Metaplanet, Strategy, and the Corporate Bitcoin Race | Dylan LeClair - What Bitcoin Did

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
I think there's sort of like a gradually then suddenly inflection point.

(00:05):
This is becoming a real discussion across corporate boardrooms.
The asset is maturing and this is a way, if Bitcoin is going to eat the world,
and that's what kind of a lot of us came to the conclusion of five years ago,
then it's not going to be everybody just buying Bitcoin on cold cards.
There's huge pools of money that can't access the asset.
Equity on the stock market was just the first pool.

(00:26):
and you know really the bigger market in terms of exposure is the credit markets
it's just a much much bigger game the pools of capital are huge
this episode is brought to you by the massive legends iron the largest nasdaq listed bitcoin
miner using 100 renewable energy iron are not just powering the bitcoin network they're also

(00:47):
providing cutting-edge computing resources for ai all backed by renewable energy we've been
working with their founders dan and will for quite some time now and have been really impressed with
their values, especially their commitment to local communities and sustainable computing power.
So whether you're interested in mining Bitcoin or harnessing AI compute power,
IREN is setting the standard. Visit iren.com to learn more, which is I-R-E-N.com.

(01:09):
Bitcoin is absolutely ripping and in every bull market there's always a new wave of investors
and with it a flood of new companies, new products and new promises. But if you've been
around long enough you've seen how this story ends for a lot of them. Some cut corners, take
risk with your money or just disappear. That's why when it comes to buying Bitcoin, the only
exchange I recommend is River. They deeply care about doing things right for their clients and

(01:31):
are built to last with security and transparency at their core. With River, you have peace of mind
knowing all their Bitcoin is held in multi-sig cold storage and it's the only Bitcoin-only
exchange in the US with proof of reserves. There really is no better place to buy Bitcoin,
so to open an account today, head over to river.com forward slash WBD and earn up to $100
in Bitcoin when you buy. That's river.com forward slash WBD. All right, Dylan Leclerc,

(01:56):
probably the most prolific 20-something in the world. How's it going, man? Last time we spoke was,
I think it was like just around a year ago, Metaplanet had a couple of hundred Bitcoin on
the balance sheet or something like that. Now you're at like 16,000 and a bit. What a wild
year. How's it been? What a wild year indeed. I appreciate you having me on, Danny. It's been

(02:18):
been a crazy year you've managed to uh to boot peter off the podcast and take the reign hostile
takeover yeah congratulations on that um yeah it's uh it's it's been exciting um i don't even
know where to begin but uh i feel like the last time we spoke the the situation was a bit different
so a lot to catch up on it was very different and i i know you're a busy person i don't know how

(02:40):
much you listen to the show but i've been pretty skeptical about a lot of the bitcoin treasury
plays. And for full context, I think strategy is its own beast. That's different. I think
MetaPlanet, again, for a couple of reasons, one being super early and then also being in Japan,
you're probably different. And I think there'll be a handful of others that do really well in this.

(03:00):
But I'm kind of skeptical about these new treasury companies that pop up every week.
I mean, it seems like almost one a day at the moment. What's your kind of read on the entire
market for this? Yeah. I mean, one is I think I, you know, for the last four or five years,
I would say I've tried to be a champion of Bitcoin, you know, no matter what the circumstance up down

(03:21):
sideways. So it's amazing to see, you know, the Bitcoin treasuries.net there was, I don't know,
what's 10 companies, 20 companies a year or two back. And now there's like 200 companies around
the world racing to announce and acquire Bitcoin. So, you know, this is, you know, I think it's
unilaterally positive for our mission. Even if you are, you know, the cypherpunk sort of,

(03:45):
you know, the cypherpunk minded Bitcoiner, you know, the crypto anarchist, if you will,
you know, what did you think Bitcoin winning and taking over the, you know, the world looks like,
right? Well, one of those avenues is, you know, the public capital markets are going to embrace it,
you know, it wasn't just going to be like a libertarian, you know, toy, right? But I,

(04:07):
Let me clarify, like I'm not dissing or putting away the cypherpunk anarchist sort of view.
They exist in parallel, right?
You know, Saylor leveraging the preferred equity market with his Bitcoin collateral does not inhibit any of the other use cases or the lightning network or anything of that extent.

(04:29):
So, I mean, I think that I sort of naively in 2021 thought that this would happen really fast.
You know, Sailor adopted it. And, you know, Pierre was like 500 companies in S&P 500 are going to adopt Bitcoin. And I was like, yes, like 100 percent. And so, you know, for me, I was a bit of, you know, I was in a bit of disbelief that I had the opportunity, even though Metaplanet was in a Japanese market. I'd never been to Asia. I don't speak the language. I didn't know the first thing about Japanese public markets at that point last April.

(05:02):
But the opportunity for me to work at a public company with a Bitcoin first, Bitcoin only vision was really exciting because at that point there was, it was NSTR and some miners and Coinbase.
so you know a year out to see what 50 announcements in the last week or two if nothing else it's

(05:24):
vindicating because you know i think we had this vision as as you know bitcoiners and sailor was
out there tooting you know his horn about this begging companies to to copy him and no one did
right and so i think there's sort of like a gradually then suddenly inflection point that
we've, you know, whether we've passed it in the grand scheme of things or we're nearing that

(05:47):
inflection point where, you know, it goes from, you know, sort of the gimmick like, hey, we're
doing this because we get attention and volume and liquidity, you know, in our equity to, you know,
this becoming a real discussion across, you know, corporate boardrooms, right? It's like, okay,
we're still going to have our business, you know, but at the same time, it makes sense to, you know,

(06:08):
accumulate this and sit on a bunch of cash. What was it? Like Figma, right? Figma is going public.
Like they casually had $50 million of Bitcoin on their balance sheet.
No one at Figma is talking about Bitcoin.
They don't have a dedicated Bitcoin strategy officer that I know of.
But at the same time, they have $50 million of Bitcoin.
Like that's not a joke.
That's a lot of money, right?
So I think that this is where this is all going.

(06:30):
You know, in terms of the scale or, you know, the capacity for, you know, however many purpose dedicated Bitcoin only accumulation vehicles that are, you know, we'll see.
You know, I think there's obviously going to be a dominant monopoly in, you know, each of the largest local markets.

(06:54):
Right. There's just economies of scale that, you know, there's a winner take all dynamic.
Even though the, you know, Bitcoin, it's it's it's homogeneous collateral.
It's fungible. Right.
In theory, one Bitcoin equals one Bitcoin, no matter what company holds it.
But in reality, I think, you know, in public markets, there's there's just a dynamic of size and liquidity, never mind like the passive indexation.

(07:18):
Right. So so there is somewhat of a winner take all or winner take most dynamic, especially, you know, in the various public markets.
So, yeah, I mean, I think it's all extremely positive.
I've been really, really encouraged to see, you know, more and more people, you know, whether it's reaching out to MetaPlanet or there's been companies, I think there's now, you know, 10 or so companies in the Japanese public market that have a little bit of Bitcoin.

(07:42):
And I think, you know, MetaPlanet has certainly been, you know, kind of a driving force there.
So it's really cool to see. And, you know, to be frank, I think we're still in the grand scope, you know, the grand scheme of history. I think we're still in the early innings of, you know, the Bitcoin corporate adoption story, even though, you know, all of the Bitcoin, the Bitcoiners, if you will, in our own echo chamber are like, okay, guys, this is really frothy. The reality is like the rest of the world actually simply doesn't care.

(08:08):
um so i think it is pretty early despite you know what what everyone sorts sort of believes is uh
you know if you know everyone thinks it's reaching a fever pitch um but i think if you step back it's
it's actually we're still you know and the the huge pools of global capital we're still this
bitcoin story is still pretty small so when i've just pulled up the bitcoin treasuries.net website

(08:30):
and there's like such a crazy drop off from say they're at like 600 000 bitcoin i think the
hundredth in the world right now is at 25 so like there there's a enormous gap between those two
things um but how much demand and how much of a market do you think that is for these bitcoin
treasury companies that trade at an actual premium to net asset value like something significantly

(08:53):
greater than one like because one of the things that i've been sort of trying to figure out is
whether we're going to have a lot of these that trade basically just at par and then a couple that
will be at two or three X. And like, where do you think that, that goes? Yeah. You know, I think
there's, it's a, it's a constant, it's a constant like fight with gravity, if you will, uh, you know,

(09:14):
above one XM now, you just think of the math and the mechanics, right? Like if your stock's at,
you know, a two X premium and the stock price is flat and you buy some more Bitcoin, you're,
you know, your premium to nav goes down. If Bitcoin goes up, your premium to nav goes down.
Right. So so in order to say, you know, stay at a constant 2x premium, if you will, every time you buy Bitcoin, you know, the share price has to has to ratchet higher.

