Should You Invest In Digital Credit Backed By Bitcoin?

[0:00] As a Bitcoiner and a longtime Bitcoiner,
[0:02] I firmly believe that this debt crisis
[0:04] will not get better and we're
[0:05] transitioning to a Bitcoin future. And I
[0:08] think digital credit could be the most
[0:10] important asset in this transition
[0:13] period. What's going on guys? Today we
[0:15] got a great conversation with Matt Cole.
[0:16] Matt is the CEO of Strive Asset
[0:18] Management and in this conversation we
[0:20] do a breakdown of digital credit. He
[0:22] explains what it is, how it works, what
[0:23] the risks are, and how they would
[0:25] respond to different situations. We also
[0:27] get into all the pros and cons of both
[0:29] strategy and Strive having these
[0:31] instruments in the market and how
[0:32] institutional investors are responding.
[0:34] I found this conversation fascinating.
[0:36] It helped me better understand digital
[0:37] credit. I hope it helps you as well.
[0:39] Here's my conversation with Matt Cole.
[0:41] All right, Matt, I want to talk about
[0:42] digital credit. This seems to be taking
[0:44] the world by storm, but at the same
[0:45] time, it is creating massive
[0:46] controversy. Can you just describe what
[0:49] is the problem that digital credit is
[0:51] solving?
[0:52] >> Yeah. Um, I've been reflecting on this a
[0:55] lot and and I think the problem that
[0:57] it's solving is actually bigger than I
[0:59] first imagined. So maybe I'll start with
[1:00] what I thought the problem that it was
[1:02] solving is and kind of what I think the
[1:04] problem that it's solving is now. Um, so
[1:07] when when we first launched Seda, what I
[1:10] viewed it as was just a preferred equity
[1:13] security. It pays a high interest. It is
[1:16] backed by by Bitcoin risk. And as an
[1:20] issuer, I was concerned with a couple
[1:23] risks on the issuer side. So like Strive
[1:25] or Strategy, namely maturity risk, just
[1:28] that Bitcoin is such a long duration
[1:31] asset. It has no cash flow. And we're
[1:33] trying to underwrite a perpetual bull
[1:35] thesis in Bitcoin. And what I wanted to
[1:39] do is have the longest liability I
[1:41] possibly could have, which is obviously
[1:43] a perpetual liability. Um, and then
[1:46] secondarily remove negative convexity to
[1:49] the maximal degree to the upside. So
[1:51] because we know Bitcoin over time on
[1:53] average goes up into the right and I
[1:56] think it's going to go to literally
[1:57] infinity that I would prefer for my my
[2:01] liability to not convert to equity when
[2:04] Bitcoin's ripping higher. That that can
[2:07] constrain the total return as an issuer.
[2:09] So, I just viewed digital credit as a
[2:11] better source of financing and I was
[2:14] happy to pay a double-digit interest
[2:17] rate to not have the negative convexity
[2:20] to the downside of maturity risk and not
[2:22] have negative convexity to the upside of
[2:25] equity conversion. And I just thought
[2:26] that was a a good trade for us as an
[2:29] issuer. And so, I wanted to be allin on
[2:31] digital credit. And just coming from the
[2:33] fixed income world, I know how yield
[2:36] starved we are. uh you've covered a lot
[2:38] and I agree with this the concept of the
[2:40] 60/40 portfolio being dead and you know
[2:43] coming from a fixed income background
[2:46] and just thinking through you know what
[2:49] I what I think that's almost like a
[2:50] consensus position 6040 is dead or it's
[2:52] consensus in our circles what is
[2:54] completely not consensus is what do you
[2:56] do with the 40 uh do you put it in
[2:59] bitcoin do you put it in you know
[3:01] prediction markets do you put it in
[3:02] digital credit uh what do you what do
[3:04] you do with it there's a million do you
[3:06] put it and you know trend following
[3:08] solutions. I've seen so many different
[3:09] ideas, a lot of interesting ideas. Um
[3:12] but I thought digital credit could make
[3:13] a play at that. So that was just kind of
[3:15] the the simplistic idea um to start.
[3:20] Where I think it's going now is
[3:22] something much bigger and and this much
[3:24] bigger idea is that right now fiat
[3:28] currencies are still the primary form of
[3:30] currency. The dollar is still the
[3:32] reserve currency of the world. As a as a
[3:35] Bitcoiner and a longtime Bitcoiner, I
[3:38] firmly believe that this debt crisis
[3:39] will not get better and we're
[3:41] transitioning to a Bitcoin future. The
[3:43] hardest part about that transition is
[3:46] how long will it take? And no one knows
[3:49] the answer to that. I think Bitcoin
[3:50] continues to go up over the course of
[3:52] time. But does it take 5 years? I don't
[3:56] think so. Does it take 10 years? Does it
[3:57] take 20 years? Does it take 30 years?
[3:59] Does it take 50 years? No one really
[4:01] knows what that transition will look
[4:03] like. But when you look at other other
[4:06] kind of emerging third world currency uh
[4:09] countries that have had their currencies
[4:10] debased what you'll see is in those
[4:12] countries as that starts to happen more
[4:15] and more the citizens look for
[4:18] alternative things to use as currencies
[4:21] and to kind of ditch the whatever the
[4:23] Argentinian peso or whatever the
[4:26] currency we're talking about. And I
[4:27] think that's going to happen in the US
[4:29] as well. And I think digital credit
[4:32] could be the most important asset in
[4:35] this transition period that kind of
[4:38] smooths it out, minimizes the
[4:39] volatility. People see where it goes,
[4:41] but you don't have to make as hard of a
[4:43] prediction of when it happens. You don't
[4:45] have to write out as much volatility.
[4:47] And what's interesting is that if that
[4:49] thesis plays out and digital credit is
[4:51] this transition asset, maybe the
[4:54] ultimate transition asset, I don't think
[4:55] it'll be the only transition asset, then
[4:58] it in and of itself could actually
[5:00] accelerate hyper bitcoinization because
[5:02] you actually have fresh sources of
[5:04] demand coming in to digital credit. So I
[5:07] think it plays that role. I don't think
[5:08] it's a forever thing. I think if we move
[5:11] to a hyper bitcoinization world, then
[5:13] bitcoin becomes money. But I think it
[5:15] could become very interesting for
[5:16] several decades.
[5:18] >> Now when we think about this digital
[5:20] credit, can you just explain the very
[5:22] simple concept of you all are taking
[5:24] capital from investors, you are
[5:26] promising them this yield in perpetuity
[5:29] and then you are buying Bitcoin, how
[5:31] does this work or or like when you
[5:33] describe it to someone for the first
[5:34] time, what do you say?
