PAPER BITCOIN SUMMER: THE TRUTH ABOUT BITCOIN TREASURY COMPANIES | Steven Lubka - THE Bitcoin Podcast

Episode Transcript
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(00:00):
Treasury companies kind of came out and the market started realizing like, hey, this is a big trend.

(00:06):
You have micro strategy, you have meta planet, like there's this thing that's happening.
People started calling it like there were people criticizing it as paper Bitcoin.
And it's kind of ironic because it isn't. It is equity. And people that call it paper Bitcoin
in that derogatory way don't understand what equity is. To have a Bitcoin financial system,

(00:29):
To have a public financial system where Bitcoin is part of it, you need financial institutions that actually hold the asset.
And so there's one way to look at this, that the treasury companies are these early, they're racing to capitalize the Bitcoin financial institutions of the future.
That this is the capitalization phase of Bitcoin financial services.

(00:53):
So outside of Metaplanet and DJT, all of the top 60 treasury companies have only purchased about 25,000 Bitcoin.
To put that in comparison, somebody went to Galaxy last week and sold 80,000 Bitcoin without materially impacting the price so much.
So if these companies have not even bought as much Bitcoin as the Galaxy seller sold, why would we expect it to have this really material impact on price?

(01:24):
We're not there yet.
These companies are still scaling up.
They are not in market buying in huge size.
And so for all the noise, for all the attention these have gotten, in my opinion, it's very early.
They're just spinning up.
They're not operating at scale yet.
Of course, this is what it looks like.

(01:47):
Of course, this is what Bitcoin succeeding looks like.
Of course, this is what Bitcoin being integrated into the financial system looks like.
I can't come up with a first principles analysis or model of looking through these things that doesn't go this way.
You have to assume a lot of things that I think are really incredible to assume.

(02:08):
I'm not somebody that is going to argue with reality or the way that these things are going to play out, nor do I think these things are bad at all.
Bitcoin capturing everything means Bitcoin has to capture the securities market.
Like, it's just it's part of everything.
It's part of the whole financial system.
It's part of the whole monetary system.

(02:30):
And so, of course, it's going to go there, too, if Bitcoin's any good.
The base of all of this stuff is buy spot Bitcoin, own spot Bitcoin in a hardware wallet.
Like do this.
This should be the largest position in your portfolio.
You should work.
You should save.
You should buy Bitcoin.
Steven, welcome back.

(02:51):
It's been a little while since you were on the show and much has changed in the interim.
How's it going?
How's life?
Because everything the world keeps on spinning and moving.
I think I've done this three times now.
Each one is very different than the last, which is kind of fun.
I think we have a Swan interview, we have a Vibes Capital Management interview, and then we have a Nakamoto interview.

(03:12):
I love it.
And technically, both Nakamoto and Vibes Capital Management.
You're wearing a lot of hats right now.
I should go get my hat, actually.
I should have brought the hat, the speculative attack hat.
Man, I cannot find my dang Vibes Capital Management tank top now.
I had it in Vegas, and I literally haven't been able to find it since then.
I need to order another one. Uh, yeah. So I, I've just, I've got to do it. Like the,

(03:36):
the tanks must be worn to be fair. I usually like, if I'm outside, I'm just shirtless. Um,
you know, this is the way. Yeah. It's, it's, it's really the way. And for anyone, you know,
that is not doing, uh, doing their meetings as sunwalks shirtless, like you really,
you got to upgrade. It's, it's, it's, it is truly like such a hack. Like I was doing a,

(03:57):
I have one of those walking treadmills under my desk. And I was doing that. And then,
And for a while, I was just like, you know what?
There's not even any point in me having my laptop here for the calls that I'm on.
I just end up multitasking and then not paying as much attention to the call, which just kind of defeats the purpose.
So let me go actually have the singular focus of whatever this call is that I'm on and at the same time get some incredible sunshine.

(04:17):
It's literally the best.
It's such an actual benefit.
This is the thing I try to get across to people is it's not just like, oh, yeah, it's more enjoyable for you.
That's like being like, yeah, it's more fun to take your calls in the swimming pool than at a desk.
It's like, sure, but like that's kind of not the most functional thing.

(04:39):
It's not like that at all.
It's actually like you're so much more focused.
You're so much more dialed in.
It works so much better.
And there's a lot of people I've had the pleasure of like – like Lynn Alden started doing walking calls for the last month's year.
And she reports the same thing.
There's a lot of people that have started doing it.

(05:00):
It's just better.
Like it's even from the like output perspective of just like what value are you bringing or how are you showing up in whatever endeavor you're part of.
It actually just literally helps.
Yeah.
It's amazing.
Like I remember I think on the first episode that we recorded together, which is a decent amount of time ago now, I think I asked you like what is happiness or something like that.

(05:24):
And your answer is so amazing.
It was like it's literally the sun.
Like that is like happiness incarnate and it will literally just make you happy.
And it's so true.
It's like, I mean, unless you're like doing one of those things, like if you are not moving in the sun, like you are stagnant in the sun, I find that that is not always the best.
Like the people who go to Mexico and like beach on the chair and just like end up super burnt and crispy and probably because they were having a lot of seed oils also.

(05:51):
But that's beside the point.
If you're moving in the sun, it's the best.
Yeah, that's something I always have to kind of explain to people that I am not advocating for just like tanning or like laying down and tanning all day. I'm actually specifically advocating for not that.
one, the movement's a key part of it. But two, like you don't get burned in the same way because

(06:15):
you're moving. It's not just like constant radiation on maximum surface area. It's like
you're walking around. So it's hitting you from all different angles. If you know, if you're kind
of moving normally, it's like you take an hour. Well, you divide that by four. It's really only
15 minutes per side if you're moving in any sort of circle or moving in any sort of like,

(06:39):
because it's just shifting around. And so you just have so much less to worry about with
overexposure to and you feel better because you're moving. Yeah, I mean, like movement in general is
just such a like such a hack. Like I am, I'm a walker, obviously, like quite literally, as my
name implies. And I've like, I've always loved it. Just like not even just because it's my name,

(07:00):
Cause it just like, it feels good.
And I think we all have this very, like, it's, it's a very easy thing to test.
It's like spend a day sitting in a chair.
The only time I sit in a chair is literally when I do this show because I've got, I've
got, I've got stuff.
I've got to, I've got to, you know, I'm my own producer.
Right.
So, but like, if you're sitting in a chair all day long and at the end of the day, see

(07:20):
how you feel.
Then in contrast, try walking for the majority of your day.
And maybe you need to sit down occasionally cause you're not used to walking all the
time, but try walking for the majority of your day.
Then try walking in the sunshine for the majority of your day.
See where you feel better.
And like it's just like it's just really irrefutable.
Like your body doesn't lie about that.
Your body feels better.

(07:41):
And it just blows my mind.
I mean at least we're starting to get some mainstream acceptance.
It is happening.
It's slowly but surely.
Gradually then suddenly.
And that's the other thing is like this isn't a hard thing to trial like you're saying.
It's not costly.
It's not risky.
It's not – you don't need to – just literally go N equals one.
Go experiment with this.

(08:01):
Like, see how you feel.
I've never met anybody that didn't feel better having more time outside, more movement during
their day versus just sitting sedentary.
And just go try it.
See how you feel.
And yeah, it is.
The New York Times had a pretty fair article on sunlight.
They had a whole publication on why we've kind of gotten it wrong.

(08:24):
And actually, there's a lot of health benefits.
Scientific American, it was the front cover of sunlight on health. Like this is becoming a more
normalized thing, even in the kind of traditional institutional establishment.
And like, I mean, thank God for that. Because honestly, like with all of the, I mean, we've
gone in like some strange, some strange directions with people's health, even as it relates to like

(08:50):
weight loss and stuff. Like during the COVID era, you had like the, the, this is healthy. I forget
magazine cover what maybe it was like i don't know if it was like cosmo or something i don't
know what it was but you remember those like the this is healthy like showing like an obese person
you know doing like a pirouette or something it's like well well no that's not healthy that's
terribly unhealthy um like that person is not is not healthy you're not can't be healthy if you are

(09:11):
obese and then you know now i feel like we're we're snapping back a little bit the other way
but it's like well just everybody should just get on ozempic you know or what one of these like
various uh you know uh inhibitor drugs and it's like well okay like yeah good that they're losing
weight but like there's a really cheap and really easy way that's accessible to everyone and it's
like have a caloric deficit and like walk like and you can like those those are free it's free to eat

(09:38):
less and it's free to go for a walk like that's the thing you don't have to spend a shitload of
money buying a you know a diabetes drug like you can just eat a little bit less and walk a little
bit more and it will make a difference. Like it is just that easy. People complain a lot about cost
when you have health dialogues. There's a lot of people that will say like, oh, I, I can't afford,

(10:00):
I can't like that. I don't have the equipment. I don't have the gym. I don't have this. I don't
have that. It is the real, but that's not true. That's not the real limiting variable. I think
it's effort. It's ultimately people don't want to say that, but the real limiting variable
is effort or even a sense of like self-ownership that like you have to,
you have to manage the process for yourself.

