← The Wolf Of All Streets
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- [00:00]
A
Well, good morning everyone. We might have a short show today because of the Juneteenth holiday. It seems like a lot of people aren't around but we'll see. You know, don't have a lot of speakers up here. Matt, I don't know what topic you want to talk about, but I'm going to vent a little bit about how dumb people are being about MicroStrategy and STRC. And I mean the word dumb. I'm sorry but it is completely reasonable to be critical of sailors rhetoric. It is completely reasonable, reasonable to be critical of the way that he has marketed or positioned it. In fact, you could even make the argument that the words digital credit is just dumb. But the fact is it's effectively a high yield product where the sole question that people have to face is will microstrategy be able to pay the dividend on the basis of their bitcoin hoard? Right. So the only question that you're asking yourself is will bitcoin be higher in the next five to ten years or not? And if it is then they're going to be able to pay it. And if in fact if it goes up more than the rate of the dividend then it's. Then STRC is a good deal. Not strc mstr. This strategy is a good deal and it makes sense to do it. But the question about whether the credit worthiness is really a question of bitcoin price and this notion that there's so much leverage and that they have to sell bitcoin, I mean they don't have to for the next year basically it's just, it's just stupid. I mean, you know, people calling it pegging the DPEG conjured up all these ghosts of UST which creates, created an infinite loop of doom in Luna which took down pretty much everybody in the crypto sphere, a who's who of investors triggering massive waves of forced selling across the industry. At the Same time in 2022 we had the yield ability to earn yield on bitcoin collapse causing various lenders to try to do stupid shit. Some dumb, some criminal and the re and some have gone to jail or you know, have been convicted at least. And so looking at this and comparing these two situations is just dumb. And I don't understand how the posts are hitting hundreds of thousands of views saying things that are just completely factually incorrect. STRC could trade at. In fact I said it on crypto town hall last week that if it is high yield and people are as bearish, I could easily see it trading down into the 70s and it wouldn't surprise me, but it doesn't change bitcoin's value proposition. And I just don't understand what people think about this and why anyone listens. I would think that if you are following someone who made the comment that strategy is going to be margin called on its bitcoin to be forced selling. That should be an immediate unfollow, if not a mute. Because if you're listening to those people, you're going to get very, very poor because they're telling you something that is a lie just to get clickbait. Now, I don't usually criticize people that badly, but I think it is that bad. Maurizio, you obviously are fielding questions all day long about this. So you know people who are associating your business, which is run professionally with all this, all the crap that happened in 2022. So, you know, you have the floor.
- [03:38]
B
Thanks, Dave. Yes, and listen, I think there's, I think the crux of it, as I've been reading a lot of commentary online, comes down to the fact that a lot of people that bought SDRC are not institutional investors. I think there was an analysis out that I thought was really interesting that said that the majority of STRC has been bought by retail investors. And I think that's very clear to me now that I see the reactions. Because one of the main issues I find with this is this idea of the naming that has been chosen for scrc, this idea of digital credit, right? When people think digital credit, people think it's something that trades at par, that has a maturity that you can hold to maturity and that's going to clip a consistent yield that cannot be taken away by the board. This is not digital credit. We issue digital credit. It's a bond and it trades at par. You can see it, it's trading at par live right now. I'll drop the link in the comments. That is true digital Bitcoin related credit. It is a loan given to somebody using Bitcoin as collateral that has a fixed maturity date that even if it goes in trades below par. You can hold it to maturity, get your principal back, your coupon won't change, and that's credit. And that's what people wanted when they were buying scrc. They expected an instrument that trades at par, that they could be buying and selling basically at will and that all they're doing is clipping this yield. They were not along for the ride of this thing going trading away from 100. And now when you're holding an instrument that's paying you 11% annualized, but it drops 20% in a week. You're feeling that you got hosed. And yes, you will get hosed because there is no maturity that you can hold this thing to. There is no coupon that won't change. So I think this comes back to the idea that this was basically given a name that frankly doesn't really match the attributes that the instrument has. And people are now waking up to the fact that this isn't credit. This is actually a stock, a preferred equity. And this is. What's this sort of moment of coming to Jesus moment that everybody's having is saying, oh, my God, this is not a money market. I left my money market account to come into this and Now I'm down 20%. And I think that's where you're seeing a lot of the frustration. If people want credit, you can buy it, but it doesn't trade in the stock market. It's trading the bond markets.
- [06:04]
A
I think that is very well said. I didn't see whose hand went up first, but, Matt, since you're new, I'm going to break the tie for you.
- [06:13]
C
Appreciate that. Everybody, it's Matt Prusack here from American Bitcoin. I agree with Mauricio here. One thing that I find really interesting is how the market is gradually starting to separate these two questions. The first being, do you want exposure to Bitcoin? Which I think many of us are keen on in many ways. The second, though, is what wrapper do you want around that exposure? Different investors will choose different wrappers regardless of the underlying asset. And so now, as you see about the different MSTR instruments, relative to some of the other credit options, relative to some of the equity players in the space, the risk profile is spreading out. And so today the question is how many different investor mandates are able to access that Bitcoin story? And which ones will the investor class prefer?
- [06:55]
A
Yeah, I think that's right. And look, the point that the reason for the title about everyone being bearish and whatnot, I mean, I don't know about the word everyone. I mean, people can call me an idiot. I'm used to it. It's fine. I've been married 37 years now, so I understand what it is to be called an idiot, and it's a daily occurrence. But look, I've been bullish the whole time. I think that 60 feels sort of bottomy. We could go lower.