(09:40):
Right. So it takes it takes, you know, more and more capital.
So that's why I think there's there's a, you know, sort of a natural trend towards the winner take most dynamic.
Yeah. Is because, you know, the liquidity, the liquidity you need to, you know, sort of maintain a consistent premium, especially as, you know, you scale a treasury, ideally exponentially.

(10:00):
right like for instance a 5x premium when meta planet was a 10 million dollar company was 40
million dollars of value or you know whenever you're a 50 million dollar company or whatever
them you know whatever kind of math you want to do is really really small in terms of the value
right now you know meta planet so i think we're a we're a five billion dollar company right so
at a 3x m now you know that's billions of dollars premium strategy is at a at a measly 1.8x premium

(10:26):
but the premium is like $50 billion of value, right?
So in absolute terms, this is a massive, massive scale.
And so everyone's like, well, the premium's as compressed as it's ever been.
It's like, well, in fiat dollar terms, it's as large as it's ever been.
So I think, you know, there's people often are like,
and we've seen this with analysts, you know,

(10:46):
kind of across the board in the treasury sector,
people are comparing a company or companies
that are two orders of magnitude in different size, right?
And so I think the expectations have to sort of be set there where just the magnitude of like, okay, well, if you do your job and you execute well as a treasury company, the scale quickly approaches billions or tens of billions if you can execute.

(11:09):
And so, you know, from that point on, maintaining, you know, that sort of premium, one, it requires a lot of liquidity and two, it requires sort of a kind of a dominant monopoly or a near sort of monopoly on, you know, you say your markets, you know, liquidity, you know, the Bitcoin vision.
Um, part of, I think why we were so successful early on. And I think still to this day is that

(11:31):
Japan, there was no Bitcoin, there was no Bitcoin exposure, narrative, or story, or, or really,
I would say like, you know, uh, you know, visionary belief, right? Like sailor, when sailor burst onto
the scene in, in August of 2020, why did Bitcoiners rally, rally around him? Right. Because we were,
we were, you know, sort of all in our own little echo chamber speaking, speaking the same language.

(11:53):
And then some billionaire shows up on the NASDAQ and is like, there is no second best. And everyone's like, oh, my God, you know. And so I think there was somewhat of a parallel or like an analog there for us in Japan. There was no one. Everybody, if you believed in Bitcoin or crypto, you believed in digital asset Web3 blockchain-isms. And that's not what we stood for.

(12:14):
So I think that was part of the reason that, you know, we got such a jolt of a start. But, you know, in terms of like the U.S. markets, right, how many billions of dollars of Bitcoin exposure currently exists and floating? And that's a lot, right? And I think, you know, there's also like there's now sort of like private Bitcoin that is being taken public, right?

(12:35):
Yeah. Versus like with MetaPlanet, we have 16,000 Bitcoin. That's 16,000 Bitcoin of demand that didn't exist prior. It was trapped in the equity market. There wasn't exposure. We raised $1.6 billion and bought $1.6 billion of Bitcoin.
Right. So I think that just because of, you know, the marginal sort of supply and demand, there's going to be, you know, amongst the hundreds of companies, there's going to be sort of a natural, you know, winner take most dynamic.

(13:07):
um but i think really the scale ultimately the real moat um here one is there's there's brand
right there's there's a sailor premium um you know in the same way that there's an elon premium or
there's a steve jobs premium back in the day but the real moat here um is i mean it's not it's not

(13:27):
just having a public company right like a year or two ago or three you know if you had if you were a
public company in the Bitcoin or crypto space, like that was a real, real differentiator.
Yeah.
Now there's a lot of crypto companies. And I think, you know, it was the ATM,
right? The ability to raise equity at the market. Like if you, if you've operated in public markets,
raising money is a, is a grueling game. You know, it's like nonstop legal, regulatory,

(13:51):
investor meetings, nonstop, no, no sleep, especially if there's like, you know, sort of like,
you know, a private placement or convertible bond process where there's like a three day
sprint window where it's nonstop meetings, roadshow, roadshow. It's grueling. But the ATM,
you get it live and then it's, I don't want to say it's smooth sailing, but you do the hard work

(14:12):
up front and then the process gets very much, it's easier throughout than constantly raising money.
And so for a while, there was sort of a monopoly. Sailor was the only one in town doing this.
And now I think there's too many to name that are selling equity at the market to buy Bitcoin.
Now, increasingly, there's some crypto digital asset companies, which is interesting.

(14:34):
But I think the real moat here is not just issuing equity to buy Bitcoin.
The real moat is, can you hit a scale in absolute terms of Bitcoin exposure where you can access
to fixed income markets?
And I think Saylor and MSTR are, to this point, the only company that's hit that scale.

(14:57):
even convertible bonds right the convertible bond process is it's long it's grueling it's
heterogeneous credit right so every convertible bond has a new process has new terms um you know
and the investors don't actually believe in in you or your story or your company right like the

(15:18):
convertible bond investors they'll woo you and they they'll you know talk a big game and they'll
talk about loving your vision and then they short sell 60% of the money they put down to hedge.
They're not actually even net long at all. They're just farming volatility. So they're not
your friend. And I say that, that's no diss. That's their business. They're in the business

(15:43):
of trading volatility. That's fine. But with this preferred stock,
you know, I guess just with the preferred equities that sailors laid out,
I didn't really see the, like that vision wasn't clear to me until, you know, the first one rolled
out and then the second and the third. And then it's sort of like an aha moment, like, you know,

(16:04):
convertible bonds were never the end game. Like I thought the magic innovation was, okay, you can
lever your balance sheet with Bitcoin volatility and access 0% cost of capital. But now it's really
clear that, you know, that process was a bit clunky. And, you know, it's also like the relative
pool of capital for convertible bond arbitrage. It's pretty small versus fixed income, you know,

(16:31):
broadly, I know that's a broad stroke term, but the fixed income markets, like the true fixed
income markets are absolutely massive. And so, you know, when Saylor said, we're going to go for
every pool of capital, investment grade, junk, long duration, short duration. And now we're seeing,
We're seeing that take form.
I think that's really the only moat that exists for the Bitcoin treasury companies.

(16:53):
I think implicitly, I don't know if anyone has said it out loud, but really every other company but strategy is in a race to hit that scale to be able to access that market.
Because you can't issue preferred equity with $100 million of collateral on your balance sheet.
Because that's not interesting.
Because what?
Okay, you issue $20 million of fixed income, preferreds.

(17:16):
it's not worth an investment. It's like a real big investor isn't going to take the time to
look into it, to trade it. It's not liquid enough. So you have to hit a scale to be able to access
those capital pools. And I think that's the real monopoly. That's the real differentiator
for the one company versus the hundredth company. So I've got like a million questions from what you

(17:40):
just said there. Let's start with, you were talking about these companies that are taking
basically private Bitcoin public.
There's obviously 21 and Blockstream's
Bitcoin standard treasury company, I think,
that are about to go public.
Have they gone public?
I'm not sure.
They're about to go public.
And they're bringing a lot of Bitcoin on,
like 30,000, 40,000 Bitcoin.

(18:01):
It's significant.
But they're still a long way behind Saylor.
Do you think these companies have any chance
of ever catching Saylor?
Well, let me clarify that.
But it was no, you know, taking the private Bitcoin public statement, there's no slight at all.
I think the more Bitcoin in public markets, the better.
And I'm a huge, huge fan of both Jack and Adam.

(18:25):
I spoke actually, coincidentally, I've had fireside chats in Amsterdam with both of them, two separate years, you know, before any of this, you know, unfolded.
So I'm really close to them.
And it's really awesome to see your friends winning.
With that said, I think that I think sailors reached escape velocity.
I say that in the position of a public company We have aspirations to catch strategy Is that feasible You know I guess we see

(18:53):
But I think, you know, 600,000 Bitcoin lead more or less is, you know, pretty, pretty insurmountable.
And so we will see.
I think the beauty of it is Michael is welcoming the competition and cheering for them and retweeting them.
And, you know, I don't think I've really, you know, I'm young, but I've thought pretty deeply about any sort of precedent where, you know, a titan of industry is openly welcoming, cheering and platforming all of their competition.

