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- [00:00]
Tim Kotsman
Sa. Foreign.
- [00:31]
Welcome back to the hurdle rate episode 61 for the week of June 15th, 2026. I'm Tim Kotsman. I'm here on the screen with Ben Workman, Jeff Walton and Matt Cole. Since our last episode, I mean a lot has happened, right? Strategy sold 32 bitcoins. Drive bought 32 bitcoin. Then this morning we had additional purchases is 73 bitcoin announcement from Strive, 1,587 bitcoin from Strategy for 100 million. And of note, Strategy increased their USD reserve by 100 million to 1.1 billion. Jeff, Ben, Matt, how important is the USD reserve to moving digital credit forward? Can you describe what B BTC Prague, what all was going on there? Especially in addition to Saylor's 10 minute answer on what is Mnav. We have SpaceX, we have Capital markets activity that I think Jeff's going to dive right into. We have bimonthly from Strategy and daily dividends in play from Strive. So no shortage of stuff to comment on. So Jeff, over to you.
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Jeff Walton
Yeah, we take a week off and then the world just actually keeps on moving and it accelerates and seems like it's moving, moving faster and faster every single week. No shortage of things to talk about. But yeah, I mean we'll start with the first one, the. Well, I guess there's so many. But the first thing you asked about, the, the cash and the dividend reserve. It's been interesting to watch. Strategy over the last week or the last two weeks has actually three weeks has added $230 million to the USD reserve. The price of the common stock has been relatively unaffected. They also have bought Bitcoin to the, to the tune of, I want to say about 2500 over the last three weeks as well, on top of selling 32. And yeah, a lot of action on that front. And they're looking to push and increase the credit quality of the, of the underlying SDRC instrument. We did see SDRC trade off a little bit. It's I think today closed around 95 ish. But you know what's happened in the last month? Well, the price of Bitcoin went up to $84,000 and then within I think four or five days, the price of Bitcoin went from $84,000 down to $60,000 as these enormous capital events were happening within the market. SpaceX IPO, Google coming out with bonds, Nvidia Bonds, different capital raises from Anthropic and all these other AI companies. It's the year of the IPO for All of these enormous companies. So some very large capital events happening in the market. But yeah, I think the, I think the USD reserve is, is helpful in, in communicating, in communicating to the market the, the relative credit quality of the instrument and the, and the, the company's ability to pay that dividend into the future. Do they necessarily need it? I mean the market has shown that they wouldn't necessarily have needed it because they have the ability to raise capital both on the atm, on the common stock and, and sell Bitcoin and raise capital on the preferred equity instruments. However, in communicating this to the traditional capital markets, the USD reserve or, or having different capital has helped traditional finance understand the design and structure of the, of the capital structure itself. So I, I think it is really helpful for the message and how it's communicated to the market. And as we've seen, I think strategy thinks it's pretty important as well. At least they're probably getting the feedback that it's important because they're continue to add to the USD reserve and bring that capital back up to where it was previously. Right. I think now it's sitting around 1.25, 1.2 ish billion dollars. It used to be about 2, 2 and a quarter billion dollars and they are moving that up. And at this pace they've added $200 million in the last two weeks. So you know, eight weeks from now, two months from now, they would be back at the $2 billion figure if they kept this space. Now what have we seen? The price of Bitcoin has gone up pretty significantly now that the war is declared over. Bitcoin sitting at $66,000. There's been a lot of energy in the capital markets over the last couple of days as we're recording this. And I wouldn't be surprised if there's opportunity for them to continue to ramp up, scaling that and improving the credit quality to get it back to par, which ultimately as these instruments get back to par, they will start bringing more capital in. The door on anything is sold above $100. So I think they're laser focused on that at the moment. Right. The, and something that, you know, was a big conversation here at Prague and a big conversation over the last couple of weeks is viewing these capital structures and these vehicles as long term capital instruments. There are decisions that are made day to day and week to week and month to month and they are constantly looking at the long term trajectory of the corporation and not necessarily any individual transaction in isolation. And all companies think this way, right? Any, any corporation that is operating in best interest of the shareholders, are thinking about the long term view of the shareholder, they may make a decision that they think is good for the company at a point in time if that helps increase credit quality, increase nav, increase Bitcoin. And that is we're making the same types of decisions that any other company is faced with week to week. So Matt, you were up there with Michael and had a conversation with this conversation about this, about mnev, thinking about capital structure. Maybe I'll kick it over to you.
