November 29, 2025 • 55 mins
Brandon Quittem, author and longtime Bitcoiner, joins to unpack why Bitcoin isn’t just an asset but the foundation of a new financial system — and why treasury companies like MicroStrategy may be the most fascinating story in corporate finance in a generation. From Bitcoin’s correlation to global liquidity cycles to the rise of Bitcoin-powered securities, Brandon explains how capital trapped in legacy mandates is being unlocked and funneled into BTC. In this conversation, we dive into the difference between pure-play Bitcoin treasuries and operating companies, and how volatility itself becomes a feature, not a bug. Brandon also explores whether these new Bitcoin corporations can outperform BTC over the next five years, the risks of “Ponzi-adjacent” upstarts, and why the very metrics we use to evaluate companies are being rewritten in the Bitcoin era.
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Transcript
Episode Transcript
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Speaker 1 (00:00):
There's nothing better than bitcoin in your gold storage. It
has the best risk adjusted return. That should be the
foundation of anyone's portfolio. If you want to take some
additional risk, then you should explore the treasury companies and
attempt to outperform bitcoin. Capital is trapped under different mandates.
Those trap pools the capital have no way of getting
some of that upside. Michael Saylor accumulates bitcoin on his
(00:22):
balance sheet so that he can create securities that fulfill
the mandate of that trapped capital. He sells those securities
and he's bringing new capital, which ultimately lands in bitcoin
from those trap capital pools.
Speaker 2 (00:35):
Do you think the good companies will be able to
outpace bitcoin over a long term? And when I say
long term, call it five years.
Speaker 1 (00:44):
Yeah, I think that's right.
Speaker 2 (00:47):
Hey, Brandon, thanks for joining me today. It's been a
while since we've got to sit down and do a recording.
I'm super excited to jump in here.
Speaker 1 (00:52):
Likewise, what was the last time Mark? Was it live
in LA a couple of years ago? Is that the
last time we recorded together?
Speaker 2 (01:00):
That is a good question. I should have gone and looked.
I did see one as I was going through from
like I think four years ago that we had a recording.
I think we were talking about I think the Fourth
Turning four years ago, but so much has changed since then,
and I would say the whole direction of the world
has changed since then. You know, the Fourth Turning was
(01:22):
a hot topic four years ago. I was talking about
the cycles and the decentralization, and I think it was
a super important message at that time. For right now, though,
I just see massive change, but so much hope and
prosperity on that side. I'm curious if your sort of
worldview has shifted since where we were four years ago.
Speaker 1 (01:43):
Yeah, I think it definitely has. When we recorded last
let's call it twenty twenty one, we're in the thick
of the COVID tyranny stuff. I was genuinely disenchanted by
my fellow American at the time. I thought we stood
up for individual rights and sovereignty and we went just
do whatever we're told. And yet I flashed back to
(02:03):
that period. I remember I was living in Minneapolis at
the time. I remember my neighbor calling the cops on
my other neighbor because they had too many cars in
the driveway for some holiday or birthday or something, and
that really set me off, and it ultimately led to
me finding the fourth Turning and trying to make sense
of this whole thing. And now that we're sort of
through the fog of war, I would like to believe
(02:26):
society learned something from that, but I honestly don't think
the average person did. But what gives me optimism now
is that it feels like Bitcoin's time is really coming.
It's clearly being financialized, it's clearly being accepted by the
political party in the US, at least for now, and
I think that puts a lot of It gives bitcoin
(02:46):
a lot of runway, and it will give us a
chance to get out really far ahead of this thing.
So even if the political tides turn in the future,
I think Bitcoin is sufficiently too big, too entrench nothing
can stop this thing. And so while we have Paul
today telling us that the two percent inflation is no
longer a target, markets react positively, obviously, So we have
(03:08):
Fiat with nothing stops his train, and we have Bitcoin
getting adopted in larger and larger scales. So that's pretty
cool to see.
Speaker 2 (03:15):
Yeah, I haven't got a chance to catch up on
what he said this morning, but I did just pop
on to Twitter for like a split second to check
a message, and I see a post from Lynn Alden
and she said if you missed if you missed her
own Palell speech. He basically said, nothing stopped his train.
I was like, Okay, that's all I need to know.
And I see the price of bitcoin and everything else
(03:36):
going back up quite a bit. So one thing I
think that's important to kind of catch up on is
the different facets that we've sort of seen bitcoin go
through as it's growing up, as it's advancing. You mentioned
the political headwinds have shifted now to maybe tailwinds. Sort
of Bitcoin has gotten to where it's at in spite
(03:56):
of all the headwinds that it's had from Operation Choke
Point to you know, Elizabeth Warren's anti crypto army, to
all of those things, and now that that headwind has
turned into a tailwind politically, which has then seemed to
bring a lot of the institutional money, the Wall Street
money maybe waiting for that sort of all clear is
from this regulatory front. That's how I see it. Anyway,
(04:19):
how are you framing up where we're at with the
bitcoin price now here breaking new all time highs, the
political wins where they are.
Speaker 1 (04:27):
Yeah, I think that's right. I think the big watershed
moment was the ETF getting approved, and so Grayscale won
that case, which essentially made the way for the ETFs.
Those were obviously the most successful ETFs of all time.
They continue to be net accumulators. And we have the
Trump administration signaling gas pedal for the industry, and so
(04:49):
you pair those two things together and it's essentially as
d risk as you can possibly get. Maybe you sprinkle
a little Larry Fink being a bitcoin spokesman spokesman on
top of that, and yeah, clearly the conditions have changed.
We're seeing Wall Street respond, We're starting to see pension funds,
Harvard Universities, some other marquee names taking a bite out
(05:09):
of this thing. And so, yeah, it's very clear the
tides have shifted. And if we look at this the
price over this recent time period, bitcoin is not operating
like it normally does in a bowl market. With these
exponential moves thirty ish plus percent declines hopefully rebase and
run up again. We're seeing a very different market structure.
(05:30):
We're seeing little pops to reprice and then we're seeing
this really boring crab market period as old investors selling
out and new investors coming in, everyone gets bored, and
then we have another little pop and we chill out
after that. And so to me, it seems pretty clear
that something has changed. I don't know if if we're
ever going to have another eighty percent bear market again,
(05:52):
if we continue this slow climb stair stepping climb, I
don't think we will. However, if we do reach some
sort of a mania Piero, let's say, in the next year,
and bitcoin really goes parabolic, I think we will have
at least a fifty percent correction.
Speaker 2 (06:06):
Yeah, it seems like if you look at a long
term chart of bitcoin, it's like the line in the
sand is sort of when the ETFs got launched, and
since the rise of the ETFs, it sort of seems
like a lot of that volatility has come out of
the market. So maybe it's that there's such a long
standing sustained bid for bitcoin that it just isn't allowed
to sort of get those twenty five or thirty percent drops,
(06:28):
as you said, because that bid is there.