(10:21):
That's kind of the beauty of most physical pursuits is it's the ultimate proof of work.
You can't like, you can't get very strong and fit without putting in the work.
There's pretty much no other pathway.
You know, you maybe talk about like steroids or something, but like you still have to do it.
Um, and it's one of the beauties of it, but it's also, I think the biggest barrier, the biggest, uh, roadblock that most people come into contact with is that, um, you've got to do the work.

(10:50):
You've got to do it.
You've got to show up.
You have to build a new habit.
You have to change.
You have to be consistent.
Uh, and it's, it's a shame because it both takes a level of effort.
It takes a level of engagement that is real.
and I acknowledge, but I also think it's so much easier than most people think because it's so
self-reinforcing. Once you start doing these things, you want to keep doing them.

(11:17):
Force yourself to do it for the first month. And I expect most people will want to do it after that
point. It just takes that first month, like 30 days or whatever. I'm making that up. But
you know, um, you just have to get over that first hump. It's not going to be like how it
feels in the beginning forever. It's, it's so true. I mean, honestly, you're such a,

(11:39):
uh, a great ambassador for this because you literally have the proof of work yourself.
You know, like it's crazy to like seeing your, seeing the old pictures of you and like
from not very long ago either. Like it's, it is, it is incredible. Like it is a transformation.
and like i mean it could could you even envision yours like there's no way you could go back

(12:00):
like now now that you have like you've seen the other side you're you know your eyes have been
open you've you know you've taken whatever pill that is the orange pill whatever the sunlight pill
the just feeling better pill and like it like it's awesome to see and i want that for more people
because like there are a lot of people who need it and so much just like i think so much of the

(12:20):
depression and anxiety and all these other maladies is honestly like most some people do
they have actual chemical imbalances that perhaps require something uh something's not like people
that are like bipolar for instance like yeah maybe that requires some actual intervention of some
sort but for the majority of people like i'm depressed i'm anxious it's like yeah but like

(12:42):
if you just went and exercised more or just walked more or got a little more sunshine a little more
fresh air, like did something with your hands a little bit more. I guarantee like it may not fix
you immediately, but it's certainly going to help a lot. And it probably will end up fixing a lot of
those issues over the longterm. Like, and again, it's free and it doesn't require a therapist or

(13:02):
a psychiatrist or whatever, or medication. It's like, it just requires what you already have on
you and what nature already provides. And there's this interesting thing where it will matter more
to you than someone else. What I mean to say is somebody who has been unhealthy, someone who has
suffered, will get, will value not suffering or being healthy much more than someone who was always

(13:30):
healthy or who didn't suffer. And that may sound like a weird thing to fixate on, but the reason
I'm saying is if you actually put in the time to correct this, it will be one of the most important
things to you, it will mean so much to you. It will be so important. And that is a real tangible
sense of value and meaning in your life that you could achieve. It is actually to the extent

(13:53):
that you lack this currently, that this is valuable to you, that this is uniquely like I
value, I get more satisfaction and more meaning out of my, uh, you know, just call it fitness or
health or whatever. Those are two different things, but both because that wasn't where I started. I
wasn't somebody that was like naturally athletic as a kid. I wasn't somebody that was always in

(14:17):
like robust health. I wasn't like, and every day that's just so much of a, it's so satisfying to
me. It's, it's such a blessing. But that's directly in proportion to like, I know what life feels like
without that. And if you're listening to this and like, that's you, uh, it's even more, even more

(14:37):
that you should do it because you haven't in the past. Uh, amen to that. And like, you can just,
you can just do things like you can just do things. Like the only one stopping you is you,
uh, at least when it comes to these, you know, free and easy things that you can, uh, you can
make a change with. Well, well, Hey, I, you know, I, Stephen, I could honestly, I could talk about

(14:57):
sunshine and walking uh all day long i i do however i want to get into some other uh some
other hot topics uh that also have to do with sunshine really tangentially and and vibes
generally but uh this uh this idea of paper bitcoin summer it is a hot topic it is uh some

(15:18):
might say controversial there it is paper paper bitcoin what a what an awesome uh awesome chain
there and just a great meme. Before getting into discussion of paper, I do want to paper Bitcoin.
I do want to have a disclaimer for folks that if you're watching this and you have stumbled across
this somehow and you are new to Bitcoin, my recommendation for you is to get yourself some

(15:42):
real Bitcoin. Put that Bitcoin in cold storage. Use a hardware wallet when you have enough Bitcoin
to justify the cost of that, but you can use a self-custodial software wallet until then.
and just stay humble and stack sats as odell would say it is great advice you should get your you
know get real bitcoin you should uh you should ignore a lot of the stuff that's going on

(16:03):
in the space and just focus on creating value in whatever your craft is and saving the value of
your time and energy in real bitcoin and that is going to be great advice for the vast majority of
people correct that and i think yeah we're both in complete agreement there and and your entire
career in Bitcoin has been literally helping people do that. I think it's important to clarify

(16:24):
that. So like that is the setting the stage for this conversation. Again, get yourself some actual
Bitcoin. Do it in little chunks so it's not scary, like dollar cost average. When you have a big
enough chunk built up, transfer that to self-custody and nobody can take that away from you or dilute
that. And you will be a happy person if you are just walking in the sun, stacking sats and creating

(16:47):
value for, uh, for yourself and for others. Okay. Let me, let me put out a little framing here on
this topic. Um, and I'm actually going to tie it into the last conversation we had. Um, let's say
we're talking about building muscle or something. Um, is it true that the, for most people, the

(17:11):
general advice should just be like, hey, just go resistance train to failure four times a week
and do that consistently for a year while eating some protein. Is that like a just generally good
piece of advice that just go do it? If you're not doing anything, then it is much better.

(17:32):
Does it matter if you're doing a barbell bench or a Smith machine or a chest press? No, it matters
that you're doing something. And so just go do whatever feels like, feels like a good place for
you to start works with your body. That's, that's really solid advice. That's true. However,
when you're more advanced, uh, is there also room for a dialogue of, well, this exercise is

(17:56):
technically 15% more effective at doing it. So maybe you want to transition here to here,
or maybe you want to refine this, or you want this supplement. There's like a more advanced,
it doesn't negate the base, but it is a dialogue that when you've been in it for a while,
it's like you're interested in having like, well, I've been doing this for years. And now I really

(18:16):
want to like, well, I want to make sure I'm spending my time most effectively. And so there's
this kind of divergence between like general advice to a gen, like a gen pop audience who
hasn't gotten into this thing. And then there's a more like advanced dialogue. So I mean, the base
of all of this stuff is buy spot Bitcoin, own spot Bitcoin in a hardware wallet. Like, like do this.

(18:37):
This is, this should be a, like, you know, the largest position in your portfolio. This should
be, you should work, you should save, you should buy Bitcoin. All of that's true. And like, you
know, we're obviously going to talk about some of this other stuff going on. That doesn't mean
there's not a, there's not a, you know, 10% or you want to take a high risk position, or you want

(18:57):
to do something that has more volatility or you want to invest in something, you know, just it
doesn't mean that like you can't do that or that that's bad or that like the process of portfolio
construction or finance isn't like managing different risk buckets and those sort of things.
Right. And so just because we're talking about that, it doesn't negate that like basic foundational

(19:17):
premise. And we've been having a lot of fun with the paper Bitcoin summer meme. And like I've tried
to I've said this to people. I'm like, you know, like I'm working on treasury companies right now.
I think they're both inevitable and exciting. So I think they're going to happen no matter what.
And they're interesting and exciting. But like, I'm not telling you to sell your spot Bitcoin and buy securities.

(19:38):
I'm not saying that at all. I actually think you should get a lot of spot Bitcoin.
I actually think that should be your focus. But for people that have like a other cash flow, other revenue,
They have a higher risk part of the portfolio.
Even those people is not even really who I think this is, is who these investments are good for.

(20:02):
It's actually they're most important for individuals and institutions that cannot buy spot Bitcoin, that need to buy securities.
And this is the big opportunity here.
There's been critics that have said like, oh, it's just all targeting.
It's targeting plebs.
It's targeting retail.
there's there's not enough like liquidity there like to to to be frank like to be honest right

(20:25):
like that's not like that it doesn't no you you you need to provide um on ramps for capital that
cannot currently access bitcoin that is the big target it is about integrating get bitcoin
into the financial system not trying to get people to sell their bitcoin in cold storage

(20:48):
and by treasury companies.
So just some like,
I'm sure we'll have fun with this segment,
but just to have a sober and serious conversation
about this for a second.
No, I think that that's super helpful.
And that's a piece that I've tried to,
there's multiple parts there
that I think you are exactly correct
and bear reemphasizing.
One is the inevitability, right?