- [06:04]
Matt Cole
Yeah, I think the high level of some of these conversations and the Q and A, the back and forth with Jack Mahlers really is around to your point is you can't view any single capital markets decision in isolation. Any capital market decision, whether it's straight issue equity and buy Bitcoin, anything could age very well or very poorly. The point is that as a bitcoiner you're supposed to have a low time preference. That's literally the whole point of investing in Bitcoin that you zoom out, you, you ignore things like the Peter Schiffs of the world that will highlight any time that bitcoin draws down 20% and you're trying to underwrite a long term investment thesis as a structured finance company around bitcoin. Whether you're strategy strive or someone else that's trying to do something similar. The common equity's duration, so the time preference is even longer than Bitcoin structurally by design. And then the digital credit instrument is shorter than Bitcoin. And so if you have a spectrum of high time preference to low time preference and you were just to view three things, digital credit is for high time preference within Bitcoin risk. Bitcoin is medium time preference, although bitcoiners would say low time preference and structured finance equity. So, so ASST or MSTR is the ultimate low time preference asset around bitcoin risk. And so I think that we kind of got a little bit too much into the weeds around was a transaction that raises cash dilutive or accretive or what was it? You need to look into the holistic set of actions. So all capital finance activities over the set of a quarter, over the set of a year and view those and say were those accretive or not accretive in driving long term performance? Which is why I'm such a big fan of how we've actually set incentives and KPIs at a company. And so I think just real quick on KPIs a lot of people look at things like bitcoin yield and they think of it as a valuation metric. They are a KPI. And so what do I mean by a KPI? It's kind of getting back to the basics math 101 here. But it's important to come back to them at times. What are the actions that a company can do on a day, to day, a week to week, a month to month, really a yearly basis that helps set the company to outperform Bitcoin over the long run. Bitcoin is the hurdle rate. The this podcast is called the hurdle rate, right? That is, that is literally the point. The point has not changed. No goalposts have been moved. We are trying to outperform bitcoin over the long run. That is the long term KPI. If over the long term. And I would define long term as generally like a market cycle. If over a market cycle you outperform bitcoin, you did your job really well. Over a market cycle, you didn't do your job really well. If you're judging a bitcoin treasury company amplified bitcoin exposure from Bitcoin's peak to the bottom of a bear market. And you say ASST or MSTR underperformed bitcoin from its peak to going down to the 200 week moving average. I would say that is structural. That should be expected. If you understand anything about these companies, that is literally how they are designed. That is not the problem. That is structural. And I think that's some people that are not investors likely. But are critics getting caught up into this. The KPIs that are very likely to drive long term outperformance in my view are two things driving a bitcoin yield before senior claims. So just straight bitcoin yield and then also paying your liabilities every single day, every single week, every single month, every single year, on time, if you do those two things. The reason I like those two as very broad based KPIs is it gives the management the flexibility to really go anywhere and say, what is the best way to drive a bitcoin yield, to pay my liabilities and to outperform Bitcoin. You could, even though I don't think this is the optimal way, you could just do an operating business, have profits by Bitcoin that would generate a positive bitcoin yield, you'd be meeting your liabilities. Maybe you outperform bitcoin over the long run, maybe you don't. Or if you think there's a better way, which we obviously do, we're all in on digital Credit with SATA to not work in the sense of man hours for outperformance, but actually to financially engineer with a win win transaction outperformance. You do that, and I think that's the most efficient way. And to do so, you're obviously paying liabilities, you're gonna likely raise cash systematically. That's actually better. And so I mean, we modeled this as in you pay dividend, you sell the bitcoin to pay the dividend. It still works. But if the company can sell cash to pay the dividend, that's actually a cheaper source of sell common equity to pay the dividend. That's cheaper. I think it works. I think people are looking and confusing KPIs versus valuation metrics and getting kind of caught up and looking at different things. But I think the structure's working. I think the conversations were good and we could get more into Prague, but that's my view on the cash question.
