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- [00:00]
A
Good morning, everybody. I hope people can hear me because I'm on my cell phone sitting in the Platinum Lounge at the Consensus conference in Miami. Anybody can hear me. This working.
- [00:13]
B
All good, Dave.
- [00:14]
A
Okay, cool. Yeah, I went back to the AirPods as opposed to the Beats, which everyone yells at me that they sound good, but there's a lot going on in the world of crypto, and obviously people like talking about markets. So bitcoin is kind of falling back a little bit now, a little bit below 82, but there's a lot of optimism. And I have to say, it is amazing to me that I can walk into a crypto conference and see a dozen of my old colleagues from TradFi, many of which I didn't know had anything to do with crypto, all now working for crypto firms or doing things with crypto firms. So the world is definitely changing. And it is, you know, despite all the geopolitics, it seems like people are just in head down building mode right now. So, I mean, I don't know what other people think. I don't know if any of you are down here in Miami, but it is interesting to watch yesterday, watching Mike Selig, who's the CFTC chair, followed by a panel with old friend of mine from the New York Stock Exchange, with Carlos from Securitize, and everyone talking about tokenization. And it's bringing us very fascinating points. We also have Michael Saylor to talk about. You know, he announced in his earning call that, yes, we can in fact sell bitcoin. And then he explained on a podcast that will air Sunday that I happen to have been watching live, you know why and how, and that's worth talking about. So I don't know which direction everybody wants to go in, but, you know, I'll either I'll call on people or whatever, but, you know, since you flashed 100%, Mauricio, I mean, we're seeing bitcoin and we're seeing crypto becoming more and more mainstream, and lending is about as mainstream as it comes. I'm curious, I mean, what are you seeing right now? Are you seeing any differences? People talking to you about stuff?
- [02:13]
C
Hey, Dave. So I'll be actually at Consensus tomorrow, so I might catch you at the conference.
- [02:18]
A
DM me. Yeah, let's chat.
- [02:21]
C
So, yeah, I was just in Vegas a week ago, and I think the. The attendance to the Vegas conference, in terms of sheer number of people, felt it was slightly down from the year prior. It's funny because we had almost the exact same location at our booth. And we kind of got to see a sort of true comparison between last year and this year. And I would say, although last year there was more people, this year the questions were a lot more. They're a lot more sophisticated. And you can really see the people that are still there are pretty bought in. They really get it. The theme of the bitcoin conference in Vegas, I would say overarchingly, was credit. What was institutional credit was this idea of lending structured products around bitcoin. There was a lot of we presented about our bond and I was actually surprised to see how many people came by our booth to basically talk to us about the bond and the amount of traffic people coming by our booth, whether that was banks, advisors, underwriters, there's a lot of tradfi circling because I believe they're seeing the writing on the wall that bitcoin institutional products are here to stay and there's demand on the other side of that trade. And so I haven't been to consensus yet. I don't know what the vibe is there at the moment, but I would say that the crowd is definitely switching to a more institutional crowd. And what we see in our numbers at led, and I think I made this point a few weeks ago when we were here, was that we were starting to see, as of now, four to six weeks ago, a lot more bullish positioning. And by that I mean people taking on more loans to buy bitcoin as opposed to partially paying down loans or asking questions about the downside or the liquidation risk. They're more thinking long term, up and to the right. And I think that's materializing right now in price action.
- [04:21]
A
I think that actually makes sense. Brian.
- [04:25]
D
Hey, everyone. Yeah, I was just going to echo both your sentence sentiments. I'm at consensus as well. I'd say that from my viewpoint, it's really well attended. The attendance or the sentiment has been a lot better than I would have thought given prices. Having a lot of conversations with folks. I think that there's a general acceptance that crypto is really a tale of two cities right now. The stuff that's working is around traditional finance coming in like stablecoins, tokenization, maybe AI agents, but that's still early. And then for a lot of the more speculative, I guess, traditional areas of crypto, there's a general acceptance that that stuff may not catch on. And then I'm also noting all the big traditional finance and tech institutions that are here, like JP Morgan, DTCC, Google, SoFi, many others. I'm spending time talking to all of them trying to understand exactly what they're doing, how quickly they think it'll catch on, whether they're going to utilize public or private blockchains. And coming away quite encouraged. Everyone is basically pushing really hard on to incorporate blockchain technology. They're doing this because they're seeing demand from the customers, they want to improve customer experience and quite frankly they want to stay relevant. My big takeaway, it's not going to be like one year where everything all of a sudden is tokenized and the whole world is using stablecoins. And it does seem like there's certain areas that are more ripe for disruption than others. But I do think like in three to seven years it will be the case that a material amount of finance has moved to these new blockchain based Rails. So sentiment is up and finding it quite encouraging.
- [06:09]
A
Yeah, I would echo that. I mean we'll see if we define each other since we've never met in person to my knowledge. But the, the, the truth is that people in the crypto world are trying to figure out what the hell does this mean for me and my bags. And that's not as obvious as it seems. So, you know, like there's, there's two topics that we could talk about. I don't really care which one we do. I'd like to talk about both of them. One is what it is becoming clear that public blockchains are actually going to get used by traditional financial companies. And there's some pretty good reasons for that. I did a post about it this morning, but that doesn't mean that, you know, you're going to see 10,000% gains in public blockchain native tokens because there's no way. It doesn't make sense for the value, you know, to be like that unless something really radically changes. And then the other topic is we should talk about STRC and what MicroStrategy is doing, at least in terms of bitcoin. So does anyone care about the topic of public blockchains? Because one would think it would matter. Yes. Maurizio.
- [07:15]
C
Yeah, I'm curious to see what you're hearing because the conversations and do keep in mind that this was a lot of institutions at a bitcoin event. I'm talking more so about anecdotal chats I had in Las Vegas, especially in the context of what's happening in decentralized finance and the ABE bad debt exploit and the Defi United and all this stuff that I think as I made the point last time we chatted has exposed that there is risk in DeFi. The guardrails that exist in traffi are very different than those that really don't exist in defi. And I think that presents a big challenge when regulated entities are considering connecting into these public blockchains. Not necessarily maybe a public blockchain for the purposes of settling a stablecoin, but for the purposes of accessing financial services.
