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- [00:32]
Grant
Sa.
- [00:58]
Dan
Ladies and gentlemen, what you are about to hear may be amazing, but it is not financial advice. It is for informational and educational purposes only. Nothing in this discussion should be considered investment advice or the offering of any security or other investment product. Please consult your own investment and tax advisors. And now I'll hand it over to the True north team for your regularly scheduled programming. Whoo.
- [01:26]
Jeff
Welcome back, True North. Episode 67, the investment grade Bitcoin Podcast. Man, Another week and a ton of stuff is happening. The market is moving so fast. Seems like things are heating up. Electricity is starting to build and we've got plenty to talk about. We're going to try to make it a little bit of a quick one today because we've got an event happening here in Oregon, a Bitcoin for business. So look forward to meeting anybody that's going to be going to that. And we're going to be talking about how corporations are adding bitcoin to their balance sheets and how to think about digital credit on a balance sheet. So that'll be great. But first I'm going to kick off. We've got an agenda that we're going to go through, but the first thing I'm going to hit with is the strategy Q A that happened yesterday. It was about an hour and 10 minutes. There were a bunch of questions that they went and rattled through. I think it'll be good to unpack some of those topics and some of those concepts, and we'll just, we'll work through it. And then we've got a chart session with Dan, Hillary. We're going to go over a few charts. What we're seeing with bitcoin, what we're seeing with the digital credit instruments, how those are continuing to evolve, and we will go that direction. As of today, bitcoin price is $77,661. A little bit of a biased data point on my end. The Strive common stock had a hundred million dollars of volume today. Ibit had $1 billion of volume. So our common stock today had one tenth of the volume of ibit, which I think is a fascinating data point because we only have about 1.9% of the Bitcoin that IBIT holds. So starting to continue to see how these instruments trade relative to each other. Volume, weighting, price, action Beta. And the relationship between the entire industry is becoming very fascinating and the relationship with the digital credit products. So just a data point that's out there. Been fascinating to see how since our announcement of daily dividends, SEDA has also gotten pretty Tight relative to par. I think the last week we've been trading within a 10 cent range with most of the volume around $100 too. So it's just great to see a couple instruments now in the market with a very similar structure that are operating at a different cadence, a different frequency, tapping different capital markets and continuing to provide that infrastructure for the bitcoin market. So first I'm going to kick it over to Mason, because, Mason, you've got a lot of thoughts. You've been thinking about these questions for quite a while and I know that you've taken a lot of notes. So let's kick it over to you to think about. What's your first takeaway on the Q A yesterday?
- [04:02]
Mason
Well, I thought the question that they addressed that was probably the most interesting and, and the most recent was their, their comments about Strive, right. That it was the first time that they've spoken publicly about what they thought about the, the Daily Dividend movement and, and Strive specifically. And they were like, frankly, incredibly generous and they, they gave you guys your, your props. I have a quote here. We're humbled enough to realize we're not going to come up with every great idea. And then he, he gave credit to Matt Cole and yourself, Jeff, which I, I thought was awesome. And Saylor said he wants to see strive grow by 10x, which is incredibly bullish. And I think we're seeing that in the equity price today. That also could be because SATA is performing so, so well. But, and, and, and then I, I also just like how they handled it. Right. Like they, they are moving forward with the semi monthly dividends and, and they are going to allow you guys to kind of take the position of, of, you know, you guys rightfully figured out how to do this and they're going to watch and, and, and see how it progresses. And they didn't say one way or another whether or not they are kind of firm in semi, semi, monthly dividends or going to go to daily. But they, they, they said that they want to see you grow, they want to see it be successful. And, and they're going to move at, you know, potentially a slower pace because they are bigger, they have, they're, they're in Delaware. So I think some of the rules are different than a Nevada corporation. And they also just have a larger shareholder base with at this point a bunch of institutional investors who may want to see how things pan out. So I thought that was probably the highlight for me.
- [06:13]
Jeff
First of all, I did not ask you to say that so thank you. Thank you. I did not ask you to say that. But I think one of the themes that I had when watching this, it became very clear and just the confidence, the way they conveyed themselves. They're ready to run the largest company in the world and they know the responsibility that comes with that. What is the responsibility that comes with running the largest company in the world, having a corporate and capital infrastructure that is in line with the new World Fed and then that comes with operating very intelligently and moving at an appropriate, appropriate pace for such a large company. And that, I think you use the words we're piloting an aircraft carrier and if you're piloting an aircraft carrier or even a jumbo jet, you're not going to be making the same moves that a fighter pilot is going to be moving. You're going to be operating very strategically, understanding that if you make any quick moves, that throws everything off. So I think that makes a lot of sense. Thinking about size and scale, having two issuers in the market issuing digital credit with scale is valuable. Any Bitcoin that we potentially buy or any other companies potentially buy is helping to raise the floor price of the underlying Bitcoin. We are fundamentally going to tap different capital pools than MSTR is going to tap into. You think about their rise and their journey to where they are today. They were previously very attractive to small cap company or small cap index funds and now they're in a much different area. They're like mid cap large cap index funds and meanwhile our company, we're, we are where they were five years ago in that kind of like small cap territory, like growth territory. So there are other, there's different capital that's interested in those different types of things and.
- [08:18]
Mason
Yeah, yeah and I, I also, it's important to note Bitcoin as a system is, is a non zero sum system and that's, that's really shown in, in how strategy throughout their lifetime has kind of, or, or they've exemplified that in, in sharing the playbook and being very public, telling other corporations literally this is how you do it. This is, this is what you need to do. This is our strategy and it's, it's been public and I, I think them recognizing that digital credit is a, a brand new asset class and that more the merrier, the better it works. Having multiple issuers, it's good for them, it's good for bitcoin, it's good for the common, it's good for the credit and it's just a very virtuous, harmonious Loop.
- [09:19]
Jeff
Yeah. And transparent balance sheets. Right. We're establishing, I talked about this on the Bankless podcast. I did. We're establishing these new trust networks. What is, what is trust? Trust is like what is built civilization. You can start to trust corporations. You think about transparency. We're making the cost of trust much cheaper because you could see our balance sheet. You don't have to go to look at like a, an annual filing to look at what my balance sheet looks like. I'm literally have it on my website. Go look at it.
- [09:49]
Grant
Yeah, I want to chime in here, Ben. So a couple things so Sayor did say, which I thought was interesting was when he said are you going to go to Daily Dividends? And him and Fong, their comment was, you know, they're going to look at it. And this goes back to the size difference. You guys have a little bit over $500 million in your, in your pref and they're about 10 billion. So there's a 20x different and, and Saylor said we want to see how it trades between the two. Now that, that you know, on the surface be like, oh whatever. I'm like, no, that, that's a big deal right there. They're, there's going to be. And there's algorithmic, there's high frequency trading. I did a post on this. We'll go between these two assets which will constantly give you more liquidity. You know, in, in when you run, when you do races sometimes in sports, this is common. But running is a good example for this. You send out a rabbit and that's a person that can run faster than the guy that wins the race because he's a more short term focused person. And then the other guy, it gets him to get set the pace early. That person peels off and sets the pace and then the other person does it. And so they had this with the marathon, they had a pace marathon and like by a car. And that wasn't an official record. So what I think is happening here is that you guys are basically setting the pace here to do this and then strategies on one side of it and both of you continue to ratchet up and benefit. And that's what Mason was talking about. It's not a zero sum game here. Both sides play off of each other in order to, you know, keep on getting new world records. That's the goal here is keep on getting the prices to go up of both the common stock and to acquire more Bitcoin. And that's what I saw. So I just want to say Jeff, to you and the strive team. Congratulations. You did not tell me to say this. You guys don't pay me. Matt made an announcement this morning or I believe. Yeah, sorry, May 19th, two days ago you guys acquired Bitcoin. I, I will say I think at some point in the future you'll probably go to if you can, filings. You'll probably start announcing your bitcoin purchases a day later. Because if you keep on acquiring bitcoin on a daily basis. Right. And we tracking this, it'll be interesting to see how that changes over time. Instead of waiting to every Monday to do it every Wednesday, a week apart. I don't know, just an idea.