Speaker 1 (06:31):
Yeah, I think that's exactly right. I think there's a
sustained bid from larger players. They know they need a position.
They're accumulating. Any dips are getting bought up, and I
think we'll see that for some time. If you look
at the market cap of bitcoin compared to let's say
there's one thousand trillion dollars in total assets in bitcoin's
two point five or something like that, this is a
(06:52):
giant whale we're going after, and Bitcoin's still a minno relatively,
so I do expect those institutional flows to continue, and
we have a lot way to go there. Now. One
thing that's very unique that I'm noticing in my personal
life is that retail does not seem to be woken
up yet. They're not coming back in large numbers. I'm
getting a few messages from contacts, but it's pretty quiet
(07:14):
compared to twenty twenty one or twenty seventeen. Are you
seeing the same?
Speaker 2 (07:19):
I would say, I would say I'm seeing about the same.
Speaker 1 (07:22):
You're right.
Speaker 2 (07:22):
I mean, typically when it starts breaking out, making new
all time highs, contacts you haven't heard from in years
start coming and sending your messages, asking you, you know,
how they can get in, if now's the time to buy,
should they wait? Those types of things, And I would
say those have been a little light right now. Maybe
it's because we've been hovering around this one hundred thousand
dollars mark for quite a while, so maybe you know,
(07:43):
we had one hundred and twenty, it's not that much higher.
It's the law of large numbers, right, It's like the
numbers have gotten so much larger that getting one hundred
hundred and twenty like what's the big deal kind of
a thing. So maybe that's it, but I would agree
with that. I'm curious what your take is. I mean,
between the ETFs, as you said, like this this sustained bid.
(08:03):
Now we have the rise of the bitcoin corporations, the
big win treasury companies acquiring you know, we've seen it
looks like five to ten times more demand than the
new incoming like mining supply. So I guess number one
the big question that everybody has is if there's all
this buying and it's outstripping supply by that much, why
(08:28):
hasn't the price moved more?
Speaker 1 (08:30):
Yeah, that's the million dollar question. You see this all
over Twitter. You see all the analysts bringing this up.
And I think I would draw from James check who
writes a newsletter check on Chain. I think he's one
of the top on chain analysts and people have opinions
about this, but I think there's some value here to
be added in your analysis. And what James Check notices
(08:51):
is that we are seeing old, large whales that have
held their coins for a very long time finally taking
some meaningful profits. And you might say, why would you
do that? Bitcoins maybe the best time ever to buy
from a risk adjusted return, why would they do that?
But if you're sitting on one hundred million or a
billion dollars in unrealized gains, maybe you want to upgrade
(09:13):
your life a little bit. And I think that's pretty reasonable.
I also think it's healthy for these coins to change
hand and not move the price very much. If you
remember that giant cell that I.
Speaker 2 (09:24):
Think Galaxy executed that Galaxy.
Speaker 1 (09:27):
Yeah, Galaxy, excuse that eighty million or I forgot the
number of.
Speaker 2 (09:30):
Eighty thousand bitcoin. I believe it was like nine billion dollars.
Speaker 1 (09:33):
There you go, it's way off. Move the market maybe
three percent that day, came back up the next day.
That's extremely bullish, and so the bid is there. We're
recycling investors. This is all healthy, and this is how
we could see a world where we don't see another
eighty percent draw down. Instead, we're more correlated to M
two growth or general macro conditions.
Speaker 2 (09:55):
Yeah, back in the day, when I first got into
bitcoin twenty five ten, twenty sixteen, then I thought, well,
it's not bitcoin, it's the blockchain. So then I'm into
the different crypto assets and I would trade these assets,
and I would sit on some of these exchanges, pullin
X I think, or bit tricks or whatever, and I'd
sit there try and trade these things, and i'd literally
watch the order books and I'd be taking the orders
(10:19):
that were the highest, so I could move my coins
without moving the market cap, without getting the slippage in
the price. And today they just dumped nine billion in
a single day, just like and it moves the market
by a couple of points. Like I literally would like
execute trade by trade by trade, you know, and just
a couple of years later you can literally have nine
billion or whatever it was in liquidity in a single day. Amazing,
(10:41):
that's wild.
Speaker 1 (10:42):
I remember the twenty seventeen market, people were selling their
kyced binance account for like twenty thousand dollars right right,
just as a sign of the times. Now you can
get a you can go buy the ETF on any
brokerage you want. The on ramps are numerous, very easy
for large volume. Times have definitely changed.
Speaker 3 (11:01):
Yeah.
Speaker 2 (11:02):
Now, when you look at the demand outstripping the supply,
I mean, obviously there's always supply. I'm talking about the
new supply, the new mining supply. When you look at
the demand outstripping the supply by five or ten times,
how much do you think this four your having cycle
really matters. When the demand is already outstripping the new
(11:22):
supply by so much, what difference does it make if
it drops by another fifty percent?
Speaker 1 (11:26):
Yeah, I think it's a good point. What people would say,
let's rewind a year or two ago, is bitcoin as
a having cycle every four years. We know that soon
after the having cycle we see a price run. And
the conclusion for most people during that period would be
because the inflation is cut in half, that just cycles
through the market and there's less supply being created. So
(11:49):
if you have steady demand and less supply, price goes up. However,
those were very different times. In the first four years
in bitcoin's life, fifty percent of the coins were issued.
This is a very large inflation rate. Next cycle, twenty
five percent of the total coins were issued, Right, that's
a lot of supply, and you meant you bring it
up to today. We're less than two percent new issuance
(12:11):
per year today and the next HAVING cycle will be
less than one percent. And if you look at that
total dollar amount like you mentioned, those are peanuts relative
to average trading volume or new new buyers. However you
want to look at that. And so just looking at
the mining supply d dynamics, I think it has almost
no impact going forward, and increasingly so each cycle. Now,
(12:32):
I think there's another bigger question here, which is was
there ever actually a cycle that was catalyzed by these
supply reductions? And if you look up an M two
money chart relative to Bitcoin's price, Bitcoin's extremely correlated to
M two meaning money printer goes burr. Where does the
new money go? Bitcoin gets an unfair or outsized percentage
(12:56):
of those new flows. And so I'm leaning to there
never was a HAVING cycle. However, it's hard to say.
I don't think we'll ever know.
Speaker 2 (13:06):
Yeah, Well, you mentioned global liquidity, and it's something that
I spend an enormous amount of time watching and reporting on.
I talk about it on almost every one of my videos.
And I would probably agree to the point that I
think you're proposing. I don't know if that's your review,
but I would agree. I think the global equity cycle
is the dog wagging the tail. It's not the four
you're having cycle. I think Michael Howell is the goat.
(13:29):
I subscribe I paid a subscribe to. It was newsletter.
I read that Nick Body at the Bitcoin Layer they
do a really good global equity cycle charts. Ral Paul
of Our Real Vision does some really good ones. And
it was actually Ralph Paul that sort of brought me
onto this idea. So getting credit where it's due. You know,
we're in a debt based monetary system, so obviously the
debt always has to expand, and debt could be termed
(13:49):
from months to up to thirty years, and so all
around the world you have all these different rates of debt.