(21:10):
Correct.
This, if Bitcoin was going to be successful,
and I believe Bitcoin is currently being successful
and will continue to be successful,
of course necessarily companies and nation states and everything in between from the individual to
the family to the community to the you know the nation state and the company everything of course

(21:30):
everyone will want bitcoin and they will want as much bitcoin as they can possibly get that's
because bitcoin is winning if bitcoin was a loser they would not want that this is like we should
all be able to agree on that this is a symptom of bitcoin success bitcoin doesn't care if you are a
nation state or if you're micro strategy strategy excuse me or if you are steven or walker or if you

(21:52):
are a you know communist defector or if you are vladimir putin bitcoin doesn't care that's the
whole point of it it doesn't know it doesn't care you are just uh you know you you are just another
user of the network the other point is around the uh like the pools of capital that cannot invest in
spot Bitcoin. And the fact that these sorts of investments, like to use Saylor as the example,

(22:16):
like with the creation of these various instruments that he has, he's not targeting like the pleb
with those instruments. Of course, plebs are freely able to go and purchase those instruments
if they want to. And that may work for some people, maybe in a 401k or whatever they want to do.
Sure But he targeting pools of capital that cannot invest in spot Bitcoin He targeting pools of capital that he wants to be able to give exposure to Bitcoin to through a proxy but that proxy has to fit into the existing

(22:44):
financial system. And I think those two points are really important to emphasize. Sorry. No,
go ahead. Even people that are managing volatility, so right, even people that can invest in spot
Bitcoin, maybe they're not 100% all in spot Bitcoin. The vast majority of human beings on
this planet are that way. And so you're saying, hey, I've got cash in a money market account.

(23:05):
That is my low risk portion of my portfolio. So I'm going to take part of that money market cash,
I'm going to buy STRC, and I'm going to earn over twice the return. That's incredibly valuable.
Yeah, it really is. And maybe a good place to start out with this, now that we've kind of got
these caveats out of the way, I think we've set the stage again. But you need to have the baseline

(23:30):
of you need real Bitcoin. You need Bitcoin in cold storage. Okay, we've emphasized this enough
now. Now, can we define, how do you define paper Bitcoin summer specifically? The hottest trend
out there these days. Yeah. So first to understand this, you need to understand what people originally

(23:52):
mean by paper Bitcoin. And so it comes from the term paper gold. And so this is when we were on
a gold standard, there were financial depositories and other institutions that basically gold was
really cumbersome to move and transact with. You're not going to like pay with a gold bar
and you certainly don't want to be carrying it around and get robbed. So people would deposit

(24:12):
it with financial institutions, banks, et cetera, and they would issue them paper slips,
which were redeemable for X amount of gold. And so at a certain point, these institutions realized
is they can create more slips than there is gold.
They're rehypothecating.
They're just printing slips backed by nothing.
And this was kind of the beginning of the end of the gold standard.

(24:34):
And so it refers to this, to that.
It also refers to like gold ETFs.
Be like, oh, that's paper gold.
It's a security.
It's not the real thing that you have in your hand at your house or in a vault.
And so people have kind of debates back and forth, right?
So that's paper gold.
And when people say paper Bitcoin prior to this, this is not how I'm defining paper Bitcoin summer.

(24:57):
But what people meant coming into this is a similar concept.
It's like an exchange like FTX, for example, was selling Bitcoin.
It didn't have that was paper Bitcoin.
And there's a lot of people online that are like worried about like, oh, there's all this paper Bitcoin in the market.
When they say that, they mean this definition.
They mean like representative depository slips that are not actually backed by the underlying.

(25:25):
And so when treasury companies kind of came out and the market started realizing like, hey, this is a big trend.
You have micro strategy, you have meta planet, like there's this thing that's happening.
People started calling it like there were people criticizing it as paper Bitcoin.
And it's kind of ironic because it isn't.
it is equity. And people that call it paper Bitcoin in that derogatory way

(25:50):
don't understand what equity is. There is this criticism I've seen thrown around of like,
oh, well, it's not redeemable. Your equity, your share is not one for one redeemable with
spot Bitcoin. You don't have a fundamental ownership right to take that out. That is not

(26:10):
what equity is. It's very different than a depository receipt whose only purpose is to
redeem or spend in absence of being redeemed. There's no equity in a receipt for Bitcoin,
which has been deposited. It's not equity because you don't own a stake in a common enterprise,

(26:31):
in a corporation. The reason treasury companies aren't paper Bitcoin in that way is because
you have equity in an operating company. You have equity in a company which is engaged in the
process of value creation. It's engaged in basically creating a return rate for shareholders.

(26:55):
And so this concept of redeemability has no bearing here. It doesn't matter.
And so paper Bitcoin summer to kind of bring it back around, it's kind of owning the insult a little bit.
You know, in some ways, like, oh, it's paper Bitcoin, it's paper Bitcoin.
It's funny because it's not. It's funny because that is a misunderstanding of the financial system.

(27:16):
It's a misunderstanding of the structures of finance.
But it's also just kind of leaning in.
And, you know, I think owning the insult, it's taking the derogatory term and making it our own.
Bitcoiners did the same thing with Bitcoin maximalists.
That used to be a derogatory term.
That was something Vitolyc came up with.
And he would criticize Bitcoiners and Bitcoin maximalists.

(27:40):
And eventually people were just like, yeah, screw it.
I am a Bitcoin maximalist.
And in this sense, there's a similar thing.
It's like, yeah, paper Bitcoin summer.
We're creating paper Bitcoin companies.
And that's kind of how the term came about.
And having fun with memes along the way.
And having fun with them.
if there's one thing bitcoiners are very good at is taking a an insult like the the psycho you know

(28:03):
the you know toxic uh psychopath one which i forget what exactly what what article or what
publication it was in but you know they're like bitcoiners are like this dark triad of personalities
you know psychopathic you know and it's like oh yeah okay yeah psychopath or like adiq you know
that's another one like yeah yeah exactly there's a lot yeah i'll take your insult i'll wear it as
a badge of honor. You have no power over, over me here. You know, like it's, and it works, right?

(28:29):
So, so I appreciate the stage being, being set for that. Now, like what I want to really get
into a little bit, which is, I think, which is, I think kind of one of the things that people have
as one of the first like red flags that they throw up to say, hold on, this doesn't feel right.
Is a lot of it is around the positioning of these Bitcoin treasury companies, people saying that,

(28:51):
oh, well, this feels like ICOs or this feels like the meme coin NFT craze. This feels like whatever.
It feels like one of these things that ended really badly. And it has some of the same vibes,
based on people's perception, that these things had. And so that makes me uncomfortable. And isn't
this just going to end with a big rug pull and a big crash? And won't this just cause all the same

(29:14):
bad things that all these shitcoin scams have caused over multiple cycles? How do you look at
that? How do you respond to that? Because I'm sure it's a question you've dealt with a lot.
Yeah, absolutely. So I think the reason people say that is because there is an element of
financialization. You're looking at a sort of financialized vehicle. And the history of
financialization ideas in the Bitcoin industry and in the crypto industry is not very good,

(29:40):
right? It isn't very good. And so there's an understandable association there.
Um, and further, I would even go so far to say, yes, to some degree, some elements of
that will happen.
There will be a ton of these companies, people that are not great operators will launch them.

(30:01):
They'll, they'll go up a lot.
They'll crash.
There's going to be, uh, you know, probably a bit of a rush, a bit of a, a bit of a mania,
uh, in some ways.
So even, you know, if that's the, I'm not arguing that even that won't happen to some
degree in the market over time, but that's not what they are fundamentally. And there's a reason

(30:23):
these companies are coming to exist. And one should understand that. So let me set the stage.
And that's not a mark against it, right? Like there being a financial rush, you could say the
same thing about Bitcoin, right? There have been many financial rushes around Bitcoin. Does that
make Bitcoin bad? No. There was a mania around the dot-com era. There was a mania around railroads.

(30:46):
There was a mania around all these things. I think let's start by positioning. Why do financial rushes or financial manias happen? Not always. Sometimes they're nonsensical in certain ways. But generally speaking, they happen around new technologies or new financial structures.

(31:07):
And this is adaptive. This is evolutionary because what the market is doing is saying, hey, there's something new with big potential here. We're going to allocate as much capital to this as possible, as fast as possible. And we're going to find the limits. We're going to find how far we can take this. And I'm speaking an aggregate of the market here.