(19:28):
And I can't find a parallel. So that's really interesting.
But no, I think, you know, the higher the Bitcoin price goes, the more the moat solidifies, the more they can access the fixed income market.
Repeat, repeat, rinse, you know, rinse, repeat.
So, yeah, I mean, you know, really like the only way that I, you know, it's probably not a Bitcoin industry incumbent, right, that if there is a potential challenger.

(19:51):
Like, you know, if Mark Zuckerberg took the orange pill tomorrow, could he get close?
Well, probably. I mean, Facebook has, you know, Facebook makes $100 billion a year or something, right? So, or whatever the numbers are. So, yeah, I mean, that would be interesting, right? If Mark Zuckerberg took the orange pill, fired up an ATM and said, we're going to issue $10 billion preferred. You know, that's an interesting story, but I don't think that's happening. I think the incentives aren't there just to, you know, go all in on Bitcoin when so many other things are happening, right? You know, AI and everything else.

(20:23):
So I think, you know, if I had to put my money on it, I would say overwhelmingly that MSTR is in the lead, you know, just probabilistically 10 years from now.
But we will we will see how the you know, how it plays out.
OK, so I do. I definitely want to talk about this new product that Sailor's just launched.
But let's just hold that for one second, because when it comes to the premium on NAV, like you say, Sailor's at like 1.8 at the moment.

(20:48):
You guys are at three. You were. How high did it get?
that it gets like seven, even higher potentially.
Is that the only metric that really matters
when it comes to this?
Or is that too much of a simplistic way
of looking at this?
I mean, it's definitely a metric.
It's probably one of the more important ones.
But I think often people are looking at this
in a static form, right?

(21:10):
So for instance, what was it?
A few months ago, MetaPlanet's,
let's say April, right?
MetaPlanet had a premium to net asset value
of three and the share price was, you know, $4, right?
Metaplanet now has a premium to net assets of three

(21:31):
and the share price is $8.80, right?
So, you know, that's three months
and the stock was, you know, remarkably overvalued
by the traditional analyst perspective.
And, you know, now it's the same valuation,
but it's repriced, you know, over 2X higher.
And so I think, you know, I say,
Instead of one snapshot, I give you two snapshots and I would pose an analyst or someone from Wall Street to say, okay, well, how did this happen? It's repriced twice as high, but it's the same relative valuation. And so there is somewhat of a forward-looking aspect here.

(22:05):
you know, the static premium to net asset value isn't considering, you know, all of the future
that's baked in, right? Equities trade at, you know, a forward expectation, you know,
a forward expectation of future, you know, cash flows is traditionally what it says,
but it's really just forward expectations, right? You know, there's a reason why Palantir trades at,

(22:27):
you know, 100x revenue and, you know, Amazon traded at 100 times earnings for 20 years and,
right it's it's it's pricing in the future not not the now and so you know a bitcoiner looks at
strategy and they say okay well they've generated 10 billion dollars of btc gain um and i btc gain
not as you know the price of bitcoin has gone up but you know they've the btc dollar gain metrics

(22:51):
they put out or btc yield is saying well what value have you generated net no dilution so let's
that let's let's you know if you issued 10 billion dollars of common stock at a 1x m nav
you would have zero BTC gain, right? There's no additional value is generated or accrued.
And so if you have a company that's generated $10 billion of value, that's worth something.

(23:13):
And so the equity markets are rational and they put a forward multiple on that.
And so I think that there's an entire industry of analysts that are trying to figure out what
this is all worth. But that's sort of the Bitcoiners at the same time that everybody's
investing in these equities, it's going up against the traditional world that has always
looked at forward expectations, not the now.

(23:35):
Right.
So like, you know, MetaPlanet, we've, you know, this is rough numbers, so don't quote
me.
But when we first spoke, we had 100 Bitcoin, 140 Bitcoin, I think.
And we had like, you know, split adjusted.
It was like, you know, I think we've 4X'd our share count and we've like 100X'd our

(23:57):
Bitcoin, right?
And so it's like, well, how is that possible? And so obviously, analysts are going to just, you know, slap a, if they believe in the management and the execution, right? This whole flywheel and the net asset per share accrual, it can work in reverse, theoretically, right? If you're selling equity at a discount to your fair value, your net assets, net asset value per share can go down, right?

(24:22):
So then the whole thing works in reverse.
And so, yeah, there's a lot of ways, you know, if the company has too much debt or they don't believe in management or, you know, various reasons, you know, maybe it's a Bitcoin bear market, right?
There could be many various reasons that the, you know, premium to net asset value closes, goes to one or goes below one, right?
And then there's another toolkit there.
But, yeah, I mean, I think that it's not – there's not going to be one uniform answer, right?

(24:45):
There's the scale of the company.
Are you micro cap, small cap, mid cap, large cap?
Are you in the mag seven?
All those things matter. You know, there's some really interesting analysts in Japan that have come up with the it's like they call it an MNAV.
It's like a theory of MNAV decay. And they're saying basically, OK, theoretically, if you had 21 million Bitcoin as a company, what's your fair value MNAV?

(25:09):
And the fair value MNAV at that at that Bitcoin holdings is one. Right.
Well, how could you be worth more than 21 million Bitcoin in Bitcoin terms?
And so then you take it to the other extreme. Well, if you held one Bitcoin, well, what's your fair value MNAV?
Right. And so the other room for growth. And so there's like sort of a spectrum, right? The larger you get, the harder it is, or, you know, maybe mathematically the market saying, well, you know, if you have, if you have 11 million Bitcoin, does it make sense to have a 2X MNAV? Well, that would be 22 million Bitcoin. So maybe not. Right. And so I think that there's, there's sort of a, you know, there's different phases of the maturation process, but yeah, I think it's company dependent on the, on the MNAV.

(25:49):
One of my questions would be if, say, 120K is the top for this Bitcoin cycle, like what do you think happens to MNAV across the board in a bear market?
Because last bear market, we saw Saylor go to a discount to MNAV.
Again, like I know there's kind of orders of scale here and maybe that won't happen again.
But I assume you'll be more volatile both to the upside and downside in terms of MNAV.

(26:11):
Like how do you see the market playing out in a bear market?
Yeah, that's a good question.
um you know i think that the uh broadly the asset class is a bit more mature um so that you know the
profile of of the just bitcoin trading has definitely changed right like last you know
last bull market we saw straight parabolic and then you know a crash and then a rift again in
the you know the fall of 2021 and then this huge epic crash and this time it's like we sort of like

(26:35):
slowly reprice we chop for six months nine months you know i think uh you know checkmate fellow
fellow Aussies, like probably the best, you know, sort of analyst these days around the chop
consolidation thesis, right? Of just like, Hey, we reprice, we chop for nine months, everyone gets
bored and then we do it again and we do it again. Um, so the terms like, you know, the big secular
bear market thesis of like, okay, we're going to, you know, 70% down, we're going to call it,

(27:00):
we're going to all go home for three years, pack it up. I don't know if I, I put Wade into that.
I don't, I actually don't believe that will happen. It might, um, obviously, um, but everything's
cyclical, right? So I think there will be a bear market. I think that, you know, during that period,
there will be pressure on MNAVs as there's pressure on, you know, valuations of any company during,

(27:22):
you know, sort of a secular bear market. But I think it, you know, it'll be case dependent on
whether, you know, various companies can, you know, manage that decline. One is, are you levered
right now? How levered? With what sort of debt, right? Do you have secured debt where your Bitcoin's
encumbered where if it goes, you know, you have to liquidate the Bitcoin. Do you have secured,
you know, unsecured convertible debt, right? Do you have a, do you have debt due in one year,

(27:47):
right? Like if you have a billion dollar, if you have a $2 billion treasury and a billion dollars
is due in six months, well, you know, that could be a problem, especially if the, you know, the,
the credit markets freeze up and you can't access, you can't roll that debt, right? So it will be
dependent. Part of the reason Sailor Lust prefers is there's no debt maturity ever. It's just the
dividends, right? So that in terms of your flexibility, like one of the biggest things

(28:07):
that everybody, all the analysts or the commentators, if you will, would flood, create fear,
uncertainty and doubt around is, well, okay, the converts are coming up. You're going to have to
pay off all that and sell the Bitcoin. And so, yeah, with the press, it's like, no, we're not
selling actually ever. And so, yeah, I mean, I also think in terms of the discount that Saylor

(28:28):
traded at the MSTR traded at last bear market. I think if I'm not entirely sure, but I think if
you looked at the enterprise value, so you factor in the debt into the market cap that if you looked
at just face value market cap to Bitcoin holdings, it looked like it traded at a deep, deep discount.
But the reality was like, you know, at the bottom, he had a couple of billion of Bitcoin and a couple

(28:48):
billion of debt. Right. So in reality, the discount wasn't as severe as it looks. But it's
It's still, you know, the conditions were pretty rough, right?
So I think for us, you know, we're focused on staying, you know, keeping a pristine balance sheet, maintaining maximal flexibility.
You know, we don't want to be put in a tough spot.

