September 13, 2025 • 44 mins
Jeff Walton, former reinsurance broker turned Bitcoin thought leader, breaks down why Bitcoin treasury strategy companies are exploding—and what it means for the future of finance. From riding GameStop to the top to identifying asymmetric risk in traditional markets, Jeff reveals how a background in risk management led him to bet big on Bitcoin. In this episode, we explore why Bitcoin treasury companies are outperforming, how MicroStrategy rewrote the corporate playbook, and the difference between simply holding Bitcoin versus having a full-blown Bitcoin treasury strategy. Jeff unpacks why so-called "zombie companies" are pivoting to BTC, the biggest risks and red flags in this emerging space, and why he believes the future of capital markets will be built on Bitcoin.
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Episode Transcript
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Speaker 1 (00:00):
Over the past eleven years. I was a reinsurance broker.
I wanted to get a job an investment banking right
out of college. I rode game stop to the top.
I nailed the trade. Sentiment broke when Robin Hood turned
the buy button off and I needed to look for
an alternative place to park capital. I was fascinated with
micro strategy. This company converted one hundred percent of their
(00:20):
cash balance sheet into bitcoin. I quickly realized, this is
going to be the biggest company in the world. The
traditional financial market is so much bigger, bigger, vastly larger
than the bitcoin market at the moment. If you're not
adopting a bitcoin treasury into the future, I think you're
going to fail.
Speaker 2 (00:37):
Your insights have been amazing, which is why you generate
a lot of noises.
Speaker 1 (00:40):
But where do you come from?
Speaker 2 (00:41):
Why is your viewpoint unique in this space?
Speaker 1 (00:44):
I think the.
Speaker 2 (00:47):
Jeff Walton. Jeff Walton, let's talk about the most exciting
thing going on in the bitcoin space right now, which
is sort of the top of the down here at
the Bitlin conference, which is bitcoin treasury companies. Before we
dive in, I want to set the stage of what
bigcoin treasury companies are versus maybe just big one of
the balance sheet. I want to talk about the froth
(01:09):
in the market, potential risks in the market, where you
see this market going. We have a lot of stuff
to dig into. But before we do that, Like, you're
new in the space, You've generated a lot of noise.
Your insights have been amazing, which is why you generate
a lot of noise. Where'd you come from? N Why
is your viewpoint unique in this space?
Speaker 1 (01:29):
Yeah? Yeah, great question. So you know, over the past decade,
actually eleven years, I was a reinsurance broker, so a
little bit of my background. So in college I studied
business and economics. I had to focus on finance and
a minor in math, so really interested in markets, economics,
(01:49):
how the markets work, how things work together. I wanted
to get a job an investment banking right out of college,
and I ended up getting a job in reinsurance in Seattle.
So I took it, and I went that direction, and
I ended up falling in love with reinsurance. It was
super fascinating. I was able to, you know, be very
(02:10):
creative and structuring financial products.
Speaker 2 (02:13):
I explained reinsurance.
Speaker 1 (02:14):
Yeah, so reinsurance is insurance for insurance companies. So the
point of reinsurance is insurance companies have all of these
assets on their balance sheet, right, and they haven't a
defined mathematical outcome on how much loss I think they
have in any one individual year. Now, when you have
(02:35):
a catastrophe like a hurricane or a wildfire, that ruins
your whole business model. Basically, you don't want to be
in a position where you have to sell your liquid
assets to pay out claims from a catastrophe.
Speaker 2 (02:49):
Never be a four seller.
Speaker 1 (02:50):
Yeah, never be a four seller. So you can purchase insurance.
Companies can purchase reinsurance to reduce the volatility on their
balance sheet. So what that looks like is, you know,
you may have exposure to an earthquake or a hurricane
or a wildfire, and we can, as a reinsurance broker,
you slice up and tronch different layers of risk that
(03:13):
we sell off into the reinsurance market. In the reinsurance market,
there's you know, one hundred plus reinsurance companies, and on
each one of these individual reinsurance deals, you may have
anywhere from five, ten fifty reinsurers that are participating, just
little slices of each, so it's diversifying the risk across
the globe. So that background and reinsurance and risk assessment,
(03:38):
volatility management, structured finance, and selling volatility has kind of
been built into my DNA over the last decade. And
that was one of the reasons I was really fascinated
in bitcoin. With my background in finance, I was seeing this.
I was seeing bitcoin as a necessary addition to my portfolio.
(04:00):
From Marko, It's modern portfolio theory. Mark what's modern portfolio
theory is the addition of a new asset to your
portfolio with different risk return metrics increases the return and
reduces the risk of your entire portfolio. So I was
really fascinated with that. And you know, around twenty twenty,
I was, you know, around COVID times, I was really
(04:22):
getting orange pilled in the bitcoin space and going really
deep down the rabbit hole into bitcoin. And around the
same time twenty twenty one, I participated in the game
Stop trade, ended up liquidating my entire portfolio. I bought
game Stop shares, I rode game Stop to the top,
ended up liquidating at the top. I was like, I was,
I nailed it. I nailed the trade. I game. Theoried
(04:46):
my way through the entire dynamic of the trade, understanding
who are the players in the market, what are the
incentives in the market? Sentiment broke when Robin Hood turned
the buy button off and I needed to look for
an alter at a place to park capital. At that point,
I was fascinated with micro Strategy and what Sailor was doing.
(05:10):
I had watched tons of Sailor videos and then I
looked up just like, oh my god, this company converted
one hundred percent of their cash balance sheet into bitcoin.
This is this is the biggest story of all you
all finance. And I quickly realized, like that day when
I when I saw what micro Strategy was doing, this
is going to be the biggest company in the world. Right,
(05:30):
There's nobody that's going to catch this company there so
far ahead, and that story has just got compounded and
gotten bigger, bigger and bigger, not with not without some volatility,
not without volatility, without a ton of volatility.
Speaker 2 (05:43):
So yeah, yeah, I love that. Okay, good job, good story.
Sometimes we get lucky calling those tops, don't we. Yeah yeah,
I've had some of those. So in the in the
insurance game, it's all about writing risk properly, right, Because
if you don't write the risk properly the news everything,
you pay out the claims, you don't have the mindse
of that, right. So would you say that your sort
(06:04):
of background in finding that risk in those balance sheets,
to digging through their assets things like that then sort
of lends to looking at these types of companies today
and trying to understand the risk models that they're going through.
Speaker 1 (06:15):
Yeah. Absolutely. And one thing that's really unique and seeing
this this new landscape of bitcoin treasury companies is really
trying to define risk, right. I mean nobody's nobody's really
seen this before, right, this is a new phenomenon with
these companies that are adopting bitcoin. And the risks aren't
your typical risks of a corporation, right. You don't have
(06:39):
you don't have physical risk, you don't have you know,
product liability risk. You know, you don't have just traditional
risks that you would see in a traditional corporation. So
rethinking what is the framework of risk?
Speaker 2 (06:53):
Right?
Speaker 1 (06:53):
And That's where I've been spending a lot of time
the last couple of weeks is really rethinking, Okay, what
is the risk to these bigcoin treasury companies and the
ones that are particularly just focused on accumulating bitcoin and
how how do they how do you manage it? And
so to me, when I'm thinking about developing a risk framework,
I'm thinking about, uh, how is the balance sheet desired?
(07:18):
Which is very very similar. I think there's a lot
of correlation to uh, a lot of similarities to what
bitcoin treasury companies are doing and insurance companies, because insurance
companies are balance sheet companies. You're you're managing the volatility
on your balance sheet, right, that's the whole, that's the full.
They're both capturing money, they have the float. Yeah, and
then how do we leverage that balance sheet the float
(07:38):
into more assets, right exactly exactly, which I'm surprised there's
not more insurance people here yet. But yeah, uh so
when you when you think about it from a bitcoin
treasury perspective, it all comes down to like structure, design
of the balance sheet, volatility, how much leverage you're taking on,
how many other people in the market can do what
(07:58):
you do, Uh, liquidity in the marketplace, timing and duration,
duration of your liabilities, and that it's evolving really fast
and people people are trying to figure it out, and
we've seen tons of new metrics come into the space. Right,
(08:20):
We've got you know, how quickly is your bitcoin yield increasing?
It kind of started with bitcoin yield, you know, Sailor
and MSDR team put out a bunch of really good
metrics bitcoin yield, bitcoin gain or bitcoin dollar gain, bitcoin
dollar income. And now we're seeing, you know, m the
evolution of m NEV for multiple and net asset value
months to cover m NEV. And I think one element
(08:43):
that the market is really missing is the risk element,
you know, risk adjusted metrics. We need, we need risk
adjusted metrics to compare some of these companies. What is
what what a lot of people are trying to do
is uh compare, right, Like how do I how do
I compare one investment relative to another investment? And you
(09:04):
look at one data point and one investment may look
incredibly lucrative, but you may look at another data point
or another framework, and it may look significantly less lucrative
because of that different framework. So I think there's there's
a lot that needs to develop into the marketplace. And
I think this this vision of risk needs to be
(09:26):
overlaid on the entire market. And that's kind of that's
one of the things I'm kind of focused on.
Speaker 2 (09:32):
Well with your background, and I couldn't agree with you more.
That's something that I'm actually focused on as well, So
I want to dig more into that. But let's just
frame let's go back a little bit and frame this up.
So we have between treasury companies which I sort of
call bitcoeen treasury strategy companies versus companies that are pretty
in big one of the balance sheet. When you see
those as different, and if so, why.
Speaker 1 (09:53):
Uh yes, a little bit. See, you've got you've got
two companies. You've got like kind of a pure play
bitcoin accumulation company, which to me really seems like it
seems like a moment in time opportunity for a very
select small group of zombie companies that have the ability
(10:13):
to do something like this. This is a you know,
you've got a little bit of operational income or operational
design on a balance sheet and you're able to leverage
the capital markets, just given the euphoria that's happening in
the capital market space right now.
Speaker 2 (10:29):
When you're talking about a zombie company, you're talking about
sort of like strategy micro Strategy was in where they
have the software business, but it's sort of dead and
it's not really worth reinvesting into. Or you have game
Stop is a company that their business model is sort
of dead at least a dead man walking, but they're
still revenues, there's still balance sheet stuff there. So that
was right about the zombie company.