- [11:48]
Tim Kotsman
All the debates that are out there now are showing that this is becoming a big idea that's too big for people to ignore. Right? It's dominating the airwaves out there. It's dominating the discourse out there on Twitter. Whether people love it or they hate it, everybody's talking about it right now. And it shows that it's becoming a really big idea that's proving its merits out there in the market, that that discourse is even, even occurring anymore. We've said it lots of times at the individual level, your emotional baseline is going to be struck at your own cost basis. That's just investing one on one for individuals. But when you're looking at this from an institutional lens and how are they viewing the performance of these instruments over time? How are they viewing the performance of these equities over time? They're going to have a different lens that they put that through. And it's not going to be things like a peak to trough as the indication of the performance here, particularly if it's the structural design around these products. So I think that's important to note, you know, going back to strategy a little bit in terms of the importance around the reserve and how the market views that. You know, I think that what they did before was, was interesting when they took that reserve and they paid off some of the debt. And I think that they would have looked at it as this cash is intended to enhance the credit quality of our company. Whether that was sitting in a dividend reserve or whether that was retiring senior debt obligations. It's being utilized to stabilize and provide credit quality to Stretch, I think looking at the retirement of senior debt, that's a big one, right? Because that debt carries risk with it right now as well. You see it in the market, anytime bitcoin's in a drawdown, anytime the equities are in a drawdown, that the market staring at those conversion prices on those bonds. And it gives the market an anchoring point out there in the future to say, well, there's a risk to strategy out there in the event that MSTR doesn't trade above that conversion price by the time it matures. And whether that data is two years in the future or three years in the future, when we're in a bear market, it doesn't necessarily matter. It is a risk and it's something that the market holds onto. So reducing that risk out into the future. And there's a reason that they focused on the one with the furthest out of the, that was the furthest out of the money. And that's because that one was at the highest risk of not equitizing, right. Not being convertible into equity. So I think using that dividend reserve to do that, you know, that was a massive pool of capital they had available to them to get that done in short order as soon as they negotiated it. And they've had tremendous success in the capital markets raising capital, whether it's through mstr, whether it's on any of the prefs that I don't think replacing that reserve is really going to be that difficult for them. You got to remember in the early days they didn't have one and they were always funding those dividends relative to their trading volumes, those dividends are nothing. So replacing the reserve I don't think is going to be a big deal, but I do think they'll replace it because I think it just gives the market kind of a shock absorber. Right? It's there in case you need it. It just shows that there's not going to be a one week or two week period where maybe we're in a straight down, you know, market move for bitcoin where everybody's freaking out and the liquidity is thin out there and they're, and they're kind of stuck sitting on the sidelines because it's not the optimal time to go raise, raise capital through equity issuance. It gives them that buffer that says, well, we don't need to. And we really don't need to for a year and a half, which is a lot of time in the markets. Look at how fast these things have moved, right Nine months ago we had zero bitcoin on our balance sheet, no preferred equity. We're not a public company. Nine months later we have more than what, 19,105 Bitcoin. We've got a perpetual preferred equity trading out there in the market with an 18 month reserve. We've converted over to daily dividends. A lot happens in the market during those time periods. So 18 months is a very long cash buffer. So I think just for the credit quality perspective, you'll see them put that back in place. Do they have coverage for dividends? Tons of it. Massive balance sheet. Tons and tons of bitcoin. Decades and decades worth of coverage. So it gets a little overblown out there when these things happen. But I think the market response showed you that people do like having those reserves in place. I think it's comforting to the market when they see that you have that reserve, you're in the position to weather it. And it just happened to be bad timing because bitcoin then drew down and so it heightened the sensitivity around that reserve because as we know, when Bitcoin's going up, everyone thinks it's going up forever. And when it's going down, everyone thinks it's going to zero next week. So you just have to put in a structure that allows you to ride out the turbulent periods and keep the market confidence in your ability to continue to execute your strategy.
- [16:45]
Jeff Walton
Yeah, I think the instrument also performed incredibly well. I mean the balance sheet dropped $16 billion in like a week. You know, there was, there was a lot happening. And then you think about the structure that sits behind it. You've got things that are happening in defi land. You got people that are using these instruments as like cash secured puts to go sell puts on the comment like the common stock and then they get called on the puts and have to go buy the common stock. So they got to go sell the credit instruments. So there's several different things that were kind of happening, correlated things at the same time. And I put the stat out yesterday too. You know, strategy sold 32 Bitcoin and the market lost their head on it. But in the last five weeks, the US Bitcoin ETFs on net sold 79,000 Bitcoin strategy sold 32. And in that same time period, strategy also accumulated 26,387. So they were a net buyer of the 33% of the net outflows from Bitcoin ETFs. We at Strive, I think we purchased somewhere, it was 3650 during that same period. And we were about 4.6% of the net ETF outflows during that period. So a lot of capital flow and a lot of capital flow movement here. And just thinking we just went through, we just experienced the largest IPO in capital markets history this last week ever that the market has ever seen. SpaceX was valued at $1.7 trillion, raised $75 billion. Right, $75 billion. Absolutely enormous amount of capital at a, at a $1.7 trillion valuation. And the stock traded up when the market opened and through today. So today it's trading, I don't know, $190. The market cap of the company of SpaceX has increased $800 billion in two days, in two trading days. So anybody that bought the IPO, you're looking at, and, and mind you, SpaceX today, I think it traded about $44 billion in volume. So anybody that bought the IPO has made a significant amount of money and that those shares are, are trading hands. You could see it by looking at the volume here on Friday and today Monday. And I mean that's a lot of capital that's, that's going into the market. Not let alone Google raised something like 60 or 70 billion dollars. We just found out today Nvidia did a 25 billion dollars 30 year bond. Okay, that's a huge amount of capital. Anthropic is apparently IPOing OpenAI is apparently IPO on the horizon. That capital needs to come from somewhere. And where does it come from? It comes from everywhere, anywhere that there's capital in the market. These IPOs and these capital events have been a vacuum, sucking out capital from every single corner of the planet. And, and you think about it, it was kind of a, if you had bitcoin exposure and you were hearing what the street was talking about with the SpaceX IPO and you're like, hey, this is going to get priced at $1.75 trillion. But you know, it's 4x over subscribed. You do the rational thing. You, you go, you go buy the IPO. It increases $800 billion in market cap. Boom. You could make a couple billion dollars pretty quickly if you could got pretty big exposure in a, in what is the largest IPO in capital markets history. So some of these things are rational. I'm really curious to see what happens over the next couple of months as capital begins to rotate, as these lockups start to clear out on employees that have lockup of stock and how these shares continue to trade. And move hands and these other IPOs that hit the market as well. So there's just a lot happening in the capital markets at the moment. I think it's helpful to just kind of look at the entire landscape.