(29:08):
So we've kept the leverage pretty low.
If I, you know, off the top of my head, I think our Bitcoin to debt, you know, our BTC rating, as Saylor calls it, is like 16x, I believe.
Right.
So we have like 100 million of debt.
And yeah, it's 16.5x is our BTC rating.
So, you know, we have 16 bucks of Bitcoin for every dollar of debt.
that's intentional. Um, you know, and I think, you know, when the opportunity arises, uh, we will

(29:31):
look to, uh, you know, increase that leverage ratio a bit. Um, but yeah, it's going to be,
yeah, there's going to be companies that trade at a discount. There's going to be companies that
trade at large discounts. There's probably going to be a sort of a, you know, uh, acquisition merger,
uh, season, if you will, right. There'll be, there'll be opportunists, you know, clear off
some debt by the Bitcoin at a discount. Uh, you know, that's a very familiar world for the

(29:55):
traditional you know financial wall street world and so i don't expect that to change um but that's
at least at metaplanet that's not our intended strategy we're pretty laser focused on on just
btc uh you know if someone else wants to do the acquisitions and all that then then have at it
um like one of the reasons i i like talking to you about this is because you're definitely a

(30:18):
bitcoiner first like you you before you joined metplanet you were already like very deep in this
world. I think there's a lot of people who are trying to copy this play who are kind of cosplaying
as Bitcoiners because they see kind of a gap in the market. From your just like pure Bitcoiner
perspective, what do you think of this cycle so far? Do you think we are out of the sort of
traditional four-year cycles? And how much does people like Saylor play into that in the sense

(30:43):
that they're kind of a buyer regardless of price? Yeah, you know, it's interesting to kind of,
come from the Bitcoin world, if you will, and then sort of enter
the traditional financial world and kind of see it through both lenses.
Yeah, I mean, to be honest, obviously

(31:05):
I can feel, you can see that there are certain people that are more
convicted than others. I think investors can see that too.
The fact that we can, I mean, Simon was in the,
not publicly, but he had some Bitcoin on Mel Gox and
you know saw the last 10 years of craziness the good and the bad right um and you know i i had

(31:27):
sort of been talking about strategy and bitcoin and everything else for the past five years so
it's a pretty natural fit plug and play at meta planet um it was just like okay let's go you know
turbo turbo hyper speed everything is is 110 bitcoin i think now it's like it's it's sort of
the opportunistic phase and i don't think that's a bad thing i think it's perfectly rational um

(31:48):
the real the real conviction or test is like can you eat the 70 percent paramount right if if it
comes right you know whether it's 60 or 50 or 40 percent who knows um you know but that that tests
your conviction right i mean outside of the bitcoin price like in the in the 15 months since
i've joined metaplanet metaplanet stock has fallen six you know 50 60 70 percent like three three

(32:10):
times you know maybe maybe four depending on on where you're measuring from right so like we're
We're speed running a Bitcoin cycle every few months, once a quarter maybe.
And so I think that sort of, not test your conviction because we didn't change anything.
We continued on unabated, nothing changed, we didn't waver.
But for the person from the traditional world, if you're just stepping into this new, you're opportunistic,

(32:36):
that sort of move will test your conviction, will test your will, will test your kind of resolve.
so yeah I mean I think there will be some wipeouts I mean the reality is like as as I'm a
diehard Bitcoiner but it's naive to say that every company that adopts Bitcoin will be a success
there will be failures I mean it's like every company that adopted the internet didn't succeed

(33:00):
like there was failures so there'll be failures there'll be a bankruptcy like there there will be
you know it's not all good it's not all sunshine and rainbows it's a it's a brutal competitive
world. There's a lot of sharks out there and Wall Street and everything else. So, yeah, I mean,
we're not I'm not naive to that. So, yeah, I mean, the times are good now. Bitcoin's around

(33:21):
the all time high. There will be a cycle. And so I think that's what will separate the men from the
boys, if you will. But until then, I think that, yeah, we'll see what happens. But, you know,
I think we're really focused on staying disciplined and, you know, managing risk responsibly in a Bitcoin, you know, in a Bitcoin standard.

(33:42):
Right. And for us, you know, managing risk means buying as much Bitcoin as we can, staying de-levered and making sure we can, you know, weather any storm.
Yeah. And one of the most interesting things in this world that's come out in the last few weeks, really, is this kind of pivot from some companies to go to like crypto treasury companies.
I think it was BitDigital sold their Bitcoin and bought Ethereum and the share price tanked.

(34:04):
um what's your take on that i mean i think i know the answer but give me your take on that
yeah i mean i i um i don't i don't know not to say i don't agree with it um because you know
you're free to do whatever you want but um yeah it's it's it's clear to me that uh it was going
to happen i was surprised it took as long as it did um but at the same time you know there's a

(34:25):
reason that uh i'm a bitcoin maximalist um you know there was i turned down a lot of uh you know
financial and whatever opportunities over the years because it was crypto related, right? And
not Bitcoin. And, you know, I'm focused on what I believe in, which is Bitcoin. And so, you know,

(34:45):
the XRP treasury company, I mean, to be honest, it's not clear to me that a lot of these things
are commodities. And so if you, I know the SEC has sort of rolled back some stuff, but, you know,
if you are capitalizing on security, there's a different set of rules, at least in the US.
but you know I guess that's another another question for me it's pretty simple it's just

(35:06):
like you know chart chart any of these things and even if you're not a you know an analyst or a
someone that likes to chart things just look at any of the altcoins denominated in bitcoin
right like it's pretty clear yeah right like I've the past couple days I've heard um you know on the
on the ethereum treasury company someone well someone said well you know dylan you guys aren't
getting a yield on your bitcoin and they are and I was like yeah well you can get a yield on your

(35:29):
fiat it's still underperformed bitcoin you know so like you know the point is like these the the
crypto companies or whatever like or the crypto alternate cryptocurrencies the altcoins something
like eth staking yield like it's just recycled dilution the reason that eth btc has gone down
only since the merge with a dead cat bounce in the last week is is because of you know people

(35:51):
realize that there was like a fundamental shift in the protocol it's not nuclear weapons grade like
Bitcoin is. And it's a, you know, it's a VC bet. It's a venture bet. It's a tech, it's like Tesla.
It's a, it's a, it's something with, you know, a team in charge. It's not just, it's not a kind
of an autonomous protocol like Bitcoin. So yeah, I mean, I wouldn't be comfortable doing, you know,

(36:12):
building a lasting foundation on any, on any altcoin. And I, you know, obviously you agree
there, but I think it's more so the, you know, there was obviously going to be some copycats.
It's funny that like the Ethereum people in general or the crypto people, you know, religiously mocked Michael for years, you know, like he's buying the top.

(36:33):
What is he doing?
He's averaging up.
He doesn't understand this.
And now they're all like it's finally after looking into it all in the last two weeks, they've realized that, whoa, the public capital markets, you know.
So it's a funny, funny change of events, I guess.
But I wouldn't say I'm shocked.
Yeah, a 7% yield when you're down 50% on Bitcoin doesn't sound like a great trade.

(36:56):
Yeah, yeah. Enticing.
What if you could lower your tax bill and stack Bitcoin at the same time?
Well, by mining Bitcoin with Blockware, you can.
New tax guidelines from the Big Beautiful Bill allow American miners to write off 100% of the cost of their mining hardware in a single tax year.
That's right, 100% write-off.
If you have 100k in capital gains or income, you can purchase 100k of miners and offset it entirely.