Speaker 1 (10:46):
Yeah, that's what I mean by a zombie company. Yeah, exactly.
It's just you know, revenue and growth is stagnating or
likely down. You're basically forced to make a decision and
do something art because if you don't, you die, right, right,
That's what what I view as a zombie company. And
a lot of these zombie companies that are adopting a
(11:08):
bitcoin treasury shredure, it's going to save them, right, It's
going to save their company and their ability to access
capital markets increase more like put volatility in your balance
sheet generates some liquidity. And you've seen companies like Simwihear
come out and you know, somewhere the similar scientific the
stock have been. You know, it was one of the
most highest performing stocks from twenty sixteen to twenty twenty,
(11:31):
and then they'd gone down pretty significantly. It is a
healthcare stock, it's a healthcare stock, and they were really
struggling to generate interest in stock. And you know, then
they announced that they were the second company to add
bitcoin to their treasury and the stock yeah, you know, booms.
It's like the biggest marketing tool in the market right now.
It's just add bitcoin of your treasury and you're going
(11:52):
to get liquidity.
Speaker 2 (11:53):
Right, But do you think the market anticipates in the
way that I'm sort of looking at it is like
putting bitcoin in your balance sheet? Man? Like, of course
companies have money, and of course they have a treasury,
and what is that parked in treasury bonds and equities?
Like what do I care?
Speaker 1 (12:10):
Right?
Speaker 2 (12:11):
And if some of that goes into bitcoin? Like, man,
so what right? Versus a treasury strategy company, which is like, okay, no,
we're going to try to this is our treasury, and
we're going to try to grow the bitcoin p share.
We're going to by tapping into capital markets. And that's
sort of like a new business model because its strategy
used to be a software company, right, They're not a
software company more. The product now is mstr or STRKSTRF,
(12:34):
so now they provide financial products. So the business model
changed and with game stop, the reason why these zombie
companies are dead men walking is because their business models
are dying the game stop adopted a bigwin treasury strategy,
they would become the next financial product, maybe like an ETF.
It's like hard to kind of compare these things versus
a company like Apple put in ano their balance sheet.
(12:56):
That's kind of what the distinction I see and so similar,
Like are they going to sort of shift their model
and they'll become the next financial asset?
Speaker 1 (13:02):
Yeah, it's it's a mindset shift, right, I think I
think you nailed it right. A company that's just adding
bitcoin as on their balance sheet as a hedge, it's
very different than a company that's actively seeking to add
more bitcoin to their balance sheet based on their operations,
the capital market activities, you know, et cetera, et cetera.
And it's it's become apparent that it's become very apparent
(13:26):
with the companies that the amount of capital that the
companies have raised in the last two I don't know,
six months billions of dollars, right, strategy makes up a
majority of it. But it's very apparent that this is
a very lucrative strategy to focus on accumulating more bitcoin
into the future. Now, and you think about like a
company like Similar or these other bitcoin treasury companies. I
(13:48):
mean that is the natural evolution is securitizing different tranches
of of risk on your corporate balance sheet. I think
that's the really big unlock here. The really big unlock
is that you've got bitcoin that you hold on your
balance sheet and you're monetizing the position in your capital
(14:10):
stack as collateral. That's what's happening. So you've got different
positions in your capital stack, so you've got the most
senior position. You can offer a security that's the most
senior position on your capital stack with reduced return but
(14:31):
also reduced risk. And every company should be offering these
types of products to the market. Right there's like a
jashes of preferred stock or convertible debt, and it's a
no brainer if you are focused on managing the risk
of your portfolio, managing the risk of your balance sheet.
And I think that's where all of these things start
to go.
Speaker 2 (14:52):
The risk, the risk, the risk. We're going to come
back to that. But we also have these zombie companies
as you call them. I would agree, where either either
shift or die kind of a thing. But now we're
also seeing a rapid increase, dozens a day of companies
that are shelf companies that are converting over to build
this out. Specifically, a lot of people were a tiny
(15:15):
little echo chamber here, but a lot of people think, oh, man,
this is the bubble. This is euphoria. I see it.
I've been here before in the Dachham era or in
the crypto craze or whatever. And so we're seeing now companies,
shelf companies just converting over and popping up left and right.
And then a lot of people think, are we in
a bubble? Is this something that's like going way too
fast and is going to explode? Or can the market
(15:36):
bear all.
Speaker 1 (15:36):
These Yeah, it's a good question. I'm trying to figure
it out. At the same time, I think personally, I
think the music's playing right now, and the music playing
you dance, right, That's right, the music's playing, you dance,
and there's just so much opportunity, and you can see
it with all the announcements we've got game Stop, Knock
a Moto, Meta Planet's going crazy sst right, egbah and
(16:02):
in all jurisdictions, which is just fascinating to see, and
that it gives me chills down my spine right, because
we're seeing bitcoin now work its way out into all
international jurisdictions. So everybody in each one of those jurisdictions
has the ability to access bitcoin like exposure within their
traditional rapper that they had access to within their market.
(16:24):
So it's a I think the market can bear a
lot of what's going on. That being said, there will
be a time when the music stops, and there will
be companies that will be exposed for being over leveraged
and and and they may have to weather a significant
storm that may be difficult to weather. And so so yes,
(16:48):
the music is playing.
Speaker 2 (16:50):
Yes, as Warren Buffet would say, when the tide goes out,
we see you swimming the game. Micaro strategy ad to
weather that in twenty twenty two, right, and a lot
of people kept saying that he's going to get liquidated
and all these things, and he built a position where
he wasn't obviously, but we could see what it took
to whether that, and so we can start to see, well,
these are potential risks. So for example, if your board
is not aligned, like that's gonna be a big problem.
(17:12):
It's not a founder led company with an aligning board
in a timel like in twenty twenty two, Like that's
going to fall apart. Also, I think if the base
of people buying it aren't right, if you bring in
a lot of short term traders, that could be a problem. Right,
So we can start to spring that up, But I
want to go back to how many can the market bear? This?
Here's kind of how I'm thinking about it, Like again
(17:34):
back to micro strategy strategy. Right, the software is no
longer their product the product. The product now is the
stock and then the three tickers that they have yep.
And when I look at it, like each one of
these companies is approaching a little bit differently, but their
stock is also going to be the financial product or
the product. And so then I ask myself, well, how
many financial products can the market bear? We have thousands?
Speaker 1 (17:56):
Right, tens of thousands.
Speaker 2 (17:58):
And if we wanted to look at it almost like
sort of like an ETF, because an ATF, basically eh
ETF sort of creates its own strategy, right, its own basket.
So each one of these is sort of maybe like
an ETF, and we we try to compare them to
things that we know. But we're going somewhere we've never
been before, right, But to try to compare it, it's
like sort of like a mancial park, sort of like
an ETF and like how many ethf's going up?
Speaker 1 (18:16):
Well, we could have unlimited unlimited it. Yeah.
Speaker 2 (18:18):
The problem I see is that in the in the euphoria,
we have this first mover advantage. The music's playing and
so like right now, every announcements they're about three hundred
percent five hundred percent percent like Kindly or you know, Knakamoto.
But then if you want to launch an ETF today,
how do you get attention to that?
Speaker 1 (18:37):
Right?
Speaker 2 (18:38):
So I think that's one big danger, like this the
diminishing return sort of thing. H But I guess would
you agree with that premise? So maybe the market could
bear hundreds or thousands of these types of companies.
Speaker 1 (18:49):
Yeah, I think they I think they can. I think
the market can be like long term sustainably yes, yeah,
And I think that's where the world is going. I
think it's if you're not adopting it a coin treasury
into the future, I think you're going to fail.
Speaker 2 (19:03):
You're never gonna make it.
Speaker 1 (19:04):
I think you're going to fail. And I think we
can see a lot of I mean, the traditional financial
equity marketers just enormous, the fixed income market enormous, real
estate market enormous, And there's a ton of a ton
of monetary premium that is inappropriate, inappropriately allocated from a
risk return perspective in those markets. So I think we're
(19:25):
going to see capital shift and move and and force
other companies to enter the fray. Here. It's you know,
adapt or die sort of situation. So I agree with
the premise that you know, it's each one of these
companies has their own it's like their own risk return profile,
and you might want a piece of all of them, right, Like,
if you think about building out an efficient frontier of
(19:48):
assets in a portfolio, you kind of want all of them, right,
you kind of want all of the pieces of them.
And now you can do it within bitcoin, right right
now you could. Now you can have a bitcoin efficient
frontier in your portfolio. Right You don't have to have
a you know, USD denominated one. You can have a
pure bitcoin one and and take pieces of all of
(20:09):
these things. Obviously, waiting an allocation is really scale and
allocation is really important.
Speaker 2 (20:16):
But yeah, with our fund, with the Big One Opportunity Fund,
I mean we're taking stabs at all these deals coming
across right now. But I see a lot across the
market that are like micro microcaps. So now you've can
start to hunt for these like smaller players that have
big one on the balance sheet. Do do you sort
of dumpster dive through those and look at these smaller
(20:36):
companies or are you sort of only just focused on
the big players.
Speaker 1 (20:39):
Yeah, it's it's a it's a good question. It's almost
like the penny stock like penny stock opportunities, right, And
to me, I've been I've been incredibly focused on like
the architecture of the equitting market, like how does this
whole thing work? And to me, when I zoom out
and I look at the architecture of the entire market,
a lot of the a lot of the inflows that
(21:01):
are coming into any equity are a function of the
design of the market, the passive flows. Right, I got
sixty percent of the market is pass I guess. So
you're talking pension funds for one k's banks, you know,
companies that are managing this iras et cetera. And there's
it's helpful to have scale to be into those passive
(21:25):
uh you know, index funds. But primarily, like the Russell
two thousand. So there's this idea of like, okay, just
get get to a billion so you can get included
in the Rustle two thousand, and that's like a huge
milestone and a huge achievement because you're going to have
passive money coming in the door to buy these equities
moving forward into propetuity. Then it's like, Okay, the next
goal is, you know, get a little bit higher, get
(21:47):
an MSCI index, then get into the S and P
five hundred, and then into the Nasdaq one hundred, and
you can kind of like work these milestones up. And
I think when every time you get included in each
one of these passive flow index ETFs, you're de risking,
and I think there's there's potential, you know, crazy returns
(22:07):
to being made on some of these small ones. But
my brain cook back to, like the risk return profile,
that's one of them.
