DON'T DO THIS... Everyone knows buy low and sell high, but ignore it | Adam Back

Adam Back, legendary cypherpunk and CEO of Blockstream, joins us to break down why Bitcoin treasury companies are emerging as one of the most disruptive forces in finance—and what this shift means for the future of capital markets. From early skepticism to full-blown corporate adoption, Adam unpacks how Bitcoin’s volatility, asymmetric upside, and institutional interest are converging to reshape how the world stores value. In this episode, we dive into why public companies are holding—and aggressively acquiring—Bitcoin, how sovereign wealth funds and pensions are finally moving off zero, and why short-term sellers are handing over BTC to long-term diamond hands. Adam also explains MicroStrategy’s unique playbook, the rise of “Bitcoin-native” corporate balance sheets, and why he believes the next phase of adoption will be deeper, more decentralized, and unstoppable. Whether you’re a retail investor or a boardroom strategist, this episode offers a masterclass in how the Bitcoin treasury revolution is unfolding.

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Episode Transcript

Speaker 1 (00:00):
Why would they sell at this time. It seems like
a really strange time to be selling bitcoin given that
way to my mind, still in the reltive early days
football market. Surprisingly, what it seems to have done is
it seems to orange pilled all those people.

Speaker 2 (00:12):
In the US, we have the Black Friday sales right
after Thanksgiving in people stand in line at six am
to go save money on whatever, electronics or whatever. But
when financialize it's go on sell. We don't think about
it like that. We're like, oh, I don't want to
buy it now it's on sale.

Speaker 1 (00:25):
Yeah. I mean, it's really a bit of a trap
with bitcoin because people will.

Speaker 2 (00:32):
All right, Adam, we're here at the bitcoin conference, you're
like the ogog bitcoiner. First of all, I want to
dig into, like some of the big excitement that we
have going on with the bitcoin treasury companies. I know
you're all about that right now. There's a lot of
things that you're doing in that space. But how far
have we come in the last fifteen years.

Speaker 1 (00:51):
Yeah, well, I think we've got a kind of growth,
But in terms of metrics in such you know, the
lost one, the SPOTTYTFS was a big one, but that
was by the courts. It wasn't like the SEC approved
it willingly. But now with the current administration and they're
more open for business, and so I think we kind

(01:11):
of got a lot of metrics caught up with where
they would have been without that friction of the last
few years. So, you know, it's the regulatory environment for
the traditional custodians of shares are now cleared to you
custody bitcoin, they got they got some work to do,
but they're able to do it. And more of a

(01:33):
wave of financial institutions offering accmulated products. Was say things
take a while to land because they were say they're
going to do it, but then they are going to
spend months figuring out the guidelines for their advisors and
what allocations they can advise and things like that. So
probably in market terms going to land in the short

(01:54):
the next six months or something in some of them.
And confusingly, the price is only one hundred ten thousand.
It feels cheap with the context, right because you know,
we got to what seventy three thousand before the halving
sev it's very and half. It's not that much higher.
And the amount of hostive news announcements from financial institutions

(02:17):
or from wealth plans. Now the eachf inflows, all of
these things are enormous, and between micro strategy alone, that's
two times the mind bitcoin per day since the halving,
and black croc i bit another two times. You know,
they're traders on bit for x at times absorbing one

(02:41):
or two times more depending on market conditions. So it's
flying if it falls back, and yeah, and somehow the
prices YEA questions who's selling, like why would you what's
what's you know, what's going in the head? Why would
they sell at this time? It seems like a really
strange time to be selling bit cind given that we're

(03:02):
to my mind, still in the relatively early days of
a ball market with all of the metrics you know,
running really hot. So one are the un chain metrics
where people try to guess based on you know, which
age utos they see moving. It's an indicator and it's noisy.

(03:22):
But it looks like some people have been holding bitcoin
for a year and a half, two years, So maybe
they bought in the previous ball market around the sixty
thousand lark. Perhaps they didn't enjoy watching it at fifteen
and a half and so they're like, Okay, they're selling bitually,
and so maybe maybe that's going on. But you know,

(03:45):
whoever is selling, you know, there's a lot of buying
they have to run out of close themselves similarly. Yeah,
so I think that's when it gets interesting again. Oh yeah,
you know, we're we're saying it's not very high, but
I mean we just had it all time high in
the life a week a few times from it, so
it's it's on the mood.

Speaker 2 (04:03):
Okay, yeah, still, yeah, I want to dig more into
those metrics and some of the things that you're working
on and where this is all going. But if we
go back a little bit so to the point that
you're making, right, we have this big pivotal shift in politics,
and I think what you were saying is maybe the
industry as a whole, maybe bitcoin as a whole, was
sort of almost suppressed potentially by this political environment that

(04:25):
we had, and now it's sort of got some catch
up to do now because the political winds have changed. Right,
So that's happening, and there's enormous buying. But of course,
as I was thinking, you said it, that means people
are selling as well. Somebody's selling, yeah, and so you know,
I see there's a lot of people in your the
original like cipher punk, and so I see a lot

(04:45):
of people online saying, but bitcoin's losing its cipher punk
roots and now it's going corporate and now everybody's begging
for the government to buy it and these types of things.

Speaker 3 (04:55):
What would your response be to that?

Speaker 1 (04:57):
Well, I don't really feel that because the you know,
the question is when new people come in, what is
their mindset and what do they learned from participating in
bitcoin in and so so if you go back a
few years, people were not sure. Uh, I mean they

(05:18):
would call it the suits coming. But you know, the professionals,
the asset managers, the advisors, the wealth management companies say,
you know, are they gonna absorb the ethos? And politicians
and son and and dilute it basically, right, so they
could have a financial success, but gett by diluted in

(05:39):
terms of its mission. It's ethos is kind of permission
on global money, right, which is a pretty radical thing.
And surprisingly actually what it seems to have done is
it seems to orange pilled all those people. So you know,
you have politicians who are clearly up to here in
terms of the personal bitcoin allocation. Who actually get it.

(06:01):
Now it seems like we have a president who actually
gets it too, right, and part of that was situational
that he got politically debanked and it clicked right. One
of the Eric Trump had specifically said that, you know,
the game debanks made it real for them, right. So,
and you know, something similar with El Salvador when they

(06:22):
first started in the bitcoin saying, initially people were unsure,
you know, is it a poltitionan sort of following a
popular trend to you know, to get elected or to
bring in bean infestment or hot thing. But then it
turned out that you know, actually he was patient zero,
and Al Salvador he was the guy that was like
pushing it, and they Keley's actually got it in a

(06:45):
big way. Right. So, what it seems like is that
the sort of incentive alignment of hard money, it brings
wholesome incentives to all kinds of situations, is scaling much
better than we might have worried in terms of you know,
initially mining and trading by individuals and then you know
private companies and then public companies, and the ethos is

(07:09):
doing well. It's just in a scaled way. And the
incentives are holding together in terms of you know, securing
the network and the balance of economic incentives to participate
in the market and in mining and in building products
and services on Birkin. So surprisingly, it's so far it
seems to scale all the way and there's a couple

(07:31):
more levels to go because the you know, while there
are a few sovereign things like a Swiss National Bank
has some exposure by a MicroStrategy. I think about one
percent of the US equities in micro stratetchery and that
will change over time. Yeah, presumably, and ABW, SOFIGN, wellth Funed, Bhutan,
El Salador and some others, but those are actually quite

(07:53):
small percentages. An another indication of institutional interest levels is
somebody went through the Black Crock Eyebit filings and they
could see of the people that are obliged to disclose,
about thirty three percent was institutional ownership. But nevertheless, you know,
that's that's that's a nice number. And I would say

(08:16):
the other ETF holders where an ETF was a simpler
it's base is sort of accessibility, right, So for the
crowd that when they want to make an investment, they
call the financial advisor, they called a broker and they
couldn't do it before or you know, then the futures
ETFs are not attractive products, right, So I would say

(08:37):
that is the sort of top ten percent of wealth
in the US minus the top one percent, so not
the superhigh networth, but just professionals, the doctors, dentists, business people,
people with a portfellow that they're taking an interest in. Yeah,
maybe you have somebody else managed, but you know, have
some input into it, and it's not you know, it's
not new money. They're just reallocating something in a portfolio.

