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- [00:00]
A
Sam welcome back to the hurdle rate episode 68. For the week of August 3rd, 2026, I'm Tim Kotsman. I'm joined by Matt Cole, Ben Workman and Jeff Walton. As of this morning, Strategy sold 1,637 Bitcoin, increased its USD reserve to $4 billion and repurchased $81.2 million of STRC. Multiple Bitcoin treasury companies had purchase announcements including American Bitcoin at 300, Strive at 20, Smarter Web at 11.89 and capital B at 1. Couple interesting tweets out in the world today. We have some topics on the table, including the JPY currency situation of note. Michael Saylor today said, when I say never sell your bitcoin, I speak as one saver to another. I have never sold mine. Not one Satoshi Strategy is a public company, not my wallet. Since 2020, it has disclosed it may buy or sell bitcoin to manage capital. Our shared conviction in bitcoin remains unchanged, to which I responded. I'm dedicating my life to bitcoin. I'm all in. I'm very intrigued if you guys have thoughts, reactions to that, especially because the post received over a million views in the first two hours. Over 1.2 million views in the first three hours. So I think it's obvious that it struck a chord on bitcoin Twitter and I think we want to start with coldcard self custody and bitcoiners helping other bitcoiners, especially in the depths of the bear market. So Jeff, I'll throw it over to you.
- [02:07]
B
Yeah, one of the, one of the most active weekends I've seen on Twitter and you know, I, I was reading until my eyes bled this entire weekend just tracking what was going on with self custody, what was happening with cold card, understanding how the market was responding, how bitcoiners that understand technology were stepping in and helping people get bitcoin off of their cold cards as, as quickly as possible. There was one word that the market recognized very quickly which is the word entropy, which is a measure of randomness, which is very important when you're thinking about developing or creating a bitcoin wallet. And so yeah, I mean this, this was the biggest self custody drain of, of all time. And I think it's struck a chord for the self custody bitcoin maxis that it, it's created a new risk vector that wasn't previously there. That, you know, the mantra between all the bitcoiners is don't trust, verify. And they, they were stuck in a situation where they trusted the cold card wallet was creating enough entropy within their randomness wallet generation when there was an actual bug in the code. So, you know, this is something that we've, we've had our eyes on the entire weekend watching it play out. Maybe I'll kick it over to Ben and Matt for a little bit of their perspective. We can kind of unpack it a little bit.
- [03:37]
C
Yeah, I mean, I think first it's tragic that it happened, right? This is impacting a lot of people who thought they were doing everything right and something like this happens and I think it results in a major betrayal of trust out there. And you can see it out there on X. There's just been a ton of despair from people who've been impacted by their wallets getting drained. And it's really bringing self custody to the forefront of the discussion. And you know, I think it highlights something that used to be contentious, but I think it's not going to be quite as contentious moving forward, which is that, you know, taking ownership of your own coins, holding your own self custody is a massive responsibility. Right. It's one of the most unique things that you can do out there in finance, which is to be the bearer of your own asset, to hold your own keys to your own Bitcoin. But it comes, you know, with a responsibility. And what we're learning now is that even in that responsibility, there's still a layer of trust that exists between you and some type of an organization. And in this instance, it's the hardware manufacturer and the software that's backing that device. And so I think that this is going to make a lot of people rethink holding in self custody and looking at other options and looking at exposure through different vehicles. And I don't think you can blame anyone for having that be the reaction here, particularly while you wait for the dust to settle. And I don't think that the self custody side of Bitcoin is dead. I certainly hope that it's not, because I do think it's one of the most unique elements of this asset and I think that that needs to be protected at all costs. And what you're seeing out there on Twitter now is a lot of people banding together to go out there and really strengthen this industry. You've seen guys like Rob Hamilton out there doing a huge amount of work, going through and doing independent reviews, using all the frontier models to go review the code from all these other providers to make sure that everything's secure and that there's no more of these bugs out there to the extent that you can stop that for now. And I think that that's been really awesome to see.
- [05:42]
D
Right.
