Bitcoin Selloff Explained: Capital Rotation & Strategy Deep Dive

[0:02] Yo, welcome back to another episode of
[0:05] the Jack Mallerie Show. I am your host
[0:07] Jack and you are listening to yet
[0:09] another edition of Mailbag Monday,
[0:12] episode 121.
[0:15] The title of today's episode is Bitcoin
[0:18] selloff explained, capital rotation and
[0:21] strategy. Strategy being micro strategy
[0:23] MSTR. So we're going to take a look at
[0:26] how the straight of Hormuz is doing in
[0:27] the conflict in Iran, the oil and gas
[0:30] market, the capital rotation that is
[0:32] happening with the expectation of some
[0:34] big IPOs, how that's impacting Bitcoin,
[0:36] and then I've traditionally got my butt
[0:39] kicked when I talk about Micro Strategy.
[0:42] Um, but I don't think that that's a
[0:44] reason not to voice my opinion. um not
[0:47] going to be very directional with any
[0:48] bias, just more factual and
[0:51] understanding what their capital stack
[0:53] is, what's going on, what people could
[0:55] potentially be concerned with, how
[0:57] things turn out great, how things turn
[0:58] out not great, so on and so forth.
[1:01] Before we do all of that, let me
[1:05] timestamp this episode. Ladies and
[1:07] gentlemen, it is June 8th, 50:03 p.m.
[1:10] here in Chicago, and I'm talking to you
[1:13] all at a Bitcoin price of 63,540.
[1:17] Bitcoin's market cap has fallen to$1.27
[1:20] trillion US. Our all-time high of
[1:23] $126,160
[1:26] remains that we made on October 6, 2025,
[1:29] 245 days ago. We are 49.6% 6% off our
[1:35] all-time high.
[1:38] The last Bitcoin block mined since I hit
[1:40] stream was block height 952,899.
[1:46] As always, thank you guys for tuning in.
[1:48] Um, just a little scheduling note for
[1:51] me. Um, after this episode, I'm off to
[1:54] Prague for the Bitcoin Prague
[1:56] Conference. My keynote is Saturday. I'm
[1:58] really excited about it. It's funny. Um,
[2:01] nowadays when I do keynotes, uh, people
[2:04] don't like when I talk about my own
[2:05] companies, which is kind of a it's kind
[2:08] of funny. It's in a weird way a
[2:10] compliment. So, uh, people just like
[2:12] when I talk about Bitcoin and the world.
[2:15] And so, I I'm all for that. Screw it.
[2:18] Let's go. So, uh, my keynote on Saturday
[2:21] is a deep dive into this idea that I've
[2:24] been hinting at for a while of how
[2:27] Bitcoin and AI can create a new
[2:30] renaissance for humanity. And I think
[2:32] that we're already beginning that
[2:35] chapter of our species and of a new form
[2:37] of prosperity. But it's very difficult
[2:39] to articulate these ideas in passing or
[2:42] when I see you guys at the grocery
[2:44] store. So, I have a keynote slot. I'm
[2:46] really excited about it. pulled some
[2:48] data understanding how fiat actually has
[2:51] harmed us in very severe ways and how
[2:54] these new technologies will unlock our
[2:56] flourishing in particular our artistic
[2:59] uh nature as humans. So, I'm going to be
[3:02] heading to Prague tonight. That'll make
[3:04] this episode a little shorter than
[3:05] usual. Something had to hit the chopping
[3:07] block this week. It was grind my gears,
[3:09] but we'll do some quick market updates.
[3:11] We'll talk a little bit more in depth
[3:13] about strategy than we usually do. Uh,
[3:15] I'll do some company updates quickly and
[3:17] I should have time for Q&A and then I
[3:19] got to head to the airport. So, without
[3:21] further ado, let's go. Um, first and
[3:25] foremost, as we always start these
[3:26] episodes, instead of trying to follow
[3:28] what every politician is tweeting and
[3:30] what Washington is biased towards
[3:32] saying, we ask the same four questions
[3:35] until the answers change. Before you
[3:38] waste time, answer these first. Is the
[3:41] straight horm still closed? Yes, it is.
[3:44] Is the conflict still ongoing? Yes, it
[3:46] is. Are global supply chains still being
[3:48] disrupted? Yes, they are. Can global
[3:51] debt survive this disruption? No, it
[3:54] cannot. None of these answers have
[3:56] changed. All of these answers remain the
[3:58] same. Uh this is increasingly
[4:01] concerning. Uh just a heads up, I mean,
[4:03] we're one of the rare shows that has
[4:05] said since March that this conflict is
[4:08] probably going to go on for longer than
[4:09] politicians tell you. It's probably more
[4:11] serious than politicians tell you. This
[4:13] is 20% of the world's oil market. We're
[4:16] talking about energy, the currency of
[4:17] the universe, so on and so forth. I
[4:19] don't have time today to go on my rants,
[4:22] but uh this is beginning to drag on drag
[4:26] on more than mainstream media and I
[4:27] think the general public thought it
[4:29] would. And that's going to have an
[4:31] impact on markets and that's going to
[4:32] have an impact on Bitcoin. We've talked
[4:34] about it on this show. Bitcoin tends to
[4:36] lead because it's the only it's like the
[4:40] last functioning smoke alarm of fiat
[4:42] liquidity. It's the only functioning
[4:43] free market we have left. And so it's
[4:45] the best at telling us the truth. And so
[4:48] when Bitcoin moves so violently in any
[4:50] direction, up or down, it's probably
[4:52] telling you something. And Bitcoin, if
[4:55] it is acting as it usually does, as a
[4:57] functioning smoke alarm for liquidity,
[5:00] it's telling you things aren't great.
[5:01] It's telling you that there doesn't seem
[5:03] to be enough liquidity to sustain the
[5:05] world around it right now. And the world
[5:07] around it, as we'll talk about, is a
[5:09] conflict in the Middle East. 20% of the
[5:11] world's oil market going entirely
[5:13] offline. Uh some of the largest IPOs in
[5:16] human history coming to market. All of
[5:18] this requires liquidity. You have
[5:21] western yields rising, which we know
[5:23] means the bond market continues to
[5:25] underperform and crash. And so Bitcoin
[5:27] is screaming. There's just not enough
[5:29] liquidity for the filthy fiat financial
[5:32] system to sustain itself. And if you
[5:34] want to know the truth about the world,
[5:36] you do not have to try and read Twitter
[5:38] timelines or the press. you can just
[5:40] look at the Bitcoin price. So anyways,
[5:42] update on the straight of horror news.
[5:44] There's no update. We're not even going
[5:45] to read politicians tweets. Uh it's
[5:47] still closed. So you can see the sharp
[5:49] decline in February, late February when
[5:51] the conflict started. And it's persisted
[5:53] now through March, through April, and we
[5:55] are now through May, in the first week
[5:56] of June, and the strait remains closed.
[5:59] And mind you, opening this thing is not
[6:02] just a flip of a switch. It's going to
[6:03] take some time. So, the world has to
[6:05] start to consider, well, what's going to
[6:07] happen if this doesn't open anytime
[6:09] soon? What global supply chains are
[6:11] going to be disrupted? What are western
[6:13] sovereign bond markets going to look
[6:15] like? Are yields going to spike? Are we
[6:16] going to need yield curve control?
[6:18] Should the Fed cut rates? Should the Fed
[6:20] hike rates? It's starting to get a
[6:22] little bit tense. This was from Reuters.
[6:24] Shoot, this is a little small, so I'll
[6:26] read it to you guys. Uh, US gasoline
[6:28] market set for fresh test after
[6:30] nearrecord stock draws. So basically, as
[6:34] we've talked about before on previous
[6:37] weeks, the United States has put a
[6:41] serious dent into its strategic
[6:43] petroleum reserve, its SPR, its reserves
[6:45] of oil. Uh, and the major gasoline
[6:48] companies are starting to say, "Hey,
[6:51] we're running low, too." Uh, and so it's
[6:54] kind of interesting, right? Like until
[6:55] we bleed through these reserves, the oil
[6:58] market's not going to show the truth,
[7:01] right? You can think of, I don't want to
[7:03] say that governments are price
[7:05] controlling, but they kind of are,
[7:07] right? Because they're are unleashing
[7:09] reserves and they're not letting the
[7:10] free market determine the price of oil
[7:12] because they're patting it with excess
[7:14] reserves. But when you run out of
[7:16] reserves, when oil companies run out of
[7:18] tricks and tactics to uh blunt the, you
[7:22] know, lack of supply versus an unchanged
[7:26] amount of demand. Well, that's not the
[7:30] true price of oil. So, what is the true
[7:32] price of oil? It's probably north of
[7:34] $200 a barrel. I'm just speculating. Um,
[7:37] but obviously what happens if you So,
[7:39] okay, price is just a function of supply
[7:41] and demand, right? If supply goes
[7:44] entirely offline and demand doesn't
[7:46] change, then the price is going to go
[7:48] skyrocketing. Now, what usually the way
[7:52] supply demand works is if you get the
[7:54] price high enough, demand starts to
[7:55] curtail off. Are you a buyer of oil at
[7:58] $2 a gallon, $3 a gallon, $4 a gallon?
[8:01] Sure. $40 a gallon? No, probably not.
[8:04] That's outrageous, right? And so, at a
[8:06] certain point, price curtails demand,
[8:10] but that's what you call a recession.
[8:12] Okay? Okay. And so what we're starting
[8:14] to see signs of is the US strategic
[8:17] petroleum reserve is starting to die off
[8:18] and get to levels where if we bleed into
[8:21] it any further it would reach record low
[8:24] levels and potentially dangerous. You're
[8:26] starting to see US gas companies signal
[8:28] through the media like hey uh we're
[8:31] going to have to fresh test the market
[8:32] again. We're starting to reach the end
[8:34] of our tactics. Um and so just a heads
[8:37] up for my listeners. You guys know what
[8:39] I've said the whole time. We are in stay
[8:42] humble stack hats. Uh I've kind of
[8:45] hinted at I wouldn't be surprised if
[8:47] Bitcoin dipped um given the IPOs on the
[8:49] horizon given the straight of horm still
[8:51] not open the conflict in Iran. Uh it
[8:54] just it would not surprise me if Bitcoin
[8:58] my dad very now famously said markets
[9:01] either scare you out or wear you out.
[9:03] And uh you're gonna get probably both of
[9:06] those. You're going to get a market move
[9:08] that's going to take the bottom right
[9:09] from right up under you. You're going to
[9:12] feel your heart drop uh into your
[9:14] stomach. And then you're also going to
[9:16] just get worn out. You're like, "God,
[9:18] spare markets last forever. Bitcoin's
[9:20] not doing anything. It's up and down and
[9:21] up and down. It's chopping around. I
[9:23] thought this was the most interesting
[9:25] space with the smartest people and the
[9:26] greatest innovation in the history of
[9:27] mankind. What the hell? This is boring.
[9:29] AI's taking our spotlight." And it's
[9:31] just going to grind you down. You can
[9:33] kind of feel that. And so my just advice
[9:36] as long I assume you guys are here to
[9:38] listen to my opinion uh just turn on
[9:40] your DCAs. Uh it's summertime. Get
[9:43] outside, eat healthy, lift heavy things,
[9:45] focus on relationship. There's so much
[9:47] I've talked about in life. Um don't
[9:50] there's a form of leverage that is
[9:52] dangerous in Bitcoin, which is relying
[9:53] on Bitcoin to be happy.
[9:56] That's not necessarily financial
[9:57] leverage, but it is leverage and it is
[9:59] dangerous. Don't do that either. Um,
[10:01] there's so much to being a good man, a
[10:04] good person, a good woman, a good
[10:06] mother, husband, uh, father, wife, uh,
[10:09] child, brother, sister, blah, blah,
[10:11] blah. Um, go be productive. That's my,
[10:15] you know, my main message in an economic
[10:17] sense, as a business owner, as a
[10:20] contributor to society, or just when it
[10:22] comes to working out, when it comes to
[10:24] nutrition and your body. Um, be
[10:27] productive, work hard, principled,
[10:30] moral. Um, I think we're in that period
[10:33] where the strong survive. Those that
[10:35] hold conviction, the conviction will pay
[10:37] dividends. They always say buying
[10:39] Bitcoin is is easy. People early got
[10:42] lucky. And then you run into times like
[10:44] this. This is hard. And that's been my
[10:46] expectation. It continues to be my
[10:48] expectation. It doesn't look like the
[10:49] straits opening anytime soon. It doesn't
[10:51] look like the oil market is going to
[10:53] ease up. In fact, we might be on the
[10:55] brink of a ratchet higher when a lot of
[10:59] these tactics run dry and we might have
[11:02] to get to prices where demand starts to
[11:04] tail off because prices are just too
[11:06] high. And that's when you'd start to see
[11:08] recessionary tendencies and that's where
[11:10] you'd start to see central planning
[11:11] intervention. So hang in there. Earn
[11:14] more than you spend. Be productive. Be
[11:18] happy. Be healthy. That's I mean at
[11:20] least I what I tell my employees all the
[11:23] time is I'll never ask you guys to do
[11:25] anything that I don't do ever. So I'm
[11:30] just telling you guys what I'm doing.
[11:32] I'm getting sun, focusing on
[11:34] relationship, experimenting with my
[11:36] diet, lifting, playing pickle ball,
[11:39] whatever, right? and just stacking
[11:41] stats, buying Bitcoin every single day.
[11:43] Um, on the topic of capital outflows, I
[11:46] just want to comment on this. You're
[11:47] probably seeing this said in different
[11:50] forms. I just want to make sure uh when
[11:52] you come to this show, you can truly
[11:54] understand these things. So, these are
[11:57] um what is happening right now in my
[11:59] opinion when it comes to Bitcoin is
[12:01] what's called a capital rotation. So,
[12:04] seeing so much outflows in the Bitcoin
[12:06] ETF. So, this tweet reads, "Spot Bitcoin
[12:08] ETFs see $1.7 billion in outflows,
[12:11] extending the redemption streak to four
[12:13] weeks, four straight weeks of outflows,
[12:16] which means more people selling and
[12:18] redeeming their IBIT than buying. So,
[12:20] more sellers and buyers. Okay, Black
[12:22] Rockck's iBit is leading the exits
[12:24] alongside Fidelity and Grayscale." Now,
[12:26] when we go to this tweet from
[12:28] Macroscope, by the way, unbelievable
[12:30] Twitter follows that are looking for a
[12:32] follow. Uh, I have him on notifications.