(09:00):
So I think the fact that they are they're reallocating
in a portfolio and they're longer term investors. It turns
out we didn't know what to expect, but they are
also quite long term investors. So they it's a good
type of investor to have because they're not going to
panic sell when it drops, said, I better think they
might buy some more. You saw that in some of
the metrics, so that's interesting to see evolve. It means

(09:23):
the the money multiplier, like how much capital needs to
come into bitcoin to push it into an next layer
as less, so you know, you get higher multiple on
the market cap versus the money in. If you have
these kind of investors, what's interesting.

Speaker 2 (09:39):
So if you have stronger hands coming in, more patient buyers.
So the point I think what you're making earlier was
who's the sellers. And the sellers are people who probably
bought around the sixty thousand dollars level. They went through
the bear market through twenty twenty two. They didn't like that.

Speaker 1 (09:54):
Yeah, they got fatigue.

Speaker 2 (09:55):
Basically, they got fatigue, they sold out. The markets moved
from impatient to patient. Now we have the patient buyers,
sovereign wealth funds who are thinking generations ahead. So then
a lot of this bitcoin goes into deep dark cold
storage hopefully, And I think that then, I guess the
point you're saying is that when we have that shift
of short term buyers to long term buyers, it, I

(10:18):
guess it removes the amount of available circulating bitcoin. And
when that happens, then it takes less money coming into
the market to get a higher multiple off of that.

Speaker 1 (10:28):
Right.

Speaker 2 (10:28):
And so then while most people would think that as
the market cap of bitcoin gets bigger, the volatility goes down,
maybe what you're saying possibly we still have the upside potential,
but it limits or dampens the downside.

Speaker 1 (10:43):
Yeah. Yeah, so yeah, blockstreaming recruits hedge funds manager and
he had shom Bill and he had a period where
he works on pension funds. So we you know, I
went to talk to some pension funds the last couple
of weeks fund you know, the fund managers and the

(11:04):
fund administrators, to you know, see what it takes to
get them off zero. They're still quite early and they're thinking.
They're asking very talented questions. But one of the graphs
that Sean assembled is a kind of volatility distribution which
shows that bitcoin has a fat tail to the right,

(11:26):
which they has like high volatility.

Speaker 2 (11:29):
But it's biased to the upside and asymmetric.

Speaker 1 (11:32):
Yeah, whereas you know, the the U stock index is
more normal, more normal distribution. They got cound and up.
I mean there are down downsides too, but the upsides
are bigger basically. So that's an interesting data point. And
so yeah, I mean I think, hm that you know,
they call it redistribution, right that you know, previous generation

(11:54):
people sell. Ultimately, it's a story of bitcoin's market behavior
is you know, the dips exist to transfer bitcoin from
weekends to stronger hands. So it's kind of evolution, and
like biological evolution, the people who for some reason are
stubborn or persistent or valium investors and the winner's holding

(12:18):
the bitcoin. People that are new to investing or can't
stand up voltility, they get cheken out because that's it's
it is a world experience, even for somebody with equity
investment experience, because the battle is just much lower in
the actuity world. But it is I think it is.
You know, you can see over the long term that
the bottles is dropping a bit in bitcoin. I think,

(12:40):
you know, these kinds of investors who are managing a
portfolio they can realitate. I think you know the message
that Sean brought to the pension fund. So he was
managing the first US pension fund that put back on
a bowe sheet. This isn't a Clara vuta, and he
was recommending around a two to three percent allocation with

(13:03):
the argument that you know, if if bitcoin half, they
could make it back in a couple of months with
their normal you know, fixed income diverse by strategies, and
that under his administration that pension fund died quite well.
They achieved a ten percent so the other ten percent
return for ten years in a row, which is good.
It's a good top quarter I return for a pension fund.

(13:26):
And if bitcoin did what it did in the past,
so you know, when he started talking to them, bitcoin
was seven thousand, by the time he got the allocation in,
it was seventeen, so already yeah, quite a bit up
from that, and that that allocation alone would fill in
the remainder of their unfunded pension liability. So, but typically

(13:50):
those funds are doing rebalancing every quarter. And a key
thing with this allocation is so you were trying to
capture the asymmetric upside, so you make a smaller ocasion
to manage the votility reci pension funds that like draw
down technical period, but you've got to you've got to
not rebalance it and you just give away the upside quarterly.

Speaker 4 (14:11):
So not not rebound nor rebounce the bitcoin. Let that
run for rebounce the equities, but let the I mean
they do rebalance the the equities. And they're in different sectors,
you know, so they'll be in some forestry or some farmlands,
different different times there it's goind of diversified, and they
will they will monitor those segments and.

Speaker 1 (14:35):
Rebalance and they've statistically shown them that it helps portfolio.
But with a big with this thesis, with a bitcoin,
you're going through the asymmetric upside rebouncing. For that specifically,
it's just stay the course, keep it five years at least,
and historically if it repeats, well yeah.

Speaker 2 (14:57):
Yeah, let your winners run. Let that thing go. You've
been here since the beginning, so you've gone through some
pretty extreme long draw downs. Yeah, so you've seen that.
You know, I got I started buying around twenty fifteen,
so I went through the you know, twenty eighteen, twenty
nineteen draw down, and I remember thinking, oh man, why

(15:17):
didn't I Why.

Speaker 3 (15:18):
Didn't I sell? Is it ever going to come back?

Speaker 1 (15:20):
And right.

Speaker 3 (15:22):
It did.

Speaker 2 (15:23):
And then I remember in twenty twenty when it plunged
with a COVID crash, and I'm like, oh man, this
is it.

Speaker 3 (15:27):
The markets are done, you know.

Speaker 2 (15:29):
And then yeah, I never sold any I didn't buy
as aggressively as I should have on the dips, but
I but I managed a whole drew and I've sort
of become numb to the rise at one hundred and
ten because I don't want to get.

Speaker 3 (15:41):
Depressed on the on the crash either.

Speaker 2 (15:44):
How have you managed to kind of think through that
on these these the euphoria and then the crash.

Speaker 1 (15:49):
Yeah. I mean, actually, of course it depends on people's
back crowding, right, but the average person is not self
managing or portfolios. So then you know, when you get
into bit when it's their first trading of the first
self managed investment, and it's a wild introduction to investment.
So I was lucky to have, you know, in the
early ninth sort of early to mid nineties, I was

(16:12):
managing my own savings and trading with E trade in
the UK equities market and an I p O and
different sectors stock trading, a bit of a day trader basically,
so I was kind of new to it, amateurish, and
but you get to learn, you know, to handle the

(16:33):
roller coaster of the market well tilty and you're you know,
you're you're buying to build stocks so they can move dramatically,
even if the index it doesn't so much.