- [08:08]
D
Right.
- [08:08]
C
Like tokenized or not tokenized, but on chain financial services there isn't yet. I think it's still an open question what's going to happen with kyc, AML and other types of compliance requirements to connect to those services. I think the Clarity act does a lot of things but doesn't answer that question. And so I'm curious if that's come up the conversation you're having.
- [08:30]
A
I think that people. There's a misapprobation. Right. You know, people tend to think of DEFI as a blob and it isn't. There's multiple things that you can do in a distributed way, in a decentralized way. You can search for yield and create yield. You know, looking engines like an A and that. That has the promise in terms of multiple verticals in finance to come out with more open architectures to create competition. Right. So there's like securities finance, the repo market, interest rate swaps markets. These are all very large businesses on Wall street that are, that use closed systems. Those are going to take a while, right. So you'll see DEFI right now is on the edges and institutions go into it. It will be driven by the user. So if you take a look at stock loan, it's an easy one to understand. There's a cabal of prime brokers, big banks that basically control the market. And this pisses off both the lenders, that is the people who hold the stocks, the one big retail platforms, et cetera, index funds, et cetera, because they get a very small percentage, the private get the majority and the borrowers, the hedge funds and others who are shorting and or using this for hedging, et cetera. And what that that business is ripe. The instant there's an ability for there to be an open protocol, the PBS will lose their edge. And that's almost certain to happen. If you talk to them, they kind of know what's going to happen, but that's not going to happen using the kind of technology like AAVE does. It's just, I'm sorry, it won't be. It'll be much more bulletproof, much more. You know, it won't be bridging from one thing to another and playing around. And so it's different. The other piece of defi, which is the trading side, I will continue to tell people that I understand the AMM model and the liquidity pool model and I have said for five years or six years that it's a piece of garbage. It's a terrible way to trade. It makes no fucking sense and it's going to go the way of the buffalo. It was there for regulatory arbitrage. It's illogical. Order books make much more sense and auctions make more sense. The AMM model is just a technological solution to regulatory arbitrage. And as people like hyperliquid proved, you can have an order book and be decentralized, that's going to win. And there will be new market models, et cetera, that will evolve. But so a lot of the kind of weird plumbing that evolved in defi is going to change over time, but the concept is going to stay the same. Anyway, that's a bit of a ramble and I didn't answer your AML question because the answer to that is governments are going to do what governments do and so they're going to try to figure out a way around it. The only thing we do know is Mike Seeley was very clear about this yesterday that they do want a way to have software developers not be brokers and have brokers be brokers and we'll see how that works out because that's. He did not make that clear and no one asked him that question anyway.
- [11:23]
E
David?
- [11:23]
A
Yeah, Dave, while you're on the subject of stock loan, didn't know if you wanted to discuss what the DTCC is doing in terms of the launch of its own tokenization service. Obviously it's going to impact more than stock loan. You know, this is something that goes across all securities and arguably helps to facilitate 24. 7 trading. Yeah, I mean, it's funny, I don't know if he's listening to me, but I'm at a table with someone who probably would have something to say about that. But the DTCC state move, in the words of Carlos from Securitize, is a baby step and it's not a bad baby step, but it's not where you really want to go. Where you really want to be is actually tokenized securities, not tokenizing something on top of an infrastructure that basically has pieces of paper sitting in a vault under 55 Water street and so it is interesting, it is the kind of baby step you take, but it is far from a be all and end all. But if you're DTCC and you have a closed system and you're a utility that everybody relies upon, obviously you want everyone to keep relying upon your utility. So it depends what jersey you're wearing is the short answer to that question. But it clearly is a step in the right direction. They're just trying to stay relevant. Well, it's not about stay relevant, it's about. Yeah, I mean that's the, that's this look. They're the 800 pound gorilla in that space. I mean they settle, you know, just unfathomable amounts of transactions and transaction value. I mean the human brain can't comprehend a quadrillion. I mean I certainly can't. But yeah, they are relevant. And there is a lot of institutional inertia every time you're trying to fix or change the system. But there are people out there who are actively working on a better system and eventually that will break through. I mean I've seen this movie before. Right. You know actually just, just putting the finishing touches on a book where I talk about a lot of this. Electronic trading was capable of being used by in the early 90s but it didn't break through into 2005 because the new York Stock Exchange specialists and the market makers had so much vested interest in keeping the system slow and manual. So yeah, you're going to see the same thing play out here for sure. It'll be faster than that, but you're going to see it play out. Does that answer your question, Dave? Oh yeah, thanks. Yeah, they actually discussed it in a panel yesterday and so it's fresh in my mind. One, you know. Sorry, who was that?
- [14:03]
D
Oh sorry, it was Brian. I was just gonna share one additional thought. So I have a lot of friends that cover broker dealers and understand like market microstructure and talking to them. Their view is that there's gonna be different areas and different financial instruments that will be quicker to tokenize. Their thought was things like ETFs make a great candidate to be tokenized because they're already like a wrapper like product. But then other things like equities will be a bit slower because it's already decently efficient. And there's centralized clearing and netting which lowers liquidity needs and capital requirements. So just trying to thinking like what areas will be first. It seems like ETFs and others might be the low, low hanging fruit.