- [05:43]
C
In a time of crisis, it's really easy for people to dive in and start throwing mud and to start getting nasty and to start pointing blame into looking at everybody who's ever touched anything to do with the brand. And in this instance, you really saw the overwhelming majority of people looking for ways to help. This is a time sensitive event. It's still going on now. So if you are somebody that's holding your assets and you're using cold cards on it, the prudent thing to do is to move them and get them out of that ecosystem. Let this dust settle, but make sure that your assets are safe. But seeing the industry really band together now, you've seen that a bigger group is formed around that, helping do these independent code reviews. You've seen grant funding come to help them to accomplish that in a very tight timeline. It's good to see that all the good parts of bitcoin are showing up. The community is banding together to protect this asset and to protect the idea and the concept of self custody, which has certainly taken a hit in the eyes of the masses, at least to those that are paying attention right now. So it was incredibly unfortunate to see. You know, it shows that every company, every institution that's involved in this ecosystem has a responsibility to do their part, to be good stewards for their customers, to be good stewards for their shareholders, and to take ownership of the outcomes that come from that. And I think bitcoin, as it always has in the past, will regroup and rebuild and it will come back stronger from this.
- [07:17]
B
Right.
- [07:18]
C
You need these stress test moments to really harden everything and to make sure that people don't rest on what used to work in the past. We're in anything but a common era now. AI models are clearly accelerating things. They're making it easier for the black hats that want to exploit things, but it's also making it better for the white hats that want to fix things and make them more sound. So we're quickly accelerating towards the future here. It's changing and with that is going to result in some different approaches for some different individuals who aren't comfortable with the state of things right now.
- [07:50]
D
One of the interesting things about this exploit was that even if a white hat would have found it, it would have been very difficult to manage. And so it gets into. I think anytime a failure happens, there's a couple things that I like to see Obviously one of them is people helping others. And I think we saw that in a major way. And the other part that's important is reflection on what went wrong, why did it went wrong, what assumptions were wrong and learn from any failure. Right. And there's been a lot of people in this bear market that have had to learn things. I mean obviously like in digital credit we had a volatility event that was probably bigger than a lot of people thought. BIP110 is getting absolutely slaughtered. And then you have the self custody thing where you had know the bitcoin purists that you know, thought they were doing the right thing. Well, I would even challenge that, the notion that they were doing the right thing and others were doing the wrong thing. I think they were trying to do the right thing. I think that you have good people that were trying to put their life savings in or a lot of their money on a self custody device that they control. And it makes sense why that, that would be something that people would try to do. But you know, one of the things that I've had a lot of conviction on for myself and that's not to say I'm right but just like I think, I think the notion of like I'm right, others are wrong is just a wrong notion in life versus we are doing what's right for ourselves based on what we know in the world and we don't know everything and we are going to be wrong all the time and, and we're going to learn and we're going to adjust. For myself, what I've kind of viewed on bitcoin self custody is that it's an insurance option and I've talked about this publicly but you know, I gave a lot of my family members in 2017 0.05 bitcoin each and with that was a letter that told them that was all the bitcoin they would ever need to ensure that they had more bitcoin than the average American could ever have if all 21 million bitcoin were in America and were distributed to each American because of how scarce bitcoin is. And so maybe it's an opt out and insurance policy from the system. Maybe for some it's, I'm going to put my whole life savings in self custody bitcoin. But I think people will realize, we're starting to realize that it's, it's hard, it's a big responsibility and maybe not everyone will be up for that, that task and that is okay. It doesn't mean that self Custody should go away. It should be preserved. But the, the other thing that's on my mind about that is that some of the, I think learning that should occur is that when you look at X right now, you see a lot of the, some of the OG bitcoiners that were kind of the quote unquote toxic maximalists, that it almost feels like it's a funeral of like how sad they are. And it is sad, it is tragic, but I wouldn't want to see them canceled. I feel like they themselves almost feel some of them like that they're kind of canceling themselves. And I think it's because there was this purity test that others did not meet the purity test. And so they, they, they themselves were the purists and everybody else was, you know, a shitcoiner or whatever or part of the XRP army. And that's just, that's just, I've rejected that. And it's why I've for a while not thought that this would happen, but that I wouldn't have surprised me to see something happen because I thought that their, their heads were in the sand versus where real people were. When you actually go out and talk to real people, it's part of the thing we talk about when we go out and talk to people that aren't bitcoiners about digital credit and they're like their jaws on the floor and they, they're excited about it, but they would never buy bitcoin because they don't like the volatility or you know, people that have mandates that when you go out there and talk to the real world, you realize that different people have different abilities, they have different risk tolerances, they have different amounts of capital, they have different needs in their life. And so I don't want us to do what I see as a community, the Democratic Party do at times, which is these purity tests that then no one meets and then people get canceled one after the other and you have to self cancel. You have to. They resigned from their position and they exile themselves. I think that's toxic behavior of a toxic community. And so my hope is that even some of those podcasters, leaders that are down right now, and understandably down because some of their recommendations obviously cost people a lot of money, that they regroup, that they get back up, that they don't give up, that they keep pushing for self custody, that obviously they don't, you know, fall back into a cave and, you know, and, and remove themselves from this community. Because I think this could actually be something where it could bring the community together. That probably everyone in this community, what no matter what you're focused on, has had some big lessons in this bare market. And the reality is that we're all pushing bitcoin in important ways and self custody will continue to be an important thing to push.