(31:27):
And then whatever doesn't work won't work. And whatever does work will consolidate and move forward. We saw this with dot com. We saw this with many other things. Right. This is just how markets function. And so it's not a mark against it.
If anything, it's evidence of a big new idea, which has huge potential, but we don't yet know the boundaries of or exactly how to execute and what to do with it.

(31:59):
And so people are generally familiar with this argument around technology.
You can't criticize a technology just because there's a financial rush around it.
Like, you know, sure.
Did the dot com era have tons of, you know, like nonsense companies?
Yeah, it also birthed all of the most valuable corporations in the world today.
So that's just how financial markets work.

(32:22):
Now, I am making the argument that the same can be said for structures of financial engineering.
And so you saw this with investment trusts in the 1920s, with mortgage trusts, and with
leveraged buyouts.
So these are three examples which bear some similarity to what's happening in that they

(32:43):
are, there's not really a new technology here. You can argue that because of Bitcoin there is,
and we can circle back to that. But what has been invented is a new structure of sort of financial
engineering or financial structuring. Those have value too. So with leveraged buyouts,
while there was a huge, there was a huge rush, there were basically all of these structures that

(33:06):
were kind of similar, right? They were just, they were selling equity at a premium. They were buying
up companies. They were bundling them together in structures that held multiple companies. They
were taking on leverage to buy companies. This formed what is private equity today. This formed
the basis of private equity and how we think about that. So there was a big rush for these

(33:27):
sort of companies. And then it ended up laying financial infrastructure. It ended up laying
models for what to do and what to not do. And the mortgage trust became REITs, became other sort of
mortgage vehicles. And, you know, investment trusts in the 1920s created so many of the
financial tools that we use today in public markets. So this same dynamic can take place

(33:52):
in just purely financial terms. And that's what we're looking at in some ways. So
we are looking at the invention of how to integrate Bitcoin into the financial system,
because it was never going to be that Goldman Sachs and the entirety of US security markets

(34:15):
are going to hold Bitcoin on a treasure. That is not how it was going to integrate.
There are securities markets and they are going to issue securities. And that was always going to
happen. There's no world where you create the hardest monetary asset known to man and no one
securitizes it. If there's an opportunity, the market will push resources towards that

(34:38):
opportunity. And so we're looking at, I think, the early days of building the structures by which
Bitcoin interfaces into public markets and how public markets gain exposure and how they use
the tools. We'll discover over time exactly what works and what doesn't work and so on.

(34:59):
Um, but so on a high level, that's part of what's going on. Um, on another level, um,
there is a very specific, why does this exist? It exists because there is a dynamic between Bitcoin

(35:22):
and fiat and Bitcoin and public markets. So why can you create value here? Why does putting
Bitcoin into a public company suddenly make it more valuable? Like, why is one Bitcoin worth more
here and not there? This doesn't intuitively make sense to many people, right? And I'm sympathetic

(35:43):
to why that is. But the reason it does is because publicly traded corporations can access financial
tools that individuals cannot. Steven Lupka cannot take out 10-year uncallable debt. Steven Lupka
cannot sell equity on my own stack. Steven Lupka cannot issue preferred shares. And so there is an

(36:08):
element of, I would call it regulatory arbitrage. That's not a bad word. That's not a dirty word.
It's not about exploiting. It's just about the fact that a publicly traded company has different
options available to it by the state of regulation. And so if you can use those tools
to deliver a growth rate, then there is value there. There is real value there. If I can use

(36:34):
10-year debt and five-year debt and equity sales and preferred sales to grow Bitcoin in a Bitcoin
denominated way by 5%, by 10%, by 20%. That is extremely valuable. It is a Bitcoin denominated
return. I've been monologuing for a little bit. So let me pause here in one sec. But

(36:55):
like this is the key point is that if individuals could issue all of those tools at the same scale
and terms as public companies, then a lot of the reason for these companies wouldn't exist.
There would be little reason that these companies should exist or trade at a premium if we could do everything they could do.

(37:18):
But we can't.
And unless you think that's going to change anytime soon, which it won't, then there's an opportunity here.
So would you – is it fair to say the reason these companies trade at a premium is because they offer something that the individual cannot?
Yeah.
Absolutely.
And that's why we're seeing, I mean, on the subject of that premium, can you talk a little bit about just like this, how you are looking at these in terms of there's a lot of different debate over like, okay, what premium is justifiable, right, for each type of company?

(37:51):
And it versus like a pure play Bitcoin treasury code versus like one that still has an operating business and how should the premium be adjusted?
How do you look at this? What's your mental model for looking at these valuations, these premiums, and deciding what is reasonable and what is overblown? Because presumably there is a whole spectrum from very reasonable and undervalued to way overvalued, way too frothy, like stay away.

(38:15):
So yeah, let's break this into two or three parts.
So first is the question of should these companies trade at a premium?
The answer is almost certainly yes, because they deliver a growth rate.
Financial assets are about the future value.
If you buy an operating company, you pay more than its total value today because it's growing at 10% per year.

(38:40):
And you have to pay for that future value too.
So anything with a growth rate gets a multiple in finance.
If these companies are delivering a Bitcoin per share growth rate, it makes sense that
they trade at a premium, which is effectively a multiple.
It's like a PE ratio, but different.
They're not one to one.
But so one, should they have a premium?

(39:02):
Yes.
I think that is very hard to argue otherwise, as long as they're growing.
Two, what premium is appropriate?
What is appropriately valued? You basically can't answer that question. I'll go deeper, but no, it's like saying, what is the correct P.E. ratio for Nvidia?

(39:23):
there's no right answer it is determined by the market and so the mnav the premium is even um
it's even more like it's really a function of unmet demand and optimism so um what happens is

(39:43):
the more money that is trying to come into one of these vehicles the higher the mnav goes and
That's why the MNAV can go up and can go down without anything really structurally changing with the company.
It's not like firmly anchored in execution or something else.
So the MNAVs, they'll expand, they'll contract.

(40:06):
You could probably look at like a historical range for these companies and apply like a gradual compression over time as they get bigger and have something that you could consider like a fair value.
But even that, it's just not – they're very determined by market conditions.

(40:27):
It's very determined by how much money is coming in and how people feel about Bitcoin over the next six months or Bitcoin treasury companies over the next three or six months.
So it's very –
Real quick, can you just break down what MNAV is for folks that are maybe new to this conversation?
It stands for multiple to net asset value.

(40:48):
So like say that MicroStrategy has $100 billion in Bitcoin, but it trades at a $200 billion valuation.
That's a 2XM NAV.
The company's trading for double the like present liquidation value of the Bitcoin.
And so this is a tool.

(41:08):
So because these companies trade at the premium, at a premium, they can effectively arbitrage the premium in what we would call an accretive way.
Let me explain that so I'm not just throwing stuff around. It means that if I sell 1%, let's say I am trading at a 2x MNF and I sell, I issue 1% more shares. So I dilute shareholders by 1%. But then I am able to acquire double that in Bitcoin on a per share basis.

(41:43):
So basically the per share holdings of a stock went up by twice as much as the dilution that I issued.
As long as you're trading at a premium, you can conduct these equity operations in a way that increases the amount of Bitcoin that one share of these companies is worth.

(42:04):
And that's a key component of this whole thing.
You can also do this by taking on debt or leverage.
You can also do this by issuing preferreds, which could be a subcategory of debt.
And you can also do it via operations and other things.
But it's all about using financial tooling to grow the per share Bitcoin.

(42:25):
That is what makes these companies interesting and valuable.
And I think one way you could frame it is a treasury company is the public market's answer to how do capital markets acquire Bitcoin positions as efficiently as possible because Bitcoin will be important in the future and currently they are underexposed.

(42:52):
I think that's a I appreciate that that kind of breakdown because I think people if they've been following this space a little bit look at some of this and think like well again why the heck is there that premium like what what is justifying that I think that this helps to kind of bridge that gap for folks so so you know okay oh go ahead.

(43:15):
And it is it does feed into itself. Right. One thing that as people look into this is it feeds into itself. The higher the premium, the faster you can grow the Bitcoin per share, the more reason for a high premium. And this is reflexive in both directions, whether the premiums expanding or contracting. It feeds into itself.