Speaker 2 (16:41):
So but even then as a trader you are buying
and selling. They're not really sitting through the VOLGME.

Speaker 1 (16:46):
Yeah. Yeah, So basically I learned the hard way. So
I was doing that and the market was rising, so
you know, you couldn't go that far wrong basically, and
so I did the day trader thing. But then you know,
the market got through, it got into a bare cycle.
So I was like, oh, I like this, but I didn't.
I was stobborn. I didn't want to realize a loss.

(17:07):
So instead I got more sort of scientific and started
looking at, you know, why would you want to hold
this individual stock in a bear market? You know, people
need health care and they need banking, and just start
paying attention to the fundamentals, looking at the company specifics
and changed my outlook to be more of a value investor.

(17:30):
And you know, eventually the market came back and it
was fine, right, So I got more introduction to like
trading thing there. And yeah, so when bitcoin came along,
I was like, oh this is look, this looks fun.
Let's let's trade this, right, But you learn like really fast.
It's like so at the beginning, I was like thinking
about trading it, and then I realized like, well, wait

(17:50):
a minute, it's going up exponentially and it's but it's
highly volatile. It's just like twenty thirteen, right, So I
was like, well, logically, if you you know, if you
were selling you know, if you don't. If you don't,
if you're selling, what you're saying is you you're hoping
it's going to fall so you can fight back lower.
But if it's going up exponentially with high volatility, the

(18:10):
odds are stacked against you, like a really bad casino rake.
So probably that's a dumb idea. So so that can's like, Okay,
let's just buy more and not sell if you can,
and if you want to like trade, maybe pick an
allocation and try to buy when it falls or something
like that. Right, And so yeah, and I think along

(18:35):
the way, somewhere in there, my my benchmark shifted. So
originally I was in you know, some mixture of pounds
and dollars and euros and things. I was working internationally,
and I gave up worrying about the forex. I was like, okay,
I've got a basket currencies. Who cares what happens to

(18:55):
the British pound and invests the euro us and and
then I yeah, so I basically realized that, well, actually
it was starting to care more. Is the number bit
one I have going up, not the dollar value of it.
So I kind of rednominated in my mind the portfolio
value to bitcoin, and then then it's a lot easier, right, Yes,

(19:18):
if you just sit through a bad market, it's like, well,
I've managed to buy a little bit more bitcoin. Bruce
was lower. This could yeah right, and like one bitcoin
is one bitcoin became kind of a thing. Actually really
didn't care because I was convinced, you know, just wall tilty,
it will come back in the next cycle. But to
your point about you know, the COVID draw down, Yeah, that,
I mean that was pretty dramatic, and as the previous one,

(19:40):
I mean they go back further, right. I didn't get
active until twenty thirteen, but when I got to experience
bus was the run up to thirteen hundred, and I
gradually fell was like three hundred and two hundred of
it did below two hundred, which I think was a
kind of previous psychological number. Okay, that it achieved, and
people did not like that. They were like, oh no,

(20:01):
it's fallen off the two hundred. That was like the
kind of floor, right, okay, and it fell off and
it's all over, it's going to ZERI But it only
lasted for a day, and so at that point I
was like, well, you know, it feels pretty scary, but
I guess this is the moment to buy some more. Yeah.
So I actually managed to do it. It's good. And

(20:21):
I called somebody who'd been sitting on the fence about
maybe I should buy some bit. It's like, do it
now if you're going to.

Speaker 3 (20:27):
Do it, yeah, and they did. It's crazy. You know.

Speaker 2 (20:31):
In the US we have the Black Friday sales right
after Thanksgiving in people stand in line at six am
to go save money on whatever, electronics or whatever. But
when financialized, it's go on cell. We don't think about
it like that. We're like, oh, I don't want to
buy it now it's on cell, which is sort of
a yeah.

Speaker 1 (20:46):
I mean, it's really a bit of a trap with
the coin because people will ooscily between you know, they'll
see a price target. It's one hundred and hands. It
got to almost seven five not very long ago. I'll
buy it when it gets to seventy five, right, and
it probably would never happen, or if it does happen,

(21:07):
that will get scared again. Oh maybe it at full
to sixty. It's scared now it's seventy five defense ball,
And so they get stuck in this kind of psychological trap.
So you know, you can look at different ways. But
door cost averaging is kind of a way to do
something in the middle, right by by some mom some
door cost average and you won't feel bad. And I

(21:28):
think also newcomers don't really have a view of your
market cycle timing because I know it's they're not that
many samples, and the last cycle had an extra all
type high right at the end of the cycle, which
is unusual.

Speaker 2 (21:43):
But now you said earlier that given all the news
that's happened, you feel that one ten is cheap, one
hundred anders is cheap. Most people that I listened to
not here at this event, but most people they say, well,
bigcoin is too expensive.

Speaker 3 (22:00):
So they're looking at in the past.

Speaker 2 (22:02):
Well it's not ten dollars or a thousand dollars or
ten thousand.

Speaker 3 (22:04):
Now it's too expensive.

Speaker 2 (22:05):
You're thinking it's too cheap because you're looking in the
windshield and not the rear mirror.

Speaker 3 (22:11):
Know where we're going.

Speaker 1 (22:12):
Yeah, yeah, I mean I think you know one way too.
You know, I'm just looking at you know, the relative
price at sixty nine thousand produce pull market or seventy
three and a half in the second top loss cycle
and the fundamentals, like the news blow and the fundamentals.
At that point, everything is just much much better now

(22:33):
from the fundamentals and the consistent buying. There are less
new coins be in mined coins on exchange are shrinking.
Say yeah, I think it should be much higher. Yeah,
and I'm guessing it will get this sooner or later
because the cellars will just simply run out coins, so
they'll get their mojo back and decide that wait a minute,

(22:54):
it's taking another run, but let's buy it back at
a higher price. That's what people do, right, yes, suh. Yeah,
we tell them they're like, oh no, it's going.

Speaker 2 (23:00):
Up, and everyone of those are supposed to buy low
and sell high, but they all do the opposite, really
right right.

Speaker 1 (23:05):
The other thing I think it's a nice thing to
look at it for people to deal with falltalty and
to think about it is there's a metric, the two
hundred week moving average, which is the four year average
price basically, and that is a really nice number because
it never falls. It's what's going up, you know, slowly

(23:28):
or fast, depending on stage of the market, and it's
generally a floor price like bitcoin for many years never
closed a month below that price even in a better
market during COVID it closed a little bit, but you know,
a ball market, it's nowhere near it, and that number
is creeping up, and I think at the moment it's
think forty seven thousand, so with someone between forty seven
and twenty eight. So if you think about that as

(23:50):
a potential floor where bigcoin's unlikely, it's full beneath that
as your kind of bankable value, and then everything above
that is wall talty, yeah, then you can be calmer
about And if you get that as your your anchor,
then you know you won't you won't get say, it
won't feel so dramatic when it and it drops thirty percent. Yeah.

(24:11):
I think the other thing that zoom out is a
good good thing because uh yeah, if you have a
nice chance of previous ball runs where there's been like
five or six, it's windy to thirty percent drops right
on the way to a ball market that's gone up
like one hundred times in a cycle or something. So
you know, we had a thirty five percent drop there
from like that's what do we get to like one

(24:33):
hundred and nine and then down to like seventy five
seventy fours, it's like thirty five percent.

Speaker 3 (24:37):
I'm about thirty percent.

