Speaker 1They're going to buy back the ones that are going to try to effectively reduce the debt load by making the currency less valuable. You actually have the president and the treasury working for Bitcoin because they're working for a weaker dollar and that's one of the strongest determinants of where Bitcoin goes. We actually think that over the course of the next, call it three to seven years, that we will see the biggest decline in the value of the dollar as measured through the DXY index in Bitcoin's history. Sometime I would say in the next 18 months you see real meaningful intervention. You see the dollar become the release valve explicitly. It's hard for me not to think that this Bitcoin bull market that I think we will be entering into over the course of the next 18 months will be substantially better than the one we saw in 2024, 2025.
Speaker 2When you hear this, it makes me want to literally go on my phone right now and buy more Bitcoin. We've been talking about doing this for a long time, man.
Speaker 1I know, it's been way too long.
Speaker 2I'm glad to have you on the show. There's so much to talk about. I want to get into a lot of things with you, but no, I don't actually normally do this, but I'd be interested. I want to get into your background a little bit because I've read a little bit about it, but tell everyone where you came from before you were in Bitcoin.
Speaker 1I came from traditional finance. You could say I was a suit, but I actually never wore a suit at my old job, but I do wear a suit now that I run a Bitcoin company at times.
Speaker 2And an orange tie.
Speaker 1I know. I don't usually go blue tie. I feel like the orange tie doesn't work for me, so I think I've rocked it like one time and then I put it in the closet. But I came from the largest pension fund in America. My parents, they were law enforcement officers. They had their pensions tied to CalPERS. And so right when I graduated college, it was at the start of the great financial crisis. And what you saw across the world, but obviously in America. Was pension funds became underfunded and growing up in Northern California, I saw the pension fund of my parents, my other family members, a lot of friends become underfunded. And so it was a very personal missing mission to go there and try to fix the underfunded pension crisis. And in a sense, a very similar thought process to strive is how do we maximize total returns at this pension? Fix the underfunded pension crisis. And eventually got a job. Yeah. So I got a job in the fixed income unit there, which is for people that maybe aren't familiar with institutional investing in fixed income versus equities. Fixed income units within institutional investments are usually where active management is most likely to occur. So more active risk taking a lot of things similar, but in a different context to what we would talk about now in a Bitcoin strategy. And so I and so I rose up there, I rose up to be their youngest portfolio manager. And managed about $70 billion, about half of that was structured products, which is to structured finance, which is what I view our company today to be is to be a structured finance company. The other half was US treasuries. And so it wasn't exactly 5050. But let's just call it $35 billion of in each bucket that I was actively managing. And the Treasury bucket was what was important for the Bitcoin journey. Because obviously, in the first half of the year, I was actively managing the Bitcoin market. I was actively managing the Bitcoin market. And I was actively managing the Bitcoin market. pushing him out there into it was that when he first did it is very public. It's like, ah, bitcoins not really for me but the government shouldn't shut you guys down you guys should be able to compete but that's kind of which which is i think is a principled uh freedom stance yeah but but also like you don't have to like it but then what happened is that we were talking to him we were helping him but here here's what you should know about bitcoin before you go on these podcasts and then he would go talk to some of the smartest bitcoiners in the world and he very publicly got orange food um and and it was it's authentic it's all like on the record of him doing that and so then when he ran for president in 2023 he became the first presidential candidate to speak at a bitcoin conference in 2024 when trump was running for president trump called out a few people on stage and why he was there and vivek was one of them and so that in a roundabout way it directly contributed to the united states taking a more friendly stance on on bitcoin uh through strive obviously there was other people as well but i think we
Speaker 2directly played a role in that that's very cool you know one of my best predictions ever vivek came on the podcast you know in its previous iteration when pete was still running it in probably 2022 maybe uh he came out to nashville and we did a show and after we recorded me and pete just walked over to the coffee shop and on the way i was like he's gonna run for president and then it was maybe six weeks later he announced he was running that was my best prediction
Speaker 1i'm still claiming that one that is a great one i internally at strive in early 2022 i think everyone thought he would run for president i don't think people knew he would be that cycle but i think it was clearly his passion yeah and he has a passion which is which is truly great because i think sometimes people come down on a billionaire for running for office and it is one of the worst financial decisions that you could make to take what i would say is a generational change and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what pete's trying to do and i think that's what or a Hall of Famer, a Kobe Bryant type of talent in building businesses, and you're walking away in your prime to go do politics. I was like, that's not for me. But I appreciate that because he really does care about that. And it is obviously a very tough system to fix, as we saw as an example with Doge.
Speaker 2Yeah, for sure. Okay, so we can't not talk about the bond market, given your background. Give me your overarching view on the position it's in right now. Because yields are high. The Treasury stepped in with this not yield curve control, yield curve control. What's your sort of overarching view on everything that's happening?
Speaker 1The Treasury and the Fed will have to step in substantially more. And so I guess to start with, where are we right now? The Fed owns over 25% of the entire supply of long end bonds. And I do think the long end is the point, the place that's more interesting to talk about right now, especially in a era of fiscal dominance, which just means that the Fed is going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going to be the one that's going. The fiscal situation, the debt crisis matters more than inflation.
Speaker 2Yeah. Can I just ask you a question on that before we carry on? You say it owns over 25% of the long end now. What would that be? Give me some context. Say you go back to 2017. What would that have been then?
Speaker 12017, it likely would have been not a ton different, but in the early era of QE, so QE basically played out through the great financial crisis, but effectively been nothing. And then you have QE1, QE2, COVID, and it just continues to go up. But then the treasury is also issuing more debt. And so this era of post-GFC is when it rose substantially. And so that's the important part. And obviously, the debt crisis continues to get worse. It does not ever go down. And so you think about this, and sometimes it's helpful to bring this back to the concept of a company. Imagine a 25% owner of a company. That is your majority owner. It is the biggest owner. If a 25% owner liquidated, it would crash the price of the stock unless you had someone that was interested to buy it at that price. And so there is already substantial intervention in the rate of US government debt. And I think this gets into, I think, an important question where you look at not only the fact that the debt to GDP level in the United States is over 100%, which is pretty common. And it's also very common in other countries for massive intervention. But if you took out intervention, you looked at the debt to GDP level, and then you looked at the trajectory of growth of debt, right, not just the current level, but where it's growing. And I think when you combine all those, most models would say the fair market rate of the 10-year treasury is over 10%. I don't think we'll ever get there. I don't think they will not let that happen. But it's just important to think about intervention. How much is intervention actually bringing rates down? So right now, the 10-year treasury yesterday passed 5.25. We actually, I think this is actually really helpful for the context running a Bitcoin treasury strategy, but Strive has an asset management business. One of our funds is a bond fund. It's a total return bond fund. It's what I used to do. And I still run the highest level decisions of that. And I think it's like, it's almost like exercise that keeps me sharp and also the Bitcoin treasury strategy. Yeah. I saw a long form post about this with regards to Bitcoin about rates. But yesterday, that fund, for the first time in its history, started to go long duration. So it bought 10-year treasury futures when it passed 5.25%. And it would potentially increase that duration long position up to like 6% on the 10-year. So basically, it just kind of legged in like a small leg into it. But if rates go higher, it will continue to leg in more. And so you might say, well,
Speaker 2that's because you think it's reaching the highest the yield is going to allow the yield to get.
Speaker 1Yes. So it's important that you said the highest they will allow it to get.
Speaker 2Well, yeah. I don't want to just like derail the conversation from there. But I do want to ask, like, why can't it get to 10%? I know that's a big number, but we were over 10% in like the 70s, right? Like, why couldn't they do that now? What breaks? This show is brought to you by our lead sponsor, Ledin. I've taken out multiple Bitcoin-backed loans with Ledin, and I think they're an awesome company. So if you do need dollars for a business expense, a tax bill, you just want to stack some more Bitcoin, whatever the reason is, Ledin lets you use your Bitcoin as collateral instead of selling it to raise the cash. And with Ledin loans, your collateral is held in custody, and it's never lent out to generate interest. They give you all the tools you need to manage the loan as the Bitcoin price moves. So you'll get alerts. There's an optional auto top-up, which automatically adds Bitcoin to your collateral if it's needed. And for any reason, you can always repay the loan early with no penalty. To see what a loan would look like for you, check out the loan calculator on their website. You'll get to see your rate before you apply and how much collateral you'd actually need. And if you do want to apply for a loan, use the code WBD for 0.25% off your first loan at ledin.io forward slash WBD. That's L-E-D-N dot I-O forward slash WBD. As Bitcoiners, we spend a lot of time thinking about taking control of our money. But what about where we live and the options we have if the rules change? Having a plan B means giving yourself and your family choices. Somewhere else you could live in a different system you can access if you need it. And this is the stuff you want to have in place before that happens. That's where Expat Money comes in. They help give freedom-minded people optionality so you're not dependent on the whims of any one government or any one system. Their founder and CEO, Mikel, has been an expat for over 25 years. He's built his own life this way and brings that personal experience to helping others do the same. If you've ever thought about building your own plan B, download their free report at expatmoney.com forward slash WBD. That's expatmoney.com forward slash WBD. So what breaks is the level of
Speaker 1debt to GDP and the fact that they have no ability to roll back entitlements. They have no ability to roll back spending. And so here's the things that don't break right now, which is it is important. So right now we have an AI boom. There is a lot of investment in data centers. And that capital is actually not sensitive to interest rates. And so if interest rates goes up, basically, these large companies like I don't care. Let's build the data center. We want capital. Give me the capital. I'll pay 10%. I'll pay 12%.