[5:36] >> Yeah. So as as an issuer, it's really a
[5:39] carry trade. So we have a cost of
[5:40] capital. So for SATA, it's 13% right
[5:43] now. It's variable rate um because the
[5:45] issuer we are trying to peg it minimize
[5:47] volatility around 100 so it could go up
[5:49] could go down for stretch strategies
[5:52] products it's 11 a.5% and so what we are
[5:55] making a investment bet on is that the
[5:59] average compounded annual growth rate of
[6:01] bitcoin into the future will be better
[6:03] than that financing rate that is what
[6:05] needs to be true for our common equity
[6:08] investors to outperform bitcoin bitcoin
[6:11] is the hurdle rate uh that has to be
[6:14] That does not have to be true for the
[6:16] preferred equity investor to win and to
[6:18] have a great asset that could pay the
[6:20] interest in perpetuity. The interest
[6:21] rate for that to be true for them is
[6:23] much lower. Uh so for SATA right now
[6:26] it's in the neighborhood of 6 12% as
[6:30] that break even interest rate where
[6:32] Strive could pay interest literally
[6:34] forever into the future. And and so
[6:36] sometimes people hear that and they say,
[6:38] "Oh, Strive is saying that if Bitcoin
[6:40] goes up 6 12% that everybody wins." No,
[6:44] everybody doesn't win. The SATA investor
[6:46] wins. They have a good credit. The
[6:48] common equity investor, how it would
[6:49] likely play out would be Bitcoin's going
[6:52] up, call it 6.5% on average. And the
[6:56] common equity probably largely just
[6:58] holds flat. It doesn't participate
[7:00] because all the Bitcoin returns are
[7:02] filtering into the preferred equity
[7:04] instrument. So it's just a a structured
[7:06] finance instrument where you have the
[7:09] more senior path and you have the more
[7:10] junior common.
[7:12] >> Now when you think about this actual uh
[7:14] kind of return of Bitcoin going forward,
[7:16] what do you think that is? Is that 20%
[7:19] 30% 40% year-over-year? Let's say for
[7:21] the next decade.
[7:23] >> Yeah, we we have a long-term projection,
[7:25] call it for the next couple decades of
[7:27] in the neighborhood of 30% a year. Um
[7:30] right now with Bitcoin in a bare market,
[7:32] when Bitcoin goes down, that compounded
[7:35] annual growth rate projection actually
[7:37] goes higher um because to make up for
[7:40] kind of the bare market. And so right
[7:41] now it would be on the higher end of
[7:43] that range. I think this is a a time
[7:46] where you want to take risk and and so
[7:48] this kind of gets into the theory of
[7:52] amplification for a Bitcoin treasury
[7:54] company. And and what I mean by that is
[7:57] that we have stated that you know we
[8:00] think somewhere you know call it in the
[8:02] neighborhood of 30 to 60 70% is kind of
[8:06] for a clean balance sheet company the
[8:08] range of amplification that generally
[8:10] makes sense um and could be managed and
[8:12] and the reason that we go to 60 to 70
[8:15] actually is to say that Bitcoin going
[8:18] down itself could actually push
[8:20] amplification beyond that in a in the
[8:21] depths of a bare market. And so we
[8:24] ourselves as an issuer would likely stop
[8:27] around there when Bitcoin's kind of at a
[8:29] current level right around a 200WE
[8:30] moving average. But um I think you
[8:33] really want to go and be aggressive. The
[8:36] concept of be greedy when others are
[8:38] fearful um and and you really want to
[8:40] push it to the max exactly at this
[8:42] period of time, but on average call it a
[8:44] 30% kagger is what I think uh we should
[8:47] expect.
[8:48] >> I don't think that that's really that
[8:49] crazy. um it tends to be right around
[8:51] where uh where I think it is as well. Um
[8:53] when you look at the way that you are
[8:55] paying out these dividends, obviously
[8:57] everything was monthly. Now we see
[8:59] stretch going to twice a month. You all
[9:02] have gone to daily. Can you talk about
[9:03] the pros and cons of you guys going to
[9:06] daily or even uh kind of twice a month?
[9:09] >> Yeah, it it really gets into this call
[9:11] it epiphany I've been having of how big
[9:13] digital credit could be. That digital
[9:15] credit is, you know, it's a preferred
[9:17] equity instrument. It's not debt. It's
[9:20] not a money market. It's not money. But
[9:23] in this transitionary period, to the
[9:25] extent that you can make the dividend a
[9:28] more continuous stream of events, then
[9:32] what it means is that someone that holds
[9:34] it doesn't need to hold it waiting for
[9:37] the next dividend event. They don't have
[9:39] to like right now when it's monthly.
[9:41] What you'll see in the behavior of
[9:43] digital credit is you'll see the price
[9:45] of stretch or SATA move up to par right
[9:48] around the dividend event and you'll see
[9:50] the volume spike which I think is the
[9:51] most interesting tell sometimes you know
[9:53] if you're just looking at price you
[9:55] actually miss the liquidity which I
[9:57] think is the most important driver of
[9:59] what's kind of happening behind the
[10:00] scenes here and and you see a massive
[10:02] liquidity spike because everybody wants
[10:04] that dividend event and then post
[10:06] dividend event it drops um on average
[10:09] about by the price of the dividend But
[10:10] some months more, some months less. And
[10:13] that economically makes sense. It's not
[10:15] anything that's crazy. But if you move
[10:17] to something like Strive's doing with
[10:19] SATA where it will be the first,
[10:21] literally the first listed security in
[10:23] US capital markets history. So like real
[10:24] innovation here to pay a daily dividend,
[10:27] then that dividend event is not an event
[10:29] that you really want to plan around like
[10:31] like it's just a continuous stream. You
[10:32] either like SATA or you don't like SATA.
[10:35] And if you like it, you just you just
[10:36] hold it. you're not trying to time a
[10:38] dividend event, which should reduce and
[10:40] compress the volatility. And if you
[10:42] reduce and compress the volatility, then
[10:45] it can be used more likely like a money
[10:48] market fund or like a savings account
[10:49] type sort of instrument.
[10:52] >> Now, when you think about kind of what
[10:54] can go wrong here, the first thing that
[10:55] my mind goes to is if you have to pay
[10:57] this in perpetuity, do you always have
[11:00] to pay a dividend? Could you pause the
[11:01] dividend? It sounds like you could lower
[11:03] the rate. What are some of the things
[11:04] that you could do to maybe mitigate risk
[11:07] over a very long period of time? Because
[11:09] in a couple of years sounds great, but
[11:11] what about 20 30 years from now?
[11:13] >> Yeah. So, um, what are the rights of the
[11:15] issuer? So, we could pause dividends and
[11:18] we actually would have a a fiduciary
[11:21] obligation as a board to pause dividends
[11:24] if paying a dividend would put Strive
[11:26] into bankruptcy risk. And and so, the
[11:29] next natural question is, well, what
[11:31] does the balance sheet look like? What
[11:33] would that scenario look like where
[11:36] something like that would be in the
[11:37] interest of the issuer of Strive? Um
[11:39] where you know SATA is our flagship
[11:41] product. If we were to do something that
[11:44] impaired the confidence of SATA that
[11:47] would permanently impair the entire
[11:49] strategy that we're trying to do, right?
[11:51] So obviously as an issuer, we're going
[11:52] to do everything we can to not do that.
[11:55] But it's a fair question to say what
[11:56] would that look like? What does your
[11:57] balance sheet look like? So Strive has
[11:59] no debt. uh we have 18 months of cash
[12:03] and marketable securities. So cash and
[12:05] STRC and reserves of over 12 months of
[12:07] cash and about 6 months of of stretch
[12:09] reserves. And and so what that means is
[12:12] that you start to look at risk and and
[12:14] say what does downside risk look like?