(43:36):
And that is a like that dynamic is in flux. And I think people are valid in looking at that and having questions and being a little skeptical and being like, this is this is financial engineering.
and that could be true. However, there's a long history of these things in finance and even though

(44:03):
it is kind of feeding into itself, that still is solid logic. If you give me a premium, then I can
grow your investment more effectively and you benefit from that. Therefore, it makes sense for
you to give me a premium. I can understand the hesitation on some of that reasoning. However,

(44:24):
that is how finance works. And that is a rational decision from the perspective of a private
investor and the perspective of a public company operator, right? So these are decisions that make
sense. And they are things that have happened in the past many times. This is not like a novel
creation with Bitcoin. The same thing happened with mortgage trusts. Mortgage trusts traded at

(44:49):
a premium to the total value of all the assets, and then they used that premium to acquire more
assets. So this is not – the high-level concept is not novel. Yeah. Well, and let's get into a
little bit like the actual numbers that we starting to look at I going to pull up I because this is the I think it become everybody go resource here So like you had some you had some great some great posts recently just talking about the actual

(45:22):
scale of these Bitcoin treasury company buys that have taken place so far as
it relates to,
okay,
what is,
you know,
micro strategy done,
which is obviously,
you know,
way above what anyone else has done versus what is the rest of the market
look like?
Can we talk through that a little bit?
Cause,
and you know,
just looking at this right now, looking at the top 10, I want to, one thing I want to quickly

(45:43):
point out, it is wild that Coinbase has now fallen to number 12. Like, I mean, wow, squandering
the first mover advantage of all first mover advantages by focusing on shit coins. I mean,
like, obviously they're a successful company still, but like the, you know, this is the,
as many people have said, like Bitcoin is the new hurdle rate. Like you're going to be increasingly

(46:04):
judged on how much Bitcoin you have and how you perform relative to Bitcoin. And that like they,
wow i mean like number 12 and i they seem to only be dropping down this list i think they were 10
like they were number 10 like last week but meta planet has since like blown past them and some of
these others as well so what perspective should people have on the actual numbers of bitcoin

(46:25):
that are being bought because i think some people look at this and they say all these treasury
companies are buying but bitcoin price is so boring right now i mean gee willikers we're only
at 118 000 per coin how boring you know sure sure no and i've heard this and i've seen this
So when you're asking this question of like, how early are treasury companies?

(46:46):
How late are treasury companies?
Why isn't the price higher?
How much buying have they've done?
You need to kind of take, you need to bring a little bit of attention here.
So one, I don't count strategy, right?
This is, they've been doing this for four years.
This is not something that started recently.
It is something that has supported the Bitcoin price for many years.
So in answering this, like there's all these new treasury companies and why haven't we seen price go further?

(47:12):
You know, you basically you can't add that 600,000 coins there.
A lot of that was in the past.
So also, when you look at this, you need to understand that a lot of these aren't treasury companies.
They are companies that hold Bitcoin in their treasury.
Clean Spark is a miner.
Riot is a miner.
Marathon is a miner.
Now, they have bought some with convertible debts.

(47:34):
So they do count a bit on some of that.
Tesla, those buys were a while ago.
HUD-8, that's a minor.
Coinbase, they are now doing buys, but a lot of that is older.
Block, those purchases were made many years ago.
I don't know who Next Technology is.
Similar as a treasury company.
GameStop, I mean, fine.
It's unclear, but they made purchases under the guise of a treasury company.

(47:59):
Kango Inc., I think those are balance sheet purchases from a while ago.
Bitcoin Group, Volkant.
So a lot of these are not micro cloud. Hive is a miner. Exodus is a Bitcoin company, not a treasury.
Nexon is a game studio in China or Japan or something. Bitdeer is a miner. Canon is an ASIC manufacturer.

(48:21):
I hope I'm getting these right. Anyways, so a lot of these are not treasury companies.
of these that are treasury companies.
You basically have MetaPlanet.
You have the DJT.
They've basically announced intention to do it.
You have Semler.
You have ProCap BTC.
That's a POMPS offering.

(48:42):
You have Saquon and so on.
You add those up.
And if you add up all of the treasury companies
that are actually treasury companies in the top 60,
you get a number that's about 57,000 Bitcoin.
Now, this includes all of MetaPlanet's purchases that they've ever done, and they've been operating for a while. And even just if you look at the DJT and MetaPlanet together, those are about 35,000 purchases, coins, which is over half of the total number.

(49:12):
So outside of Metaplanet and DJT, all of the top 60 treasury companies have only purchased about 25,000 Bitcoin.
To put that in comparison, somebody went to Galaxy last week and sold 80,000 Bitcoin without materially impacting the price so much.
So if these companies have not even bought as much Bitcoin as the Galaxy seller sold, why would we expect it to have this really material impact on price?

(49:43):
We're not there yet. These companies are still scaling up. They are not in market buying in huge size.
And so this is something that just needs to be kept, needs to be taken into account that for all the noise, for all the attention these have gotten, in my opinion, it's very early.

(50:07):
They're just spinning up.
They're not operating at scale yet.
And a lot of the big deals that were announced, oh, so people might wonder why I'm excluding 21, that's number three, and the Bitcoin Standard Treasury Company.
Those have 70,000 coins between the two of them.
The reason is because those were pre-existing Bitcoin that got rolled into the deal.

(50:28):
So that was not – and maybe not all of it, but like a lot of it.
I know 21 has done some extra purchases, maybe even a good amount.
They might have even bought over 10,000.
But a lot of that number was pre-existing and rolled in.
So that didn't contribute to like actual buy pressure in the moment.
Yeah, and I appreciate that context because I think that's super important.

(50:49):
And the contrast with that, you know, that massive OG whale that was basically like, here's 80,000, you know, 80,000 Bitcoin, like just massive numbers.
And I think people are very quick to, you know, to talk about price suppression or things like that.
When in reality, it's like, it's hard for us to understand the amount of Bitcoin that is still held by OG whales.

(51:14):
And they are, they are parting with a lot of that Bitcoin now.
Like, you know, they've held it since it was worth next to nothing.
And now it is worth hundreds of millions or billions of dollars.
Like, yeah, you know, they had a pretty good run and maybe they're trying to do some things with that now versus just just hold it.
More power to them.
It's their money.
Do it.
Do what you want with it.
But like, I think that that's really important to look at how early we are in this stage.

(51:39):
Like when you're so focused on Bitcoin, when you're in the, you know, quote, Bitcoin community, when you're active on X and on Noster, you feel like sometimes you're – it's almost easy to think that you're somehow late to the party or that things are further along than they are when in reality we are still so, so very early in Bitcoin, in Bitcoin treasury companies, in nation state adoption, in all of this stuff.

(52:02):
And I think it's just important for people to take a step back and look at that.
100%.
I'm actually getting some brain.
Oh, yeah, go ahead.
right now uh let me just look at this so in um the report the uh kind of the crypto report the
bitcoin report uh it is looking like let me see did they just drop it they did uh so it actually

(52:30):
looks like they used the phrase stacking sats in the report i'm looking at this tweet from matt
pines unless i'm being uh he's unless he's messing with me but uh he could be but you never know with
him but there's a tweet and uh it looks like at some point in the report they do use the phrase
stacking sats which is pretty cool wow wow do they say staying humble as well or is it just the sat

(52:56):
uh sat stacking excuse me okay well you know what that's that's a that's a pretty good start um
definitely gonna have to to dig into that yeah and they did reiterate that they're gonna be
using will develop strategies that could be used to acquire additional Bitcoin for the reserve.
So they are reiterating that it's on a new statement, but it is them putting it in again,

(53:19):
reiterating that statement in the most recent one. So that's, you know, interesting. You know,
they could have left that out. They could have not reiterated that if something had changed.
So it is it is incrementally positive, I think, to see that.
Well, I'm going to have to dive into this in detail.
But yeah, you love to see some of the Bitcoin maximalist terms bleed over into kind of the common nomenclature.

(53:45):
You know, it's a beautiful thing to see.
I mean, talk about memeing stuff into existence, right?
Bitcoiners are the ultimate meme into existence people on the planet.
I think they are without peer in their ability to just meme things into existence.
I really do think so.
I interrupted you, though.
You had a question?

(54:05):
Oh, yeah.
No, no.
I wanted to ask a little bit about when people talk about price suppression or things like that.
Something that gets brought up a lot is these OTC buys, OTC buys, and all of this.
Can you talk about that a little bit?
Because I feel like there are some misunderstandings around how that works and what impact it has.

(54:26):
And I've seen some really dumb takes on it.
So can you clear the air a little bit there?
I think there is no concept that more confuses people on Twitter than the functioning of OTC desks and purchasing.
It's really wild because it's not that complicated, really.
And I understand they're not something most people ever come in real contact with.

(54:47):
And, you know, I worked with OTC desks for five years at Swan.
So it's something I have a lot of experience with as well as have many friends in the industry that work for OTC desks.
But so I can appreciate that most people don't actually ever interact with one, but it really twists people into knots.
So people think that if you do buy OTC or sell OTC, it like doesn't impact the market like it like somehow.

(55:14):
And that's true insofar as like, let's say I engaged a private transaction with an individual seller for 100,000 coins.
And we did that.
That doesn't really happen much.
Yeah, sure.
That wouldn't show up in like the order books of Coinbase or whatever.