Speaker 2Because they just need to put compute online right now.
Speaker 1Yes. Yes. And so that part doesn't break down. So I do not think that if rates go up, we go into a recession. But because of the debt level of the United States, the United States itself cannot support the debt level. So it's not the economy. It's the country. And it's the fiscal dominance situation, right? The fiscal situation is the debt level. And so it's not the economy. It's the most important thing for the Fed and for the Treasury. And so what and we saw this last week where the bond auctions were one of the weakest bond auctions in several years. I mean, there was very little demand for Treasuries. Yields are moving higher. And then you've seen actions from Besant. So Besant saying, I am the house. And he has basically a trillion dollars to buy back bonds if he wanted to. But he started with six billion, which is six billion of effectively a trillion dollar pot of money. And so he's got a lot of money. And he said, I will use this if I have to.
Speaker 2And then interestingly, I was just going to say, I saw a tweet from Luke Grohman when Besant came out and said that saying anyone that tells you that the house, they're not the house. I think he's implying that the market's really the house.
Speaker 1The market is the house. I've said, you know, I believe percent and what i mean by i believe him is i think that he will deploy all of that money the question becomes how much pain is he willing to tolerate and i think something interesting happened yesterday that i think has not been really covered as much in the bitcoin community yet but yesterday um a long time head of macro at jeffrey's his name is david zervos i don't know if you've heard of him or not no but uh someone that in bond space uh bond nerds uh listen to him a lot uh and so you know i i've you know he used to come into calipers a good amount and all of the head pms watch what he would say very very carefully and he actually coined the term bonfire in the era of qe um which and he was very supportive of it it wasn't a critical message it was and he was talking about different countries and basically a soft uh defaulting on the idea of a bond and he was talking about different countries and basically a soft uh defaulting on the idea of a bond and he was talking about different countries and basically a soft uh defaulting on the idea of a bond and he was talking about different countries and basically a soft uh defaulting on the idea of a bond and he was talking about default by making the value of the currency less and effectively doing a bond fire you're not defaulting but it's effective it's debasement and he he was a big proponent of that and he just got put in basically as the second person under percent interesting yesterday uh and and i found that fascinating because you have a cent saying i'm the house you have someone that is on the record historically of not only calling but supporting basically currency devaluation going to the and i think he's very smart i think it's good for the treasure i think unfortunately i think it's the best option that they have but you think about that and you pull it back to bitcoin what does that mean if someone goes there that you know that's their view of the world you have the sense saying the house what do you think they're going to do they're going to buy back bonds they're going to try to effectively reduce the debt load by making the currency less valuable and it's it's
Speaker 2soft follow by bitcoin
Speaker 1by bitcoin so
Speaker 2um when we say they're not going to allow it to go over six percent whatever that number ends up being how are they going to stop it what tools will they use do you think we'll have a very explicit yield curve control in the us i think
Speaker 1we can get there they you you see what they're doing right now so what are they doing they're starting small and i think they're seeing what they have to do yeah right like so they would not want to go to explicit yield curve control unless it was a last option i think they will take steps so steps would be increasing the size and i think because he's already signaled i think he's going to have to deploy the full size the market is in control i think the question becomes
Speaker 2in terms of like treasury buybacks and and help me understand this because are they buying back sort of off the run long-term debt that's not that or are they buying like from auction brand
Speaker 1new debt off off the run but my view is it it doesn't overly matter when you look into a lot of institutions so as an example calipers which would be similar to a lot of others for their treasury portfolio they own a lot of the on the runs but they own a lot of the off the runs as well they really just own a lot of duration a lot of long-end debt and so yes you're supporting liquidity by buying the off the runs but you're really just reducing the amount of long-term debt and then you're pushing it in the front end where the front end the fed actually does have yield curve or control of the actual rate right so i think that's what's going to happen is they're going to push more long into the fed's uh levels and then over time i think the fed will bring that down and that they won't potentially actually need to control the long end because they'll just push more and more financing to the short end where the fed can control it okay that's what they
Speaker 2want to do so before percent came in he was very critical of yellen for issuing all the debt at the short end um and he's come in and done the same thing essentially which like the only thing you can really drive uh derive from that is that they've got no other option um is term dead like is long-term debt dead in the sense that obviously you have to have a take on the debasement rate inflation but also when you add like ai into the mix how are you meant to know what the world looks like in 30 years therefore take the risk of buying 30-year
Speaker 1debt yeah i i think that does that make sense it does it does make sense and and i think that your framing was right in the sense that in 2020 i thought the united states should be doing 100-year bonds and and and but the reality is and it's easy sometimes on the outside to play quarterback to be you know you shouldn't be doing this you should be doing that and when we hear this all the time as a company it's like well i know things you don't know and and probably what yellen knew was there is no buyer like yes i would love to sell trillion dollars of 100-year debt but you don't see that there's no buyer and the lesson that besant's learning is it a surprise
Speaker 2that there was no buyer then though when rates were significantly lower i mean there was still inflation but is it surprised that there was no buyer at that point what does that signal about the market i
Speaker 1think it signals that it's that it's weak that there's a that when you know the trajectory of your own situation and so like you could even in a very different way you can compare this to what we're doing where we want to have a high amplification ratio which means we want to issue a bunch of preferred which is obviously not debt but it's financing and and we have to look into the market to say how big how much demand do we see and so if they're looking at this and they see a very bleak outlook for demand then maybe they can issue the next 10 million or 50 million but maybe not the next billion or trillion for them right and so then they have to you have to look at the bigger picture of where things are going and so they then have to look at the bigger picture of where things are going and so they then have to move move it to the short end and i do think that in a sense like you know to com you asked about yield curve control and i think this is important because i'm going to go back to qe so in the era of qe the fed and the treasury and this was part of what made me a bitcoiner is i would sit with them not with a microphone but like this and say you're doing you're doing money printing you're and say no we're not printing money and they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you this long technical explanation and then they would give you control just like they did with huey
Speaker 2yeah it's funny like i've had conversations with jeff snyder over the years and he always will like he always say that this isn't actually money printing and maybe like technically that's correct but it's semantics like the the reality is that they're creating new money to to buy these these debt this debt yes um does whatever happens next in terms of how the government try and protect markets in the economy is it going to come from the treasury not the fed is that like with the fiscal dominance is the treasury now at the
Speaker 1driving seat they would like that to be true okay and and so i think there's a a reasonable chance that if the treasury deploys the full tga trillion dollars that that could be enough for the next couple years but there's not another trillion dollars behind that it's a it kind of it kind of eventually ends but i guess what the treasury could do the treasury could issue more and more short-term debt that the fed controls the rate on and then kind of pump up the amount of money they have to basically do bond buybacks and do a a twist operation at the treasury that is that is possible um to me i view it as in times of crisis i kind of view the treasury and the fed as the same thing in times where things are working they are two distinct bodies with different mandates one's independent one's you know not independent but it's kind of independent yeah exactly they're they're in fact
Speaker 2they're the same thing yeah so it's um with the treasury general account there's a trillion dollars there at the moment they're likely going to spend all of that where does that money initially come from and how does the treasury general account get
Speaker 1filled back up so money's fungible uh they would probably tell you it comes from tax receipts or something along those lines but we know that we have a a situation where the government is spending more than it actually gets in and so whether it comes technically came from issuing bonds that they just held back a little bit of cash whether it came from tax receipts because they're issuing bonds to pay their expenses i don't think it really matters um they found a way to get a trillion dollars in the bank account uh and and i think that's true for any company any government that money is fungible uh but they have a trillion dollars and uh they have a trillion dollars and they have a trillion dollars they have a trillion dollars and they could top it up by issuing more debt but clearly they didn't they will not be topping it up through tax receipts
Speaker 2yeah if that's clear um so the kind of long and short of it is we're just going to have more and more intervention going forward in one way or another
Speaker 1it's it is a a ball rolling down a hill that picks up steam that unless you fix the debt crisis the spending and i and i am very optimistic on what ai can do for the economy for abundance I'm not optimistic on what it will do for tax receipts.
Speaker 2Okay, that's worth getting into because a lot of people will talk about AI as the potential savior here in the sense that they can maybe grow their way out of debt with this. Why don't you think that's the case?