[12:35] legend. Um, his tweet reads, "Just in
[12:39] case anyone didn't understand that this
[12:40] Bitcoin selloff is mostly a capital
[12:42] rotation story and not Bitcoin specific,
[12:45] it's very easy to click sell iB in the
[12:47] brokerage account and free up funds for
[12:48] this. In the long term, Bitcoin will
[12:50] continue to greatly benefit from
[12:52] creation of an ETF. It also becomes more
[12:54] susceptible to short-term capital
[12:56] rotations by mainstream investors. This
[12:58] rotation should slow, may already have
[13:00] started in the past day, and then
[13:02] eventually reverse." and he's quote
[13:04] tweeting a quote that's talking about
[13:05] the SpaceX IPO and when you see these
[13:08] outflows and capital rotation you what
[13:11] people are saying when they mention this
[13:13] is that when you have there's a few
[13:16] things one let's just take the ultimate
[13:18] step back when the US economy is
[13:22] starting to boom again money is going
[13:25] into the economy and out of financial
[13:28] assets the the best example to
[13:30] understand this are the large cap tech
[13:33] companies like Meta, Amazon, Microsoft,
[13:37] Google. These businesses have gone from
[13:41] taking all their cash flows, billions
[13:43] and billions and billions of dollars in
[13:45] doing stock buybacks where they're
[13:46] pouring their cash into financial
[13:49] markets and now they're pouring their
[13:52] cash into large capital intensive AI
[13:56] buildouts. And so that is bearish the
[13:58] equities and bullish the economy. the
[14:02] money is going into the real economy and
[14:04] out of the equities. And you started to
[14:06] see this. It doesn't necessarily mean
[14:07] that their stock price goes down, but it
[14:10] means that the multiple like you
[14:13] starting to see you're starting to see
[14:14] the multiple compression. And people
[14:16] say, "Oh, that's AI compressing the
[14:18] multiple." At the end of the day, yeah,
[14:21] everyone's going to come up with their
[14:22] own narrative, but the point is capital
[14:24] cash is going into the main street
[14:28] economy and out of financial markets.
[14:31] This has also been a bit of a drag on
[14:33] Bitcoin. When people need to raise cash,
[14:36] they sell things that were saving their
[14:38] cash, whether that's gold, whether
[14:41] that's treasuries, whether that's
[14:42] Bitcoin. And so you see Bitcoin sell off
[14:46] when people need to raise cash. It's
[14:48] always sell what you can, not what you
[14:50] want. And because Bitcoin's so
[14:52] accessible, it's such a free market.
[14:54] 24/7, 7 days a week, 365 days a year,
[14:58] you can sell Bitcoin in any currency at
[15:01] any time. It's the easiest way to raise
[15:03] cash. And so, for one, because the
[15:06] economy is starting to boom, you're
[15:08] starting to see this tension between the
[15:10] mainstream economy and financial
[15:11] markets. And you see this in things like
[15:13] semiconductors, etc. The other thing are
[15:16] these IPOs and AI sucking the marginal
[15:19] risk capital away from the financial
[15:23] other financial assets like Bitcoin.
[15:25] When you have you've got the SpaceX IPO,
[15:27] then you've got the Anthropic IPO, then
[15:29] you've got the OpenAI IPO and all these
[15:32] capital managers and hedge funds and
[15:34] retail investors want an allocation into
[15:37] these premier equities. This is the new
[15:39] internet. This is the new wave, the new
[15:41] bubble. And you're clearly seeing a
[15:43] capital rotation out of things like
[15:46] Bitcoin and into these other things,
[15:49] which is fine. It's not the it's not the
[15:53] end of the world. It doesn't mean that
[15:54] AI here's the thing. Bitcoin is money.
[15:57] Uh SpaceX is a company. They're not
[16:01] competitors. You know, at the margins,
[16:03] risk capital is going to like in a month
[16:08] or two or three or four, whatever. Who
[16:10] cares? the same investors are going to
[16:13] be selling their SpaceX equity because
[16:15] it it had a successful IPO and they're
[16:17] going to be rotating back into Bitcoin.
[16:19] They're not one for one replacements.
[16:21] They're not competitors. SpaceX equity
[16:23] is not money. It doesn't matter. Uh but
[16:26] I just want people to understand what's
[16:29] happening here. What's happening here is
[16:31] capital rotation. And it's very, it's
[16:32] clear as day to see when you have these
[16:34] large outflows from the ETF and this
[16:37] coincides with all of the brokerages
[16:39] instructing people on how to get
[16:41] allocations into these blue chip IPOs.
[16:43] It's very simple. And on the back half
[16:46] of all of this, as I said, Bitcoin is a
[16:50] functioning smoke alarm for fiat
[16:52] liquidity. And so when you have a
[16:53] combination of conflict in the Middle
[16:56] East, the straight hormoose remains
[16:57] closed. Oil market remains in relative
[17:00] shock and it's bleeding through
[17:02] strategic reserves and is might re-enter
[17:05] new price discovery that could threaten
[17:07] recession and really do even more damage
[17:10] that's already been done to Western bond
[17:12] markets. On top of that, you have some
[17:14] of the biggest technology IPOs at least
[17:16] in the last 26 27 years, but probably
[17:19] ever. And what Bitcoin is saying is
[17:23] there isn't enough filthy fiat to
[17:25] support this filthy financial system.
[17:28] All of this debt, all of these bonds,
[17:30] all of this war, all of these tech
[17:33] bubbles. If you want to support this
[17:36] financial system, you're going to have
[17:38] to print more money or else you're going
[17:40] to start to see things fall apart or
[17:41] else you will enter a recession or else,
[17:44] you know, uh
[17:46] that that's the point that people should
[17:48] be taking away because when you look at
[17:50] Bitcoin, it just tells you the truth.
[17:52] You know, I've come to like a spiritual
[17:56] um peacefulness with Bitcoin where I
[17:58] don't get mad at Bitcoin. It's not
[17:59] Bitcoin's fault. Bitcoin doesn't have
[18:01] any emotions. It doesn't think. It
[18:02] doesn't have a bias. It's just telling
[18:04] me information. It's telling me the
[18:06] truth. And I should be okay with that
[18:08] information. I shouldn't be too
[18:09] leveraged. And that information
[18:11] shouldn't ruin my life. It shouldn't
[18:14] change how I think about myself. Uh it's
[18:16] just it's just information. And the
[18:18] information is there's too much tech
[18:20] bubbleness. There's too much war.
[18:23] There's too much bond market selloff.
[18:25] There's too much oil shock for this
[18:28] filthy fiat financial system to handle
[18:30] itself. Because at the end of the day,
[18:32] when you're $40 trillion in debt, you're
[18:34] levered. You're substantially levered.
[18:36] And a little bit of gust of wind can
[18:39] blow you over. And that's what Bitcoin
[18:41] is telling us. And so what's going to
[18:44] happen? I've been on record and I'll
[18:46] continue to do so. I think they will
[18:48] print the money. I think that they will
[18:49] find ways to inject liquidity into the
[18:51] financial system and they will
[18:53] effectively over time default via
[18:55] dilution. The other thing that can
[18:56] happen is we just enter uh a recession
[18:59] which turns into a depression which
[19:01] turns into a severe form of austerity
[19:03] where we go through like the great
[19:05] depression times a thousand and we reset
[19:08] human civilization and everything we
[19:09] know about it through violence and war
[19:12] and everything around you is on fire and
[19:14] every institution that you know falls
[19:16] apart. Now Bitcoin in my opinion wins in
[19:18] that world too but it will sell off
[19:20] along with everything else. everything
[19:21] we know and love will be gone. And and
[19:24] uh now that those are the two kind of
[19:27] options politicians obviously opt for
[19:29] the first one, which is we're going to
[19:30] sneakily print money and bail out the
[19:35] situation we're in by stealing from the
[19:39] the common man in in their purchasing
[19:42] power. So keep that in mind. That's
[19:45] what's happening to Bitcoin. It's
[19:46] telling you the truth. It's one of the
[19:47] rare assets that can it's not a bad
[19:50] thing. It's a thing. It's okay. It's the
[19:52] state of the world. It's fine. Uh over
[19:55] the long arc, the dollar has to get
[19:58] debased. They have to print the money. I
[20:00] think Bitcoin will win in the free
[20:02] market competition of money. Um but that
[20:04] is what's happening. One more kind of
[20:06] like just including this in the update.
[20:08] I just needed to make a a note that
[20:10] Zcash being so what happened with Zcash
[20:14] uh clawed this clawed model that was
[20:18] previously not available to the public
[20:19] because of just how good it was at
[20:21] finding critical security
[20:23] vulnerabilities cla 4.8 uncovered a
[20:26] critical Zcash bug and it was an
[20:30] inflation bug. Uh, Zcash crashed. I
[20:33] think this tweet was 27% down on the
[20:35] day, but I think it got up to 50% down
[20:37] on the day. So, in one day, its price
[20:39] dropped in half. Um, I just want to say
[20:42] something about this. Obviously,
[20:43] everyone knows I'm not a fan of
[20:45] altcoins. You could call me a Bitcoin
[20:47] maximalist, although I've been around
[20:49] long enough to know that Vitalic
[20:52] Buterine created the term Bitcoin
[20:54] maximalism as a slur. And so I don't
[20:57] necessarily like to use it um because he
[21:00] he created it to imply that there are
[21:02] people that aren't open-minded enough to
[21:05] consider other currencies and other
[21:07] projects and other pre-mined tokens. And
[21:09] so those people over there, those are
[21:10] Bitcoin maximalists. Those are rigid,
[21:13] angry. You don't want to piss them off
[21:15] cuz they woke up on the wrong side of
[21:17] the bed. And then you have these
[21:18] open-minded people that wouldn't mind
[21:20] entertaining the idea of buying my
[21:21] premine token. That's why he invented
[21:23] the term, just for those curious. Um,
[21:26] but anyway, I'm not a fan of shitcoins.
[21:28] Um, I think they're all garbage. I don't
[21:30] think they've innovated and solved a
[21:32] real problem. I think they're an
[21:34] arbitrage on the trend. They're both a
[21:35] regulatory arbitrage and an information
[21:37] arbitrage. They are taking advantage of,
[21:40] you know, if the securities or equities
[21:42] market [clears throat] tried to do what
[21:45] they do, everyone would go to jail. So,
[21:47] it's a new industry that isn't properly
[21:49] regulated. So, there's a form of
[21:50] regulatory arbitrage where they get to
[21:51] get away with things that other like
[21:53] printing tokens out of thin air and
[21:54] paying Justin Bieber to tell a bunch of
[21:56] 18-year-olds on Instagram to buy it. If
[21:58] that if if someone did that with equity
[22:01] in a company, they'd go to jail. But
[22:03] because it's a crypto, it's it's legal,
[22:05] I guess. Um, so there's a regulatory
[22:07] arbitrage and then there's anformational
[22:09] arbitrage, which is how can I make money
[22:12] on this technology trend? Well, most
[22:14] people don't fundamentally understand
[22:16] any of these things. So I could tell
[22:19] them that they were late to Bitcoin and
[22:20] I built the faster Bitcoin, the more
[22:22] private Bitcoin, the smart contract
[22:24] Bitcoin, the the even more decentralized
[22:27] Bitcoin, the lighter Bitcoin, the
[22:30] Chinese Bitcoin and I can sell it to
[22:33] them. I can create it and sell it to
[22:34] them and they don't know the difference.
[22:35] As long as the marketing budget is high
[22:37] enough and the brand is good enough,
[22:38] then that's the best way to monetize
[22:40] this technology trend is I call it an
[22:42] arbitrage on the trend. It's a both
[22:44] regulatory andformational arbitrage. And
[22:46] so Zcash was marketed recently as the
[22:50] privacy bitcoin. And
[22:53] the way Zcash achieved this is, you
[22:57] know, through to to greatly oversimplify
[23:01] it because that's what this show is
[23:02] about in my opinion is by the common man
[23:05] for the common man. Um Zcash prioritized
[23:10] security. uh um it
[23:14] prioritize privacy
[23:17] at the expense of transparency and
[23:20] auditability.
[23:22] One of the things that's been highly
[23:23] debated in the Bitcoin technical
[23:25] community for years, guys, I've been in
[23:28] the Bitcoin space for almost 14 years,
[23:30] okay? This has always been a highly
[23:34] debated and just topic of conversation
[23:37] in the developer community is we can
[23:40] make Bitcoin transactions more private,
[23:43] but then it gets a lot harder, in fact
[23:46] technically impossible in some cases to
[23:49] actually audit the Bitcoin supply,
[23:53] Bitcoin transactions because if you use
[23:56] certain privacy tools, you can't
[23:59] actually tell how many bitcoins there
[24:01] are. What if someone created more than
[24:03] 21 million? And so there's this very
[24:06] natural trade-off between simplicity and
[24:09] auditability and privacy. And that's why
[24:11] you've hear people say things like,
[24:13] well, you can actually take great
[24:15] strides with privacy on a second layer
[24:19] like lightning. You know, you can solve
[24:22] privacy on side chains. You can solve
[24:24] privacy on second layers. But at the
[24:26] very fundamental base blockchain layer,
[24:28] we want to keep it on on layer one. We
[24:30] want to keep it as simple as possible
[24:34] because Bitcoin needs to be auditable,
[24:37] transparent, and it just needs to work.
[24:39] It needs to be money. And what's funny
[24:41] is now that all of these uh AI models
[24:44] are getting so good, the rate of hacks
[24:47] in DeFi and the rate of bugs in
[24:49] shitcoins is through the roof. People
[24:52] would say all the time to me, "Oh, these
[24:54] DeFi lending markets are so much cheaper
[24:56] than strike lending." Like, aha. And
[24:59] it's like, I don't know how long you
[25:00] guys will be laughing because I don't
[25:03] use any of these shitcoin DeFi things
[25:05] that Claude is going to find a bug in
[25:07] and your money's going to disappear. I
[25:09] also don't encourage people to store
[25:11] money in something that's trying to sell
[25:13] you the private version of Bitcoin.
[25:15] Guys, Bitcoin attracts the brightest
[25:17] minds in the world. It's a top 10 asset
[25:19] in the world. It's been around the
[25:21] longest. It's not as if any of us
[25:23] haven't thought of these ideas. Zcash
[25:25] didn't come up with anything that
[25:26] Bitcoiners didn't come up with. The
[25:28] Bitcoin community decided it was
[25:30] irresponsible and it was dangerous.
[25:33] And it's just these people are arbiting
[25:36] the trend. They're, "Hey, I have the
[25:38] private Bitcoin to sell you. I have the
[25:39] faster Bitcoin to sell you. I have the
[25:41] slicker Bitcoin to sell you. I have the
[25:43] Justin Bieber to sell you. I have the
[25:45] gaming Bitcoin to sell you."
[25:48] No.
[25:50] You have a version of Bitcoin that was
[25:52] deemed irresponsible and dangerous, but
[25:54] you're going to repackage it, put a nice
[25:56] logo on it, print a bunch for
[25:57] yourselves, and go sell it. That's what
[26:00] you have. And now, the coolest thing
[26:03] about AI is the marginal cost of
[26:07] knowledge work is going very close to
[26:09] zero. The marginal cost of intelligence
[26:11] and knowledge work for me is $200 a
[26:14] month. That's what I pay anthropic.
[26:18] So in order to find bugs in all these
[26:20] shitty software, in order to do models
[26:23] on all my interesting ideas, in order to
[26:26] write software for all the things that I
[26:28] want to build, in order to explore
[26:30] philosophy for all the ways I view the
[26:32] world, it costs $200 a month. And so the
[26:36] marginal cost for you to ac truth is
[26:40] just so cheap nowadays. It's great.
[26:43] [sighs]
[26:44] So anyway, just be careful, man. like
[26:47] there's no faster Bitcoin. There is no
[26:50] there is no privacy Bitcoin. These
[26:52] things are dangerous. They the Bitcoin
[26:55] community decided not to do these things
[26:57] for a reason. And now you have Zcash
[26:59] with an inflation bug. Nobody knows how
[27:01] much Zcash there is anymore. That's why
[27:04] it's selling off. It's not safe. It's
[27:06] not a good way to store any of your
[27:09] money.