(37:19):
Blockware's mining as a service enables you to start mining Bitcoin right now without
lifting a finger.
Blockware handles everything from securing the miners to sourcing low-cost power to configuring
the mining pool they do it all You get to stack Bitcoin at a discount every single day while also saving big come tax season Get started today by going to mining forward slash WBD

(37:42):
and for every hosted miner purchased, you get one week of free hosting and electricity.
Of course, none of this is tax advice.
Speak with Blockware to learn more at mining.blockwaresolutions.com forward slash WBD.
One of the things that keeps me up at night is the idea of a critical error with my Bitcoin cold storage.
This is where AnchorWatch comes in.
With Anchor Watch, your Bitcoin is insured with your own A-plus rated Lloyds of London insurance policy,

(38:05):
and all Bitcoin is held in their time-locked multi-sig bolts.
So you have the peace of mind knowing your Bitcoin is fully insured while not giving up custody.
So whether you're worried about inheritance planning, wrench attacks, natural disasters, or just your own mistakes,
you're fully protected by Anchor Watch.
Rates for fully insured custody start as low as 0.55%
and are available for individual and commercial customers located in the US.

(38:27):
Speak to AnchorWatch today for a quote
and for more details about your security options and coverage.
Visit anchorwatch.com today.
That is anchorwatch.com.
Do you wish you could access cash without selling your Bitcoin?
Well, Ledin makes that possible.
They're the global leader in Bitcoin-backed lending,
and since 2018, they've issued over $9 billion in loans
with a perfect record of protecting client assets.

(38:48):
With Ledin, you get full custody loans
with no credit checks or monthly repayments,
just easy access to dollars without selling a single SAT.
As of July 1st, Ledden is Bitcoin only, meaning they exclusively offer Bitcoin-backed loans with all collateral held by Ledden directly or their funding partners.
Your Bitcoin is never lent out to generate interest.
I recently took out a loan with Ledden and the whole process couldn't have been easier.

(39:10):
The application took me less than 15 minutes and in just a few hours I had the dollars in my bank account.
It was super smooth.
So if you need cash but you don't want to sell Bitcoin, head over to learn.ledden.io forward slash WBD and you'll get 0.25% off your first loan.
That's learn.leadden.io forward slash WBD.
Let's talk about strategy because they've just come out with a new product.

(39:34):
I think it's really interesting.
Shout out to Odell.
He called Sailor building a stable coin quite a long time ago.
And I know it's not a traditional stable coin, but it kind of essentially is.
Do you want to explain what Stretch is?
Yeah.
You know, I didn't see it coming.
I should have seen it coming.
I actually put out a few thoughts or ideas the past couple of weeks that I think if we kind of take a step back, people are talking like Bitcoin treasury companies are a new idea.

(40:08):
It's a new model.
The reality is in the long arc of history, Bitcoin treasury companies aren't really that unique.
right like if we think of the the model of like the central banks of the past or the banks of the
past right what are you doing you're capitalizing on a hard asset gold and you're issuing liabilities
against that right and as you know fiat or you know gold-backed ious or whatever it was but if

(40:34):
we think of all of the reasons that these that these you know financial institutions of the past
failed you know it was basically you know an asset it was one these are fractional reserved
banks, right? So they, you know, they would issue all this, all this, you know, these liabilities
and money they didn't actually have and just hope that they wouldn't get bank run. But also, you

(40:56):
know, in that process there, you know, they were a lot of these, the gold, you know, the gold banks
of the past, they were issuing the liabilities were redeemable in gold, right? So not only were
the liabilities callable at any one point, but they were in the hard asset, right? And so when
there was any sort of crash or financial crisis or whatnot, all of a sudden, you know, and

(41:17):
there's a rush to gold, all of a sudden your liabilities, you know, are much more valuable
and there's a run on the bank and, you know, you're toast.
So the reason we got to fiat in the first place was because, you know, the hard asset
treasury companies of the past failed spectacularly over and over and over again.
So like, if you had to think, like if you were a monetary theorist of the past and you

(41:39):
that, okay, well, let's design a financial institution that solves every problem that we
faced or faced today, back 200 years ago. Well, you'd want the gold to teleport.
You would want there to not be able to mine any more gold to devalue your assets.
You would want your liabilities to not be callable, to not be able to be run on your liabilities.

(42:03):
You'd want them to be perpetual. You wouldn't want them to ever come due.
and you'd want the currency your liabilities are denominated in to be printed forever.
Theoretically, if you had to optimize a perfect bank of the past on a gold standard,
that's what you'd want.
And so when you think of what Michael is doing,
if you think of what strategy is doing,
they're capitalizing on Bitcoin, obviously, we know that.

(42:25):
It's better than every way than gold, we know that.
Bitcoin talking point 101.
But the real interesting thing is the engineering and innovation on the liability side.
And they've kind of tested this out all in public, right? If you think about the maturation of their liability profile. MSDR first issued convertible bonds. They did a couple converts. They did a senior note, so just a straight bond. They issued that through a subsidiary. So they put 100,000 Bitcoin in a subsidiary. They issued a bond against it. It was encumbered collateral. That Bitcoin was first claim before all the equity was secured.

(43:01):
right they went to silvergate and did an over collateralized loan and everyone and in the bottom
of 2022 is saying seller's gonna get margin called he's gonna get margin called you better sell your
yacht michael like right so they they tried everything right and they you know did more
converts in 2024 and and you know the perpetual preferreds now i i think this is sort of uh

(43:21):
kind of the final evolution of what theoretically the best liability profile for
a hard asset treasury company financial institution looks like, right? You have the
perfectly engineered asset Bitcoin, but on the liability side, you want something that's
perpetual denominated in a bad money relative to what your asset's holding. It's going to devalue

(43:43):
forever. That can't be called, right? And so, you know, strike and strife were interesting.
You know, strike is essentially a tokenized convertible bond. Strife is, you know, a perpetual
virtual Bitcoin dollar swap that has a duration of, you know, a thousand years.
But, you know, stretch is really interesting, right? Because, you know, everybody, there was

(44:04):
that report from like Bernstein, I think six months ago, and it was like, strategy wants to
become a neobank. And everybody interpreted that like, oh, they're going to, you know, acquire a
bank and they're going to become, you know, get a commercial banking license and, you know,
service deposits. What they did is actually much, much better. Being a bank is a total nightmare.
You know, infinite regulatory hurdles and red tape. There's a limit to what you can do on the balance sheet. There's, you know, it's just it's a total nightmare. And so instead, you know, it's like the stretch is essentially they're issuing a stable coin. It's a, you know, sort of a neo stable coin. That's perpetual. Right. That's and and and so I think that it's a pretty genius feat of financial engineering.

(44:49):
I think that, you know, the total addressable market for stretch is huge.
It's like every dollar in money market funds.
I understand that money market funds are a technically different thing from a regulatory perspective.
And maybe there's just a lot of money that's siloed in those accounts that won't leave to go to a brokerage account.
But like how many, you know, how many Bitcoiners do you know or people, you know, you read our conversation just before this, right?

(45:12):
You're talking about, oh, if you have extra cash in a brokerage account, what do you do with it?
Right. You know, stretch is short duration.
It's a cash equivalent, essentially.
I understand it's technically different, right?
But yeah, it's, you know, the theory, there's this trilemma problem in international economics.
I posted about it yesterday.
I saw this tweet.
Can you explain this trilemma?

(45:34):
Yeah, so essentially, this is a sort of kind of an international economics problem, you know, theoretical, where you can only have two of three.
You can have an open capital account.
you can have a fixed exchange rate currency or you can have control of your interest rates
you can't have all three right and so you know like for instance the u.s we have an open capital

(45:57):
account we control our interest rates but the dollar floats right you know something like china
they you know i guess it's debatable whether it's you know they truly have an exchange rate peg they
have bans, right? But they control their interest rates. They control the price of their currency,

(46:17):
but they have a closed capital account, right? And so, strife, strike, and stride are essentially,
I know this is not a sovereign issuing their own money, but if you can sort of pick up what I'm
putting down, these are monetary instruments. And so, obviously, there's free capital mobility.
And in terms of what monetary autonomy means is, are you setting your own interest rate?

(46:39):
And so with Strike and Strike, they set the interest rate. It's fixed. The dividend is fixed in perpetuity, but the exchange rate floats. And so what stretches is they just decided to flip it. And they said, okay, obviously there's free capital mobility, but we're going to fix the exchange rate at 100 or between 101 and 99. And we're going to let the interest rate float.