Speaker 2 (22:13):
Yeah, well, I mean, and hopefully smarter people they always
start with the risk. Unfortunately, most people most retail think
about how much I can make?
Speaker 1 (22:21):
Yeah, right about the risk.
Speaker 2 (22:22):
On the downside, of course, the term hedge fund comes
because they hedge right their position. But you know what
we're seeing right now is there's a lot of people
jumping ship on MSTR. Yeah, for any number of reasons,
one of which Michael Saylor. People are mad that he's
hitting the ATM too hard and diluting the stock. But
a lot of it is also I think it's just
(22:43):
gotten so big that it doesn't grow at the same
rate as some of the smaller players. And to your point,
like it's maybe almost to the S and P five hundred, right,
like the risk is getting less, but then at the
same time volatility goes down. And then so there's a
lot of traders in there. I guess what's your Are
you a bitcoinner?
Speaker 1 (22:59):
Yeah?
Speaker 2 (22:59):
So, and then you buy these companies because of the
long term bitcoin vision?
Speaker 1 (23:05):
Yeah, how do ei them? Because of the long big
the long term vision.
Speaker 2 (23:08):
You also hold bitcoin?
Speaker 1 (23:09):
Yeah absolutely, okay, Yeah, it's like your base layer one
hundred percent. Yeah, that's my you know, it's never touching it. Okay, yeah, yeah, absolutely.
That was That was That was a monumental time for me.
When I moved bitcoin to cold storage off in an exchange,
I was like, oh my god, this is way bigger
than I than I thought this was, you know, like
I walked around the block, you know, with my hardware wallet,
(23:31):
and I was like, oh, you know this, it was
a yeah, it was a very like a visceral feeling.
You're like, oh my god, the money has changed. Money
has totally changed. But you know, thinking back to this
this concept of when I when I look at strategy
that there's relative to some of these other ones I
(23:52):
think they're in it's just a whole nother ballmark, right,
I mean they've got fifty times more. Uh, they've got
fifty times more bitcoin than the mag seven. Yeah combined, Right,
you've got Tesla's the only one in the mag seven
that the old bitcoint right, and they've got forty nine
times more. They'll do the amount of bitcoin then the
(24:13):
entire SMB five hundred, the top five hundred US companies
in the world.
Speaker 2 (24:17):
Right.
Speaker 1 (24:18):
And so if you think if any of these companies
start adopting anything remotely close to a bitcoin treasury strategy,
even if they just add bitcoin to the balance sheet,
that pushes strategy further up into the stratosphere. And they've
got the only ones in the market right now that
are offering these preferred you know, fixed income alternative debt instruments,
(24:40):
and they're going to have the highest credit quality forever.
And if you're talking about onboarding trillions of dollars of
capital into the bitcoin ecosystem, it's coming from fixed income. Right,
It's not coming from the equity market. It's going to
come from the fixed income market. It's going to come
from the real estate market. In these rappers that are
(25:01):
more appealing to those types of investors. And because the
risk return trade off is so much higher, so much better.
These products that Strategy is offering, the risk adjust returns
on them are monumentally higher than anything else in the
fixed income market.
Speaker 2 (25:17):
Right.
Speaker 1 (25:17):
You can look at like the preferred stock of PG
and E, Like the utility provider in California provides utilities
for two thirds of the state. Their preferred product is
paying like six point twenty five percent interest compared to
the strife product that Strategy provides. It's paying like ten
or eleven as of today. Right, And you think about
(25:37):
what are the what are the relative risks each of these? Right?
PG and E just paid out a four billion dollar
loss in twenty twenty from the twenty twenty eighteen wildfires,
the Paradise wildfires. Wow, it's rate this huge, Like physical
risk liability you know population risk that there are so
many risks in the and that's just one example. Right,
(25:58):
I just shine a light on you need.
Speaker 2 (26:00):
And that's a pretty healthy yield. A lot of the
market's much less than that, right BOMs or the AT
and t S or Yeah.
Speaker 1 (26:06):
Yeah, you can look at the Boeing and some of
these other ones and you start to compare them and
you see amount. You Okay, it's like, why would I
hold that with all of these risks when I can
hold this with digital risk involved other risk. And I
truly believe there's going to be like a landslide movement
at some point, it might be five years from now,
(26:28):
where all of this capital is getting reevaluated, like the
risk return gets re evaluated.
Speaker 2 (26:35):
Let's talk more about the risk. Yeah, so this is
a good segue because a lot of people think that
it is too risky because sure they don't have wildfire
risk or liability risk. To your point, but how can
he afford to pay that yield in perpetuity in perpetuity
and how can he continue to do that when micro
Strategy doesn't even have a business and no underlying cash row.
(26:57):
So there's certainly some risk there. Yeah, you look at
the My first step is I look at the balance sheet.
Right as of today, they're holding sixty four billion.
Speaker 1 (27:07):
Dollars a big point under balance sheet, and they have
ten billion dollars worth of debt. Of that ten billion
dollars worth of debt, five billion of it is already
trading in the money. It's a convertible bond. So really
their their pro forma debt is like five billion dollars.
In terms of interest income payable, I think as of
right now it's about maybe two hundred million dollars a
year something like that. To put that in perspective, Strategy
(27:29):
raised seven hundred million dollars last week on the ATM
of Strike and MSTR. So they have the ability to
raise capital incredibly quickly and fast. I mean they raised
last year in one month. I think they raised seventeen
billion dollars in one month. And it's to me, I
(27:50):
see this as this is just this is a pure
risk management.
Speaker 2 (27:53):
Put in a down market they have they potentially could
lose the ability to raise money so quickly or or
raise money at all. They could and so then what happens.
Speaker 1 (28:01):
Yeah, they could they could delay the they could delay
the dividends payable. That is a function in strike and strife.
They have the ability to do that, they think most dividends. Yeah,
but it just it's very similar to like you can
refinance the debt as well, right, you can as long
as you have a strong balance sheet, you can go
(28:23):
get capital, Like you can go refinance your debt even
even in a bad market yet, right, I mean, let's
just say the price of bitcoin fell fifty percent of that.
Right now, Strategy has thirty two billion dollars of bitcoin
and ten billion dollars of debt. Would you underwrite alone
for them?
Speaker 2 (28:41):
Still seems pretty good to me.
Speaker 1 (28:42):
I would Still it looks like they're still incredibly strong. Yeah,
And and I don't think people quite conceptualize that, right.
This is this is a financial strength play, and Strategy
is very focused on managing their financial strength. And you
think about, like, okay, back to this risk. What is
the risk? Right? The price of bitcoin we need to
(29:02):
go down to sixteen thousand dollars and stay there for
five years in order for Strategy even remotely without even
thinking about refinancing it to remotely be at a position
of risk to those holders.
Speaker 2 (29:16):
I don't want to spend all our time talking about strategy,
although it's the big dog in the space and Michael
Saylor is sharing that playbook with everybody yet so it's
important to understand that because everyone's running the derivative off
of that if you rail. I don't want to spend
all our time talking about it, but I do want
to ask one more question about it before we move on.
So one big thing that's been happening in the market
is proof of reserves, and proof of reserves is in bitcoin.
(29:39):
We say, you know, don't trust verify, and so there's
been a big call for years of exchanges to show
the reserves because like with the FTX, we found out
they didn't have a bitcoin that they said they did,
so people help paper claims and so there's a lot
of uproar after the last couple of days when Sailor
took the stage talking about proof of reserves. What's your
take on that.
Speaker 1 (29:59):
I think the the market sentiment is a little bit
overblown on the proof of reserves. I mean me personally,
would it be ideal that Strategies showed the brief proof
of reserves? Absolutely? Absolutely, I mean there are other companies
that are doing it. Do I think there is some
risk of doing it. Absolutely do. I think it's a
risk with bitcoin and the protocol of bitcoin not at all.
(30:21):
It's human risk, it's target risk. Right. You have if
those wallets are out that is showing information, it's just
more information that the market has to potentially target some
kind of social engineering attack. You also have elements of
I was talking about this with somebody yesterday of like
(30:43):
dusting dusting attacks is becoming a thing of dusting is
where you have like corrupt like old silk road bitcoin
that's just being sent to these wallet addresses because they
know what they are. And now you just create this
nightmare for.
Speaker 2 (30:59):
A couple.
Speaker 1 (31:00):
It's like who's managing it? Where did it come from?
What is this? And you've got to figure it out. Additionally,
there's there's elements that the market doesn't quite understand too. Right.
Let's just say strategies got this all of their capital
in two thousand different wallets, a ton of wallets, and
(31:20):
the value of the bitcoin rises. They may want to
rebalance all of their portfolios such that they don't have.
Speaker 3 (31:26):
You know, too much in what they might want to
make four thousand, right, but the price bitcoin doubles, you
might want to be like making more wallets so you
don't have too much in anyone And that might be
a function of insurance policies that because custodians provide and
all of a sudden you may see fud in the
market of strategy selling your bitcoin because they moved it.
Speaker 1 (31:44):
And it's like we saw this with the US government, right,
Like people were like, oh, the US governments sold their
bitcoinke It's like, no, they just moved it.
Speaker 2 (31:50):
But we don't know that.
Speaker 1 (31:51):
We don't know that. But I know what just in
you know what I mean?
Speaker 2 (31:54):
So like the way I look at it also is
that certainly don't trust verify, but I think I think
it could potentially give a lot of false hope because
number one.
Speaker 1 (32:05):
It's in equity.
Speaker 2 (32:06):
They're not immutable, right, like right, it's there's counterparty risk yep,
it could be revoked, right whatever number one. Number two,
to your point about the capital stack, just because I
see that there's bitcoin there doesn't mean I have a
claim to it. Right Where am I in the stack?
Speaker 1 (32:21):
Right? Right?