- [13:12]
B
Yeah, this was a totally humbling event for really, for the market. And like we were talking about a bit earlier, Matt, is this, everybody's been tested in this bear market and just tested in different ways and you know, like our volatility event and now this self custody event. I, I wouldn't be surprised to see a little bit of cohesion here as every single person that's involved in the bitcoin network is going to push that much harder now. Right? The, the security is going to get better. People are going to be testing and using these AI tools to, to test all of their platforms as much as possible. And that's going to be an ongoing task that people are doing. Corporations are going to be doing it. Corporations are going to be pushing their custodians to strengthen and harden the network. They're going to question, they're going to verify and ultimately I think this will be really strong for the bitcoin network. A couple crazy things that came to my mind. This event happened and the price of bitcoin is, is trending up. This is the largest thing theft in bitcoin history on, on sovereign cold storage wallets. Yet the price of bitcoin didn't really move. If this would have happened in 2017, the price of bitcoin would have nuked. Right? It would have nuked significant significantly it would have been dropped 50, 60%. Yet here we are and the market is improving. Just a, just a couple other things that are mathematically interesting if you're thinking about risk, like if you're a sovereign bitcoin holder and you're holding bitcoin in cold storage, that the concept is be your own bank. I even have a sticker on my water bottle that says be your own bank. And it's not for everybody. It is difficult. There, there are things you need to take into consideration and I think that that mathematical risk perspective is going to become a bit more apparent to everybody now that this event has occurred. It changes the risk calculus. It changes how you would think about managing your, managing your funds, whether that be single point of failure or multi sig. Multi point of failure and how you interface with that. If you are not interested in understanding what those are, there are now options to get bitcoin Exposure where you don't have to take those things into consideration, you can outsource that to other parties. That was one of the biggest developments in the entire Bitcoin ecosystem was the development of the Bitcoin ETF and companies that are holding Bitcoin on their balance sheet, taking leverage positions on the balance sheet. And that is, that is all the evolution of the entire market here. So yeah, this is. And then lastly, thinking about the, the math just for perspective, because true randomness in, in 256 bit, 256 bit entropy, like the, the comparison of this cold card eventually between what a, what true randomness should be with 256 bit 24 word entropy and a bitcoin passphrase. The comparison is a computer selecting a single person out of the total US population. That's like one person out of eight billion people. That's effectively what the cold card hack created. A computer can calculate that very quickly. It's around, you know, within four seconds now. 256 bit like true randomness would be equivalent to selecting 1000 atoms, a group of a thousand atoms in the entire universe. Like mathematically it is so. It is so many orders of magnitude more difficult to guess or identify a private key. Like that's the scale of the difference, the mathematical scale of the difference between the two, which I think is pretty staggering. However, the concept of how did you create your entropy? How did you create your randomness? Was there an algorithm that can be reverse engineered? That is the new risk surface that people are beginning to contemplate.