(47:05):
right and so this is a this is basically a market you know there's a they're going to decide the
stretch rate every month but essentially this is going to be a free-floating essentially currency
um that exists and i i think it'll be you know it'll have a premium to t-bills because the u.s
is the money printer um but yeah i mean this is uh quite quite the the financial engineering

(47:32):
instrument. I mean, it's really, really impressive. But with all their products,
they're covering every side of this triangle. Yeah. Well, not C, right? They always have an
open capital account or capital mobility. But for another example of this at the sovereign level is
Hong Kong, right? They have an open capital account, right? And they manage the price of

(47:59):
their money, right? It's pegged to the dollar, but they don't have monetary autonomy, right? They
follow whatever interest rates are set by the Fed, right? So this is sort of kind of an age-old
question or theoretical choice for sovereign nations. And so, yeah, it's interesting that
I don't think, I think like people like, you know, Chuck made an Odell and kind of, they said,

(48:22):
oh, well, yeah, you know, Saylor will create a stable coin or, you know, Chuck and I had a
a conversation in 2022 where we said, you know, really the, from an engineering point of view,
the biggest, you know, the golden goose of crypto generally, like what all of the Ethereum
DeFi engineers were chasing for all of this time, you know, for years was, okay, how do we make a

(48:48):
stable coin that's, you know, decentralized, you know, that's not, you know, and I understand that
this is centralized it's listed on the nasdaq by a you know delaware a delaware company um but
you know the the interesting thing is that no one can really figure it out i understand it's
not a decentralized oracle and it's not this like you know cypher crypto anarchist holy grail that

(49:13):
that you know they were uh intending for but you know all of crypto has been spending a lot of time
to try to figure out how do we make a stable coin that's not some T-bills or money in a bank account
that's sitting in Circle's vault or Tether, right? How do we do this? So they tried DAI.

(49:34):
They tried all these different options and none of them caught on. And Saylor just listed it on
the NASDAQ and none of the crypto people that have been trying this for 10 years have even said
anything about it no one even knows um so yeah i mean i think that stretch might be the most
in-demand product of the preferreds right because with strike and strife there's a very high interest

(49:57):
rate but you're taking you're taking what's called duration risk right so it's like the reason that
if you know this is just sort of some finance jargon but you know if you have a one-year
bond or a t-bill or you have a 30-year bond right a one percent change of interest rates for a one
year instrument doesn't change much right interest rates go from five percent to four percent

(50:21):
the value of your money doesn't change much you get you get less interest but the value of your
money stays pretty much the same if you put money in a bond you know at four percent and it goes or
let's say 2% and it goes to 3% or 4% the yields, the value of your money you put in collapses.

(50:41):
This is what we saw in 2022, right? The whole, you know, the Bank of England and the, you know,
all of these bond markets were imploding because interest rates went from 1% to 4% and the bond
market got cut in half. And, you know, non-finance people were like, what do you mean the bonds fell
by 50%? That makes no sense, right? But that's just kind of how do these things work. So, you
know, with Strife and Strike, these are long, long duration instruments. So, you know, people

(51:04):
last week, they bought at 125 and now it's at 116, you know, and obviously long-term investors,
they understand this and they understand where this is all going and they're not too worried
about that, right? But the beauty of Stretch is that there's no duration risk. I mean,
not to say no duration risk, but there's minimal duration risk. It's a perpetual instrument,

(51:25):
but because this interest rate's floating and not fixed, it's going to be a stable price. At
least, you know, this is the, this is the target for sailor and team. So yeah, I mean, I wouldn't
be surprised if we saw a huge, huge demand for this instrument. Um, they're starting to, you
know, they intentionally price the interest rate at nine. I think they, they know that that's
extremely attractive. Um, and so, yeah, I mean, another tool in the arsenal, um, and, you know,

(51:49):
money market mutual funds and, you know, cash equivalents and stable coins, that's, uh, you
You know, that's the real, that's a, that's a real big game.
You know, it's also, I think it's a bit ironic and a little funny that the, you know, the
sort of the meta of, of crypto, the crypto industry has been stable coins, right?
Everyone's like, what's the real use case for this?

(52:11):
Okay.
Yeah.
Bitcoin, but that's, that's for boomers.
That's boring.
What's, what's the real use case?
Where can I make money on this from this industry?
You know, none of the, the Ethereum or Solanas or none of this is interesting, but stable
coins have a real use case.
and uh you know circle's ipo was a huge success and now everybody's sort of looking okay well
where's the next sort of opportunity here and mstr dropped dropped a stable coin you know at 5 p.m

(52:35):
and no one even no one even said anything it's just the bitcoiners on twitter right so yeah uh
it's uh it's it's pretty ironic in my opinion it should be much much bigger story than it actually
has been so far especially when circle and tether have both been told they can't offer
yield on their stable coins and then say that comes out with this product that is offering at

(52:55):
least at inception nine percent um i would like to get your opinion on where that dividend rate will
go but before we do that just because we've talked a little bit about this but for anyone
who's not been following this closely who didn't see say this presentation like how does he retain
the peg to close to a hundred dollars yeah so there's a few options um you know above 101
One, they don't have it yet, but they're going to attach an ATM to this, meaning that if the price rises, they're just going to issue more securities.

(53:24):
They're going to print more stretch, STRC, and they're going to sell it on the market so they can drive the price down.
They also have a call in this at 101.
So legally, they're allowed to basically take your stretch and give you $101 in return at any point.
And so with these other preferreds, I mean, so the preferred market's interesting, right?

(53:48):
Because for bonds, you know, there's five-year bonds, 10-year bonds, 20-year bonds.
Preferred equity is interesting because there's a concept called there's perpetual instruments,
right?
And so perpetual means forever, right?
And so, you know, in the history of finance, this perpetual preferred instrument isn't used
much or too popular, but if it was issued at all, right?

(54:12):
there was always a call in it, meaning that if I'm a company, company A, and I want to issue
preferred equity and I do, and I issue perpetual preferred equity with an interest rate, right?
That means I'm on the hook for it forever. So any rational CEO or a management team says, okay, well,
if the price rises or, you know, our conditions change and we don't need the financing anymore,
we want to call it in, right? And so perpetual preferreds were always perpetual in name,

(54:35):
but not actually, right? And Saylor's innovation was like, no, no, no, we want to make this the
best credit instrument possible and we're accumulating Bitcoin and our belief is Bitcoin
appreciates relative to fiat forever. So we're not going to give you where there's no call,
right? And so this like sort of melted a lot of, you know, Wall Street minds when they said,
no, no, no, we don't want the call, right? Because the call hinders the value of the call option and

(54:57):
strike and everything else. But with Stretch, unlike the other preferreds, they do have a call
so they can call it in at one-on-one, right? So that's, they have, they have ways to sort of,
manage the upside. They can also lower the interest rate. So if Stretch is at 101, 102,
it's constantly higher and they are not selling the ATM for whatever reason on Stretch, they can

(55:20):
lower the interest rates and they can do this once a month. Conversely, on the other side of this,
what if it falls? The real worry by some is in creating sort of a synthetic stable coin as well,
the downside, right? What if, you know, there's sellers or short sellers or people get scared and
all dump at once. And there's a few tools. One is, you know, the people that are comparing this to

(55:42):
like previous algo stable coins or whatever, it's just a total joke. Like it's totally,
totally different. One, because if the price of stretch falls to $95 or $90, they're not selling
any Bitcoin. Like there's no, there's no like force redeem function here where everybody's
going to all panic at once and take all of the collateral like it's like that that's not going

(56:06):
to happen they don't they're they're not going to sell the bitcoin they have there's no redeemability
for the the user or for the owner of the preferred they can't just take the bitcoin and run like you
could with some crypto you know science experiment um the second is that you know if it falls they just going to raise the interest rate right and then that if their intention is just 100 and you have that sort of trilemma right Well they said we have open capital account and the exchange rate is going to be fixed at 100 or whatever

(56:36):
So if it falls and they said, they acknowledged, hey, we're going to raise 500 million in the IPO.
If we sell it at 100, it's going to be a 9% instrument.
If we sell it at 95 or 90, it could be a 9.5% or 10% instrument.
So that means like it could IPO, I expect it to be at 100, but it could, like the previous preferred instruments, it could open below the IPO price. It could open at 85 or 90 or 95. That's not out of the question. So what does that mean? It means that, you know, in a month, they're going to raise the interest rate to 9.25% or 9.5% or whatever they raise it to, right? And theoretically, that will draw in capital.