- [12:08]
Jeff
We just become the daily company.
- [12:10]
Grant
Just a daily company.
- [12:11]
Jeff
It's just everything. This, everything's daily. Everything we do is daily.
- [12:14]
Grant
Yeah, it sounds like a lot of work. By the way. If you guys acquire 200 bitcoins per day and you've already acquired more than that, but if you acquire 200 bit, you know, for a work week, that's a thousand a week. You know, it's a very, I'm going to use this very particular words. It becomes a very durable structure because you have no debt. You're not acquiring it at a crazy rate. That's unsustainable. It's durable. As the price of bitcoin goes up, your amplification drops. That's why sale, that's why strategy is acquiring back one and a half billion dollars worth of the converts is to reduce that potential future dilution in the delta hedging. So getting rid of the, the debt that's on their balance sheet is what they're doing. But you guys are already debt free.
- [12:56]
Jeff
Yeah.
- [12:56]
Grant
So. And, and that goes back to. We said so you know, congratulations to you guys. Congratulations to it. Strategy has done and built and, and we'll see how this play. I, I'm rooting for both of you guys to you know, see who can, you know how it goes.
- [13:11]
Jeff
Thanks Grant. Appreciate it. Yeah, the, There's a, there's so many, so many different things to think about here with the, with the development of the daily dividends too. Just like you mentioned like announcement frequency. What does that look like? What's the downstream impact look like in defi land? What's the trading environment between the two? I mean the trading is going to be so fascinating, Dan. I mean I've already seen you tweeting about different trades that you could potentially do relating to both of the different instruments at different times. The arbitrage surface is just so Fascinating. And Saylor even alluded to it on the, on the Q and A call where he was talking about the opportunity for hedge funds. If the price of STRC falls, is it your responsibility to come in, step in and bring the price back to 100? It's like, well, there's actually opportunity for capital that's 50, $100 billion of capital that's sitting there just watching this marketplace. They may not be interested in coming to step in for, you know, 20 cents off par price, but they may be willing to step in when it's a dollar off par price or a dollar fifty off par price. And what did we see this last month after the, the ex dividend date, the price of STRC fell to what was it, like 98.70 or something? It was like the first time in a while that the price of STRC fell below the actual dividend that was paid out that month. So and the next day the price of STRC was back up above the amount of that the dividend was for, for that month. It's like every single time that they issue a dividend and that capital comes in and they're issuing shares into the market, those shares like effectively cure. There's people that are coming in the door to arbitrage is what we've been talking about for weeks. Arbitrage, just the dividend for that single month earn, earn that relative yield for that very short period of time. And that's got a relative churn that's just going to continue to happen. And as, as the price of STRC potentially falls below even further, the amount of capital that's interested in the instrument even further below that is exponentially higher. Which makes sense, right? Because like, did the risk profile of STRC change in a day? The answer is not really. If the bitcoin price is flat, did the risk profile and the company's ability to pay that instrument the next month, did it change materially? No. Maybe infinitesimally small fraction of a basis point yet the price dislocated. So that's where capital is interested. We've got computers that are continuously looking at this relative risk return profile and they're interested in those instruments as they, as they come down. So it's that that incentive structure is what is bringing that capital in the door for these specific products. Dan, would love to get your thoughts.
- [16:12]
Dan
I know, yeah, I think the, yeah, the retail Q and A I thought was very, very valuable. And they did a great job answering why? Well, two things that they really, they really hammered Home is one. They're not going to, they're not going to dilute STRC with the issuance of other products. And they said they're interested in shifting the dividends for the other preferreds to a monthly cadence, but they're not going to focus on that as it's not the flagship product issued by the corporation. And so that leads me to believe that, you know, they're clearly going to continue to market STRC and they don't want to do anything that even distracts the public from the instrument. Now I do believe then Saylor said this in the past and I think it's very important, Grant and I talked about it on our space today is that the other preferred leave strategy, massive optionality with regards to issuing them. And in the Q and A, one of the questions was would you consider making a product like Stretch except it has a fixed dividend at 10%? And Saylor, you know, he was very, you could tell he was holding back and he was about to freak out, you know, but he's like, well that's strife or stride, depending on the risk profile you want to take on. So I think that was an interesting. There will be aha, moments like this where people go, oh, I can hold strife instead and get the guaranteed payouts on a quarterly basis. And that solves my retirement problem. So I think more and more the volume may take up in those products. I think it's a no brainer to take them to monthly. But again we talk about the optionality. So I said on the space, an IPO, typical IPO costs about 7% of the capital raised or the capital brought to market to go forward. And so all of these are, they were on average billion dollar IPOs above that. So they each cost around $70 million to take to market. So those are pretty expensive products and retiring them wouldn't be smart as it would reduce some of the optionality in the future. And then I'll leave this part of the discussion with kind of thinking about strike and specifically strike because for example, some point in the future when mstr, two points. But when MSTR is trading at higher and higher prices, 3,000, 4,000, $5,000 strike will effectively be 95% delta exposure to MSTR. So it's effectively MSTR with a senior position in the capital structure to common MSTR and a small cash dividend. Let's say you had a bunch of MSTR who wouldn't want a 2 or 3% annualized cash dividend just for holding pure MSTR exposure. It would be fantastic. So I think Strike's volume will tick up. And the last point that I think was super important on the podcast or on the Q A was simply that they said they're creating a security that matures not in one year or two years, but will be mature for 10 years, 20 years in its final form. So they're trying to season this security to trade and really have no change to the instrument over the next 10, 20 years. And this is what we've seen the money market fund industry, it's been unchanged since 1972. We'll get into that later.
- [19:15]
Jeff
So many good points. Yeah, they're not, they're not going to retire any of the other press that they have out there. And they've continuously said we believe these are underpriced. And it's, it's going to take a long time for the market to. Maybe not a long time. It's going to take some time to, for the market to figure out what is the relative risk return profile for these instruments. And then you also have this like parity question too, which is like if you've got STRC which kind of fits in between the capital stack and it's at 11 and a half percent return, you almost have this like parody of, well, STRF is senior, so it should probably pay a little bit less. But the ones that are junior to it, it's going to be interesting to see if there's any disconnect on like this like pricing curve where some of these instruments that are more junior to STRC if they ever trade with an interest rate that is lower to what STRC pays. So it'll be fascinating to watch that. But, you know, I'd venture to guess that there's, there's probably 5 to 10% of STRC holders that don't even know the other, the other press exist.
- [20:21]
Mason
I would say it's higher than that.