Speaker 1I'll start with saying, I do think that we should be trying to grow our way out of it. There is not a good option. The best option would be fiscal conservative rollback entitlement. Just never going to happen. But this is not going to happen. So you have to live in the world that exists, not the world that you wish would exist, which I think sometimes people spend too much time on the world they wish exists. And that's, I guess, fun to pontificate about, but it's not reality. So with reality, the best solution is to try to grow your way out of it. That is the rational solution. So I am fully supportive of Besson saying that, doing that, being the salesman to go out and try to sell Treasury debt as an American. He also knows there's no way that's going to happen. He knows. Yeah, definitely he knows. He's one of the smartest guys probably that's ever been in this. He knows. But it's the best solution. And so if you look at what does failure look like there, which I do think it'll be failure, and I'll get to why. Failure there looks like you went all in on AI. You created, hopefully, a world of abundance. You drove technology forward for the benefit of people. And the dollar potentially is the release value because it didn't generate the tax receipts you wanted. I would rather have that be the world in five years than if you can't cut back entitlements, we don't do anything, we don't have technological innovation, and it still breaks. I would say lean into innovation and make the U.S. the best you can before it breaks. Yeah. That sounds like the best option to me. But you think about what drives tax receipts. Ultimately, what drives tax receipts is corporate profits. And what I'm not seeing is, how do we, I mean, when you look at the debt crisis, how do you 2X, 5X, 10X corporate profits? What is the actual driver of that? And I think the era of abundance in AI is actually, it's not even clear that some of these frontier models will have massive profits. I mean, they're operating at massive losses right now. Open source, which hopefully never gets banned in the country, is whatever, six months, a year, maybe it'll be a week. I don't know. It's just a little bit behind. But at what point does that also become good enough for me?
Speaker 2And that distance behind is shrinking rapidly. The open source models are very close now.
Speaker 1And so will frontier models be potentially a very profitable business? I think yes. But will they solve the debt crisis? I don't see that. And then this era of abundance, you think about a lot of corporate moats, a lot of corporate moats are going to be really challenged. And so what drives them? Already have been in a lot of cases. Yeah. And so, and then you think about jobs. I think the honest truth is that AI will challenge many jobs. I actually, and this will be, I'll tell you something I think could be controversial for some, maybe not for Bitcoiners, but I actually think that we have too many jobs in this country. And this is a fundamental life view that I think that if you were to go back 50 years, 100 years, what you would find is that typically there's one person in the household that makes money. One person might stay home. They raise a family. And that model does not work anymore. Yeah, actually, because people can't afford it. And so now both parents have to work and then they have to delay having kids. And I don't think that that is, and we have to train people growing up that go to college, both you're going to work both, you know, and I think that's not because that's what most people, some people want it and even freedom, but I don't think that's what most people want.
Speaker 2It's definitely not what most people want, in my experience, at least. Like, so we're in that situation and I'm grateful, but really it's Bitcoin that's allowed us to be in that situation. We have, like, we've got a young kid and another on the way soon, but all of our friends who are in the same situation, generally, apart from one of them, like they're all, both parents are working, going back to work, you know, six months, three months after having a kid, which is really hard. And like, realistically, all of them would rather stay at home and raise their kid. Like who's better to raise the kid than the mother? Or the father, however the family works. But people definitely want that. They just can't achieve it right now. And if AI led to huge abundance and made everyone's cost less, like I think most families would pick that.
Speaker 1Yeah, I think so. And so then that means, what does that mean for the economy? That means less people working because they're able to achieve what they need to live a life that is acceptable to them. And I actually think, so a lot of this is, in a sense, this is, I think, actually a positive part of where I think this could go. I think we're talking a lot about doom and failure of the dollar, the debt crisis, and what happens if the dollar fails. Well, if we actually try to grow our way out of this and we move to this era of cheap everything, abundance, I don't actually think the failure of the dollar will be painful in a sense. But like, I don't think that's the most scary thing if we could actually move to that future. I think it's actually more of a right now we are living in the dark times, a lot of our generation obviously now running a public company, financially I've never been doing better, but I didn't grow up in wealth and pretty much all my friends, I mean, most, both people work, the mom and the dad work, and they have to have someone help raise their kids, but it's not the ideal situation. And most people, my friends, it's hard to own a house, housing is very expensive, that I would rather move to this era of abundance. And even if people weren't Bitcoiners, I think they would say, give me that future and I don't really have very many dollars to begin with. So if the dollar became worthless, I don't really care. -
Speaker 2But the trade-off in that scenario is that the dollar becomes worthless. - Mm-hmm. - There's no good answer really. - There's no good answer. - But you think that's a better outcome? -
Speaker 1It's a better, so right now you hear a lot of talk about the K-shape economy, right? The average person is not doing well, the elites are doing really well. -
Speaker 2And it's so clear, like you walk around, it's so clear that exists. -
Speaker 1Yeah, it's so clear, so obvious that I think that that future will be a substantially better future for the average person. It may not be a better future for the average billionaire, but I think they'll be fine. -
Speaker 2Yes, I think they'll be fine. It's kind of, I don't know whether that's bleak or not, 'cause it sounds like a better future, but I just, I wonder what happens in both the economy and society if the dollar does significantly,
Speaker 1significantly devalue. - Yeah, and I have not called actually for the failure of the dollar. What I've called for publicly is a massively devalued dollar. So that's core to our thesis on Bitcoin, is that we actually think that over the course of the next, call it three to seven years, that we will see the biggest decline in the value of the dollar as measured through the DXY index in Bitcoin's history, not in historical history. It might go to the lowest levels, but it's not going to go to the lowest levels. But if you look at the dollar over the course of the last 50 years or so, what you'll find is that the dollar's actually structurally been getting weaker on average, and then since the great financial crisis in the era of Bitcoin, it's generally been flat to moving up, but in Bitcoin bull markets, it's kind of gone down within that trend in Bitcoin's history. But then if you zoom out, it's actually being devalued over time. And if you think about what the president wants, President of the United States, Trump wants, what J.D. Vance wants, what Besant wants, I think a lot of them have called for a weaker dollar. And so the structural forces would support a weaker dollar. They want a weaker dollar. They want to lean into growth. And so I don't see why we won't get the weaker dollar, which kind of means in a sense, you actually have the president and the treasury working for Bitcoin, because they're working for a weaker dollar, and that's one of the strongest determinants of where Bitcoin goes. - Every Bitcoin goes. -
Speaker 2Every Bitcoiner eventually has to answer one question. If something happened to me, could my family access my Bitcoin? Would my children inherit what I've spent years stacking? That's why Anchor Watch builds Bitcoin custody solutions designed to protect you and your family against real life accidents, errors, kidnappings, and even death. Every solution includes their inheritance protocol designed to help your Bitcoin reach the people you intend it for. And US-based customers can also add Bitcoin insurance backed by Lloyds of London. Whether you're a self custody expert, or want multi-institutional support, your Bitcoin estate plan should not be an afterthought. Bitcoin is only generational wealth if it can be passed down. So make sure your family can access tomorrow what you've built today. Anchor Watch is your custody, your way. So visit anchorwatch.com to get started. That's anchorwatch.com. Recent hardware wallet vulnerabilities have definitely made me rethink my entire security setup, as I'm sure it has for a lot of Bitcoiners. And the uncomfortable truth is that no single security product can promise there'll never be a problem, which is exactly why the design matters. BitKey is a self custody hardware wallet that uses three keys created in three separate environments. There's one on your phone, one on the BitKey hardware itself, and one on a secure BitKey server. Two of those three keys are required to sign any transaction. So a problem isolated to just one key is never enough to move your Bitcoin. So if you are rethinking your setup right now, as I'm sure a lot of people are, you should really think about the BitKey. The hardware looks great. The app and the user experience is second to none. Backing up and restoring your wallet is seamless, and they even have inheritance bills. So I really don't think you'd be disappointed. So download BitKey today, use the code WBD for 10% off the second generation BitKey, which is this device, here with the screen download the app download bitki use code wbd and get 10 off so maybe this is me being impatient but how long has trump been in like just over 18 months something like that and both him and percent have been sort of signaling they want a week a dollar the entire time and it's not really happened um why is that
Speaker 1so the the trade-off here is if yields are moving higher long in yields that's generally going to be positive for the dollar and so you see besant saying you know i will use the full treasury general account i will use i'm the house i'm blah blah blah but then he hasn't done enough and so yields are moving higher so the dollar is strengthened with that at some point if that thesis if they can't take the pain anymore and you know whether i'm right that call it like they can't let it go above six but even if they let it go to seven but if they ultimately step in the trade that i'm talking about on the fixed income side will still play out fine we're just saying this will be a higher than average rate because of the pain that we don't think they'll take and because ai is likely going to be a deflationary force so they'll ultimately bring rates down that when they take that action the dollar will move lower but until they take that action it actually they the dollar should be moving higher rates will be moving higher what i think has been interesting is that bitcoin's held up remark remarkably well through that yeah i think that and part of i mean i i was writing about this when the 10-year was still like about four four 4.6 or so and i was saying this is what i think is going to happen rates will move up higher the dollar will move up higher at some point they will reverse that that will be the start of the real bitcoin bull run and right now what i think has been encouraging for bitcoin is that i think people are seeing that because if you don't see that and you just see rates moving higher dollar moving higher bitcoin should be moving lower unless the markets are actually moving higher and you don't see that and you just see rates moving higher dollar moving higher bitcoin should be moving higher unless the markets are actually being forward-looking and saying you know bitcoin may kind of struggle a little bit throughout this and be choppy but it's kind of getting bulled up for what they think might happen