(57:11):
um so yeah i mean i think that there's uh you know there's a ton of runway for these preferreds i
think strategy is really looking forward to they mentioned it in the presentation to let these
converts roll off um and then you have really like a pristine pristine capital structure i mean it
already is a pristine capital structure you have 70 billion of bitcoin and you know 10 billion or
so of combined liabilities but 50 of those converts are already through the strike price

(57:37):
It's already basically quasi-equity that hasn't converted yet, right?
So, yeah, I mean, there's a ton of runway for these preferreds.
I think there's a huge, huge untapped demand for, you know, dollar equivalents backed by Bitcoin.
Unlike previous sort of algo stables, if you will, or synthetic over-collateralized stablecoins is probably a better term.

(58:00):
You know, this is like 7x over-collateralized, right?
It's like, you know, okay, you issue a few billion dollars preferreds, but it's 7, 8, 10x over collateralized.
You know, that's unlike anything that's ever been tried and tested in crypto before.
Why?
Well, because if you have, if you wanted to make a 7x over collateralized stablecoin, it's super capital inefficient.

(58:21):
Like if you're familiar with crypto DeFi or whatever, the Ethereum DeFi complex created DAI.
DAI, D-A-I, right?
And so decentralized autonomous something.
I forget exactly.
But that whole idea was let's create a stable coin backed with crypto collateral.
And they first did it with ETH.

(58:43):
But the problem was nobody wanted to put their ETH idle to back a stable coin for no reason.
And so it was really capital inefficient.
So what ultimately resolved, what ultimately happened with DAI, the product?
uh well it ended up being like 50 collateralized with usdc the decentralized algorithmic stable

(59:05):
coin on ethereum was backed by the centralized stable coin because it was more capital efficient
to just back it one-to-one yeah then to like take a bunch of ethereum and and and you know
and so like if you wanted a real real safe stable coin on ethereum you could have theoretically
backed it 10 to 1 with e for every you know every dollar of the stable but nobody wanted that because

(59:25):
as capital inefficient. So there was no product market fit for this. And so that was the same
sort of problem with all the other synthetic stablecoins that existed. Strategy saying,
no, no, no, this is going to be senior to the common equity, senior to two of the preferred
instruments. And ultimately, once these converts roll off, it'll be the second in the capital
structure. So you have a supremely over collateralized stablecoin that's probably

(59:49):
going to be paying you, you know, five, six, 7% interest. And so, you know, while the rest of
crypto tries to sell you on, you know, holding a stable coin with no interest, right? So that's the,
you know, I think it's not really a close competition. And, you know, it's also, it sort
of inverts the model. All the stable coin companies are issuing stable coins, not paying you interest,

(01:00:13):
and then collecting interest for themselves. Strategy saying, no, no, no, we want the liability
and we're going to buy Bitcoin because that's what we believe in.
Which I, you know, if you had to say, Dylan, would you rather sit on, you know,
would you rather sit on a bunch of cash that, you know, other people have a claim to,
but you collect the interest or would you rather be levered long Bitcoin forever?
I would choose the second, right?
I would want to be levered long.

(01:00:34):
So I think it's a much superior model.
Nevermind, we're not even talking about the nightmare of compliance and KYC AML and money laundering
and, you know, blah, blah, blah, blah, blah, that you have to deal with as a stablecoin issuer.
um so yeah i mean it's uh it's like the best of both worlds it's like you you know there's
it's sort of an entrance into the quasi banking system slash stable coin world without service

(01:00:58):
servicing any you know true like uh i mean they're servicing customers they're not servicing
customers they're servicing investors right and that's you know that's a much much better world
uh to operate in in my opinion yeah i totally agree and i assume this is going to be massively
the demand is going to be huge for this. What happens to the interest rates there? Because I

(01:01:18):
assume the Fed's fund rate basically sets a floor that it likely won't go below. But do you see this
trading down to like 5%, 6%? Well, so the beauty of it is the floor is actually the SOFR rate.
Okay. So the lowest interest rate will ever go is actually the Fed funds rate. But yeah,
I think it'll be market driven.

(01:01:38):
Um,
to be honest,
I think that,
uh,
you know,
there's,
I believe,
and I have to read the documentation more clearly,
but I believe the low,
the,
the most they can lower the rate per month is 25 basis points.
It's like that difficulty adjustment.
It is right.
It is like the difficulty adjustment.
Um,
and so,
yeah,
there's,
you know,
once a month,
they're going to declare the stretch rate.

(01:01:59):
They're going to pay the dividend.
Um,
you know,
I,
I think that,
you know,
and also anybody that's like,
you know,
making a fuss about the dividends,
you know,
they have to pay is like, you know, totally just missing the scale of this all. Right. Um, you know,
they can raise, they have raised the dividends they need to pay for a quarter in an afternoon
of trading and no one noticed, right. Like strategies, common equities, supremely liquid.

(01:02:23):
Um, so that, you know, that doesn't worry me at all to be frank, but, um, yeah, I think the
interest rate on the, on stretch probably, I mean, ultimately settles, you know, just right above the
risk-free rate probably in the long term with a bit of a spread just for the, you know, any
perceived credit risk. But yeah, I mean, right, probably I would, I wouldn't be surprised to see

(01:02:45):
6% in the, you know, or like, like, you know, 200 basis points above the Fed funds rate in the near
term, you know, or the short medium term. But, you know, probably should go lower than that,
you know, to be honest, right. There's not, there's not another issuer of fixed income that's
this over collateralized, that's this transparent.
You know, everyone else that's borrowing money doesn't have it.

(01:03:06):
I guess, you know, the big tech companies have the money
and they just borrow it to get some leverage.
But most of the borrowers in the corporate credit market
are companies that need the money that don't have it, right?
And they don't have collateral.
They have, you know, future discounted cash flows to pledge, right?
So, yeah, that's the real innovation is that they have the money.

(01:03:28):
They don't need it.
They're just doing it to get some operating leverage and the collateral is transparent and homogenous.
So, yeah, it should be a pretty low interest rate, to be honest.
And, yeah, short duration, too.
You know, we're not even talking about what happens 12 months from now when, you know, sort of a patsy Fed chair is put in.

(01:03:51):
That's if it takes 12 months.
Yeah, true.
Right.
But, you know, and a Fed chair resigning from, you know, decree of the president or prime minister is sort of what happens in Banana Republics.
And I would implore anybody to sort of look at what happens to like the bond market in those scenarios.

(01:04:11):
You know, ask someone from Turkey what happens when Erdogan fired their Fed, their central bank chief, you know.
so yeah i mean this is all very very uh pro btc um i and i say that you know not like not political
or social or whatever but just purely from like a flow's fundamental standpoint uh there's a lot

(01:04:32):
of people in finance that are saying oh wow well if that happens then i really wouldn't want to own
bonds it's like uh well yeah no kidding like where have you been um so all of this is is you know
it's that the tailwinds are supremely bullish uh for for strategy and for you know for bitcoin and

(01:04:53):
for bitcoin treasury companies all right last question on sailor because when i was watching
his presentation of stretch um he was talking about something else that i thought was interesting
um where he was talking about equitizing the convertible nodes why would he do that is that
purely just to deleverage the company i think it's uh it's because they're sitting senior to
the preferreds. So right now, the preferreds, you know, outside of the fact that the convertible

(01:05:18):
bond guys are sort of, I guess it depends where the strike is, but, you know, a simple model is
when the price of your stock goes up, they're shorting. And when the price of your stock falls,
they're buying, right? And so there's never been a serial issuer of convertible bonds like MSTR,
partly because there's never been a, you know, collateral or abuse of proceeds as strong as

(01:05:40):
Bitcoin, but more so because, you know, you do a convert or two or three. And, and I mean,
it's basically like, you know, I guess the equivalent, I could, this isn't a perfect
metaphor analogy, but it's like, it's like, it's sort of like you're squeezing the volatility out
of your stock, right? It's like, that's what their job is, is, you know, they're, they're
gamma trading, which not to go into the weeds, but they're essentially like neutering the volatility.