- [14:46]
A
Well yeah, I'm glad you said that. So the ETF point is absolutely true. I agree with that. The point on the centralized settlement netting is such a bullshit argument. It is one of the biggest bullshit arguments that gets used. And I totally don't understand how people are dumb enough to fall for it. Now I'm not not saying you, but just saying it really is dumb. Now here's why in the world, when you have an option to do something, it doesn't mean you have to do it. So if you're token, if you, if equities were tokenized, that doesn't mean you're going to have atomic settlement. What it means is you can have on demand settlement. So you could easily have sessions with netting within a session so that, you know, like every eight hours market makers connect. And so you can buy, sell, buy, sell, buy, sell, buy, sell, and then, then settle. And you can settle on the blockchain at 8 hours in 1 second or 2 seconds. In the current system, you're settling still with an overnight back office, you know, lift. I mean, anyone will tell you how many, how much money was spent to go from T, you know, from T2 to T1 was a huge deal because it's a back office. Now you're talking to someone who literally my first job on Wall street was to work on part of that batch system for Morgan Stanley. And I'm told some of that code is still in production. And so that should tell you something. First of all, I wasn't the best coder in the world. Second of all, it's from 40 years ago. So you can do it in a tokenized world. But yes, they're going to fight like hell to keep their inefficient system. And so, yeah, it's going to be baby steps, but that's really the point. And it's funny because so many people keep talking about it, yet, you know, in a market where, you know, I ran into a friend of mine who, you know, she works for State street and you know, they're doing more in the digital asset side and she's on the traditional ETF side. And she came down here because they said, hey, we have a ticket. Do you want to learn more about this? So your point about ETFs ultimately getting tokenized pretty quickly I think is absolutely right. That makes sense, Brian.
- [16:42]
D
Yeah, it definitely does. And I'd also be curious if you have a view on like, which participants would want to push this along the fastest. I think like DTCC obviously wants to stay relevant. I think the exchanges have, you know, motivation to move in this direction. Seems like maybe prime brokers Would not like if you can lend out your stock, you know, for shorting purposes yourself and you don't have to go through a prime, like maybe some revenue streams for these intermediaries get disrupted. I don't know if you have any thoughts on like who's pushing for this and who's not.
- [17:18]
A
Well, I mean, you nailed it. You're absolutely right. But the thing is, is that if you're a prime broker, you have a ton of businesses. I mean, JP Morgan has a ton of businesses. Yes, they have a huge prime broker, but they do a lot of other things and these companies have learned. I was there at Citigroup when all these markets changed to go electronic. And so yeah, of course, you know, that created lots of disruption, but you try very hard to, you know, embrace the disruption when it's happening because you don't want to be irrelevant if you kind of like stick your head in the sand. So, you know, that's true. You know, as I said, my friend who runs is on the strategy side for the New York Stock Exchange is actually ice. You know, ICE is their parent company but you know, they're all in on pushing towards tokenization. You've seen from NASDAQ as well. CBOE has been involved in the space. I mean these guys are the 800 pound gorillas in the exchange space and they know that this is going to matter. And what do they not want to have happen? What they don't want to have happen is for their market caps to be dramatically lower than startup crypto. Y kind of firms. We heard yesterday, someone from Robinhood talk about how they think that this, this, these conversations, these are false distinctions. Right. Because you know, it's, it's just finance. Yes, right now we have crypto and we have Trad 5. But how many years is it before it's just five? Right. You know, I don't know if that makes sense, but that's going to happen. That answer your question?
- [18:55]
D
Yeah, yeah, it makes total sense. You kind of got to move on this stuff so you're not disintermediated by those who do.
- [19:03]
A
Right. And so that's what, that's what's going on. And you know, the other thing that we've heard in the last couple days, which is fascinating is, you know, I almost don't know what's going to happen with the Clarity Act. But my, my, my intense skepticism is that it will now pass. And the reason I think it will now pass is because of a very simple but not really well understood point which is that with the CFTC and SEC now having a taxonomy, having agreed literally among themselves how to divide up the world, and are now working on rule sets, that there's a very real chance that the market can move in the direction where the only thing that Clarity really does is create legislation that says you can never in the future regulate by enforcement. And I'm not saying that's not valuable, but, you know, it's not strictly necessary for a lot of people, which means that if you don't get a Clarity act, that the Genius act is the only law, which means that the banks have their. They're terrified of the whole interest thing on yield and flavor coins. So what does that mean? What does that mean? It means that the banking lobby is going to be pushing for clarity and watching Democrats cave, that's what I think is going to happen. And you know, if you read the body language, as I said, Mike Selig talked yesterday and Paul Atkins spoke at the Milken conference. And so if you read, if you watch both of them, they're basically saying, listen, we got a couple of years, we are going to be regulating this stuff in a rational way and we're moving forward, which is from the industry's perspective, exactly what you want to hear. And if you're the banks now, all of a sudden it's like maybe we're going to push on it. And so I think that this, this does matter. Maritia, you think, you think differently or
- [20:42]
C
you think, no, I 100% agree with you. And this actually goes very much in line with some of the thinking that I heard from some other people. And again, this is a bit of a more skeptical, long term view. But again, the Clarity act does a lot of things primarily to your point from a sort of power dynamics perspective. It goes to fix, quote, unquote, what the banks think they broke through the Genius Act. So I think, number one, they have an agenda to sort of plug that hole, if you would. And the other open question around the Clarity act, which I think again is not talked about enough in our crypto circles or bitcoin circles, is that it does not address the AML and KYC issue. It does not address, like, it addresses a lot of other things in terms of structure, but it does not necessarily give a sort of white flag or a green flag for tokenized services to basically run like, do whatever they want because it doesn't address that particular topic. So this could be, you know, the clarity could come through fixing, quote, unquote, the bank's issue that they want to get sorted through their stablecoin yield. And then longer term it leaves an open door for banks or for legislators to essentially bring down not a hammer but more clarity per se, further clarity around what is permissible or not from a compliance AML KYC perspective. And I think that is where the banks potentially find comfort in that sort of long term protection, if you want to call it that. But that is very in line with some of the thinking I heard from some really smart people. And so I echo what you said.