And there's this really interesting phenomenon where you take a metronome,
which is supposed to keep perfect time for music, and
if I put like one hundred metronomes on this table
and started them at all different times in a period of time,
they would all sync up because of the way the
table vibrates or whatever. And so you have all this
(14:10):
debt around the world at these different terms and rates.
But in two thousand and eight, when we had the
Great Financial Crash, the entire world dropped rates to zero
and everybody called the banker and refinanced basically, right, So
all the debts got synced up. And if you look
at the profile of the debt today, seventy five percent
of the debt is termed between three to five years,
(14:33):
which means four years now. That started in two thousand
and eight, twenty twelve, twenty sixteen, twenty twenty, twenty twenty four,
which just so happens to be the four year having cycle,
which just so happens to be the four year presidential
election cycle, which just so happens to be the four
year business cycle, all on the same cycle. And so
(14:58):
certainly we think about are they trying to stimulate the
economy going into a presidential cycle. I mean, I saw
some talk today about Jerome Powell and potentially trying to
get some easy for the midterms next year. So there's
certainly the four year election cycle, certainly the global liquidy cycle.
So I tend to kind of think that is the
dog that's wagging the tail and I remember, you know,
(15:19):
going into the last cycle.
Speaker 3 (15:22):
No, this can't be the top.
Speaker 2 (15:23):
Michael Sailor said, all my models are destroyed. Sixty nine
or wherever it was in the sixty thousand. It's not
high enough. It needs to be higher. It's got to go,
gotta go, gotta go. But right on point November twenty
twenty one, it made it high. But it was Jerome
Powell that went out on the news and said we're
going to start raising rates, and he said he gave
(15:45):
forward guidance, he said in January will raise rates, and
just like that, Bitcoin and then NASDAC and then S
and P five hundred drew down. So I think back
to the point that you're making. You look at the
M two. It was Jerome Powell coming out saying we're
going to because he had said we're not even thinking
about thinking about raising rates. He said, we're not going
to raise rates for four years. But then he came
(16:06):
out and said, okay, we're going to tighten, and then
Bitcoin's sold off. So then the question is is Jerome
Powell going to come out in November and tell us
they're going to tighten and start raising rates.
Speaker 1 (16:17):
It's a good question I'm no fed hawk. I don't
keep an eye too much day to day. I just
pick up the scraps on Twitter. But his recent comments
today are him signaling that the two percent's gone, two
percent target's gone, and markets are screaming. So as far
as I can tell, we're going to be printing until
further notice. And if so, Bitcoin's going to do extremely well.
Speaker 2 (16:39):
I mean, I just think about Trump seems to kind
of get his way. He's been banging on Fed chair
Powell to lower rates. He wants them down like three
and a half points. And if he doesn't get Powell
to drop him either way, Powell's gone next year and
he'll replace him with someone who will bring.
Speaker 3 (16:56):
Them down three and a half points.
Speaker 2 (16:58):
So it was a rhetorical question, you know, and rather
than Jerome Power raising rates, I mean, potentially he could
before he's gone, but by this time next year he'll
be gone. Most betting odds are that Trump will replace
him with a dove and those rates are going to
be down by several points, and so that changes the
global equity cycle, and it changes that for your having cycle.
Speaker 1 (17:21):
I think I agree. If so, if we went with
the four your having cycle, the market should be pretty
exhausted by this time next year. But if we have
some right decreases starting this year maybe next year, there's
no way that the cycle will be over if we're
correlating to M two. So I'm on the train selling
(17:42):
now is crazy. Hold your bitcoin, folks.
Speaker 3 (17:45):
Yeah.
Speaker 2 (17:46):
Now, the other big phenomenon is not just do we
have these ETFs buying massive amounts of bitcoin, but we
also have the bitcoin treasury companies buying them. And so
these are companies like Michael Saylor started Strategy micro Strategy,
which is now Strategy, and they're basically leveraging public deechn
equity markets to buy bitcoin. And now there's a sustained bid,
not just a sustained bid, which there.
Speaker 3 (18:07):
Is, but a race, if you will.
Speaker 2 (18:10):
What's your take on that sort of situation that's been
setting up in the markets.
Speaker 1 (18:14):
Yeah, absolutely, So I love this topic. First of all,
I've been in bitcoin full time for about eight years now,
and you know, you kind of go through these different
periods where you're excited about bitcoin and then you kind
of get bored, and then you go learn about mining
and that's fun, and then you go learn about something else.
And for me, treasury companies is the latest fascination and
(18:36):
most of my mental cycles outside of work and family
are going this way, and so I think it's I
think it genuinely is the most exciting story in corporate
finance and at least a decade, maybe generations. So it's
definitely something to pay attention to. But before we go
into analysis and different ways to slice this, I want
to be very clear, there's nothing better than bitcoin and
(18:56):
your cold storage. It has the best risk adjusted return.
That should be the foundation of anyone's portfolio. Now, if
you want to take some additional risk, and there is
significant additional risk, then you should explore the treasury companies
and attempt to outperform Bitcoin. Some of these absolutely will,
just like Michael Saylor has shown, not all of them will.
(19:18):
Maybe some of them will over different time periods. But
point being, Bitcoin and cold swords is the foundation. Take
additional risk on top of that as you see fit.
That's that. So what's going on here? Okay? Capital is
trapped under different mandates. You may be only able to
invest in fixed income, you may be only able to
(19:39):
invest in equities, all these different structures, right, and if
you look around the world, bitcoin is the best performing asset,
and those trap pools the capital have no way of
getting some of that upside. And so what does Michael
Saylor do. Michael Sailor accumulates bitcoin on his balance sheet
so that he can create securities that fulfill the mandate
(20:01):
of that trapped capital. He has a whole portfolio of
these things now, and he packages them up for different
types of investors. He sells those securities, and he's bringing
new capital, which ultimately lands in Bitcoin, from those trapped
capital pools. And we talked about this earlier. Bitcoin's two
and a half trillion. Fixed incomes in the hundreds of trillions,
(20:22):
and so there's a lot of capital chasing yield right now,
and there aren't many good options for fixed income guys,
and so enter these preferred equity products that Sailor's creating,
and it's just a far better product for the fixed
income guys. And what are they doing. They're buying it
in volume. And so I suspect that this trend is
going to continue for a long time, and I think
(20:44):
it's important to maybe differentiate in the types of these entities.
I think micro strategy. Now strategy is in a league
of its own. It's almost silly to compare it to
the others. But I think there's roughly three different types
of these companies that I think it's important that we differentiate.
So number one is the peer play treasury companies. This
(21:04):
is micro strategy. This is more or less Metaplanet, but
essentially the operating business is either nothing or marginal. The
whole game is accumulate bitcoin issue securities to accumulate more bitcoin.