- [20:42]
Matt Cole
One of the interesting points there just on the IPO and employees getting shares is late last year, Jordi Visser termed the coin Bitcoin having its IPO moment. Right when bitcoin was kind of going down. And for those that may not remember, I thought it was a really strong framing there that because of ETFs and strategy, buying a ton of bitcoin for the first time in Bitcoin's history, it had deep liquidity for the OG bitcoiners to actually take some chips off the table and not crash the price of bitcoin. Right? Yes, in previous bull runs you could sell a little bit, but the liquidity wasn't institutionally deep and it's become institutionally deep and it's allowed people to take chips off the table. What you're seeing with SpaceX is the beginnings of the makings of the same thing. The reason that was called bitcoin's IPO moment is that typically post ipo, once people get liquidity that have not had deep liquidity for a long time, you should expect to see some systemic sell pressure that should work its way through. That is natural, it's healthy, it's part of capital markets. But to start a lot of those people have lockups and you have a lot of demand to get to buy into just obviously an awesome company in SpaceX makes sense why there is a lot of demand to buy SpaceX shares, but you're going to see a lot of volume as that works through. You're going to see similar if these AI companies go public later this year, just a lot of capital moving hands. And it's important. Jeff, you made the point just of this capital has to come from somewhere. This capital was not capital sitting in cash. When you're talking about that amount of money, it was invested. It was almost all invested for sure. Even if it was invested in treasury bonds or whatever, it was invested capital. Someone had to sell something to put tens of billions of dollars into a new asset that they never had access to before. And we've never seen that type of capital rotation at that scale in IPOs. And so it's not surprising that you see capital flows move out of places. And you know, I think what's interesting when you kind of pull it back to bitcoin is that and kind of What I think is showing the signs of a healthy market and part of what's made bitcoin being down at its 200 week moving average, I would say just, I know this isn't the same lived experience for everyone, but I'd say for strive easier than expected is that the capital markets have been open. I mean we've been buying a ton of bitcoin, raising a ton of capital, strategy has been raising a ton of capital as well. You would not model that as your base case scenario. When Bitcoin's at its 200 week moving average in the depths of a bear market, you would assume, and this is actually part of the reason for having a cash reserve, is you would assume when bitcoin is crashing to its 200 week moving average, which typically marks close to the bottom of a bear market, that you're probably just going to have to sit there and go with what you got for a little bit. We haven't seen that. That is an immense sign of strength for companies like us to be able to buy the dip. And I think it's because when large companies are going public, companies don't go public when capital markets are shutting down, they go public. Large companies like that, when capital markets are open, when capital is flowing. And so it's consistent with IPOs, major IPOs happening, but it's also consistent with the fact that we've been able to raise a lot of capital, stock markets are doing well. And that's why it's hard for me to not remain extremely constructive of where we ultimately go from here. This, this feels to me, I've called it a bear market for ants and it feels like that because of what we're seeing in the broader capital markets, it's extremely constructive. And I think that getting through Those dynamics of SpaceX is an important part of highlighting what we mean by that.
- [25:04]
Tim Kotsman
I think one of the things that you highlight when you look at the drawdown we just saw in bitcoin, we went down more than 50%, we're down at the 200 week moving average. We talk a lot about what would happen if the capital markets were closed to you. If that's not the period where the capital markets closed to you, you have to ask yourself what are the conditions where that would actually happen and for how long? Being in a bear market and then having a crash down from 84,000 to 60, if that didn't shut off the capital markets while there was already fear in this sector, you have to ask yourself what will and how long will it Last, I think that's important to put that context around what you're seeing here. With companies like Strategy still accumulating bitcoin, with companies like Strive still accumulating bitcoin, seeing our products still performing. SEDA closed at above par today. $100 and a penny. And so you're continuing to see the demand out there, even in the depths of a bear market. I think most bitcoiners would look at this type of move and go, yep, this is kind of what the low end of a bear market looks like. And if that didn't shut off the capital markets, even though there was fear and wars and capital draining out into these massive IPOs and going everywhere else, which was definitely competing capital, look at these companies, these are risk companies, right? If you don't think SpaceX is risk capital going into there, you're out of your mind. Right? Like the company is built on getting to Mars and standing up civilizations. You're making a bet. There's. And I know they had contracts coming on for data centers, hosting GPUs and all that, but those contracts are cancelable, all these things. There's risk in that investment, but it drained a ton of capital because people obviously have confidence in Elon's ability to execute. Not only was it a lot of capital draining into that ipo, it was risk capital and capital that's looking at tech. It's very directly capital that would normally compete with Bitcoin or Bitcoin treasury companies. And so I think it's really interesting to watch this performance because yeah, you saw the impact happen, but it lasted for what, two weeks, week and a half and then we had a monster day, I think for us, I believe Strive or Asst traded what, more than 136 million during the trading hours today alone. I think SATA was more than 75 million today. There's capital out there that's moving and it's finding its way into the bitcoin correlated instruments. And I think that's important context to keep in mind when we start talking about the doomsday scenarios, because it seems like we've seen a couple, right? We've been in a bear market. We've been in a bear market basically since we went public, right? So the entire time period of us getting SATA out into the market and doing all these things has been in a continuous drawdown in bitcoin's price. And the capital markets are all stuck, still open and very, very active. So I think it's important to recognize that when we start Thinking about the risk scenarios out into the future and what would it take for the markets to be shut off so long that you draw down, tying it back. An 18 month dividend reserve.