- [22:18]
A
Yeah, I think that's right. I do want to make one point though that is funny. We always put AML KYC in the same breath. They started very, very differently. So just this is a bit of a rant but I just want people to understand AML is anti money laundering and effectively the most important place to control money laundering is the into and out of and in the stablecoin world there is a reason why payments is going to be in this hyper regulated stablecoin world. So one of the things that crypto used to really drive the regulators batshit crazy. And I'll never forget sitting in a room at the FCC with like 40 of them trying to explain this. But you know, if you buy IBM stock, you can't sell IBM stock to buy a house. You can sell it for dollars and buy the house but you can't exchange IBM to buy stock and buy, you know, buy a house bitcoin. Clearly you can and that scares them. A lot of other cryptos are tokenized other stuff. They are going to fight tooth and nail so that you can't swap your IBM or Tesla stock to buy a house or a business or use it in payments. They want that to go through stablecoins so they want to maintain something that crypto and the notion of pairwise trading can allow. And so if you do that then you can enforce most of your money laundering on the stablecoin side. That's what they think. And you can poke holes in that if you want and that's fine, I do myself but I'm telling you that's how they think KYC is know your customer and KYC started for is this, is this investment prudent? Does it make sense? Are you selling the wrong thing? And it was really based on brokerage, you know, doing an advisory to retail. But with the rise of self directed trading that that's kind of gone. I mean you know, you know you just make people say, you know, you're going to click through a thing that says I recognize these investors have guy do this, it's not solicited, etc. And so KYC, with the exception of knowing who they are for the AML perspective is going to go boom. And that's not really going to impact it. And so the rules, I think for each year what will happen is it's going to pop up around payments and stable coins. And look, you could get a lot of cypherpunk people up here to tell you the same thing I'm about to say, which is that the AML rules have more or less failed. They don't work. And it's not like this fact is lost on anybody. You know, there's just, look at the number of fines in the banking system for aml. It's just, it's kind of crazy.
- [24:51]
C
No, as a Venezuelan, I agree with you. You know, I still have a lot of friends and family that cannot open a bank account. They just because of where they were born. And I'm not saying it's perfect by any means, you know, at all. And there's a lot that can be fixed but you know, just again to compare and this is more just, this is not a secret, right? Like right now it's almost like there's two standards, right? Because you know, a centralized company will have to have an army of lawyers, an army of compliance people, eight different licenses to service one state and then on the other side you can just spin up some code and say that, you know, it's decentralized and then offer the same services without the lawyers, without the agreements. And so I think at some point if you look at who the biggest centralized players are in the world today, they're the banks, right? And every single other tradfi institution you mentioned has those same armies of lawyers and requirements. And so I think it's just going to be interesting to see how this, you know, does collide or doesn't. But it's, but it's interesting.
- [25:59]
A
I'll tell you what I mean I've met with three different neo banks, people who are much lighter touch in terms of regulators and where it's going and I think that that's going to be a trend, right? And that will have some pretty big investable impacts. But right now, yeah, you're probably right. I mean, look, I think that a lot of this stuff is going to matter from a crypto holder perspective, like people worrying about what coins are going to do what, what tokens going to do what, and I think that the most important question really is if you're trying to evaluate an Asset is where's the value coming from? I mean, let's say for the sake of argument that the entire, you know, whatever trading market, you know, all of it is going to go on the Solana. Now I'm not saying it's going to happen, by the way. I'm just saying, just as a thought experiment, what would that mean for the value of the Solana token? And my answer is it's not 100% clear. Right. You know, the same thing can be said for any other token. And so you really need to be able to follow that through. And this is a thread that I think it's important for the audience to pull through is like, what, what, what does all this stuff mean? Because the one thing we know for sure is the technology is going to become ubiquitous. We know that. Right. Anybody have any, any thoughts here other than the, other than listening to Mario and I talk? Although we could talk all day. I mean, that'd be fine by me. But I mean, lawyer, you know, you've been listening to all this stuff. I mean, to make you crazy or do you see what's going on?
- [27:26]
D
No, same old. I mean, I don't see what. I don't think that I have anything
- [27:30]
E
meaningful to add, but you know, par for the course.
- [27:33]
A
Yeah, it's, it, it's, you know, all I could say is watching tradfi come into crypto, the one thing I do know is when markets move into something, every single one of these people want to try to figure out the best way for them to make money. And so you just have to remember that now, generally speaking, what will happen is they'll take investments in what they're going to use and so that will end up being good for people who are in that investment first. And so I would say move accordingly. I mean, Jamie, you know, you host a lot of shows and you talk to a lot of people from the crypto community. I mean, do you think people have their eyes open as to what's happening?
- [28:14]
B
Yeah, I do. I think it's mixed. I think there's a, you know, still resistance within the core, you know, bitcoin more side related that, that, that the traffi is, you know, hopefully not going to continue to take over. I think especially after the conference, the bitcoin conference, there was a clear message that this is a, a bad sentiment across crypto that of where this is headed and what's it going. So yeah, I think it's going to be interesting. And then hearing what you're saying from, from consensus, it Kind of confirms it. So, I mean, I think it's something we're going to have to get used to and we're going to have to find a way forward, especially with the crypto and the bitcoin ecosystems together.
- [29:02]
A
Yeah, Craig, I see your hands up.
- [29:05]
F
Yeah, I think. Can you hear me clearly? I just want to make sure I'm
- [29:08]
A
in a new headset. Okay, perfect.
- [29:11]
F
I think the relationship between bitcoin and all other cryptos is incredibly close. And I think just from day one, when we look at Laszlo, the 10,000 Bitcoin for two pieces. Bitcoin started off as a meme, it was a joke. Now it's not a joke anymore. And so you have all these powerful institutions taking their position and it just begs for one thought. And then just kind of curious to see what your, what your response is on this is strike. You've used strike from Michael Silver. Do you view that as a net positive or neutral or negative in the space? That's just my question for you. And then just on second of that, I'm very curious to see we had over towards 100,000 in the next two to say three months, maybe even five, towards over past 100,000, how the overall market is going to respond. I see little market manipulations around certain entities, communities. And I think Scott was joking last week about lazy lines like, hey, I hope my lazy lion value goes up. So for me, I'm watching how, you know, in a very manipulated market, how people are positioning their bags so they can make money, maybe extract, maybe it's not a negative back into bitcoin. But do you see strike as a positive or is it just kind of a negative or a negative for you?