[27:11] So, and I expect this to happen more.
[27:13] All these AI models are going to find
[27:15] critical vulnerabilities in these
[27:16] projects. By the way, in order to have a
[27:19] project that can carry trillions of
[27:20] dollars in market cap and be highly
[27:22] secure, it's not easy. I think there are
[27:25] only like five core Zcash contributors
[27:28] in the world. So like there can't be
[27:31] thousands of crypto tokens. Do you know
[27:33] like that doesn't scale? There are
[27:36] network effects and economies of scale.
[27:37] like all the MIT professors and all of
[27:40] the open-source grants and the Jack
[27:42] Dorsey's and the Michael Sailors of the
[27:44] world, like they're focused on Bitcoin.
[27:46] Zcash doesn't have any of that. They
[27:48] don't have hundreds and hundreds of
[27:50] expert level developers and the best
[27:52] universities, professors studying and
[27:54] teaching courses and classes and public
[27:56] companies starting open source grants.
[27:58] Like, they don't have any of that. None
[28:00] of these projects do. And so, they're
[28:02] very vulnerable to critical error. So,
[28:05] just be careful. I expect where the
[28:07] marginal cost of all of this white
[28:09] collar expertise gets closer and closer
[28:12] to zero. This is going to get I mean
[28:14] it's good for the world. It's very good
[28:16] that shitty things are being called out
[28:18] for being shitty and being caught. But
[28:20] it's very bad that normal people get
[28:22] caught in the middle of that. Like I
[28:24] feel awful. I've been in the space the
[28:26] whole time. I've watched these projects
[28:28] start and convince people that they're
[28:30] buying that they're early to the better
[28:32] version of Bitcoin or the private
[28:33] version of Bitcoin. And I'm now watching
[28:35] them. their wealth just evaporate and it
[28:37] sucks and it's sad. So, whatever. If I
[28:39] if I have some airwaves and some people
[28:41] willing to listen to me, just be careful
[28:42] out there. Just stay humble and stack
[28:44] sats, buy Bitcoin. Keep it simple. This
[28:46] is why Bitcoin simplicity matters. This
[28:48] is why whether a block confirms in an
[28:51] average of 10 minutes or 5 minutes or 3
[28:53] minutes. It doesn't [ __ ] matter.
[28:55] We're going to scale it in layers
[28:56] anyway. It's about being secure. It's
[28:58] about being simple. It's about being
[28:59] sound. It's about being scalable. Okay?
[29:02] There is no like faster, slicker, Justin
[29:04] Bieber version of it. Bitcoin isn't the
[29:07] MySpace to who whatever influencers
[29:09] version Facebook. [ __ ] that. [ __ ] these
[29:12] people don't have your best interest at
[29:15] heart. Either e and my last line then I
[29:18] got to move on. They're either
[29:20] incompetent or malicious, but both are
[29:22] as equally dangerous. Some people are
[29:24] just too stupid to be giving you advice
[29:26] and they don't know it. But that's just
[29:28] that's still just as dangerous.
[29:32] Okay, let's spend a little bit of time
[29:35] uh talking about micro strategy or
[29:37] strategy uh and then we'll get into some
[29:40] Q&A and then I got to go to the airport.
[29:42] Um okay, uh first of all, just some
[29:46] quick disclaimers here. Um when I've
[29:49] talked about strategy in the past, uh
[29:51] I've gotten my ass kicked. I expect to
[29:53] get my ass kicked again. Um that's okay.
[29:55] Uh I've come around to it. It's no
[29:57] problem. Um but you guys should know a
[29:59] few things. one have nothing but respect
[30:01] for Michael. Have met him, hung out with
[30:04] him a ton of times. Talked to him
[30:06] semi-frequently.
[30:08] I have no I have no problem with
[30:09] Michael. I also do not own any MSTR.
[30:12] Never have. I don't own any stretch.
[30:15] Never have. So, I'm not talking my book.
[30:17] I'm not also talking against I don't
[30:19] I've never shorted the I've nove never
[30:22] taken a position. Uh never owned, never
[30:25] none of that. Okay. Um, I also don't
[30:28] consider 21 to be a direct competitor of
[30:32] strategy at least anymore. Uh, and I'll
[30:34] get into that. Like, uh, none of my
[30:37] companies doing the perpetual preferred
[30:40] thing. Uh, and so I I don't consider
[30:43] this to be like benefiting my corporate
[30:46] interest in any way either. This is
[30:47] strictly forformational purposes. This
[30:50] is people ask me tons of questions. It's
[30:52] a common topic. People are either scared
[30:54] or excited. generally feel uninformed uh
[30:57] want my opinion and so I'm not going to
[31:00] let you know people on the internet uh
[31:02] make me feel afraid to give you my
[31:04] opinion. It'll be my opinion. Um but
[31:06] this I don't feel as if sharing this
[31:08] information biases me in any way. Uh I
[31:10] don't own any of these things. I've
[31:11] never shorted any of these things. I
[31:13] have no financial incentive to say
[31:16] anything in particular. It's just my
[31:18] opinion. Uh ultimately at the end of the
[31:20] day, both my financial incentive and my
[31:22] heart is with Bitcoin and that's what I
[31:26] care about most and it is what it is.
[31:29] Fair enough. Cool. I got a Slack
[31:32] message. Let me make sure it's not
[31:33] Dylan.
[31:35] Okay, cool. Let's do it. Um All right.
[31:39] So, first and foremost, uh I don't know
[31:43] who listens to me actually like knows
[31:46] what strategy is. Maybe there's some
[31:47] people here that need to get caught up.
[31:49] So, we're going to start just from the
[31:51] basics. Uh, Strategy owns about 4% of
[31:54] all the Bitcoin that were that will ever
[31:56] exist. Okay, they have about 845,000
[32:00] Bitcoin. That Bitcoin is valued at about
[32:03] 57 billion. Now, these things change.
[32:07] So, let's pull up uh the actual data.
[32:12] Okay, so this number needs to come down
[32:14] a bit. Uh the Bitcoin as I'm talking to
[32:17] you is at $53.4 billion.
[32:20] Um their debt plus preferred is at about
[32:23] $22 billion. So this is kind of the
[32:26] company in a nutshell. They've got I
[32:29] think it's about $6 billion of debt. Uh
[32:32] they've got about $16 billion I believe
[32:35] of preferred equities that they've
[32:37] issued. So that gets you to this $22
[32:39] billion number. That's against $53
[32:41] billion worth of Bitcoin. And that $53
[32:44] worth of bitcoins, $845,000 units. And
[32:47] that implies, you know, the price of
[32:49] whatever 6 63,000. Fair enough. Okay.
[32:54] Um, so for the beginning of Strategy's
[32:59] journey, it was a fairly simple idea.
[33:03] Um, they would raise cash via uh two
[33:06] ways. They would sell equity via what's
[33:09] called an ATM. And that is them selling
[33:11] their common equity shares at the
[33:13] market. That's what ATM stands for. And
[33:16] so if a share of strategy costs $127,
[33:21] they would create a new one. So they
[33:23] would inflate the supply by one and they
[33:26] would sell it into the market. And if
[33:28] someone would buy it at the price they
[33:30] were looking for, then the buyer got a
[33:33] new share of MSTR. And MSTR Strategy,
[33:36] the company got $127 worth of cash. And
[33:39] that was one way for them to raise it.
[33:41] Now, that's obviously dilutive to the
[33:44] equity because you're inflating the
[33:46] supply, right? In the same way that when
[33:48] the Fed prints dollars, they create new
[33:50] dollars. They're making all the existing
[33:52] dollars weaker. Same thing with a
[33:54] company. When a company prints new
[33:55] shares, they're making all the existing
[33:57] shares weaker. But the question is, what
[33:59] does the company do with the proceeds of
[34:02] the cash? And so the theory for this
[34:05] company is that they would raise the
[34:06] cash by selling new shares into the
[34:09] market and they would take the cash and
[34:10] they would buy Bitcoin and they would do
[34:12] it in an accretive way where if excuse
[34:16] me if the economics worked out to where
[34:18] they could sell equity and use the cash
[34:21] proceeds to buy Bitcoin and it would
[34:24] increase what they call Bitcoin per
[34:25] share then it's it's uh accretive in
[34:29] Bitcoin terms. The other way that they
[34:32] raised money is with these convertible
[34:35] debt instruments. So they would raise
[34:36] this debt and they were very famous at
[34:39] the time for this zero coupon which
[34:42] means 0% interest they would have to
[34:44] pay. So they could raise a convertible
[34:46] bond that converts in five years at a
[34:50] certain premium. Let me give you guys an
[34:51] example. Sorry if this is repetitive to
[34:54] some of you but um again just trying to
[34:57] keep things simple on the show. So,
[34:59] let's say an equity is trading at $10 a
[35:02] share and they raise a convertible bond
[35:04] that is a zero coupon up 30. What does
[35:08] that mean? That sounds like a bunch of
[35:10] gibberish. That means that zero coupon
[35:13] means 0% interest. So, how much money
[35:15] are do you have to pay in like a this is
[35:18] a convertible bond. So, what's the bond?
[35:20] What's the coupon? What's the yield?
[35:22] There's 0%. So, you don't actually have
[35:24] to pay the holder anything. And then the
[35:27] up30 means that the holder of this bond
[35:30] converts into equity at a 30% premium.
[35:32] So if the stock's at $10, they convert
[35:34] at $13.
[35:36] Now, the reason that this was an
[35:38] interesting instrument is because
[35:39] effectively you're selling these guys
[35:41] equity at $13 a share when your equity
[35:45] is at $10. So you're selling them
[35:47] expensive equity. You're selling them
[35:48] equity at a 30% premium to where the
[35:51] equity is today. So, if I sell a billion
[35:54] dollar zerocon convertible bond at UP30,
[35:59] that means I'm selling my I'm selling a
[36:01] billion dollars of my equity 30% higher
[36:04] than what it's trading today. And I can
[36:06] take the billion dollars right now and
[36:08] buy Bitcoin. So, I'm effectively selling
[36:10] a billion dollars of my equity at 13
[36:12] bucks and buying Bitcoin with it. And
[36:14] I'm kind of capturing the spread. It's
[36:16] creating an arbitrage against, you know,
[36:18] the future my equity, a premium to my
[36:21] equity and the current value of Bitcoin.
[36:22] Does that make sense? And it was very
[36:24] cheap because there was no cash
[36:27] obligation on these instruments. And if
[36:29] there was, you know, uh, Micro Strategy
[36:31] was paying 0% interest or 0.5% interest,
[36:36] 75% interest, very very very cheap
[36:39] interest payments for large sums of
[36:42] money that inevitably converted into
[36:44] equity, but at a premium. And so they
[36:47] raised a bunch of these debt instruments
[36:51] and they bought a ton of Bitcoin with
[36:53] the combination of selling their common
[36:55] equity
[36:57] at at a premium to the asset value on
[37:00] the balance sheet and using these
[37:02] convertible debts to raise a ton of
[37:04] money that converted at 30% above 40%
[37:07] above 50% above the stock price in
[37:10] buying Bitcoin. The point at the bottom
[37:12] is they they didn't really have any cash
[37:14] obligations. So the company doesn't make
[37:17] any money. Uh and it's not like a
[37:19] Facebook or a Microsoft or an Amazon.
[37:21] It's not a big company that makes a lot
[37:23] of cash flow, has a lot of customers,
[37:25] produces a lot of new products. Um its
[37:28] actual operations is fairly small. Um
[37:31] hasn't displayed tons of growth and
[37:32] doesn't make any money. Uh and so it was
[37:35] important in the beginning they didn't
[37:37] have any cash obligations. So again,
[37:39] there was no there's no interest on
[37:41] selling equity. And when they sold these
[37:44] convertible bonds, um, there was rarely
[37:47] a large coupon, if any coupon at all.
[37:50] Make sense? You guys, I cut out grind my
[37:52] gear so you guys can ask questions. So,
[37:54] please write questions in the chat.
[37:55] Dylan uh can can jot them down and we'll
[37:58] answer them later. So, that was a very
[38:01] simple idea. And in this world, by the
[38:03] way, there was no scenario in my opinion
[38:06] that they'd ever have to sell Bitcoin
[38:07] ever. Uh just to be clear, I think their
[38:11] need to sell Bitcoin came later after
[38:14] the preferreds, which we'll explain in a
[38:16] second. But it should be noted that in
[38:20] this where you're just doing equity and
[38:22] you're just doing convertible debt, that
[38:24] they never had to sell any Bitcoin. Now,
[38:28] why didn't they just keep doing this?
[38:29] Well, Sailor noted very publicly and he
[38:33] said many of times that they outgrew
[38:35] this market. They outgrew this
[38:36] convertible bond market. And so he could
[38:40] have very easily just said, "Uh, the
[38:42] trade is over. We outgrew this market
[38:44] and we're just going to end it here."
[38:46] Whatever. I I'm making up a number. We
[38:48] already have 500,000 Bitcoin. This debt
[38:51] I can continue to refinance and
[38:53] eventually over time it will convert or
[38:56] I can even retire it if I want. I
[38:58] there's all sorts of options, but I
[39:00] don't ever technically have to sell the
[39:02] Bitcoin. there's no real scenario to
[39:04] where in which I'll have to sell the
[39:05] Bitcoin and whatever it doesn't I'm not
[39:08] going to continue to stack. I'm not
[39:10] going to be able to buy Bitcoin every
[39:12] Monday. Um but I I mean I did a thing I
[39:16] I put on I I would say that these are
[39:19] trades and these are self-described
[39:20] trades like they call them like the
[39:22] company describes itself as financial
[39:25] engineering. So this is clever versions
[39:28] of arbitrage, right? These are these are
[39:30] trades. I would I would describe it less
[39:32] as business in the sense of building a
[39:35] product, having customers. There's no
[39:36] customer support for these products
[39:38] necessarily, right? Um, so they did a
[39:40] trade, but the problem is trades have a
[39:42] start and an end, right? Like an
[39:44] arbitrage trade, just so everyone knows,
[39:46] an arbitrage, for example, would be if
[39:48] on one side of town I could buy a banana
[39:51] for $1. Let's say on the east side of
[39:55] town I could buy a banana for a dollar.
[39:58] And on the west side of town, I can uh
[40:00] sell a banana for $10. So, there's an
[40:03] arbitrage opportunity there because the
[40:05] market is inefficiently pricing demand
[40:08] uh bananas across town. I could very
[40:11] easily just drive to the east side of
[40:13] town, load up on $1 bananas, and then
[40:16] drive over to the west side of town and
[40:18] sell all of them for $10, and I'm
[40:21] netting $9 for every banana.