Speaker 1 (24:39):
Yeah, But I mean it's normal, right, I mean, going.

Speaker 2 (24:41):
Back to twenty twenty two dep Since then, I think
we've had nine pullbacks of twenty five percent or more
in that period. Oh okay, so yeah, so it's just normal.
I want to get back into some of these Biglin
Treasury staff and things that I know that you're working
on and sort of just taking that back first thing.

Speaker 3 (24:59):
I just want to dressed though quickly. You mentioned like
the suit's coming.

Speaker 2 (25:02):
That's the first time I've actually ever worn a suit
of the bitcoin conference. I'm using mister black t shirt guy.
But the corporations are here, right, I guess I'm one
of them now. But you know, one thing that people
think about is, unfortunately the distribution from the decentralized sort
of retail, you know, people that came to originally and
now sort of transferred to the to the corporations, if
you will, the institutions. You mentioned that, it's people think

(25:25):
that maybe they could change Bitcoin changes them. It seems
like it seems like it and I would agree with that,
But do you see danger in it becoming too centralized
with all the corporations and institutions and the sovereigns coming in.

Speaker 1 (25:41):
Yeah, I mean, I think you know, you can look
at the folk drama twenty fifteen to twenty seventeen. It's
the Block Size Wars, Yeah, as an example where the mean,
I would say that was resolved by the market going
into people were uncertain about what was going to happen.

(26:02):
You know, some people thought the miners were decision makers
or these genes or developers, but actually missed the market
made the decision and everybody else looks shamed to go
with Yeah. So and like, now that we've seen that, okay,
that seems reasonable. Now right, you've got a radical free
market money. The market will resolve whatever debates there are.

(26:23):
And so with that president, that's good because it gives
you the predictability. You know, next time it might be
dramatic because you go out of never mind, you just
you know, short the futures if you disagree with it,
if the if the ecosystem guys. So, I think, you know,
it was interesting to watch that because the activist investors,
you know, the people that were like, we're not really

(26:43):
sure what to do, or thought it might be mildly
good for companies in the retail payment space. They were
big blocks but like it would be nice, but they
weren't willing to like dieing in a financial bow right right.
And the guys that were you know, early early investors,
the people it was really a mission for they were

(27:05):
they were kind of ferocious in the market and all
in and so of course they won't That's what happens
at a market, right, So people sit on the fence,
they're not their voice is naturally heard in the market.
So so I think that's that's one factor. And then
you know the the custodian effects because with the ETFs

(27:28):
and the treasury companies and our companies that are fiduciaries
for they're investors or in a ETF, you know the
unit holders who are they're just managing the security of
it basically, right, there's no kind of management discussion on there.
So I think that they are you know, you probably
don't want too much in the hands of professional asset

(27:51):
managers because you want the activist investors. You're looking at
the network and you know, speaking up or trading if
they see something coming after rails. But I think ultimately,
if you know, if one E t F or one
treasury company try to pick a side in a future

(28:11):
policy cind of debate. There is feedback loop, which is
people will sell their units in the biolettle right, so
if the Lizard assets are the management that drops the
zero through out of business, right, I think they'll that
will make them, you know, pay attention that. Maybe that's
not what people want, so then it's a feedback loop.
But I do think you don't want too much in ETFs.

(28:34):
But you know, Bitcoin's distribution helps. And like I say,
if people care about decentralization, buy some bitcoins, cold store it. Yeah,
we'll take it out of the ETF. Now you can
you can fix it. You know. See in bitcoin you
can't really sort of complain to somebody if you do
it yourself, right, So if you care about something by
buying cold store, and of course, as you said, you

(28:55):
know the people the the cohort that are selling bitcoin
from a couple of years ago, you know they're doing
the opposite, right, which is they're selling the coins to
the softom weve phones. And so the Treasury company I
use so the ETFs and the Black Croc, I mean
as well as the ETF Black Croc did something else interesting,
which is they recently made the position paper suggesting a

(29:20):
two percent allocation or diversify punts, which is a helpful
a reference point for people like Sean who are making
a similar recomdemnation in twenty nineteen. But yeah, they can say, well,
Black Croc also is saying something similar, right, so right,
people will in a finance world will feel the Black
Croc saying it kind of covers them, you know, as

(29:43):
if that goes wrong, or people will feel comfort that
there's multiple people recommending.

Speaker 2 (29:47):
It, so then you don't see the centralization from the
ETFs or the corporations. There's a big problem as long
as people continue to exercise.

Speaker 3 (29:57):
Their ability to vote with their money, I guess.

Speaker 1 (29:59):
Yeah, But as long as it's not too extreme, I
think it's it's okay, and it's it's providing a family
to the market, which is making theme more accessible to
a wide range of people. And you know, you know
about the suits thing, now, I think it's a bit
of a misnoming there because we have a kind of
simplified view of the world, but actually almost all of
the money being managed by professional asset managers his money

(30:22):
of individuals, you know, it's their pension funds are like
insurance policy. It's a managed like a neutral fund or
some managed fund, right, and so you know that that
is good for the individual. So you know with the
pension fund that got bitcoin in there, you know that
was actually the transport authority, right, So it's the policeman, firefighters,

(30:42):
train drivers, all these guys who you know, they're going
about their lives. They're not focusing on manually investing. Say,
if there's a bitcoin in there and it improves the
improves their pension, it's good, right, Yeah.

Speaker 2 (30:57):
Yeah, And I think there's also aligned interest there as well.
Well if you think about you know, whatever ETF or
whichever fund. I mean, they want bitcoin to remain valuable.
Otherwise if they lose their business, and if you break
the decentralization, then bitcoin loses the value and then they're
sort of shooting theirselves in the foot a little.

Speaker 1 (31:13):
Bit, right.

Speaker 2 (31:14):
So from that standpoint, it seems like we're at least
aligned economically to keep it decentralized and secure.

Speaker 1 (31:20):
Yep.

Speaker 2 (31:21):
What about So we have been having almost another sort
of not really a block size war debate, but there's
been a debate going on recently about the block size
was that the op net oh yeah, Maturn and you know,
expanding that obviously, then there's like, well, how about we
have a different the nots you know, protocol taken off.

(31:45):
How do you look at something like that, I mean,
do you think that there should be something done or
you're also sort of the same thing where like let
the market sort of decide how that plays out.

Speaker 1 (31:53):
Yeah, I mean it's it's kind of slide effects of
censorship resistant permissionless network is you can't stop people. They
can do whatever they want, get paid the fees, they
can fill out what cat pictures if they really want to.
Right now, that's kind of disappointing because there are uneven

(32:15):
wealth distribution in the world and the best, the hardest
and strongest asset protection assurances from holding directs on chain
utexsos in hardble world or something right, so, you know,
outside of the bigcoin space, your options are like offshore banking,
maybe real estate in Florida, you know, life insurance rappers.