Speaker 2yeah and i think bitcoin did well when it started seeing the intervention too from the treasury like i i think the writing looks like it's on the wall it's kind of a matter of when not if um there's a few things that have happened recently which is people have called for like oil if it got to say 120 or whatever it was when the iran conflict started like that was going to be the pain that they can't take and yields getting above five percent was like the pain they can't take and so far they've taken the pain and like nothing has significantly changed what is the the level that you think okay that's it they can't go higher from here or they have to step in and do
Speaker 1something so there is on a short-term basis no level that breaks them it's just like on a first drive there is no level that bitcoin can go down that breaks us we have no encumbered bitcoin but things get harder but there's clearly levels that if it's goes down and then stays down there would be very hard for us as a company and the same concept is true for the treasury and so the 10-year yield could go to 10 tomorrow doesn't break them but they clearly can't sustain it and so i think what what is part of the unknown and part of the part that you have to forecast is that besant clearly wants is willing to deploy that full trillion dollars i think he knows he's going to have to but there's a lot of stakeholders in that conversation there's congress that if he just deployed it too early like what are you doing you didn't have to do that who knows what the president's influence is in on that decision and so ultimately will be the the collective group when they say okay like we need you to step in and there is no number that's too high what we know is that i would say at the current level and above it's a ticking clock they cannot allow it to sit at that level for a sustained amount of time and when i say sustained what i really mean is several years but but when because they're able to model it i think they will see it and at some point they're going to capitulate and that's that's when it changes
Speaker 2so the government needs to go through some time pain um what happens if during the midterms you know the republicans lose uh which is like looking likely um does that speed up how percent and trump now deal with this i
Speaker 1don't know that it really matters uh my my general view in in dc is it's just dysfunction and unless you had dc with such a overwhelming majority of republicans in power or democrats in power if it's 51 49 in the senate or something like that it doesn't move the needle we saw this with the struggles with clarity that you're able to effectively play political games to to kick the can down the road and so if the if the democrats win i mean they're probably going to start to try to investigate trump on who knows what and if you had a democrat president republican congress they would start to investigate whatever the democratic president will do and i just i just don't think that there is a there is a a urgency until things break but i think that they do know that you can't support rates at this level and so i think they'll ultimately bless besant taking action but i bet
Speaker 2bitcoin yes um what do you think is going to be the sort of near-term projection for inflation because i had a show with lynn olden recently and she was talking about how rates going higher can also be
Speaker 1inflationary so so they are in the sense that um they increase the cost of capital and you have a situation especially with ai in the data centers where they're not sensitive to because they see this so they're just going to keep spending and so that will increase kind of the the velocity of cost increases across across the economy and so that's kind of gets into the the challenge for the fed as uh they in an era and i think when does this better than anybody is in an era of fiscal dominance if you raise interest rates it actually causes inflation and if you lower them it probably doesn't have a lot of impact on inflation and so what's the optimal solution well it is to realize that and to stop raising rates but the the fed i think if that's the stance that they take the whole model that they've tried to build trust on right yeah right and so i i see the challenge for them it's like they probably at least some of them probably see that i think some of them are probably too academic they may they may not be seeing it yet but but i think that is the challenge and and it will be a major trust breakdown and so i think when there is a major trust breakdown at these large institutions they'll try to do it in a way just like they did with huey it's not money printing you know it's not yield curve control uh to try to keep the trust up in their institutions
Speaker 2it's um like when you hear this it makes me want to literally go on my phone right now and buy more bitcoin like that i i think i might have some cash left but do you think it gets we get to a point in you know the next couple years where bitcoin does become the fastest horse again because over the last few it's definitely not been like ai has dominated um gold even outperformed bitcoin for for a period of time bitcoin's looking strong now but do you think we get a real growth in bitcoin again in the next few
Speaker 1years i i really do i i've and and and i'll say that because obviously a lot of bitcoin bulls would always say that i generally do not go out publicly with a crate like a very high bitcoin bull target i'm kind of more in the camp of i think that it's going to outpace monetary debate but i think that bitcoin is going to outpace that i think that it's going to outpace monetary debate i i do think generally it would be the fastest horse and i generally kind of underwrite around a 30 cagger but sometimes even like a 20 cagger when you zoom out but right now with everything that we talked about and you keep saying makes me just want to buy bitcoin that is our internal house view as well that when you see the potential and the need for intervention and long-term rates that maybe does maybe happens this year maybe it's next year probably not beyond that it's hard to see it going beyond that but sometime i would say in the next 18 months you see the real meaningful intervention you see the dollar become the release valve explicitly it's hard for me not to think that this bitcoin bull market that i think we will be entering into over the course of the next 18 months um will be substantially better than the one we saw in 2024 2025 and i think that was a very disappointing bull market uh for any bitcoin bull i mean bitcoin did not break out to new all-time highs versus gold it basically got to the previous level that it had in the 2021 bull market and then it failed to break out and so the fastest horse theory for bitcoin did not play out and bitcoin should be the fastest horse it's an emerging money it's the best form of money we've ever seen and i think as as bitcoin bulls how could we not authentically say that if it's not the fastest horse versus gold that in a sense our thesis was incorrect yeah that's just that's just the truth and i think that's the truth of the last uh bull market but i think some of the game theory in bitcoin and in the hunt for scarce assets is such that there's just substantially less bitcoin there's less supply of bitcoin into the future than there is of gold i do think that technology puts some pressure on potential inflation in gold over the course of the next few decades and and i think that trust in bitcoin is rising and i think from a u.s perspective i think the u.s is actually incentivized to push bitcoin over gold because most of the gold has moved across the world
Speaker 2china been stacking
Speaker 1heavily yes and a lot more of the bitcoin is in the united states and so i think number one goal would be preserve the dollar as long as you can that makes sense if that fails what's the best solution in the u.s it's bitcoin in china it probably is gold and that's not just because they're a communist nation we're a capitalist nation just where does the actual capital sit in each country and i think the u.s it's bitcoin and it's
Speaker 2not just like the the number of bitcoin held in the u.s which i'm i would imagine is the the highest anywhere in the world but it's also where all the big bitcoin companies are like there's the it is where the u.s has the most to gain um obviously modeling bitcoin is really important for your company um do you think the idea of cycles is over uh over
Speaker 1maybe too strong of a statement but i do think that right now we are more in what i would coin a super cycle but it's important to how to define that right like we can talk about all these different concepts and terminologies in our space and and and the nuance and the conversation is actually critically important and so i've always viewed a super cycle where basically you have 30 to 50 percent drawdowns not 80 drawdowns and this bear market we saw basically a 50 drawdown yeah it was a very mild bear market for bitcoin obviously for many companies that levered bitcoin you know maybe not but like that's their problem not bitcoin that's their problem yeah for bitcoin it doesn't care right so bitcoin was a very mild bear market it was a very emotionally taxing bear market for og bitcoiners with self-custody and and vulnerability so it was a emotionally challenging one but from a return perspective it was very mild and and ultimately that's from like a super cycle perspective what matters and and so if we did have a a mild bear market um that would be and and then we're moving into potentially the best macro conditions or one of the best macro conditions bitcoin's ever seen which means one of the worst macro conditions one of the worst macro conditions for the world but right that's what bitcoin is it's an opt-out from the system it's not that's the it's understanding the world that exists not the world you wish existed and taking advantage of for your own situation your own family right sovereignty and and so i do think that that's the situation we're in and and so it would break down the theory of four-year cycles i think the the four-year cycles partially was driven by the havings which obviously every happening the amount that it decreases just matters less and less that's just the math but then it also is driven by macro and business cycles which also have tended to run in bitcoin's history in basically four-year cycles when you look at financial conditions and monetary conditions and that doesn't have to be the case and so i think that one the fiscal situation but two the era of ai that we're entering into the growth era i think they both support less of what we've seen from a four-year cycle perspective before yeah um which does make me very bullish that bitcoin could do really well for the next you know decade or two although our thesis on like a way of a thesis on like a 50 bitcoin cagger through 2030 which effectively would be one year over an average four-year cycle but i like to give myself a little bit more time to be right in in in projections and and which is why our focus is on and i think you know we just got through a bear market everyone's concerned about cost and capital blah blah blah all these you know how do you do this in a bull market it's can you have a high amplification ratio and can you sustain it and and i think that's going it's it's moving from fear to greed and right now we're you know still at fairly low bitcoin prices and people are you know they have ptsd and those things but i think we're going to start to move towards the greed area which will have a mindset shift in what it means to be successful in our space