- [17:08]
C
I think a lot of people didn't really understand the importance of the cryptography side of all of this. And I don't even think a lot of people actually had a, a baseline understanding of it. If you just think about, okay, If I had 2 handfuls of 100 quarters and I'm throwing them in the air, how many times do I need to do that before they're all going to come up heads? It's going to take me a very long time to do that. Well, what if I only have eight quarters and I throw it up and I need those eight to come up heads? Well, I might be able to do that while we're on this call. As that randomness and as the number of choices shrink, it becomes less and less random. So modern cryptography is really all about picking a random number that's so large and so unique out of so many possibilities that nobody could possibly or statistically arrive at that same number at any time during this lifetime or Multiple more. And that entropy and introducing that randomness into that equation is so important that any limitations in the amount of randomness there cuts down the set of possible outcomes and therefore makes it much quicker now with modern technology to go and crack those. And that's kind of what we're seeing here. So, you know, there's an appreciation that this cryptography is, you know, there's a lot of art there. How do you create true randomness? You know, and for a lot of these hardware wallets, when that randomness is being generated through the device itself, right. Some of them are taking, you know, temperatures of chips and all these other inputs to put into it, to try to create randomness, it's very difficult to do. And so getting that part right, when you're taking that self custody aspect of this and wanting to own something and having confidence in the security of holding that asset yourself, that someone can't just go out on a whim and guess this in any reasonable amount of time is just so critical to feeling comfortable in that position. And what happened now makes a lot of people feel very uncomfortable in that position. Because even to your point, Jeff, about how many possibilities there were, even with ColdCard, even with the deficiency in the entropy, how many different combinations there could be, was a huge set. But with computers it can move very fast through that. But it just shows you the importance of really focusing and making sure you get that critical component right. And particularly for a lot of these hardware vendors and the people that are writing this code, and then the people that are auditing this code, making sure that that is of the most critical components to setting up those private keys for your own wallet to store your Bitcoin in. And it's unfortunate that this is how it got highlighted, but because it got highlighted, I think everybody is going to be strengthened from this. And so the industry as a whole is going to emerge on the other side with much better practices, much better review processes. I think there's going to be a much bigger leaning towards open source. Anytime you bring things behind closed doors and you're using things that are proprietary in nature, you take away the ability for others who want to help to be able to audit that code and look for bugs and look for deficiencies that can be patched. And so I think this will actually push for a lot of people to move towards more open source standards where you can have a full energized community like what we're seeing now, putting a huge amount of dollar resources and effort and compute resources into making sure that we are hardening all of these different components that go into allowing people to take that self custody and hold it securely. So it's a very unfortunate event, but it's one where there's going to be a lot of growth, a lot of learnings and a lot of changes to processes and procedures to make sure that this isn't happening again in the future.
- [20:54]
D
Maybe just to highlight part of the good news with regards to the Bitcoin price. I know Weny mentioned it already, but Bitcoin's up since this, since the initial drop from here. Bitcoin's also above the price that it was at when STRC had its downward volatility. And so we're starting to see one of the things that people often look for in market bottoms is when bad news does not move the price down and it responds neutral to favorably. That's often a sign of basically a lack of sellers left in the market that we're seemingly right now passed or we're at least not on the precipice of a leverage flush. So there's not forced selling. That's really occurring right now. And we're starting to see kind of a more neutral market where I think the odds of a bottom forming here seeming I think are higher. Now to see something like this happen, to see the obviously unfortunate despair of many and not to see the price of the asset go down I think is a bullish sign for the price which obviously we're watching closely. So we shall, well, we shall see I think maybe another when we talk about like price action markets to talk into. Jeff, you were talking about the, the treasury and the actions around the dollar and the dollar relative to the yen and just kind of what's, what's happening there. It's, it's a fascinating market. So if just to rewind for a second, I think we've talked about this in the past on the hurdle rate, but calling the yen in a sense the canary of, in the coal mine of fiat currencies that obviously the dollar is still the reserve currency in the world, but Japan has really high debt, probably the highest debt of any developed nation. They've already tried things like yield curve control. The interest rates on JGBs have been moving up in ways that we haven't seen for a long time. And then we just saw the yen weaken to levels that have not been seen I think in over 40 years. And so that's obviously a long term trend. Now the yen, if you go beyond those 40 years, it's been substantially weaker but it's levels that the market has not seen in a long time. So the treasury stepped in and they sold some Euros and they bought some yen to prop up the price of, of the yen. And you know, it's going to be interesting to see how that plays out. I mean, what is the treasury trying to do? Japan is a very large holder of U.S. treasuries and they want to