(01:06:04):
They're, they're dampening the volatility intentionally. Right. And so strategies,
business model is like, we want to be hypervolatile. And so part of it is one, I think for the converts
is there's a maturity cliff. So if your stock isn't high enough, then you have to come up with
the money or, you know, refinance and do another convertible bond. So that's, that's annoying.
It's like sort of a flood talking point. Two is the game, you know, they're, they're gamma trading

(01:06:28):
it. So they're stripping the volatility and dampening the volatility. And then three is
it sits senior to the preferreds, right? So, so there's a, you know, the strategies come out with
risk model that says, okay, Bitcoin has a volatility of, of, you know, X and we expect
the return profile of Bitcoin over the next 10 years to be Y. And, uh, you know, there's,

(01:06:50):
you know, this much collateral, there's 10 times the collateral as there is the debt.
And so what's the probability of, you know, your Bitcoin, your, your debt position being
under collateralized. So if you own this preferred stock, what's your probability of us having less
Bitcoin, you know, than we have of dead outstanding, right?
Or, you know, not insolvent, but, you know, you're in a bad position.

(01:07:11):
And so when you do the math now, those converts, you know, those $8 billion converts, it means
that there's a lot less collateral left for all the preferred equities.
So I think when they want to equitize the convertible bonds, because it basically allows
their preferreds to be that much more collateralized.
And, you know, essentially, it creates a more runway to issue more preferreds is really what

(01:07:32):
what the unlock is there. That makes sense. Okay, cool. So then to kind of close out with this,
what do all these products that strategy are now issuing mean for the other treasury companies? So
like for you at MetaPlanet, do you see this as we have to do something similar or we get left behind?
You know, that's a, that's an interesting question. I mean, I think what it, what it means

(01:07:56):
is that if you know, for Bitcoin in general, is that the asset is maturing. And this is a way,
You know, if Bitcoin is going to eat the world, and that's what kind of a lot of us came to the conclusion of five years ago, then it's not going to be everybody just buying Bitcoin on cold cards.
There's huge pools of money that can't access the asset.
And so, you know, common equity, just, you know, equity on the stock market was just the first pool.

(01:08:19):
And, you know, really the bigger market in terms of exposure is the credit markets.
Right. So the preferred equity, there's debt, you know, the sovereign bond market is much, much bigger.
Right. And so if Bitcoin is going to entrench itself in the financial system, it has to get to all these different pools of capital.
So I think that's the bigger idea in terms of like the competition between the treasury companies.

(01:08:40):
I mean, the preferreds, not only just having preferreds authorized, never mind having them issued, but having them be issued liquid and a sufficient scale is a whole nother story.
And I think that, you know, kind of circling back to what we said earlier, like that's the really the not the only true moat, but one of the strongest, right, is, you know, I think of preferreds as, you know, for strategy is in two ways.

(01:09:06):
One, it's sort of it's offensive, right?
We're levering the balance sheet.
We're buying more Bitcoin.
We're increasing Bitcoin per share.
We have the potential to buy back our stock.
or it's Saylor said, hey, if MNAP gets to one or below, or maybe even above one, I'm not sure if
he said that, but we can buy back, we can issue stride and buy back our stock. He said that,
right? And so if you're a short seller and your thesis is, okay, well, they're just, you know,

(01:09:29):
they're sort of dribbling in stock every day and let's just front run them and, you know,
play this MNAP compression game. And all of a sudden, even if like, you know, strategy scale,
even if Saylor goes and buys back a hundred million of stock, which is not that much for
strategy's $150 billion scale, right? But all of a sudden those flows go the other way. And so
someone like a short seller has to unwind and get out. Right. So it's, it's the, the preferreds are

(01:09:50):
both like a offensive tool and it's defensive. Right. Like I, I think of preferreds as like,
it's like an M nav defense mechanism, right. It's like, okay, well, if, if the, you know,
the short sellers and the, you know, the, the arbitrageurs are really, really trying to short
sell like, like Jim Chanos, right. His whole thing. It's like, if you listen to Jim Chanos,
he's not, he's not just a belligerent hater of Bitcoin or sailor, far from it. He's just,

(01:10:16):
saying that he's like, actually, I get Bitcoin or I don't know how much he, you know, quote unquote,
gets it. But he's like, look, I get the trade. I'm just, you know, playing the spread game,
right? And kind of like dancing in and out. And so with the preferreds, like it gives
it gives sailor or, you know, the operator sort of an option to, okay, we're going to continue to

(01:10:37):
stack Bitcoin every week because that's our mandate. And that's what we said we're going
to do. And that's our business. But at the same time, we're not going to put the pressure on the
common shareholders. You know, one of the kind of the misconceived notions that people had is
the convertible bonds, right? Like people see the leverage as something that's positive for the
common. And that could be true, right? You know, increase the leverage, you know, a billion dollars

(01:11:01):
of Bitcoin, especially like, you know, a couple of years ago, makes a material difference in the
market. So there was all these reasons it was supportive. But under the hood, you know, when
they came out and says, okay, we're going to raise a billion dollars of convertible bonds,
under the hood, you know, someone like myself a few years ago or, you know,
analysts or commentators would be confused because the stock would drop. It's like, wait,

(01:11:22):
they just raised a billion dollars to buy Bitcoin and the stock went down? I was like, well, yeah,
that convertible bond desk just shorted 500 million of stock after trading, you know? And so
the reality was like a sort of paradoxical. It's like, okay, well, we're going to lever up because
we don't want to sell some common, but it's essentially, it's like you're selling 50% of
the stock. You know, it's like, it's like a, you're selling, it's like, it's like half the

(01:11:44):
sell pressure as you would get by just selling a straight equity. So the preferreds are totally
different. It's a, it's basically, it's a completely different profile of investor,
right? And so, you know, they're, they're on the journey with you. They're, they're, you know,
contributing, they're aligned with your, you know, your worldview and, and, you know, the,
the 20 year vision, the convertible bonds are not the same. So I think the preferreds, you know,

(01:12:07):
how I think of them, you know, in the treasury space,
I think it's definitely, you know, the credit market,
Bitcoinizing the credit market is a much, much, much bigger,
you know, bigger fish than, you know,
Bitcoinizing the equity markets, right?
Or equitizing Bitcoin.
It's just a much, much bigger game.

(01:12:28):
The pools of capital are huge.
Nevermind long duration and short duration, right?
And so, yeah, I mean, I'm a big fan.
uh you know it's i think from a financial engineering perspective it's absolutely
fascinating and historic um and i think that you know that's the real you know um yeah that's the

(01:12:48):
real golden goose is uh can you get those figured out can you get those live can you get those liquid
and can you hit a scale you know where whether it's your local market or globally that you know
you can uh you know sort of really carve out a uh i don't know maybe a monopoly or a quasi monopoly
in one of these markets.

(01:13:10):
Because I think anyone, especially in the US,
that's saying, okay, now we want to issue preferred stock,
you're going to have to issue it at a spread to Saylor.
Because Saylor has more Bitcoin,
it's more liquid, he's more established,
this seasoned issuer,
he's been on the NASDAQ for 35 years,
he's been at this game for five.
So if you want to issue perpetual preferred,
like a strife, and you're in the US on the NASDAQ,

(01:13:32):
well, he did it at 10, you got to do it at 12.
right so i think that there's like this is the benchmark this is like almost like the bitcoin
risk-free rate if you will and you know obviously there's all those instruments are different but
yeah that's sort of how i think about it um i think uh you know the fixed income markets
in general um are you know definitely in need of a of a revamp um or uh you know kind of a

(01:13:56):
revitalization um you know and japan notwithstanding so um it's an exciting time it really
is that's really interesting i've not heard this described as like an m nav defense mechanism that
makes a lot of sense um i think i've been mid curving the treasury plays to a certain degree
uh this has definitely helped me um i've really enjoyed this dylan thank you for uh for giving

(01:14:17):
me the time where do you want to send anyone to find out more about you and meta planet yeah you
can uh well one danny i i appreciate you uh giving me the platform it's been too long um so
it was great to catch up um we have to do it in person next time for sure but uh yeah you can just
um you can find me on twitter um or x uh dylan leclair underscore um or uh you know for meta

(01:14:42):
planet uh we also on x or you can just go to meta planet.jp uh japanese domain if you want to
you know kind of see what we're doing um so yeah that's uh i think that's that's all i got
all right cool thank you dylan and definitely in person next time i'm sure i'll see you around at
one of the conferences at some point soon but i appreciate you man thank you indeed cheers

All Episodes

Metaplanet, Strategy, and the Corporate Bitcoin Race | Dylan LeClair

Episode Transcript

Popular Podcasts

On Purpose with Jay Shetty

Dateline NBC

24/7 News: The Latest

.css-15opob5{left:0;position:absolute;top:0.8rem;} All Episodes

.css-14f5ked{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:2;overflow:hidden;}Metaplanet, Strategy, and the Corporate Bitcoin Race | Dylan LeClair