(55:37):
But in reality, A, even if you did that, that's 100,000 coins that would have been sold on the order books alternatively.
So you're still satisfying this kind of market demand.
But really, the better point is that these OTC desks plug into all the exchanges.

(56:01):
They're a more efficient, lower slippage way to execute orders.
but they're literally sourcing liquidity.
Some of them just plug into all the big exchanges
and just get you the best execution
from Binance, Coinbase, Kraken, Gemini, et cetera.
And they're pulling parts of the execution from everywhere.
That's the most common way to think of it.

(56:22):
And so they literally are impacting the public order books
just in a more efficient way.
And the OTC decks are also able to do order execution
in like an intelligent way.
They can do like a TWOP purchase where if you want $100 million, you're buying, you know, a million dollars every hour for 100 hours or something like that.

(56:43):
You know what I mean?
Like they're able to do more sophisticated execution.
But that's all.
That's all that's going on.
You're still impacting the market.
There's not like secret stuff.
It's not very cloak and dagger.
And it's not somehow a scheme to suppress Bitcoin's price action or to boost it.

(57:03):
Or like depending on who you talk to, like it's either suppressing it or it's pumping it too much or like, yeah, I've seen a lot of takes on both sides.
If you read Twitter, you would think that everyone that buys OTC buys OTC to not pump the price and everybody that sells dumps it on the public order books to decrease the price.
It really is remarkable.

(57:24):
Apparently, it's the door that swings both ways depending on how you how you want to interpret it.
So thank you for clearing that up.
The thing I want to talk about is just the speculative attack narrative on this.
Where are you at with this?
Are Bitcoin treasury companies – is this a speculative attack?
And if so, on what?
Yeah.
So let's define the term.

(57:46):
So it comes from – I mean it probably preexisted.
But most Bitcoiners are familiar with the term from the Nakamoto Institute argument.
I mean it definitely preexisted.
But anyways, most Bitcoiners reference the Pierre and Bitstein article on Nakamoto Institute.
And it was basically a, what do you call it, a theory or a prediction that they wrote about then that as Bitcoin develops, it would become the incentives would naturally lead to large actors conducting what they'd call a speculative attack.

(58:22):
And what is it on? I think it's better to describe this as what is it between, actually? What is it between? It is between fiat and fiat finance and Bitcoin.
And so the attack is essentially like leveraging the arbitrageable or the exploitable characteristics of one of the systems by using the qualities of the other system that effectively benefit in like a profit way from it.

(59:01):
So it's speculative because it is performed by speculators.
And reading Twitter, you would think that people have forgotten this fact, you know, because they're looking at like treasury companies and they're looking at these things that have spun up.
And it is speculative. It is done by actors who have a profit motive.

(59:22):
That is what it is talking about. And it is saying that like when there is such a dynamic. So a simple example of this, borrow a depreciating currency, buy an appreciating currency. You're leveraging the debt quality of the depreciating currency against the appreciating quality of the other currency. Borrow dollars, buy Bitcoin.

(59:47):
That's a simple way where your debt loses value in real terms over time.
Your Bitcoin gains value.
If you could get debt long enough that you could service, the incentive would be to borrow as much money as you can and buy as much Bitcoin as you can.
Right. If you had enough timeline and you had you had the ability to take 100 year debt or whatever.

(01:00:08):
Right. You would just you would max it out.
Right. And this is something people do in financial markets all the time with different currencies and different debt structures.
However, there's this other interesting element that I think was less talked about and is actually more salient in the treasury company story.
And it's actually less about the nature of fiat currency and more about the nature of what we could call fiat finance or what we could call just institutional public market finance.

(01:00:35):
And the reason I highlight this, I talked about this a little bit earlier, but the more valuable tools here for kind of like taking advantage of this dynamic or creating profit from this dynamic are actually the public market financial tools.

(01:00:59):
Because those are the ones that really allow publicly traded companies to raise capital in a much more efficient way.
So a lot of that's via equity sales.
A lot of that can be during preferreds taking on debt.
But these public vehicles, by access to these financial offerings and tools, they can buy Bitcoin way, way more efficiently.

(01:01:31):
Right. So from this speculative attack angle, you could look at the preferreds on micro strategy.
And it's basically Michael Saylor saying, hey, I'll borrow as much money as you'll give me at 8 percent or 9 percent or 10 percent.
And I'll buy Bitcoin with it because I'm willing to put on a position that says Bitcoin will grow at that rate on average.

(01:01:54):
It will it will on average grow faster than that, even if there's some down years.
Right. And it's structured in such a way where because he's a public company, he doesn't have a lot of risk in the down years. Right. It's not, you know, if me or you were going to borrow against our Bitcoin or something, there'd be like a margin call built in.

(01:02:15):
And so then if Bitcoin goes down, like you could lose all your Bitcoin and that's that's tough. Or you have to structure that. At the least you have to structure that position much more conservatively because you have to account for that.
But with these public vehicles, they can get this very long term debt or perpetual debt.
They can sell equity.
They can create this whole vehicle.
So the majority of the speculative attack is through the structure of public finance.

(01:02:41):
It's through this structure of public markets.
And there is basically just a huge amount of value that can be created for shareholders by leveraging those tools in along the lines of what Pierre and Bitsteen kind of talked about in that article.
So I think it is in many ways it is. And I think like for anybody that read that piece or saw any or like over the years has held the view of it's inevitable that as Bitcoin develops, eventually this speculative attack happens.

(01:03:15):
it should be not a it should hopefully not be like an unbelievable statement or something that's hard to believe that the nature of that speculative attack is not going to be done by individuals getting a 30K loan from Bank of America at a high interest rate.
Right. It's going to be done by extremely well capitalized vehicles that can really put on the trade that can really put on the dynamic and they can access capital at a large scale.

(01:03:47):
I mean, the one who is clearly accessing it currently and I mean, probably just because of first mover advantage will continue to access it at the largest scale is strategy.
Sure. Sailor. Sailor has Sailor has obviously one thing that I think is actually taking a step back.
incredible about watching this all unfold is just that sailor has, it hasn't been any sort of like

(01:04:09):
hush hush. I have a secret strategy. It's, it's literally from the very start. He's been like,
here's what I'm doing. Here's how I'm buying Bitcoin. Here's what I'm, here's what I'm doing
with it. Here's why you should do it too. Let me go, let me go on every single podcast and go to
every single conference and go to on every single mainstream news media show and tell you how I'm
doing it and that you should do it too. And now people are finally, like finally catching up.

(01:04:35):
And podcasters are finally getting real jobs, which is great to see too. But like, it's just
such a, it's honestly refreshing in a way because there was nothing hidden about this. It's like
this, he made his strategy very, very, very public and now has a massive, I mean, looking at the
Bitcoin treasuries.net, 628,791 Bitcoin, which is a staggering number. Does anyone ever catch

(01:05:02):
sailor and catch strategy? Like that's certainly a tall order. That's very hard to do. So I would
say very unlikely, you know, it's he has a huge first mover advantage and it's good for him. He
built it. He built this whole playbook. He recognized the opportunity and in many ways

(01:05:25):
carved out the rails for other people to do this. And so I think it's unlikely, but, you know,
it is. So, you know, on one hand, right, you can look at this as this kind of like this arbitrage
between fiat and public finance and Bitcoin. And so this is just the market normalizing

(01:05:47):
this gap and people leaning in and, you know, effectively closing that gap, which I think
will take a very long time to close.
But there's another way of looking at it, that this is also the process by which Bitcoin
gets integrated into securities markets and into public markets.

(01:06:07):
And I actually think this is pretty interesting because you could look at this.
Eric Yakes has a report coming out on this soon.
I got an early copy of it, but there's some, I'm going to forget the term he used, but it's a kind of an early stage.
I think he was talking about correspondent banks, but there are similar structures in banking and in finance where we are building the financial institutions that are willing to hold Bitcoin exposure.

(01:06:41):
Ultimately, if you want to integrate Bitcoin into public markets, there needs to be counterparties that hold the asset and take the directional risk, right?
There's just things you can't do unless those counterparties exist.
A simple example of this is that the preferreds that MicroStrategy issues cannot be created unless MicroStrategy held all that Bitcoin and took the directional risk on it because they need the gain from that Bitcoin to pay the preferreds, right?

(01:07:16):
Either directly or indirectly through equity sales.
But like if they didn't, you know, if they didn't have any Bitcoin that they're going to make money on, they can't issue a preferred that pays 10 percent because where ultimately where is it going to come from? Right.
And there's many other things like this where to have a Bitcoin financial system, to have a public financial system where Bitcoin is part of it, you need financial institutions that actually hold the asset.