Speaker 2 (32:22):
So I don't know how encumbered it could be. Right,
We have no idea even with an exchange. If an
exchange shows me a proof reserve, I don't know what
encumbrance that might have, so for it sort of then
leads to a false sense of security. And then I
almost think, like, if people are really depending on that,
there's the ethos and the ideology, and like do I
(32:42):
want to be aligned with that? I guess. But then
at the same time, like I said, it's like a
false belief and if people are really hanging it on that,
maybe they're not understanding the way equities work in the
market works.
Speaker 1 (32:52):
Right, Yeah, you don't know the liabilities. You don't know
the liability side of it, right, just because somebody shows
proof reserves, I mean they could be leveraged center of
the perform and you have no idea. It's like it's
a much bigger focus on the liability side of things. Also, right,
all of these companies have audits, annual audits. Yeah, by right,
do you want do you really think that all of
(33:13):
the executive staff and the auditor want to go to jail?
Speaker 2 (33:18):
And everyone would say, but en run yeah, but.
Speaker 1 (33:20):
In run right? Yeah, but end round? I mean the
world's changed since then round a.
Speaker 2 (33:24):
Nuclear mom dropped once before too.
Speaker 1 (33:25):
Yeah. Great, It's it's like it's it's black swan right
to me. It's binary, right, they have the bitcoin.
Speaker 2 (33:31):
Or they dealt.
Speaker 1 (33:32):
If they don't, the entire market is scripped. Yeah, at
least for at least for an extended period of time.
Speaker 2 (33:40):
Yeah, all right, let's move on past micro strategy. So
bushing companies popping up left and right, Like I said Thier, overnight,
amazing amazing returns. The music's dancing, we're dancing, right. But
what I guess what would you say when you're looking
at these new companies? Well, I guess number one? Are
you look at the new companies?
Speaker 1 (34:01):
Absolutely?
Speaker 2 (34:01):
And then number two, Well, let's start with let's start
with if you were to let's start with the risk.
What do you think the biggest risks are that you're
what are the red flags that you would see glaring?
There's a lot of unknowns we don't know yet because
it's evolving so quickly. But from what you do see
and what you do know, if you saw a company
doing these couple of things, what would be red flags
(34:23):
for you? Uh?
Speaker 1 (34:25):
Secured debt okay, debt secured by the bigcoin and my
only the instead of the stock it well yeah right,
instead of being unsecured right, effectively, the any any debt
structure of being collateralized by the bitcoin. And my concern
with that is the traditional financial market is so much bigger, bigger,
(34:52):
so much bigger, vastly larger than the bitcoin market at
the moment, the incentives are not aligned, right. So if
somebody is offering these debt instruments that maybe they're decent terms,
maybe will get you know, generate two hundred and fifty
million dollars more of capital, which is great. My concern
is the provider of that debt calls up his trad
(35:14):
five buddies at any point of weakness and says, hey,
let's bury these guys. And that's what happens. Let's bury
these guys. And and then at that point if if
they start getting buried, you may lose sentiment in like
retail traders, and have no liquidity going back up. You
(35:36):
have no liquidity there to backstop it. And the traditional
financial market, again is so much bigger. They could do
that for an extended period of time. I mean, we've
seen it with these like targeted short interests on a
lot of these stocks like Walgreens to game stole, game stop,
the same thing. They can they started, they could, they
could be there longer than you, and they're bigger than you,
(35:56):
and they.
Speaker 2 (35:57):
Will get more billions from their buddies.
Speaker 1 (35:58):
They're stronger than you, they're bigger than you. And that's
kind of my concern in the market is that the
incentives aren't aligned for the security debt instruments at the moment,
and there could be a situation where the convertible bond
the seller may look at like that is an opportunity, like, oh,
(36:19):
I could go get bitcoin at a discount, right, I
go bury this company and I go get bitcoin at
a discount. And so that's that's one of the most
glaring risks I'm kind of looking at right now. It's
just like the structure of the leverage, like how are
you getting leverage? Where does it come from? And I
think there are ways to do it that may be
(36:41):
less existential risky than others.
Speaker 2 (36:45):
Okay, that's good. Yeah, So then let's talk about the
converse of that. So if you were going to imagine
the best company starting today, well, how would they do it?
Speaker 1 (36:55):
Yeah? I've been trying to think about this as well,
and really I think having an operating company that has
income coming in from a diversified stream is really important.
Uh that because that hasn't been important for Metaplanet. Hasn't
been important for Metaplanet. I mean, they're they're generating an
income stream right now. They're doing it right now by
selling cash secured puts, you know, so that is that
(37:18):
is a revenue stream for them. But Metaplanet also hasn't
weather to storm yet, right right, So I think that
having that operating cash flow will be incredibly important for
cover the debt service. Yeah, cover debt service, but also
have you know a sentiment boost, right It's like a
sentiment booster. If bitcoin goes down fifty percent and you're like, oh,
(37:42):
this little tiny company is still buying you know, tons
of bitcoin and everybody else is paused, Yeah, that that
might be incredibly attractive. You're like, wow, this is a
They're they're accumulating faster than anybody else right now because
they have this other diverse cash flow. So, uh, the
rest spot cash managed, managed leverage, being prepared to weather
(38:04):
a storm, but I think a storm was coming at
some point in the future. So that that's kind of
what I'm focused on. And then the ability to what
I think is really cool here and unique is this
because of strategy has grown so fast and so big
they and and they're so consistent and transparent about what
(38:24):
they're doing. They don't want to go chase any weird
capital pols. They are folks. They are laser focused on
the fixed income market, right and credibly transparent about it. Now,
that provides opportunity for these other players in the field
to go tap different alternative capital cools that may be
(38:45):
just unique and weird and different, right. I mean, like
what Strive is doing and uh looking at buying company
distressed biotech companies for less than that cash and basically
getting bitcoin at a discounty by doing that and and
holding the IP that comes along with it to bunch
it up and sell it to no big biotechs when
(39:05):
the market shifts and moved around, and there are thousands
of opportunities like that. And for me, I'm thinking about
that in the insurance space, Like the insurance space is
so archaic and old, Like that's a huge untapped market
that I've got my eyes pretty focused on two to
go identify opportunity over there. So that's I think going
(39:29):
to lead to the most success with these bitcoin treasury
companies is like identifying unique pools of capital that need
that need yah, need it.
Speaker 2 (39:40):
I sat down with grand cardon yesterday and he has
maybe one of the best ones that I've seen right now.
And I mean, obviously he's a real estate developer and
now he's building real estate projects that will be paired
with bitcoin.
Speaker 1 (39:53):
Yeah, he's amazing. So you have in the United States
thirty year debt.
Speaker 2 (39:58):
No one else in the world has that, and most
of the real estate debt is somewhat you could say,
subsidized by the government that super low rates. So I
get super cheap debt turned out super super super far.
But then in the US we have tax write offs
from the you know, depreciation from the from the real estate.
So then I get the tax depreciation from that. Then
(40:19):
I have tenants that pay that for me, and that
goes up with inflation, and then he takes that. So
you have basically no volatility asset yep. And then all
the cash flows from that go into bitcoin.
Speaker 1 (40:32):
Yeah.
Speaker 2 (40:32):
So you have a nova, super cheap, subsidized long term
money with no volatility paired with a high volatility asset
like bitcoin. And his goal is to I think he said,
build up nine or twelve of these, bundle them together,
and then watch that as a public traded Bickuin treasury
strategy company.
Speaker 1 (40:49):
Yeah, it's a no brainer. Yeah.
Speaker 2 (40:50):
And so it's like that's like one idea of like
a whole whole subset of pools of cabbo.
Speaker 1 (40:56):
Yeah, I mean private equity. There's very similar opportunities in
equity market. Just like, throw a bitcoin kicker on anything, yeah,
any of it, for all, any transaction, any transaction that's
made you throw a bitcoin kicker on it, you know,
five to ten percent, and it's like, okay, well that
whole transaction changes. But it could be a duration asset.
(41:16):
Real Estate's very very clear that's an opport just because.
Speaker 2 (41:20):
Of the long term cheat money. And I'll tell you
it's a good edition.
Speaker 1 (41:24):
All right.
Speaker 2 (41:24):
So where do you think the what do you think
bitcoin and bitcoin treasury strategy companies aren't five years?
Speaker 1 (41:31):
Yeah, okay, so five years from now, so we're talking
twenty thirty, twenty thirty. I think bitcoin is a six
to seven trillion dollar asset, and I think these bitcoin
treasury companies are. I think there's going to be a thousand,
at least a thousand of them, and yeah, I think
(41:56):
they're all going to be continuing to shift this way.
I think the USC is going to hold a significant
amount of bitcoin. I think Nation States are going to
hold a significant amount of bitcoin. And we'll see some
of the larger companies have a cost basis of over
a million dollars per bitcoin, and I don't think they'll
take it seriously until that.
Speaker 2 (42:14):
So you think bitcoin could be I guess that's three
to four times And do you think some of these
treasury shaddy companies will be two three four times bitcoins
most price? Uh?
Speaker 1 (42:27):
Yeah, yeah, I mean I think they're going to move faster, right,
because what is an equity and equity is a forward looking,
forward looking view. So how far into the future do
we look? And if we think bitcoin is the strongest
asset on the planet, and then these companies have x
amount of bitcoin x percent of the network, you know
they should be priced as such. Yet and so how
far on the forward do you look? And how far
(42:49):
forward do you look? And like in videos ten years
forward looking? If you start looking ten years forward looking,
like is strategy a five to ten trillion dollar company?
Speaker 2 (42:59):
Maybe?
Speaker 1 (43:00):
Right? Are these other companies, you know, hundreds of billion
dollar companies? Absolutely, and they're going to have the ability
to eat and consume other companies that are distressed because
they don't have bitcoin on a balance yet. They've got
no strength, no liquidity, and they're going to be able
to absorb a lot of these companies, they think.
Speaker 2 (43:17):
Now cool, all right, anything you want to shout out
bring attention to, We'll link to your Twitter profiles down below.
Speaker 1 (43:24):
Yeah. No, I've got a crew. We've got a show
called mstr True North or just True North, and we
talk every Wednesday about what's going on with strategy, what's
going on with bitcoin, treasury companies, the evolution of these
financial products, securitization of bitcoin, how the market's changing and evolving.