(32:37):
There are more things that people do for asset protection purposes,
and bitcoin lowers the barrier to entry to that and
being able to protect your assets is a big deal
in some parts of the culture world, right so you know, ultimately,
if in global terms, wealthy people having fun with NFTs

(32:59):
and things are clogging up the chain with you know,
the latest tad thing, they're effectively pricing out some emerging
market people from owning a Ugexso so they're going to
get to be you know, they'll have to do it
in a less secure way, right, They'll have to use
a custodian or something else. So that's kind of unfortunate.
And of course the thing that's creating that is it's

(33:21):
hard to scale blockchain the technological limits which people are
trying to improve, but at the moment, it is what
it is. So yeah, I mean, I think you you
can't really do that much about it. There are some
kind of loose things in the network that make it
more work to bypass the sort of anti spam like
common sense limits in the network. The network healthy, but

(33:45):
you know, it doesn't do that much because they can
use a minor like a pool or a minor's accelerate API,
they can bypass all the policy limits. So and then
the other funny thing about the opera ton is that
it's not what people are using. They're using some other
scripts like tap route script because they get seventy five

(34:06):
percent discount on the fees do that. So actually the Operaturn
has not been used for the images anymore. So the
debate was kind of a little bit missold in terms
of what it was about. It's actually about some kind
of layer to anchor transaction that was hitting the limit,
which was I think eighty bytes and they were like

(34:27):
one hundred and twenty eight, so they didn't quite fit.
And they didn't want to use an x area because
they care about decentralization, because their anchor transaction doesn't make
it in they could lose money on a layer to you.
They really wanted it to be standard in the network,
so they did some other trick, which is users up memory.
So it's not ideal anyway, so kind I think still

(34:51):
a little bit in progress, but probably they'll just do
some kind of simple change to accommodate that. I think
there's like a little bit of a blown drama. I
think the things you bear in minds is that you
can't do anything about it, right, say, it's a side
effect of permissionlessness.

Speaker 2 (35:09):
Right, Yeah, Well they're making a change to allow more
of it, right or not? Was then making a change
to be able to censor.

Speaker 1 (35:17):
It, right, Yeah. I mean I think the debate is
because even you know, there's there's two types of a
rule in the net. One is the sort of node
policy or minor policy, and that you know that the
node can say, well I don't I don't relay that,
or I won't mind that. But there's the actual consensus rule,

(35:39):
which is the rule that mass for whether a transaction
or a block is balad that one you can bypass
by getting you know, you can get to that one
by going directly to a minor or to a poll,
and so even if not, you know, people can still
bypass it, and that's what they're doing, right, Yeah, So
it's it's not that you know what I think the
problem is people like are annoyed about the spy, so

(36:01):
they want to fight back, yeah, and so like, why
don't we do this even if it's not very effective,
they want to yeah, push back, right. And then the
other kind of argument is, well it doesn't you know,
people are already bypassing it. It won't really have much effect.
So you get this kind of you know, no clear
strategy is going to win, and alms race stuck the thing, right,

(36:21):
So it's kind of a trade off.

Speaker 2 (36:23):
I don't I don't know the technical detail and technical
capabilities to really sort of understand it, but I sort
of look at it in the same way, which is
sort of like the free market can sort of win,
and like, right now the block space is pretty empty. Yeah,
and if economic transactions aren't more valuable than spam, then
that's a problem. And if someone's willing to pay for it,

(36:46):
is it spam, because then you're trying to say someone else,
someone else's value is not valuable.

Speaker 1 (36:52):
Right, right, Well, I mean, yeah, I thought I think
the free market, does you know, does resolve it in
a way, because because there are times when the bitcoin
transaction fees are very high and then they don't want
to know, they get pushed down, right, these cases get
pushed down, and so I think the you know, the

(37:13):
network kind of oscillates between low and high fees. So
probably you know, when when there's a big run up
in bitcoin price, the traders tend to push their fees
up because they don't they don't really care what the
fees are because they're paying maybe ten their susplints to
an exchange commission and the fee is nominal, irrelevant, and
they want to get in the next block because they're

(37:34):
trying to trade, so they'll just say what's the fee,
and there's pay twice as much, right, and then they'll
just quite push the fees up. So that's really the driver.
But it goes through cycles. So yeah, I mean, I
don't know, this was just a normal drama, normal drama
when the Treasury company angle is an interesting trend as well.

(37:56):
There was an advantage of what days ago here by
stay at the conference where I had a number of
the Treasury companies speaking like panels talking about their company experiences.
And apparently there are at this point eighty such companies
globally of various sizes. You now, if you if you
ask them, it's a name, and they're probably to name
like five or ten, right, But they're apparently anymore in

(38:18):
different parts of the world. So it's it's a growing phenomenon.
And then as in effect, it's been something people are
grappling with. So people from a bitcoin ecosystem, like bitcoin holders,
some of them are skeptical like, well, why why can
a company charge a premium above the bitcoin price? You know,

(38:38):
they'll say, well, you know, why are you paying two
hundred thousand dollars for a bitcoin aside this company and
the traditional finance people who are used to valuing companies
based on cash flow, some of those are also confused
to say, well, why isn't the value of the bitcoin
on the balance sheet? You know, then the asset value
like one multiple, right, plus the enterprise value, and so

(39:01):
I think things some of the people are still getting
to grips with, and I've been you know, involved in
trading them for a few years. They got interested in
sort of supporting micro strategy early on because you know,
initially they just took their investment to protect against inflation eroding.

(39:22):
There they had half a billion cash reserves from the company,
and during COVID they were worried that it was just
shrinking at ten percent a year and there's nothing they
could do. The treasury rates were really low, so they
hit on the idea of using bitcoin. But after that
they turned around it keept buying more and more, right,
So it started this sort of exploration of phenomenon. So

(39:45):
I invested in it partly because I wanted to support
what Sailor was doing, which was he was sort of
trying to orange pill the corporate world, like the company
world so using bitcoin as a reserve asset, a company
reserve asset, and you know, then when you are trading
those things, you try to figure out, like economically what's

(40:06):
going on, and you know you're by buying it a premium,
you've got to form a uh, if you're a value investor,
which is my outward, you want to feel that that
premium is defensible. Why is it there? Is it going
to hold onto that premium long time or is it
going to collapse?

Speaker 3 (40:24):
Right?

Speaker 1 (40:25):
Is it like a bubble and it's going to collapse.
And so the way I was able to persuade myself
and it's safe to invest in two times premium is
you know, you can look at it historically, like it
bounces between I don't know, maybe one and a half
and three and a half in a bear market, but
it's a board market and maybe between you know, one
point five and two and three you know, in the

(40:47):
last six months probably, And so you can look at
the range and say, well, it's lower than the middle
of the range, so that you could buy some, but
that's just super expensive. Yeah, I mean, it's just like
looking at the market. But in this it should be
like a fundamental reason why does it even have a pinion?
And so I think there's a reason, which is that
it's generating yield, so not in a normal interest sense,

(41:12):
but they are increasing the bitcoin per share and annualized rate.
And in twenty twenty four, micro Strategy achieve seventy three
and a half percent increase in bitcoin per share and
in twenty twenty five years today he did some more.
So it's over two times from January twenty twenty four.

(41:33):
And so my argument is, well, if you would or
micro Strategy in January twenty twenty four, it's now paid
for that risk.

Speaker 3 (41:40):
Now it's you know, that's the deeds to cover a metric.

Speaker 1 (41:43):
Yeah, so that that was the kind that thinking was
a genesis of that, and I tried to put like
a calculation on it. Well, you know, what are you
really saying? Well, it's just how many miles? How many
days does it take until the yield catches up with
the current en nerve And so you can look at
that core is saying well, in Macrostrategor's case, it was
about eighteen months. It's moving around quite quickly. Right, So

(42:06):
if you you know, if you buy it and you
think in eighteen months, there's more time to run because
like the other part of the thinking is that when
bitcoin is fully adopted, you know it reaches this you
know how Finney's two thousand and nine bitcoin could be
addressable market two hundred trillion. I think we're starting to

(42:27):
see that becoming much much closer to reality, and so
in buying this so and I think once bitcoin does
get there, the treasury strategy doesn't work nearly as well.
Where mostly but the effect is mostly mostly an arbitrage
on the fact that bitcoin is increasing my adoption very

(42:48):
rapidly and in four year periods. But once it's fully adopted,
it doesn't have you know, if the dollar value won't
increase that fast, more like an inflation hedge. Right, So
my thinking is just conservatively, maybe it will do better.
But conservatively, let's assume that the MNF drops to one.
Once that's happened, maybe that's in a couple of decades.