(01:07:44):
And so there one way to look at this that the treasury companies are these early they racing to capitalize the Bitcoin financial institutions of the future that this is the capitalization phase of Bitcoin financial services
And we're just in the like get the capital, like get the capital phase.

(01:08:06):
I think that's a – it's a good way to look at it.
And just on Sailor specifically, obviously, first mover established, but now is coming up with all these different types of instruments.
And you talked about some of them.
He's got basically four different instruments in addition to just good old-fashioned strategy, MSTR.
There's all these different vehicles now appealing to these different sets of markets.

(01:08:30):
And he essentially told everyone that, look, I just vibe finance these things into existence.
right like i i used ai and i brainstormed with it and then sent it over to my lawyers and said okay
make this happen which i just think is like it's kind of incredible like it is this new era
with this new pristine asset bitcoin and you've got this this guy who is like you know doing the

(01:08:53):
financial version of vibe coding these new products that the market has never had before
you can just do things like you could you can just do things like it's it's really remarkable
to see. Like, what a time to be alive right now. It's incredible. It's incredible.
It's – there's just like when I look at this, it's just like, of course, this is what it looks

(01:09:14):
like. Of course, this is what Bitcoin succeeding looks like. Of course, this is what Bitcoin being
integrated into the financial system looks like. I can't come up with a first principles analysis
or model of looking through these things that doesn't go this way.
You have to assume a lot of things that I think are really incredible to assume,

(01:09:38):
mainly that you're able to have this very widespread, bottom-up, grassroots adoption
where all the people in the world do it themselves
and the financial institutions don't catch on until it's too late.
And there's two main problems with that.
One is that most people don't want to do it themselves.

(01:09:58):
You're just you're just never going to get like like the psychological profile of a Bitcoiner is very different than your average person.
So most people don't want to.
And we've all experienced this trying to convince people in our lives to adopt Bitcoin.
And two, if there's a huge financial opportunity, then, of course, financial institutions and public market participants are going to jump into that at a certain stage.

(01:10:23):
And so this like model that you'd have to create for why Bitcoin could become widely adopted and hugely successful without securitization happening and without these things, I just it's incredulous to me.
It just I think it's so tremendously unlikely.
And I'm not somebody that is going to argue with reality or the way that these things are going to play out, nor do I think these things are bad at all.

(01:10:50):
I think, as I've said many times in this, this is just what integrating Bitcoin, like Bitcoin capturing everything means Bitcoin has to capture the securities market.
Like it's just it's part of everything.
It's part of the whole financial system.
It's part of the whole monetary system.
And so, of course, it's going to go there, too, if Bitcoin is any good.

(01:11:15):
Is there a risk that you see with these?
like is is there like or i should say maybe not is there a risk what is the biggest potential risk
that you see people talk about like well what happens in a bear market when these companies
are forced sellers like is that the biggest risk you see is there is there anything else how do you
view that yeah that's a great question so um there are of course risks there's plenty of risk right

(01:11:38):
um when you're doing new things and you're trying to bring kind of a new model and a new thing into
existence, there's always going to be risks. Like there's operational risks. You could get too
levered. You could, you know, struggle to raise capital there, you know, custodial risk. There's
all sorts of things, right? Like this is, you know, and it's like, it's funny, the criticism

(01:12:01):
that some people have of this is like, oh, like the treasury companies are trying to tell you that
buying their stock has the same risk profile as cold storage Bitcoin. No, I'm not. Not at all.
It has a completely different risk profile. And that doesn't make it good or bad. It makes it
different. And so I think on the macro level, so you need to separate two sorts of risk categories.

(01:12:27):
One is an individual company. So one company, what risk can that company have?
many risks. The second is as a segment. So all of the treasury companies, what sort of risks or
what sort of things could happen? So on the big scale that actually matters, I think that that

(01:12:51):
number of risks get smaller because it's not about like, you know, a couple operators that
just aren't very good or even dozens of them that aren't very good. So the main scenario that people
throw out there is this kind of scenario where the treasury companies become forced sellers.

(01:13:11):
And so basically this works really good as Bitcoin's going up, as it comes down,
they all have to sell for some reason. That's the main criticism and the main scenario.
Now let's like break that down. For that to happen, you need one of two things.
One, they all need to be highly levered with short term debt.

(01:13:33):
right now that doesn't exist. Nobody is levered in that way. And there's also not that much coin
wrapped up in these companies. That's the other thing to realize right now.
Of like the treasury companies we counted earlier, if they were all to have to sell
all of their coins over a month, we're talking about 60,000, 80,000 coins. It's the same as

(01:14:00):
the Galaxy seller. It's just not large enough, let alone they don't have the sort of leverage
that can force them to sell. So we're not there yet. And you need to keep that in mind that in
order for this kind of scenario where all the treasury companies have to liquidate and this
causes a problem for Bitcoin, in order for that to play out, treasury companies actually have to

(01:14:21):
get so much bigger first for that to even be possible. They just don't hold enough coins yet.
But let's say that happens. They then would need to have a lot of short term debt that is callable. Right now they don't. We can revisit that conversation when you have hundreds of thousands of Bitcoin, a million Bitcoin, which is exposed to short term liquidations.

(01:14:45):
but we're not there. And so as we get, if that happens and we get closer to that,
that's the time to have that dialogue is how many of these companies have positioned themselves
to not be able to weather a downturn. Ultimately, right now it doesn't happen.
The only other scenario by which that risk to play out is like some giant custodial hack,

(01:15:07):
like Coinbase gets hacked or something, and they're all using Coinbase, right?
And so there's merit in having diversified custody. There's merit in thinking well about these things. There's merit in insurance. But again, that would be a challenge for the whole industry, right? Like Coinbase isn't just a treasury company thing. BitGo isn't just a treasury company thing. Fidelity.

(01:15:28):
You know, so, yes, those those risks exist, but they're not specific to treasury companies. Those are just risks that exist at any time in in Bitcoin.
So those are kind of the two that play into like the forced seller risk bucket, which as you can kind of gather from my answers, I just don't think is – it's not something you need to worry about right now.

(01:15:54):
We're not at that scale and people aren't structured in that way.
you could also have like, you know, I mean, you could, you know, there's risks, you know,
you could have the S&P crashes 30% or, you know, whatever market conditions turn or whatever,
you know, you could have like a bad market turn. And that makes it harder to operate. But it doesn't

(01:16:20):
mean that these companies fail, right? MicroStrategy operated through a huge bear market
after deploying very aggressively. And they came out with more Bitcoin in a stronger position than
ever. So we have history to show that these companies are not like these structures that
can only survive bull markets, right? And I think the best companies and the best operators

(01:16:41):
are those that are planning. They have a strategy for that bear market. That's something we talk
about all the time, right? Like it's a very, you know, long term vision for Nakamoto. And I was,
happy to find that echoed once I got on board and joined. But everyone is planning for a long-term
vision. At Nakamoto, these are all operators that have worked in the Bitcoin industry for

(01:17:06):
over a decade. They've been through multiple bear markets. These are not people that think
it's not going to happen. Do you have a risk if a lot of those players enter the stage and you have
all these new treasury companies that think a bear market's never going to happen and they
position themselves poorly for that? Sure. Yeah, that could happen. We'll see if it does,
but we're not there yet. Can you talk a little bit as much as you're able, given that where

(01:17:29):
Nakamoto is at right now, can you talk a little bit about just at a high level without some
specifics, obviously, but what the Nakamoto kind of strategy is? What is that long-term vision?
What is the high-level, non-specific game plan? Yeah. So I can share everything that we've been
public about. We're in the merger, so we're still completing the merger. And so there's some

(01:17:49):
limitations on what we can talk about. But the differentiating factor, so the thing that Nakamoto
does that other people don't do is a little bit of backstory. So David and Tyler and the rest of,
they ran a hedge fund called UTXO for the last, well, for a while. But in the last year or two,

(01:18:12):
they were focused primarily on Bitcoin treasury company investments. And so what that means is
they did MetaPlanet, they did SmarterWeb, they did Blockchain Group, they did, you know, etc.
Most of the best performing new ones, actually. And so they ran UTXO, which from my understanding
is the best performing hedge fund in the world of the last year. Really an incredibly successful

(01:18:35):
strategy with some incredibly successful investments. And what they realized in doing it
is that there's a huge amount of value that can be unlocked when you launch a first mover
treasury company in a capital market that doesn't have one currently. So let's say Brazil or India

(01:18:58):
or Japan or wherever. And so let's say there currently is no microstrategy. There's no
treasury company in those markets. If you launch one, all of the capital that's in those countries
that can't go international, either because of investment mandates or regulation or just burden,

(01:19:22):
can suddenly get Bitcoin exposure.
And you unlock this huge amount of new capital
into the business that otherwise couldn't allocate.
And that's one of the reasons,
just on a high level, I'll come back,
but that's why I like treasury companies.
What treasury companies are doing
is they're getting more fiat to convert to Bitcoin.