Then you have the second category, which I call Bitcoin
forward operating companies. This might be a bitcoin minor like Mara,
(21:24):
This might be fold, This might be there's tons of these,
but they have core operations that are totally related to bitcoin.
They're exposed to bitcoin, and they also accumulate bitcoin for
their treasury, so it's kind of a hybrid. And the
third one is just an operating business that maybe has
nothing to do with bitcoin, but they generate free cash
flows and they put a percentage of their free cash
(21:46):
flows into bitcoin as one of their treasury assets. This
could be Tesla. This could be Figma, which we saw recently,
and the market treats these three categories very differently. Operating
business with a bitcoin treasury Figma Tesla essentially no premium
on those on that holdings. Now, the Bitcoin Forward operating companies,
(22:09):
they're not getting much premium either here right now, the folds,
the Maras, there's many others, but the peer play treasury.
Speaker 2 (22:15):
Where would you put similar scientific in that.
Speaker 1 (22:18):
It's a good question. They do have free cash flow
generating operations, not technically Bitcoin Forward, and they also do
some novel different finance games to try and accumulate. I
think they're kind of in category two, but it's not
technically Yeah, it's not technically a bitcoin operating business, right,
and so maybe I expand that category to just say,
(22:40):
a free cash flow generating operating business that also does
financial engineering.
Speaker 2 (22:45):
Yeah, and it's a great breakdown. That's exactly the way
that I look at it in those three categories as well.
One of the things I told you before we started
recording was it two months ago or so a couple
months ago, I was in Prague a keynote at Bitcoin Prague.
Got there and I got to have a small intimate
dinner with Michael Saylor and Alexander from the Blockchain Group,
(23:06):
and Adam Back and Eves from Tobain and Eric White,
you know, a small little group, and he gave us
a you know, three hour masterclass on on what's going
on and bigwin treasuries and and I was telling you
how it sort of reframed my entire brain as to
what was going on. And what you just laid out
is one of those and I can give you more,
(23:26):
but one of those things. And and and he really
kind of gave me the difference of at least those
two tiers of the peer play versus a business that has.
Speaker 3 (23:36):
A bitcoin treasury strategy.
Speaker 2 (23:39):
And the big difference that I saw and that completely
changed my mind on this is and and is well
there's two there's two parts of it. So number one,
when when micro Strategy started, they started using convertible debt,
and there was all this noise in the market and
(24:01):
the ecosystem of they took on this debt and what
if they can't afford the debt and how they'll be
able to afford it, and what if it comes do
and all these things right, but don't worry because they
have an underlying business model that throws off free cash.
And as long as the debt doesn't exceed what the
business can do with free cash, they can, right.
Speaker 3 (24:16):
So remember that whole narrative.
Speaker 2 (24:18):
But what he sort of. He didn't say in as
many words, but what he basically told me is that
when he changed micro Strategy into Strategy, he also changed
the strategy. He headfaked the whole industry. Hey check this out.
Speaker 3 (24:32):
Oh, but I'm gonna go do this over here.
Speaker 2 (24:34):
So Strategy employees a completely different model. So Strategy doesn't
use convertible debt anymore. Now they use preferreds. And what
he told me, if I started over, if I could
start over again, I would never do the converts. I
would just do the preferreds. And so that's all he's
doing now. He's trying to get the converts. At their
last meeting, he talked about getting that off. But here's
(24:56):
here's what I want to add on to what you
just said with the pure play versus the stage two,
I think you called it like a similar. So what
he said was that the market wants to see me
as more volatile than Bitcoin. The market wants to know
that I move with Bitcoin in a more volatile fashion
so they know how to position around me. He said
(25:18):
that if he used an example, he said, if God
came and spoke to me tonight and told me the
market was going to crash tomorrow, and I woke up
and hedged my position so we didn't crash. That'd be great, right, No,
the market wants me to crash. If bitcoin crashes, the
market wants me to move up and down. They need
to know how to position around me. If I'm two
(25:41):
times as volatile, they knew how to position. But if
I changed volatility, they don't want that. They would rather
change their position size. And so what it did is
it made me reframe if I'm similar, not to throw
similar science scientific under the bus, but they have an
underlying business model in the medical world. Will they get
a new invention and a new patent and will that
(26:02):
bring up their revenue or will they get this DOJ
lawsuit and will it bring them down? We don't know.
But that unknown makes the stock move differently than with
the price of bitcoin. And so all of a sudden
I have to like, well, how do I evaluate a
business and how do I evaluate the bitcoin? And I'm
not sure. I don't typically invest into medical businesses, so
(26:24):
I'm not you know, versus like just looking as a
pure place. That was one big mental shift that I got.
Speaker 1 (26:29):
That's absolutely fascinating. It also brings up the point that
sailor always hammers, which is volatility is vitality, right, he
wants the volatility. But I hadn't thought about what you
just mentioned, that how complex security analysis becomes if you
have to analyze a business and a bitcoin market and
(26:50):
their ability to raise capital in a creative way. That's
way too complex for most people. And it's also fascinating
to say when bitcoin's down ten percent and strategy should
be down twenty percent, and that actually rewards him in
the long term. Counterintuitive and fascinating.
Speaker 2 (27:07):
Yeah, now you mentioned Checkmate earlier, James, I also agree
with you. He's brilliant. I love his is on chain analysis.
He's been pretty critical of these bigcoin treasury companies. He
seems he calls them Ponzi adjacent, not quite calling them
a Ponzi scheme or a Ponzi's game or whatever, but
I think that was him used the word Ponzi adjacent.
(27:30):
What's your take on that.
Speaker 1 (27:31):
Yeah, I think his primary argument is that, first of all,
micros strategy is separate and unrelated. He thinks that's too
big to fail, doesn't have the same risk. But I
think his primary point is targeting the upstart treasury companies
that quickly get to market and try to follow in
the footsteps. And if I'm capturing his argument, well hopefully
(27:53):
i am. He believes that we're going to have too
many of these things relative to the demand, and if
you have a sitch situation like that, mnavs can press
so low that the smaller treasury companies essentially don't have
any moves left because without some sort of hype in
their stock price, it's very hard to raise capital in
(28:13):
a way that's a creative to shareholders. And I think
it's a fair argument. I think that there's some truth
to that. I think what I would say in response
is that timing is very challenging here. Right. If we
look at the timeline of these things for four years
twenty twenty to twenty twenty four, it was only Sailor.
(28:33):
Then we got Metaplanet, I think in twenty twenty four,
and people were not confident about Metaplanet coming out. They
were mocking Metaplanet. Obviously, Metaplanet absolutely crushed, and I think
once Metaplanet performed, well that's really when the game started.
Now we see a bunch of these things coming out
with different strategies, different jurisdictions. There's a lot of different
(28:55):
ways you can go to market, and most of those
are still small. They're obviously small compared to strategy, but
they're small compared to their potential. And many of the
larger ones haven't even acquired any Bitcoin yet, such as
twenty one or atom Back's new one bstr or whatever
that is. And so we're essentially at the very very
(29:16):
beginning of this thing. So while I think James Check
might be right in the long run, between here and
there could be years, and if you took his advice today,
maybe you'll miss out on some opportunities in the midterm.