(43:10):
In how it takes. So the conservatives like, let's say
it takes a decade, it will drop to one. So
if you're buying it two, if it doesn't achieve any years,
you can lose half your money by maturity rate in
bitcoin terms. But that adoption is not you know, not
going to stop now in most bitcoins opinion, right, So
you say, well, if if it you know, it continues

(43:33):
its adoption and it reaches this level, there's like a
one hundred times bi con press appreciation between here and
there and a few market cycles, so probably you know,
you will get you know, it will cover the two
times p m F you know, in the next year
or two, and then then you're covered. And the rest

(43:55):
of it is upside with organization.

Speaker 2 (43:59):
So the my our kits are discounting mechanisms, right, so
we're trying to buy something cheaper today than it will
be in the future. And so what you're saying is
even though the m NAV we're buying, we're paying more
for the bitcoin today at the rate of their continue
to appreciate or acquisition of more bitcoin, then it'll cover
and then we'll be in the positive in the future.
So we are buying a discount today based off or

(44:21):
it will be. But then we see that days to
cover number very quite a bit.

Speaker 3 (44:26):
So then why.

Speaker 1 (44:26):
Yeah, well, it's the I mean, the market price is changing,
so you know that that will directly do it. It's
like a little bit fautilty and it will you know
it will fall. I mean at the moment, there's a
short seller from a short march strategy, Jim Channels in

(44:48):
a short sellar ye, And I mean he's he's not
just straight out shortening be dangerous. He is long bit.
I mean he's a dollar investor, but he's long bitcoin
a short mac strategy. So he's trying to compress the
M and F. I think that's as bad timing because
it was already low. And of course, you know, Mike
strategy is not standing still. Right if I'm more bitcoin,

(45:10):
it was five hundred thousand and it's five and eighty,
it'll be six hundred you know soon enough. Yeah, And
that's just adding pressure against Channis is short, right, So
I think you left to get out of the way
sooner or later and then say that. So that's you know,
that's the kind of a short term. There were a

(45:30):
couple of other short funds that tried it. I think
one of them went under from it was Heisenberg Capital
and then Citrin Research and then channel Us. Yeah, so
I think I think like at least one of them
blew out by doing it. It's a very dangerous doing
anything short short and bitcoin very dangerous shorten M and

(45:52):
I also quite dangerous because it's elastic because you just said,
you know, it can be three, it can be two.
That's a big margin, right, So you're shorting some kind
of Bitcoin derivative effects. And it's all very bold.

Speaker 2 (46:04):
Off, which is not a lot different than traditional stocks
with like a PE ratio. They could go from forty
seven to fifty two or something like that.

Speaker 1 (46:11):
It's quite analogous the PE ratio in a way. Yeah,
and then the other phenomena is that you see that
different strategy companies have a different regime. So you can
see that Meta Planet and or Japanese hotel company one,
they have a very rapid rate of bitcoin appreciation, and
the Blockchain Group, a newer one in Paris software company.

(46:36):
It's LPG is the ticker, and both Metaplanet and ORPG
are increasing the Bitcoin for share much more rapidly. And
so you know, I was so you know there m
nev on Metaplanet has been between five and tend it's
much higher they micro strategies maybe like two to three.

(46:59):
And so you know, in buying Metal Planet at five,
which is lower endo the range, you kind of feel
it like what that's a big multiple is it is
it safe or is it going to like fall to
you know two or three like motor strategy and it's
over shot now, right, And so that was my kind
of wrestling with, like should I be buying this or
is it already over plowing? Right? And so then I

(47:20):
got onto the months to cover and I realized that
it's you know, it's months to pay for it. Even
that big premium premium was it was about three point
three times at the time, but they had doubled them
a bitron on a balance sheet in one quarter, so
now it's just sixteen times annualized. Yeah, so I mean, okay,
maybe that's a short term effect and it's going to

(47:43):
average a bit lower, but it's really aggressive. And say
the months to cover was only like five or six months.
So when you look at it like that, you know,
as long as they keep something close to that track,
buying at five to even five times or a three
point three at the time, it's actually you know, real
through that risk. And so that that is a useful

(48:05):
metric to say You've got to overlay it with your
risk perception of yeah, you know, will they continue, is
it reputable what they're doing? And are they execution focused right,
And some of these guys are like, Sailor is amazing
at execution.

Speaker 3 (48:17):
Yeah.

Speaker 1 (48:17):
Just when you think he's done, he finds another billion
from something else or seventeen million. Yeah, so never bet
it's Sailor buy more bitcoin. Basically is the end message
that they have delivered repeatedly to the markets. But you're like, okay, yeah,
but Channels has given it a go, so good luck
to the guy.

Speaker 3 (48:32):
And what about all BG.

Speaker 2 (48:33):
So what we're seeing also now is if Sailor sort
of created this strategy the name of the company, and
now he's given the strategy other people and they're following it,
and then we're starting to see different versions of it,
variations of it. So All BEG is doing it more
on like a bit bond.

Speaker 1 (48:49):
Yeah. Actually it's quite innovative for what they've done. So,
I mean, I think sometimes what people are doing is
because the market available market mechanisms are different in different jurisdictions.
So in the case the mess Planet there using moving
strip warrants because they don't have an ATM and it
has a similar effect. Apparently they don't have a lot

(49:10):
of debt, so it's basically at the market, and in
the French one it did something interesting, which is is
a convertible note technically, but it's a bitcoin basis one.
So the interesting thing there is they don't really have
a debt ratio because what they'll do is they will
accept bitcoin in kind, or you could send in euros

(49:32):
and our buy bitcoin and then you have a like
with other conversed convertibles, as a conversion premium. If it
does up thirty percent, then you have the option to convert.
And if it you know, if it reaches maturity and
it doesn't reach the conversion premium, they don't already have
a credit risk because they just give the bitcoin back
and then they put the bitcoin in a separate special

(49:53):
company ring fenced and the in custody of an independent custodian,
and so they can actually sell a lot more convertible notes.
So you know, with with the euro or the dollar
basis convertible note, the company is sort of moderating how
much debt ratio they take on, and you know, micro

(50:17):
Strategy has said they want to keep it no more
than twenty to thirty percent leverage, so one point two
to one point three, and of course they can moderate
it right they can build the laboratrature up to one
point three, then they can sell some shares at the market,
which reduces their debtoration, and they can do it again.
So they kind of oscillate. Yeah, but in a in
an LPG, particularly because they they are recent and they

(50:39):
start small. They you know, if that was debt, their
debt ration would be enormous. Because it's not debt, it's fine, right,
so enable them basically to move faster because they have Yeah,
so basically they have a debt instrument that doesn't create
a debt liability effectively, right with a conversion. So that's

(51:02):
pretty interesting. Now, of course, you know you're the bitcoin
and the MNF. If that eventuality happens, which rink, right
because it be given back bitcoin that people have thought
was part of the formula. But nevertheless, the you know,
it's the situation, the scenario in which a treasury company
would have to repair there is that bitcoin is lower