support effectively the customers of US Treasuries and not have a scenario where one of their largest customers is effectively forced. They wouldn't actually be forced, but basically forced to sell Treasuries which would obviously push up the price of US Treasuries and could start to have cascading impacts on the dollar itself. And so that is what is happening right now. And I personally don't think it's guaranteed to be successful. I think it's very possible that it will be successful. But, and I, and I think that it's in the Treasury's interest to try to prop up the yen, to try to not have this for selling event on Treasuries. But to me, this is all part of a house of cards that could crumble because there's no telling if, you know, how much the US would have to buy and there becomes a certain level of support required where it would almost no longer be in the US interest to, I mean, they wouldn't buy trillions of dollars of yens. Right. There's probably more capacity, but there's not unlimited capacity to support other currencies from the US we have our own problems at home. Right. So my, my initial guess is it's probably likely to be successful now, but it's at some point because the situation in Japan is worse than the situation elsewhere. I still do think it ultimately breaks, and part of that breaking would be the yen's purchasing power declining substantially. Right. Literally what we're talking about actually happening. And so I think this is ultimately the path. But again, it's kind of like the Fed being the doctor in this thing. Right? Like the doctors will try and in a sense, the treasury is the patient for the dollar, but the treasury is basically taken on the role of the doctor for the yen. Right? Like doctors, they can't fix problems that are terminally bad. And I think the problem again in Japan is terminally bad. And it's worse than the US because they have more debt and they're not the reserve currency. And so I view this as kind of like a temporary release of pain that hopefully, I mean, just, you know, even obviously the bitcoin will benefit. Like I would prefer to not have the destruction of all fiat currencies tomorrow. Hopefully it works for, you know, several years into the future. But there is that risk that it doesn't now and ultimately it probably won't at some point.
- [26:59]
C
I did have to laugh. Did you hear Trump's quote when they were asking him about this, where he basically said it was a show of friendship and he said Japan's been very good to us, with the exception of course, of Pearl Harbor.
- [27:13]
B
Pearl Harbor.
- [27:16]
D
Pearl Harbor.
- [27:19]
B
Matt, I've just got a couple of questions and just wrapping my head around this. Okay, so just a couple of things that I'm watching here on my end as well. So the long end of the US treasury is rocketing. So the concept being if you've got some of your largest holders of U.S. treasuries being Japan, if they have to sell Treasuries in order to bolster their own currency, they're not going to be afraid to do that. So they would sell Treasuries, bolster their currency and, and then I guess Bessant goes, whoa, whoa, whoa, don't do that. We can't have our 30 year rocket. Like, we need to get interest rates under control. We'll sell some euros, we'll buy Japan currency so you don't have to. But the, the other concept here is, you know, right. The, the road to hell is paved with carry. You still have this perpetual carry trade where people are shorting the Japan currency and buying stronger currency. So at the same time you also have, the US Dollar is getting stronger as well. So like the DXY is up, Japan's currency is down. It's just like all of these kind of interconnected bits and pieces. How do you start to think through those?
- [28:30]
D
So it kind of gets into, I mean, there's so much to unpack there. But I mean, the yen just hit the weakest level in 40 years, but at the same time the dollar is, I mean, somewhere around its average level over the last 40 years. I mean, it's been lower, it's been higher, but within that there's been kind of a structural downward channel in the dollar, the dollar strength relative to all other fiat currencies. And so these currency markets are there. It's, it's so complicated because there's so many different currencies in these baskets, right? It's not just the yen, but it's, you're managing a house of cards. Every single developed nation has a debt crisis. There's not a, there's not a developed nation without a debt crisis. And so the, the optimal thing that they're playing for here is to try to like kind of keep them all roughly a lot in line with each other. Like they're gonna, they're gonna flex, they're gonna stretch a little bit, to use a word that we use a lot in our industry. Right? They're, they'll stretch up, they'll stretch down. But, but try to, I mean they're all trying to minimize the volatility of, of themselves relative to each other even. Because that could introduce, you know, a, this house of cards collapsing down. Right? Like there is no. The US has to find people that are effectively like non economic buyers of Treasuries because the rate is too low relative to the level of debt that they have. And so then when you find the customer, you have to keep the customer. And it's challenging. I mean, even where the dollar is right now, I get that it's, it's up, you know, over the course of the last year. DXY, I think about a year ago was around 96, it's around 99 right now. I mean that's kind of like a non volatile year. I mean it's like the dollar is up, but it's not really up that much. It in 2022, DXY was at 113 and it's at 99 right now. So it's down whatever 12% in the last four years and it's still holding that 40 year plus structural downtrend. And so, you know, look, I think, I think the dollar is trending lower. The yen as the canary in the coal mine. So because the dollar is turning lower versus a basket of currencies, right? Like there's a big basket of currencies, it's trending lower versus but the yen being kind of the dirtiest shirt of this basket of currencies and being the canary in the coal mine can fail. But the yen failing could actually coincide with the dollar weakening versus the overall basket because of it being the canary in the coal mine, if that makes sense.