- [28:14]
Jeff Walton
Yeah. I mean it's so fast. I've got two more points I want to add on here is in thinking about how we've designed the structure of the two securities, SATA and asst. Having that beta relative to Bitcoin and understanding the purity of those instruments and being able to calculate those instruments very quickly is actually by design very interesting to anybody that's running an arbitrage model or anybody that's running a computer model that's starting to run correlations to any type of correlation trade. And as we know, the capital markets are getting far more digital and faster and moving towards computers. That, that's, that's an interesting dynamic when you are looking for somewhere to hedge or somewhere to take different positions in different directions. And, and that is, in my opinion what I think makes these instruments particularly interesting is that they, they have correlation relative to the underlying spot that can be kind of calculated and thought about. I think that makes it really interesting to computers. So that's point number one, point number two. One thing that I'm incredibly excited about with the SpaceX IPO, I didn't get allocated to it, but it's interesting. You now have two of the top 10 companies in the United States hold Bitcoin on the balance sheet. That's, that's incredible. That is, that is an incredible stat. And as that change, like as the underlying price of Bitcoin changes, that's going to flow through to their earnings, that's going to flow through to the narrative, that's going to flow through to how they make, manage the company. It's going to flow through to Elon talking about energy money. And, and that is, I, I think we'll continue to kind of like infiltrate within the narrative here. And just thinking about this, I think SpaceX has about a billion dollars of Bitcoin in the balance sheet. Before the IPO represented about 6% of their capital, 6% of their balance sheet. And if you think about raising $85 billion if they kept that same allocation, it'd be, you know, about, about $5 billion of Bitcoin buys in order to keep that same relative 6% of the total balance sheet. I don't think, I don't necessarily think that it will be how they think about that capital moving forward, but it is something to throw in the pocket that could be on the horizon is you know, keeping that relative allocation of capital on the balance sheet and the diversification. So I know there have been several studies by capital allocators looking at what is the ideal proportion of capital to have in bitcoin. Anywhere from 2 to 8% depending on how you view risk return and how it fits into Markowitz modern portfolio theory. So if they've got forward looking thinkers over there, which I think they have several of, that might be something that they're considering.
- [30:57]
Matt Cole
It's obviously always a good trade to buy bitcoin. It's interesting when you think about it in the lens of kind of this AI Renaissance era, when you're a company like them, there is just so much capital to put to work today. I think what we've seen in the previous era, the software era, was that there was actually a lot more difficult to put capital to work for infrastructure projects. You saw really large balance sheets, you saw perpetual stock buybacks and you also saw, I would say more flimsy ability to do capex. And so that is like the perfect environment for corporations to just stockpile bitcoin. Prepare for the future, hedge your future, have strength. My view on SpaceX is, look, I mean you have Elon, he's obviously a pro bitcoin guy, he sees it, he gets it, which is great, right? The world's richest man sees it, he gets it. As two public companies have put bitcoin on their balance sheet. Amazing guys trying to go to Mars. It's going to take a lot of money, build a civilization on Mars, build data centers in space, right? And I think that's a beautiful thing. Kind of when you think about this kind of emergence of this new Renaissance era, building beautiful things, building a better future. I mean, frankly, I want to see him go for the moon. I want to see him put all that capital into those interesting things. If he has capital and I don't know what his capital plans are because I know these things take time that fits the duration profile of bitcoin. I think he should buy bitcoin. But you know what, maybe he should be buying digital credit. Maybe that's the better thing for him with bitcoin risk. I don't know that he will. I'd be surprised. But if you actually think about his goals, his accomplishments, I think that's actually probably a more appropriate asset. So if anyone at SpaceX is listening to this, check out SATA, check out STRC.
- [33:11]
Jeff Walton
Yeah, I mean you need to store a bunch of money to have a bunch of money to do these grand things. You need to store your energy, energy without decay. That is completely, completely aligned.