And my Twitter is at hunter Jets on my Twitter
ex handles at h I do. I post a lot
(43:48):
of research and analytics on the space and what I'm thinking.
Every now and then I'll do, you know, thirty minutes
to an hour long just Live show and I'll just
talk about everything that I'm going through in my thought process,
what's going on in the market. Yeah cool, all right,
thanks so much, appreciate it.
Over the past eleven years. I was a reinsurance broker.
I wanted to get a job an investment banking right
out of college. I rode game stop to the top.
I nailed the trade. Sentiment broke when Robin Hood turned
the buy button off and I needed to look for
an alternative place to park capital. I was fascinated with
micro strategy. This company converted one hundred percent of their
(00:20):
cash balance sheet into bitcoin. I quickly realized, this is
going to be the biggest company in the world. The
traditional financial market is so much bigger, bigger, vastly larger
than the bitcoin market at the moment. If you're not
adopting a bitcoin treasury into the future, I think you're
going to fail.
Speaker 2 (00:37):
Your insights have been amazing, which is why you generate
a lot of noises.
Speaker 1 (00:40):
But where do you come from?
Speaker 2 (00:41):
Why is your viewpoint unique in this space?
Speaker 1 (00:44):
I think the.
Speaker 2 (00:47):
Jeff Walton. Jeff Walton, let's talk about the most exciting
thing going on in the bitcoin space right now, which
is sort of the top of the down here at
the Bitlin conference, which is bitcoin treasury companies. Before we
dive in, I want to set the stage of what
bigcoin treasury companies are versus maybe just big one of
the balance sheet. I want to talk about the froth
(01:09):
in the market, potential risks in the market, where you
see this market going. We have a lot of stuff
to dig into. But before we do that, Like, you're
new in the space, You've generated a lot of noise.
Your insights have been amazing, which is why you generate
a lot of noise. Where'd you come from? N Why
is your viewpoint unique in this space?
Speaker 1 (01:29):
Yeah? Yeah, great question. So you know, over the past decade,
actually eleven years, I was a reinsurance broker, so a
little bit of my background. So in college I studied
business and economics. I had to focus on finance and
a minor in math, so really interested in markets, economics,
(01:49):
how the markets work, how things work together. I wanted
to get a job an investment banking right out of college,
and I ended up getting a job in reinsurance in Seattle.
So I took it, and I went that direction, and
I ended up falling in love with reinsurance. It was
super fascinating. I was able to, you know, be very
(02:10):
creative and structuring financial products.
Speaker 2 (02:13):
I explained reinsurance.
Speaker 1 (02:14):
Yeah, so reinsurance is insurance for insurance companies. So the
point of reinsurance is insurance companies have all of these
assets on their balance sheet, right, and they haven't a
defined mathematical outcome on how much loss I think they
have in any one individual year. Now, when you have
(02:35):
a catastrophe like a hurricane or a wildfire, that ruins
your whole business model. Basically, you don't want to be
in a position where you have to sell your liquid
assets to pay out claims from a catastrophe.
Speaker 2 (02:49):
Never be a four seller.
Speaker 1 (02:50):
Yeah, never be a four seller. So you can purchase insurance.
Companies can purchase reinsurance to reduce the volatility on their
balance sheet. So what that looks like is, you know,
you may have exposure to an earthquake or a hurricane
or a wildfire, and we can, as a reinsurance broker,
you slice up and tronch different layers of risk that
(03:13):
we sell off into the reinsurance market. In the reinsurance market,
there's you know, one hundred plus reinsurance companies, and on
each one of these individual reinsurance deals, you may have
anywhere from five, ten fifty reinsurers that are participating, just
little slices of each, so it's diversifying the risk across
the globe. So that background and reinsurance and risk assessment,
(03:38):
volatility management, structured finance, and selling volatility has kind of
been built into my DNA over the last decade. And
that was one of the reasons I was really fascinated
in bitcoin. With my background in finance, I was seeing this.
I was seeing bitcoin as a necessary addition to my portfolio.
(04:00):
From Marko, It's modern portfolio theory. Mark what's modern portfolio
theory is the addition of a new asset to your
portfolio with different risk return metrics increases the return and
reduces the risk of your entire portfolio. So I was
really fascinated with that. And you know, around twenty twenty,
I was, you know, around COVID times, I was really
(04:22):
getting orange pilled in the bitcoin space and going really
deep down the rabbit hole into bitcoin. And around the
same time twenty twenty one, I participated in the game
Stop trade, ended up liquidating my entire portfolio. I bought
game Stop shares, I rode game Stop to the top,
ended up liquidating at the top. I was like, I was,
I nailed it. I nailed the trade. I game. Theoried
(04:46):
my way through the entire dynamic of the trade, understanding
who are the players in the market, what are the
incentives in the market? Sentiment broke when Robin Hood turned
the buy button off and I needed to look for
an alter at a place to park capital. At that point,
I was fascinated with micro Strategy and what Sailor was doing.
(05:10):
I had watched tons of Sailor videos and then I
looked up just like, oh my god, this company converted
one hundred percent of their cash balance sheet into bitcoin.
This is this is the biggest story of all you
all finance. And I quickly realized, like that day when
I when I saw what micro Strategy was doing, this
is going to be the biggest company in the world. Right,
(05:30):
There's nobody that's going to catch this company there so
far ahead, and that story has just got compounded and
gotten bigger, bigger and bigger, not with not without some volatility,
not without volatility, without a ton of volatility.
Speaker 2 (05:43):
So yeah, yeah, I love that. Okay, good job, good story.
Sometimes we get lucky calling those tops, don't we. Yeah yeah,
I've had some of those. So in the in the
insurance game, it's all about writing risk properly, right, Because
if you don't write the risk properly the news everything,
you pay out the claims, you don't have the mindse
of that, right. So would you say that your sort
(06:04):
of background in finding that risk in those balance sheets,
to digging through their assets things like that then sort
of lends to looking at these types of companies today
and trying to understand the risk models that they're going through.
Speaker 1 (06:15):
Yeah. Absolutely. And one thing that's really unique and seeing
this this new landscape of bitcoin treasury companies is really
trying to define risk, right. I mean nobody's nobody's really
seen this before, right, this is a new phenomenon with
these companies that are adopting bitcoin. And the risks aren't
your typical risks of a corporation, right. You don't have
(06:39):
you don't have physical risk, you don't have you know,
product liability risk. You know, you don't have just traditional
risks that you would see in a traditional corporation. So
rethinking what is the framework of risk?
Speaker 2 (06:53):
Right?
Speaker 1 (06:53):
And That's where I've been spending a lot of time
the last couple of weeks is really rethinking, Okay, what
is the risk to these bigcoin treasury companies and the
ones that are particularly just focused on accumulating bitcoin and
how how do they how do you manage it? And
so to me, when I'm thinking about developing a risk framework,
I'm thinking about, uh, how is the balance sheet desired?
(07:18):
Which is very very similar. I think there's a lot
of correlation to uh, a lot of similarities to what
bitcoin treasury companies are doing and insurance companies, because insurance
companies are balance sheet companies. You're you're managing the volatility
on your balance sheet, right, that's the whole, that's the full.
They're both capturing money, they have the float. Yeah, and
then how do we leverage that balance sheet the float
(07:38):
into more assets, right exactly exactly, which I'm surprised there's
not more insurance people here yet. But yeah, uh so
when you when you think about it from a bitcoin
treasury perspective, it all comes down to like structure, design
of the balance sheet, volatility, how much leverage you're taking on,
how many other people in the market can do what
(07:58):
you do, Uh, liquidity in the marketplace, timing and duration,
duration of your liabilities, and that it's evolving really fast
and people people are trying to figure it out, and
we've seen tons of new metrics come into the space. Right,
(08:20):
We've got you know, how quickly is your bitcoin yield increasing?
It kind of started with bitcoin yield, you know, Sailor
and MSDR team put out a bunch of really good
metrics bitcoin yield, bitcoin gain or bitcoin dollar gain, bitcoin
dollar income. And now we're seeing, you know, m the
evolution of m NEV for multiple and net asset value
months to cover m NEV. And I think one element
(08:43):
that the market is really missing is the risk element,
you know, risk adjusted metrics. We need, we need risk
adjusted metrics to compare some of these companies. What is
what what a lot of people are trying to do
is uh compare, right, Like how do I how do
I compare one investment relative to another investment? And you
(09:04):
look at one data point and one investment may look
incredibly lucrative, but you may look at another data point
or another framework, and it may look significantly less lucrative
because of that different framework. So I think there's there's
a lot that needs to develop into the marketplace. And
I think this this vision of risk needs to be
(09:26):
overlaid on the entire market. And that's kind of that's
one of the things I'm kind of focused on.
Speaker 2 (09:32):
Well with your background, and I couldn't agree with you more.
That's something that I'm actually focused on as well, So
I want to dig more into that. But let's just
frame let's go back a little bit and frame this up.
So we have between treasury companies which I sort of
call bitcoeen treasury strategy companies versus companies that are pretty
in big one of the balance sheet. When you see
those as different, and if so, why.
Speaker 1 (09:53):
Uh yes, a little bit. See, you've got you've got
two companies. You've got like kind of a pure play
bitcoin accumulation company, which to me really seems like it
seems like a moment in time opportunity for a very
select small group of zombie companies that have the ability
(10:13):
to do something like this. This is a you know,
you've got a little bit of operational income or operational
design on a balance sheet and you're able to leverage
the capital markets, just given the euphoria that's happening in
the capital market space right now.
Speaker 2 (10:29):
When you're talking about a zombie company, you're talking about
sort of like strategy micro Strategy was in where they
have the software business, but it's sort of dead and
it's not really worth reinvesting into. Or you have game
Stop is a company that their business model is sort
of dead at least a dead man walking, but they're
still revenues, there's still balance sheet stuff there. So that
was right about the zombie company.
Speaker 1 (10:46):
Yeah, that's what I mean by a zombie company. Yeah, exactly.