Speaker 2 (29:30):
What you brought up the I think is really interesting
talking about the m navs. That's the multiple to the
net asset valuation. So the company is trading at a multiple,
so it's trading at one times the net asset value
or two times the net asset value. But what I
see as this duration mismatch, where bitcoin is like a
long term asset. You've got to be looking at it,
(29:51):
you know, over years, not over not over weeks or months.
But yet the Bitcoin treasury companies, it's it's a it's
a big build. They got to build this engine, they
got to acquire the asset base. They got to spin
up the financial assets on top of that.
Speaker 3 (30:06):
It's going to take time.
Speaker 2 (30:07):
But the market in the security space is marketing them
to market on a daily basis and a weekly basis,
and so it's not allowing them the grace period of
allowing them to get this engine up and running. And
it's like, really interesting that everyone's so focused on the
net asset value, which I think is wrong in a
couple of ways. And I want your opinion on this,
(30:29):
but in my opinion, it's like number one, most growth
companies aren't being judged on their net asset value. They're
being judged on their forward potential future valuation. Number two.
The net asset value wall, it's certainly an important metric.
I don't think it's everything because, for example, if I
add one more bitcoin, my net asset value drops, or
(30:51):
my multiple drops because I added one more bitcoin, unless
the price of the stock also goes up with it.
But those don't happen on a one to one day
mirrored basis. So it's like I added more bitcoin, congratulations,
that instantly shows up right now today, My need asset
value drops now maybe in a couple weeks or a
couple of months when the market realizes that my stock
(31:12):
price goes up and now it's too late. What's your
take on using that MNAV as his indicator.
Speaker 1 (31:18):
Yeah, it's a good one to bring up. So MNEV
became popular over the last three to six months or
something like that broadly across all these things. Yeah, and
the naive investor would just look at a simple metric,
what is MNAV. If it's low, then you should buy.
If it's high, you shouldn't buy. But that's extremely flawed
for the reasons you mentioned, and I'll share a few more.
(31:38):
So Metaplanet has done extremely well. Their MNAV was like
ten or maybe more at one point. And if you
go look at their price chart, buying Metaplanet at an
MNAV above five to seven ten, something in that range
in the early days would have performed extremely well. And
the primary reason there is because MNEV doesn't tell the
(32:00):
whole story. You need to look at their current size
and what is their ability to acquire more in the future.
You hinted at the forward potential. So how do we
price securities? Well, we normally price them to a price
to earning ratio. How long does it take to earn
enough to make back my investment. And in bitcoin we
kind of sort of use MNAV, but again that's forward looking.
(32:22):
So MNAV should be high for companies that you believe
will accumulate multiples theoretically of their current position, and so
the smaller ones MNAV should be high if they can perform. However,
you're looking at Sailor. Sailor should never have an m
NAB above five ever, again because the ability to accumulate
(32:43):
that much bitcoin going forward is going to be hard,
simply do the law of large numbers. And he bought
most of his bitcoin, well, he bought most of his
bitcoin recently, but that's sort of a distraction point I'll
skip for now. And so what I see here is
mnav's useful, but not in isolation. To have the rest
in context, and I think going tying back to our
(33:04):
point on the bare case from checkmate, is that I
think what you're really betting on here if you want
to go invest in these smaller microcaps, which have extreme
potential also some risk, is that who do you think
can actually get to the endgame. And let's just assume
the endgame at this point is the preferred equity, because
as far as we can tell that's the most accretive
(33:26):
way to raise capital. Maybe Sailor comes out with new
things in the future. I wouldn't bet against him, but
for now, that appears to be the mature phase. And
so really you have to accumulate a large enough bitcoin
that the preferred equity investors will take you seriously. Right,
If you have one hundred bitcoin, you can't issue a
preferred equity. If you have a thousand bitcoin, you can't
(33:46):
issue it. But at some stage higher you will be
able to issue those vehicles, and I think that's when
these treasury companies start to be de risked in a
meaningful way. Sailor has a whole portfolio of these things,
and you can think about it as different tools to
apply at different market conditions. If the market's screaming hot,
(34:07):
he can sell his shares into the market and raise cash.
If the market's a little bit more bearish, maybe he'll
use one of his preferred equity tools, and vice versa.
So essentially he's creating a whole toolbox to keep his
engine moving regardless of the market conditions. And so I
think that's when you're mature, that's when you're safe. And
so just to rewind a full circle, you'd be betting
(34:29):
on who can get to scale and execute that effectively.
Speaker 2 (34:34):
So I'm curious, how do you look at all these
new entrants into the market. So I have a new
company that's entered the market, Satsuma in the UK, so
we have a new jurisdiction. The UK market one of
the largest oldest financial centers of the world on a
percentage basis. It has the highest fixed income to the
(34:54):
overall market on a percentage basis, similar characteristics to Japan.
You with Swan obviously you're involved with Sikwans and what
they're doing over there. Congratulations, you guys did a very
big raised three hundred and some million.
Speaker 3 (35:07):
I think.
Speaker 2 (35:09):
We did two hundred and some million. But now there's
all types of entrants all the way down who raised five.
Speaker 3 (35:13):
Or ten million?
Speaker 2 (35:14):
Right? I mean you have the h one hundred and
smarter Web they start with a couple bitcoin, right. How
do you look at all these new entrants and then
think about which ones could get to that level?
Speaker 1 (35:25):
Yeah, it's a good question. It seems like there's kind
of two sides to this game, and the first side
is do you have experience in capital markets specifically public
capital markets and can you actually generate the cash needed
to keep the engine going, And so someone on the
team needs to have deep experience there. The second side,
(35:48):
which is I think where checkmate he calls it Ponzi adjacent,
is that there is a retail element here and you
have to be careful around securities law. But Michael Saylor
did really well by creating an army of retail investors
that would be buying his stock and resharing his information.
Part of that is to educate the market broadly, because
(36:09):
most people still don't know what's going on. But having
retail buy your stock increases your m NAB, which allows
you to issue more shares and makes your stock more volatile.
And so I think the two parts are a capital
market experience and also the ability to communicate with retail
investors to explain your vision, and that comes with some transparency,
(36:31):
that comes with a plan, that comes with hiring spokespeople
that are well trusted and that are in it for
the long game. So that's my two.
Speaker 2 (36:40):
Another metric that people use along with the m NAB
is the bitcoin yield, and so that's the percentage of
how fast you're able to grow your bitcoin stack. And
kind of the point that you made about micro strategy.
They have so much bitcoin, it's very hard to grow
that even though they're even though you know sailors buying
more bitcoin in one perchase. Then number two Metaplanet has
(37:02):
bought you know, all year for example, as a percentage,
it's a small yield versus you take another company who
starts with one bitcoin and buys a second bitcoin. They
have one hundred percent yield. Now, recently I saw I
won't throw them. I won't, I won't throw them out there.