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Matt Cole
Yeah.
- [33:27]
Tim Kotsman
Just the fact that this is going to be wrapped up in that story. Right? Just having bitcoin along two of the most interesting talk tracks that have been out there in the recent decade, I would say, right? The space exploration, the autonomous driving and having bitcoin embedded in those balance sheets, that's highlight enough for it. When you have the most visionary thinkers looking at these assets and Elon, I don't think is a guy who wouldn't just get rid of it all if he stopped believing in it. I'm pretty sure that that would be a very easy decision for him to make and he would do it. And he would have done it very publicly. Right. Last time he sold, you know, they were testing liquidity or whatever. He never came back afterwards. But then it came out that SpaceX had a ton of it, so maybe it just rotated and the purchases happened there. Either way, you want bitcoin tied to the most visionary companies in the world because I think it is the most visionary money and the most visionary capital in the world. Right. It's all forward thinking. And that's the entire thesis that we're building around. We're building around a future that looks materially different than what we see today. And we don't know if it's one decade, two decades, three decades, no idea. But we all see it coming, right? So for someone who's out there looking deep into the future, I would expect that they would identify some of those same structural weaknesses that we would and they would protect their companies accordingly. And I think that's what you see with a Tesla and a SpaceX. The other interesting thing, and this one came out at Prague, was I heard a lot of people that were managing institutional capital saying that down here, around this 200 week moving average, was when those conversations were starting back up from institutions where they were starting to now get interested enough. It was like all the froth had drained out of the market, the excitement had drained out. Bitcoin showed resiliency, stayed liquid. It's trading $35 billion a day and now the institutional capital starting to pay attention. But not only that, we heard from Richard Byworth and he's one of the advisors at Jan3, that they've never had more nation state conversations happening than they have right now. And I think that's a big signal when you're starting to see those conversations pop back up. Because these are the times where it would be really easy for people to abandon those conversations. You go into a bear market, as things do in bear market. It can really crush sentiment, makes people disinterested. Everyone gets very interested after price has been running for a very long, long time. But the fact that those conversations are strengthening now shows that the conviction didn't disappear or the interest didn't disappear and that this is more of a timing thing now. So I'm going to be very interested to watch over the next year or two and see how much of that materializes, because historically these have been the great times to start creating those allocations. You know, institutions have been paying attention to that. Bitcoin's been above a trillion dollar asset for a very long time now. So it's. It's been on the radar for a while. And I think that this is showing all the signs of a market that they would start to like getting involved in. So while everyone, you know, on X can sound very bearish all the time behind the scenes, I think you have a lot more strategic conversations happening and a lot of those will tend to get kicked off when the price action's right for them. So I was pleasantly surprised to hear as many conversations as I did in Prague with that being the case. Right. It shows that we may be turning that corner despite all the other noise going on out there broadly in the markets right now.
- [36:52]
Matt Cole
That was probably my main takeaway from Prague as well. And it was just interesting. You see a lot of the arguments on X going on right now between some Bitcoin OGs and the Bitcoin treasury space. And then you go to these conferences and it's pretty much all cordial responses. There's no mean debates, but I think the debates were elevated in person in a major way from what I see on X. And so there's a few things that I think are going on. I had some conversations at some smaller dinners as well that led me to be very positive on small nation states, really doing diligence on adopting bitcoin in a major way. And also why maybe some large nation states might not want that to happen and kind of some of the dynamics that are at play here. But it makes sense. I mean, if you're a small nation adopting bitcoin, just think about the capital flows that would go into your small nation if you made bitcoin money. It makes all the sense in the world. There's a lot of sounds like geopolitical, you know, stuff happening behind the scenes on that, but I think it's more of a matter of when. And a lot of bitcoiners working with different smaller nations for full adoption of bitcoin as money. And ultimately a matter of when, not if it will happen. And I think we're going to continue to see when these things do happen. Beautiful stories like El Salvador of just the improvements of a nation by adopting or embracing a hard currency in bitcoin. So that's one point that I think is important. I think when it comes to X sentiment, I think that actually gets into part of the other. I would say the more intelligent version of the debate on what I think is going on with bitcoin is I think that a lot of just smaller investors are not really embracing bitcoin as money. They're not using it as P2P. P2P cash. I think a lot of bitcoin companies around these things maybe are not seeing the success that they were anticipating and kind of like the view of how bitcoin wins because it's winning with corporate adoption, nation state adoption, ETFs, not buying a coffee. And I think as a longtime bitcoiner, I think my view is we should be encouraging people to keep the health of the bitcoin network up, obviously to self custody bitcoin play around with it. I'm not saying use bitcoin as money, but buy a coffee with bitcoin. When you go to bitcoin Prague and support the EcoSystem on the P2P level, I think that is actually an important part of the long term build here. In no way does that mean that the math of a bitcoin treasury company doesn't work. Those are two different arguments. Right? But I think supporting the P2P network and kind of this grassroots movement is a critical part of success. It actually ties in on the corporate side in a similar way to why we care so much about other companies issuing digital credit instruments and kind of being stronger as a ecosystem with all sorts of different corporate players, different countries doing different things. That is a strong thriving ecosystem. If it's just strategy or strategy and stripe, that's not the strongest that it could be. Right? 2 is better than 1, 20 is better than 2. And I think a similar thing on the P2P level is that we really do obviously care about that network success and we'll be obviously all working together to grow that. And I do think that that is probably part of the reason, in addition to the bear market, that you might see more of the everyday OG bitcoiners having a little bit of frustration on the OG side. And then obviously when you expand out, I mean crypto is just dead so it makes sense to me why retail sentiment on X is really, really poor right now. But these are bear market things, right? When bitcoin goes back up to 100, 120k, I think it'll all be okay.