[40:24] But eventually I buy enough bananas at
[40:28] the do at $1. I start to drive the price
[40:30] up to $5 and then I sell enough bananas
[40:34] at $10 where I start to drive the price
[40:36] down to $5. And the market finds its
[40:40] true efficient equilibrium of $5 for a
[40:43] banana. And maybe that there's a slight
[40:46] premium on one side of town and a slight
[40:48] discount on the other because of weather
[40:50] or because of traffic or because maybe
[40:52] at the margins but generally speaking
[40:54] the market finds its efficiency. Now
[40:56] I've monetized. What did I do that was
[40:59] productive? Why did I earn capital? Why
[41:02] was I profitable? Well, because the
[41:04] market was inefficient and I provided
[41:06] efficiency to the marketplace which is a
[41:09] very productive thing to do. people that
[41:13] people that were looking to sell bananas
[41:16] uh on the east side of town were missing
[41:19] out on $4 by selling it for a dollar and
[41:22] people looking to buy were overpaying at
[41:24] $10. They could have got them for five
[41:26] and I provided the market efficiency but
[41:28] then the trade the point is the trade
[41:30] ends like the arbitrage trade doesn't
[41:32] necessarily go forever. Then the trade
[41:34] has an end date and you move on and you
[41:38] look for a new trade or you do no more
[41:40] trading. It's up to you. Now, um, Micro
[41:44] Strategy did a new trade. So, the next
[41:47] chapter was these preferreds, okay? And
[41:51] there's four preferreds that exist.
[41:53] There's one called Strike. Okay? It's an
[41:56] 8% convertible preferred. Sold about
[41:59] $5.5 billion of that. There's Strife,
[42:02] which is a 10% senior preferred. They
[42:04] sold about $2 billion of that. There's
[42:07] Stride, that's a 10% junior preferred.
[42:10] They sold about $3 billion of that. And
[42:13] then there's Stretch, which is their
[42:14] flagship, the one that they talk about
[42:16] in market the most. It seems to be the
[42:18] future of the company according to their
[42:20] earnings calls and their interviews and
[42:23] media appearances. That is an 11 12%
[42:28] perpetual preferred. That prefer that 11
[42:31] 12% is variable. So it changes and has
[42:35] historically gone up if the instrument
[42:37] is below 95. It's supposed to go up 50
[42:41] basis points and they've already issued
[42:44] over $10 billion of that. Across all of
[42:48] these preferreds, they have issued $15
[42:50] billion in total and the blended annual
[42:53] rate of that is about 11% because the
[42:57] majority of it has been stretch. Okay.
[43:01] Um let me zoom in on this because this
[43:04] is really important. Uh now we have to
[43:07] understand the capital stack. So after
[43:10] the preferreds I would say micro
[43:12] strategy got decently more complicated.
[43:16] It was a very simple capital structure
[43:19] to understand when it was just
[43:21] convertible notes. Um, and when you add
[43:23] the preferreds, there's now many
[43:26] different types of people that you have
[43:30] to please involved in the capital
[43:32] structure. So, at the very bottom, the
[43:36] safest are these debt holders, the
[43:38] convert holders. If things go kapoof and
[43:42] people need to get their money back, the
[43:44] people that get their money back first
[43:46] are the con are the debt holders. The
[43:48] debt holders get out first. Then you
[43:51] have the preferreds and the preferreds
[43:53] are stacked as such. And then at the
[43:56] very bottom, the people that
[43:59] are waiting last in line are the common
[44:02] equity holders. But these are there are
[44:06] four different in my opinion
[44:10] people to please. One are Bitcoiners. So
[44:14] they have a bunch of Bitcoin, right? and
[44:18] they have like selling Bitcoin is not
[44:23] necessarily something that Bitcoiners
[44:25] would want if you just dumped 800,000
[44:28] Bitcoin on the market. So you have
[44:29] Bitcoiners, then you have debt holders,
[44:32] then you have preferred holders, and
[44:34] then you have common equity holders.
[44:36] Those are the four classes, and they
[44:38] each have different Bitcoiners. Like no
[44:41] one has rights to this Bitcoin. Um this
[44:43] is just Bitcoin owned by the company.
[44:45] Um, I think sometimes it's confusing.
[44:48] People say that the preferred are backed
[44:50] by the Bitcoin. They're not backed by
[44:52] the Bitcoin. There's no guar there's no
[44:54] claim to the Bitcoin. If you want to get
[44:56] your money back from a preferred, you
[44:58] have to sell the preferred in the
[45:00] secondary market. The company cannot
[45:03] give does not give you anything to
[45:06] guarantee that preferred. So, the
[45:08] Bitcoin is separate. Um, but I do think
[45:10] that this company has a relationship
[45:13] with Bitcoiners because of the amount of
[45:15] Bitcoin they have. Then there's the debt
[45:18] holders, the preferred holders, and the
[45:20] common equity holders. Okay, let's keep
[45:22] going.
[45:24] Uh, oops. Why is this not working? Come
[45:28] on. There we go. Okay.
[45:31] What is a perpetual preferred? This
[45:33] stretch thing, this is like the core of
[45:36] what we need to understand here. a
[45:38] perpetual preferred. It's interesting
[45:40] because there are people on the internet
[45:42] that say
[45:44] u it's not debt because you never have
[45:48] to uh repay the principal.
[45:52] So, you know, someone buys a $100
[45:55] stretch
[45:57] strategy never has to pay back the $100.
[46:00] It's not like a loan. So, it's not debt.
[46:03] But then they imply that it's equity.
[46:05] But it's not equity either because it
[46:07] never converts in. It doesn't convert
[46:10] into equity. It's perpetual. It's
[46:12] non-allable. It means you owe the money
[46:15] forever. So what I have written on the
[46:17] slide is a subscription that you sign
[46:19] your company up for. You pay a fixed
[46:22] dividend now twice a month forever. It
[46:25] never matures. You can never ever cancel
[46:28] it. Now, technically, and we'll get into
[46:31] this, technically the company can cancel
[46:32] it, which I don't know if that makes it
[46:35] better or worse. I guess it's kind of in
[46:37] the eye of the beholder. Um, but the
[46:40] point is the structure of the instrument
[46:42] is that it's perpetual. It never ever
[46:46] ever ends. So, you owe the money
[46:48] forever. Once you die and you hand your
[46:52] e your company to your heirs, like they
[46:54] also then owe the money and then they
[46:56] die and they hand that and they also owe
[46:57] the money. it it can never be retired.
[47:00] Um, and so let's compare that to the
[47:04] convertible bonds they were doing. The
[47:06] convertible bonds were zero coupon, so
[47:08] there was no cash that was owed. They
[47:10] matured and they converted into equity.
[47:13] And so they didn't last forever. The
[47:14] stock hit $13. Everyone converted.
[47:17] Remember the whole the stock was at $10,
[47:20] the convertible bond was up 30, which
[47:22] means the premium conversion was 30%
[47:24] higher, which a $10 stock means it's 13.
[47:27] There was zero coupon, so there was no
[47:29] interest payments to make. So, it was
[47:31] very cash light, capital light. There
[47:33] was no I didn't have to make interest
[47:35] payments, which was critical because the
[47:37] company wasn't making any money. So, I
[47:40] could take a bunch of money, buy
[47:41] Bitcoin, and just wait for the Bitcoin
[47:43] to go up enough for my stock to go up
[47:44] and then everyone converts into equity
[47:46] and then the debt is retired and I move
[47:48] on. Now you compare this preferred, it's
[47:51] kind of the opposite where not only is
[47:54] it not 0% coupon, it's 11.5% right now,
[47:58] which means you owe 11.5%
[48:03] on 10.5 billion forever. I think right
[48:07] now strategies cash obligation on an
[48:10] annual basis for the preferred is $1.7
[48:13] billion. So even if they never issued
[48:16] another preferred, they would owe a $1.7
[48:21] billion forever, never stopping.
[48:24] Uh these things don't mature and they
[48:27] don't convert. And so that's why when
[48:29] people say, "Well, it's not debt. They
[48:30] don't owe the principle." Yeah, that's
[48:31] fair. I'm not I mean, sure. Um but
[48:34] implying it's equity is is equally as
[48:36] misleading because it doesn't convert
[48:38] into equity. It's a it's a it's I don't
[48:40] know how what it should be categorized
[48:43] as. Um, not really the point of this. Th
[48:46] this is just for information, just to
[48:48] try and educate people, answer as many
[48:50] of the questions as I get at once here.
[48:52] So, the point though is how how opposite
[48:56] it was from what they did before and how
[48:58] they they introduced a brand new class
[49:02] of people to their capital stack. So,
[49:05] you have people that own debt. Now, you
[49:07] have people that own these preferreds,
[49:08] which are basically owed cash forever.
[49:11] Then you have the common equity holders
[49:13] which own the actual MSTR equity. And
[49:16] then you have the Bitcoiners that care
[49:18] about all the Bitcoin that you hold and
[49:20] whether that's a risk to Bitcoin. And I
[49:23] have at the bottom here that they
[49:24] marketed this to everyone. Like these
[49:28] are direct quotes. So again, people are
[49:29] going to say I'm being mean. I'm
[49:31] literally quoting. I'm not being mean at
[49:34] all. Uh the direct quotes, the safest
[49:37] 12% yield on the planet. Uh, another
[49:40] one, it's like a money market fund. Now,
[49:43] obviously after the last week, I don't
[49:46] think anyone would say that this is like
[49:47] a money market fund, but that's just how
[49:49] it was initially marketed. And not to
[49:51] say that there was any malicious intent.
[49:53] Maybe they thought that. Who knows? Um,
[49:56] here's the 1.7 billion number. So, this
[49:59] is how much because now we understand
[50:00] how the perpetuals work. This is how
[50:02] much cash the company needs to come up
[50:05] with a year forever. And obviously it's
[50:08] a really there's a really interesting
[50:10] feedback loop here because as the
[50:12] preferreds are more successful the
[50:14] burden of cash becomes higher. So if
[50:17] they keep issuing more stretch then this
[50:19] number just keeps going up and up and up
[50:21] and up and up. And mind you the company
[50:24] doesn't make $1.7 billion a year. If
[50:27] Google wanted to say we make $10 billion
[50:30] a year of free cash flow and or or let's
[50:33] use Tether for example. Tether makes
[50:35] something like that. I actually don't
[50:37] know. Call it $10 billion a year of free
[50:39] cash flow. And if they said, "We want to
[50:40] take on $2 billion of dividend
[50:42] obligations to raise money to do
[50:44] something, buy Bitcoin, build something
[50:46] new, I have no idea." They could pay
[50:48] that with their cash flow. And so the
[50:50] question of how do they pay that is
[50:52] pretty simple. Their business produces
[50:54] that. Now, the risk is that the business
[50:56] stops producing it. Tether becomes a
[50:58] shitty stable coin. People move to
[51:00] Circle and Tether can't afford it
[51:02] anymore. And investors would have to
[51:04] like gauge the risk of okay well you
[51:07] know when buying this thing I'm taking
[51:09] on the counterparty risk that they can
[51:10] make me whole on it right this is not
[51:12] like buying a a real government bond
[51:15] because the government can print the
[51:16] money to make you whole on it but how
[51:19] does Micro Strategy pay it? Well they
[51:22] don't make any money and so that's kind
[51:25] of the natural question that the market
[51:27] has started to ask is they have to raise
[51:29] the cash somehow because they owe this
[51:31] money forever. they can't retire it. So,
[51:33] where does the $150 million a month come
[51:35] from? Uh here are the four options and
[51:39] these are kind of the four classes of
[51:41] people within the capital structure that
[51:43] we talked about earlier. One is the
[51:46] Bitcoin holders. So, one way to come up
[51:48] with the cash is you can sell Bitcoin.
[51:51] Um two is the MSTR common equity
[51:54] holders. Another way to come up with the
[51:55] cash is you can sell common equity. So
[51:58] that ATM that at the market you can
[52:00] create new shares. So you can inflate
[52:03] the count of shares and sell new shares
[52:05] into the market. Um and then the other
[52:09] people that you have here uh are
[52:12] preferred holders and debt holders. And
[52:14] the question that I think the market is
[52:17] asking right now is can all of these
[52:20] people win at the same time when
[52:23] Bitcoin's not going up? I'm going to say
[52:26] that again. There are four four people
[52:30] enter the capital structure. I'm going
[52:32] to change my slide here actually. Four
[52:35] investors
[52:39] enter the capital structure.
[52:43] Can they all win at the same time? And
[52:47] especially
[52:48] when BTC is in a bare market. That's the
[52:53] fundamental question that we need to be
[52:55] asking. Can all of these people be
[52:57] happy? Because, for example, right now
[52:59] the preferred holders are getting
[53:02] crushed because the preferred is down a
[53:04] bunch and one way they can help the
[53:07] preferred people out is raise some cash
[53:09] to give the market confidence that they
[53:11] can afford these bills and increase the
[53:13] dividend. But by raising the cash, if
[53:16] they have to sell Bitcoin and sell
[53:18] strategy shares and then by raising the
[53:20] dividend imply that their future
[53:22] expenses are even more expensive, then
[53:24] you are making the Bitcoiners and the
[53:27] MSTR common shareholders sad to benefit
[53:31] the preferred holders and the debt
[53:32] holders. Now, another option is you can
[53:34] say we're never selling any Bitcoin and
[53:36] we're not in we're not diluting the MSTR
[53:39] shareholders, but that would be making
[53:40] the Bitcoiners and the MSTR shareholders
[53:43] happy at the expense of the preferred
[53:45] holders because you're saying, "Yeah,
[53:46] stretches $93 a share, but we don't give
[53:49] a [ __ ] We told you it was like a money
[53:52] market fund. I guess we were kind of
[53:54] wrong."
[53:55] So the question that the market is
[53:58] asking today and like why it's such a
[54:00] topic of conversation is before a long
[54:03] time ago strategy was fairly simple to
[54:05] understand. You had equity you had these
[54:08] convertible debt instruments and the
[54:10] debt converted into equity and it was a
[54:13] very simple capital structure. Now with
[54:15] these preferreds especially the
[54:17] perpetual one it it gets a little bit
[54:20] more complicated. Uh it's the financial
[54:22] engineering is a little bit more
[54:24] complicated. So here's I sorry this
[54:26] slide's really shitty designed I
[54:28] whatever it's about hey it's it's it's
[54:31] the point that matters but here's
[54:33] basically what I just said in a slide
[54:35] for enter will all leave so the Bitcoin
[54:38] holders are saying well they'll never
[54:40] have to sell Bitcoin the debt holders
[54:42] are saying well assets will always
[54:43] exceed liabilities the preferred holders
[54:45] will say the dividends will always be
[54:47] paid and the MSTR common will say
[54:49] Bitcoin appreciation will always keep
[54:51] the MNAV above one individually each of
[54:54] those can be right for a long time, but
[54:57] the question the market has is can they
[54:59] all be right forever, especially through
[55:02] a bare market because their EBIT, so how
[55:07] much money they make is zero? And
[55:09] obviously if you lay over that $2
[55:11] billion of expenses a year, it's who who
[55:16] is burdening that cost? Like which class
[55:18] of people is burdening that cost? Um,
[55:23] and are they okay with that is the
[55:25] question. So I write each stakeholder
[55:27] group has a belief about why they're
[55:28] safe. Bitcoin holders think that
[55:31] strategy will never sell. Debt holders
[55:33] look at the balance sheet and say that
[55:34] the assets exceed the liabilities.