- [07:24]
D
Sure.
- [07:25]
A
You know, you get into these war, into these periods of time, I Think money talks and bullshit walks. And there's been an enormous outflow, and you've seen it, of your competitors, Matt, of miners switching over to AI. And yet the Bitcoin hash rate is still six and a half times where it was in 2022 the last time we were at these prices. And you know, I've been taught you don't go poor betting on where, where the smart money is going. And so that tells you a lot about the strength of the network. Network. The other thing to understand about the strength of the network is that there's no excitement at these levels. I mean it's exactly the opposite. I mean we've been either fear or extreme fear for, I mean except for a few brief periods, I mean almost consistently now since October 10th, I mean I think there maybe we've had like three weeks in the last eight months that haven't been fear or extreme fear. And when that's the situation,
- [08:25]
D
this is
- [08:25]
A
looking how these are bottoming sorts of things that you see. The 200 week moving average is another one, et cetera. The whole point of microstrategy is really straightforward. It is if you believe Bitcoin will not have a CAGR that will justify paying the above market interest rate that STRC pays, then sell or don't belong microstrategy. It's a very very strategy, it's very, very straightforward. If you believe that Bitcoin is going to fail and effectively drop from here down towards zero, then you don't want to belong a high yield instrument that requires Bitcoin to at least hold its value. It's sort of like buying a high yield debt of a company who you think their business model sucks. You wouldn't do it. And the truth is though, I think that from my perspective, Bitcoin is more likely to hold its value and increase than most high yield companies that are paying because businesses are very, very difficult. And yield when you go through, when you're doing high yield investing, it's all about ability to pay things back. And it's obviously not as binary as most people think. Neither is this. In other words, most high yield debt doesn't fail immediately, it gets refinanced. And so you take haircuts and the same thing could be true here, the dividend could drop, et cetera, et cetera. But that's what's going on anyway. David, you've been patient. What are your thoughts on all this?
- [09:54]
E
Well Dave, I think what's going on with the STRC right now is a clear reminder that markets are fundamentally irrational, and that markets can remain irrational longer than you or I can remain solvent. And I think what we're doing here as far as investor education is concerned is critical. But we have to understand that given the irrational nature of markets, you know, whatever's written into a covenant in black and white is fine. And the lawyers can interpret that. But I think at the marginal investor here basically looked at what sailors refrain had been constantly, which was never sell your Bitcoin. And when he broke the faith by strategy selling bitcoin, credibility went out the window.
- [10:50]
A
Credibility went out the window. Seems, seems strong. I mean, look, I have been. I know, I know. You can call me a moron, your wife can call you an idiot many times. I am not a fan of the philosophical, you know, ex posts that Saylor does, but I was also not a fan of Elon Musk, you know, puffing a joint and talking about 420 price assured and some of his tweets. But if you invested on the basis of hating Elon's tweets, you got, you didn't do very well. And God forbid if you shorted because you didn't like the way he tweeted, you know, you're bankrupt. So it's one of those things that, and people always, when things go bad, it's sort of like, you know, Tim waltz dancing about how Tesla went down right before it rocketed up by about, what is it up more than 100% since he did that. Since he did that. It is crazy to do that. But yet people invest emotionally. And generally speaking, and I've said this every way you possibly can, if there is one activity never to be emotional about, it is investing. If you are making a buy or a seller based on emotion, you're going to go back and look. And I'm actually going out to Vegas, you know, to start to play in a few World Series events on Monday. And I know that if I play emotionally, I'm going to come back with a lot less money in my bank account than I went out there. And there's no difference in stock trading and crypto trading and futures trading and options trading. Emotion is no part of it. Yet almost all of the narrative is emotion. Maurizio, is that an old.
- [12:38]
E
Yeah, but we.
- [12:39]
A
By the way.
- [12:41]
B
No, no, it's an old hand. It's an old hand. I guess the only, the only comment that I would add is just, you know, we've seen on the topic of people investing around emotion, it does happen time and again where you have these characters that end up becoming sort of larger than life and take sort of a profit role and people just blindly follow them. Like, frankly, like I said in my first comment, it's very clear to me that a lot of people did not even read the fine print on fcrc, right? Like you're making the comments, you did not read those disclosures. And so it's a little, you know, it's a little late to, to cry. But, but this is a very hard lesson. And people, over time, this is the way you learn painful lessons.
- [13:22]
A
Yeah, I think that, that the, the most, the thing that is that I've seen the, the most coherent criticism of strategy that I, that I recently is that they're probably going to face a shareholder lawsuit because the lawyers will take them, of course, because they do them on contingency. And when that happens, the question, they're going to point to all the cheerleading tweets that Saylor put out talking about the Sharpe ratio and the risk, et cetera, et cetera, all those characteristics, and they're going to try to use that to say that it doesn't matter that the disclosures that anyone can see that's in the public domain that you're talking about would tell you that, that there really is risk.
- [14:06]
D
And the Peter Schiff argument, right, that he, he thought that he effectively marketed it to retail as a safe place to earn 11.5% yield for retirees.