- [41:04]
Tim Kotsman
I think there's been, when we look at the arguments that have happened with a lot of the OGs out there, it seems like at some point this idea entered the ecosystem where there's this perception that the people at these treasury companies think that you shouldn't spend any time building products around Bitcoin anymore, like consumer products. That couldn't be further from the truth. I was on a panel with Jack at the Corporate day and it was one of the things I said, like, I'm rooting for Jack and Strike to build the greatest financial services company around bitcoin the world's ever seen. Like, why would I, why would I not want that? And people have become very absolute in their view of things. Like they think that the view of everybody in bitcoin is shifting to where digital credit should be the only idea you should pursue. And that's just nonsense, right? Like we want bitcoin to become a thriving ecosystem and you need people building. And to your point about crypto being deadmap, maybe some of the people that we're building over in that space will, you know, come back here to the promised land and start building on Bitcoin again and start working on building out those financial rails where Bitcoin becomes a more accessible form of money for peer to peer transactions so individuals can embrace it, create better experiences around the self custody of Bitcoin, which I think is one of the most important offerings that it has because it's such a unique characteristic and such a unique feature. But it's not either or right for us. It aligns with our backgrounds, it aligns with our capital markets experience. We see it as a monstrous activity to connect that bridge into the capital markets and start to transition capital from a structure we think is greatly flawed into one that's now backed by the hardest money in the world and the hardest capital in the world. And I think that that is also a worthy endeavor. But it doesn't mean that's what everybody has to do. You should build products, they should continue to innovate. There's a huge amount of infrastructure that needs to be built around Bitcoin as this scales up and succeeds. If tomorrow everybody decided they wanted to use bitcoin as money, I'm not sure we have the right tools in place right now to handle that. So I think that there is a huge amount of innovation and work for builders to be doing in this space. And I don't think people should be discouraging them and forcing them into becoming capital markets machines all the time. Sometimes you want them to focus on what they are the absolute best at. If you are the best at designing some individual product, do that. We all want the bitcoin ecosystem to succeed. We want this to be the greatest asset the world's ever seen. We want it to be incredibly usable. And I think that we're on the path and there's a thousand different paths that are in front of us here. Not every company is going to be doing what we're doing. Not every company is going to be doing digital credit. I think several will end up doing digital credit and I think it'll be a huge mechanism for onboarding capital into the bitcoin network. But there's lots of other work to be done. So the fight's out there where it seems to that people have built the mindset that digital credit is now the only thing you can do with bitcoin, right? That's just not reality, right? That's what you see on Twitter, that's what you see online. But when you're in person, in real life, with the people that are doing these things, that's not the sentiment that they share.
- [44:22]
Matt Cole
Your keynote, I think, hit on this as well as Adam back X post today. So I think in your keynote, you talked about digital credit and bringing people that have never bought bitcoin one step closer to bitcoin.
- [44:38]
Tim Kotsman
My view on this is that for me, my view on digital credit is that we move bitcoin one step closer to them so that they don't have to take that first step towards bitcoin, right? You need to find people where they're at. You need to create products that integrate into their everyday lives, that bring them immediate benefit that they need today, right now. And if we can bring them one of those products in digital credit that helps them today meet the cash needs that they become reliant on, right? Everybody's got bills, everybody's got expenses, everybody's looking for better returns on their money that's sitting idle. Like, if we can make bitcoin take one step closer to them, that ultimately leads them to the revelation where they start to understand the benefit and the value that bitcoin can bring to them by holding it directly. To me, that's a worthy cause because when we're at these conferences, we forget how small our bitcoin world is right now and how many people out there are, are not having these conversations, are not talking about it, because day to day they're just trying to survive. Right now it's a luxury for all of us that this is where we get to spend all of our time is thinking on innovative and futuristic ideas and being able to think in decades instead of days or weeks. That's a mindset that we have the benefit of being able to have. But so many people have struggles today and they need products that can benefit them today. And if we can build one of those backed by bitcoin, right? If we can use that bitcoin as capital to bring an asset that can provide a tangible benefit to people's lives, I believe very strongly that it'll help us to onboard the next hundreds of thousands of investors. Because when they find out why this product works for them, why would you not want to hold the asset, making it possible? Right. I just think it moves bitcoin one step closer to people where they're at without having to try to force and bully people into making the step towards
- [46:35]
Matt Cole
bitcoin, which is obviously Adam back is the OG of OGs in Bitcoin and made the same point today is you buy digital credit, you have positive experience with it, you are going to be more likely to buy bitcoin in the future because you now took something that was complex, highly volatile, you had a positive experience with it, you're more comfortable with it. And then bitcoin starts going up into the right, and maybe you want a little bit more than 13% or 11.5% and you're more willing to take volatility because you've seen it work for your needs in life. And I think that's how this is going to play out for sure.