- [20:22]
Jeff
It might be higher, you know, it might be significantly higher and I think that's okay. But that optionality, as people start to understand this ecosystem and that optionality and how you can construct, really all of these have different risk return profiles and you could just construct them very differently. Mstr, the whole capital stack and there's just massive optionality with all of them. So great to see. A couple other things that were on my mind. One continuous focus on maxing out bitcoin per share. They want to increase the bitcoin exposure per share for the common stock, that they're just laser focused on what that is going to be return of capital dividends. Something that people may not be aware of is that anytime a corporation is going out and buying bitcoin, I'm relatively certain MSTR operates this way is they have, you know, thousands of wallets. So let's just say they've got a week of activity. They might have like all of that week's activity in one wallet. And the purpose for doing this is it creates different cost basis buckets for every wallet that you have. And you can track your cost basis across all those different wallets. It's not like you have one specific wallet that's got one cost basis. So that's really valuable because if you are in a situation where you ever needed to sell Bitcoin, you could sell that high cost basis bitcoin and it's just in separate individual wallets and you can go target that specific high cost basis Bitcoin as opposed to taking profitable low cost basis Bitcoin. So that's helpful to think about. That should retain return of capital, return of capital cost treatment for the dividends into perpetuity. I don't think that's going to be an issue moving forward, at least for the next decade, the maturity of these instruments. I mean, it's going to be fascinating to see how this grows, right? This instrument is a $10 billion instrument. It's the largest perpetual preferred equity in history right now. And it, it can 10x, it can 100x. That will be fascinating to see how the market's perception of this grows over time. These become more mature. Saylor talked about the Lindy effect, which is something that, you know, we've been hitting on pretty consistently. Like if, if something's been around for a year, you can expect that maybe it'll be around for another year. If something's been around for 10 years, you can expect that it'll, maybe it'll be around for another 10 years. So it's kind of this like exponential rise in your, your view of something based on its success over, over, over time in history. So it will be fascinating to see how that continues to play out into the future here. The one on that, Jeff.
- [23:08]
Dan
So I don't know if you guys have read the Black Swan by Nassim Taleb and I may be misunderstanding it, but what I understood to be the Lindy effect was simply that as something has been performing for a certain amount of time, people expect it to continue performing in that manner. But that's the nature of tail risk generally across asset classes. So that's why people are unprepared for market corrections, specifically in traditional equities. So I see what Saylor's saying, but it's very funny because when he mentions that, it makes me think of a tail risk sell off in strc, which is specifically how Taleb was using it. That's how he made his money in the great crash of 89.
- [23:49]
Jeff
So, right, you think about that concept. You can think about it on both sides of the curve, right? There's, you've got tail on both sides of the curve. You're talking about a distribution with two sides of a curve. So you've got the positive side and you've got the negative side. What it's really probably referencing too is what he referenced is the positive side of the curve Lindy effect. What you're referencing is the negative side of the curve Lindy effect, which is private credit, traditional credit, you know, this landslide of capital that they've been, they've been operating in this way for 40 years, 50 years, 60 years, and this landslide of capital could come in the door because they start to recognize, oh my God, all of my underlying assumptions on this are completely torched. This, I wasn't even looking at this part of my portfolio because I just assumed that the credit market was going to be around because it's been around for 50 years. And so that's, that's something we've been like forecasting and talking about quite a bit. Right. Is the, the risk return profile of all these other credit instruments looks crappy. It's, it's challenging to identify. Like I'm not bullish bonds here, like corporate bonds.
- [25:04]
Grant
Yeah. So, yeah. So Jeff, let me chime in here. You know, we joke about, it's on the website, there are these dashboards and one of the things, the people that follow us and watch us, we tend to get impatient for things to move faster. We have all this transparency. But when you talk about bad bonds, I talk about Blockbuster because that's what people remember. It got displaced by Netflix because people use it on a daily basis. Blockbuster to back up their bonds was using DVDs and leaseholds, not real estate. The lease holds because those were like long term leases, which is a liability. Any rational person be. This is a lie. And whatever they had 2500 stores, whatever it was, and DVDs, the value of that age is like bananas. You know, once you watch a DV, the DVD for 98% of your DVDs, you probably never watch it ever again. So the DVDs, when they come out, or any of these proper Any of these pieces that come out, they have exponential decay very fast. And that's what they were using to back the bonds. And so everybody's like, oh, I'm higher in the capital stack. I'm like, yeah, but you're holding a bag of crap. And, and by the way, if they would have had a website that listed this, it wouldn't have changed. People would have been like, oh okay, you're just telling us, giving us more frequent updates. But strategy and, and strive and bitcoin, treasury companies back it up with, with Bitcoin. And I want to go off on oh, 32nd tangent. You know when I read Fred's book, which is right over, sorry, right over there, Bitcoin, 1 million in there. They came out of these just card bonds in, in the early 70s in France due to inflation and they were indexed to the price of gold. Now you know what they, you know what, they did not back the bonds up with these gold index bonds. They did not use gold to back them. So when the, when inflation hit in the 80s, France had to figure out what the hell do we do with these bonds that we issued because we never backed it with gold. I mean, how do you. And it's like, well if they would have had a website, it would, it no would have just told you the disaster that was unfolding. And so I had never heard of that until I read the book. And then I looked this up and they, they could not bail it out. And so they made so these, these colossal mistakes happen. So what do I think is going to happen? You've got artificial intelligence, you've got artificial money, which is Bitcoin. And it's going to play out and either you're, either you're going to be in. And there are many people don't believe in artificial intelligence. It's like, well, you ever hear of Nvidia? I don't know what you're talking about. It's like it's a 5 trillion dollar company. And so unfortunately those people cannot be saved. I mean you can try. I've been trying for years. Anyway, with that said, you know, the
- [27:51]
Jeff
stuff is just going to get integrated. It's going to slap people over the head. You know, five years from now, four years ago, if you would walk around anywhere and say, hey, have you heard of company Nvidia? People would be like, I don't know what you're talking about. And now you could walk down the street, have you heard of Nvidia? Everybody's heard of Nvidia. It's Like a, it's like a landslide of, of people understanding, like, hey, this is, this is durable, this can work, this is what the future looks like. And I think that Saylor was kind of getting at that as well, is that once the perception of the market is that this is worth a 5pe, this is worth an 8pe and then all of a sudden it's worth a 20pe. And that's what the market is, you know, giving, giving the equity value.
- [28:42]
Grant
I just want to chime in one thing real fast. So yesterday was my ninth, I hit my ninth anniversary of being all in on bitcoin or bitcoin derivatives. And so with that I bought sub $2,000. And people be like, big deal. I think what I would tell people that are watching this right now is whatever price you bought out, if somebody said to me when I bought a 2000, Tom Lee was saying Bitcoin could hit 10,000 by the end of the year and it hit, it hit 20,000, what I would tell people is that if you look on a nine year or a ten year time frame and whatever year you bought in, extrapolate that out and write it down and say, hey, what do I think the price of bitcoin is going to be? And go do that. And then that's the advantage. And people are like, oh, grain got lucky, he got in early. I'm like, I've been in here for nine years. And so what I would tell everybody is that you guys are all younger than I am. So when you get to your nine year anniversary, you're still going to be 30 years younger than me. But anyway, with that said, I think try and if you, as soon as you do that thought experiment, what happens to the price of bitcoin four years out? And so for me, you know, if Bitcoin was 80,000, that's a 40x jump. And if Bitcoin at all time high of 125, we're talking a 60x jump in nine years. 60x. And that is crazy. It is. But then when you look back, I was like, what do I think it's going to do in the next nine years? I'm like, if I get another 20x out of this or whatever, the number is awesome. And so I tell people that time in the market beats timing the market sometimes.
- [30:19]
Jeff
Yeah, I mean capital flows are unpredictable and they happen at different points in time. You can't control them. And sometimes the equity markets are open, sometimes the credit markets are open and it's all timing the different, different elevations. Maybe let's maybe, let's shift gears and unless anybody else has anything else on.