- [31:37]
B
Right.
- [31:37]
D
It's just one of the other currencies. And so it would not be positive for the dollar to see the yen fell, even though the dollar might initially strengthen as it fells. And so it's a difficult position that bessens in, I guess is the bottom line. And it kind of gets into the thing that we've talked about over the last couple weeks with Warsh and the Fed and bringing in Marc Andreessen and Saying, I think Besson is probably about as smart of a person as you could find to run the Treasury. Like, it would be hard pressed for me to find someone that I think would be a better person to run it, but that's a difficult job and I don't think that he's going to be able to actually fix it. He's just trying to find these short term fixes to keep, keep the music playing, basically.
- [32:33]
B
And was this move a typical move of a Treasury? Isn't this move typically reserved for somebody like the Fed to come in and take this position? Is this different?
- [32:44]
D
I think in a post QE world, the actions of the treasury have continually been anything but typical. But I would agree with you, it is not something that you would see in a Treasury that is functioning normally and with great health. Yeah, it is a sign of weakness.
- [33:05]
A
Right?
- [33:07]
B
Yeah. And Ben, going back to that interview that you were mentioning with Trump on the airplane, I mean, after he talked about the Japan, Pearl harbor thing, he talks about, you know, the US Is very strong and you know, all of the things that we've done. He's like, intel, like I invested in Intel, I made, I made the country $80 billion. And so it's, it is very clear that, you know that they are, they're operating in a different capacity than they have traditionally and there are different moves that are, that are occurring at the top.
- [33:36]
D
I think this is another thing though, that if you just zoom out and you say, why is this happening? It's happening because these markets are incredibly fragile. The treasury market's fragile, the Yen is fragile, JGBs are fragile and it's kind of cracking and they have to step in to fix it. I mean, that's obviously very bullish for bitcoin.
- [33:59]
B
Yeah. A lot of, a lot of money to print. Yeah. Okay.
- [34:05]
C
Isn't it like 14% of the DXY? Because I think it's between the yen and the euro. I think they make up 70% and I think that the, the yen's like 14, 13 high 13s 13. So it's impactful.
- [34:22]
D
Yeah, yeah, it's impactful. The euro's 57%.
- [34:26]
B
Yeah. And the pound about 12.
- [34:30]
C
Yep.
- [34:31]
D
Dollar Canadian dollar 9%. So it's basically you got the euro at almost 60%. Then you got the yen pound and Canadian dollar at like around 10% each. Then you got the Swedish Krona and the franc down below that. So it is impactful. It is impactful for sure. But I mean, because it's only 13% if it dropped if the yen dropped 50%, which would be a catastrophic move like that would be insane. It would only push DXY on its own up by half of that. Right. So six and a half percent. And so even if the yen failed, it on its own could not push DXY higher than it was in 2022. So, so, so if the yen went to zero, literally to zero, DXY would basically be at its 2022 high. If that was the only thing that happened. But which is why, like, if you think about back to the canary in the coal mine, if that's all of the impact, could it be meaningful? Yes. Would people freak out? Yes. But if that actually fell and it truly is the canary in the coal mine to the dollar, the dollar probably starts to weaken versus a lot of these other currencies, which is why the treasury has to prop it up.