- [14:15]
A
Well, but, but at the end of the day, if you're a retiree and you're living off the yield, you haven't lost anything yet. Right? You know,
- [14:25]
B
but that's the thing that. No, but, but, but that's the thing you, a lot of people thought that this is a bond, that this is money markets that you could redeem at par. The fact that this thing is not trading. I know that this didn't start out trading at par, but because it stayed there for so long, people, basically, that was the expectation. And right or wrong, when you're calling something digital credit, you're trying to be that idea.
- [14:51]
A
That's right.
- [14:51]
B
And when you consistently keep calling something digital credit, you're consistently trying to feed that idea. And again, as I said from the beginning, like any, any professor or any scholar or any, anybody that's actually read that right, definitions will tell you that this is not credit. It should never been called credit, in my opinion.
- [15:07]
A
I couldn't agree with you more, Maurizio. Actually, I'm, I'm writing a, a post exactly saying that I hate the name, I've hated the Name from the beginning I've said this on it is, it is high yield. You know, it's basically like it's not even high yield credit, it's a high yield product that is based upon the ability to repay which is almost solely based upon the value of a particular asset as opposed to the value of future cash flows of a company. That's what it is. So call it whatever the hell you want to call it. But understand that if someone, you know, my father taught me if the price is something, don't ignore it. If someone is willing to pay you more than double the risk free rate and they're willing to pay you an interest rate that is higher than the average high yield bond, then obviously there's risk, full stop. Don't tell me I'm getting something for nothing. If someone tells you something, you're getting something for nothing. The old expression is whenever someone offers you something for nothing, put your hand on top of your wallet and probably both hands. Understand what those are. Always try to know. And so there's nothing wrong with it, I think, you know, as a product it makes sense if you have a certain belief, if you believe Bitcoin is going to languish and, but eventually succeed and do well, then earning yield makes sense. Right? You know, and having holding the product makes sense. But if you believe Bitcoin is going to, you know, going to rocket, well then you should own Bitcoin, you know, if you. So it really depends. All these things are path dependent, right? I mean, Scott, you have these conversations with people all the time and Marico, was that a new comment or new hand by the way?
- [16:54]
B
Yeah, it was. And I completely get what you're saying, but I think people think of their portfolios in buckets, right? Like there's the risk taking bucket which you're saying, okay, this thing could be 100k today, 60k tomorrow. I don't immediately need this cash. I'm going to invest this in long term bitcoin. Right? And then there's my retirement money, the money that I do need to spend, the money that I might need to tap into if I have a medical emergency or whatnot. That you're counting on the redeemability at par, right? It was that bucket that was pursued with scrc. They kept trying to tell you to bring your money from money markets, stop earning 4%. You are not meant to live an uncomfortable life. Come earn 11. Okay? And now you move some of that money that you were counting on redeeming at parents and you put it into this thing where you're thinking you're just getting a better yield for it, now you're trying to redeem at par, you're down 20% and you realize, oh my God, what did I do right? And I think again, it's buyer beware. But I think that was the problem. It was this trying to constantly brand it as a money market replacement that was just better. And then lo and behold, if you're actually going to try to use that thing as a money market, all of a sudden you should have put that in your risk bucket. And now you're stressed. And so I think that's where a lot of the disconnect is coming from, the reaction you're seeing.
- [18:15]
A
Yeah, I mean, I think that's exactly correct. I also think that if, if just if you just looked at it the way you look at if you buy high yield debt, you know, there's a chance you're not getting par. Right? You know, high yield debt fluctuates. You know, the closest analogy is if you look at the debt of SAS companies from last year to this year now, the high yield debt cratered significantly on many, many. There's quite a bit of it, actually, which is one of the reasons the equities were down so much. And there's been a rebound. They're not back to where they were last year, but it is extremely similar. Yet I don't hear, or I didn't hear anybody complaining about the labeling of the, of the debt of the SAS companies. It's just that people say, well, the equity of the SAS companies should be considered impaired because they're, you know, look what's happening. And the credit markets are telling you such that the issue is, as you suggest, Mauricio, it's the naming. But what's funny is inside, funny is the wrong word for it. But what is interesting is in the bitcoin community there's all these people who say, well, this is weakening bitcoin. Well, only if you don't understand what bitcoin is and you don't understand what's going on. There are things that could weaken Bitcoin. Right? Bitcoin is still extremely aspirational because if it isn't, it should be 10 or 15 times the price that it is. It's not digital gold yet, that's just a matter of fact. So the question is, what will happen with it? And so all of this stuff becomes, it doesn't weaken anything. I mean, if you believe that this is going to be worth something in the future, just like you believe the cash flows of Company X are going to be able to pay this debt, then fine. But if not, not fine. And I don't understand why it goes past that. I mean, Scott, you had an interview with Alex Miller yesterday. He was talking and he's pretty bearish about in the short run, you know, but in the long run he thinks it'll be fine. So from his perspective, it's like, you know, I don't know if you got to strc. I didn't hear the whole thing.
- [20:30]
D
Yeah, I mean we, we talked about it briefly. I think you guys have actually covered it exceptionally well. I mean to me it seems like everything Mauricio is saying, so the, the risk I guess is the litigation, as you said, for the way that it's been marketed. That said like nothing about the way that this preferred is trading is particularly surprising if you look at the way that people levered up and the way that prefs have traded in the past non exclusive to bitcoin. I mean preferred equities can trade below par for years and flip back to par. So to me the more interesting conversation and the one that seems to continue to get missed isn't really what happens with STRC or SATA in the short term. It's. Is the market actually more concerned about the buying engine being turned off than it actually is about STRC being off par? I think the, is the, you know, the kind of floor buyer of bitcoin at multi billions per month, not in the market question is probably more interesting.