- [30:39]
Mason
Yeah, I have, I have one last from, from the Q and A. Say, you know, Sailor was asked why, why isn't bitcoin tracking equities? And I, I think this is weighing on a lot of minds right now, right? We're seeing S and P at all time highs. And I thought his answer was, was really concise and important and he said, you know, bitcoin is its own asset, it has its own capital flows and, and it's, it's influenced by different things and I have a list here. So geopolitical capital flows. So policy in China, India, Pakistan, Iran, Russia drives bitcoin rising long and long End yields globally is, is drawing out capital. So we're, we're seeing the bond market kind of blow up globally. AI trade is, is a headwind. Right? There's a lot of capital, a lot of speculative capital frankly is on fire.
- [31:37]
Jeff
The AI trade is on absolute fire and everybody's fomoing hardcore into the AI trade.
- [31:43]
Mason
And, and that's, that's including miners. And one example of this was, yeah, Softbank and, and Mara. Mara just sold 1.5 billion in Bitcoin, I think around 15,000 Bitcoin last quarter. And people are saying oh, Sailor bought 2 billion worth of Bitcoin last week. Why is the price going up? Well Mara sold one and a half billion the week before. So it's, it's a dynamic market. And then he said, you know, trade wars and, and, and hot wars of course. And then also the, the bank credit networks haven't rolled out completely.
- [32:20]
Grant
Right.
- [32:21]
Mason
You can't go to JP Morgan and post your bitcoin and, and borrow off against it. I think you can with ibit but you can't borrow against bitcoin easily yet. But I think we all believe that that's coming at some point. So I, I thought that was a really concise kind of broad view of, of kind of why, why bitcoin is sucking wind right now in the face of equity.
- [32:50]
Jeff
All time highs sucking wind being 30 off of, off the bottom potentially.
- [32:56]
Mason
Yes, yes, yes, yes.
- [32:57]
Jeff
Right. So yeah, I completely agree. You've got that. It's kind of what I mentioned there with Grain is like you have capital flows in different parts of the market that are moving in different ways and that's, that's just the way it is. Metallic capital is going to have different market than digital capital is going to have different market than equity capital, which different market than credit capital. Some of that is interchangeable. But I think one of the fascinating things here is the spigot has been opened to these other capital markets to be interested in this ecosystem in a wrapper that fits into that marketplace. So that is just started. We're talking about watching this for the next decade, right?
- [33:36]
Mason
It's the biggest tailwind for bitcoin. You know, I don't know. I don't maybe since, since the etf.
- [33:44]
Grant
Yeah, so sorry. So, so I agree with you guys, what you said, what Sailor said, but I have a little bit different take of this. And, and we just talked about. I, I had mentioned myself, you know, the long term being something for nine years, I think what happened with SATA literally on the announcement on May 14th and I did a post on this already and originally when I started looking at it, I said, you know, I had to start thinking like a computer instead of like a human. And what I wrote was, you know, is it great getting paid on a daily basis? Sure. And then I did the quick analysis and then I realized, you know what, maybe I should look at this at one minute intervals. And then I was like, wait a second, if I'm a computer and we have this step function, you guys went from monthly to daily. I then I then said, what should I look at, you know, into AI. And AI said it seemed like 10 seconds was the best interval. And so I did a post on this, on 10 seconds. And if you can go look at any of, you know, STRC live that tracks us, even though we're talking about SATA here, is that there was a step function change and the computers and the algorithms looked at it and said, said, oh, if this is going to trade, you know, you know, it turned out with the analysis that it trades over 50% plus or minus $0.01 off of its par value. That, that changed because. And, and you guys haven't even gone to daily dividends yet. I think that's the craziest part. You guys did the announcement and then literally right after the announcement it automatically traded up to par. And I was like, oh, so while we can say there are long term, there are long term views, geopolitical, everything Sailor said is right. But for the algorithmic trading that's going to trade both between SATA and Stretch. And then I think that you also have to do analysis. I would never, I never look at less than, you know, two or four hour candles. You know, trading swats to look at 10 seconds is absurd, but seeing what happened with, with SATA once I did that analysis and I Posted I was like wow, that, that's a major difference. So again, congratulations to you guys. I think the high frequency trading firms are here.
- [35:48]
Jeff
Yeah, we, we built this for the future, right? We built this product for the future. We know that we're going to communicate with the computers like the computers are going to interface with these products. And that's obvious to us. And you could see it in the, just the, the trading history and the, the trade. How like on the 10 second candles, right? You could. How does an instrument trade. You look at STRC trade hundreds of millions of dollars within two pennies throughout a day. That's infrastructure, that's incentive infrastructure. That's computers that are there that are like sitting on the bid and the ass going in both directions. Right. It's just something that's automatically, algorithmically, structurally created and we think that's going to expand. And right now the credit market doesn't have much of that. So again it just makes such a fascinating surface like trading surface of thinking about relativity to money market funds, relativity to other dividend paying equities, high liquidity ETFs like HYG or just the amount of trading pairs. We think by moving to daily dividends is a step function higher, a magnitude greater, potentially multiple magnitudes greater of optionality that a computer could potentially create. Sure. Yeah.
- [37:09]
Dan
And I'll jump in here. I ran some. So I didn't understand this and I think people, this is at least news to me. So to buy stretch and collect the dividend payment you have to, you have to be a recorded holder on the, on the start of trading on the record date there's t plus one settlement. So therefore you have to be holding stretch during both the regular hours and, and the post market hours on the cumulative dividend day which is the day before the ex dividend date. So all of the dump where stretches price tends to fall from 100 down to whatever it settles at 99.3 or 99. That all happens in the pre market on the ex dividend date. So the volume on the pre market of the ex dividend date is roughly 7 to 10% of the traded volume the day before the cumulative dividend date. And those cumulative dividend dates have been the days where we've seen the $700 million of volume and $600 million of issuance last, last month I think it was 1.5 billion on the cumulative dividend date and around 1.3 billion of issuance. So when the price falls it's always in the pre market trading and then there's an auction where anyone who's looking to get out, when the stock opens up at 9:30am there's an auction to get out and it settles at the
- [38:29]
Jeff
price
- [38:31]
Dan
that it trades that day and the volume completely dries up. So when you look at the volume, all the selling volume happens in pre market on the ex dividend date and the volumes dry for, for the rest of that day and then it slowly builds into the next exit in date point. The reason I looked at this was because you know, obviously SATA is going to be trading with an ex dividend date essentially every single day. And you're not going to get paid out the exact next day simply because there's t plus one settlement and the record time. But nevertheless there's going to be a lot of pre market volume and there's going to be a lot of post market volume. The post market volume on the ex dividend date. If you want to get the most amount for your time value of money, you'd buy in the aftermarket on the cumulative dividend date and then sell in the pre market of the following date, the ex dividend date. And so that's going to be occurring every single day with seda. And then and Jeff keeps talking about okay, you know, we built SATA for the future and obviously they did. And you know, now with the SEC potentially approving the tokenization of securities that trade 24 7, this is going to be pretty, pretty complicated and complex with regards to how you get paid, the small pennies worth of arbitrages that come up overnight with SATA. So you know, people are watching the credit markets, the capital markets kind of transform in real time. This is all pretty novel and it's moving very quickly.