[12:16] So if you were to assume the 2022 2023
[12:20] bare market played out as an example,
[12:22] what that would mean in Bitcoin terms
[12:24] today would be about a $40,000 Bitcoin
[12:27] bottom. and for Bitcoin to not move off
[12:30] of the 200E moving average to the upside
[12:32] until very late 2027.
[12:34] Um, that that's not a scenario that that
[12:37] is impossible to imagine. I think it's
[12:39] it's more bullish than or more bearish
[12:41] than my base case scenario. I'm pretty
[12:43] bullish on Bitcoin for the back half of
[12:45] this year, but you know, it's it's not
[12:47] an insane scenario. If that scenario
[12:49] were to play out, Strive could literally
[12:52] do nothing and just use our our cash
[12:55] dividend reserves and not have to sell a
[12:58] single Bitcoin through that entire bare
[13:00] market. Um, and then if you were to say,
[13:03] well, Bitcoin has something worse than
[13:05] 2022, 2023, it's longer in duration.
[13:08] It's down longer. Well, then we still
[13:10] have, depending on where you think
[13:11] Bitcoin price is, $40,000,
[13:14] 5 to seven years of Bitcoin coverage in
[13:16] of itself. So once you start dipping
[13:17] into the Bitcoin, so you really have to
[13:19] start thinking about a scenario where
[13:21] it's a substantially longer and worse
[13:24] bare market than 2022, 2023 in duration
[13:27] and downside before we even have to dip
[13:29] into our Bitcoin. And and so it becomes
[13:31] very hard, not impossible, but very hard
[13:34] to see the scenario where we have to
[13:36] actually pause the dividends. Um you
[13:38] basically have to underwrite Bitcoin
[13:40] failing for that to be true. When an
[13:42] investor buys SATA, how much of the
[13:45] dollar that they give you goes into
[13:47] Bitcoin versus goes into the dollar
[13:48] reserve?
[13:50] >> It's a it's a dynamic question. So,
[13:52] we're not just issuing SATA, we're also
[13:55] issuing the common equity ASST. Um, and
[13:58] we don't have a a mandate to preserve
[14:01] the dividend reserve. And so, actually
[14:03] looking at kind of the history of, you
[14:05] know, I can say a lot of different
[14:06] things as you know, the CEO of the
[14:08] company, but you know, don't, you know,
[14:10] don't trust verify. I think the actions
[14:12] are actually more interesting than what
[14:14] I could say, right? Um, and so when we
[14:16] IPOed SATA in November, we started with
[14:18] a 12-month dividend reserve. Bitcoin was
[14:21] over $100,000 a coin when we IPOed Seda.
[14:24] We've gone into a bare market. And so it
[14:27] would be natural to say, well, I would
[14:29] expect that in a Bitcoin bare market,
[14:31] that might be when an issuer would start
[14:33] to use the dividend reserve. That's
[14:34] probably what it's for. Um but what
[14:37] Strive has actually done is we've
[14:38] increased the dividend reserve from 12
[14:40] months to 18 months. We were under no
[14:42] obligation to do so. Um so not only have
[14:44] we maintained it, we've increased it as
[14:46] SATA has been increasing in size. And
[14:49] the reason is is that we we you know
[14:52] we're actually seeing kind of the
[14:54] opportunity for SATA to be bigger than
[14:55] we expected and we want to do everything
[14:57] as an issue or to preserve confidence in
[15:00] this instrument to be able to withstand
[15:03] downside scenarios and and so right now
[15:07] we feel pretty that it's pretty
[15:09] appropriate to try to maintain an
[15:11] 18-month dividend reserve. I think it
[15:13] would be very possible like if Bitcoin
[15:16] went down to $40,000.
[15:18] The reserve is a reserve and if capital
[15:21] markets and liquidity conditions
[15:22] completely dried dried up, it's a
[15:24] reserve. It's not something that has to
[15:26] be maintained. It should be used if when
[15:29] needed otherwise what's the point of
[15:30] even having it. Um so I think it's
[15:33] possible we could dip into it. Um it's
[15:35] you know possible with SATA issuance
[15:37] that we often will put 100% of the the
[15:40] money raised into Bitcoin. It's also
[15:42] possible that we might reserve, you
[15:45] know, an 18 18month or a 12-month
[15:47] dividend reserve if we think that's the
[15:49] most appropriate action. Um, but what's
[15:52] been actually happening is that both the
[15:54] common equity ASST has been firing and
[15:56] SATA and and so it's really um a dynamic
[15:59] question, but what is the first
[16:01] principle? What is the goal? The goal is
[16:04] to maintain confidence and maintain SATA
[16:07] as a low volatility high yielding
[16:09] instrument. and and so that what that
[16:11] means is that you know if we have to
[16:13] reserve cash to do so we will um but our
[16:16] goal is to stack Bitcoin.
[16:18] >> What do you think is the single best
[16:21] critique of these digital credit
[16:23] instruments?
[16:24] >> Um I think the the it it depends I think
[16:29] there's two two different sides of the
[16:31] best critique. Um one is well why don't
[16:34] you just own Bitcoin? Why don't you just
[16:36] own Amplified Bitcoin? Um, as a as a
[16:38] Bitcoiner, I've been very um open that I
[16:42] do not own digital credit. I own Bitcoin
[16:45] and I own amplified Bitcoin exposure
[16:48] because I'm so confident in the
[16:50] direction that this goes. That is what I
[16:52] view as appropriate for me and what I
[16:54] think is going to maximize the returns
[16:56] for me and my family over time. And I
[16:58] can ride out the volatility. I think
[17:00] this this bare market's a bare market
[17:01] for ants. It doesn't even phase me. Um
[17:04] the reality is that that's and there's a
[17:07] lot of Bitcoiners that have that
[17:08] mindset, but that's kind of like a sicko
[17:10] mindset. Most people are volatility
[17:12] adverse. They have different needs in
[17:14] their life. They need cash flows. They
[17:15] have a lower duration ability. And and
[17:18] so what I what I saw is the problem with
[17:20] Bitcoin just in kind of anecdotes across
[17:23] people in that I know is that they tend
[17:26] to buy Bitcoin at the tops of the bull
[17:28] market. They don't actually have
[17:29] conviction. and they ride off of other
[17:31] people's conviction and don't do the
[17:32] homework and then they sell in the
[17:34] depths of a bare market because they
[17:35] weren't prepared for the volatility and
[17:37] and so I think digital credit provides
[17:39] the great product for them. Um but if
[17:42] you have the conviction and the ability
[17:43] then going out the risk spectrum further
[17:46] I think is is appropriate. Um I just
[17:48] think that the product market fit for
[17:49] that to not be true is insanely massive.
[17:52] Um on on the other side, the the risk
[17:56] adverse side, I think people say, "Well,
[17:58] it's not debt. You don't have the the
[18:00] credit protections." And then they'll
[18:03] list like, you know, 50 different risks
[18:05] that are, you know, disclosed in the
[18:07] disclosures, which is fine. And and I
[18:09] think what's fair is that every
[18:11] individual should look at any risks of
[18:14] an investment and assign a expected
[18:16] value, a probability of those and then
[18:19] make use those to make a a risk
[18:21] determination. Um and so if you think
[18:24] that Bitcoin is going to fail, if you
[18:26] think that uh people can't be trusted,
[18:29] companies can't be trusted, then you
[18:31] will likely assign a higher expected
[18:33] value to those risks than maybe I would
[18:36] or maybe a lot of other people would.