Speaker 2yeah i think so you obviously mentioned bitcoin only fell 50 percent this this cycle this you're talking about bear market i think people are underestimating how important that is um like the difference between 50 and 80 is once it's dropped 50 you drop another 50 i've said that over and over again but i don't know if everyone understands like how big the difference is you obviously speak to a lot of institutions uh with your business like are they seeing that as a real game changer
Speaker 1and looking at bitcoin differently now they are and and i think that what's interesting is that bitcoin dropped 50 percent it still dropped to its 200 week moving average and so i think part of that was because you had a pretty uh unattractive bull market so bitcoin didn't go up as high and so it didn't have to drop as far yeah to get to its 200 week moving average right and so you had a a mania or less of a mania so less of a need for a correction and i do think that part of that was the institutionalization of bitcoin but you do have i think long-term allocators that viewed bitcoin as 200 week moving average as attractive and and started started buying the dip i think you and so i think that that we saw that i think we also saw macro conditions start to change and give more reason to be optimistic about bitcoin into the coming years and you're starting to see the momentum build towards optimism around bitcoin but you know bitcoin's still at 84 000 right it's not it's not it's still pretty far off it's all-time high and and importantly it's like even if you look at a an example our our 50 kagger for bitcoin which will not be linear if it was a 50 kagger you're basically talking about bitcoin being back at its all-time high late next year and i think sometimes what i think happens in the space is you people think too short-term they get too euphoric maybe and this could happen but bitcoin's gonna go back to its all-time high this year could happen i have no reason to believe it will happen or won't happen but then it's like oh well 50 all-time highs into oh that's too bearish but then but then you zoom out and said i say i think bitcoin might be 500k by the end of 2030 and i think the average was like that's actually higher than people would think because they're trying to think return diminishing returns maybe bitcoin would only go up to 250k over the course of the next few years and and i think that the short-term versus long-term nature just compounding people struggle with compounding they think too much in the short term and less on the zoom
Speaker 2out i think you're probably describing me like because like i don't think we'll probably get all-time highs this year and the next year i could believe that but then 500k by 2030 seems high like i'm gonna take it i hope it does like it doesn't change how i behave but it seemed it seems high but i hope you're right um do you think it's important that bitcoin decouples from things like the nasdaq and it looks like it has done to a degree so far but um again when you talk to institutions is that a problem for them if it's just behaving exactly like the
Speaker 1nasdaq it it isn't if they actually are underwriting of both uses and so when you look at so institutions think differently than than strive so strive is is all in we're talking about maximizing amplifying focused on total returns institutions tend to think about risk-adjusted returns so they're thinking about modern portfolio theory this is what i did when i was at calpers i was on the stage yesterday with rick edelman one of the largest ras in history and you know putting the bitcoin in a model and how much bitcoin is the optimal amount of bitcoin to maximize risk-adjusted returns and rick's i think started came out with a recommendation of 10 to 40 percent for bitcoin for a lot of investors and that's very different than a lot of advisors that might focus on maybe a one percent or a three percent five percent allocation which i think you hear a lot from advisors and what's interesting is getting the math on that and i've done all the math on this and so what happens is that if you don't believe in bitcoin you're you haven't done the work then you pretty much have to start at like a one or three maybe five percent allocation because you can't handle the single asset volatility of bitcoin yeah you don't believe in it so it crashes 50 you want out even if the whole portfolio would do better with a 10 or 40 allocation because you can own less risk because your risks in bitcoin uh rick just says if you want to maximize risk-adjusted returns the mass is 10 to 40 that's what it says and so he's then out there trying to educate orange pill people and get people comfortable with that volatility and and why this matters is that ultimately from an institutional perspective um the more you educate yourself the more you can actually move to what the math says and the less you do you have to go based on emotions and and ultimately this goes back to is your goal to get off zero and basically which i think is kind of the blackrock approach of which i i do appreciate and i actually do think it's the right approach because they have a broad base of clients that do not understand bitcoin and they don't know what to do with it and they don't understand bitcoin and they don't know what to do with it so i think the best way to do that is to just put it in your portfolio in a way that doesn't matter watch it and then ultimately if you're trying to maximize risk gesture returns effectively replace bonds with it which is the 10 to 40 percent and you think about 40 in a 60 40 portfolio and then if you are a sicko that just has pure conviction in bitcoin then you either put your whole net worth in bitcoin which a lot of bitcoiners do or if you're like strive you're like i actually want to amplify bitcoin's returns because i have even more confidence in that and uh it really just comes down to the fact that in the long term it's going to come down to conviction and the ability to concentrate versus diversify
Speaker 2okay so let's get into strive um well maybe it's going to be obviously centered around strive but maybe treasury companies more broadly so you're saying you're you predicting a 50 percent CAGR by 2030 until 2030 why should people own a treasury company over bitcoin so
Speaker 1so let's just assume that that bull thesis is true and and really actually any bull thesis if you're saying over about a 20 percent CAGR for bitcoin Okay. if anything above that's true the number one determinant of total returns over the course of a bull market cycle will be the amplification ratio and so right now strive is 50 amplified and our what does that mean it's basically leverage and so i we use amplification to note that sata is a preferred equity it is not debt which is very important for the downside and so if you think about this as and and i don't mean this in like the sense that we are a rocket ship but like if you think about it like you're trying to build a rocket ship what you want to do is you don't want the thing to blow up and you want to get to the destination get to the moon or whatever and and so if you have debt and bitcoin's volatility happens you blow up and we saw a few examples of that i think there were other examples that were extremely close to actually blowing up but didn't blow up um and thankful uh for those those those companies that did not blow up i'm glad they didn't blow up but um but we with sata we do not encumber any bitcoin which is important bitcoin can go to a penny it's kind of like the conversation earlier how high could the the u.s treasury go it goes as high as it needs to go it doesn't really matter but it just can't sustain at that level and so you're really thinking about more calculus like area under a curve how low could it go how could it sustain where i actually would i don't think this happens but i would love for bitcoin to make a new all-time low because i was what i think would have to happen for that to be true i think if the treasury was too slow and the 10-year shot up to 10 i think the dollar would go up i think you would see bitcoin make new all-time lows in that scenario but then what would happen would be the mother of all interventions in the market which would be the most bullish thing for bitcoin ever so it would be like a flush it'd be like the covid dip yeah exactly and and so i don't think it happens but if you could give me the scenario that i would actually want to happen even though it would not be fun for a few months it's like give me that scenario like like bring it on let's let's do it because of the the reaction function um so why own a treasury company if a treasury company is not very amplified and they don't have cash flow then i i don't think there's a lot of reason that i could see to own a treasury company because if you're not very amplified you don't really have a levered return profile to bitcoin if you don't have some sort of a cash flow generator to buy more bitcoin then really your model is very dependent on a premium to be able to sell in a creative manner which obviously is is valuable to do when that exists but i view that as more of like a cherry on top thing than a foundation to build a business uh if you're underwriting a bitcoin both these is well an institution a corporation has access to financing that individuals do not have and i think this is is very important for leverage concepts because i do think that there's a lot of bitcoin companies that are really working hard to bring better terms to individuals and i think that's a good thing but it's very hard to do it's very hard to get that underwriting for individuals and so then they run the risks of risk of um being liquidated if bitcoin goes down either in a single night or over the course of a month or two months basically their ability to maintain and not not blow up if bitcoin goes down is very challenged to where our company we have 18 months of dividend reserves and then we also have a lot of bitcoin but if bitcoin dropped to a penny we could just say you know what we have 18 months of cash like we'll pay it and we'll see what happens we and obviously that's not going to happen but but just point being is that no individual can do that and so then we have effectively a 50 percent amplification of that amount of money and we're not going to be able to do that so we're going to have a 50 percent leverage ratio right that if bitcoin goes up we are 50 percent levered exposure to bitcoin and so then the question then becomes can a company maintain a reasonable degree of amplification if bitcoin starts moving up because if bitcoin doubles and we did nothing the amplification ratio is going to half