[55:36] Preferred holders trust that the
[55:37] dividends will keep flowing. And common
[55:39] shareholders believe Bitcoin's
[55:40] appreciation will always justify an MNAV
[55:43] above one. Individually, each can hold
[55:46] for a long time, but collectively it
[55:48] might be impossible for all four to hold
[55:51] forever. You can't pay $2 billion a year
[55:54] with no income without sacrificing one
[55:58] group when markets get tough. That's
[56:00] pretty much the story. Does that make
[56:02] sense? And there's a there's another
[56:04] layer in here which I may need to
[56:06] explain that MNAV is interestingly
[56:09] calculated. Like their true MNAV is
[56:11] actually closer to 1.3 than one. So
[56:13] having an MNAV right now of 1.2 is
[56:16] actually not above one. I'll have to
[56:19] explain that maybe in Q&A. I wanted to
[56:22] keep this simple. So anyways, what
[56:24] happened over the last few weeks? So if
[56:26] you are casually just like living your
[56:28] life, you're going to the gym, you've
[56:30] got a family, you're eating farm-raised
[56:32] food, and you're not paying attention to
[56:33] any of this and all of a sudden strategy
[56:35] is all over the news. You're like, "What
[56:37] actually happened?" Here's my
[56:39] interpretation of what happened earlier
[56:41] this year. Strategy, I think it was this
[56:42] year, right? 2026. Had to have been.
[56:45] Strategy raised a US dollar reserve.
[56:48] They raised a $2 billion US dollar
[56:50] reserve by selling $2 billion of newly
[56:53] printed MSTR shares.
[56:56] And it was my interpretation that they
[56:58] raised this cash to tell to basically
[57:01] show the market, hey, Bitcoin isn't
[57:04] doing so hot, so you must be asking how
[57:06] we're going to come up with all this
[57:07] money. Well, here's $2 billion worth of
[57:10] cash, which should give us a little bit
[57:12] of runway in case the market bleeds
[57:15] sideways. You guys won't have to panic
[57:17] because basically the market is like,
[57:19] "Holy [ __ ] they have to come up with
[57:21] all this cash. Are they going to be
[57:22] sacrificing me?" Like the preferred
[57:24] holders are saying, "Are they going to
[57:26] suspend the dividends?" The MSTR holders
[57:28] are saying, "Are they going to dilute
[57:29] and inflate away the stock?" The
[57:31] Bitcoiners are saying, "Oh my god, are
[57:32] they going to dump a bunch of Bitcoin on
[57:34] our heads?" Right? And so everyone's
[57:36] asking like who are they going to
[57:38] sacrifice to come up with the cash and
[57:41] they raised the cash at the time and
[57:43] said this should put everyone at ease.
[57:44] We have enough cash. Okay. Now at the
[57:48] time I think it was 2 years then it
[57:51] became 18 months because they issued
[57:53] more stretch which again the more
[57:54] successful stretches the higher the
[57:56] burden becomes on how much cash they
[57:58] need. But the point was everyone can
[58:01] breathe a sigh of relief. Now, this was
[58:04] like at the time this was painful for
[58:06] MSTR shareholders cuz they got diluted,
[58:09] but it was helpful for Stretch because
[58:13] it put everyone's mind at ease. But
[58:16] again, I keep highlighting this because
[58:17] there's a tug of war going on like every
[58:19] time it's beneficial for one group, it's
[58:21] detrimental to the other group. And
[58:23] unless Bitcoin is in a raging bull
[58:25] market, it's unclear to the market. I
[58:28] think what the market is trying to
[58:29] figure out right now is how the entire
[58:32] capital structure can be happy at the
[58:34] same time. Um so oops um so we go on
[58:41] what happened over the last few weeks is
[58:43] Micro Strategy spent that cash reserve.
[58:46] So, they actually paid off a 2029
[58:49] convertible debt early at 92 cents on
[58:52] the dollar. And the market freaked out
[58:55] because they went from having enough
[58:57] runway for the market not to have to
[59:00] freak out about how they're going to
[59:01] come up with the cash anytime soon to
[59:04] needing to come up with cash soon. And
[59:06] everyone was like, why did you pay off a
[59:09] debt instrument that converted by 2029?
[59:12] Like, that's so far out. Meanwhile, you
[59:14] owe all this cash and you don't make any
[59:16] money. And so now we all have to start
[59:18] panicking and figuring out who you're
[59:20] going to burden to come up with the
[59:22] money. Um, which again it it depends on
[59:26] who you are and if you think this is a
[59:28] good strategy or bad strategy. I'm just
[59:30] more reporting. But that is when
[59:32] obviously the market started to freak
[59:34] out a bit. And then there was obviously
[59:36] if you look at the prediction markets of
[59:37] is sailor going to sell bitcoin started
[59:39] to spike because again you have to come
[59:42] up with the cash before the preferred
[59:44] you didn't have to come up with the cash
[59:46] now that you have these preferreds which
[59:48] might be the most genius invention in
[59:50] human history. I'm not you know I
[59:53] personally don't think so. Obviously I
[59:55] could do this strategy at my company if
[59:57] I wanted to. I don't. So, I am
[60:00] personally not a fan, but I'm not
[60:03] saying, you know, Sailor has defied like
[60:06] all the all the haters before. Who knows
[60:08] if he will again? It's totally possible.
[60:11] Um, but when you introduce this to your
[60:14] capital structure, you owe a lot of
[60:16] money forever. And so now the market
[60:18] starts to freak out and say, "How are
[60:20] you going to come up with the money? Are
[60:22] you going to just tell all of the
[60:24] stretch holders like, sorry, this
[60:26] thing's going to sit in the low 90s for
[60:27] a while? like it's not a money market.
[60:30] And then they start dumping it. MSTR
[60:33] shareholders start to get nervous like,
[60:35] "Oh man, what if he starts issuing a ton
[60:38] and and diluting the stock even though
[60:40] it's not above NAV?" Again, the actual
[60:42] NAV is not 1.0. I'll explain that later.
[60:45] Um, and then the Bitcoin holders start
[60:46] to freak out and the Bitcoin market
[60:48] starts to freak out because it's like,
[60:49] okay, this guy owes a ton of money
[60:50] forever and he seemingly can't pay it
[60:53] without selling something. What if it's
[60:55] the Bitcoin? Then you've got Iran. And
[60:56] then you've got these IPOs and Bitcoin
[60:58] starts to sell off. So that like that's
[61:00] kind of what happened. So they kind of
[61:03] they used the word inoculate which I
[61:05] found weird. U it's an interesting word.
[61:08] Look up the meaning. I thought it was
[61:10] interesting. I mean I don't know if it
[61:11] was on purpose or not. Um but they sold
[61:13] 32 which is obviously a meaning it who
[61:16] cares about that. That's that's a tiny
[61:18] number in the grand scheme of things.
[61:20] But the point was to warm the market up
[61:23] and to start to change the narrative
[61:24] from the narrative went from never sell
[61:27] to buy more than you sell, which is
[61:29] fine, but it's it's it's a narrative
[61:33] shift because the buy more than you
[61:35] sell, it depends on the duration. Is
[61:37] that buy more than you sell every week,
[61:39] every month? If it's buy more than you
[61:41] sell every five years, then strategy
[61:44] could sell 800,000 Bitcoin this year and
[61:48] still have bought more than they sold
[61:49] over the last 5 years. But I don't think
[61:52] people would be super happy if they
[61:53] dumped 800,000 Bitcoin. So, it's the
[61:57] narrative. They did this to start to
[61:58] change the narrative a little bit, which
[62:00] again is fine. To be clear, they have
[62:02] to. They don't have a choice. They owe
[62:05] the money.
[62:07] So, you have to pay the money. It is
[62:09] what it is. And yeah, obviously if they
[62:12] end up with millions of Bitcoin and they
[62:14] only sold thousands of Bitcoin, that I
[62:17] would consider that an awesome trade.
[62:19] Um, but the question is, you know, sure,
[62:21] buy more than you sell. Over what
[62:23] duration though? Like are there
[62:25] specifics to that guidance or is it just
[62:28] general and the market needs to
[62:30] interpret their meaning on their own?
[62:33] But they did this little teaser test
[62:36] sell. Um, and then today,
[62:40] uh, they announced that they did two
[62:43] things. One, they bought 1550 Bitcoin
[62:46] for a little over 100 million bucks. And
[62:48] then they also increased their dollar
[62:50] reserve by hund00 million to a billion.
[62:52] And if you look on the right, you can
[62:54] see they did this entirely by issuing
[62:56] new stock by selling common stock,
[63:01] raising the cash, and performing what
[63:04] Sailor announced on the left. Now, I
[63:06] will say usually Sailor announces, and
[63:10] again, we're friends. It's not anything
[63:13] I wouldn't say to his face. Usually he
[63:15] announces the BTC yield metric or the
[63:19] BTC per share. It was a little
[63:21] convenient. He left it out on this one
[63:23] because this was deludive.
[63:25] So the point, the only reason I'm saying
[63:28] this is because it goes back to the
[63:31] initial point, which is why did he do
[63:34] this? He did this for two reasons. One,
[63:36] he wants to show people he can still buy
[63:38] Bitcoin and he can buy more than he
[63:39] sells. It's a signal to the market of
[63:41] telling everyone, "Shut up. You guys
[63:44] shut the [ __ ] up." He added $und00
[63:46] million to the dollar reserve because
[63:48] he's trying to tell the market, "I know
[63:50] why you're scared. You're scared because
[63:52] you don't think I can come up with the
[63:53] money. I can come up with the money.
[63:56] Now, how did he come up with the money?
[63:59] MSTR shareholders paid the price. So,
[64:04] Stretch got a boost of confidence today
[64:06] because they added to their dollar
[64:08] reserve. Bitcoin got a boost of
[64:11] confidence because Sailor is buying more
[64:13] than he's selling. Who lost? MSTR
[64:17] shareholders lost. So again you have
[64:19] these four classes of people you have
[64:22] Bitcoin debt preferred and common equity
[64:27] and the question is with such a complex
[64:29] capital structure can everybody win and
[64:32] especially in a Bitcoin bare market
[64:34] because obviously there's one thing that
[64:36] can solve strategies problems right this
[64:39] second if Bitcoin rips to 200,000 and
[64:42] you see people online saying Sailor must
[64:44] be acting this way because he knows
[64:45] something that we don't and maybe he
[64:47] does I have no idea He definitely knows.
[64:49] He's been in rooms that I've never been
[64:51] in. There's no doubt about that. So
[64:53] maybe he does. But people are saying
[64:56] that because they're trying to
[64:57] rationalize how they're the company is
[65:00] building their balance sheet and
[65:02] building their capital structure.
[65:03] Because if you're not if you're not
[65:06] confident Bitcoin is going to go up to
[65:08] new all-time highs like relatively soon,
[65:11] then you're going to have this overhang
[65:13] of a problem of every single week you're
[65:16] going to owe money, a lot of money, and
[65:18] someone in the capital structure is
[65:20] going to have to pay the price to like
[65:24] fulfill the obligation obviously. And
[65:27] that's kind of does that make sense?
[65:28] That's kind of this lay of the land. And
[65:31] there's a bull case and a bare case. The
[65:33] bull case is Bitcoin's going to rip
[65:35] soon. Who cares? I I mean, there are
[65:38] MSTR shareholders that don't mind paying
[65:41] the price. I don't know. I don't know
[65:43] why. I don't know the logic there.
[65:44] Again, I don't own an MSTR. I mean, this
[65:46] is one of the reasons. I just don't I
[65:49] don't want to carry this brunt, but
[65:53] PE people do and that's fine. Um, and
[65:56] now obviously the bare case is why like
[66:00] why would you own MSTR? it it has a lot
[66:04] of obligations to fulfill and it seems
[66:06] like it is the vehicle to raise the
[66:09] cash. Um, now there are people out there
[66:12] that are saying why would you own
[66:13] Bitcoin? If this company needs to raise
[66:16] so much money and they might sell the
[66:18] Bitcoin. Now I'm not worried about that.
[66:21] That's why my DCAs are on. I I've
[66:23] survived many bear whales as they say,
[66:26] many large sellers. Doesn't matter. Why
[66:28] would I own Bitcoin because someone has
[66:29] to sell? stupid question for me. And
[66:31] then there are other people saying, "Why
[66:33] would you own any of these preferreds?
[66:34] Clearly, they're not scalable. They're
[66:36] going to fail at some point and you're
[66:38] going to be caught holding the bag." And
[66:39] so there's it depends on who you ask and
[66:41] who you talk to. There are MSTR bulls.
[66:44] There are bears of the certain parts of
[66:46] the capital structure. I would say the
[66:48] best and safest place to be right now is
[66:50] owning the debt because you get you get
[66:52] paid out first. It's really no way you
[66:54] can lose, but it I don't know. It
[66:57] doesn't really yield you much. um zero
[66:59] coupon and you're converting at a
[67:00] premium. So I don't they're way out of
[67:02] the money. So I don't know. Anyway,
[67:04] that's when people say what's going on?
[67:07] Why are people talking about strategy?
[67:10] Why are why is the Bitcoin market
[67:11] nervous about strategy? Why is the MSTR
[67:14] price reacting to what they're doing?
[67:15] Why is Stretch trading down? Hopefully
[67:18] that should answer your questions in
[67:20] again the most unbiased way I possibly
[67:22] could. I'm going to have opinions. The
[67:24] internet could agree or disagree with
[67:25] them. It is what it is. Now again, I'll
[67:28] just reiterate, every option that they
[67:31] have hurts somebody. So you sell more
[67:34] common stock, you're crushing the you're
[67:36] diluting the shareholders of MSTR.
[67:39] If you sell Bitcoin, then you're
[67:42] spooking the market and you're creating
[67:43] this like really self-defeating
[67:46] recursive loop that, you know, you're
[67:47] going to have to rake cash by selling
[67:48] Bitcoin. You're no longer the never
[67:50] sell. You're selling more than you're
[67:52] you're buying. and it really defeats
[67:55] this whole idea of Bitcoin per share
[67:56] which is the whole point of owning the
[67:57] equity in the first place. Um you can
[68:00] cut the dividend or you could just stop
[68:02] paying it but then the preferreds are
[68:04] going to cut in half. There'll be
[68:05] lawsuits surely because people were told
[68:07] it was a money market fund and access to
[68:10] the capital markets might shut down
[68:11] which would be the worst because if you
[68:13] don't if you can't monetize the equity
[68:16] by allowing people to invest and sell it
[68:18] and issue more debt then the whole thing
[68:21] kind of just stops. Um, so you kind of
[68:25] have to just pick as long as Bitcoin's
[68:27] not ripping. Now, I'll say it again. I'm
[68:29] not predicting anything. I'm not saying
[68:31] anything's going to fail. I'm not
[68:33] bearish on anything. None of that. The
[68:37] thing that can fix everyone's problem
[68:39] here is Bitcoin rips to 200K tomorrow.
[68:42] That would solve everything.
[68:46] Now if it doesn't these are the options
[68:51] which
[68:52] um
[68:54] you know
[68:56] just people should know that
[69:00] um
[69:01] and yeah the other thing I will say and
[69:03] I said this you know in Q&A before is
[69:06] that this is all built on a lot of
[69:08] confidence. So if Bitcoin goes way
[69:11] higher everything is solved. um you sell
[69:14] a little bit of Bitcoin each year to
[69:16] cover the dividends,
[69:18] but as long as Bitcoin, you know, goes
[69:21] up a predictable amount every single
[69:23] year, everything's good. Um, but it
[69:27] requires a lot of belief. Like, meaning
[69:30] how much is Tesla worth? Is Tesla worth
[69:32] a thousand times earnings? Well, it is
[69:36] if that's what the market's willing to
[69:37] pay for it. It doesn't matter your
[69:39] opinion. It matters what the market is
[69:42] pricing it at. What is anything worth?