(01:19:45):
There is fiat that can't convert to Bitcoin
and having a securities wrapper
allows that fiat to convert. And fundamentally, I'm bullish on converting more fiat to Bitcoin.
I think that's a good thing to do. So launching these treasury companies and these international
capital markets gets more capital in. And those companies do very well and those investments do

(01:20:07):
very well. So David and Tyler, I mean, they created this. Like, Saylor invented the playbook.
Saylor invented the whole thing. But MetaPlanet and David and Tyler, they proved that you could replicate microstrategy. Before they had done it, the market didn't know. I mean, is it a one hit wonder? Is there room for only one microstrategy? Are there room for more treasury companies?

(01:20:31):
And then MetaPlanet succeeded massively. And it kind of validated this thesis that, yes, you can do more. There is the market does have more demand for these companies than micro strategy alone can satisfy.
And so they ran this very successful strategy. And then Nakamoto was a way to run it at a larger scale through a public vehicle and use capital markets to do a Bitcoin treasury strategy and use that capital to invest more in this international strategy.

(01:21:04):
So that's the primary unique thing that Nakamoto does is that we take our balance sheet in the form of Bitcoin. So we buy Bitcoin. We then plan to. So we plan to. We plan to buy Bitcoin. We plan to take our balance sheet. And then we deploy that balance sheet into new treasury companies around the world.

(01:21:27):
And then as those companies do well, we're able to return some of that gain back into our own balance sheet and buy more Bitcoin with it.
So it's basically it's a treasury company that uses the whole playbook, but is also hopefully increasing returns through a number of unique capital strategies internationally.

(01:21:48):
I mean, it is incredible.
like the meta planet story is just incredible to look at as an example of this, that there were,
and especially for those that aren't aware, the situation in Japan was that the tax treatment,
capital gains treatment on Bitcoin was incredibly prohibitive for the average. What was it? It was
like 50% or something insane. Yeah. 55. Which is nuts. Like, and so you can see why people would

(01:22:12):
be, you know, if they didn't need to sell, they're getting absolutely destroyed with over 50% of their,
any gains they have going to pay in taxes. And so clearly there was all this pent up demand.
And you see that now with Metaplanet success, like it's been incredible to watch. And it's,
it's, it's very curious to wonder, you know, like, this is obviously what you guys are looking into,
like, which of these other markets have this similar pent up demand with nowhere to go,

(01:22:35):
that is just waiting for a place to deploy it, you know?
There are two answers to that. So one, you should assume as a starting point,
that most markets have some sort of regulatory barrier like that. It may be tax, it may be
something else, but it is more common that something like that exists than doesn't exist.

(01:22:57):
It's not saying it's everywhere, but generally speaking, you go to one of these markets
and you'll find weird limitations like that, that assign a greater efficiency to investing into a
security versus investing into Bitcoin. And so those become really fundamental drivers of like
the value proposition of like, yeah, if buying securitized Bitcoin lets you dodge a 55% tax,

(01:23:22):
like even if you think everyone should just do cold storage Bitcoin, other people will
prioritize the tax thing. And that's just how they're going to operate. So there's demand for
that. But I want to I want to even guide people to think beyond that, because people say there's
a lot of people that are pretty skeptical on this. They're like, OK, Saylor makes sense because he
did well and they're so big. And so they give sailor a pass. And these same people used to be

(01:23:46):
skeptical of micro strategy. Now they're not skeptical of micro strategy, but he's somewhat
unique. Then they were skeptical of meta planet. They thought meta planets not going to work.
Now that meta planets worked, they've justified why meta planet works, but nothing else will.
And the way they justify that is they say, oh, well, it's just the tax thing. The only reason
meta planet worked is the tax thing. And so I want to guide people to think beyond that.

(01:24:09):
the main reason these vehicles are valuable, the tax arbitrage is icing on the cake. The main reason
they're valuable is because most of the capital can't buy Bitcoin, period. Like it's about creating
the pipes. And so like, even if there was no tax arbitrage in Japan, my base case is that Meta

(01:24:33):
Planet would have still been highly successful because a lot of that money couldn't easily buy
Bitcoin. And it creates a way to do it. And that's without even taking into account that these
companies can deliver a growth rate, and some percentage of capital is going to find that more
valuable. Yeah. Another thing, and I don't even necessarily want to give this breath, but I'm also

(01:24:55):
curious of your take on it, which is around the ETH treasury companies that have now sprung up.
Now, to me, this seems like a really dumb idea, given ETH is a proof of stake network,
and the amount of coins that you control,
the more that you control actually has a meaning,
like it actually means something.
Like it's fundamentally different from proof of work.

(01:25:15):
Like, do you see this as like,
have they not thought this through
or have they thought it through
in the Ethereum Foundation in conjunction with what it's like,
Tom Lee from Fundstrat is the one who just recently
like went from being a,
what I think people thought was a full-on Bitcoin bull
to like, hey, we're doing an ETH treasury company play now.
What's your read on all this?
Yeah, so I think there is a unique,

(01:25:37):
proof of stake vulnerability to if the ETH treasury companies get too large. I think that
from my understanding, that is a technically true assessment. So that is something material to think
about. Ultimately, my view and our view is that Bitcoin is the only asset that this really makes
sense for. What you're doing is you're building a long term capital base, like you are accumulating

(01:26:05):
a valuable form of capital that financial markets will have increasing demand for in
the future and that financial institutions will need access to, that people want exposure
to, and that Bitcoin is the only asset that really fits that criteria as a treasury asset.
Now, are people going to spin up all of these other vehicles and try to do it on another

(01:26:28):
coin?
I'm sure they will.
Are we bullish on those long term?
No, we're bullish on Bitcoin.
Oh, I do have a yard crew just showed up. So there's going to be a little noise. I'll mute.
Don't worry. Well, and we're getting we're getting towards the the end of it here. I want to be conscious of your time as well. We've covered we've covered quite a lot today. And I appreciate you taking the time.

(01:26:49):
I hope for people that maybe had some worries, some doubts, some fears about this, that you have addressed some of those.
And again, reiterating that for folks who are just stumbling upon this and wondering what to make of it all, you should probably just buy good old-fashioned spot Bitcoin and create value and spend time with your family and go for walks in the sun and enjoy your life.

(01:27:13):
But people are going to purchase these other vehicles.
There's a lot of capital that is going to flow into them.
And I think it is something that it behooves everyone to at least be aware of what is happening.
So I appreciate you taking the time to make everybody a little bit more aware of that.
Anything else we didn't cover?
Anything else you want to toss in before we go?
So I think the main thing is just to be aware.

(01:27:33):
I'm not here to convince anybody to make a personal allocation to treasury companies broadly or our company.
What I think that people should do is understand that this is basically an inevitable trajectory for Bitcoin.
So there's very little path by which Bitcoin could succeed without this happening.

(01:27:53):
Sorry about the background noise.
And one should understand that this is A, inevitable, and B, I would argue positive for Bitcoin.
This is just how Bitcoin integrates into financial markets.
And so that doesn't mean you have to buy any.
But you should understand that there's a lot of demand around the world

(01:28:14):
and in capital markets for exposure like this.
And this is part of what it looks like for Bitcoin to win.
And so I think my motivation is just for people to clarify how they think about these companies
rather than like convince, you know, if you just want to stack sats in a cold storage,
like, great, like, go for it.
There is plenty of capital around the world that this is a very beneficial and unique opportunity for

(01:28:42):
and that that helps Bitcoin.
And that ultimately comes and benefits Bitcoin.
Amen to that.
You know, everything is good for Bitcoin.
And this is ultimately one of those things that pretty clearly is funneling more capital, more fiat capital into Bitcoin.
Like this is speeding up that black hole engulfing absolutely everything, which Bitcoin is.

(01:29:05):
And so, yeah, Stephen, appreciate you.
Appreciate the time.
Looks like a beautiful day there that I hope you can go walk in now that I've had you sitting for so long.
I could use a walk myself.
I'll link everything, your links in the show notes and whatnot.
But thank you so much for sharing your time.
It was a pleasure as always.
Always a pleasure, man.
Thanks for having me.

(01:29:30):
And that's a wrap on this Bitcoin Talk episode of The Bitcoin Podcast.
Remember to subscribe to this podcast wherever you're watching or listening
and share it with your friends, family, and strangers on the internet.
Find me on Noster at primal.net slash walker and this podcast at primal.net slash titcoin.

(01:29:51):
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(01:30:11):
Bitcoin is scarce, but podcasts are abundant.
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