[18:38] And so if you assign a higher value then
[18:40] maybe you think the risk re reward of
[18:42] these instruments is not favorable. Um I
[18:45] think that there's really one true risk
[18:48] to these instruments. Um and and the
[18:49] reason I say that is as an issuer there
[18:52] was one key risk that we were trying to
[18:54] eliminate and that key risk was maturity
[18:57] risk. And so if the issuer is trying to
[18:59] eliminate maturity risk and that means
[19:00] that the investor of SATA takes that
[19:02] risk and then they get compensated for
[19:04] that risk with a return right. Um, and
[19:06] and so if that's the key risk, then you
[19:08] have to put a an expected value on that,
[19:11] which we kind of went through a little
[19:12] bit already when we're talking about
[19:13] downside scenarios. And so you have to
[19:15] put a probability that you think that
[19:17] that scenario plays out and then what
[19:19] you think that means. But I think if if
[19:22] you're willing to view Bitcoin as an
[19:25] asset that likely succeed succeeds and
[19:28] you need income, then I think these are
[19:29] a very attractive riskreward security.
[19:33] Let's talk about uh strategy and Michael
[19:35] Sailor selling Bitcoin. Obviously, they
[19:38] haven't done that in a number of years.
[19:39] They sold uh now infamously 32 Bitcoin.
[19:42] Um there's a lot of folks who are
[19:43] looking at recent price action of
[19:44] Bitcoin and saying Bitcoin went down a
[19:46] lot because Michael Sailor has given up.
[19:48] I think the Wall Street Journal called
[19:49] it a U-turn. Um it seems that there's a
[19:52] lot of speculation as to why this
[19:54] happened and what the implications are.
[19:56] What's your read? Um I think it was a a
[20:00] necessary evolution from strategy and
[20:03] and so when when we launched SATA in our
[20:07] investor calls the IPO process we
[20:09] explicitly said that if we need to sell
[20:11] Bitcoin we will sell Bitcoin. It wasn't
[20:13] off the table and the institutional
[20:16] investors really appreciated that um
[20:18] from Strive and then you know I think in
[20:21] in call it 90% of instances Strive has
[20:24] learned from strategy. They've been the
[20:26] pioneers in the space. In a couple
[20:27] instances, I think that we've done
[20:30] something that has proven to be valuable
[20:32] and and one of them was introducing a
[20:34] cash reserve when we IPOed SATA and now
[20:36] stretch has a cash reserve also, which I
[20:38] think, you know, better reduces the risk
[20:40] profile. The second was, you know, being
[20:42] willing to sell Bitcoin. Um, you know,
[20:43] but Sailor had been out there very
[20:45] publicly with a lot of messaging, never
[20:46] sell your Bitcoin, we will never sell
[20:48] your Bitcoin, all these different
[20:49] things. And and so I think he just had
[20:52] to message that I'm willing to do this.
[20:55] And and that willingness to do that was
[20:57] always going to come with the critics
[20:59] saying, "Oh, this is the tip of the
[21:00] iceberg. First it's 32, next it's going
[21:02] to be 3,200." But if but your goal
[21:06] should be maximizing total returns. You
[21:08] know, Bitcoin is your hurdle rate, but
[21:10] ultimately the goal is is you want to
[21:11] maximize the total returns for for your
[21:13] common equity shareholders. And to not
[21:16] have selling Bitcoin on the table when
[21:18] it might be advantageous, I think um is
[21:20] not the optimal way to do that. Um and
[21:23] and so selling 32 I think just it
[21:25] clearly shocked the market. And I think
[21:26] just the fact that a 32 bitcoin sell
[21:29] would shock the market. I think shows me
[21:32] that he had to do this to get to the
[21:34] point where they can operate maximizing
[21:36] total returns into the future. And with
[21:38] Bitcoin down you know there's potential
[21:41] that you know just from a like a tax
[21:43] loss harvesting perspective that more
[21:46] you know Bitcoin cells might make sense.
[21:49] But what's mo most important there is
[21:51] that I think he's going to be a net
[21:53] buyer of Bitcoin effectively every
[21:54] single month into the future. And so if
[21:57] he did a tax loss harvest transaction
[21:59] and sold whatever 50,000 Bitcoin and
[22:03] then the next day he buys back 50,000
[22:05] Bitcoin or even the next hour he buys
[22:07] back 50,000 Bitcoin. I think that
[22:10] shareholders should be should be
[22:12] thankful for that because it actually
[22:13] helps them put themselves in a better
[22:15] long-term position. I don't think you
[22:17] nor I believe that Michael Sailor has
[22:19] given up on Bitcoin or has changed his
[22:21] views on Bitcoin. Um but do you think
[22:23] that there could be negative
[22:24] ramifications in terms of the story now
[22:26] is a little bit more nuanced. You know,
[22:28] when you just say, "Hey, we will never
[22:29] sell Bitcoin." I think it's kind of the
[22:31] smooth brain, right? Anyone can
[22:32] understand that. Um the second that you
[22:34] start to talk about, hey, we are
[22:36] intelligent capital allocators.
[22:38] Sometimes we're buyers, sometimes we're
[22:40] sellers. It kind of depends on the
[22:41] market. Obviously, that doesn't mean
[22:43] it's not a smart decision, but the story
[22:45] changes a little bit. And so, how do you
[22:47] look at story versus maybe like what's
[22:49] the actual right decision as a capital
[22:50] allocator, whether for you or for a
[22:52] sailor?
[22:54] >> I I think the the actions ultimately
[22:56] will speak the loudest. And and so the
[22:59] story, it's kind of like how how we
[23:01] talked about what's the story of, you
[23:02] know, could you do you have to have a
[23:04] dividend reserve? What have you actually
[23:05] done? And so I think the the story
[23:07] becomes a little bit scary to some when
[23:11] you first see that first Bitcoin sell.
[23:14] But if over the course of the next year,
[23:16] if every single month strategy is a net
[23:18] Bitcoin buyer, then I think that story
[23:21] and that concern quickly ages poorly of
[23:24] I mean I mean I've been you on X, I'm on
[23:27] X. And the amount of people, big, you
[23:30] know, X accounts, big Bitcoin accounts
[23:32] that are predicting right now that this
[23:33] is the start of Bitcoin cells, continual
[23:36] Bitcoin sales from Michael Sailor, I
[23:38] think becomes part of the narrative and
[23:40] and the story for now. Um, but I think
[23:43] that story will quickly evolve over
[23:46] time. um and and quickly evolve over
[23:49] time. That actually reduces the the tell
[23:52] risk that I think people have always
[23:53] been concerned about is that strategy
[23:55] becomes like a forceller of a million
[23:57] Bitcoin, right? If you're willing to
[23:59] manage it on the on the fly on the go,
[24:02] then then that that risk becomes
[24:04] substantially less and I think
[24:06] ultimately the risk of strategy failing
[24:08] reduces um substantially even though I
[24:11] think maybe the consensus is that it's
[24:13] increased right now. Um, and ultimately
[24:15] that I think will be good for the price
[24:17] of Bitcoin.