- [21:36]
A
Yeah, I think so too. So Matt, I see your hand up.
- [21:41]
C
Yeah, no, look, I think on the crc, is it credit or debt or not? I think there's an interesting distinction that's being made between whether or not it's mispriced, where there's an argument you can make either way about whether it's going to recover from the 80s to the 90s up to 100. And then there's another argument around is it being misunderstood? Right. Which is are people treating this preferential preferred equity as if it were a money market fund or whatnot. Right. And I think those are both interesting arguments. They're just, they're just different conversations. I think if somebody thinks that they were buying a money market substitute and discovered somewhat abruptly that this was actually a market price security, that that's a pretty brutal conversation, you know, and then, but, but a separate conversation I think from another debate which could be had which is, is, is STRC going to recover this time? Are they going to be able to employ the effectively one way yield ratchet to, to induce this thing to go back up to 100 and if so will it stay there. And so again, I think for the last period of time we've been talking about this wrapper and kind of this last point, that underlying demand engine, whether it's still there and is there a bidder, whether strategy or ETFs. Obviously a new ETF just launched in the past week that is a yield generating etf, treasury companies, miners retaining Bitcoin, et cetera. I think the thing that it's interesting to look for as a player in the space is where is that next marginal buyer coming from and whether or not that demand will remain durable as we go into Q3.
- [23:07]
D
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- [23:13]
F
So I, my only thought on it
- [23:14]
A
is a little bit different.
- [23:16]
F
Like I'm not so much of the belief that there's like, like I know there is retail involvement in terms of people looking for this, but the thing I would say I worry about more is the amount of protocols projects and firms that were counting on this being paid out to sustain, sustain different things like DeFi. So I think you'd see an unraveling there in terms of tokenized STRC and a lot of these projects counting on that remaining at par and then that actually depegging, having a bit more of a consequence in terms of some of the liabilities there. So I've seen a lot of that. I know there's probably a lot of people offsides on that trade right now. And if I was to be most worried about one thing, it would be that unraveling and people being forced to sell to cover any kind of redemptions on the DEFI side and people essentially chasing that as a way to outperform traditional treasury yield.
- [24:11]
D
I will say this, that Dave, you were there, right? So in Miami at Consensus, obviously Saylor had the earnings call where he said that they would sell Bitcoin to inoculate the market. And then you and I woke up and I was like, oh, I'm interviewing Saylor at 8:30 this morning and there he was. So we were kind of the first to get to have this conversation with him. And I think maybe now in hindsight, Mickel's point is one of the more shocking sort of disclosures in that conversation where he was actually pushing or discussing favorably the tokenized versions of STRC and what could happen with those in Defy.
- [24:45]
A
I mean, I didn't know that that
- [24:46]
D
was very much out of his own mouth?
- [24:48]
A
No, I thought that was aspirational. I didn't know that was actually a thing. Is there a significant, significant amount of STRT that was tokenized use in defi right now?
- [24:56]
D
Apex, and there's a couple of them. Somebody might know better. I never actually looked, but yeah, there are a few. I don't think it's a meaningful amount, but it exists.
- [25:05]
F
The problem is, though, is, like, as much as we talk about defi, there are things that are like, yes, they need the tokenized STRC to make it a pure DEFI product, but there's a lot of projects out there that are very blatant. They call it defi, but it's like, take a look at all the vaults. Like, the vaults are. Can use strc, not tokenized, and they can just have a centralized intermediary in there just crossing from the traditional account to paying out people another way. So, like, I just think there's a lot of this backing different ways. It doesn't necessarily have to be fully tokenized. There's a lot in DEFI that's not necessarily fully decentralized or run on these smart contracts in a way that they actually need it tokenized. So I think it just goes to two parts. I think there's obviously some amount of people I don't know. I work with a lot of people in the cryptocurrency market. I don't know how many people, especially retirees, actually started loading up on like, strc, but I know a lot of people who are chasing yield to be able to offer investors who wanted to plug into this thing because it made them competitive versus what other people were doing, which was treasuries. Like, the bet was that they could count on this. And I think the chase for yield from the profit perspective and the, hey, we're offering eight and a half percent is probably the bigger issue here on the back end.
- [26:28]
A
Yeah, I so agree with you. I mean, I think the point here is something that, I mean, it's almost pathetic how many times I've said this and I asked this question. And it is the most important question. It has been the most important question. And that is simple. If someone offers you yield, ask, where does the yield come from? And if you don't like the answer, do not put a penny there. And if the answer is, in Saylor's case, his answer is, we're paying this because we think Bitcoin is going to go up by X percent over the next N years. And so we're willing to pay above market interest to continue to allow us to, to create this bitcoin yield. Because we think bitcoin is underpriced significantly. Okay, that's a bet. I understand it. Whether I agree with it or not doesn't matter. I actually do. But it doesn't matter. That is understandable. But when you talk to people who are now a level beyond that saying, okay, well how, what's your yield coming from? Well, my yield is coming from a product that we're buying that we're not telling you we're buying. And, and you know, and we're using leverage to do it. So like one way, and we've seen this before, a traditional financial thing was we're going to borrow yen, we're going to buy Treasuries, the exchange rate is going to be fine, and that extra 2% of yield pickup is great and we're going to leverage it 10 times, we're going to make 20% and we're going to keep half of that ourselves. And we're going to give you a 10% yield based on that, which is just pure leverage bond arbitrage. And it is extremely common. I've just given you a very simple example of it. But when people talk about the carry trade potentially blowing up, that's what they're talking about. When long term capital blew up, it was based on a lot of the plumbing around various bond arbitrages. This is not a new story. What is a new story is the fact that people think that the fundamental asset that's backing it is imperiled by it, which I think is nonsense.