[69:44] What is this hat worth? This hat is
[69:47] worth what someone is willing to pay for
[69:49] it. Any other answer is wrong. If
[69:52] someone wires me a billion dollars for
[69:53] this hat, guess what? It's worth a
[69:55] billion. If someone is only willing to
[69:57] pay me a dollar for the hat, guess what?
[69:58] It's only worth a dollar.
[70:02] And so, what's Tesla worth? It's worth
[70:04] whatever someone's willing to pay for
[70:05] it. It's worth the last person that
[70:07] bought a share times the outstanding
[70:10] shares. That's what it's worth.
[70:13] And so the problem is it's this is built
[70:16] on a lot of confidence. Like does
[70:17] strategy have to trade above one MNAV?
[70:21] No, it doesn't. Should it? I don't know.
[70:25] It depends on who you ask and how they
[70:26] view the world, but it doesn't have to.
[70:30] Um, and like does the market have to
[70:33] believe that Stretch should trade at
[70:34] $100? No, it doesn't. You know, so it's
[70:39] it's an interesting like I guess my
[70:41] point is without a business that
[70:44] produces cash flow,
[70:47] um you're kind of just relying on well
[70:49] you have to sell either Bitcoin, you
[70:51] have to sell MSTR, or you have to sell
[70:53] more preferreds. And if people right now
[70:55] are saying, well, the straight of Hormos
[70:57] is or Hormuz is closed and there's an
[70:59] oil shock, so I'm Bitcoin's going to
[71:02] have to sell off. there's a bunch of AI
[71:04] IPOs, so Bitcoin's selling off. Uh MSTR
[71:07] is not going to trade above 1 MNAV and
[71:09] Stretch isn't going to be at 100. Well,
[71:11] like then you're out of options. Um and
[71:14] that's kind of that's kind of the issue.
[71:16] Um I guess uh that the market is having.
[71:20] Uh and the last thing I'll say is this
[71:22] idea of path dependence. So I tried to
[71:24] come up with an analogy. You guys will
[71:26] let me know if it works. Um but what I
[71:29] came up with is can I drive you? So, I
[71:32] recently got a car. Um, just got a
[71:35] normal car. And can I give you a ride to
[71:37] your destination? Of course I can. Even
[71:39] if I had to stop at a gas station a 100
[71:41] times. Of course, I'll give you a ride.
[71:44] But what if your destination is across
[71:45] an ocean? Well, then we'll drown.
[71:49] Because the whole point, the whole plan
[71:51] was I assumed that we'd stay on land. I
[71:53] don't have a plane. I have a car. And
[71:55] the point is I I want you guys to get
[71:57] familiar with this idea of path
[71:58] dependence. A path dependent model would
[72:01] assume that Bitcoin goes up enough
[72:03] consistently forever. But the problem is
[72:07] what if you have to cross an ocean
[72:08] notion? What if it goes sideways for two
[72:10] years? What if MNAV starts behaving at a
[72:14] discount for whatever reason? What if
[72:16] there's a war? What if there's a
[72:18] liquidity crisis? What if there's three
[72:20] AI IPOs over the summer? Then what? And
[72:23] this is the idea of path dependence. And
[72:25] path dependence when you're modeling out
[72:27] like I grew up in a house of traders
[72:30] path dependence is very important
[72:32] because it's you know what am I assuming
[72:34] a reliable path for the trade
[72:38] and it's like can I can I give you a
[72:39] ride yes but I'm assuming we're on land
[72:42] and that my vehicle can get enough gas
[72:44] to get there right if if I have to cross
[72:46] not I have to have to drive you to
[72:47] Africa we're going to die and so the
[72:50] question here is like yes Bitcoin
[72:53] ripping tomorrow will solve these
[72:55] problems
[72:56] But if it doesn't rip tomorrow, like
[72:57] this is what we call path dependency,
[73:00] which is, you know, you hear these
[73:01] things all the time. Oh, Bitcoin just
[73:02] has to go up 1% a year. Yeah, but if
[73:05] Bitcoin is flat for 10 years straight
[73:08] and then the 11th year goes up enough to
[73:11] make the average kagger in hindsight 1%.
[73:14] I don't know if it works, you know? And
[73:16] I again, I'm very bullish Bitcoin. I
[73:18] don't think Bitcoin is going to go
[73:19] sideways for 10 years. I don't think
[73:21] strategy is going to default. None of
[73:23] this. I'm not I'm not making a
[73:24] prediction, but I'm trying to answer.
[73:27] You guys should see my DMs, see the
[73:29] comment section here. It's obviously a
[73:31] hot topic in Bitcoin. Um, and you know,
[73:34] path dependency is something you need to
[73:35] keep in mind even with risks that you're
[73:38] pricing in your own life. Should Google
[73:40] it if you want. Um,
[73:45] last thing I want to say,
[73:48] um, real quick,
[73:51] the whole like it's like a money market
[73:53] fund thing, you know? I'm trying to stay
[73:55] as neutral as possible here. I I got to
[73:58] I got to say on this one, it's not. And
[74:01] we should stop pretending that. We
[74:04] really should because I just think it's
[74:05] slightly dangerous.
[74:07] Listen, let me say something. I'm no
[74:10] stranger to marketing. I've caught
[74:12] myself on the wrong side of marketing
[74:15] too much before. Like I am no like
[74:19] stranger to that. I've learned from it.
[74:22] I've matured through it. So just to be
[74:25] clear, building [ __ ] is hard. Building
[74:28] businesses is hard. In in certain
[74:31] contexts, I get it. You know, you got a
[74:34] public company, you're selling
[74:35] specifically to retail investors. It's
[74:37] not a money market fund. And I think now
[74:40] over the last few weeks we can we can
[74:42] move on from that hopefully. So I pulled
[74:44] up cash and cash equivalents because
[74:46] people have said previously like why
[74:47] doesn't Tether back their um why doesn't
[74:51] Tether back their uh stable coin with
[74:54] these preferreds? Uh why doesn't Strike
[74:57] integrate these preferreds? Because
[74:59] they're not cash or cash equivalents.
[75:00] Cash cash equivalents according to GAP
[75:02] and and uh Fazby like they mature in
[75:05] less than 90 days. highly liquid,
[75:07] convertible to known amounts of cash,
[75:09] insignificant to risk of value change.
[75:11] So, a tea bill, commercial paper, like
[75:14] the government will print the money. It
[75:16] doesn't ma it doesn't mean that you're
[75:18] going to get the same purchasing power,
[75:20] but you're never not going to get paid.
[75:22] Uh like it's not going to drop 7% in a
[75:25] week. Um the preferred equities, there's
[75:28] no maturity. Uh trades in an open
[75:30] market. So the price is the price is
[75:34] what we call floating. It it's not stuck
[75:38] to anything. It floats. It can go down
[75:40] to 90. It can go down to zero. Um, it
[75:43] does again it doesn't mean it's bad, but
[75:45] we we we should not like for the bit
[75:48] Bitcoin ethos, Bitcoin ethics, you know,
[75:52] I I find it's similar to kind of the
[75:53] ethical question of if you see a woman
[75:56] on the street get her purse grabbed by
[75:59] someone, what do you do? And like for
[76:02] me, how I was raised, I go try and help.
[76:05] I chase the guy down. I just find that
[76:08] to be the ethical thing to do. So I
[76:10] don't want I don't want people you know,
[76:12] people DMing me that are truck drivers,
[76:15] people DMing me, you know, just normal,
[76:18] you know, common man jobs that are like,
[76:20] "Hey, can you explain this stuff on your
[76:22] show?" I personally would not think of
[76:25] it like a money market fund. It is not
[76:27] the risk-free rate. It is not. It's not
[76:31] to me. You guys want my opinion? That's
[76:33] my opinion. And here's the definition of
[76:35] cash and cash equivalents. And this is
[76:37] why Tether doesn't Can you imagine if
[76:39] Tether backed their stable coin with
[76:42] Stretch over the last week? I mean,
[76:44] there'd be a run on the bank. It'd be
[76:45] not good. So, that's why. Doesn't mean
[76:48] again doesn't mean Stretch is bad. Just
[76:50] it's not a money market fund. It's
[76:52] definitely not that.
[76:55] Okay, the last thing real quick. I
[76:57] decided not to make a slide out of it,
[76:59] but I do want to say something um
[77:05] real quick. So, I here I have this in my
[77:08] notes. I was writing I I have a whole
[77:11] document and I made slides. I left this
[77:13] out on purpose, but I I want to include
[77:15] it now because there's one last thing. I
[77:16] see people tweeting at me saying, "Oh,
[77:20] well, strategies at a 1.2 mnav, so they
[77:23] can sell as many shares as they want
[77:25] above one, and it's accretive." And
[77:28] that's not true. Um,
[77:32] again, I'm not saying they shouldn't.
[77:35] They should do whatever they want. They
[77:36] have to come up with the money somehow.
[77:39] You either got to sell MSTR, sell
[77:41] Bitcoin, or suspend the dividends and
[77:43] let the stretch holders
[77:46] uh die off. So, whatever. They'll make
[77:49] their decisions.
[77:52] The math that I feel responsible in
[77:55] telling you guys is yes, above one MNAV
[77:59] means that the new shares are accretive
[78:01] on a per share nav today. That's true.
[78:04] However, it ignores that new shares are
[78:07] also inheriting a permanent share of the
[78:10] $2 billion a year of pre dividend
[78:13] payments that they need to make. So what
[78:15] we call that is we call that a drag.
[78:18] That drag has a cost. So the real
[78:21] accretion line is probably somewhere
[78:23] around 1.25.
[78:26] So said another way, MNAV above one is
[78:31] accretive on a snapshot basis, but the
[78:33] preferreds charge over 3% of a perpetual
[78:38] tax on every bitcoin in the pile. So the
[78:41] real accretion line is probably 25% or
[78:45] so above the 1.0.
[78:49] Does that make sense? So I just like I I
[78:53] would feel irresponsible not answering
[78:55] these questions.
[78:57] So the real accretion versus dilutive
[79:00] number is not to 1.0. I mean the market
[79:03] cap today is 45 billion and the Bitcoin
[79:06] is worth 53 billion. And so obviously
[79:08] just the traditional market cap versus
[79:10] the Bitcoin is trading at a discount.
[79:13] But even if you try and do fancy math to
[79:15] make the MNAV something besides just
[79:17] market cap over Bitcoin, you have to
[79:19] include the drag that the preferreds
[79:22] have on the stock and that pushes the
[79:25] actual accretive versus dilutive line
[79:28] much higher than 1.0.
[79:31] And so you guys should know that and you
[79:33] can ask questions if you want, but when
[79:35] people tweet at me and say, "I don't
[79:36] understand what you're saying, Jack. The
[79:39] the MNAV's at 1.2 two and I've been told
[79:41] anything above one is is accretive. Um,
[79:44] not when you have a drag where every new
[79:47] share is inheriting a bunch of future
[79:52] obligations.
[79:55] Okay,
[79:57] trying my best there. Really, really
[79:59] nervous to uh log on to Twitter after
[80:01] this one. Surely going to get my butt
[80:03] kicked. Hey, I'll say this. At least the
[80:06] thing I got my asset for is I said
[80:08] Sailor used to be raising these
[80:09] convertible uh debt instruments at zero
[80:12] coupon and now he's paying 11.5%.
[80:16] And the whole, you know, internet was
[80:20] like, "Fuck you. You don't understand
[80:21] any of this stuff." Guys, I've raised a
[80:24] half a billion dollar convert. I run the
[80:26] company that has the second largest
[80:29] corporate holdings in the world. I
[80:31] specifically instructed my business and
[80:32] my board not to do this strategy because
[80:36] I think it's it's potentially dangerous.
[80:39] So, I do know what I'm talking about.
[80:41] Okay? It wasn't my fight to fight on the
[80:43] internet that day. It is what it is. But
[80:46] now, after this presentation, do you
[80:48] guys understand why I said what I said?
[80:51] Raising a zero coupon convertible bond
[80:53] is very different than an 11 12%
[80:56] perpetual preferred. It just makes
[80:58] things a little more complex. It doesn't
[81:00] mean it can't work. It just makes it a
[81:02] little bit more complex.
[81:04] So, we'll see what the internet has to
[81:06] say. Probably not nice things, but
[81:07] whatever.
[81:09] Free speech. It is what it is. If I'm
[81:11] wrong, I'll put my hand up and I'll
[81:13] admit it. Uh, strike.
[81:16] What the hell?
[81:19] Damn it. My slides didn't produce
[81:21] correctly. Let me Hold on. Let me pull
[81:24] up some of this stuff here.
[81:28] Okay.
[81:30] So strike um what we shipped last week.
[81:34] So we do this thing where every single
[81:36] Monday we tweet what we shipped last
[81:38] week. So one anti-ishing codes. So a lot
[81:42] of our customers are you know there are
[81:43] fishing attempts on them especially
[81:45] through email. So when we send you an
[81:47] email now it will come with a code and
[81:49] you can check your app on your account
[81:52] in your settings and see that the code
[81:54] matches. And so that's how you can
[81:56] verify that the email or the
[81:58] communication came from us. You can also
[82:00] reference this code when you're on the
[82:01] phone with us. So this is a security
[82:03] feature for us to make sure that you're
[82:05] safe and we're very proud of it. We have
[82:08] a new team internally at Strike called
[82:10] the Trust Team. They've been absolutely
[82:12] killing it. the leaders of that team.
[82:14] I'm so happy they're at the company and
[82:16] we're starting to ship some features
[82:18] that at the end of the day, our top
[82:20] priority is keeping you guys safe and
[82:22] making sure that your Bitcoin journey
[82:24] lasts as long as you want it to. And
[82:26] that means that you have access to
[82:29] education, protection, security. So,
[82:31] we're going to increasingly launch
[82:33] features that keep you safe. Very happy
[82:35] about this one. If you have questions
[82:36] about it and you have feedback on it,
[82:38] let us know. But huge leap to make sure
[82:41] that you know when we are talking to you
[82:43] and when you're talking to us, you can
[82:45] always confirm with us and say, "Hey,
[82:47] this is my code or or you tell me what
[82:49] the code is and and we'll be able to
[82:51] confirm that." Um, our dashboard
[82:53] continues to get better. So on the
[82:55] dashboard, you can now track your
[82:56] activity. We now have target orders. So
[82:58] everyone wants to use Strike on desktop,
[83:00] you can dashboard.strike.me. Go in, log
[83:03] on, see all the features you have access
[83:05] to. We'll continue to make that better.
[83:07] Uh we have our new uh iOS quick action
[83:11] buy bitcoin. So as part of the strike
[83:14] app and icon and widget um quicker
[83:16] access to buy bitcoin and then we
[83:18] continue to lower minimums for states in
[83:20] the United States for lending. So both
[83:22] Wisconsin and Minnesota got lower
[83:23] minimums. That's everything that we
[83:25] shipped just last week. We continue to
[83:28] absolutely ship [snorts] our
[83:31] uh coonas off. We also launched
[83:34] something called limits 4.0. That's what
[83:37] we call it internally. So, we constantly
[83:39] iterate on limits. I'm not going to
[83:40] share too much detail on that because
[83:41] some of that's proprietary information,
[83:43] but we shipped a new limit system. I
[83:45] think limits are one of the most
[83:46] important features for any Bitcoin
[83:47] financial service is, hey, when does my
[83:50] money settle? When can I withdraw my
[83:51] Bitcoin? How much can I buy at once?