Speaker 3 (37:21):
But someone came out of a new metric called p bid, which.
Speaker 2 (37:25):
Basically measures what that yield is how fast they're acquiring
that that bitcoin. To me, that seems like the wrong
metric to use, at least isolated on its own, because
again I went from one to two, I went from
one to five. I have a five hundred percent yield.
I'm better than Michael Saylor because he only grew.
Speaker 3 (37:43):
At fifteen percent. How do you think about that metric?
Speaker 1 (37:47):
Yeah, it's a good point. I think you critiqued it
pretty well here in that none of these metrics tell
the whole story, and so as a savvy investor, you
need to take these things into account, and there's a
bunch of subjective stuff that's not to reduce down to
a simple number, even though humans love simple numbers. And
so I think yield is useful. I think it shows
the growth and I think it could predict or help
(38:10):
predict where the stock price could go. The other wildcard
here is that if a metric is flawed, however everyone
uses it in a way, it creates its own reality.
Right Like you look at the thacharts, everybody knows a
two hundred week moving average. Does that magically make the
price go up? Or does all the market participants think
(38:31):
it does, in which case it does, right, And so
there's some interesting dynamics there. One more point I forgot
to add on how do we evaluate these, especially the upstarts,
is their geography. You touched on the benefits of the UK.
Japan has some major benefits. Brazil has different tax treatment
whether you're owning an equity or bitcoin, and so I
(38:53):
think that's a very important element here. If you have
a structural advantage in that geography, that would lead to
an increased percentage of flows, that's obviously a good thing. Now,
the one caveat is how long do these geographies stay
roughly isolated. And for example, if metaplanets trading everywhere in
the world, does that change anything? Right? And then one
(39:17):
last point here, sorry I'm scattered, is the fact that
we're squabbling over the different metrics and new ones are
popping up every week. I think that says something important here,
which is that this is an entirely new way to
look at securities. It's a new type of company. And
we're early in this thing because we don't even have
agreed upon ways to evaluate these things.
Speaker 2 (39:39):
And that is our opportunity, the thing that I wrestle
with and I haven't quite figured out, and we won't
figure out yet. But I think, as somebody who believes
in the long term vision of bitcoin, I believe what
happens in studying history and technology. What happens is we
try to take something new, like this electricity and what
(40:03):
is it? So we try to compare it to something
that we already know to grasp it. Well, it's sort
of like a digital candle. Well it was at the
time that was the killer app, but of course electricity
was more so what is this bitcoin? And I think
it's going to make us rethink what capital is, what
assets are. You know, with the gap change on the
FASB rule, we're starting to rethink what income is. And
(40:25):
so when you sort of break these things down into
first principles metrics or first principles thinking, I should say,
I think it's going to change the entire way we
look at these companies. So for example, you know, companies
typically give you a bond and they're going to have
some sort of credit rating based off of their ability
to create the income in the future to pay you.
(40:48):
They don't have the income, but maybe hopefully you think
I can get the income and I can pay you,
versus micro strategy has the assets right now today to
pay you. So like just even a little thing like that,
but the rating agencies don't consider that to be a
factor in giving them a credit rating. So I might
be able to make the money, maybe I can make
(41:10):
the money in the future to pay you, but you
have the money to pay, but you're not as safe
as I am. Right, So, I think all of these
ways that we look at companies and we look at risk,
and we understand income and we understand asks, all of
that changes, and it's really hard for us to understand that.
I think the outlier. Well, let me ask you a
question before I lay out the outlier. Do you think
(41:30):
the good companies? Yeah? Maybe it's a two part question.
Number one, do you think the good companies will be
able to outpace bitcoin over a long term? And when
I say long term, call it five years? And number two,
how many good of those types of good companies do
(41:50):
you think we could see in five or ten years?
Speaker 1 (41:54):
Yeah? Good question. I do think the good ones will
outperform Bitcoin over a five year period. I hesitate to
go much further than that because it's really hard to
speculate on when this. It is an arbitrage right, Eventually
something in the market will change, And so is it
five years, is it twenty years, is it two years?
(42:15):
I don't know. I think five is pretty safe where
I feel comfortable placing bets in some of these companies
in over five years. Maybe some fail, but the others
do extremely well and do outperform Bitcoin, So I think
that's fair to say. Now the next question is how
many could we see? And that's really tricky. Right on
one side of the argument, people say it's a winner
(42:36):
take all market. Eventually strategy will be available and everyone's
brokerage all around the world and they'll only pick the
best one. I think that's absolutely wrong. On the other side,
you could say there's going to be thousands of these
things and they're all going to be winners. That's also
obviously wrong, And so I lean towards a winner take
(42:56):
most market, and I winner take most, with a caveat
that jurisdictions still will matter in the future because there
will be slight rule changes depending on where you are.
Individuals sometimes have national pride, and maybe the countries will
provide advantages for their citizens to invest locally or something
like that, and so I think geography matters. I think
(43:19):
it'll be a winner take most in most markets. Now,
I don't think like I don't want to even name
a country, country X that's small close to the US,
that isn't that different from the US. I don't think
that they need their own treasury companies. I don't think
there's a geo arbitrage there, and so I think the
(43:39):
US absorbs a lot of the flows. It's still number one,
but I would expect on the order of twenty to fifty.
That's kind of what feels right to me right now.
Speaker 2 (43:51):
Now.
Speaker 1 (43:51):
The other thing we don't know about is are we
in a world where the FIAT long debt cycle is
unwinding and there's pandemonium in markets because that sort of
blows everything out the window.
Speaker 2 (44:03):
If people are reaching that I think I lean that way.
Speaker 1 (44:06):
Yeah, if we're leaning that way, which I also do timing. Sorry,
if we lean that way, the number could be much
higher as people are just reaching for exits. It's kind
of a waffle answer, but I'm going to say twenty
to fifty feels about right.
Speaker 2 (44:23):
My take on it is is the winner take most.
I mean, certainly we always have winners that take a
majority of market share. But the way I sort of
think about it is Strategy has already released four different
products that each reach a different type of a person
that's looking for a different risk and credit profile. Each
(44:43):
company could create another flavor, another version, another basket, another whatever,
another way to do this. In the United States, there's
thirty nine hundred ETFs thirty nine hundred that are each
doing something just a little bit different. It's a little
bit of a different basket than the other one. There's
(45:04):
I believe another five thousand types of bonds, from junk
bonds to HYO credit bonds, to institutional grade. Right, each
one of those bonds has a little bit of a
different profile. So we're talking ten thousand just in the
US alone, not including what's in another country. So why
(45:27):
can there only be ten or twelve or twenty or fifty.
We have ten thousand right now in the US, So
I take a little bit of a different view. I
think Number one, right now we can see there's over
ten thousand products in this type just in the US alone.