- [28:38]
F
Yeah, I honestly think where I would be most concerned is just not the amount of US dollars taken and invested just out of people's accounts, but the amount of people who have borrowed against Bitcoin or borrowed against another asset and then taken those proceeds and then taken that and putting it into an strc. Like that's where I think the vast majority of the risk lays. Because then you get a serious unwind, right, as these things start to strike off par. And that's where I think the biggest issue is because it gets away from this idea of like, oh, well, you have this person and they took some money and they put it in the account. And you know, maybe over time it will repeg, but it becomes a lot more of an immediate issue in terms of how much time they actually have to cover and unwind that trade.
- [29:26]
A
I mean, look, it doesn't take a rocket scientist. We have memory, right? You know, what happened to Genesis you know what happened to n number of firms who thought that well GBTC is a closed end fund and of course it's going to go back to par once ETFs are approved or blah blah blah. But it went to a 50% discount. I mean they called that trade a widowmaker for a reason which you know it, it's. And that was a large part of what happened in 22 that it was obviously the pin that popped. A lot of this was Terra Luna and ust. There's no real similarity here. Unless there is. There's embedded leverage that I don't know. I mean Mauricio, do you, you know you're in this. Is there a lot of embedded leverage from STRC that you can create issues.
- [30:15]
B
I want to go back to Mikkel's point. So at let in our loan like the loans we issue are not designed in any way at all to put on this type of carry trade. Like our loan rates start at 11:49 on the low and that's basically what SCRC is paying. So the carry there is not necessarily worth the squeeze. Even at the highest Tier we're at 9.25. But that's because we have a specific funding structure and that is just the nature of our costs. Like you can see the cost of our funding in our bond, et cetera. And so that is just the function. Our rates are a function of our cost of capital. And right now it is not a venue where you would choose to put on this type of trade. However, I did see many competitors rolling out new products, new Bitcoin backed loan products explicitly calling out the STRC carry trade, saying now it is possible because our rates allow it. And I would argue that even when I heard sailors push this idea of tokenizing STRC on defi, the obvious use case for STRC and defi is looping. Right? And so if, if and looping is precisely the type of structure that unwinds into what looks like a cascading liquidation which frankly looking at the price action it is what we saw yesterday. So I agree very much with Michael in that the, the one of the main issues for this unwind was that there were people. I'm not aware of how many. I wasn't looking. I think he's closer. He has a closer view to the vaults. Some of the newer lenders that I'm referencing are very obscure. They don't share any information. They're not like us where we publish everything. These people just are a bit of a black box that throw out Marketing to try to lure people or any given use case. But this idea of picking up pennies in front of a steamroller by buying an instrument that's not supposed to trade at par, it is exactly what leads to this types of situation. So just from the price action, my intuition tells me that there was leverage taken. People were borrowing against bitcoin and other assets to put on this trade. And now that the purchase, basically now that you're down on the principal, the yield goes out the window and you have to unwind the position. And I think the price action tells me that there is more of that than people thought.
- [32:32]
D
I think hedge funds are having a great time right now. I mean, I really think that that's what's happening. We all know that nothing, that there's no more popular trade on Wall street than shorting Saylor. Right. I mean, historically there was a time when strategy, I think, was the most shorted stock on all of Wall Street. So I mean, imagine that you're sitting in the shoes of a hedge fund and you see this thing starting to trade below par and you realize if you just simply push it below 95, 94, you're going to get a liquidation cascade and send it into low 80s and be able to buy it up at the bottom, capture $17 upside plus yield. That's a really, really easy trade for these guys, assuming they don't believe it continues down to zero. Right. So I think that there's mechanics at work below this that have very little to do with what anyone in crypto is doing.
- [33:21]
A
Oh, I think that's absolutely true. I mean, look, I, I basically made the point that from a, a strict high yield perspective, given, you know, what could happen, that you could see STRC traded into the 70s. I mean I, I said that two weeks ago. So I mean, I was not terribly surprised. I didn't think it would happen. And we got very close and we might still get there. But I don't think any of that is nearly as problematic as the market thinks it is. That's really the issue. But Maurizio makes an incredible point, which is there are a lot of companies out there and a lot of people out there that do things and investors often ignore what's going on under the covers. Let's face it, Celsius was prop trading, you know, because they couldn't earn bitcoin yield anymore and nobody cared until they did. Right. You know, it's, I won't mention, you know, he who Shall Not Be Named, that that gave a loan to 3 hours capital. But, you know, we've seen this. This story before. It's really a question of if you
- [34:27]
D
look at Steve Erlich, isn't it?
- [34:30]
A
Well.
- [34:31]
D
Well, honestly, Steve, I want my money back.