- [39:42]
Jeff
It's so fascinating to watch. And like we've been thinking about this too. A couple things come out out of that conversation, Dan, that I'm thinking about. One, the first one being the relative volume on the ex dividend date relative to the day after and which is which you mentioned is much smaller. So one thing to think about, a lot of the market has been talking about, you know, strategy needs to raise the interest rate for strc. Well, you could go look at the website, they've said that if the price of STRs, if the 30, if the 1 month VWAP of STRC is below 99, they will look at raising the interest rate. Well, the price fell the day after the record day and the one month VWAP is 99.72 right now today the price is currently trading at 99.32. That's because the volume weighted average price is still so incredibly high. Because so much capital came in at a hundred dollars. Like billions of dollars of capital came in at $100. So that relative weight weight of having a low volume day where the price falls, it doesn't move the needle very much on the vwap. So I wouldn't count on them potentially increasing the interest rate. I would say it's working. And the anti fragility like you've got capital that's coming in the door that yes, the price fell below $99 but that means nothing. The relative risk profile hasn't really changed. Also super fascinating to think about how it's trading in the pre market. Like who is who, who's there? Like who is trading that on like the fraction of the second that the market is open. Is it like whoever's closest to the market? Does it matter? The length of the fiber, Internet cable and your ability to press the buy button to be close to the New York Stock Exchange that exists. There's a book about it called Flash Boys. Highly recommend it. Very fascinating. It talks about the value of the real estate. Being closer to the exchange is far functionally important because your fiber optic cable and how quickly you get the data impacts how fast you can trade these instruments. So I wouldn't be surprised if there are people that are or their computers that are able to trade on that fraction of a second of the market, the pre market opening to be able to capture some of that arbitrage spread. It's just a FASC fascinating decision making process and it is going to get more complicated for sure. And the, the intraday trading is going to be so fascinating to watch. Like Soleil brought up last week. Like are people going to, you know, pull their car out of the driveway, go to work for the day and day trade the opportunity cost of capital and then pull their car back into the driveway at the end of the night. And what does that trading volume look like and does it start to create
- [42:21]
Dan
like a,
- [42:23]
Jeff
a different volume structure Intraday? It'll be interesting. Okay, so shall we shift gears? Dan, you've got, you've got some data and analysis, BTC market benchmarks, capital flow. Let's jump into it. There we go. He's working on it.
- [42:50]
Dan
You guys good?
- [42:51]
Jeff
I can see an infinite screen. There we go. It's up.
- [42:53]
Dan
Okay, cool. Now it's up. I won't do the infinite screen again. So I figured we'd touch on this because I know Jeff, you comment on this, and I'd love to talk about this publicly for people trying to put their heads around what a capital structure means. So my illustration here was simply looking at the capital structure and trying to understand what are the residual claims of the common once the liquidation preference is essentially accounted for by the preferred equity. And that's effectively what amplification means. Amplification is the amount of extra Bitcoin, or it's the amount of Bitcoin that's been purchased or is kind of backed by the preferred equities liquidation price. And that's how you get this meaningful outperformance of the common relative to Bitcoin and obviously to the preferred equities, which are static. SATA, which is static at $100. So the illustration I was trying to make make was like, okay, so right now at 44% amplification, that's effectively 1.8 times leverage on the common. Now, if you take that up to 50amplification, that's effectively two times leverage on the common. What if you take that up to 70? Or to use thirds, let's 2 thirds or 66% amplification, that's 200% leverage. So that's 3x times leverage. And there becomes a point where if Bitcoin has a drawdown, then you essentially wipe out the equity value in the common because the liquidation preference of all the preferreds lay claim to the entirety of the Bitcoin stack. Now, that's just kind of the thought experiment I wanted to put forth. And obviously I want to hear what, Jeff, how they're thinking about it at Strive, because I know they're trying to be quite aggressive with amplification moving forward.
- [44:35]
Jeff
Yeah, we're looking and thinking about amplification and thinking about. There's so many different things, right? There's the mathematical conceptual theory and then there's the behavioral market theory as well. And those are like two competing forces that are moving both directions, as very similar to how Saylor has alluded to. We want to facilitate both instruments at the same time, our common equity being amplified Bitcoin and our credit instrument SATA. And we want the ability to grow the interest in both of those at the same time. So you're thinking about amplification. The one thing I would challenge here, Dan, is this concept of a preferred claim. And I think when you're thinking about the concept of a preferred claim, we don't have any debt on our balance sheet. Because we don't have any debt on our balance sheet, we can't default, there is no event of default. We can't go bankrupt as a function of not paying our dividends. So thinking about that claim of the capital on the balance sheet, we don't have debt on our balance sheet. So I think that's a fascinating behavioral constraint to think through. And a mathematical constraint to think through is that the capital structure? So then you start to think about, well, how do you start to think about risk profile? What is, how do we facilitate the liquidity of this instrument and the risk structure of the instrument? We're particularly focused on the size of our balance sheet relative to years of coverage of the interest obligation. And so we call this, I guess, bitcoin coverage ratio, bcr. So this is kind of how we're thinking about it internally and we're thinking about what does that look like in a time frame into the future, but also how can we think about the amplification or that BCR rating on a structural bid on the underlying Bitcoin. So when we're looking at the leverage, the financial leverage of our balance sheet, the amplification we're looking at, what does this look like in a downside scenario? What does our capital structure look like at the 200 week moving average? What does the capital structure look like at 20% below the 200 week moving average based on where it is today and how much capacity and headroom do we have on our balance sheet based on thinking about those different constraints? So it's kind of getting to the point of like, what would you want to be true if we got into a period of time where the price of Bitcoin was depressed and how do we manage that depth and duration over a specific horizon? So that's what we're constantly thinking about. So we're thinking about our cash balance, our SDRC balance, our bitcoin balance relative to all of those. And I would encourage people to start thinking about that perspective. What is our coverage ratio of the capital relative to the interest obligation for a year? So, for example, I put out this tweet providing some perspective. At 50k Bitcoin price, the value of our balance sheet today would be $769 million. Our annual interest obligation as of today is $68 million. So if the price of Bitcoin were to fall to 50k, which is significantly lower than what we're at today, around 77, 78,000. At that point in time, we would have 11.2 years of interest coverage with our Bitcoin alone, let alone the cash, let alone the SDRC position So I would encourage you to start to think about what does the credit market look like, what other credit instruments in the market have that much coverage, let alone thinking about the future cash flow that they could potentially generate. I think you'd be shocked to identify the discrepancy at that point in time. That's how we started to think about it is a structural long term view of amplification, if that helps.
- [48:46]
Grant
Yeah, can I chime in here a bit and, and, and just tell you, you know, looking at this from a little different of a perspective, but specifically what you said, Jeff, about having no debt. So people that are my age or older, if they're my age, they had to pay attention to this. They probably might not know this. So in the 1990s what happened was the, in Japan, the real estate market went crazy. And so they were sitting on these massive gains and they decided to buy up two properties in the US and those two, they bought up a bunch of things, but the two high profile one was Rockefeller center in New York and the other one was Pebble Beach Golf Course in California. These icon properties, there was a lot of pushback on this. And what they did is they paid very high prices. Rockefeller center, they, Mitsubishi paid $1.4 billion and Pebble Beach Golf Course was sold for $841 million. Now what happened to them? They both blew up. And why did they blow up is because Mitsubishi had 70 to 80% debt financing. 70 to 80% was debt finance. So they could not make the debt payments on it. And that's why they basically had it went bankrupt. It was restructured in 1995, it lasted six years. And Pebble Beach Golf Course had the exact same thing happened basically two years later. And they lost about $350 million on it for that one. So when somebody says to me, oh, these bitcoin treasury companies, specifically, let's say they say strive or strategy. Oh, they're, they're, they're levered up. They got tons of leverage. I don't think you understand the meaning of leverage. Strategy has about 11% debt. Strive is zero. And like, oh well, they're borrowing money to buy bitcoin. No they're not. They're raising it through either equities or the preferred prefs. And if somebody does not have the financial understandings to have the conversation right there, you have to make a determination. Do you continue talking to them? And so that's why you turn around, you say to them, you know, there's a difference between borrowing money that you have to pay back on a set time frame.