Number two, I think it also requires what does success
look like? So I know it's atsuma in our initial rays,
(45:49):
which we haven't even fully got up and going it
gives us enough bitcoin just from here if we were
to never and actually going back to the dinner with Sailor,
he was asked a very direct question. Don't think he
liked the question. He probably gets asked it all the time,
but he gave a good answer, so I'm gonna repeat it.
Speaker 3 (46:04):
He was asked, what goes wrong?
Speaker 2 (46:08):
What's the risk? What is the thing that you haven't
considered that could potentially go wrong? He said? He said,
the worst case scenario is we can never raise another
penny ever again. Okay, so let's say that. So with Withsatsuma,
let's just hypothetically say that we can never raise another
(46:30):
penny ever again for whatever reason. Let's just say that, Okay,
well we got a couple thousand bitcoin in five years
from now. That puts us to a three or four
billion dollar valuation. You know, how many companies ever make
it to a billion dollar valuation point zero zero two?
I would say that's the success. So, like, what is
(46:54):
the level of success, right? How many products can be bear?
So that's sort of my frame. Certainly there's going to
be a top dogs. Certainly, no one's going to surpass
the amount of bitcoin that micro or Strategy has, Like,
certainly they've won before the game even got started. They've won.
And so the winner take most, sure certainly, But I
think there could be hundreds or thousands of different types
(47:15):
of products out in the market. I think the market
can bear that. And I do think that we can see,
you know, a bunch of these companies have some level
of success if you call that becoming a unicorn as well.
But certainly I do agree with the winner take most.
That's how the world works, right, and so we'll certainly
see that. Certainly there will be the winners in each jurisdiction.
I agree with that, but a little bit of nuance there.
Speaker 1 (47:37):
Yeah, I think that's interesting. And yeah, is it so
bad that you own part of a company that has
a lot of bitcoin? I agree, That's not the end
of the world. It's not the same type of risk
is taking a bed on an operating company that fails
their execution or market changes or they get swallowed up
by a competitor. Right, It's a very different type of risk.
(48:00):
I think. I think when I think about winners, I
think about they have the Fiat arbitrage or the financial
engineering tools to continue this thing for a while. Sure,
I guess that's how I define it. But yeah, the
worst case scenario, you have a pile of bitcoin, you
could do something with that. I think that's yeah.
Speaker 2 (48:18):
Yeah, Unlike you know the risk of going into an ico,
for example, and then you found out it was just vaporware,
the protocol got abandoned, the anonymous founder, rugbold, the treasury
or whatever. Right, Like, there's a lot of risk there
traditional trad fy you know, I po to your point,
they could have operational risk. It could you know, the
patent could wear out, someone could duplicate whatever. So here
(48:41):
it's like, as long as they hold the bitcoin, it
kind of de risks that position. So I hate to
use this word, I have to kind of think about it.
But when I look at like investing into early stage
traditional companies and doing IPOs, or I look at crypto
doing icos, and then I look at these companies, I
would say they're the safer of those three because at
(49:02):
the end of the day, if the company holds the bitcoin,
it's gonna be worth something in the future.
Speaker 3 (49:08):
Anyway, fun stuff, fun stuff.
Speaker 1 (49:11):
I think that's true. With the only caveat that retail
investors can buy some of the microcaps time it poorly
misunderstand the market. Sure, and although the company itself is
secure with let's just say MNAV one, the investor might
have invested at a much higher m NAV and so
if they don't time it right, they could get wrecked.
(49:32):
And I do expect a bunch of retail to plow
in at the wrong time, just like we do in
every type of hype cycle.
Speaker 2 (49:38):
And so let's play that out, thoughts. Let's play that out.
So let's say that let's say that I invest for
easy numbers because I'm not good at math on the
fly I invest at a company at two times at NAV,
so the NAV is worth a million dollars, and I
invested at two times, so the company is worth two
million dollars. When I invest the m NAV compresses to one,
(50:01):
so the million of assets they have. So I lost
fifty percent of my equity, right, or my equity valuation.
But let's say in five years from now that million
dollars becomes worth ten million dollars a bitcoin and it's
still traded at a one time z m NAV. I
(50:21):
went from owning a percentage of a company with a
million dollars of assets to now on a percentage of
company with ten.
Speaker 3 (50:26):
Million in assets.
Speaker 1 (50:28):
That's right.
Speaker 2 (50:30):
So over time, even though even though in the short
term my equity took a hit because of the compression
of the NAVE, over time that equity comes back up.
Speaker 1 (50:40):
That's right. I think in that case, your equity investment
would be returning positively. But you essentially bought at twice
the market price on day one, right, That'd be another
way to look at it. So you have less upside.
You harvested less upside because of that m NAV compression,
but you didn't lose more because at the end of
(51:01):
the day. Bitcoin is the engine here, and that does
de risk a lot of this stuff to your point,
assuming an investor would hold through that long period.
Speaker 2 (51:09):
Right, But here's where I think this differentiation matters. You
and I are bitcoiners, So to me, Bitcoin is my
base assets. Bitcoin is my hurdle rate.
Speaker 3 (51:20):
I look at.
Speaker 2 (51:20):
Anything that I could potentially put money into, and if
it can't beat fifty percent a year, I'm not interested.
So for me, if it's not going to outperform Bitcoin,
I don't want to do it. So when I look
at that m NAV, if it's only doing a one
time z M NAB, it's not beating bitcoin, why would
I do it? So to what I just laid out,
I bought it at two times, I ended up at
(51:40):
a one times, and in fiat terms, I made a
lot of money in fiat terms, but in bitcoin terms,
I maybe never got back potentially. Right, That's the way
I'm looking at it. I think that's the way master
us as bitcoiners look at it. But the problem is
it's not the problem. The reality is the majority of
the world doesn't look at things like that. They're trying
(52:02):
to beat either CPI or the S and P five
hundred bitcoin is not their unit of account, and so
they don't look at it that way. So they go,
I put one hundred dollars in in five years, that's
worth a thousand dollars.
Speaker 3 (52:15):
That's good.
Speaker 2 (52:16):
And so I just try to kind of pull back
a little bit and think, because again, we have a
public company now we're trying to sell to retail. The
bitcoiners are just a small percentage and hardly any of
the buyers. These are really for trad fi investors. These
are for fiat maximilis, right. These are for people trying
to beat the SMPR or a CPI, and so from
that level, i'd say it's pretty safe for them. As
(52:38):
a bitcoiner, as you started out, and I'm gonna maybe
wrap this up by a green with what you said
and reiterating it one more time. These are not a
replacement for owning bitcoin in cold storage. Buy your bitcoin,
put it in cold storage if you want a little
bit of extra risk. These are fun to play with. Ultimately,
these are trad fi tools for people who can't buy
(52:59):
cold storage bitcoin.
Speaker 1 (53:01):
Yeah, well said Mark. I think that's a really important point.