- [34:33]
F
Steve. It was when people were coming to me and telling me that they could borrow against Bitcoin and go take that and use that to leverage into SDRC that I started having flashbacks to the same exact people were telling me that they were doing with Terra Luna and that whole situation. So it just seems to me like it's like almost in. In a more conservative way, in somewhat the same thing over again. It's not necessarily that I think there's a structural problem with the way the product is issued. And I think this point is made a lot that, like, okay, yes, he has the money to pay the dividends. To me, one of the bigger things that I just think is an outstanding issue is really what the market's confidence is in with Saylor. Like, that's where I think there's more of an issue, because the M Nav can be extremely flexible. When the M Nav was trading at 3, I was saying, look, I don't see why this would even trade it as a positive M Nav because ultimately you're taking so much sailor risk on the bitcoin. I always thought you would see the M Nav at something like a 0.8 or a 0.5. Now, it's important to realize that Saylor is not someone who comes from, like, deep ties in the bitcoin community. He was kind of celebrated by the bitcoin community when he showed up into this ecosystem, but he got involved, like, fairly recently. He's underwater on the majority of strategies, bitcoin. So if he's doing things that ultimately sell, like piss off the bitcoin crowd, and he ultimately becomes unfavorable, because some of these things, I. I don't think he necessarily does that great in a lot of his media appearances. Just the other day, he was saying he designed these products with ChatGPT. I think that loss of confidence and if he goes away from being this kind of relic of the bitcoin community, I think you also get into trouble on the M Nav story. And the more these things start to slide, there could be nothing structurally wrong with the products themselves. But if he starts to lose the confidence of the market, I think that's where you can have some real issues.
- [36:24]
A
Oh, I think that is absolutely right. I. I think that's.
- [36:28]
D
That video is from last year, by the way. It was. He Was like, it's so fun.
- [36:31]
F
Is that from last year viral?
- [36:32]
D
Like as if. Yeah, yeah, it's going viral.
- [36:35]
F
As if.
- [36:35]
D
He literally just went on episode of a podcast, like, while STRC was crashing and was like, yeah, well, I did it on chat gbt. He's been very transparent about that. He told. When I did the interview with him at Money20 20 in Vegas, he talked about how he used AI to finally get to kind of the superior project. It's so funny that the narratives, like. But it doesn't change it, but it's you.
- [36:56]
F
I would have actually felt better if we use chat GBT recently because about a year ago it was kind of slop. I like, I don't know how the
- [37:04]
D
outputs of that, but that's definitely the killer. It's like, what model were you using? 1.1.
- [37:09]
F
Exactly. Chat TVT, where it could barely hold a conversation.
- [37:13]
D
Remember the early chat gbt? Would it be like, we don't have information from before September 2021?
- [37:17]
A
Yeah, exactly.
- [37:18]
F
And sailors just arguing with it. And then STRC popped out.
- [37:23]
A
The key question, though, for all of this, if you really want to boil it all down, it's very straightforward. Is there a wave of forced selling that needs to come or is likely to come out of all of this? And I think the answer is pretty damn obviously no. Right. Yeah, there's probably some Bitcoin, some small percentage of people who borrowed against Bitcoin to do this. But as Maurizio said, the math doesn't math. Right. It's just, it's not very easy to do. It's not going to be at scale. And so if you're, if you're talking about what's going to happen to the crypto markets, you know, I think what you did see are people who, who got frankly disgusted, saying the market's not moving, it's not happening. They get morose, maybe they'll buy back later. They either sold or they said, oh, wait, maybe instead of selling, I'll borrow because they have it from lower. They didn't want to take the capital gains. What am I going to do with my cash? Well, let's get some yield and put that in strc. I think there is some of that, but are any of those people or any of those people going to now be forced to liquidate that position? Did they lever it up that much? And if the answer is yes, okay, then there'll be some. But I think we've already seen it. I mean, anybody disagree?
- [38:36]
F
My history in the crypto market is just that normally when you have events like this, like someone blows up at the bottom, like there's someone or there's something systemic that happens at the bottom. And like the most obvious thing for me would be some of the stuff that's going on in the defi market, slash vault market in terms of people thinking they're getting some type of guarantees to some type of yield. I don't know who it's going to be. I don't know who. Who it is, but I just feel like there were so many people.
- [39:03]
A
Right.
- [39:04]
F
Like us as investors. Right. We have very concentrated risk and we're not necessarily leveraged or at least the most of us. And we can go through periods like this and we can get very bored from price action. But there's a lot of other people who are making calculated bets based off the financial health of their products that the market was going to keep going up. And I think the bottom of this market is when we start to see some of those implosions.
- [39:26]
A
Yeah, I think, I think that's probably true. I mean, but look at. If you look at a lot, there are a lot of tokens out there that are. Have had really bad.
- [39:33]
D
I was literally just going to say the tokens have done it for us. So.
- [39:36]
A
Yeah, no, they have. And. And so it very well. Generally when the body floats to the top of the pond, they've already sold. So, you know, I don't doubt that you're right. Nickel. That there are bodies floating to the top of the pond. I mean, you know, just there's so many tokens that are down. I mean, the volatility is crazy. I mean, the favorite one, you know, Gaurav is up here too. I mean, look at Tao. I mean, Tao in the last week has been below 200 almost all the way to 300 and now it's back at 220. I mean, these are big ass moves. And.
- [40:08]
D
And good times. If you're trading. What?
- [40:09]
A
What'd you say?
- [40:11]
D
It's a good time if you're trading.
- [40:13]
A
Yeah. I'm just saying. But it is.
