracking this stuff out there. Yeah, this has kind of been the entire revolution around True north in the first place.
- [44:40]
C
Right.
- [44:40]
A
Was we were out searching for all the filings that people were missing and, you know, highlighting where this information was coming out of. And so, you know, it's kind of fun to be on the other side and drop Easter eggs once in a while and see who follows them. Right. We'll find out one day.
- [44:57]
C
Absolutely. I. I've got just like one. One more thing that I want to hit on, and it's this. There's been some people talking about, you know, just digital credit as a term. And I. I kind of wanted to define it because I. I feel like people haven't really defined it yet, or it's just kind of been floating out there. And really they're like, well, you know, credit card is digital credit. And you're like, well, hold on, hold on, hold on. I feel like everybody's misconstruing or getting. Just not necessarily understanding exactly what these. What these are. When we call it digital credit, digital credit being, this is a credit instrument that is issued, backed by a digital asset balance sheet. So digital being, we have a digital asset balance sheet, and credit being, we're issuing a credit instrument, digital credit. We have a credit instrument backed by a digital asset balance sheet. And it's. And it's no more complicated than that. Right. And you think about other credit instruments out in the market. You have physical credit, you have cash flow, corporate credit, and now you have digital credit, if you want to call it digital asset credit to, you know, be okay with it. So be it. But it's digital credit. It is a credit instrument that is created, supported by a digital asset balance sheet.
- [46:19]
D
The haters will never be satisfied with that, I'm sure. But I think it's important to note, and there's all these debates, and I think they're fun debates, like debates of, how do you look at a Bitcoin treasury balance sheet? And I go back to just having seen different portfolio managers look at things completely differently, and they both have a framework that completely works for them. And, and then I've spent literally multiple years of my life previously debating how to define leverage. You would think that leverage is very easy to find, but actually, when you get in the weeds, even like an institutional space working with like BlackRock directly, you'll find that there's no agreed upon definition of leverage. And so these debates of, like, these technicalities, the reality is that in all these terms, at the highest levels, there is no agreed upon definition. And so what I think is important is you take a term, digital credit, and you say here, as an issuer, as the leading issuers, here's what this means. Call it whatever you want, I don't really care. Like, here's what it is. And we're trying to put a name on it. So that way it's understandable to different people. Right? There's a digital asset. The primary risk of this instrument is the credit risk. If you can underwrite and understand or feel comfortable with the credit risk, then the instrument works. And that, you know, And I think when you get into the nuance of this, it's like, look, the reality is, is that for almost anything that's deep in the weeds in finance, there is no perfect term. And so it's on us to make a term, educate on what it means, and then just get into, like, do you like the instrument or not? Like, let's move on. It's digital credit.
- [48:02]
C
It's digital credit. The. This, this is exactly what I'm going to talk about in Prague for my keynote as well. Is that just this concept? Because it's been around for 400 years. Like the creation of the very first stock company, voc, in Amsterdam. It was about shipping ships that were crossing the ocean. There were wealthy people that were individually effectively insuring these ships going across the ocean. And if the ship didn't make it, they lost all their money. Okay? If the ship made it, then all the spices come back and you had global trade and you 400x your return. Well, as you can imagine, that's very, there's very few People that can do that back in 1600s, okay, so they created the stock market. They created VOC, which was the first stock market, and they allowed people to invest and effectively spread that risk across a group of people, as opposed to a single individual, like a single wealthy individual. So they spread that risk across a group of people, and that capital that they brought in the door was permanent capital. They never gave people their money back, but if the ships made it, they would pay out a dividend. And so they took that, what was like an incredibly volatile act of, you know, a ship crossing the ocean for global trade, and they socialized it across a group of people that were interested in taking on that risk. And now here we are today. And people hated it back then as well. In the 1600s, people absolutely loathed it. But it established the stock market that we know today, and it established, effectively, this opportunity that we're seeing right here, right now with digital credit being issued on a relatively volatile instrument, and that risk is being spread across our entire balance sheet of people that are holding all of these instruments. It's a cool story. I'm going to talk about it in depth in Prague.
- [50:05]
D
It's going to be a good conference. Should get people to live stream it for us, make sure we send it back to the States.
- [50:11]
C
We will send it back. That's happening in two weeks. Yeah, two weeks. There's a lot going on. Everybody's really busy. Despite short weeks, things are cooking.
- [50:23]
B
All right, well, thanks, everyone, for watching episode 60 of the hurdle Rate, the Math of Amplification. For Jeff Walton, Matt Cole, and Ben Workman, I'm Tim Kotsman. We'll see you back here next week for another edition of the Hurdle Rate.