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[27:04] Now when you look at the actual price
[27:07] action of Bitcoin, obviously we have
[27:09] sailor selling 32 bitcoin, there seems
[27:11] to be uh two narratives around Bitcoin
[27:14] in relationship to geopolitics and the
[27:16] conflict in Iran, etc. Uh there's also a
[27:20] deluge of information on a daily basis
[27:22] in the headlines of Wall Street
[27:23] institutions, sovereign wealth funds,
[27:25] etc. all adopting, using beingcome much
[27:28] more sympathetic to Bitcoin. It seems
[27:30] like all of the news is fairly positive,
[27:34] but the price keeps going down and then
[27:36] you see the NASDAQ is going up. And so,
[27:38] how do you rectify maybe the news to
[27:41] price action, especially with the
[27:42] context of all of these other assets
[27:44] that seem to be going up and to the
[27:46] right while Bitcoin is not?
[27:48] I remember back to previous bare markets
[27:52] that I've that I've lived through where
[27:55] I was looking at headlines and you know
[27:57] scary headlines and asking myself has my
[28:01] fundamental view of Bitcoin changed and
[28:04] both in you know in 2017 2018 when we
[28:07] did the 2018 bare market and then 2022
[28:10] 2023
[28:11] my foundational
[28:14] belief in Bitcoin and the fundamentals
[28:16] of Bitcoin actually increased during the
[28:18] bare market and the price action did not
[28:21] behave and and that wasn't surprising to
[28:24] me but it was just interesting. Um and I
[28:26] think right now in this bare market I
[28:29] believe the same to be true. Um I think
[28:32] we're at the early stages of broad
[28:36] institutional adoption. Uh one of those
[28:38] reasons still being the Bitcoin ETFs.
[28:41] Um, when you look at the the growth
[28:43] trajectory of ETFs in general, it is a 3
[28:48] to five year maturity process and we've
[28:50] already seen them be the most uh
[28:52] successful launch in financial products
[28:54] history and it's only, you know, in the
[28:58] first couple years and and so track
[29:00] records are being developed. You know,
[29:02] issuers like Morgan Stanley are getting
[29:03] their Bitcoin ETFs out there. different
[29:06] allocators in the space, they're still
[29:08] making them be investable in their
[29:10] investment policy statements. These just
[29:12] always structurally take time and and so
[29:15] I think we've only seen the beginnings
[29:16] of of ETF adoption and Bitcoin adoption
[29:19] from those. On the digital credit side,
[29:22] digital credits only existed for almost
[29:24] a year at this point. So if you think
[29:26] about that in its track record building
[29:28] process, from an institutional
[29:30] perspective, it still has a couple years
[29:32] to go. And I would argue it's building a
[29:34] great track record that the number one
[29:37] question that you would get as a issuer
[29:40] of digital credit last year is how how
[29:43] will it behave in a bare market. And
[29:46] what we've seen is that Bitcoin's gone
[29:49] down, you know, north of 50% at times.
[29:51] Right now, it's approximately 50% from
[29:53] its all-time high. And you have digital
[29:56] credit instruments still right around
[29:57] par. As we're recording this, they're
[29:58] just, you know, a couple points below
[30:00] par. But importantly, the total return
[30:03] for both SATA and Stretch since they've
[30:06] been issued is positive still because
[30:07] they're paying a high yield, right? So
[30:09] that that yield has been more than even
[30:11] the prices that they've dropped right
[30:12] now. And and so that correlation to
[30:15] Bitcoin is very low, right? Because it's
[30:18] had a positive return when Bitcoin goes
[30:19] down 50%. And so it's proving the thesis
[30:22] of having substantially less volatility
[30:25] than Bitcoin, which I think eases the
[30:27] biggest institutional fear. On on the
[30:30] retail side, you might have, you know,
[30:32] you have people that obviously like want
[30:33] it to stay at 100 every single day, and
[30:35] that's what we're trying to do. And I
[30:37] think these things will evolve to have
[30:38] less volatility over time. But on the
[30:41] institutional side, anything with a
[30:43] double-digit yield is just attractive.
[30:46] And they're prepared for
[30:50] substantially north of high yield
[30:52] volatility. And if you just pull up a
[30:53] chart of the HYG high yield ETF and you
[30:56] look at how volatile that thing is and
[30:58] that thing has a yield to worst of 6 12%
[31:01] or so and you double that with digital
[31:03] credit and if you can double that and
[31:06] have less volatility then I think it's
[31:09] just going to be something that will be
[31:10] will make a lot of sense for
[31:11] institutions to adopt and and but we're
[31:14] in the early stages of that happening.
[31:16] So if that happens in a couple years and
[31:19] ETFs get a you know three-ear track
[31:21] record in in a year or so then you could
[31:24] see mass institutional adoption continue
[31:27] to scale in 2027 2028 2029.
[31:31] Now when you think about um kind of the
[31:34] situation of this playing out obviously
[31:37] this digital credit has become
[31:39] attractive to somebody right so somebody
[31:41] is out there is this a cash replacement
[31:43] in their portfolio is this a fixed
[31:46] income replacement like how are people
[31:47] thinking about their portfolio
[31:49] construction putting this in where is it
[31:52] taking capital from and how do you see
[31:54] that evolving over time
[31:56] >> I think it's going to evolve over time
[31:58] in a major way where I think we are
[32:00] right now is the biggest people that I
[32:03] see allocating to it are allocating it
[32:05] more from fixed income sleeves that that
[32:08] 40% what do you do with that putting it
[32:10] into digital credit we've seen a lot of
[32:13] examples of real estate investors
[32:15] actually selling some real estate
[32:16] property and buying digital credit you
[32:18] get more yield with less work and real
[32:21] estate investors generally they
[32:23] understand the problem with fiat
[32:25] currency debasement they're you know
[32:26] hard asset investors and so we've seen a
[32:28] lot of examples on that uh I think as
[32:32] SATA and digital credit generally starts
[32:34] to pay dividends more frequently, I
[32:38] think tokenization will be a further
[32:39] innovation on top of that. So you're
[32:41] going to see a lot of tokenized
[32:44] securities in the future. I think
[32:45] there's no better security to tokenize
[32:48] than digital credit. and and as you
[32:52] tokenize digital credit, I think it will
[32:55] move ultimately to a place where right
[32:56] now SATA will pay dividends on business
[32:59] days. There's no reason that in the
[33:01] future dividend frequency can't continue
[33:04] to increase further from there. And
[33:07] there's also no reason in the future
[33:08] that you won't see banks, banking
[33:11] products, financialization products
[33:13] built on top of digital credit. And and
[33:15] you think about that a lot of brokerage
[33:18] accounts already today offer checking
[33:21] type sort of features. This is not
[33:23] something that's new. But if you combine
[33:26] tokenization,
[33:27] you know, moving towards instantaneous
[33:30] dividend payments, and the ability to
[33:32] have financial products, debit cards,
[33:36] credit cards, things like that tied to
[33:37] the digital credit instrument, I think
[33:40] in that future, it'll start to be used
[33:43] as an alternative to currency for more
[33:46] people. Um, I think that'll make some
[33:49] people on the internet lose their minds
[33:51] um about the risks of that, but I think
[33:54] that's ultimately where it goes. And I
[33:56] think it it makes sense. And I think
[33:58] this is kind of a one of my core beliefs
[34:00] around tokenization and securization and
[34:02] the fiat currency debt crisis is that as
[34:05] consumers look to move out of the
[34:08] dollar, the financial ecosystem exists
[34:11] for securities in general to become
[34:14] alternatives to dollars. And that's not
[34:16] just saying digital credit, but just not
[34:18] you don't necessarily need to hold
[34:20] dollars if you have tokenized things
[34:21] that you have a card attached to that
[34:23] you could sell. And I think digital
[34:25] credit is probably the best version of
[34:27] that. Um, but I think we're still in in
[34:29] the early stages of that adoption cycle.