It's just you know, revenue and growth is stagnating or
likely down. You're basically forced to make a decision and
do something art because if you don't, you die, right, right,
That's what what I view as a zombie company. And
a lot of these zombie companies that are adopting a
(11:08):
bitcoin treasury shredure, it's going to save them, right, It's
going to save their company and their ability to access
capital markets increase more like put volatility in your balance
sheet generates some liquidity. And you've seen companies like Simwihear
come out and you know, somewhere the similar scientific the
stock have been. You know, it was one of the
most highest performing stocks from twenty sixteen to twenty twenty,
(11:31):
and then they'd gone down pretty significantly. It is a
healthcare stock, it's a healthcare stock, and they were really
struggling to generate interest in stock. And you know, then
they announced that they were the second company to add
bitcoin to their treasury and the stock yeah, you know, booms.
It's like the biggest marketing tool in the market right now.
It's just add bitcoin of your treasury and you're going
(11:52):
to get liquidity.
Speaker 2 (11:53):
Right, But do you think the market anticipates in the
way that I'm sort of looking at it is like
putting bitcoin in your balance sheet? Man? Like, of course
companies have money, and of course they have a treasury,
and what is that parked in treasury bonds and equities?
Like what do I care?
Speaker 1 (12:10):
Right?
Speaker 2 (12:11):
And if some of that goes into bitcoin? Like, man,
so what right? Versus a treasury strategy company, which is like, okay, no,
we're going to try to this is our treasury, and
we're going to try to grow the bitcoin p share.
We're going to by tapping into capital markets. And that's
sort of like a new business model because its strategy
used to be a software company, right, They're not a
software company more. The product now is mstr or STRKSTRF,
(12:34):
so now they provide financial products. So the business model
changed and with game stop, the reason why these zombie
companies are dead men walking is because their business models
are dying the game stop adopted a bigwin treasury strategy,
they would become the next financial product, maybe like an ETF.
It's like hard to kind of compare these things versus
a company like Apple put in ano their balance sheet.
(12:56):
That's kind of what the distinction I see and so similar,
Like are they going to sort of shift their model
and they'll become the next financial asset?
Speaker 1 (13:02):
Yeah, it's it's a mindset shift, right, I think I
think you nailed it right. A company that's just adding
bitcoin as on their balance sheet as a hedge, it's
very different than a company that's actively seeking to add
more bitcoin to their balance sheet based on their operations,
the capital market activities, you know, et cetera, et cetera.
And it's it's become apparent that it's become very apparent
(13:26):
with the companies that the amount of capital that the
companies have raised in the last two I don't know,
six months billions of dollars, right, strategy makes up a
majority of it. But it's very apparent that this is
a very lucrative strategy to focus on accumulating more bitcoin
into the future. Now, and you think about like a
company like Similar or these other bitcoin treasury companies. I
(13:48):
mean that is the natural evolution is securitizing different tranches
of of risk on your corporate balance sheet. I think
that's the really big unlock here. The really big unlock
is that you've got bitcoin that you hold on your
balance sheet and you're monetizing the position in your capital
(14:10):
stack as collateral. That's what's happening. So you've got different
positions in your capital stack, so you've got the most
senior position. You can offer a security that's the most
senior position on your capital stack with reduced return but
(14:31):
also reduced risk. And every company should be offering these
types of products to the market. Right there's like a
jashes of preferred stock or convertible debt, and it's a
no brainer if you are focused on managing the risk
of your portfolio, managing the risk of your balance sheet.
And I think that's where all of these things start
to go.
Speaker 2 (14:52):
The risk, the risk, the risk. We're going to come
back to that. But we also have these zombie companies
as you call them. I would agree, where either either
shift or die kind of a thing. But now we're
also seeing a rapid increase, dozens a day of companies
that are shelf companies that are converting over to build
this out. Specifically, a lot of people were a tiny
(15:15):
little echo chamber here, but a lot of people think, oh, man,
this is the bubble. This is euphoria. I see it.
I've been here before in the Dachham era or in
the crypto craze or whatever. And so we're seeing now companies,
shelf companies just converting over and popping up left and right.
And then a lot of people think, are we in
a bubble? Is this something that's like going way too
fast and is going to explode? Or can the market
(15:36):
bear all.
Speaker 1 (15:36):
These Yeah, it's a good question. I'm trying to figure
it out. At the same time, I think personally, I
think the music's playing right now, and the music playing
you dance, right, That's right, the music's playing, you dance,
and there's just so much opportunity, and you can see
it with all the announcements we've got game Stop, Knock
a Moto, Meta Planet's going crazy sst right, egbah and
(16:02):
in all jurisdictions, which is just fascinating to see, and
that it gives me chills down my spine right, because
we're seeing bitcoin now work its way out into all
international jurisdictions. So everybody in each one of those jurisdictions
has the ability to access bitcoin like exposure within their
traditional rapper that they had access to within their market.
(16:24):
So it's a I think the market can bear a
lot of what's going on. That being said, there will
be a time when the music stops, and there will
be companies that will be exposed for being over leveraged
and and and they may have to weather a significant
storm that may be difficult to weather. And so so yes,
(16:48):
the music is playing.
Speaker 2 (16:50):
Yes, as Warren Buffet would say, when the tide goes out,
we see you swimming the game. Micaro strategy ad to
weather that in twenty twenty two, right, and a lot
of people kept saying that he's going to get liquidated
and all these things, and he built a position where
he wasn't obviously, but we could see what it took
to whether that, and so we can start to see, well,
these are potential risks. So for example, if your board
is not aligned, like that's gonna be a big problem.
(17:12):
It's not a founder led company with an aligning board
in a timel like in twenty twenty two, Like that's
going to fall apart. Also, I think if the base
of people buying it aren't right, if you bring in
a lot of short term traders, that could be a problem. Right,
So we can start to spring that up, But I
want to go back to how many can the market bear? This?
Here's kind of how I'm thinking about it, Like again
(17:34):
back to micro strategy strategy. Right, the software is no
longer their product the product. The product now is the
stock and then the three tickers that they have yep.
And when I look at it, like each one of
these companies is approaching a little bit differently, but their
stock is also going to be the financial product or
the product. And so then I ask myself, well, how
many financial products can the market bear? We have thousands?
Speaker 1 (17:56):
Right, tens of thousands.
Speaker 2 (17:58):
And if we wanted to look at it almost like
sort of like an ETF, because an ATF, basically eh
ETF sort of creates its own strategy, right, its own basket.
So each one of these is sort of maybe like
an ETF, and we we try to compare them to
things that we know. But we're going somewhere we've never
been before, right, But to try to compare it, it's
like sort of like a mancial park, sort of like
an ETF and like how many ethf's going up?
Speaker 1 (18:16):
Well, we could have unlimited unlimited it. Yeah.
Speaker 2 (18:18):
The problem I see is that in the in the euphoria,
we have this first mover advantage. The music's playing and
so like right now, every announcements they're about three hundred
percent five hundred percent percent like Kindly or you know, Knakamoto.
But then if you want to launch an ETF today,
how do you get attention to that?
Speaker 1 (18:37):
Right?
Speaker 2 (18:38):
So I think that's one big danger, like this the
diminishing return sort of thing. H But I guess would
you agree with that premise? So maybe the market could
bear hundreds or thousands of these types of companies.
Speaker 1 (18:49):
Yeah, I think they I think they can. I think
the market can be like long term sustainably yes, yeah,
And I think that's where the world is going. I
think it's if you're not adopting it a coin treasury
into the future, I think you're going to fail.
Speaker 2 (19:03):
You're never gonna make it.
Speaker 1 (19:04):
I think you're going to fail. And I think we
can see a lot of I mean, the traditional financial
equity marketers just enormous, the fixed income market enormous, real
estate market enormous, And there's a ton of a ton
of monetary premium that is inappropriate, inappropriately allocated from a
risk return perspective in those markets. So I think we're
(19:25):
going to see capital shift and move and and force
other companies to enter the fray. Here. It's you know,
adapt or die sort of situation. So I agree with
the premise that you know, it's each one of these
companies has their own it's like their own risk return profile,
and you might want a piece of all of them, right, Like,
if you think about building out an efficient frontier of
(19:48):
assets in a portfolio, you kind of want all of them, right,
you kind of want all of the pieces of them.
And now you can do it within bitcoin, right right
now you could. Now you can have a bitcoin efficient
frontier in your portfolio. Right You don't have to have
a you know, USD denominated one. You can have a
pure bitcoin one and and take pieces of all of
(20:09):
these things. Obviously, waiting an allocation is really scale and
allocation is really important.
Speaker 2 (20:16):
But yeah, with our fund, with the Big One Opportunity Fund,
I mean we're taking stabs at all these deals coming
across right now. But I see a lot across the
market that are like micro microcaps. So now you've can
start to hunt for these like smaller players that have
big one on the balance sheet. Do do you sort
of dumpster dive through those and look at these smaller
(20:36):
companies or are you sort of only just focused on
the big players.
Speaker 1 (20:39):
Yeah, it's it's a it's a good question. It's almost
like the penny stock like penny stock opportunities, right, And
to me, I've been I've been incredibly focused on like
the architecture of the equitting market, like how does this
whole thing work? And to me, when I zoom out
and I look at the architecture of the entire market,
a lot of the a lot of the inflows that
(21:01):
are coming into any equity are a function of the
design of the market, the passive flows. Right, I got
sixty percent of the market is pass I guess. So
you're talking pension funds for one k's banks, you know,
companies that are managing this iras et cetera. And there's
it's helpful to have scale to be into those passive
(21:25):
uh you know, index funds. But primarily, like the Russell
two thousand. So there's this idea of like, okay, just
get get to a billion so you can get included
in the Rustle two thousand, and that's like a huge
milestone and a huge achievement because you're going to have
passive money coming in the door to buy these equities
moving forward into propetuity. Then it's like, Okay, the next
goal is, you know, get a little bit higher, get
(21:47):
an MSCI index, then get into the S and P
five hundred, and then into the Nasdaq one hundred, and
you can kind of like work these milestones up. And
I think when every time you get included in each
one of these passive flow index ETFs, you're de risking,
and I think there's there's potential, you know, crazy returns
(22:07):
to being made on some of these small ones. But
my brain cook back to, like the risk return profile,
that's one of them.
Speaker 2 (22:13):
Yeah, well, I mean, and hopefully smarter people they always
start with the risk. Unfortunately, most people most retail think
about how much I can make?