yeah right and so there's a and so if bitcoin goes to 500k you also need the engine to be able to continue to issue and be at the size to be able to issue that and maintain it and so i think that's a good thing and i think a reasonable application ratio which is why i'm very bullish on what we're doing because we have the best liquidity both on our common and on on our preferred equity in the entire capital markets i think we're the right size and what i mean by the right size is that to get institutional investors you need to be you could be a little bit smaller than strive but not a lot smaller than strive otherwise a lot of them it's just too small for them to matter and then if you're too big it's not that it's impossible job but you could be too big for the market to actually be able to sell enough preferred equity or debt to actually maintain amplification as bitcoin potentially moves to 500 000 and so you know i've when i was at calipers i managed 70 billion dollars i know what it's like to be the cruise ship to be one of the largest investors in the space and what it's like is when you're that bit when you're huge you see a bunch of investment opportunities that are too small for you yeah and i saw that when i was at calipers i was there but i had to ignore a lot of the best opportunities because they were too small for my portfolio and i had to find things that were massively big it's achievable it's just a different game where we're big enough for institutions to care we've built the liquidity we have over just over 50 amplification which is for someone that can't be liquidated the highest amplification ratio in the space so i think we're ideally situated and i think the market has recognized that which is why we have a leading premium in the space is that we kind of have the the engines humming and we've actually bought bitcoin throughout the entirety of the bear market i mean if you look at our common equity as an example when we announced the strategy to now we've outperformed bitcoin year to date we've outperformed bitcoin um and i think that is because of the ability to have that amplification ratio to build trust you know bear markets are for building and i think we've we've built the engine so you
Speaker 2you know when you say you have no debt and you obviously have a lot of obligations in terms of paying the people that own sata is that almost semantics like the money printing thing we were talking about earlier where it kind of behaves like that even if it's not so we actually
Speaker 1intentionally put investor protections in sata to make it as much like debt as we could without being debt and so it's it's semantics but it's important because of the downside risk and i think this is you know if you're in underwriting an investment thesis and say that it's preferred equity and preferred equity is a hybrid instrument and what's important about a hybrid instrument and preferred equity is that the terms of the hybrid instrument really matter actually because it's a spectrum something could be more equity like or it could be more debt like so you have no investor protections you could have non-cumulative dividends and a very low dividend it converts into equity that you know i don't know the exact number that might be 99 like equity you could have very strict investor protections that could make it 99 like debt and so is that where you think you are
Speaker 2you're you're obviously this is a preferred equity but are you on the the furthest side towards debt possible
Speaker 1we are very far towards the terms that that's like that i mean there could be additional terms that could make it even more like debt but i would say on the spectrum we're much more like debt than we're like equity and so i'll get into some of those investor protections which kind of give you a sense of why that would be true um and so let's say that uh bitcoin dropped obviously we're talking about the bitcoin bull thesis which i think will be and cost of capital won't matter all these things will matter less but let's say the the credit protections bitcoin drops we put in an investor protection that we cannot lower the interest rate on sata so if bitcoin dropped to 40k and let's say sata was struggling we couldn't just say this was a failed experiment interest rate's 13 percent now it's 12 and a half 12.75 and to basically just drop it down
Speaker 2and stretch can do that content they
Speaker 1could yeah obviously say there's done everything he can to bring stretch to parts investing in billions but technically from an investor perspective he could do that um we could not do that we have to have the average price of sata over 99 for the month to lower the interest rate so we could not lower the interest rate another protection we have is not only are the interest payments cumulative if we stopped paying them there's actually a ratchet up in the interest amount that we would owe ratchets up if we stopped paying them um additionally if we stop paying them for over a year board seats are given to say to investors and then lastly if we miss a single dividend payment for the year zero zero bonuses are paid for anyone at the company and so we've tried to align incentives maximally that we have investor protections that it would be maximally painful for us to not pay a dividend as a company we could not you know we could we don't have the option to screw investors and if you have cumulative dividends where the interest rates ratcheting up and there's a liquidation preference that's very painful those are very debt-like covenants that I put in there intentionally and the reason I put in there intentionally is that my view is that we are underwriting a bull thesis on Bitcoin and that bull thesis needs to be right otherwise the entire structure of our company is wrong and so to underwrite risk and to say I want to build trust with investors through our actions or think we've done by maintaining cash reserves and all the actions that we've taken and and we want to have a high amplification rate ratio, trust needs to be there. And I think that trust is there partially by, you know, that Bitcoin saying don't trust verify. We have verifiable investor protections in SETA, but then our actions are also supportive. And I think that combination is why you've seen SETA trade really well, even though we've brought amplification ratio so high.
Speaker 2In terms of the SETA investors, do you have any idea what percentage of them are retail versus
Speaker 1institutions? Yeah, probably a little bit higher percentage on institutions than STRC. And a lot of that's driven by the investor protections.
Speaker 2Because they came out and said it was 80-20 retail. Is that right?
Speaker 1They did. The data is really hard. So there's data when you start to get in there. So the data providers will lump some institutions and retail together, which we have a lot of experience looking into because of our ETF business. So there's some data integrity issues that not that anything's been done. But there's some data integrity issues that not that anything's been done. But there's misleading. It's just some part of it's unknowable. So it's kind of an estimate. But then importantly, it's important to talk about what is retail actually. And this is very important. So of our retail investors, I can say confidently that the average retail investor is a multimillionaire. And I think that a lot of people think, oh, you're talking about the grandma that's investing $1,000. And when I'm talking about retail, because I have met so many of these people and they tell me how much they've invested in Seda, is that the average one is someone that's around retirement age or older. Multimillionaire typically is looking for cash flow, has real estate investments, is comparing. They see the debasement trade. They don't love the volatility of Bitcoin. They often haven't bought Bitcoin or own very little Bitcoin and are either selling their bonds or they're selling sometimes real estate properties to buy Seda in the order of millions of dollars. And that's retail. And I think that there's this connotation that you're taking advantage of the grandma, the retail investor. And I'm like, affluent millionaires are investing in digital
Speaker 2credit. And I definitely don't think you're taking advantage of anyone. Whoever wants to invest in this can. I don't think there's any taking advantage here. But the reason I ask is because if we're expecting, again, to go back to your thesis, 50% CAGR on Bitcoin, why would anyone own Seda rather than own Bitcoin? Because I understand the volatility side of things, but position sizing fixes. I've seen you have a ton of debates with Parker Lewis about this, and you probably know his arguments better than I do.
Speaker 1Yeah.
Speaker 2So the average
Speaker 1person, even affluent person, is very fiat minded. It's really that simple that they would not underwrite a 50% CAGR for Bitcoin. They would say, well, debasement is happening. I largely think Bitcoin is going to do well, but I'm 60 years old. I'm 50 years old. I'm 70 years old. Give me 13% cash flow and I can live a great life for the rest of my life. And I don't have to worry about the volatility about Bitcoin. I'll let you underwrite that risk. And if you're right, you can have the excess returns and I can get my cash flow and move about my day. It's really that simple. And I think as Bitcoiners, and I'm very public about this, so I do not own Seda. I have many family members. I have many family members that actually are of retirement age that do own Seda. So it's not that I don't actually believe in Seda. I literally personally live this experience of these different investor profiles. But is this just
Speaker 2because you can stomach volatility more? You want the volatility?
Speaker 1Yes. Volatility. It literally gives me no heartache at all because I'm not worried about where Bitcoin goes over the course of years. I would not be able to sleep if we had a liquidation point, which is why we do not encumber our Bitcoin while we turn down those terms. But when you can zoom out and underwrite a multi-year thesis, which we can do because of our cash reserves and the way we've structured the company, I sleep very well with owning Bitcoin and amplified Bitcoin exposure. So those are effectively the only two things that we own still because we obviously have a lot of common equity in Strive on a personal basis and then also have Bitcoin. I basically own nothing else. And I sleep really well with that. But a lot of other people, like a lot of I'll give you an example that I hear very commonly. I own people on multimillionaire. They own one Bitcoin or two Bitcoin or five Bitcoin, and they just don't want more than that. And then they want cash flows to live their life. And so they want they actually are looking for Bitcoin minus returns, but with stability. But then they also don't love investing in debt in the midst of a debt crisis. And so they like that profile for them, which is to me not surprising.
Speaker 2I totally get it. And like for my parents retirement age, like have some savings. This probably makes more sense for them than buying Bitcoin in some scenarios. I'm trying to what I don't necessarily understand is what happens to the common shareholder. Assuming you know, as we go into a bull market, you'd imagine the common the common stock is going to go up. It's probably going to go up more than Bitcoin. I can totally believe that. But over sort of cycles, bull and bear market cycles, is it just amplified in the bull market and amplified in the bear market, where it gives back all the gains it made in the bear market? And it kind of evens out as like, a net neutral trade.