[34:32] >> As I'm looking online at various uh news
[34:35] coverage of this, I think that people
[34:37] are still wrapping their head around
[34:38] this idea of Bitcoinbacked credit. Are
[34:41] there other Bitcoinbacked type of
[34:43] instruments or assets that you all are
[34:45] looking at or do you think that it is
[34:48] less of a let's diversify from an asset
[34:50] standpoint and let's focus on just the
[34:52] Bitcoin backed credit?
[34:54] >> I think the opportunity set for
[34:57] Bitcoinbacked credit, digital credit, um
[35:01] whatever you want to call all the all
[35:03] these different things built on top of
[35:04] Bitcoin is close to infinite. And it's
[35:08] part of the reason why strategy has done
[35:11] this in a major way. We do this. A lot
[35:13] of other players in the ecosystem do
[35:15] this is that Strive in and of itself
[35:18] will not be able to offer all of these
[35:20] products. We have SATA. I think it's,
[35:23] you know, it's there's a possibility
[35:24] that maybe one more product comes, but
[35:26] there's also a possibility that it
[35:27] doesn't come because the demand for SATA
[35:29] is just so high. But we can't be
[35:32] everything to everyone and we just can't
[35:35] utilize our balance sheet to provide a
[35:36] million different products. That would
[35:38] create too complex of a risk structure
[35:39] within Strive. But other players that
[35:43] have Bitcoin on their balance sheet, I
[35:45] think will make plays into this uh
[35:48] Bitcoin backed credit ecosystem and will
[35:50] provide real products that will have
[35:52] real demand and a differentiated risk
[35:55] return profile than SATA and and I could
[35:59] think of a bunch of different examples
[36:01] of this. Um the international example is
[36:03] just so easy and so obvious, but I think
[36:05] there's also a lot of examples in
[36:07] American capital markets. But the
[36:08] international example is SATA but paid
[36:11] in the pound. Seda but paid in the yen.
[36:13] Seda but paid in the euro. Like if if
[36:15] this truly is the best bridge between
[36:18] the current fiatbased system and the
[36:20] bitcoin future then different people are
[36:23] going to want to have different types of
[36:24] exposures to that risk profile and it
[36:26] just makes sense that there should be
[36:28] multiple products out there. Um, and so
[36:31] I think SATA gets really big, but also I
[36:33] think if if that is true and if digital
[36:36] credit were to
[36:39] speed up hyper bitcoinization, then you
[36:41] could start to see that really making
[36:43] banks mad. Think about Jamie Diamond,
[36:46] how he's losing his um mind about stable
[36:49] coins paying interest and the fight
[36:51] between Jaime Diamond and Brian
[36:53] Armstrong and and it makes sense. If if
[36:56] stable coins paid interest then you
[36:59] might see a run on the banks and so that
[37:02] creates a systemic risk for the banks
[37:03] and uh I think that for the US capital
[37:06] markets it would be best if banks are
[37:09] the blockbuster of today that that
[37:12] transition happens orderly and it
[37:14] doesn't happen in you know a overnight
[37:16] fashion that that would not be something
[37:18] that anyone you know wants but I think
[37:21] the problem is not the banks the problem
[37:22] is the money the problem is the dollar
[37:24] and And ultimately, I think that you
[37:27] can't constrain through regulation where
[37:30] this will ultimately go. Um, and and I
[37:32] think that digital credit will play
[37:34] that. And so, as an issuer, if you see
[37:36] that as a risk, you see, you know, in
[37:37] the future Jaime Diamond screaming at
[37:39] Strive or screaming at Michael Sailor,
[37:42] um, then, you know, you want a few
[37:44] different things. One, you want to
[37:45] educate everybody. You want to educate
[37:47] DC. But two, you also want like a
[37:49] diversified ecosystem of issuers. you
[37:53] don't want there to be, you know, one
[37:55] head to attack. You want there to be a
[37:56] lot of different products out there
[37:57] providing different risk return that
[37:59] actually increases the chance of
[38:01] success. Um, which is just kind of a
[38:03] unique thing to this ecosystem and to
[38:06] Bitcoin and why I, you know, firmly
[38:09] believe that, you know, this this is
[38:11] like a it's like a friendly type of
[38:13] competition in this ecosystem than like
[38:15] a cutthroat because we grow the pie
[38:18] together. And and anyways, I just think
[38:19] that's a a interesting nuance that even
[38:23] strategy right now, they're getting a
[38:25] little bit of heat online because of
[38:26] their support for Strive because their,
[38:29] you know, stock is down or whatever. But
[38:31] what I think interesting and what I
[38:33] think is true is I think Michael Sailor
[38:36] and Fong Lee are preparing themselves to
[38:39] run the largest corporation in the
[38:40] world. and and they see this from a
[38:43] longer term perspective which is why
[38:45] they want to see growth and success
[38:47] across the ecosystem with Stride but
[38:50] also with you know several other players
[38:51] as well.
[38:53] >> Now this is part of the uh uncomfortable
[38:55] conversation I think of the industry. I
[38:57] know you pretty well, I know Michael
[38:59] pretty well. I think both of you are
[39:00] highly competitive. You also are both
[39:02] very polite. I think of you both as
[39:04] gentlemen and so there is this uh
[39:06] somewhat you know uh friendly
[39:08] competition I think that you describe.
[39:10] Um at the same time if there was an
[39:13] outsider who didn't understand some of
[39:14] the interpersonal dynamics here and and
[39:16] the belief that you guys are actually
[39:18] benefiting from having each other uh I
[39:20] think people would say hey wait a second
[39:22] you know they're going to go to twice a
[39:24] month dividend you go to daily. They
[39:26] come out with 11 12% you know interest
[39:29] you go to 13%. That seems pretty
[39:31] competitive. What are the downsides
[39:34] maybe to having two? Right? Because I I
[39:35] do believe that there's actually a
[39:37] benefit to more players, grows the pie.
[39:40] It kind of normalizes this in the eyes
[39:41] of institutional investors. They see
[39:43] that it's a repeatable, scalable type of
[39:45] strategy. But there's got to be
[39:47] downsides. And so, do you think that
[39:49] Strive is taking away some of the
[39:51] capital flows to the stretch product or
[39:53] or vice versa?