Speaker 1 (22:21):
Yeah, right about the risk.
Speaker 2 (22:22):
On the downside, of course, the term hedge fund comes
because they hedge right their position. But you know what
we're seeing right now is there's a lot of people
jumping ship on MSTR. Yeah, for any number of reasons,
one of which Michael Saylor. People are mad that he's
hitting the ATM too hard and diluting the stock. But
a lot of it is also I think it's just
(22:43):
gotten so big that it doesn't grow at the same
rate as some of the smaller players. And to your point,
like it's maybe almost to the S and P five hundred, right,
like the risk is getting less, but then at the
same time volatility goes down. And then so there's a
lot of traders in there. I guess what's your Are
you a bitcoinner?
Speaker 1 (22:59):
Yeah?
Speaker 2 (22:59):
So, and then you buy these companies because of the
long term bitcoin vision?
Speaker 1 (23:05):
Yeah, how do ei them? Because of the long big
the long term vision.
Speaker 2 (23:08):
You also hold bitcoin?
Speaker 1 (23:09):
Yeah absolutely, okay, Yeah, it's like your base layer one
hundred percent. Yeah, that's my you know, it's never touching it. Okay, yeah, yeah, absolutely.
That was That was That was a monumental time for me.
When I moved bitcoin to cold storage off in an exchange,
I was like, oh my god, this is way bigger
than I than I thought this was, you know, like
I walked around the block, you know, with my hardware wallet,
(23:31):
and I was like, oh, you know this, it was
a yeah, it was a very like a visceral feeling.
You're like, oh my god, the money has changed. Money
has totally changed. But you know, thinking back to this
this concept of when I when I look at strategy
that there's relative to some of these other ones I
(23:52):
think they're in it's just a whole nother ballmark, right,
I mean they've got fifty times more. Uh, they've got
fifty times more bitcoin than the mag seven. Yeah combined, Right,
you've got Tesla's the only one in the mag seven
that the old bitcoint right, and they've got forty nine
times more. They'll do the amount of bitcoin then the
(24:13):
entire SMB five hundred, the top five hundred US companies
in the world.
Speaker 2 (24:17):
Right.
Speaker 1 (24:18):
And so if you think if any of these companies
start adopting anything remotely close to a bitcoin treasury strategy,
even if they just add bitcoin to the balance sheet,
that pushes strategy further up into the stratosphere. And they've
got the only ones in the market right now that
are offering these preferred you know, fixed income alternative debt instruments,
(24:40):
and they're going to have the highest credit quality forever.
And if you're talking about onboarding trillions of dollars of
capital into the bitcoin ecosystem, it's coming from fixed income. Right,
It's not coming from the equity market. It's going to
come from the fixed income market. It's going to come
from the real estate market. In these rappers that are
(25:01):
more appealing to those types of investors. And because the
risk return trade off is so much higher, so much better.
These products that Strategy is offering, the risk adjust returns
on them are monumentally higher than anything else in the
fixed income market.
Speaker 2 (25:17):
Right.
Speaker 1 (25:17):
You can look at like the preferred stock of PG
and E, Like the utility provider in California provides utilities
for two thirds of the state. Their preferred product is
paying like six point twenty five percent interest compared to
the strife product that Strategy provides. It's paying like ten
or eleven as of today. Right, And you think about
(25:37):
what are the what are the relative risks each of these? Right?
PG and E just paid out a four billion dollar
loss in twenty twenty from the twenty twenty eighteen wildfires,
the Paradise wildfires. Wow, it's rate this huge, Like physical
risk liability you know population risk that there are so
many risks in the and that's just one example. Right,
(25:58):
I just shine a light on you need.
Speaker 2 (26:00):
And that's a pretty healthy yield. A lot of the
market's much less than that, right BOMs or the AT
and t S or Yeah.
Speaker 1 (26:06):
Yeah, you can look at the Boeing and some of
these other ones and you start to compare them and
you see amount. You Okay, it's like, why would I
hold that with all of these risks when I can
hold this with digital risk involved other risk. And I
truly believe there's going to be like a landslide movement
at some point, it might be five years from now,
(26:28):
where all of this capital is getting reevaluated, like the
risk return gets re evaluated.
Speaker 2 (26:35):
Let's talk more about the risk. Yeah, so this is
a good segue because a lot of people think that
it is too risky because sure they don't have wildfire
risk or liability risk. To your point, but how can
he afford to pay that yield in perpetuity in perpetuity
and how can he continue to do that when micro
Strategy doesn't even have a business and no underlying cash row.
(26:57):
So there's certainly some risk there. Yeah, you look at
the My first step is I look at the balance sheet.
Right as of today, they're holding sixty four billion.
Speaker 1 (27:07):
Dollars a big point under balance sheet, and they have
ten billion dollars worth of debt. Of that ten billion
dollars worth of debt, five billion of it is already
trading in the money. It's a convertible bond. So really
their their pro forma debt is like five billion dollars.
In terms of interest income payable, I think as of
right now it's about maybe two hundred million dollars a
year something like that. To put that in perspective, Strategy
(27:29):
raised seven hundred million dollars last week on the ATM
of Strike and MSTR. So they have the ability to
raise capital incredibly quickly and fast. I mean they raised
last year in one month. I think they raised seventeen
billion dollars in one month. And it's to me, I
(27:50):
see this as this is just this is a pure
risk management.
Speaker 2 (27:53):
Put in a down market they have they potentially could
lose the ability to raise money so quickly or or
raise money at all. They could and so then what happens.
Speaker 1 (28:01):
Yeah, they could they could delay the they could delay
the dividends payable. That is a function in strike and strife.
They have the ability to do that, they think most dividends. Yeah,
but it just it's very similar to like you can
refinance the debt as well, right, you can as long
as you have a strong balance sheet, you can go
(28:23):
get capital, Like you can go refinance your debt even
even in a bad market yet, right, I mean, let's
just say the price of bitcoin fell fifty percent of that.
Right now, Strategy has thirty two billion dollars of bitcoin
and ten billion dollars of debt. Would you underwrite alone
for them?
Speaker 2 (28:41):
Still seems pretty good to me.
Speaker 1 (28:42):
I would Still it looks like they're still incredibly strong. Yeah,
And and I don't think people quite conceptualize that, right.
This is this is a financial strength play, and Strategy
is very focused on managing their financial strength. And you
think about, like, okay, back to this risk. What is
the risk? Right? The price of bitcoin we need to
(29:02):
go down to sixteen thousand dollars and stay there for
five years in order for Strategy even remotely without even
thinking about refinancing it to remotely be at a position
of risk to those holders.
Speaker 2 (29:16):
I don't want to spend all our time talking about strategy,
although it's the big dog in the space and Michael
Saylor is sharing that playbook with everybody yet so it's
important to understand that because everyone's running the derivative off
of that if you rail. I don't want to spend
all our time talking about it, but I do want
to ask one more question about it before we move on.
So one big thing that's been happening in the market
is proof of reserves, and proof of reserves is in bitcoin.
(29:39):
We say, you know, don't trust verify, and so there's
been a big call for years of exchanges to show
the reserves because like with the FTX, we found out
they didn't have a bitcoin that they said they did,
so people help paper claims and so there's a lot
of uproar after the last couple of days when Sailor
took the stage talking about proof of reserves. What's your
take on that.
Speaker 1 (29:59):
I think the the market sentiment is a little bit
overblown on the proof of reserves. I mean me personally,
would it be ideal that Strategies showed the brief proof
of reserves? Absolutely? Absolutely, I mean there are other companies
that are doing it. Do I think there is some
risk of doing it. Absolutely do. I think it's a
risk with bitcoin and the protocol of bitcoin not at all.
(30:21):
It's human risk, it's target risk. Right. You have if
those wallets are out that is showing information, it's just
more information that the market has to potentially target some
kind of social engineering attack. You also have elements of
I was talking about this with somebody yesterday of like
(30:43):
dusting dusting attacks is becoming a thing of dusting is
where you have like corrupt like old silk road bitcoin
that's just being sent to these wallet addresses because they
know what they are. And now you just create this
nightmare for.
Speaker 2 (30:59):
A couple.
Speaker 1 (31:00):
It's like who's managing it? Where did it come from?
What is this? And you've got to figure it out. Additionally,
there's there's elements that the market doesn't quite understand too. Right.
Let's just say strategies got this all of their capital
in two thousand different wallets, a ton of wallets, and
(31:20):
the value of the bitcoin rises. They may want to
rebalance all of their portfolios such that they don't have.
Speaker 3 (31:26):
You know, too much in what they might want to
make four thousand, right, but the price bitcoin doubles, you
might want to be like making more wallets so you
don't have too much in anyone And that might be
a function of insurance policies that because custodians provide and
all of a sudden you may see fud in the
market of strategy selling your bitcoin because they moved it.
Speaker 1 (31:44):
And it's like we saw this with the US government, right,
Like people were like, oh, the US governments sold their
bitcoinke It's like, no, they just moved it.
Speaker 2 (31:50):
But we don't know that.
Speaker 1 (31:51):
We don't know that. But I know what just in
you know what I mean?
Speaker 2 (31:54):
So like the way I look at it also is
that certainly don't trust verify, but I think I think
it could potentially give a lot of false hope because
number one.
Speaker 1 (32:05):
It's in equity.
Speaker 2 (32:06):
They're not immutable, right, like right, it's there's counterparty risk yep,
it could be revoked, right whatever number one. Number two,
to your point about the capital stack, just because I
see that there's bitcoin there doesn't mean I have a
claim to it. Right Where am I in the stack?
Speaker 1 (32:21):
Right? Right?
Speaker 2 (32:22):
So I don't know how encumbered it could be. Right,
We have no idea even with an exchange. If an
exchange shows me a proof reserve, I don't know what
encumbrance that might have, so for it sort of then
leads to a false sense of security. And then I
almost think, like, if people are really depending on that,
there's the ethos and the ideology, and like do I
(32:42):
want to be aligned with that? I guess. But then
at the same time, like I said, it's like a
false belief and if people are really hanging it on that,
maybe they're not understanding the way equities work in the
market works.