[83:54] It's unfortunately complicated because
[83:56] the US banking system sucks. When you
[83:57] guys send me dollars, sometimes it
[83:59] doesn't settle immediately. And so one
[84:01] risk I have to engineer against is
[84:04] someone sends me dollars, I let them buy
[84:05] Bitcoin and withdraw it, and then they
[84:07] reverse the payment, and I don't get the
[84:09] money for the Bitcoin, they stole my
[84:10] Bitcoin, and I'm out of money. I let
[84:12] that happen too much, I'm out of
[84:13] business. And so it's very complicated
[84:15] engineering and data science to figure
[84:17] out, well, who's a good user, who's a
[84:19] bad user, what should their limits be?
[84:21] Obviously, if we make your limits like
[84:23] $1,000 a week, I mean, we can't service
[84:25] Bitcoiners all over the world. What if
[84:27] you want to buy one Bitcoin? It's going
[84:28] to take you more than a year to get it
[84:29] off the platform. What the [ __ ] And so
[84:31] we work really hard on our limit system.
[84:34] We shipped a brand new version of it,
[84:36] which not only should give you better
[84:38] limits, but also more transparency into
[84:40] how they work and ways so that you can
[84:43] figure out what to expect. It should be
[84:45] really useful. So check that out as
[84:47] well. You're not going to see as much uh
[84:49] like tweeting about it and stuff because
[84:52] again, it's more proprietary data stuff.
[84:55] Um like there's not that much. What what
[84:57] can I say? We launched new limits. Um,
[84:59] that's as much as I can tell you, but
[85:01] anyway, I don't know, the ride or dies.
[85:02] The people that support me the most are
[85:04] on here, so check that out. Um, and then
[85:06] these are some of the bigger ones that
[85:07] we got coming up real soon. So,
[85:09] volatility proof loans, these are the
[85:11] loans you can get that we'll never
[85:13] liquidate. Now, there's a caveat. If you
[85:16] never pay us back, eventually we do have
[85:18] to confiscate the Bitcoin. But the point
[85:20] is, whatever. We need maybe better
[85:22] branding, wick protection. you know,
[85:25] there's no liquidation clause where like
[85:27] if the Bitcoin price crashes down, there
[85:29] is no liquidation. You pay a slightly
[85:31] higher cost for this loan and we use
[85:34] that slightly higher cost to put on
[85:35] hedges to make sure that liquidation's
[85:38] not even an option for you. And so, I
[85:40] think this would be such a cool thing to
[85:41] get out in the bare market. I think this
[85:44] could launch as soon as next week,
[85:46] hopefully this month. We've been really
[85:48] iterating and and testing this one. Um,
[85:50] we're very happy with it. It'll be in
[85:51] the app. Everyone that has access to
[85:53] lending will have access to it. Very,
[85:55] very, very exciting. Our interest on
[85:57] cash, you guys have wanted this forever.
[85:59] Uh we're finally getting close to
[86:00] releasing this to you guys so that your
[86:02] uh cash balance on Strike will not only
[86:05] be giving you interest, but interest
[86:06] paid out in Bitcoin. And then Stacks is
[86:08] another one that's coming in hopefully
[86:10] the second half of this year, which is
[86:11] sub accounts within Strike. So if you
[86:13] want an account designated just for your
[86:15] kids or for your wife or for your
[86:17] savings, a lot of feature requests so
[86:19] that you can organize different piles of
[86:21] money inside of Strike that's coming as
[86:23] well. So this is going to be very
[86:25] exciting time for Strike. You know, we
[86:27] as a business, we've been very resilient
[86:29] to the bare market. Uh we continue to
[86:31] grow. I'm very happy with the
[86:33] performance of the company. You guys all
[86:34] supporting us as customers, the
[86:36] performance of my employees, just
[86:37] absolutely knocking it out of the park.
[86:39] And we pride ourselves on proof of work,
[86:42] velocity of shipping, work ethic. I'm
[86:44] just really proud of, I don't know,
[86:46] being part of this thing. It's a special
[86:47] place, man. Like, um, you get to know
[86:49] other companies and not talking [ __ ]
[86:52] but I don't know if anyone ships as much
[86:54] as we do and works as hard as we do and
[86:56] as ambitious as we are. It's a really
[86:58] special place in a special group. So,
[87:00] it's fun to ship you guys software and
[87:03] see the reaction. And it's also fun to
[87:06] have you guys tell us what you need. And
[87:08] we just have an uncanny ability to just
[87:10] build it like quick and great and design
[87:13] it beautifully and support staff is so
[87:15] knowledgeable and 24/7 around the globe
[87:18] to make sure we're getting back to you
[87:20] quickly. So really proud. And then for
[87:22] 21, listen, I think the conversation
[87:24] today will hopefully give you guys some
[87:25] insights into why we are working on what
[87:28] we're working on. I think having
[87:30] productive cash flow as a company is
[87:32] really important to being able to acrue
[87:35] leverage and afford these payments
[87:37] without dilution or afford these
[87:38] payments without selling Bitcoin. So,
[87:40] you know, can you imagine if
[87:43] um Strategy said, "Hey, we actually have
[87:45] a business that makes $2 billion a year
[87:47] so we can pay all these dividends
[87:49] without needing to do any of these
[87:51] options." I think their stock would go
[87:53] up 50% in a day. So, um obviously it's
[87:56] easier said than done. Um, we uh we're
[88:00] continue to work on it. I get the
[88:02] frustration. Um, but that's, you know,
[88:05] why we want to be different. We don't at
[88:08] the moment. And we're we're watching
[88:10] strategy. We're watching all these other
[88:11] companies. And of course, if they figure
[88:13] out something that I haven't figured out
[88:15] yet, I'm all in on it. And and we'll
[88:17] work on the preferreds. We've got a huge
[88:19] stack of Bitcoin and really really deep
[88:22] pocketed partners in Tether. But with
[88:24] that being said, it's unclear to me what
[88:28] I just went through like how this will
[88:30] all shake out. Who knows? Not saying
[88:31] it'll be bad. I'm not saying it'll be
[88:33] good. I'm saying I don't know. And so,
[88:35] we're going to uh continue to stand up
[88:37] these operating businesses with the goal
[88:39] of cash flow and growth and an ability
[88:41] to both acquire a lot of Bitcoin with
[88:44] what we would consider healthy leverage
[88:46] and scale businesses um that have cash
[88:49] flow. And the combination of the two, I
[88:51] think, would be unique. I think the
[88:52] market would be interested in that. So,
[88:55] we'll see.
[88:56] Okay. What questions you guys have for
[88:58] me? I'm sure there's some. Uh, and then
[89:00] I'll try and keep it not short, but not
[89:04] long because, uh, I have to catch a
[89:07] flight. Let's see. Let me blow this up.
[89:12] Let me open Dylan's uh, let's see.
[89:15] Dylan, how nervous should I be to log
[89:16] into Twitter after this?
[89:19] I tried to be as neutral as I possibly
[89:22] could, guys. I really genuinely from the
[89:25] bottom of my heart, I have no incentive
[89:27] for anyone to blow up. I own Bitcoin. I
[89:30] care about Bitcoin. I want everyone
[89:32] working on Bitcoin to be successful and
[89:33] help Bitcoin.
[89:36] Please spare me while I'm on my flight
[89:38] doom scrolling.
[89:40] Um, okay.
[89:43] At what point do you worry about Micro
[89:45] Strategy having too much Bitcoin? Like
[89:47] is there a a point at which they're sort
[89:49] of ruining Bitcoin by being overly
[89:52] greedy with it? I don't care about how
[89:55] much Bitcoin anyone has. Strategy, the
[89:57] US government, Russia, I don't care. Um,
[90:04] listen, Bitcoin finds a home where it's
[90:08] treated best. you know, uh, if someone
[90:12] needs to sell it because they're too
[90:14] levered or something, it's gonna find a
[90:16] buyer that wants to put it on ice and
[90:20] hold it forever. Yeah. So, I'm not
[90:22] worried about that. People used to ask
[90:24] me all the time like, "What if Satoshi
[90:26] sold all of his coins tomorrow? What
[90:28] would you do?" Uh, buy them. I don't
[90:31] know if what if he crashed the price to
[90:34] 3,000? I would log on to Strike and I
[90:36] would buy all the bitcoins I could at
[90:38] 3,000. That's what I would do. And then
[90:41] all all price is is a function of supply
[90:43] and demand. And so if there's not a lot
[90:46] of demand for Bitcoin at 3,000, well
[90:49] then the price is going to be 3,000. But
[90:50] if there's a lot more demand than there
[90:52] are people willing to sell Bitcoin at
[90:53] 3,000, well then the price is going to
[90:55] go back to 63,000. Super [ __ ] simple.
[90:58] And I have a really low time preference.
[91:00] So do I worry that someone can own a lot
[91:02] of Bitcoin and potentially sell it? No,
[91:04] I don't care. I'm a buyer of whoever I
[91:06] buy Bitcoin every day and I work hard to
[91:09] try and produce more cash flow and more
[91:10] productive profit so that that buying
[91:13] can increase so that I try and be more
[91:15] valuable to the world on net so that I
[91:18] have cash to have more of an influence
[91:20] on the future that I want to see whether
[91:22] that's buying Bitcoin hiring people
[91:23] getting certain licenses so it doesn't
[91:26] concern me and then the other thing that
[91:27] you guys should understand is
[91:28] structurally the way Bitcoin is designed
[91:30] it doesn't matter how much Bitcoin you
[91:32] have you get the same rules as everybody
[91:35] else. So, Michael Sailor's node and my
[91:38] node and your node and Donald Trump's
[91:40] node and the bakery down the streets
[91:43] node all runs the same consensus rules.
[91:45] So, no one has an advantage at the
[91:47] protocol level. The protocol doesn't
[91:49] give a it has no idea how much Bitcoin
[91:52] you have. Doesn't give a [ __ ] How would
[91:54] it know who owns what private keys? It
[91:56] has no idea. Doesn't give a [ __ ] So, we
[92:00] all have the same rules. And so from
[92:01] that standpoint, who cares? You can own
[92:04] as much or as little as you want, even
[92:06] playing field for everybody. And then in
[92:08] regards of like, can someone sell a
[92:10] bunch and quote unquote crash the price?
[92:12] Sure.
[92:14] Sure. And then we'll all buy them and
[92:16] then the price will go back up. I've
[92:17] seen it happen a million times. No
[92:19] problem. And those that benefit from
[92:21] those moments are those that are
[92:23] responsible, earn more than they spend,
[92:25] aren't too levered, cash flow positive,
[92:28] liquid when others aren't, no problem.
[92:30] Eventually, by the way, we call it the
[92:33] market matures. So things like the ETFs
[92:35] and Black Rockck, you're bringing really
[92:37] mature market participants that help
[92:39] stabilize markets and give it the
[92:40] liquidity that it needs. I don't think
[92:43] Bitcoin, like we saw, I think it was
[92:46] last summer, we saw someone sell 80,000
[92:48] Bitcoin in a day and the price didn't
[92:51] move. That would be 10 if Sailor came
[92:53] out and said, "I'm selling 10% of my
[92:55] stack." I think the world would freak
[92:57] out. But mind you, someone sold 10% of
[92:59] strategy stack in a day and the price
[93:01] didn't move. So I'm just really not I
[93:04] really just don't think it matters. Will
[93:07] there be uh self-custody Bitcoin backed
[93:10] loans in the space at some point? Um
[93:16] I doubt it because here's the problem.
[93:19] Uh the point of Bitcoin backed loans is
[93:21] they're collateralized. like you give me
[93:24] the best collateral humans have ever
[93:26] come up with is liquid property on a
[93:29] Sunday night I can sell a percentage of
[93:31] it. By the way, little plug strike our
[93:34] Bitcoin backed loans we our liquidation
[93:37] policy is we will only liquidate a
[93:38] little tiny amount to get you back in
[93:40] good standing. Most other companies just
[93:42] sell all your Bitcoin and blow the whole
[93:44] thing out. And so the way strike works
[93:46] is you give us the best collateral ever.
[93:49] If the markets go down and we absolutely
[93:52] have to sell a tiny sliver to get you
[93:53] back into good standing, I can do that
[93:55] on a Sunday night. There's no risk 247
[93:58] totally liquid in all the currencies we
[94:00] want to support. No problems. Um but the
[94:03] point is you give it to me so that I
[94:05] feel safe enough to give you a million
[94:07] dollars or $10 million or $100 million
[94:09] or a billion dollars. If you say, "Hey
[94:12] Jack, give me a billion dollars." And I
[94:14] say, "Cool, give me the Bitcoin." You're
[94:15] like, "Nah, I'm going to keep that,
[94:16] too." Well, then what the [ __ ] What if
[94:19] you just never pay me back? You just run
[94:21] away with my money. And so, you know,
[94:23] like, what guarantees do I have now?
[94:25] That's, you know, like that's just
[94:28] credit. That's uncolateralized
[94:31] lending. I don't I'm not in that
[94:33] business. That's basically when I have
[94:34] to scan your eyeball, figure out where
[94:36] you went to college, who you're married
[94:38] to, where you live, who your parents
[94:40] were, and then I make a riskbased, you
[94:43] know, how much money can I lend this guy
[94:45] because of his credit score and like,
[94:48] can he pay me back or not? [ __ ] that
[94:49] [ __ ] That's stupid. Anyone can download
[94:51] my app, deposit the Bitcoin, and we're
[94:54] working on you put it, we'll put it in
[94:55] an address for you where you can see it,
[94:58] and we will never liquidate it. And now
[95:00] we have proof of reserves that we
[95:01] publish for our lending product. And
[95:02] like we don't do any there's no funny
[95:05] business. The whole point is this is a
[95:07] better lending product because there's
[95:09] no credit checks. Anybody can use it any
[95:12] amount. Like you guys want a billion
[95:14] dollar loan, I can get you a billion
[95:15] dollars. But you got to give me the
[95:17] collateral. If you don't give me the
[95:18] collateral then and my best guess is if
[95:21] someone said I'll launch a product where
[95:22] you get to keep the collateral and you
[95:24] get all the money. I'm sure they'd get a
[95:27] lot of adoption immediately and then
[95:28] they'd go out of business because no one
[95:30] would give them the money back and then
[95:32] they'd fail as a company. So, that's
[95:35] kind of the problem. It's not that I
[95:37] want to hold your guys Bitcoin, but I
[95:39] have to in order to give you a loan.
[95:43] It's kind of like how it works,
[95:45] unfortunately. It's like, give me a
[95:46] heliloc, but you don't have the the
[95:49] right over my house. It's like, well,
[95:53] I mean, good luck.
[95:56] Um,
[96:03] okay. Strike questions.
[96:07] Wow. Were there really no other strategy
[96:10] questions? You guys, well, maybe Dylan's
[96:13] acting as a filter, but did I make that
[96:15] much sense? Maybe I did. Who knows?