(51:24):
in five years. They're generally trying to target at five
year bonds, which is a pretty good time frame. Yeah,
so most bitcoins are like, oh, I'll take those odds.
That's unlikely, right, but if it did happen, it might
be painful for the company to refinance, right, they might
have to sell shares very dilutively if they sold bitcoin

(51:45):
definitionally but a lower price, and so it would be painful.
And so then it brings into the question for the lender, well,
you know, that's that's the stress case credit risk. Can
it pets back? And what micro Strategy is doing is
they're trying to double over collateralized to provide assurance. So

(52:06):
firstly they've got you know, average lower cost bitcoin and
a lot of it. But secondly, they're generally you know,
selling you know, a billion of convertible nodes and a
billion at a ATM. So they bought two billion bitcoin
and they got one billion of convertible debt. So this
kind of overclateralization. Yeah, and then they're not doing it

(52:30):
too much so that they don't create a debt ratio.
But you know, the most of the people that buy
in the converts in MicroStrategy are delta neutral kind of arbitrage. Say,
you know, they'll buy one hundred and fifty million hedge
funds specializing this, they'll buy one hundred and fifty million
of the convert they'll short one hundred million of the stock,

(52:50):
and what they're left with is any fifty million long
day call option and they will do a kind of
option yield strategy. And Microtractor is fantastically balt bitcoin, so
they can have a lot of fun doing it. When
it reaches the conversion premium, they'll sell it by the
next crunch. Yeah, and so you know, as as they convert,
the debt ratio is getting reset again. So it kind

(53:11):
of sets a nice h kind of sequence when in
microstretch and bring more money in. These guys are bringing
new types of money and that doesn't even care about
direction of bitcoin or even believe in it necessarily, right,
but they can they can help bring the capital in.
That's it's it's interesting.

Speaker 2 (53:28):
How many of these types of companies do you think
the market can bear?

Speaker 1 (53:32):
Yeah, it's very interesting questions. So somebody I know in
a private banking so wealth management banking, ask me this
question and I was like, huh, interesting question, Like how
scalable is it? You know, if if Butcher had away
in Apple and Microsoft plow in, well they can press
the opportunity. Now, what I came to think about is actually, no,

(53:54):
it's enormost it's effectively it's an arbitrage between the bitcoin
futures two hundred trillion bitcoinized financial markets, which I think
of as not displacing the fit currencies but sort of
sucking out the monetary premium and everything. There's monstal premium
in the stock market if you take out the mt
monetary expansion, the stock indexes haven't gone up that much,

(54:16):
and montal premium in real estate are and other bards
all kinds of things where people are trying to preserve
their assets so preserve their svenu powers. So if you
if you take the two hundred trillion, that is the
size of the arbitrage, and then that's an enormous amount
of money. So you can look at the treasury companies
as one of the vehicles to arbitrage that future because

(54:37):
they've got you know, while bitcoin's going up, they can
bring forward corporate capital mechanisms and buy that at a discount,
and their actions are also applying pressure to bitcloining probably
bring that period forward so kind of accelerate you know,
highly at bitcoganization basically. So from that point of view,
I think it's very scalable and you can see that sailor,

(54:59):
you know, was relaxed about getting I think he has
an annual conference where he tries to encourage people to provide
the playbook and explain the accounting rules are used. It's
got a bit simpler now with the spottytfs for companies
to use those even but you know, clearly he's not
feeling it's competitive in terms of you know, for people
who are doing an arbitrage, sometimes they're trying and keep

(55:20):
it quiet because they know that it's not very scalable,
and other people pile in it it'll just pit. But
here it's it's an enormous dislocation. So it's like the
arbitrage of a century.

Speaker 2 (55:29):
Basically, well, he's got five hundred and eighty thousand bitcoin,
and if everybody jumps in.

Speaker 3 (55:32):
And pushed the price of bitcoin up.

Speaker 1 (55:34):
Yeah, but usually yeah, yeah, right, Well, I mean I
think there is an effect, which is that strategy is
a bit index to the MNA if you can hold.
So if you have a higher m nerve, you know,
for m nerve it's three rather than two. When you
sell shares or sell convertable notes, it makes it more

(55:56):
accretive bitcoim per share per dollar. And that's partly where
Metal Planet and LPG have an advantage is they have
a high mp and so when they do a corporate action,
whichever version, it's more effective like that. So it's a
little weird because kind of sort of self reinforcing, it
has a high m A high m F helps it

(56:17):
keep a high en F because the corporate actions. So
that factor is one thing that makes people skeptical. But
they do need a fundamental to get it to the
high mnds and and and earn it, like justify it
and keep it. You know, they'll they'll drop and then
they'll come back. So there is something fundamental there. But anyway,
I think it's enormous. And that's the scalability question and

(56:41):
the other one is sort of sustained sustainable. You know,
can can these companies maintain their yard? You know, can
they keep doing it? Or is or is that just
going to droop? And you know one theory for why
it might four as they get bigger. You know, if

(57:03):
you if it takes it very small, they can create
a fifty percent return. Start with one bitcoin. You can
buy half a bitcoin and now the fifty percent return
in one shot. Right, So now, so that's true, but
you know, once it gets going and it's you know,
it's one hundred million versus get getting off one hundred
billion in Sailor's case, they you know, they have I

(57:25):
think their ability to raise is somewhat scalable with their size,
right because you know, sort of the debt ratio, right,
if they're both targeting on one point three debt ratio,
you know, one hundred million guys they can raise thirty million,
and one hundred billion can raise thirty billion. And Sailor
is doing it. You know, he is bringing him larger

(57:48):
amounts of money in bigger chunks. And you know, I
guess the other question is do they start to exhaust
the arbitrage players and the bond market competition, right, But
those markets are very big, yeah, and the the the
convertibles are extremely attractive for those traders. They're the best,

(58:13):
the better upside, the best fertility product on the market
for their strategy. So I think ultimately, you know, if
it starts to become significant in that market, you know,
people looking for you, they're really from something else. It's
not very interested in the treasuries or fixed it them
or sud it, right, Yeah, So I think that makes

(58:33):
it more scalable. But it could you know, it could
cause it to be a bit harder to go big.
But there are some advantage being big, which is they
get into stock indexes that benefit from passive flows of
people making regular savings that get dropped into like an
index one. So I think sailor is you know with

(58:54):
my strategy, they're in one of those inexperts. Another target
coming up, which now they need a certain number of
cause off the pul tea and they and size and
they get in there, so they may get into it soon.

Speaker 2 (59:07):
Well let's uh, I mean, like I said, this is
the most fascinating thing going right now. I love this
moving new things and new terminologies. Let's uh, let's let's
wrap this up and talk about the potential for risk
because inherently this business model relies on leverage to grow,
and of course leverage is that double edged sword, especially

(59:27):
in a bitcoin world where it's extremely volatile both to
the other side and the downside. So in order to
do good in this strategy, I have to use leverage.
And so that's number one. And then some people are
naturally always gonna take it too far number two. And
then on top of a volatile asset, so how are
you looking at that the risk side of it.