- [50:54]
Jeff
That's debt.
- [50:54]
Grant
You guys have digital credit. It's somewhere between a bond. It's. It's a hybrid, and it's perpetual. Right. And it's, it's issued in an equity wrapper.
- [51:05]
Mason
Right.
- [51:05]
Grant
But it's not an equity. Your equity is your common stock. And if somebody, if this conversation I just had is, is 90 seconds. And if somebody doesn't understand the difference between debt and equity, you could just, you just say to them, I don't think I need to discuss this anymore with you until you understand what an equity is, what debt is. Right. And what a perpetual preface. If you don't understand those, I can't talk to you. It's not that you're being mean. And that's why I give the example that if you have this massive debt, that's why they're not durable and they lost hundreds of millions of dollars. And that's why you say back to older people. So it sinks into their brain. Go ahead.
- [51:44]
Jeff
Yeah, I just want to say. I just want to say a couple more things, Dan. We're incredibly laser focused on being able to pay the dividends and to perpetuity in managing both the interest in the common equity and the interest in the preferred equity, because it's critical that we're watching both of those at the same time. Mathematically, I think you can support an amplification ratio far higher than the equity market would probably allow you to do and the credit market would allow you to do. I think mathematically you could probably support looking at historical bitcoin drawdowns, looking at different regimes, different capital structures. I think mathematically, with zero debt, you can support an amplification far above 100%. Now, would the market allow that? Probably not. And that's something that we're laser focused on and we're going to be watching very closely is how the market reacts to daily dividends, how the market reacts to, you know, different amplification structures, how the equity market reacts to those things. And that's something we are watching very, very closely behind the scenes. And we've got super advanced analytics that only we have access to that we're watching behind the scenes. And all these different instruments, how they're moving together, how they're moving in lockstep, how they're moving in different ways, having conversations with outside capital. And I think the market could support a higher amplification than where we're at right now. Not saying that we're necessarily going that direction, but that's Something we're looking into.
- [53:13]
Mason
Hey Dan, can you, can you talk about the article you wrote, Strategies Trading Bitcoin's Power Law Trend?
- [53:21]
Dan
Sure, sure. Maybe let me get through one more slide, Mason. Maybe we can all kind of put our heads together on that one. I don't have it up. Yeah, this is an important metric and this is illustrating what I said before. It's specifically the amount of trading that occurs. I actually have it in. Here you go. I have it in chart format as well but it's actually easier to read in a graph. And it's the amount of trading volume that occurs on the pre market of the ex dividend date. So this is kind of a sequential list. This is pre market. This is, sorry regular trading hours. On the cumulative dividend date obviously we see massive trading volume. It's 1.5 to 3 times the adjusted daily volume over the prior 30 days after after hours. On the cumulative dividend date we see massive trading volume once again as the last ATMs are going through after hours. Our friends Sonax run a lot of that aftermarket ATM. Obviously the morning of the ex dividend date, 4:00am to 9:30am in the pre market is when the dumping happens. And this is 7 to 10% of the adjusted of the daily trading volume on the cumulative day. So, so again that's 7 to 10% of roughly 2 to 3 times the adjusted daily trading volume. So that's hundreds of millions of dollars being sold every single pre market day on the exit end date. That's why you see the price go down and then takes a little while
- [54:46]
Jeff
for it to recover.
- [54:49]
Dan
And then finally the last thing I wanted to bring up, just setting the scene for kind of how digital credit will likely grow into the future is simply the growth of money market funds. And so there is this, this Reg Q which was a product of the 1933 Banking act and it capped the interest paid on savings accounts in banks and CDs at about 5% in the 1970s. In the 1970s CPI was running at about 11% annualized. There was no way for people for holders savers to get a yield above the above the 11 CPI. So it was in 1972 the first money market fund was created as a private fund in order to offer short duration $1 exposure to to something that was on pace with the short term interest rates in line with sofr. And you can see it grew to a now almost a 10 trillion dollar industry from 1972 until today. So it's grown at a logarithmic Pace, much like a power law. And it's one of the fastest growing, you know, financial products in history. So again from $0 to 10 trillion. And this is the kind of growth we're staring down probably a lot faster in digital credit.
- [56:13]
Jeff
0 to 10 trillion. Couple things there, Dan. Money market funds, they accrue daily and they pay monthly. Just that, that was an innovation that happened in the 70s as well was the accrual of interest daily and paid out monthly. We were, we were looking at that and thinking these products can disrupt everything. So not only just the credit market, it's the equity market, it's the money market, it's bank deposits. As the trust in those ecosystems is being eroded and the relative return that you're getting in these systems relative to the increase in the money supply, you're theoretically losing capital by the money market itself. Paying less than the increase in the money supply.
- [57:04]
Dan
Yep.
- [57:04]
Jeff
Yeah, I mean we could see exponential growth for sure.
- [57:08]
Dan
I stopped to share my screen. Is that all good guys?
- [57:11]
Jeff
All good? All good, yeah.
- [57:14]
Dan
So I think this idea of money, I think money market funds are actually an interesting parallel specifically because now money market funds are larger than the total short term T bill issuance in the United States. And that kind of is in line with our thinking. And we play around with this idea, but what if the digital credit market ultimately grew larger or the total bitcoin backed derivatives market being common equity and digital credit grew to be larger than the actual outstanding Bitcoin market. And if Bitcoin is this real settlement layer collateral that's transferred its final settlement between institutions, there's no reason why these sorts of products won't grow to a larger market capitalization than Bitcoin itself. And that's something we've even seen with money market funds. Whereas T bills are the short term settlement infrastructure backing them.
- [58:05]
Jeff
I don't think, I don't think people are prepared for that. I don't think the, the bitcoin maxis are prepared for that.
- [58:11]
Dan
That's a lot of paper, Bitcoin.
- [58:14]
Jeff
That's a lot of. Yeah, it's a lot of paper built on the bitcoin infrastructure for sure. For sure.
- [58:20]
Dan
Mace, did you, did you want to talk about that power law trading model? Maybe you can tell us your thoughts.
- [58:27]
Mason
What I, I think, I think you should, you should explain it a little bit because I, I thought it was an interesting insight.
- [58:35]
Dan
Sure, I'll end it. Yeah, go ahead.
- [58:38]
Mason
No, no, no, you go.
- [58:39]
Dan
And I think, I mean strives looking at it in an interesting way as well. And so I think it started with this idea that Josh talked about this a lot too. And we all have Jeff reference that strives internally using different metrics like the 200 week moving average, the number of days which bitcoin has traded below it, the probability of a sustained drawdown, you know, from an all time high, et cetera. We all have price metrics and we'd all to say that we don't use price metrics. I really believe in sort of a long term trajectory of Bitcoin that's in line with a power growth or decaying exponential. And that's very similar to what Saylor has put forth with his 2121 model. And so I think bitcoin will follow a decaying exponential. And so when you model that out, anytime you're below the long term trend, whether that be down at the 200 week or 200 day moving average, you'd want to be amplified heavier, you'd want to have more amplification as the downside risk is significantly less than the upside potential in the short term. And so you can lever up and during those periods of time when Bitcoin's in a substantial decline, you're able your capacity as an issuer to issue the stable yielding instruments. So STRC or SATA expands, right? Grain can speak on this point, but strategies top three Bitcoin purchasing quarters have come in 2026 or top, sorry top bitch coin purchasing quarter came in 2026 on the back of STRC specifically. So now we have a mechanism that works during drawdowns to buy bitcoin. When does the M nav expanded? When, when is common equity issuance accretive? Well we know for strategy at least and I know it's a little bit different for strive that's above 1.22 times M navigate. When is that likely to occur? When Bitcoin's short term overheated or above its long term power trend. When issuing common equity, that's a de amplifying maneuver. So when you amplify below the trend or whatever moving average you're using, you're getting outperformance on the way up when the market naturally demands deleveraging by issuing common equity, then you're actually cushioning the downside for every common you're increasing bitcoin per share yield by issuing common equity at a premium, but you're also de amplifying the balance sheet which mutes the downside leverage that you wrote on the way up. So if you can accurate, if a company can appropriately lever up during bottoms and then deleverage during tops. Using the two mechanisms we just talked about, they can be very successful in accruing bitcoin per share yield over a long period of time. So these cycles really benefit these sorts of corporate vehicles. I just think it's pretty interesting.