- [30:33]
A
I don't want to comment on them particular, but what I will say is this, there is a bifurcation. You know, I, you know, people like me, I'm not alone, have, you know, kind of look at, at crypto as bitcoin is a monetary asset and will is growing into its monetary assetness. And the rest of crypto are infrastructure assets that may have utility and will grow or live or die, appreciate or fall based upon how that utility gets done. And it's getting much, much, much more obvious that that view of the world is what the market is pricing. Right? And so when you look at, you know, some of the news on bitcoin, like today, some, you know, Saylor comes out and he, he makes a statement that you, if it had been a month ago or two months ago, if he, if all you saw was the headline you know, Saylor says that, yeah, we can sell some btc. I mean, it would have gotten crushed. But what he actually said, which is interesting, is we're almost certainly going to stay a net buyer at btc, but if we sell small amounts in order to fund dividends on our digital credit product as it's going higher, why wouldn't we do that? And it's very logical. And, you know, he made a point that, you know, I, I hate to steal the thunder. It's going to be a really, it was a really good interview that's going to come out on Scott's channel on Sunday, and I, I strongly advise people to watch it. But he made a point that, you know, that Scott then talked about. So I'll, I'll mention this, which is that if he was completely unwilling to sell Bitcoin, then that would make the asset impaired and not useful. He needs to be able to have it on his balance sheet in an unimpaired manner. And so it has to be able to be sold. And so anyone, you know, like, I saw various people on the Internet saying on X on this platform saying, well, you know, you see, lied to you. It's like, no, not a lie. It's just. It is what it is and you need to understand that. And, you know, these are adults that are playing in, in the real world with billions of dollars at stake, and they're not going to do things based upon, you know, some philosophy that, you know, you might think about as kind of, you know, important.
- [32:46]
E
Jamie?
- [32:47]
B
Yeah, I, I really like this, actually. So, I mean, for me, I'm kind of with you, Dave. I think the, the end result is that this increases the likelihood that the dividends and obligations are going to continue.
- [32:59]
A
Right.
- [32:59]
B
I mean, the concerns always come up with, well, strategy can exercise. They don't actually have to pay it out, you know, So I think this kind of proves that, kind of takes that argument out of the equation. I, I think it sends a message, you know, it's more so about smart treasury management than it is capitulation. I mean, he said he's gonna smell so small amount just to prove that they're liquid, you know, that they're gonna do it to pay dividends, and it allows for some flexibility, maybe with some tax harvesting, you know, on the downside or on the, on the, the bitcoiner side. You know, I think it kind of dilutes the arc of, you know, sailor as the, you know, the champion, one of the champions who's taken us from 2020 through now and kind of breaks that HODL narrative that you know that that's really core to the bitcoiners. But I think net positive it's smart, it's, it's something that you, you know is more important than keeping the story that they'll HODL and it's really what's about going to drive long term success and stability. That's kind of what I would put my two cents on. I'm curious what you think.
- [34:08]
A
I agree with you Craigs and Maurizio.
- [34:11]
F
You know I just wanted to say thank you for that layered answer. It's not whether it's a positive, negative or neutral. It's what is the representation of, of of STR in the overall ethos and I appreciate it. And Jamie, thanks for that context on that. That really kind of helps to kind of reposition my thought on kind of overall where Michael Saylor is and the importance of it.
- [34:33]
A
Yeah, look there's no way you can look at this market without understanding what's happened from Blackrock and Bitwise and the other cadre ETFs and from strategy and soon to be Jack Mahler's and what his company is doing. We saw a plethora of other also rans who pumped their stocks up and did some stupid things including the guy who runs the bitcoin conference. And you know there's no doubt that that had a lot to do with the psychology of the market and it wasn't good. But you know, we're getting to a much more professional, balanced approach and that is good. And the prices quite frankly don't reflect it all yet. Which is why I have been and I took a lot of over the last couple of months basically saying when I said bottom and I laughed at people on the four year cycle and I talked about, you know, how much M2 has grown, it didn't really matter what the reasons are. But I'm sorry but it feels to me that a grinding rally, which will not be as fast as people want it to be, that will frustrate them is the most likely scenario. And I've been saying that for $20,000 on Bitcoin's price and I'm not changing it because it feels the same anyway. Maurizio.
- [35:44]
C
Yeah, I agree with your grinding rally view. I think that's pretty much what we're going to see and it's going to frustrate a bunch of people like the previous market cycle. But I think going back to this sdrc, we can sell bitcoin.
- [36:00]
E
Comment?
- [36:01]
C
I've been watching some of Michael's interviews recently, and I've noticed a shift, and he's actually pretty open about it in that I think when I look at the sound bite, this idea that, hey, yes, we can sell bitcoin to pay the dividends is a comment that is at face value. You could perceive it as a negative comment for MSTR and a positive comment for strc. Right. And if you listen to him speak over the last little bit, he sort of has come around his thinking. And given the wild success that SDRC is seeing, he's realizing that it's better for him to be the champion of high, predictable yield than it is to be the champion of bitcoin. And so if he. If he's. His product is no longer superpower Bitcoin, his product is amazing yield. So stable yield. And I think what he's realizing is he wants to go after the sort of money market pie, and that's an easier pie to convert than to convert corporate treasuries into buying Bitcoin or MSTR. So the easier sell is, hey, stop earning 4% on money markets. Carmen 11:5@STRC, don't worry about how I pay it to you. I'll make sure you're good with the dividends. And I think for him, that basically feeds his flywheel. I would argue perhaps more productively than mstr, just given the signals he's sending to the market. But to me, this is a bit of a pivot into. From you're selling supercharged bitcoin via MSTR to you're selling incredible yield through strc. And that comment, in my mind reflects that.
- [37:34]
A
Well, I'm not sure I agree with that. But rather than letting me talk about it, grain, you're. Did you just disappear?
- [37:40]
E
No, I'm here. Can you hear me?
- [37:42]
A
Yeah, I can hear you. Yeah. I mean, this is. This is your bailiwick. So why don't you go. I just want to let grain jump in here because this is something he's expert.