Speaker 1 (59:45):
Yeah, I mean it's effects what it depends which which
approach they're using. So you can see micro strategy. They're
quite transparent that they're learning, you know. So they start
with one strategy. So when they started, they used their treasury.
I mean, firstly they did a share buy back opper
so that people didn't believe in they could leave, so

(01:00:06):
they brought them back at prinion most people stayed. They
bought a first slug of bitcoin with cash and an
a rat of cash possible on us, right, and so
the next thing they days talk took a corporate bond.
It's a long running company or a steady revenue, so
they had a credit rating to bring in a big
corporate bond because they brought up a debt ratio. And

(01:00:28):
so they were quite aggressive into their first bear market.
In the price fell, they did more, more and more
and more right, and they actually ended they overcuoked it.
So you know, I went back and looked at it,
and I bought some of it in that bear market period,
but I went back and looked at it in terms
of how much debt they'd had versus then that I said,

(01:00:50):
the bitcoin and the debt got larger than bitcoin for
five months in a row. So if that was a
leverage position on exchange, they would be liquidated it. So
now they it wasn't in a directly margin coller ball.
They had the equity cushion, had plenty of revenues paid,
i mean the interest on it, so they just you know,

(01:01:13):
plowed through it. They did something tactically interesting, which is
they had at the tail end of it, like a
two hundred million collateralized backcoin learn from Silgate, and silver
Gate started to suffering the market and they needed liquidity fast,
so they actually bought back their own debt like a

(01:01:34):
thirty percent discount of silver Gate. So that works out well.
But generally speaking, I think you can see that they've
blearnt from it, right because now they are targeting the
conservative leverage ratue. And they also cleaned up the call ability,
you know, so there's no direct lean on the Bitcoin.

(01:01:56):
It's restructured things and they had, you know, the negotia
empowered to do that, so it's in a safer position.

Speaker 2 (01:02:04):
And but they're able to do that because of who
they are. But what about all the new entrants there.

Speaker 1 (01:02:10):
Well, that's a very good question. So you know, there
is a potential risk that some new entrants push it
too far in like an attempt to catch up or
you know, getting a bit too exuberant and pylon straight
debt that then they have difficulty servicing in a bed market, right,
get too high leverage. Now, some of them, like two

(01:02:34):
of the ones that have a very high in end
the have actually have almost no debt. Interestingly, so matter
Planet has almost no debt and LPG has debt, but
it's bitcome basis debt. So the debt there if bitcoin
principles that drinks and so they're not never get into
a kind of solvency issue with a guilty to repay, right,

(01:02:55):
So but yeah, you might you might see that in
a bear market that some people have made some kind
of rick suberant straight debt structures that could you know.
So I think I think one of the worst risk
points is people looking at the big ones and saying,
well it if microstrech is sold like five hundred thousand
bicker in the market, well create I don't think that's

(01:03:16):
happening because you know, the debt ratio is low and
they got a lot of levers to play with. And
the debt. A lot of the debt they have is convertible, right,
and so they can you know, they're converting it as
it as it, which is premium. So the debt that's
left over when the market turns presumably well eventually is

(01:03:36):
you know, it's it's manageable. And I think the other
thing is, you know, the average entry price and bitcoin
in this loan sixty five something probably is gradually creeping
up to seventy. So they got they got some hydron
from one hundred and ten level, right, and you know
the floor price this two hundred week moving average is
also creeping up forty seven. Soon enough it will be

(01:03:58):
fifty saying, and if that's an indication of well the
market probably won't fall below that kind of region. You know,
there's a safety in that. But you know past history
doesn't necessarily predict the future also, right, and you know,
if the phenomena gets big, you know, it could contribute

(01:04:21):
to the market dynamics in a negative way. I guess, yeah, yeah,
So you know, you just hope that the people that
take the risk that goes wrong do it when they're small,
so they don't have an impact on the market. Well,
the other thing that occurs to me is that you know,
a bigger strategy company could buy them, you know, if
it makes sense.

Speaker 2 (01:04:40):
Yeah, all right, last question, where do you see bitcoin
in this bitcoin treasury strategy sort of being in five
years from now, in twenty thirty.

Speaker 1 (01:04:54):
Well, I think, you know, because what I was saying
about the scalability or to approach, I think eventually it
will pull in some of the larger cap companies because
you know, there's a there is literally a fiduciary obligation
to protect their shelves interests, and some of these companies
are sitting on a billion dollars bus up cash or

(01:05:15):
having more rate ten billion or.

Speaker 3 (01:05:16):
Something at all.

Speaker 1 (01:05:17):
Yeah billions, yeah right, And so you know, realistically, with
the empty mercery expansion and the debt ratio in the
major economies, we're probably facing you know, a decade or
two of financial repression, which means that the implation rate

(01:05:39):
is higher than the interest rate. And so if you
know they have ten billion or more sitting in US treasuries,
they're just straight up losing it, right, And so that's
not you know, I mean, Warren Buffett would say cash
is king, and he's waiting for an opportunity in the market,
and he's good at like waiting for the bomb of
the market to go buy stuff. But in the meantime, like,
why is he losing money on the cash? Wait? You know,

(01:06:01):
there's obvious alternatives. So I think, you know, some of
the sort of more technology focused companies with younger management
will probably start to get there. You've seen a couple
of shareholder requested votes for the boards with Microsoft and

(01:06:25):
Apple are not it didn't get past. But the question
is coming in and there are bitcoiners in there, you know,
I know somebody who is. And there's some ext Microsoft people,
people on the the top management on the board who
are bitcoiners, right, And so there are people around them
that understand bitcoin, have been at bitcoin for a while.

(01:06:46):
Who would you know, try to explain it to them. Yeah,
for sure, and don't have to like put all the
cash in it, but like and.

Speaker 2 (01:06:52):
They see what strategy is doing, so they're like, hey,
we we should probabe do something similar.

Speaker 1 (01:06:56):
Yeah. Yeah, So I think they they're missing a trick.
And you know, it's actually kind of surprising how few
companies participate in the treasury company play in that you
could see that sailor was, you know, trying to leave
the dance right, you know, this kind of dance floor

(01:07:17):
phenomena one pubs and dancing. Eventually everybody Johns joins in,
and you know he's leading it. He's out on the bridge,
he's on the making voyage of the flight to show
it safe, full conviction. It's contagious. So i'd like this
is great. Less, you know, let's see some more. And
he's running the conferences and nobody's got in. I mean
they come in now, but they're starting from the smaller end,

(01:07:38):
like the innovative ends. But yeah, I mean I guess
there are some a few public companies doing it. I
mean just during the conference there was one of the
Trump media companies with a convert you know.

Speaker 2 (01:07:51):
Yeah, yeah, I mean to the dance floor analogy. I mean,
the one person dances alone for quite a while and then.

Speaker 3 (01:07:57):
Two well apparently it's now eighty right, so like they're
coming and it just takes time.

Speaker 1 (01:08:03):
Yep.

Speaker 3 (01:08:04):
Great, Well I think that's a good good chance to
cut it off.

Speaker 2 (01:08:07):
Anything you're working on that you want to draw attention
to that people should be checking out.

Speaker 1 (01:08:11):
Oh yeah, I mean we're just doing a you know,
whatever helps to help bitcoin reach its potential reach the
mission objective of involving more people in bitcoin recent pushes
into bringing the pension funds and endowments to get them
off serio. So you bought Sean Ville who had the
inside experience of trying to get bitcoin in there and

(01:08:34):
the outside experience of being an hedgebonter manager, so trying
to help help them do it.

Speaker 3 (01:08:40):
Get off zero. All right, we'll sign it up with that.
Thanks so much.

Speaker 1 (01:08:43):
Thank you,