- [61:17]
Jeff
Countercyclicality. Yeah, countercyclicality. They could both move in different directions. One, the equity becomes more attractive as the market moves up. That DE amplifies the credit, the risk profile improves, which de risks the downside of a downward trajectory movement in Bitcoin. You could also think about people peeling off capital as well. If bitcoin heats up and moves too hot and people are like, ooh, I want to risk off, people may risk off into the credit instrument. And watching the relative trading dynamics between the two is going to be so fascinating. But I think having a structural perspective, power law 200 week moving average. Looking at a structural perspective or framework, thinking about downside, risk and capital structure is, is the way to go. You have to, you have to look at what is the, what is the floor? What is the floor like? We're all kind of underwriting the floor, not necessarily the peaks. What do I want my balance sheet to look like at the floor? If we hit the floor, what do I want it to look like after that? Like, what does the health of the balance sheet look like in that period of time? And this is one of the reasons that I became incredibly interested in MSTR to begin with was in 2022 when strategy was like 120% leveraged. In November of 22, I sat back and I looked at the balance sheet. I'm like this, I mean, the debt doesn't expire for four years. The company is still healthy and they got more Bitcoin than anybody else. And it was one of those things that the price deviated from expectation. Nothing had really changed in the risk profile of the Bitcoin aside from the fact that companies blew up. There was a political regime that was trying to kill Bitcoin. But like the blocks were still happening, transactions were still happening. Bitcoin didn't take a day off. Like the risk profile didn't fundamentally change. And at that point being 120% leverage, they had a lot of, they had debt at that point. At that moment in time. That was valuable opportunity for those that were able to see through that. It was a good entry opportunity for those that are able to see through that.
- [63:36]
Mason
Yeah, absolutely. I, so I, I had a few thoughts about this. I mean this observation and
- [63:45]
Grant
if you're
- [63:45]
Mason
familiar with kind of the, the power trend or power law space, you know that there's like, there's these power, power law maxis who will like say that it is kind of absolutely right. In, in the same way Jeff tells Coffeezilla, it's just math. Right. If you're talking to Giovanni, he's like, it's just math. It's, it's, it's right there.
- [64:06]
Grant
Quick question. Did Coffeezilla ever post the video?
- [64:09]
Jeff
No. No, I don't think he will either.
- [64:13]
Grant
You know, you know, guys, sorry to interrupt. Mason, I think that's a big deal. I think that's a guy that thought that he was going to go in and crush you with this. And he has what, a mil, more than a million followers on YouTube?
- [64:27]
Jeff
4.5 millions.
- [64:29]
Grant
Yeah, 4 millions of followers. And they love to hear him talk, obviously, because he has 4 million followers. And he came on and then if he crushed you, the first thing he would have done was he would have posted it and he didn't. And the fact that you, if you didn't record it yourself. Right. It would have never seen the light of day. And so kudos to you. And this is one of those things where there are people like, they have great rhetoric and, and I'm sorry to, you know, cut you off here, Mason, for a second, but you know what, if I start talking to somebody and I start running through 200 week moving average, RSI, relative strength indicator, power law, perpetual prefs, equity versus debt, and they're like, they're like, oh. And they started asking me questions and I could I get a sense that they don't know what I'm talking about. Or let's say they're being arrogant. I'll be like, great, you know what? Those are my ideas. What metrics do you look at in order to judge an investment? Yeah, you just say that and then you go like this. You don't say anything for five seconds. And I could tell you that every time I've done that, the other person is like, well, what do you mean? I'm like, what do you mean, what do I mean? You have no metrics that you even look at or you don't even if you had a metric, tell me what number you're looking for. Amplification, is it between 30 and 50% or 50% and 70%? We know that there's a metric, we just don't know what that met, what the sweet spot or the equilibrium point is. That was the point of what you did, Dan. Previously putting this up. What is the range in a bull market for Bitcoin? You're going to have a higher amplification you can tolerate. And if Bitcoin drops down, you want it to be a lower amplification. We don't really know yet what that's going to be. Right. We have a good idea. Go ahead.
- [66:11]
Jeff
The irony is the transparency, because those same people that will make those statements go park money in a bank and have never looked at the health of
- [66:19]
Grant
the bank, and they don't need to look in the health of the bank because it's FDIC insured. So therefore, as long as it's less than 250 grand, they kind of don't care. Right?
- [66:31]
Jeff
Yeah. So this is kind of what I talked about on the Bankless podcast is like this trust, this evolution of trust. We are trying to make trust cheaper via transparency and math. And this is something that you can go look on our website. You could go look at the relative risk profile. You can look at the safety, the security, the liquidity. You could go look at all of those things and you can make your own judgment. Whereas the trust infrastructure that's been created with banks is a function of the fdic, which has allowed banks to take on more risk, which is like perverse incentives. It's not aligned with the people that are actually holding. They're not. They're rehypothe getting your capital. You're actually losing money when you hold it in a bank. And you know, all of those things, it's just genetic, right? Like the people. The people operate in that way because it's genetic that they've been. They've been taught that's what they should do as opposed to question. Yet this new system comes out that's incredibly transparent and they're asking questions as they should, but they don't even have the tools to start to understand what the risk profile is because they've never had to consider that in their previous lives or anything else that they do, even though they should be doing that. So it's just an interesting criticism that's evolving as people are trying to wrap their heads around it. They're taking this one view to this new bright, shiny thing, which is fair, but not doing it to everything else in the rest of the world, which is just fascinating to me, but neither here nor there. Good perspective grain. So I got to go back to Mason. You're on a heater there. Where'd we leave off?
- [68:12]
Mason
So you have these power law maxis who are treated like law. It's written in stone. And, and kind of the, the question that came to me after reading this article by Dan is okay, treasury companies with the preferred model currently strategy and strive they have an obligation to their shareholders to manage the amplification ratio responsibly. And some of that is like understanding when, when Bitcoin is cheap and, and when it's oversold because you do not want to be heavily amplified, let's say, going into a 50 drawdown. And I, I think strategy, you know, had had relatively low amplification going into the bear market and has now increased it. And, and the question that came to my mind was should this be something like the power law? Should this be something they should be explicitly managing too? And, and that, that had me thinking about kind of the, the earlier announcement in, in last summer about mnav, right when, when, when they were going to sell equity at a premium or, or when they would not. And so, and of course that had second and third order effects that, that announcement that were previously unforeseen. So in my mind, I think, I think you do want your management to manage the amplification to some kind of model, some kind of understanding of Bitcoin price, some kind of framework. But I don't, I don't think you want to explit, you don't want them to explain explicitly, state this is what we're doing because that has second and third order effects that, you know, you once, once that is stated, once that is public, you no longer have the optionality or the flexibility and, and, and potentially the market may punish you. Let's say in, in, in the same way the, the M. Nav kind of suffered after that announcement, it could happen the same, the same way with, you know, potentially if you're going to say, hey, we're going to de. Amplify at the 80th percentile ban of the power Law. And, and then the, the, the market kind of knows that it could potentially be harder or, or it could, it could, it could be a hiccup. So. Yeah, yeah, go ahead.