Speaker 1So obviously, to a certain extent, entry point matters, but that would be true in any business. So if even if you're investing in Google or Meta, I believe strive is a great company. And if and if you're investing in a great company, over the course of a decade, you're going to be able to be able to get a lot more out of it. But if you're investing in a great company, over the course of a market cycle, any great company at times will be undervalued, at times will be fairly valued, at times will be overvalued. And it's actually incredibly difficult, even as the leader of the company, to confidently say at this moment, it's overvalued, undervalued, or fairly valued. I think there becomes clear moments, like I would say, in early this year, where effectively, our entire management team bought our common equity that we had a very strong belief that our common equity was undervalued versus what was reasonable. And a lot of our employees basically put every penny of liquid net worth into the common equity, which was awesome to see. But over the course of a market cycle, underlying our company is a cost of capital to financing, right? We debate the semantics of debt versus preferred equity, but it is an obligation that has a 13% cost of capital. And so very simplistically, as we grow, our corporate expenses, our salaries, I mean, on an average year will represent less than a 1% cost of capital. We've talked about this in depth, and I think we've been a shining star in a trust issue around compensation philosophies. But as we grow, it'll likely go even, if we do grow successfully, we'll grow even less than 1% of a cost. And what really matters is the fact that if Bitcoin goes up, on average, more than 13% across market cycles, we will likely structurally outperform Bitcoin. If our MNAV shoots to 10, and someone buys at a 10 MNAV, that individual might underperform Bitcoin, right? Like you as an investor have to underwrite the amplification ratio, the growth of Bitcoin, the ability to maintain it, contrast that versus the valuation of the company. And which I think you would find is, if any reasonable Bitcoin, both of these are going to be underperforming, then you're going to have to be able to maintain the amplification. And if we're able to maintain amplification at the current MNAV, you would likely still drastically outperform Bitcoin. But what is the current MNAV? Current MNAV, it depends on the way you model it. And so there's different philosophies in MNAV valuation. And what we've tried to do is move away from the name of MNAV, because I think it was kind of a made up term. And to say, how could you look at our company? I think right now it would be around a 1.5 on an EV basis, which I think is a good idea. But I think it's a good idea to look at I view is the best basis. But we actually provide three different numbers. We provide the EV number, we provide the number, if you take our Bitcoin, subtract all state of liabilities and get to kind of a net treasury asset value and compare that to the market cap of the company, which would be around a two. Or if you look at it versus the kind of the original, just ignore the fact that there's liabilities and just what's the value of the Bitcoin versus what's the value of the equity, then it's around a 1.2, 1.3. And so I gave you three numbers, but I think it's actually important to just go into a conceptual point on this, because in institutional investing, any different metric, there's typically three to 10 different measures that institutions look at. And so I think some people say, there's three MNAVs. This is crazy. Like, what are you doing? And I'm like, well, in fixed income investing, there's 10 different measures of duration. There's 10 different measures of yield. And what I noticed was that a lot of successful portfolio managers had a framework that would focus them on a couple of those different metrics as what they viewed as the most important. And then other successful portfolio managers would have a different set. But the question becomes, do you actually have a framework that then you take those numbers and put them together into an investment philosophy? And if you do, I think you could use any of those MNAVs and come up with a framework that works. And then I will have my own preferred way. But I actually reject the notion that any one of those MNAVs is the single right way, and it's the only way to look at a company.
Speaker 2Okay, so for sake of argument, then let's use your preferred way of thinking. calculating the mnav at 1.5 um i i'm under the impression i don't think we're going to see mnavs blow out like they did in the last cycle i i've met upon it got to over seven i think like that seems like it's probably not coming back i could be totally wrong and you might have a different opinion on that but at what point do investors look at this be like mnavs at 1.8 or two they're just going to hit the atm bring that back down and that's now like not an investment until they do
Speaker 1that so i think that this space will continue to evolve over time and and this is important because people are looking at the last cycle where there was very little amplification actually i think the strategy was around 1.2 times levered in the last bull market metaplanet i don't think had substantially different amplification ratio we're at 1.5 times and and so if you have no amplification and then you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting mnav to go up and you're just expecting that's obviously not a sustainable model amplification ratio in and of itself you can say it is more sustainable what would be most sustainable would be having a high amplification ratio but actually being able to use your balance sheet like a traditional company so whether that traditional company is an insurance company whether it's a bank that that traditional finance would look at this company less as it has bitcoin and it has cash and instead it's it has a multi-billion dollar balance sheet and so that is part of the work of this industry that if you can get that done then you do have the opportunity to earn non-correlated returns or yields off of your bitcoin that is not selling options on bitcoin selling calls or selling puts which we have not done we do not like the convexity profile that that puts into our company um it's you know if we if you had to you if you had to do it you had to do it but but if you could do things in traditional finance like an example would be in traditional finance uh a lot of balance sheet companies maybe it's like an alliance uh berkshire hathaway did this a lot they would underwrite non-correlated insurance risk where you have basically a bell curve of hundreds of thousands of con of insurance contracts the risk is very known and you need balance sheet capital to put to work and you could earn mid to high sometimes low sometimes mid sometimes high single digit returns on capital that would be a traditional business that has existed for years the challenge is don't look at bitcoin and puke that it's bitcoin that's underneath there but it's actually a balance so that's the the work as an industry but but if that were achievable over time as bitcoin is more and more accepted as capital which i do think is let's say if that were true how would you rate a bitcoin treasury company that has amplified bitcoin exposure but is also in a non-correlated way to bitcoin putting that to work in a way that's similar to other companies well then you actually should see mnav expansion right because a balance sheet company that has cash or fixed income like an alliance or something like that that puts it to work their balance sheet would trade at a premium because of their ability to generate a sustainable non-correlated yield to their their investments and i think that sometime over time i think that will happen in bitcoin whether it happens in this cycle or if it's a future cycle tbd but i would agree with you that the you know mnav expansion is going to be a sustainable non-correlated yield nav just goes to 10 scenario would not play out other than something like that occurring at a fundamental level with a lot of the balance sheet put
Speaker 2to work so you think generally there needs to be a maturation of like how people view a company with bitcoin on
Speaker 1the balance sheet yeah and in in the traditional finance space and i do think that is a lot of the players in the industry we're doing this but a lot of a lot of the other treasury companies are also engaging with these institutions which most of these institutions now have real bitcoiners that sit inside them somewhere that also want to help shepherd this um you see this as a very public example at marsh where you have garrick johnson um that's helping trying to help push the best people to educate marsh about bitcoin and have them accept bitcoin more and more as a long-term source of capital that can be underwritten against and so i do think that we ultimately get there i think the the hardest part is over what time frame which is why you know i think you know i've been talking about how amplification is going to be the most important thing to drive total returns and i think that you could clearly look at strategy and say well they're they're so big they don't have a lot of amplification right now stretch you know what is the growth trajectory of stretch but on the long-term basis i think they're going to be the biggest balance sheet company in the world and i think that's a i mean they've won i think they're going to win yeah uh and and and these from a zoomed out perspective i think are micro issues for what i think they'll mature into as you know one of the most successful companies
Speaker 2in history yeah i mean they are so set up right now um there's been a lot of iteration in what a treasury company is since say the first did this like initially he was just putting excess cash into bitcoin then there was like the convertible notes and obviously now there's the preferreds what's the next thing is there a next thing or do you think you have the secret source right now
Speaker 1i think you'll continue to see evolution i think you'll see building on top of just very simplistically it preferred is obviously equity it never matures um it has and and when you look at as an example what an insurance company might want as an asset well they would actually want something that matures and so you could have bitcoin bonds bit bonds whatever that would go in there that are rated you could have structure on top of seda or stretch where you actually take basically provides downside up to 20% or 30%. It really, you can pick your number that's required. And then at the end of the term, let's say you have a three-year term. If SEDA is above $80 a share, obviously we're maintaining it at 100, but just because you have downside protection, then the top tranche gets paid in whole. The bottom tranche takes those first losses if there are losses. And then you have a term, you have structure to provide protection. That top tranche very likely could be investment-grade rated. Then you have a term, you have an investment-grade rating, you have structure. That then becomes, you transformed it into something that's investable with likely a very high yield. I mean, who knows what the yields are, right? Because you have to basically have two investors that want to invest in each of those tranches and come up with what the economics are. But let's say you had something that paid 7%, 8% that was investment-grade rated. I think there'd be a lot of demand for that.
Speaker 2And that unlocks a different pool of capital. That has restrictions on what they can invest in. It needs to have like duration or a rating or whatever it might be. Yes. Interesting. Um, and in terms of like the treasury companies that we have right now, there's obviously like there's, there's strategy and you guys, which do who are doing the preferreds at the moment. And I don't mean this in, I just don't know a better way of framing it, but that's like what I would consider like a pure play Bitcoin treasury company. I don't mean, I know people take that, that term the wrong way. And then we have the ones that are trying to be like operational Bitcoin companies that are, you know, buying Bitcoin business. This is, and doing things like covered calls on their Bitcoin. Um, do you think they are going to become two very separate, um, like pools of Bitcoin treasury companies, essentially? Like, are they going to be viewed very differently within the market?