- [35:53]
B
Yeah. Right. Which is why you are interested in Bitcoin. Why we are all interested in Bitcoin. Yes. Got it. Yeah. Okay. Well, this is. We could talk, we could have our own podcast on foreign exchange currencies, probably, but we should shift and talk about what's going on with strategy. It was, it was a busy week and a pretty big week. I wanted to bring up some data here because obviously we're underwriting strategy into the future. We are a holder of STRC and we have a very similar business model. So watching what they've got going on is really very important to how we see the entire space and how these instruments correlate to each other. So this last week, very fascinating Strategy sold about $290 million of MSTR stock and $104 million of Bitcoin. The, I think is around 1, 600 Bitcoin. So far, the bit. The amount of Bitcoin that strategy has sold last week was larger than the entire cold card theft incident. Just for a relative perspective, in total strategy, they generated about $394 million last week. 250 million. Of that, 394 went into the USD reserve. So they're now at 4 billion billion in the USD reserve, which is 2.3 years, which would take. If Strategy didn't raise another dollar of capital, they would be able to pay all of the dividends on all of the preferred instruments to the election in 2028, to the presidential election in 2028. They would be able to pay their dividends if they didn't raise another dollar capital, didn't sell another bitcoin, and just utilize the USD reserve. So they're continuing to bolster the liquidity profile that sits behind or I guess the duration of the liquidity profile that sits behind the preferred equity dividend obligation. So the reserve is going up. They bought back $81 million of STRC. So that was about 21 of the activities last week. And then they also paid $52 million of the STRC dividend with the capital raised from BTC sales and MSTR sales. So they raised the USD reserve, they bought back STRC and they paid the STRC dividend. And bitcoin stayed flat. Slash went up to $64,000 and we had a very large theft incident on cold storage. So the two. Matt's point earlier in thinking about when, when does a bottoming happen? When has it happened historically? Typically when there's bad news or selling in the market that's very public and yet the bitcoin price doesn't move. So we experienced a bit of both of those. I mean, this I believe was strategy's largest bitcoin sale in a single week. And we are seeing liquidity on both of these instruments, both the common stock and bitcoin to absorb those sales in the market.
- [38:49]
C
And you're seeing an impact in STRC as well.
- [38:52]
D
Right.
- [38:52]
C
So in the after hours, right now it's about 9,250. So it's up about 3.5% on the day. And so you are starting to see the impact of these cumulative actions. Right. The improvement in the credit quality, the buyback activity. For scale today, they traded about 168 million in STRC. So it's a little bit under half of a day's volume that they bought back last week. And the market's starting to notice and it appears that capital is moving back into the security. So it's good to see that it's, you know, turns started moving the other way. I think confidence is coming back. I think people understand the way strategy intends to operate now, you know, so I think that their capital framework that they laid out and then sticking to that and following through on that here has been a major net positive to them overall. And you're starting to see that show back up in the market here. So very good to see.
- [39:45]
D
Yeah, this is the highest we've seen stretch trade since basically mid June. So we're, we're summer's marching along. We're about a month and a half since we've seen STRC this high and you know, broke above some levels that it had struggled. I mean really, it struggled to get above 90. Right. Anytime it had tested 90, it's probably just not because it's chart, just a psychological level that people see a nine handle and if they're freaking out, that's a, a level for people to sell. And it broke through, so hopefully it holds. It feels like they're starting to have that momentum build and that confidence build in the market that this is all going to be okay. And I think it's a reinforcement of strategy's decision to say when this type of an event happens, raising the yield is not going to be the thing that ultimately drives this thing back to par. It's going to be driven by balance sheet actions. Raising cash, buying back the stock and more of the interest rate changes are things that are around the edges that can fine tune things here or there. And so that appears to be playing out and it's great to see. I think the volumes have also picked up a little bit as well from where they've been over the course of the last month or so.