- [71:05]
Jeff
Yeah, I think you're outlining the importance of having a stochastic view of the world, a probabilistic view of everything that can happen in the world. And like having a probabilistic distribution and a probabilistic understanding because things are going to happen differently than you anticipate and that you need to have the ability to adapt and change and think about the entire capital structure across, across a horizon of time. Not just, you know, six months, 12 months. It's 24 months, 48 months. I want to think four, eight years out. If I'm. If I'm selling a credit instrument that's got a, you know, Macaulay duration of eight years, I need to be thinking eight years plus. I need to be thinking about the person that's buying the instrument. What does eight years plus look like? How long does it take for capital to get capital back from holding that particular instrument? What does that entire lifespan look like? We're thinking in terms of decades and a stochastic view of risk. I provide that 200 week moving average is a proxy of financial strength in the downside. But I agree with you.
- [72:20]
Dan
I mean, I didn't understand. Yeah, I think what Mason was saying, as I understood it was simply like for any sort of stochastic or probabilistic analysis of bitcoin into the future, you obviously are going to have some sort of benchmark return plus price targets, et cetera, et cetera. And I think what Mason's saying makes a lot of sense that you wouldn't necessarily want to publish that to the public, but you're going to construct your balance sheet and construct your bitcoin performance, you know, using one of your two levers differently based on where you are relative to your own internal models of bitcoin price.
- [72:55]
Jeff
I've been a little less active on X because we're having these conversations every 10 minutes behind the scenes. So yeah, it's, it's happening and it's happening in real time. And you know, our, our company operates a little bit differently than strategy and, and we have different conversations with different capital markets than they do and. Yeah, completely agree, completely agree. Okay. Or hour 15 in. That's all I've got. It's. A lot is happening. Capital's flowing and it's been a fun time to pay attention to the markets. You guys have anything else or final thoughts?
- [73:32]
Mason
Yeah, we, we. You know, today on Twitter there was announcement. A congressman introduced a, a bill for a strategic bitcoin reserve that would buy 1 million bitcoin over five years. Will it go through? I don't know. But that is incredibly interesting. Just, just the fact that we are in an age where these conversations are happening. And it is a very real possibility. Maybe not likely, but the American Reserve
- [74:09]
Jeff
Modernization act of 2026, there's a million Bitcoin.
- [74:13]
Mason
Yeah.
- [74:13]
Jeff
Over how many years?
- [74:15]
Mason
Five years, I believe.
- [74:17]
Jeff
Wow.
- [74:17]
Grant
I think the goal is to acquire 200,000 bitcoin per year. But look, Mason, exactly what you just said is the fact that they're even having these conversations. Cynthia Loomis had talked about this before also, you know, congratulations to you, Jeff. Would you've achieved that. Strive to the whole Strive team. Congratulations to Strategy. With they built. I think that what's going to take place over the, over the very short term, next two to three years, there's going to be two groups of people, people that looked at the future and said I've got to go protect myself. Either I'm buying bitcoin self storage, I'm buying, you know, Bitcoin derivatives. Being strategy Strive so forth Perpetual preps. I'm investing in Mag7 or AI. They're doing something to protect their future. And there'll be a group of people like that that they'll say, oh this is an awesome world to be in. And then there'll be another group of people that'll just be like completely unprepared. And it's not that they didn't know, it's that they chose not to know. And so when you have those conversations in the future, I would say give them a little kindness and grace and say, you know, you can kind of change your thing, change your life around, but it's going to take two to four years. It's not going to happen over. It's not a get rich quick scheme. And so with that, I mean that's what I just wanted to say to you guys. I think that this is changing very quickly. But I will tell you, the vast majority of people around the world have no idea what we're talking about. You know that Jeff, that different events, no idea. We're talking about.
- [75:44]
Jeff
Digital credit is barely a, barely a year old. Like Strike Strike was launched in February and Stretch was launched in like late June or July. So we're. When these things aren't even a year old, they don't even have yet.
- [75:57]
Grant
Right. Strategy was the largest issuer of new. Of new instruments last year. $23 billion. The large out of all all equities. He was the largest. But if you were to go even ask that question to people in equity market will be like, who's Michael Saylor? What a strategy. And so with that, you know, the takeaway for this is congratulations to all of us that we've done this, we've stuck through this. I think crypto winter's over, the bottom is in, the price is going higher. Everybody have a great holiday weekend. You guys go around. I'm done.
- [76:28]
Jeff
Yeah. I had a conversation this morning with a guy that was, he's like, hey, you know, I Want to talk to my, talk to my CEO about this and my, my CFO and coo and he's like, what should I say? I was like, well there's a company that had $500 million in 2020 and now they have $62 billion of Bitcoin. Might you want to learn about what's going on there? Like they have 100 balance sheet in five years. You work with balance sheet companies, is that not interesting? Are you not curious about that? Like you work with balance sheet companies, they 130x their balance sheet in 5 years. Like you should probably pay attention to that and maybe learn about what's happening in the capital markets because it's bigger than all of your counterparties. So yeah man, it's, it's moving and it's gonna slap people over the head. I mean once, once bitcoin's back at all time high, what's the strategy balance sheet? It's over. It's over a hundred billion dollars, right? It's got 84840000 times 126 000. And by the way, the strategy balance sheet is going to be a hundred and five billion dollars when bitcoin goes back to an all time high. I think you're talking about going into price discovery with 100 billion dollar company at Bitcoin all time high. I mean that's crazy.
- [77:45]
Mason
Yeah, crazy, crazy.
- [77:48]
Jeff
Dan, gonna pass it over to you. Final thoughts?
- [77:51]
Dan
Yeah, I think obviously the market's pricing amplification in a favorable way. It likes the daily dividend. Semi monthly with STRC is super interesting. I love that strategy. Is not rushing to try to chase the daily dividend trend. They should move slowly. They should respect their investors. Obviously they're moving to a shareholder vote for all of their shareholders for the semi monthly dividends, which is an important step I believe. And so yeah, I think the landscape for different types of digital credit is clearly being built out in real time. And I remain optimistic for all the different products, not just STRC over the medium to long term.
- [78:31]
Jeff
Go vote your shares. If you have mstr strc, go vote your shares. The vote is over in a couple weeks. Takes a little bit of time. You got to go into your brokerage account and define the. It might be in your email. Maybe some people got a note in the mail. Go vote your shares. It makes the product better. Good stuff. That's all I got. Mason, anything else?
- [78:56]
Mason
No, I, I just wanted to bring attention to the, the strategic reserve. And yeah, I mean I, I think I don't know. I don't know what the price action is going to be this summer, but I'm just incredibly bullish for the next five years. It's. It's.
- [79:15]
Jeff
It's a great time to be working in bitcoin, isn't it? Yeah, yeah, it's. It's been a lot of fun. I look forward to the next decade. It's going to be. It's going to be a blast. A lot of things to be positive about and, yeah, let's keep the price of bitcoin moving. Thanks, everybody, for the time. Appreciate it. That's it for True north episode 67. We will see you quite possibly next week after the holiday. Take it easy.
- [79:40]
Mason
Sweet.
- [79:40]
Dan
Awesome. See you guys.