- [47:15]
Jeff Walton
Yeah. You start to ask why questions, right? Like, why does this work? And that's, that's actually happened with several, like family members, right? Like, I feel comfortable talking to a family member about this because they can conceptualize it and it kind of like leads them to water a little bit and just to kind of pull this entire conversation together. We're in such a unique position because we get to underwrite the underlying instrument being Bitcoin. And so we have a vested interest in how bitcoin continues to thrive, like as an economy, as an ecosystem, as businesses build on top of it, as it becomes a medium of exchange and we underwrite the entire thing. Now we're also capitalists. We're trying to bring this new capital into the market. That never would have accessed bitcoin. You would think in a perfect world there would be cheering of both of these camps there. There's been a little bit of a civil war going at the moment. But you know, we are trying to access this new pool of capital and bring, I guess we're taking it closer to them. To your point, Ben, we are taking it one step closer to them. But you think about what we're trying to do here. Our goal is to bring in $10 billion, a hundred billion dollars, $200 billion of new capital into the ecosystem. Them ideally that starts to push the price of bitcoin higher, which lifts the floor for everybody else, right? That makes, that makes everybody else. The value of everybody else holding bitcoin, the value of their company should increase. That gives them more financial strength to go, go out and get loans and build businesses and, and do build on top of this entire ecosystem. So the alignment is, is there, which is the, the crazy thing. There's significant amount of alignment between our company strategy and all of the other companies that are operating in this entire space. So it is a bit surprising the, the, the hate a little bit. But you know, ideally, thinking about the future, there should be several issuers of digital credit. There should be 5, 10, 15 issuers of digital credit instruments. That way that starts allowing traditional capital markets to get a more diversified exposure, have different business type exposure, start creating ETFs, start creating alternative products that start to infiltrate and go throughout the rest of the market. I think there's opportunity on both sides to facilitate, you know, businesses growing within Bitcoin and then companies that already operate and exist within Bitcoin to build these future products, which just accelerates adoption into the future too.
- [50:01]
Tim Kotsman
I also think you'll see these companies working together in the future. Right, right now, all of these companies, right, the ones that are doing kind of the core bitcoin financial services, the ones that are running more of the capital markets, types of activities, they're operating in isolation from each other. But I think that there's actually going to be a lot of ways in the future to be able to create a more supportive and collaborative environment around there that ultimately helps. Like we're saying, when you bring Bitcoin one step closer to people and they start to discover the need for the benefits, there may be ways for us to work together to capture and bring those individuals into bitcoin, right? Take that attention that we've captured from them. Now they're interested in the asset and find ways to get them onboarded. Into holding and using bitcoin themselves. So right now, anytime you have something disruptive and new in the market, it's going to be natural for there to be a huge amount of debate. It's going to be natural for there to be a huge amount of resistance. People don't always like something that's new and novel and takes a different approach than what they're typically used to. But in the end, I think we'll look back on this four or five years from now when everything's matured, and I think that these debates will largely look silly in hindsight, and everyone will realize we're all pushing towards the same future here. We just disagree on where the largest opportunities are.
- [51:24]
Matt Cole
Those are the fun debates.
- [51:26]
Jeff Walton
Absolutely. Prague overall was. Was a great event. I'm really glad I went. It was a bit surprising to see how Europeans think about it. They just think about it a little bit differently. There's been more of a need for bitcoin as. As money in. In Europe. So that was one thing and then the other. There was no other cryptocurrency stuff there. It was, like, all pure. It felt incredibly pure. Bitcoin only. And it had this kind of, like, grassroots feel to it, but still very, very powerful, very clean. So it was. And a great event. And Prague is just a wonderful city, too. Just beautiful all around. You could. You could kind of see hard money all around you, everywhere you go. So it's. It's inspiring. It fits within the, you know, the bitcoin ethos. So it was a great event. Very glad I went.
- [52:27]
Tim Kotsman
Awesome. Well, thanks everybody for listening and watching episode 61 of the hurdle Rate. What's your time preference for Ben Workman, Jeff Walton and Matt Cole? I'm Tim Kotsman, and we'll see you back here next week right here on the Hurdle Raid.