- [37:50]
E
Yeah. So. So this is awesome that Maurizio is on the call. So. And you'll see how this is related to MSTR and strc in 15 seconds. So, Maurizio, I was talking to you at. At the bitcoin conference, and I said, yeah, man. Yeah. You remember this conversation? And I said to you, and by the way, this was in a public setting. There was people around us. So you don't mind me retelling this story, correct?
- [38:14]
C
Not at all.
- [38:15]
E
Right, Right. So I said to him, I said, so Ledn got a credit rating on their product. And I said, hey, can strategy get a credit rating? And what you said, and you correct me if I make any mistake about what you said. And he said, it'll be hard for him to do it because he, like us with Ledden, we're able to liquidate a bitcoin position if it drops to a certain level. And since strategy is unwilling to do that, it'll be very difficult for them to get a credit rating. Is that a good paraphrase?
- [38:44]
C
Yes. And it's, it's obviously a lawyer can probably give it more nuance, but in not too many words.
- [38:51]
E
Yes, yes. So now when you look at this, and strategy has done a tax loss harvest before in 2022. So now this has changed the way that they, the perception because they've been more forthright about what they've said. And so now they can say, look, if you're trying to short the stock, they're saying, look, we could sell. And I did the math and I did the post on it. They could say, hey, you know, we'll sell 50,000 Bitcoin and that'll at $80,000, it's worth $4 billion. They can book a tax loss on it. People be like, well, why would that stop the shorts? Well, they could take a billion dollars of it and start buying back their shares. And now all of a sudden, there's a buyer in the market with a billion dollars that you don't know when they're going to deploy that cash and to buy back their shares or since I said there was $4 billion, they could, they could, in strategy said this. They could retire their converts, not all of them, and they could say, we'll put a billion dollars towards the converts. And so now it's like, wait a second, they're getting rid of a Delta hedge on their, on their stock, which is the converts, right? Somebody takes a convert, then they Delta hedge and short it. Now they have somebody saying, wait a second, he could buy back the actual shares for a billion dollars. He could buy back another billion dollars worth of the converts early, and then he still has $2 billion sitting in cash. And that increases the credit worthiness of the company. And you're like, wow, why? Because they sold the most expensive bitcoin that they bought. They have a little bit over 100,000 bitcoins that were purchased at above $100,000. So the crazy part about this, that this strategy works, I should say this plan works when, right now, when bitcoin is low, if bitcoin rips to 125,000. They kind of don't have any bitcoin that's below their cost basis. So this would be better to do this now and buy back some shares or buy back the converts because they get the tax loss benefit. And this is, this is, this is a big, a big change what they've done. I'll answer any questions. Maurizio, chime in. See if what I said, make if that makes sense to you.
- [40:56]
C
No, to me, what you just laid out is this idea that it gives strategy and Michael and the board more flexibility on. Basically it does not impair the bitcoin position. It allows them to use the bitcoin position for what's best for the company and share prices. And I think as a shareholder, not necessarily like a fervent bitcoiner. Like, if you're looking at this through your bitcoin maximalist glasses on, this is terrible because he was supposed to be the champion and never sell it and now he's saying he's going to sell it. So from a bitcoin maximalist perspective, you can see how this is against the sort of, you know, the, the, the, the, the, the faith or not the faith, but like the, the mission.
- [41:33]
D
Right.
- [41:34]
C
But as a, as a strategy shareholder, regardless of where you are on that stack, I think this is a welcome, you know, welcome statement because it does assure you that he's looking out for your benef, for your interest as opposed to, you know, making bitcoin, you know, rise to a particular level.
- [41:50]
E
Yeah, and I want, you know, people to understand about this that, you know, it's one, look, they've acquired a lot, a lot of bitcoin and they have different terms. Bitcoin yield is the net increase of bitcoin per share. But then they talk about something called bitcoin gain. And bitcoin gain takes into account any debt or all the parameters for acquiring Bitcoin. So in the fourth quarter of 2024, that was the best quarter for ever, acquiring bitcoin and the best bitcoin gain. So that was a, that was a huge advantage to buying Bitcoin. But in other quarters, they bought, not only did they buy bitcoin, but they bought at a high price and a low mnav. So this allows them to correct that situation. So this is like, this is where you have to think about there's multiple parts. Not only can they, like I said, Sell 50,000 Bitcoin just to keep the math simple, $4 billion and book a tax loss, but they're also able to pay dividends. And if their dividends is about $1.2 billion per year, but in one sale, in one sale, $4 billion they get the tax loss and they can pay the dividends. And people are like yeah, okay, but I thought the goal was acquire more bitcoin. You know what, one week later or two week later they could buy back another billion bitcoin. People would be like well why would they sell bitcoin if they're buying it back again? Well, they're buying back the bitcoin with strc. They're selling bitcoin at a high cost base basis. And Josh Mandel made a comment. The wash rule does not apply to Bitcoin. But I would say as an operating company, not as a hedge fund, they would not take advantage of that. What they would do is they would sell the bitcoin and they don't have to sell 50,000 in one shot. They could sell it 10,000 at a time. They can get the tax loss. Then they start issuing STRC and that increases their amplification. So this is where it becomes more complex but it becomes more accretive to the common shareholders. And, and the shorts have to be thinking now is oh crap, if he sells the bitcoin and he's sitting on a mountain of cash, what is he going to do? He's going to buy back his shares. And by the way, mag seven companies and and I wrote a piece about this. They buy back about a trillion dollars worth of shares every year. So stock buybacks are common and they've been around for I don't know, 50 years, 75 years, whatever it's been. But Apple buys back their own shares and I wrote an article about this in September of last year and people thought well that's a terrible idea to buy back their own shares. And I'm like no it's not. It just took a little bit of time for it to sink in.