- [41:13]
B
Yep. And the game theory of this is fun as well. I mean the concept of buybacks and just, just thinking about equity theory, right. You know, if buybacks are happening within the market in, you know, typical, typical stocks, people front run that, right. If you know that a company is going to buy back certain stock, what we've seen in history is, is there are traders and people that are front running that buyback, recognizing that there's buy buying pressure on the underlying instrument. Now that we've seen strategy purchase, purchase back or buy back SDRC two weeks in a row, they've bought back a hundred million dollars of stock over the last two weeks, which is about 1% of the, of the outstanding notional outstanding on the, on the STRC instrument. There's incentive to front run that and be in front of continuous buybacks, effectively pushing this back to par. So it's a bit of signaling, it's a bit of buy pressure and I think it's good for the overall credit quality as a, as a tool to push back up if we don't, if we don't have anything else. I want to talk about one more thing and it's really this, this capital concept that, that I, I had a conversation in the last couple weeks and just talking about integration of bitcoin as collateral in alternative capital markets and the. I just wanted to share the concept and get it out there because I think it's helpful for people to start to wrap their head around. And one thing that we've all been looking for, at least the industry has been looking for, is a way to park Bitcoin as collateral in any sort of transaction and reduce the effectively margin risk. The if there is volatility in the underlying instrument that your collateral gets liquidated at a bad price. And I've always seen the insurance industry as a unique, a unique place to potentially park collateral for a long duration that is really not dependent on the, or doesn't care as much about the volatility of the underlying collateral. And so I had some conversations and I've seen some innovation in the insurance space where the conceptual framework is you can park Bitcoin as collateral. There's traditional financial capacity that's providing reinsurance for this insurance company and they have an overwhelming amount of capacity for their underlying insurance program. Basically there's so much interest in it from the traditional reinsurance market that they're just overflowing with people that are willing to take on the business now because of that excess capacity that, that company that has that business has some pricing power. Right? They've got power. And in how they, which reinsurers they take on their, on their panel to, to get yield on their, their fiat assets. And so the concept is they're, they're exploring digital capital or crypto assets being held in a fund as collateral on this insurance transaction. And if there is, and so you, so let's just say you take on $100 million of risk, you post $100 million of Bitcoin collateral. If the price of bitcoin falls below 75% or something like that, then the, the size of the contract itself will shift and change and that traditional capacity will automatically come in and fill in the gap as opposed to the coins getting liquidated. That alternative traditional capacity just comes in and fills the gap. So the contract itself gets redefined, not necessarily a liquidation in the underlying assets. And that contractual framework I think is really fascinating and I think that concept can be built upon. So I think it's just helpful kind of getting, getting that out there to talk about it, because I think it will infiltrate in other ways. It'll take. People will grab the AI and shove that concept in there and see where they can go with it.
- [45:19]
C
Well, I think it shows that people have already been doing that. Right? I mean, these are, we're getting to the point now where you're starting to see the creative solutions coming into the market that's going to make access into these markets possible. And so seeing this happening in an industry like the insurance industry now, which you've been preaching for years, that this was something that should be considered, seeing that come to fruition. Starting to see more and more of these companies start evaluating ways to integrate this asset into their normal course of business through new and innovative structures. It shows Bitcoin's out there. People understand it now. It's a large enough asset class that it should be a part of those overall portfolios. And once somebody cracks that open and makes it easily accessible to all the others, there's a lot of capital behind those doors. So it's very exciting to see that starting to progress now.
- [46:12]
B
Yeah. And if we get, if we get Clarity act, that would be, that would be helpful in this context as well. That will just open the door for the conversation to happen in many of these different places, potentially impacting Basel 3 risk weightings, which would impact downstream on banks, insurance companies, rating agencies, how they're all viewing this underlying asset. So if I chatted with a few people this weekend and they were just completely unfamiliar with what's, what's happening with the underlying bitcoin market and you know, they're like, you know, I'm willing to bet against it, it's going to zero. Just, just a classic one of those anti anti scenarios. And you know, I just informed him a couple of the things that, you know, people are working on underneath. And so many people have no idea that there are significant number of people that are working to, you know, push this entire market forward, politically, financially, technology, security, like every single aspect, you name it, and there are people that are working to push it forward. And it takes all of us working in tandem to get that done. So, yeah, it's interesting times.
- [47:26]
C
It's moving fast. Yeah.
- [47:28]
A
Awesome. Well, thanks everybody for joining us for episode 68. Look for the helpers for Jeff Walton, Ben Workman and Matt Cole. I'm Tim Kotsman and we will see you next week right here on the Hurdle Rate.