[39:56] >> Possibly in the short term, vice versa.
[39:58] Uh you're a big believer in capitalism
[40:01] obviously. So am I. And
[40:03] >> just a little bit.
[40:04] >> Just just a little bit. I think I think
[40:06] I think you're a fan. And and as we
[40:09] know, the great thing about capitalism
[40:11] is that that competition pushes
[40:14] innovation and it pushes people to be
[40:16] the best versions of themselves. It
[40:18] pushes companies to be the best versions
[40:19] of themselves, which ultimately grows
[40:21] the pie to be substantially larger. If
[40:24] if you were to go to a system where
[40:27] there's one issuer, how it would likely
[40:29] play out would be laxidasical
[40:32] innovation, you don't need to do it.
[40:33] There's no competition. Um, and so you
[40:36] could just sit and provide an inferior
[40:38] product and it would be the only
[40:39] product. And I think that would be how
[40:41] it would play. And and so you think
[40:43] about some of the things that Strives
[40:45] innovated on. Um, providing a cash
[40:48] reserve that might seem like a silly
[40:49] innovation. It's like, well, it's not is
[40:51] it really even an innovation? But I
[40:53] think it improved the products. Strategy
[40:55] then followed. They saw how the market
[40:57] reacted to that. The willingness to sell
[40:58] Bitcoin. Um the frequency of dividend
[41:02] payments to really push that. Um
[41:04] Strategy had made some, you know,
[41:06] initial statements that NASDAQ rules
[41:08] only allowed you to pay this amount of
[41:10] of dollars. Actually, we thought that
[41:12] was true, too. It wasn't like when
[41:14] they'd said that we were like, "Oh, like
[41:15] they're wrong." We actually were pushing
[41:18] every angle to see if that wasn't the
[41:20] case. And that is, you know, the great
[41:23] thing about capitalism is that we found
[41:25] a way within the system to get NASDAQ
[41:28] and DTCC to say yes, right? Which is now
[41:31] open source strategy in the future can
[41:33] can copy that. They can innovate on
[41:35] this. And that innovation from different
[41:37] minds, I think, makes these products
[41:40] substantially better and grows the pie.
[41:41] And in the meantime, you know, it's like
[41:44] we might, you know, do something that's
[41:46] really cool. We stack a bunch of
[41:47] Bitcoin, they do something that's really
[41:49] cool. I mean their their scale is just
[41:51] so much massive to us, right? Like I
[41:52] mean even when we stack a lot of Bitcoin
[41:54] for them it's like you know effectively
[41:56] nothing. Um and but um you know for us
[41:58] it's it's meaningful and ultimately I
[42:00] think that provides a a better system. I
[42:03] think in in the in the short term that
[42:06] can cause that can cause flows to go
[42:09] more one direction than the other. But
[42:12] ultimately as a as a Bitcoin balance
[42:15] sheet company the most important thing
[42:17] is making Bitcoin win. If Bitcoin wins,
[42:20] every company that has substantial
[42:22] balance sheet of Bitcoin, they win. And
[42:24] and and so if and if Bitcoin doesn't
[42:26] win, then we all lose. And and and so I
[42:30] think that innovation, making these
[42:32] products better, driving demand,
[42:34] ultimately benefits the most important
[42:36] thing, which is our balance sheets.
[42:38] >> Now, when you think about strategy, they
[42:41] obviously own a lot of Bitcoin. It's
[42:42] something like 840,000 or more Bitcoin.
[42:45] Um, you all have also gotten into double
[42:47] digit thousands of Bitcoin. Is there too
[42:50] much Bitcoin that could be held by
[42:51] public corporations?
[42:53] >> Um, if it was 100% of the Bitcoin, sure.
[42:57] But when you think about money, whether
[43:00] you're talking about dollars or whether
[43:02] you're talking about gold, the majority
[43:04] of of those types of commodities,
[43:07] dollars, currencies, are typically held
[43:09] by institutions anyways. Um, so I think
[43:11] that's just the natural arc of these
[43:14] types of things. What I think is great
[43:15] about Bitcoin is that it always
[43:18] preserves that ability to opt out and
[43:20] have your your freedom money in self in
[43:23] self-custody.
[43:24] And that's something that we
[43:26] fundamentally believe everybody should
[43:28] do. Um, but what's interesting about
[43:30] Bitcoin because it's so scarce is the
[43:33] amount of Bitcoin that you need to hold
[43:36] in self-custody to kind of have have
[43:40] that insurance is not very much. So, one
[43:43] of the the stats that I that I like to
[43:45] talk about is in 2017, we gave basically
[43:48] everyone in our family, my wife and I,
[43:50] 0.05 Bitcoin on a ledger and it had a
[43:54] note attached to it. And what that note
[43:56] said was with 0.05 Bitcoin, even if 100%
[44:01] of the Bitcoin was held in America, you
[44:04] will have more Bitcoin than the average
[44:05] American can hold. So if you're
[44:08] concerned about the system falling apart
[44:10] and needing this opt out, literally that
[44:12] amount of Bitcoin should be enough to
[44:14] make it. and and and so if that's enough
[44:17] to make it then ultimately I think what
[44:20] will happen is that you know for most
[44:21] people it'll be held in institutional
[44:24] rappers whether that's ETFs or Bitcoin
[44:26] treasury companies um and when you think
[44:28] about Sailor's stack he probably gets to
[44:32] a million Bitcoin I think probably this
[44:34] year uh and if that were to happen you
[44:36] know he holds approximately 5% of the
[44:39] supply and when I think about any
[44:42] distributed ownership structure
[44:45] 5% is not a controlling position. It's a
[44:47] large position. It's the I think in SEC
[44:50] land, if you own 5% of a stock, it's
[44:52] like when you start to have to disclose
[44:54] that you have a stock. It's not a
[44:56] controlling position. It's just like the
[44:57] the minimal of like a material position
[45:00] in in their eyes. And so I don't think
[45:02] it's anything to the level of
[45:03] concerning. And even if he doubled it,
[45:06] it would be very large. But I don't
[45:08] think it would be something that
[45:09] overtakes or takes down the network.
[45:12] It's always interesting to me like a
[45:13] corporation technically, you know,
[45:14] Michael Sailor, you you you don't own
[45:16] 100% of the corporation, right? They're
[45:18] they're shareholders that have a claim
[45:19] on the assets on the cash flows. Um, and
[45:22] uh, you know, it's a little weird
[45:24] because they're kind of pulled together
[45:25] in this name strategy or in Strive. Um,
[45:28] but I do think also at the same time,
[45:30] uh, you control to some degree, you
[45:33] know, the company, right, in the sense
[45:34] of you're making decisions as the
[45:35] steward for those shareholders. And so I
[45:38] guess the other part of this is can
[45:41] there be too many digital credit
[45:43] instruments? Like is there a point where
[45:45] you say okay you know two is better than
[45:47] one, three would be better than two but
[45:50] 25 of them would be a net negative and
[45:53] there would be too much fractured energy
[45:55] capital you know mental focus.