- [40:14]
B
And you have money, by the way, also.
- [40:16]
A
That's right.
- [40:17]
D
What's that time?
- [40:17]
B
If you're trading. But anyone who was trading.
- [40:20]
D
Yeah, I wanna. Yeah, yeah, for sure. Dave. I wanted to pivot. I invited Mauricio because I wanted to ask them about their announcement yesterday.
- [40:28]
A
Okay.
- [40:28]
D
So I want to make sure we get that done. Yeah. Before the show because Mauricio, you guys. Well, I guess I'll just. Let me pull it up for me. But I Saw this. So that's why I invited you obviously, because even though you're here all the time, is that you guys. Gold comes to Leaden. So you guys have. I think this is absolutely huge because you've effectively been bitcoin only, right? And you've sort of ignored the allure of all the altcoins over time. But now you have borrow and repay loans in I guess, tether gold, right, with 10 pairs and you can store and do all the things. So I wanted to ask you about it because I thought it was a huge announcement and obviously you're always here on the show with us.
- [41:08]
B
Thanks, Scott. Thanks, Dave. Yeah, so yesterday we announced support for Tether gold on the LEDN platform. You're now able to buy and hold gold at ledn. Soon you'll be able to borrow against it at leadn. We love tried and true hard assets. And I think the. The sort of evolution of. It's not the evolution but the technological evolution that has allowed assets to come unchained. Namely, I think the ones that have made the biggest impact today are stablecoins because putting a dollar on a blockchain and letting everybody in the world access it. As a Venezuelan and as someone that has spent most of my life living through capital controls and inability to get dollars, the world wants dollars and now you are able to buy them and hold them anywhere you want with a wallet. And I think that that sort of, that created a Cambrian explosion of adoption and use cases. And you're seeing countries like Venezuela and others that run entirely on stablecoins. I think the same happened to gold by the same company. Actually Tether brought gold on chain. It's a beautiful product. It's physical gold, real physical gold held in vaults in Switzerland and tokenized by the same company that issues the dollar token in which most of the economy or the digital dollar economy runs on. And so we see it as a great complement to bitcoin. Again, it's another tried and true hard assets. My grandparents didn't have bitcoin, neither did anyone before them. And they did everything with gold. And so I think again, it's an asset that has a lot of the same hard money properties, non sovereign asset, you know, scarce. And making it digital really elevates it historically. A lot of our clients are gold investors. They've come to us many times and told us about the challenges of borrowing against physical gold. And now with tokenized gold, I think this is a great opportunity for us to. It makes the asset a lot more dynamic and we're Happy to support it now and buying and selling and soon to borrow against it. And I think that it's just going to be one more great tool for your portfolio and yeah, we're happy to. I'm excited for the launch. I will come back here when we're doing when now the ability to borrow against the gold is live, but this first step is now live. We've also expanded support for more stablecoins. So tether stablecoins, both USDT and USAT are now live on ledn. And you're able to do the same things that you do with USDC across the board. Get funded your loans, repay your loans, trade, et cetera.
- [43:47]
D
Yeah, so clearly. So, so just I guess for people who don't understand it then you're saying that you can use USDT or USAT or USDC as like to borrow that against your bitcoin but also to like repay the loan in those stable coins.
- [44:03]
B
Correct. And to buy and trade amongst them. So you know, sometimes people get paid usdt, they need usat. You can do that at leathernow. You want to switch from USDC to USDT for whatever reason. You can do that at Leather. Now if you want your loan dispersed, if you're in the US and you want your bitcoin backed loan dispersed in usat, you can do that now. If you want to repay your loan in usat, you can do that now and you can trade across every one of those assets through. So if you want to sell bitcoin for gold or gold for USAT or usdt, you can do all of that. Atlanta today.
- [44:35]
D
Yeah, it's awesome. So I'm curious since obviously you have the plan to go into. It'll be what they call it Xaut, right, The tether gold.
- [44:44]
B
That's right.
- [44:46]
D
You're going to offer loans as you said, later this year and I know we'll get more information on that. But does the underwriting differ from Bitcoin in any way and do you expect it to be sort of the same or a different customer? It's just so interesting in context that this entire conversation we're having around yield and borrowing.
- [45:07]
B
Yeah. So one of the things we love about our underwriting is that for us we lend to you based on the value of your collateral and on the value of your collateral alone. That won't change with gold because it's just as good of a reserve asset, it's just as deep. It trades in the same 247 format now that it is in a tokenized structure. And so the underwriting will not change. You will still be able to borrow based on the value of the gold. Gold is a much less volatile asset. Therefore I do think there's going to be benefits on the LTVs and the rates relative to bitcoin. Many of our clients are long term hard asset investors. Like I mentioned, many of them hold gold but historically they've had challenges borrowing from that physical gold at their vaults, at their cage and with with now with this product. You know, they said it's so much easier for me to borrow against my bitcoin, to borrow against my gold. I wish I could do the same, same with gold. And this is the first step of that. So the underwriting won't change. If anything, I think the LTVs and the rates will be slightly better than they are with bitcoin, again given the lower volatility. And so the, you know, people will still be able to access their loans as they do with bitcoin, but now with gold as well.
- [46:23]
D
You said you have 10 trading pairs right now, right?
- [46:28]
B
Yeah. So that's a combination across, you know, USAT to USDC to us, the. Yeah, basically.