- [44:32]
D
Yeah, I can follow up on that. Agree with everything that you said to me. The simple explanation of all this is that it's really just in service of bitcoin per share. I mean that is the whole point of owning a bitcoin Treasury Company like MicroStrategy. Otherwise you might as well just buy IBIT. Obviously they lost their premium multiple that they once had given the inflood of a lot of other copycats and us being in this bear market. So they're not raising equity via the ATM or at least they hadn't been. They then moved over to the convert Market, they filled that market up also it brings on additional credit risk that they don't really want. And so now they moved to this model where they could issue all these prefs. And the very simple way to think about it is if BTC appreciates more than the yield on the press, then that was a good trade. And they need to basically keep issuing these press to continue to grow and to continue to increase BT per share. And there's no better way than to be able to continue to issue press than to say you have 60 billion of unencumbered Bitcoin that they can use for the dividends. And then the other thing that they can do, and this is to your point, gains, is they can actually monetize the multiple in both directions. So when you trade at this substantial premium you issue equity by definition is accretive to your BTC per share. But then if you do happen to trade at a discount, you can basically sell bitcoin, buy back your stock, you run over the shorts. But then you also by definition is additionally accretive to BTC per share. So I think like the whole point of owning MSTR is in last I calculated it since August 2020 when they turned on this strategy, they increased bitcoin per share at a 65% CAGR. That's the whole reason why you'd be willing to pay a premium and buy less bitcoin through MSTR than just buying bitcoin outright. Because you think they're going to compound nav and compound BTC per share over time and pretty quickly you'll be better off and own more bitcoin through them. I think this all just goes to be in service of that bitcoin yield and BTC per share.
- [46:33]
E
Yeah, so, so look, I, I agree with what you're saying, but I want to make, I want to make sure this nuanced but important point gets across. If, if I, if let's say I buy a house and the house goes up in value and I take out a home equity loan, I would prefer to take out the home equity loan at the time and place when, when the house is trading at a higher equity value to what I bought it. So sometimes let's say they reduce interest rates or I refinance a house, price could jump up in price. And that's the point when I have the most equity. So it's not only about increasing bitcoin per share, it's about, and this is why BTC gain is a much different number than BTC yield. Not all BTC Yield is the same. Because when strategy sells stock at 3M NAV, use the math real simple. This is when Saylor made the comment, I'm selling a $1 stock for $3, I capture the $2 arbitrage and immediately it becomes accretive. And you're like, where did the $2 come from? Because three times one is three. So you're selling a $1 stock for three bucks and the difference between the $1 stock and $3 is $2. And that premium right there, getting that $2 in premium is the key part. That's the most accretive way to increase the BTC yield, BTC per share. But if he sells stock at 1.25m NAV, right. If you just use a simple math, he's not getting that $75 a premium that he got from the market because the multiple was high. So while it's still BTC yield increases, it's nowhere near as close as a higher M now. So this is the most important part. He's trying to ensure that his stock is based upon having the lowest cost based Bitcoin. Right. And he'll take any tax gain that he can get in order to do this. This is, he did not use this term and this is a term I wish they would use is shareholder value. The goal of a Bitcoin treasury company. I'm going to give, right, right now I'm going to give away $1 trillion worth of free advice to Bitcoin treasury companies and to digital asset companies. Okay? Digital asset treasury. This is a $1 trillion free gift. If you're listening on the call, if you have a publicly traded company, it is not about acquiring the most Bitcoin or the most Ethereum or any digital asset. That is not your goal. Your goal is shareholder value and making sure your stock trades at a high price. That is your goal. That, that is a fundamental public market goal. That's a one trillion dollar rule or law. And you can say grain of salt said it. I wrote a book on this. But if you say no, we're going to acquire as much Bitcoin as possible. You know what? Your stock may take a horrible beating or you may say, we're going to acquire more Bitcoin than strategy. Your stock takes a horrible beating. We're going to acquire Bitcoin at the fastest rate possible. In case anybody thinks that I'm, I'm being not clear here, Meta Planet. We're going to acquire Bitcoin at 500% BTC yield. But then you have a stock trading at $2. And that's because BTC yield, without looking at the M nav is is kind of screwed up. Oh, but they're acquiring Bitcoin faster than strategy by 50x, right? Because 500% is 50x more than 10% a year. Which strategies metric to grow bitcoin yield at 10% a year, which means it doubles in about seven years. So their goal to do that, but it's to also preserve shareholder value. If you acquire tons of Bitcoin and you do not preserve shareholder value, your shareholders hate you, you don't have capital formation and you can't raise money and you can't get out of pref. That's why, as of right now, there's only two companies that have a preface that a pref that's out. One is strategy and one is strive. That's it. That's all there is. So if your other Bitcoin treasury companies, right, or digital asset treasury companies. This is the trillion dollar idea. It all comes down to capital formation. Whatever asset you're acquiring, it has to be valuable in your stock price. And if you say we're just going to acquire Bitcoin or Ethereum or whatever as fast as possible to get the most, you have not. You have a fiduciary responsibility to your shareholders. And if you don't do that, you're going. It's not going to be durable. Your stock will be impaired. I'll take any questions on that. I'm a little bit wound up, But. But that's the key point.
- [51:15]
A
Yeah, but I mean, look, obviously we have a counterexample in Nakamoto, you know, which is like literally the exact opposite. You know, he didn't vaporize a trillion dollars only because it wasn't that big, but he vaporized quite a bit of money.
- [51:29]
E
By the way, I meant collectively data as a whole.
- [51:32]
A
But. But no, I know. I'm happy to make fun of him because, you know, it's like he puts himself out there and has done some stuff that I've just.
- [51:41]
E
So.
- [51:41]
A
So let me.
- [51:42]
E
Let me recap.
- [51:42]
A
I lost money there, but not nearly enough to be angry, but enough for me to basically make fun of just some obviously bad, you know, fiduciary stuff. But look, I don't want to kill ourselves on the stock price stuff. It. It's all part of an ecosystem. And your point is well taken. There's an ecosystem, and if you care about bitcoin, the asset, if you care about other crypto assets, then you need to know who the Sellers and buyers are. And understanding that when MNABs are high, that that means that there's going to be more assets bought because they're going to be liquidating stock. That's important. And when MNABs are low, then it's going to be the opposite. So these are the sorts of cushions and liquidity dynamics that most people in the market are not really aware of. And you're extremely aware of it, but I think so it's valuable for people who own it. Anyway. I saw Buddha and then Brian. Hey guys.