[96:20] Okay, strike questions. Are we going to
[96:21] get a debit card for our strike
[96:23] accounts? would be nice. Would be nice.
[96:27] Um,
[96:28] we continue to think about it. Um, not a
[96:31] yes, not a no. Uh, internally there's a
[96:35] lot of momentum to get some card product
[96:37] because you guys keep asking for it. And
[96:39] we kind of have a culture of we're not
[96:41] right, you're right. We work for you
[96:43] guys. So, you want a card, you get a
[96:44] card. Um, the problem has always been
[96:48] why would we be better at giving you a
[96:50] card than like AMX or Chase? We're a
[96:53] Bitcoin company. They're going to
[96:54] probably have better rewards for you,
[96:56] better card [ __ ] They're a fiat
[96:58] company, so why would you want a card
[97:00] from us, but you know, we continue to
[97:03] research it and try and, you know,
[97:05] provide
[97:06] uh answers to ourselves to justify it.
[97:09] So, we're looking into it for sure. Hey,
[97:11] Jack, is there any ETA on a Bitcoin line
[97:13] of credit for individual retailers being
[97:16] available in the state of Washington? I
[97:17] would really love to start when Bitcoin
[97:19] is below 200 EMA. I get that. Uh we are
[97:22] very close to getting that license. Uh
[97:24] we need Washington
[97:27] uh legal. So I'm reading um sometimes
[97:30] the team, not sometimes, most of the
[97:32] time, Manuela, the president of the
[97:34] company who leads uh our products, she
[97:37] writes in answers to help me answer
[97:39] these as accurate as I can. And she
[97:41] says, uh we think we're a few weeks
[97:43] away. Take that for what it's worth.
[97:46] Guessing these things is hard. I don't
[97:47] like being wrong there and letting you
[97:49] guys down, but the team thinks we're a
[97:51] few weeks away, which is that sounds
[97:53] exciting. Hello, Jack. Please give some
[97:55] news about being in Canada, especially
[97:57] Alberta. Thanks. We are working on
[97:59] Canada. We we have hired a little while
[98:02] ago actually. Uh our head of Canada, uh
[98:05] we're going through the whole process.
[98:07] It's an intense one. Canada is no joke.
[98:09] The amount of licenses and regulation is
[98:11] legit. Um but we're actively working on
[98:14] Canada. I was actually in Strike Canada
[98:16] meeting on Friday of last week, I think
[98:19] it was. No, two Fridays ago.
[98:23] Two Fridays ago, I don't know, whatever.
[98:25] Recently, felt like yesterday. Um, yeah.
[98:29] Manuela wrote here, "We have a country
[98:30] manager. We're going through all the
[98:32] work to set expectations. It's probably
[98:36] not until 2027,
[98:38] but over my dead body, we will be in
[98:42] Canada. I promise you that is hard. It's
[98:44] not a lot of company, Bitcoin companies
[98:46] of our size and scale that can operate
[98:48] in Canada, but we are going to do it. We
[98:50] are Let me say something else. It's hard
[98:54] to just stay focused on Bitcoin. Don't
[98:57] get distracted and have the money and
[98:59] the production and the growth to just do
[99:02] the simple things. Lower the time
[99:04] preference and let things play out.
[99:07] Because usually people get into altcoins
[99:09] and prediction markets and start selling
[99:11] stocks on the platform and they things
[99:13] get complicated and it's distracting.
[99:15] You're like, "How is there no simple
[99:17] Bitcoin global bank yet?" Like, how is
[99:19] that possible? It's like, well, because
[99:21] people get distracted and they start
[99:22] working on all sorts of crazy [ __ ] and
[99:23] they come up with their own blockchain.
[99:26] We one by one just apply for the
[99:29] licenses, hire the right people, talk to
[99:30] our customers. It's not very sexy. It
[99:33] doesn't make all the headlines. We don't
[99:35] have a big enough as big of a TAM as
[99:37] Coinbase,
[99:39] but that's why I started this thing is
[99:42] we're going to do it. We're just going
[99:43] to be a simple, reliable global Bitcoin
[99:47] company. Best user experience, best
[99:49] features, best pricing.
[99:52] So, we will every license hopefully
[99:55] before I die, we will get that so that I
[99:58] can serve all you guys. Uh, can we get a
[100:01] more dynamic way to pay down our line of
[100:03] credit? something like a smart LOC that
[100:05] your model outlined at the launch. Uh
[100:08] yeah, I love these ideas. Um if you if
[100:12] you guys have these use cases, DM me, DM
[100:14] the Strike Twitter account. Um the
[100:17] product team reads the Strike Twitter
[100:19] account like is shared with the product
[100:22] team so we can see you guys and what you
[100:24] want. Let us know like if you have a use
[100:27] case where you want to split off like a
[100:28] certain percentage of your paycheck or
[100:30] you want my model that I outlined at
[100:33] launch to be specifically implemented.
[100:35] If there's enough demand for something,
[100:37] we build it. That's just how it works.
[100:39] Pretty much everything you guys ask for
[100:41] gets written down somewhere. But the
[100:43] problem is and the hard part about
[100:44] building is what do you build first,
[100:46] right? Like how does priority work? You
[100:48] can't build everything for everyone. And
[100:50] so if there's enough demand and it's
[100:52] clear and makes sense, then we'll build
[100:54] it. Yeah.
[100:56] Uh, okay. Other questions? Uh, Spurs or
[101:00] Knicks?
[101:03] I don't know. I mean, I will say this. I
[101:06] wouldn't mind either.
[101:09] You know, I used it used to pain me
[101:13] watching LeBron in the finals because I
[101:15] did not want to see LeBron win rings. He
[101:17] bothered me. Um, so,
[101:20] um,
[101:24] I'm just glad that either team I
[101:27] wouldn't mind Brunson holding up the
[101:29] Larry O'Brien, but I personally would I
[101:32] want We Wy to get it personally. I love
[101:35] the emotion. I love the way that this
[101:36] team plays the game. Um, this New York
[101:40] fans bother all of us. Um, and this team
[101:44] is a little annoying. I don't know. It's
[101:46] It's hard. It's hard as like a I grew up
[101:48] playing basketball. I joke all the time
[101:50] that Satoshi made me 5'8 150 160 pounds
[101:54] or else I if I was 6'4 I'd be in the
[101:56] NBA. I wouldn't be working on Bitcoin.
[101:58] So it's hard like Carl Anthony Towns
[102:01] male Bridges like these guys. Um you
[102:04] know the Spurs are much more fundamental
[102:08] fun basketball. Um I think WBY would
[102:10] make for a great face of the league. the
[102:12] way he plays, watching him draw his
[102:15] characters in the in Times Square or
[102:17] whatever the [ __ ] he's he's going and
[102:19] focusing on his mental health with
[102:21] Monks. So on the off seasonason. So I
[102:24] hope the Spurs take two back in the
[102:26] Garden and this series goes, you know,
[102:29] five, six, seven. That'd be fun. But
[102:32] hey, at least we're not watching [ __ ]
[102:36] LeBron's Miami Heat teams.
[102:39] Uh, Jack, is there a steakhouse that you
[102:42] go to in Vegas? Um,
[102:46] not really. Uh, Manuela wrote here that
[102:50] she likes Golden Steer
[102:54] and I like Manuela. I trust Manuela. So,
[102:56] let's go with Golden Steer. When I'm in
[102:59] Vegas, you guys know how I feel about
[103:01] Vegas. I think Vegas is fiat capital of
[103:03] the world. I don't like Vegas. I go to
[103:05] Vegas for business if I have to. And so
[103:08] when I'm there, I'm always holed up in
[103:10] my hotel room working on my slides
[103:12] trying to like not, you know, spend time
[103:16] around gambling junkies and strippers
[103:19] and all stupid disgusting [ __ ] So, um I
[103:23] haven't really like
[103:25] spent time going to different
[103:27] restaurants. Dylan Dylan gets
[103:29] reservations at really cool places and
[103:30] they're all good. I mean, there's a ton
[103:32] of money invested in Vegas, so it's all
[103:34] none of it tastes bad. At least the
[103:36] places Dylan takes me. But off the top
[103:38] of my head, I wouldn't even be able to
[103:39] tell you. Oh, that's not true. My
[103:42] favorite place in Vegas is Delila's.
[103:45] That's not true. I like Delilas. Um, but
[103:48] it was just fun. Like, uh, I got a table
[103:52] next to the live performers. The food
[103:54] was good.
[103:57] I don't know. Whatever. [ __ ] that place.
[104:01] Uh,
[104:05] did I get a Tesla with uh full
[104:08] self-driving? I did. I did do that. So,
[104:12] my analogy of I can give you guys a ride
[104:14] as long as my car can get enough gas.
[104:17] My car actually doesn't need gas. That
[104:19] was just for the analogy. I got a Tesla.
[104:22] Um,
[104:25] my So, my fiance, uh, I never wanted a
[104:30] car. my fiance uh when she moved in here
[104:34] uh we realized we needed a car. She
[104:36] really wanted one. Um and I get it. I
[104:38] mean she's whatever needs errands to
[104:41] run. It's cold. I don't want her running
[104:43] around on her own. Um she needed a car.
[104:46] And we looked around like she wanted a
[104:49] classic Jeep. Um we looked at a few car
[104:52] dealerships. But then the like engineer
[104:55] in me just functional, practical. was
[104:58] like, "There's a car on the market where
[104:59] cuz I already know she's going to wake
[105:01] me up on a Sunday morning like you got
[105:03] to go fill up the tank." Like, "Fuck
[105:05] this." And I already know I don't want
[105:07] to be short oil. I like you guys listen
[105:10] to this show. I'm too smart to be short
[105:12] oil. Short oil means I need gas in
[105:14] perpetuity. And so I was like, "Okay,
[105:16] there's a car where I can install a
[105:17] charger. I plug it in at night, like my
[105:19] phone, and it drives itself. So, if I
[105:22] need to go, I was just at Lake Geneva
[105:24] this last weekend for family uh birthday
[105:27] event. That's like a two-hour drive. And
[105:30] I pick up Dylan. I didn't have to drive.
[105:32] I'm sitting there as if I'm in the
[105:33] passenger seat. The car drives me two
[105:35] hours, makes a a dent in its battery.
[105:38] Barely a blip. No problem. So, I don't
[105:41] even remember the last time I drove this
[105:42] car. I get in, I put in the address, I
[105:45] hit self-drive, and I'm listen to
[105:46] Bitcoin podcast. I have the AI hooked
[105:48] into it. So, I talk to Grock about
[105:50] Austrian economics or the market or um
[105:54] the latest whatever. So, I'm talking to
[105:57] AI. I'm listening to podcast. I don't
[105:59] even have to drive it and I don't need
[106:01] oil. So, the Tesla uh my fiance and I
[106:05] love it. Um it's great. So, yeah, I have
[106:08] self-driving. I we we got all the
[106:10] features. I don't know. I didn't have
[106:12] enough time to research all Elon's up
[106:13] to. So, we were like whatever. If Elon
[106:15] built a feature, we'll take it.
[106:16] Hopefully, we don't get scammed. And
[106:18] it's a great car. Worked out for me. I
[106:21] hate driving. So, I get to just put in
[106:23] like she's going to take me to the
[106:25] airport after this. We're just going to
[106:26] put in O'Hare and hit drive and we'll
[106:29] hang out, chat, and listen to some music
[106:32] and no one has to drive.
[106:35] Pretty cool. Uh, what is my chess
[106:38] rating? So, I haven't played a regulated
[106:41] chess tournament in a long time. So, my
[106:44] USCF rating,
[106:47] United States Chess Federation rating, I
[106:49] don't know off the top of my head. Um,
[106:51] probably around 2,000, but my online
[106:54] rating, I play a lot of bullet and a lot
[106:55] of blitz. I'm I'm probably like 2500 at
[107:01] chess.com. Le chess, my le chess rating
[107:03] is a little higher than my chess.com,
[107:04] but I think on chess.com I'm 2500.
[107:08] So,
[107:12] I'm decent. I'm decent, but I don't I
[107:15] don't study anymore. My opening theory
[107:17] has gotten worse. So, like when I'm
[107:19] playing bullet against GMs and stuff
[107:21] like I'm beating GMs and IM all the
[107:22] time, I'm obviously losing. But I'm
[107:24] playing knight F3. I'm playing the Kings
[107:26] Indian no matter what because then I
[107:27] don't have to, you know, if I in a
[107:30] bullet game, I can't get into complex
[107:31] Sicilians anymore because I just don't
[107:33] have the time to spend on opening
[107:35] theories. So, I don't know how I would
[107:37] do in a regulated tournament nowadays.
[107:40] If I got to play in like the 1500
[107:43] division, I'm sure I'd mop the floor.
[107:45] But, you know, to say that I'm playing
[107:47] GMs and IM every day in Blitz online
[107:51] thinking that I can go People are like,
[107:53] "Oh, do you think you have a chance
[107:54] against Magnus?" Like, no. Magnus would
[107:56] beat me a million out of a million times
[107:58] if we played a million games. It would
[108:00] never be close. Um, so don't don't take
[108:04] my 2500 rating as me that I could
[108:08] compete in, you know, the candidates.
[108:11] Um, but online blitz between meetings, I
[108:15] can hang in there. I can hang in there.
[108:18] Um, all right. Well, that's all the
[108:20] questions Dylan gave me. If you guys
[108:22] asked a question and I didn't answer it,
[108:25] don't say I'm avoiding it. Blame it on
[108:27] Dylan. Story of my life. Blame it on
[108:29] Dylan. Um, that's all I got. I gotta get
[108:33] to the airport. I'm really excited about
[108:35] my keynote in Prague again. It'll be
[108:37] about
[108:39] the art renaissance. I think AI and
[108:41] Bitcoin are going to do tremendous
[108:42] things for us. Last year, my speech was
[108:45] a little more sad. It was just real. It
[108:48] was about how fiat has been destroying
[108:50] us in my generation. Seeing drug
[108:52] overdose, rise in metabolic disease, a
[108:56] lowering of life expectancy in certain
[108:58] areas of the country. And it was just
[109:00] real and there were people crying in the
[109:02] in the audience. It was a very emotional
[109:04] moment. And now we're at the B we're at
[109:06] the bare market. Prices down. Sediment
[109:09] consumer sentiment's never been lower.
[109:11] I'm like, I'm not going to get up there
[109:12] and make people cry. Not going to do
[109:14] that. I'm going to do the opposite. So,
[109:16] I really do think that
[109:18] as humans, we engineer a better world.
[109:21] That's our story. And the combination of
[109:23] AI and Bitcoin is tremendously exciting.
[109:25] And uh there's some data that I use to
[109:30] draw the world today and just what's
[109:33] wrong with it and how these technologies
[109:36] relieve us of the problems it's created.
[109:39] And I think an art renaissance is on the
[109:40] other side. So that's Saturday. Really
[109:42] looking forward to uh to doing that and
[109:45] seeing a lot of you all out in Prague.
[109:46] If you see me, don't be shy. Come say
[109:48] hi. I love talking to you guys. And with
[109:50] that, I'll talk to you later.
[109:54] Peace and love. Hello, Bitcoin Treasury
[109:57] Company folks. Take it easy on me.