- [46:36]
D
I'm curious since you're seeing it. Yeah, I'm just curious since you're seeing it. Like do you get any insight on market sentiment that we might be missing here? I mean you can literally see the order flow.
- [46:45]
B
Yes, it's fairly recent, so it just went live yesterday. So it is, it is pretty fresh in terms of data. We did see quite a few trades come in, people buying gold for the first time now that it's available. So we saw people trade from stablecoins to gold, from bitcoin a little bit even to gold. Not material, more so just to dip the feet in the water. I'll come back and share more once we've seen a week or two of flows and I can share sort of more directional views. But right now what I'm reading and what I'm seeing in the numbers is people are excited to see the new asset and to test it. A lot of people are actually unfamiliar with it. Many didn't really know about it. And now that it's there, people are starting to dip their feet and get a feel for it.
- [47:29]
D
So seems like the main market narratives right now have been on tokenized equities and real world assets. And of course now we're getting perps everywhere. Do you think that you're actually contrarian right now by focusing on hard assets? I mean, you were always bitcoin, but adding gold you could be Adding any of these things.
- [47:48]
B
Yeah. So I do listen, we're hard money fans and bitcoin is a clear use case. It's the hardest money that ever exists. Gold has held the title for 5,000 years. So again, it's worked for my grandparents and every other generation before them. It's tried and tested. It's worked. And so gold is a natural complement to bitcoin in terms of hard money. There are other hard assets out there, right? Personally, I don't think tokenized equities are quite there yet because a lot of the value of tokenized equities comes from regulation and those legal guardrails that give you those protections. Until those exist formally on chain, I think it's way too early to consider those things as true tokenized stocks. I mean, we all saw that in the SpaceX IPO and the anthropic IPO, all these things that never got assigned. So the true tokenized stocks, in my humble opinion, don't exist today. And I think it's too early to even have discussion around those. The other sort of premier hard asset that's forged for humanity is real estate. But the challenge with real estate is that it's not that fungible.
- [48:56]
F
Right?
- [48:56]
B
It's very different depending on where you are. And so some assets, some hard money assets lend themselves very well for this model that is bitcoin and gold. In the others, there are ways to help people invest in real estate. But it's not going to be in the same tokenized fashion I think that you're seeing with gold and bitcoin stocks. Again, I think it's still too early because I think you still need to have a lot of those protections and legal assurances brought to the on chain product. And I think that's lacking today. But for us, we like the stuff that's tried and true. You know, slow and steady wins the race. With stocks you have, you know, it's much harder to pick the winners and you don't really know. There's a lot more. It depends on the management team, it depends on a lot of other factors. Whereas when you're going bitcoin and gold, you're really just saying our government's going to keep printing. The answer is yes. Well, then, slow and steady wins the race.
- [49:55]
D
Is there anything missing from the hard asset financial stack that you're going to build next or that somebody should build next?
- [50:04]
B
I don't want to spill the beans just yet, but I think again, there are many other quality assets out there that people love to own and to invest.
- [50:14]
D
Right.
- [50:15]
B
We've already taken an excursion into real estate earlier in Lenin. And again, we like hard money. Things that are tried and tested and true. I think bitcoin, I think gold do that very well today. They're not the only hard assets in the world, but we're constantly listening to our clients and building towards what people want and what they get value out of. And so I won't share much more yet, but we're always building. So I'll come back and share more news when we're ready.
- [50:48]
D
All right, I'll take it. I mean, so where can everybody check out all of this?
- [50:54]
B
Leden IO is our website. Oddlwithletn is our handle. You guys have my DM or my X handle here. My DMs are open if anybody has any questions. You can reach out anytime and you can, you know, LEDN is available to, you know, over 100 countries. So anybody listening here can, if they want to go to Leaden IO, create an account and just get a feel for what we offer. And yeah, we're an open book. We, you can see basically the size of our book. You can see our proof of reserves. We share more information out there that I would argue any other lender. Our bond is public. Anybody can just Google the dud and bond and see, you know, the S and P reports as well as the price that it's trading at, etc. So, yeah, I welcome everybody to check it out.
- [51:40]
D
Awesome, man. Thank you as always. Sorry we took a lot of time, but I appreciate you breaking that all down. Dave was there. I mean, I know we're kind of at time, but we. I sort of interrupted the conversation. Was there anything else left unpacked?
- [51:51]
A
Well, I mean, yeah, we can let this. We can talk about it next week, I think, you know, I, I'll be very curious to see what the legal minds dissect about this what seems to be completely ridiculous lawsuit from the CME
- [52:04]
D
on perpetual against the FTC on swaps.
- [52:07]
A
Yeah, yeah. I mean, it's. I mean, my God. I mean, we're taking, you're taking regulatory capture and, and cronyism to the next level, but I, I don't want to unpack that on a Friday, especially on a. When everything else. So I think we could talk about it on Monday and.
- [52:24]
D
Awesome.
- [52:24]
A
And that will give us something to talk about. And yes, I will be on macro Monday from Las Vegas because I won't be in the time zone yet. So. And I can do this one. I don't know about Wednesday and Friday. Next week in terms of crypto Town hall, but. But I'll be cool on Monday.
- [52:40]
D
Awesome. All right, everybody, it's been another great one. Appreciate all of you joining and listening, and we will see you on Monday.
- [52:47]
E
Bye.
- [52:47]
D
Bye.