Speaker 1They will. And here's how I think I don't take any offense to the pure play. I think both of those are pure play Bitcoin companies. I think the return between them and the risks will be very different. And so you take. A 21 as an example of a company that has substantially less, I think they have a convertible note, but substantially less amplification. They're focused on building Bitcoin businesses. And you've heard Rafa say this, that they want to focus on risk adjusted returns. And, and so let's say that they are successful in maximizing risk adjusted returns. My view is that would likely be less returns than Bitcoin, but maybe more return. Per unit of risk than Bitcoin. Okay. And, and so that will have a very large pool of capital that would want to invest in that risk return profile. Uh, it will, if they're successful, they could be very successful businesses. Um, but because they're investing in cashflow, if Bitcoin goes up 30%, 40%, 50%, that cashflow growth will just be less than Bitcoin. But if Bitcoin goes down, that cashflow goes really helpful. Right. And so it's less risk. But also for less return, there's, there's a, there's a trade off. There's a likely break even rate of return of Bitcoin that will vary based on what they do based on what we would do. Or one company would be better off from a return perspective than the other, but there's in all forms of finance. There's a lot of people that care about sharp ratio. Yeah. There's also a lot of people that care about just total returns. I just say, Hey, don't break the thing and just maximize returns, right? Those are just different mindsets. And so. I mean, I mean, I've met with a lot of these people. I, I, I respect their strategy and I think that they can drive massive success is one of pure play is one, not a pure play. I, I think they're both technically pure plays unless they're investing. I think maybe orange juice might be doing this like non Bitcoin businesses. Yep. I think that would also fall in the realm of risk adjusted returns, cash flows, plus biz plus plus Bitcoin with less of a pure play Bitcoin company, but it is a, I would say likely. I think that would also fall in the realm of risk adjusted returns, cash flows, plus biz plus plus Bitcoin with less of a pure play. Bitcoin minus return company, but with less risk than Bitcoin, which I think that and actually I love those companies existing. They are out there. They are helping orange pill small businesses. I'm very thankful that they exist. And I think that they'll be super successful. Ours is the, we are a Bitcoin bull. We are all in. We are trying to outperform Bitcoin explicitly. That is our mandate. And when you have that mandate and a bull thesis, it becomes too costly to invest in cash flow businesses. Now, that's different than what I was talking about when I said if a traditional finance business could underwrite our balance sheet and allow us to put that balance sheet to risk, that's not investing in a plumber or something like that. That's just on top of what we would already be doing. That would be additive for us. That would be additive for an orange juice or a 21. That could be additive for both sides. But the return profile, I think, will be very different.
Speaker 2And what do you think of the treasury companies that are trying to generate yield on their Bitcoin? And there's a few strategies I've heard of. There's people, and I think, this is generally smaller treasury companies that are trying to run lightning routing nodes and collect fees there. I think that will go very quickly to zero if enough people do it. It doesn't scale to your size. And then there's the other ones that are doing things like covered calls on Bitcoin, which you just said you don't like for your business. But what do you think about it? Why don't you like it for yours? And then what do you think about it in general?
Speaker 1Yeah, I'm going to focus on the covered calls. To your point, the lightning things are just not a scalable thing. And so very small Bitcoin treasury companies would have, in efficiencies of the cost or in a strategy, and they would be looking for small opportunities generated yield like that to basically offset those things. And so I think that makes sense for them. Not something that is even implementable for us or strategy. The option stuff technically would be implementable for us. We could definitely do that. But it comes down to negative convexity. And so simplistically, if you sell a covered call, we know that Bitcoin's returns tend to be generated from 5%. 5% or 10% trading days over the course of a year when you get the massive green candle. And if you're selling calls into that, you likely don't get the full return on Bitcoin's biggest days of the year. And in exchange for that, you get a yield. And so you're doing what's called a negative convexity trade. And so if Bitcoin is very non-volatile, it does not have big days of return, you actually probably get better returns. But if you're underwriting a real Bitcoin bull thesis, you get a yield, but you get less returns. You get less returns, right? And we're trying to maximize total returns. And then on the opposite side, if you're selling puts, even if they're cash-covered puts, if they're cash-covered puts, then you have to hold more cash. And why do you want to hold cash? I want to hold as much Bitcoin as I can in this little cash. But let's say we have 18 months of dividend reserves and we started selling puts against it. Well, then when Bitcoin goes down and we need that cash the most for dividends, we are then forced to allocate to Bitcoin and potentially, I mean, if the put level, we're going to have to allocate to Bitcoin. If the put level was higher than where Bitcoin goes, we just lost a bunch of our cash trying to generate a yield. And so we just don't like that risk-return profile. Now, if you talk to professionals that are implementing these strategies, they'll tell you why they're different, why they are not actually selling the upside, and they'll do collars or all these sophisticated things. But what you'll find is that the average one of them are doing exactly what I said. The best performer, we'll actually be able to manage this. But then you're talking about selection of like, you're playing poker and there's 10 people at the table and one of them will be able to do it correctly, but there are nine won't. That's not a game that we want to play as a business.
Speaker 2No, that makes sense to me. And, you know, assuming we are now in a Bitcoin bull market, last Bitcoin bull market, we had this sort of peak crazy of treasury companies where every single person was coming out. It was almost like one a week we were getting at a time. Do you think that is over? Do you think. Do you think the companies that have survived to this point will continue to do well and we're not going to see a crazy influx of new treasury companies popping up? Are we going to have paper Bitcoin summer again?
Speaker 1I think that it's just like any startup. So any new technology, what typically happens, you see a good idea, there's a rush of capital, and 90% of startups fail in any industry. I think we saw that in paper Bitcoin summer last year. But in any industry, there's actually. There's actually an opportunity. A few people emerge as winners in the space. And I think that you will see that. I think Strive has emerged as an early winner. I think you will see a few other companies emerge as winners. I think there's a lot of ideas and have some hated rallies. And I think you also have ones that do not emerge. But I think the willingness to invest in this space and a new idea, the bar got raised substantially. Yeah. And I think that will be true even in a. In a bull market.
Speaker 2I think that's a really good thing.
Speaker 1Yeah, I think that's a great thing. I think we saw a mania. I think we saw a handful of companies, and this is one of the more disappointing ones of companies that I think viewed it as a get-rich-quick scheme that didn't even have a conviction in Bitcoin, and they just exited. And good riddance. Then you saw others that never got their footing, that maybe had a thesis or took bad debt terms. I think that those are potentially learnable experiences. I mean, no one is perfect. And so they can learn, they could not learn. If they do learn, then that could be an emerge-from-the-ashes scenario, right? Where they took some pain and they reflected and they learned. And we've seen that in other businesses, right? A lot of businesses end up having a thesis, then they pivot and they ultimately find success. Pivoting doesn't mean you'll find success, but I do think it is possible for some of these other players.
Speaker 2And with the ones that are still around, do you think we'll see a lot more M&A going forward? Obviously, you guys have already done that with Semler. Do you think we're going to see more of that?
Speaker 1I think you should. And I don't know if we will. So why say you should? We're seeing right now some of the players issue digital credit instruments, as an example, with $10 million, $20 million, $30 million.
Speaker 2Just don't have the scale.
Speaker 1It's no scale to drive any institutional interest. You probably need, in my view, a minimum of $200 million. And that's like a minimum to get real institutional interest. And we saw this when we IPO'd Seda. We went out with $125 million, and this was a learning for us. There was very little interest at $125 million. We ended up selling $250 million notional, and it was over two times oversubscribed. And the reason was we heard consistent feedback, no bid, no interest at $125. I'll take $20 million, $30 million, $40 million, $50 million, if you do $250. And so then I looked back. I looked at companies that either have to or are choosing to do a very small size, and say, what's your path to growth? Well, your path to growth is basically probably start with your current investor base that wants to help you get off the ground, which is reasonable. And then pretty much through retail only try to grow that up. But there will be no, I don't think, any institutional support until they grow that up massively. And so I say that to say, if you consolidated a couple of companies, and now you take two companies that have 3,000 Bitcoin, now you have 6,000 Bitcoin.
Speaker 2You start getting to that scale.
Speaker 1To get to that scale faster. So I think that's that. Should happen. Whether, where it happens, and if it happens, will be TBD. But I think it would help accelerate the growth path for some of these people. But it probably won't make sense for Strive, given where we're at.
Speaker 2Yeah, it's interesting. It's going to be really interesting to see how it all plays out. Because obviously, it's been a really rough year for most of the treasury companies. Probably, the Bitcoin bull market saves a lot of things. And I think it's going to save a lot of companies. Obviously, you guys are positioned really well. The performance is going to be interesting to watch. Yeah, it will be. I don't know what to expect. But it's going to be good. Thank you so much. I think it's been an awesome show. I really appreciate the way that you, you know, I see you on Twitter fighting the haters. And I think you do it in a really good way. So I appreciate the help.
Speaker 1Well, thank you. I do view the Bitcoin community as that we're all brothers and sisters that are almost all freedom-minded. There's obviously always, you know, a few bad actors. But there can be vigorous debate where underlying the principles that people live, their life, I think, can be very similar. And so, you know, for almost all of it, I actually view the debate as healthy, as good.
Speaker 2I definitely think it's good. These ideas need to be stress-tested to the maximum.
Speaker 1Exactly. It's fun.
Speaker 2Awesome. Thank you so much.
Speaker 3Thanks for having me. That was great. Thank you.
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