- [52:39]
G
Yeah, I just wanted to. Yeah, I'm here. I want to comment on what Grain was saying and just like really simply for, for the trade that Saylor was saying, hey, we're were willing to do this. He's basically saying we're willing to sell one unit of Bitcoin to then buy 20 units of Bitcoin through the sale of STRC, just simply. And most of the maximalists are getting mad because of selling bitcoin. But he's not selling bitcoin at like 105 and then hoping the price gets to some level and hoping to select the bottom. He already knows the t, the, the tax implication and benefit that he can get from harvesting that and then immediately the next week buying multiples of his sale. That's not something Hodlers have ever experienced or have ever been able to do. And I think that's a unique quality that people just aren't respecting.
- [53:36]
A
I think that's right. In fact, he more or less said that, you know, as I said in the interview that you got that'll it'll pop on Sunday. He more or less said exactly that. He said, listen, yeah, we may sell, you know, you know, 50 Bitcoin and buy, you know, you know, whatever, a thousand, you know, or hundreds or whatever, you know, it's. It, you know, the tax loss harvesting is obviously useful, but it's not just that. It's also understanding and how the accounting is working inside the company. They, they have a variety. They have an entire capital stack and a digital credit stack. It's not, it's not monolithic. And so, yeah, your point is the
- [54:11]
G
stable, you know, him not selling bitcoin, I think was an exercise in his own discipline. I think if he, because they obviously knew the optionality that was available to them, they could have done this earlier if they wanted to. But like Grant had pointed out, the people that were doing some of these kind of more aggressive optionality strategies started having issues and Saylor waited till he was at a size and scale where he had the lever, all the levers that he can pull on to then say, okay, we're ready for this fight. We have the scale, we have the capital, we have the size to be able to push the market into a corner if we don't like what they're saying or what they're doing or we disagree with them or we find. Or we find opportunity and such and.
- [55:05]
A
Exactly.
- [55:06]
G
And it's absolutely not being respected for some reason. I don't know if it's, if it's unseen actor versus seen actor type of thing going on where sale where this company is communicating so explicitly, continuously nearly every week that it creates a vector for people to just scream in the void about. And I think you don't see any of this with almost any major company because they don't talk about what they're doing so explicitly every week. And having the bitcoin stack as a stationary stack with no utility creates a vector for shorts that Saylor basically has to stand in front of the boxing ring and get punched in the face and say, hey, I'm willing to take this volatility. But the. But if bitcoin's going down, this is an obvious vector for attack and we can't quote unquote, do anything right now because we're hope there's no utility in the bitcoin stack other other than the collateralization of, of the products. So, so now he's like, hey, we're going to start accessing this utility, I'm going to start dodging, I'm going to start throwing punches.
- [56:20]
A
All makes perfect sense. Okay, so Brian, and then Grain, we're going to let you bring us home.
- [56:24]
D
Yeah, thank you. I was just going to respond to Grain's comment. So completely hear you on issuance at different multiples. Like if you trade it two times, you're effectively selling a dollar for two or you're buying bitcoin half off and you should issue as much as you can. If you're trading at 1.05 ex banker fees, it technically might be accretive, but only slightly. And you probably actually don't want MSTR issuing there because if you're growing the company, you're just making future accretion harder. In other words, a similarly sized, similarly priced raise will be much less accretive on a much larger base. And then I think the other issue is that if you only use the atm, you're almost definitionally buying high. And that's because you trade at the highest multiple and can therefore raise the Most money when you're in a bull market when the price of BTC is high. And I haven't done this calculation, but my best guess is if, Mike, if MicroStrategy would have somehow been able to DCA into Bitcoin since they started this strategy in 2020, they'd have a much lower average purchase price than they currently do now. And so it sounds to me grain like what you're saying is like this new evolution of their strategy is something that could directly help with this.
- [57:40]
E
Absolutely. I mean this is the big shift here. Now for, for, look for a regular, this is for any stock investor. This is not, this is not financial advice. Look, tax loss harvesting has been around for, I don't know, 75 years, maybe it's been around longer. So if you made a bunch of money on a whole bunch of stocks in one year before December 31, you then sell your losers, right? And now assume that you think that your losers are going to recover, you could then buy them back. This is why December 31st is an important year. In one year, you sell whatever losers you had or a percentage of your losers. You sell those, it offsets the gains on the winners that you don't want to sell. You don't sell those, okay? But if you did sell those, you could then book your tax loss against what you sold. And so doing it in a tax year is important. What strategy has done here is they've looked back now and they're like, hey, we have high cost basis bitcoin that we bought that we can now sell. And they tell you on the, they told you in the presentation, I think it's 129,000 or 139,000 Bitcoin that they bought over $100,000 they paid for it. But if bitcoin rips higher, it doesn't help them. But this because the stock will go up and bitcoin goes up, it's not in a loss anymore. So I think they're going to do this sooner rather than later. And I'm going to predict the future. You're going to see a bunch of impaired bitcoin treasury companies that are like, you know what sailors signal to the market that this is okay. They will sell their high cost basis bitcoin, they'll have a much better capital stack and they'll be able to go back to capital formation because they sold off their high cost basis bitcoin or impaired bitcoin and they'll be able to resume this and get it working. I think Saylor, what he said not only helped his own company but helped the rest of the bitcoin treasury company to say if it's in your best interest to sell bitcoin, do that strategically. That's the key point. So I don't have any more to add, Dave, but you know and I usually.
- [59:37]
A
Yep.
- [59:38]
E
Thank you.
- [59:39]
A
I think that's right. Well, we're, we're basically up against time. Was anybody else has any other thoughts? I'm going to go back into the conference and see what's going on. It was funny as I was talking, Kevin Leary was literally right behind me speaking so I didn't hear what he was saying but it's all interesting. Anyway, we will see you guys all on Friday morning with less crap going on. I think we'll all be back at our desks and we'll see how all of this stuff progresses. So thank you very much and see you next time. See you, Dave.
- [60:08]
B
Great job today, Dave.
- [60:11]
C
You guys.