[45:58] >> It there there definitely probably is a
[46:00] level there but it's going to be such a
[46:02] high level that it's not even a concern
[46:04] of mine. Um, frankly, I would love to
[46:07] see that happen. You think about
[46:08] financial services, how many how many
[46:10] banks are there? How many insurance
[46:12] companies are there? And if you were to
[46:14] ask the average American, even for the
[46:16] largest banks, what's the difference
[46:18] between JP Morgan and Bank of America, I
[46:21] don't think the average person could
[46:22] give you any answer. They would just say
[46:24] they're they're two really large banks.
[46:27] Um, and and so even just like two of the
[46:30] same thing, I think, is is a good thing.
[46:32] and and arguably when you have, you
[46:35] know, too little, you have a couple
[46:36] major banks, well, what's happened to
[46:38] the banking industry, you have systemic
[46:40] risk tied to single institutions. And I
[46:43] don't think that's a a good thing for
[46:46] for the ecosystem. Um, and so having 20,
[46:50] 30, 50, 100 different issuers,
[46:54] I think would be a great thing. it it
[46:55] starts to actually look more like a
[46:58] capitalist society where there isn't
[47:00] single points of failure where you know
[47:04] you think about why the US government if
[47:06] JP Morgan ever failed you 100% know
[47:08] they're going to bail them out but in a
[47:11] true capitalist society you wouldn't
[47:13] want that to be true but part of the
[47:15] reason the banks got so big was because
[47:17] of regulation they made it very hard to
[47:19] compete with the banks post GFC and you
[47:22] got these emergence of these mega banks
[47:25] I think it would be healthier for
[47:26] Bitcoin uh for that not to be true. I
[47:29] think it would ultimately be healthier
[47:31] for Strive for that not to be true. Um
[47:34] for Strategy for that not to be true. Um
[47:37] you think about like if if Strategy held
[47:39] all the Bitcoin um in several different
[47:42] ways that would increase risk even to
[47:44] Strategy shareholders. Um it kind of
[47:46] creates a single point of failure for
[47:47] the US government to potentially go
[47:49] after and so a a thriving ecosystem is
[47:52] better. Um, the last thing I'll say on
[47:53] this is that just even you look at ETFs,
[47:56] if you wanted a digital credit ETF, that
[47:59] you need probably at least 30 issuers of
[48:02] digital credit to have a diversified
[48:05] compliant 1940 act product. And so when
[48:08] you only have two, you're you're kind of
[48:10] in this land where it might be really
[48:13] good for Strive or for Strategy on
[48:15] individual basis, but for the ecosystem,
[48:17] it's not great. And then you come back
[48:20] to well our ecosystem is built on a
[48:24] foundation of a Bitcoin balance sheet
[48:26] and so a thriving Bitcoin ecosystem
[48:29] it is going to be the best thing for our
[48:31] balance sheet over the long term.
[48:33] >> When you talk to your team internally
[48:36] how do you describe what the opportunity
[48:38] is in front of you guys?
[48:40] >> Um
[48:42] it was this evolution that that we
[48:44] talked about. So the first version being
[48:45] the best form of form of financing for
[48:47] us. We thought it was a superior form of
[48:49] financing that reduced risk and allowed
[48:51] us to take on a higher level of
[48:54] amplification while controlling risk.
[48:56] And now it's really
[49:00] taking this this kind of what I would
[49:02] say stewardship position of if we
[49:04] believe and we do believe that digital
[49:06] credit will play this transitory role
[49:08] between today's fiat, you know, world
[49:10] and tomorrow's Bitcoin future. That's a
[49:13] really big role to play as as a as a
[49:16] firm and we need to be excellent
[49:18] stewards of that through SATA through
[49:22] helping evolve the growth of digital
[49:24] credit through you know working even
[49:27] with you know strategy and an unofficial
[49:29] capacity going out there and telling the
[49:31] world and and trying to be
[49:35] the most transparent companies that have
[49:37] ever existed. I mean, you can go to our
[49:39] website and the risk of SATA and the
[49:42] risk of AST, it refreshes every 15
[49:45] seconds. Um, outside of the Bitcoin
[49:48] ecosystem, I'm not sure of another
[49:50] ecosystem where you can refresh the risk
[49:52] of a security every 15 seconds. The
[49:55] institutional world lives in the private
[49:57] credit land where you get a mark every 3
[49:59] months. And and in the meantime, it's
[50:02] complete opakquakeness. And and so
[50:04] ultimately, it's it's being transparent.
[50:06] It's being out there. It's, you know,
[50:08] openly discussing kind of the risk and
[50:10] the opportunity set and then actively
[50:13] working to improve these products and,
[50:16] you know, actually making the things we
[50:17] say true, which I think that any great
[50:20] entrepreneur and investor can do through
[50:22] through actions. That's just been true
[50:24] historically is that the true innovators
[50:27] in the world, you know, the people that
[50:28] we all look up to like an Elon Musk,
[50:30] they go out there and they say crazy
[50:32] things, they actually believe these
[50:34] crazy things. Like I think a lot of
[50:36] people think they're just, you know,
[50:37] BSing people and and they're grifters or
[50:40] whatever. But what I found in the the,
[50:43] you know, innovator ecosystem, and I
[50:45] would put you in this category, too, and
[50:47] and I don't say that just because I'm on
[50:48] this product because I actually believe
[50:50] it. You say crazy things, but I know you
[50:52] believe them. And then you go out there
[50:54] and you take risk. You try to make those
[50:55] things happen. That's what we're trying
[50:57] to do as well. And you know, ultimately
[51:00] in these things there's there's risk.
[51:01] there's risk that the innovator doesn't
[51:04] succeed. Um, but ultimately I think
[51:06] that's what makes our capitalist society
[51:09] great is that you put capital in the
[51:11] hands of people that have major visions
[51:14] and then they go out there and they try
[51:15] to make it happen. Um, and that's what
[51:17] we're trying to do here.
[51:19] >> You know, it's always funny. Sometimes
[51:20] you say things and you know it's going
[51:21] to be uh or it's going to sound crazy.
[51:24] It's going to be received as crazy.
[51:25] Other times you say things that seem
[51:26] like common sense and then everyone else
[51:28] thinks that they're crazy and so you you
[51:30] sometimes get surprised uh by uh by the
[51:32] reaction. Uh Matt, thank you for taking
[51:34] the time to do this. I I I find it
[51:36] fascinating the entire digital credit
[51:37] space. I think that both Michael Sailor,
[51:39] you both of your companies, your teams
[51:41] uh have really been pioneers here and
[51:43] continue to push this forward and it
[51:45] feels like something that people may not
[51:46] quite understand yet, but is very
[51:49] rapidly becoming normalized and
[51:51] obviously entering into the portfolios
[51:52] of very smart capital allocators. Where
[51:54] can we send people to find out more
[51:55] about Strive or or find uh you online to
[51:58] be able to follow along?
[52:00] >> The best place is just following us both
[52:02] on X. So myself at colemro and strive
[52:05] atstrive and then our website
[52:07] atstrive.com. Uh you can refresh that
[52:10] risk every 15 seconds and see what SATA
[52:12] looks like.
[52:13] >> Amazing. All right. Well, thank you for
[52:15] doing this. We'll do it together in the
[52:15] future.
[52:16] >> Awesome. Thanks.