Speaker 1 (32:52):
Right, Yeah, you don't know the liabilities. You don't know
the liability side of it, right, just because somebody shows
proof reserves, I mean they could be leveraged center of
the perform and you have no idea. It's like it's
a much bigger focus on the liability side of things. Also, right,
all of these companies have audits, annual audits. Yeah, by right,
do you want do you really think that all of
(33:13):
the executive staff and the auditor want to go to jail?
Speaker 2 (33:18):
And everyone would say, but en run yeah, but.
Speaker 1 (33:20):
In run right? Yeah, but end round? I mean the
world's changed since then round a.
Speaker 2 (33:24):
Nuclear mom dropped once before too.
Speaker 1 (33:25):
Yeah. Great, It's it's like it's it's black swan right
to me. It's binary, right, they have the bitcoin.
Speaker 2 (33:31):
Or they dealt.
Speaker 1 (33:32):
If they don't, the entire market is scripped. Yeah, at
least for at least for an extended period of time.
Speaker 2 (33:40):
Yeah, all right, let's move on past micro strategy. So
bushing companies popping up left and right, Like I said Thier, overnight,
amazing amazing returns. The music's dancing, we're dancing, right. But
what I guess what would you say when you're looking
at these new companies? Well, I guess number one? Are
you look at the new companies?
Speaker 1 (34:01):
Absolutely?
Speaker 2 (34:01):
And then number two, Well, let's start with let's start
with if you were to let's start with the risk.
What do you think the biggest risks are that you're
what are the red flags that you would see glaring?
There's a lot of unknowns we don't know yet because
it's evolving so quickly. But from what you do see
and what you do know, if you saw a company
doing these couple of things, what would be red flags
(34:23):
for you? Uh?
Speaker 1 (34:25):
Secured debt okay, debt secured by the bigcoin and my
only the instead of the stock it well yeah right,
instead of being unsecured right, effectively, the any any debt
structure of being collateralized by the bitcoin. And my concern
with that is the traditional financial market is so much bigger, bigger,
(34:52):
so much bigger, vastly larger than the bitcoin market at
the moment, the incentives are not aligned, right. So if
somebody is offering these debt instruments that maybe they're decent terms,
maybe will get you know, generate two hundred and fifty
million dollars more of capital, which is great. My concern
is the provider of that debt calls up his trad
(35:14):
five buddies at any point of weakness and says, hey,
let's bury these guys. And that's what happens. Let's bury
these guys. And and then at that point if if
they start getting buried, you may lose sentiment in like
retail traders, and have no liquidity going back up. You
(35:36):
have no liquidity there to backstop it. And the traditional
financial market, again is so much bigger. They could do
that for an extended period of time. I mean, we've
seen it with these like targeted short interests on a
lot of these stocks like Walgreens to game stole, game stop,
the same thing. They can they started, they could, they
could be there longer than you, and they're bigger than you,
(35:56):
and they.
Speaker 2 (35:57):
Will get more billions from their buddies.
Speaker 1 (35:58):
They're stronger than you, they're bigger than you. And that's
kind of my concern in the market is that the
incentives aren't aligned for the security debt instruments at the moment,
and there could be a situation where the convertible bond
the seller may look at like that is an opportunity, like, oh,
(36:19):
I could go get bitcoin at a discount, right, I
go bury this company and I go get bitcoin at
a discount. And so that's that's one of the most
glaring risks I'm kind of looking at right now. It's
just like the structure of the leverage, like how are
you getting leverage? Where does it come from? And I
think there are ways to do it that may be
(36:41):
less existential risky than others.
Speaker 2 (36:45):
Okay, that's good. Yeah, So then let's talk about the
converse of that. So if you were going to imagine
the best company starting today, well, how would they do it?
Speaker 1 (36:55):
Yeah? I've been trying to think about this as well,
and really I think having an operating company that has
income coming in from a diversified stream is really important.
Uh that because that hasn't been important for Metaplanet. Hasn't
been important for Metaplanet. I mean, they're they're generating an
income stream right now. They're doing it right now by
selling cash secured puts, you know, so that is that
(37:18):
is a revenue stream for them. But Metaplanet also hasn't
weather to storm yet, right right, So I think that
having that operating cash flow will be incredibly important for
cover the debt service. Yeah, cover debt service, but also
have you know a sentiment boost, right It's like a
sentiment booster. If bitcoin goes down fifty percent and you're like, oh,
(37:42):
this little tiny company is still buying you know, tons
of bitcoin and everybody else is paused, Yeah, that that
might be incredibly attractive. You're like, wow, this is a
They're they're accumulating faster than anybody else right now because
they have this other diverse cash flow. So, uh, the
rest spot cash managed, managed leverage, being prepared to weather
(38:04):
a storm, but I think a storm was coming at
some point in the future. So that that's kind of
what I'm focused on. And then the ability to what
I think is really cool here and unique is this
because of strategy has grown so fast and so big
they and and they're so consistent and transparent about what
(38:24):
they're doing. They don't want to go chase any weird
capital pols. They are folks. They are laser focused on
the fixed income market, right and credibly transparent about it. Now,
that provides opportunity for these other players in the field
to go tap different alternative capital cools that may be
(38:45):
just unique and weird and different, right. I mean, like
what Strive is doing and uh looking at buying company
distressed biotech companies for less than that cash and basically
getting bitcoin at a discounty by doing that and and
holding the IP that comes along with it to bunch
it up and sell it to no big biotechs when
(39:05):
the market shifts and moved around, and there are thousands
of opportunities like that. And for me, I'm thinking about
that in the insurance space, Like the insurance space is
so archaic and old, Like that's a huge untapped market
that I've got my eyes pretty focused on two to
go identify opportunity over there. So that's I think going
(39:29):
to lead to the most success with these bitcoin treasury
companies is like identifying unique pools of capital that need
that need yah, need it.
Speaker 2 (39:40):
I sat down with grand cardon yesterday and he has
maybe one of the best ones that I've seen right now.
And I mean, obviously he's a real estate developer and
now he's building real estate projects that will be paired
with bitcoin.
Speaker 1 (39:53):
Yeah, he's amazing. So you have in the United States
thirty year debt.
Speaker 2 (39:58):
No one else in the world has that, and most
of the real estate debt is somewhat you could say,
subsidized by the government that super low rates. So I
get super cheap debt turned out super super super far.
But then in the US we have tax write offs
from the you know, depreciation from the from the real estate.
So then I get the tax depreciation from that. Then
(40:19):
I have tenants that pay that for me, and that
goes up with inflation, and then he takes that. So
you have basically no volatility asset yep. And then all
the cash flows from that go into bitcoin.
Speaker 1 (40:32):
Yeah.
Speaker 2 (40:32):
So you have a nova, super cheap, subsidized long term
money with no volatility paired with a high volatility asset
like bitcoin. And his goal is to I think he said,
build up nine or twelve of these, bundle them together,
and then watch that as a public traded Bickuin treasury
strategy company.
Speaker 1 (40:49):
Yeah, it's a no brainer. Yeah.
Speaker 2 (40:50):
And so it's like that's like one idea of like
a whole whole subset of pools of cabbo.
Speaker 1 (40:56):
Yeah, I mean private equity. There's very similar opportunities in
equity market. Just like, throw a bitcoin kicker on anything, yeah,
any of it, for all, any transaction, any transaction that's
made you throw a bitcoin kicker on it, you know,
five to ten percent, and it's like, okay, well that
whole transaction changes. But it could be a duration asset.
(41:16):
Real Estate's very very clear that's an opport just because.
Speaker 2 (41:20):
Of the long term cheat money. And I'll tell you
it's a good edition.
Speaker 1 (41:24):
All right.
Speaker 2 (41:24):
So where do you think the what do you think
bitcoin and bitcoin treasury strategy companies aren't five years?
Speaker 1 (41:31):
Yeah, okay, so five years from now, so we're talking
twenty thirty, twenty thirty. I think bitcoin is a six
to seven trillion dollar asset, and I think these bitcoin
treasury companies are. I think there's going to be a thousand,
at least a thousand of them, and yeah, I think
(41:56):
they're all going to be continuing to shift this way.
I think the USC is going to hold a significant
amount of bitcoin. I think Nation States are going to
hold a significant amount of bitcoin. And we'll see some
of the larger companies have a cost basis of over
a million dollars per bitcoin, and I don't think they'll
take it seriously until that.
Speaker 2 (42:14):
So you think bitcoin could be I guess that's three
to four times And do you think some of these
treasury shaddy companies will be two three four times bitcoins
most price? Uh?
Speaker 1 (42:27):
Yeah, yeah, I mean I think they're going to move faster, right,
because what is an equity and equity is a forward looking,
forward looking view. So how far into the future do
we look? And if we think bitcoin is the strongest
asset on the planet, and then these companies have x
amount of bitcoin x percent of the network, you know
they should be priced as such. Yet and so how
far on the forward do you look? And how far
(42:49):
forward do you look? And like in videos ten years
forward looking? If you start looking ten years forward looking,
like is strategy a five to ten trillion dollar company?
Speaker 2 (42:59):
Maybe?
Speaker 1 (43:00):
Right? Are these other companies, you know, hundreds of billion
dollar companies? Absolutely, and they're going to have the ability
to eat and consume other companies that are distressed because
they don't have bitcoin on a balance yet. They've got
no strength, no liquidity, and they're going to be able
to absorb a lot of these companies, they think.
Speaker 2 (43:17):
Now cool, all right, anything you want to shout out
bring attention to, We'll link to your Twitter profiles down below.
Speaker 1 (43:24):
Yeah. No, I've got a crew. We've got a show
called mstr True North or just True North, and we
talk every Wednesday about what's going on with strategy, what's
going on with bitcoin, treasury companies, the evolution of these
financial products, securitization of bitcoin, how the market's changing and evolving.
And my Twitter is at hunter Jets on my Twitter
ex handles at h I do. I post a lot
(43:48):
of research and analytics on the space and what I'm thinking.
Every now and then I'll do, you know, thirty minutes
to an hour long just Live show and I'll just
talk about everything that I'm going through in my thought process,
what's going on in the market. Yeah cool, all right,
thanks so much, appreciate it.
Host
Mark Moss
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