And if you go out on Twitter sometimes you see
people fighting over these things, and I think if everyone
understood that point, which I've seen you tweet multiple times,
I think the tension would come down between the paper
Bitcoin summer and the haters or whatever we're calling these tribes.
Speaker 2 (53:19):
Yeah, because it's you know, you've been doing this for
a long time and you help high net worth people
come into bitcoin, and it's easy for us to go
just just buy the bitcoin, and that is the right answer.
But that doesn't take into account the reality that most
people have money locked up.
Speaker 3 (53:33):
In pensions and four one gains and they can't do that.
Speaker 2 (53:36):
So it's like, thank you, but I can't write, and
so this this is a solution for that. Let's go
ahead and wrap it up here. Brandon, any last thoughts
or anything you want to draw attention to where they
can follow, or anything that you're working on.
Speaker 1 (53:49):
Yeah. Absolutely. I was going to say one more point
on Sailor's elegance here, and it's drawing from the unit
of account conversation we just had. So what is Sailor doing. Okay,
he's putting bitcoin on the balance sheet, so his assets
are in bitcoin, and he's paying out some fixed income
through his preferred equities in dollars, so assets in bitcoin
(54:12):
dollar liabilities. That's the game, and that's the engine for
a lot of shareholder value. So that's just a beautiful
thing to see. And if you're too late to switching
your unit of account to bitcoin, well you pay the
price for that. So yeah, there's a little cheeky ending
for that. You can find me on Twitter at b
quitm b in my last name. All my essays are
(54:32):
brandonqu dot com. I've been at swan for five and
a half years. We're a US focused bitcoin wealth platform.
So if you want to buy some bitcoin and a
personal account, a retirement account, an entity account, if you
want to get a two of three collaborative multi sig,
you want someone to hold your hand through any of
this stuff, come to swan dot com and check us
(54:52):
out there.
Speaker 2 (54:53):
Yeah cool, all right, Brandon, thanks so much.
Speaker 1 (54:56):
Thanks Mark at
There's nothing better than bitcoin in your gold storage. It
has the best risk adjusted return. That should be the
foundation of anyone's portfolio. If you want to take some
additional risk, then you should explore the treasury companies and
attempt to outperform bitcoin. Capital is trapped under different mandates.
Those trap pools the capital have no way of getting
some of that upside. Michael Saylor accumulates bitcoin on his
(00:22):
balance sheet so that he can create securities that fulfill
the mandate of that trapped capital. He sells those securities
and he's bringing new capital, which ultimately lands in bitcoin
from those trap capital pools.
Speaker 2 (00:35):
Do you think the good companies will be able to
outpace bitcoin over a long term? And when I say
long term, call it five years.
Speaker 1 (00:44):
Yeah, I think that's right.
Speaker 2 (00:47):
Hey, Brandon, thanks for joining me today. It's been a
while since we've got to sit down and do a recording.
I'm super excited to jump in here.
Speaker 1 (00:52):
Likewise, what was the last time Mark? Was it live
in LA a couple of years ago? Is that the
last time we recorded together?
Speaker 2 (01:00):
That is a good question. I should have gone and looked.
I did see one as I was going through from
like I think four years ago that we had a recording.
I think we were talking about I think the Fourth
Turning four years ago, but so much has changed since then,
and I would say the whole direction of the world
has changed since then. You know, the Fourth Turning was
(01:22):
a hot topic four years ago. I was talking about
the cycles and the decentralization, and I think it was
a super important message at that time. For right now, though,
I just see massive change, but so much hope and
prosperity on that side. I'm curious if your sort of
worldview has shifted since where we were four years ago.
Speaker 1 (01:43):
Yeah, I think it definitely has. When we recorded last
let's call it twenty twenty one, we're in the thick
of the COVID tyranny stuff. I was genuinely disenchanted by
my fellow American at the time. I thought we stood
up for individual rights and sovereignty and we went just
do whatever we're told. And yet I flashed back to
(02:03):
that period. I remember I was living in Minneapolis at
the time. I remember my neighbor calling the cops on
my other neighbor because they had too many cars in
the driveway for some holiday or birthday or something, and
that really set me off, and it ultimately led to
me finding the fourth Turning and trying to make sense
of this whole thing. And now that we're sort of
through the fog of war, I would like to believe
(02:26):
society learned something from that, but I honestly don't think
the average person did. But what gives me optimism now
is that it feels like Bitcoin's time is really coming.
It's clearly being financialized, it's clearly being accepted by the
political party in the US, at least for now, and
I think that puts a lot of It gives bitcoin
(02:46):
a lot of runway, and it will give us a
chance to get out really far ahead of this thing.
So even if the political tides turn in the future,
I think Bitcoin is sufficiently too big, too entrench nothing
can stop this thing. And so while we have Paul
today telling us that the two percent inflation is no
longer a target, markets react positively, obviously, So we have
(03:08):
Fiat with nothing stops his train, and we have Bitcoin
getting adopted in larger and larger scales. So that's pretty
cool to see.
Speaker 2 (03:15):
Yeah, I haven't got a chance to catch up on
what he said this morning, but I did just pop
on to Twitter for like a split second to check
a message, and I see a post from Lynn Alden
and she said if you missed if you missed her
own Palell speech. He basically said, nothing stopped his train.
I was like, Okay, that's all I need to know.
And I see the price of bitcoin and everything else
(03:36):
going back up quite a bit. So one thing I
think that's important to kind of catch up on is
the different facets that we've sort of seen bitcoin go
through as it's growing up, as it's advancing. You mentioned
the political headwinds have shifted now to maybe tailwinds. Sort
of Bitcoin has gotten to where it's at in spite
(03:56):
of all the headwinds that it's had from Operation Choke
Point to you know, Elizabeth Warren's anti crypto army, to
all of those things, and now that that headwind has
turned into a tailwind politically, which has then seemed to
bring a lot of the institutional money, the Wall Street
money maybe waiting for that sort of all clear is
from this regulatory front. That's how I see it. Anyway,
(04:19):
how are you framing up where we're at with the
bitcoin price now here breaking new all time highs, the
political wins where they are.
Speaker 1 (04:27):
Yeah, I think that's right. I think the big watershed
moment was the ETF getting approved, and so Grayscale won
that case, which essentially made the way for the ETFs.
Those were obviously the most successful ETFs of all time.
They continue to be net accumulators. And we have the
Trump administration signaling gas pedal for the industry, and so
(04:49):
you pair those two things together and it's essentially as
d risk as you can possibly get. Maybe you sprinkle
a little Larry Fink being a bitcoin spokesman spokesman on
top of that, and yeah, clearly the conditions have changed.
We're seeing Wall Street respond, We're starting to see pension funds,
Harvard Universities, some other marquee names taking a bite out
(05:09):
of this thing. And so, yeah, it's very clear the
tides have shifted. And if we look at this the
price over this recent time period, bitcoin is not operating
like it normally does in a bowl market. With these
exponential moves thirty ish plus percent declines hopefully rebase and
run up again. We're seeing a very different market structure.
(05:30):
We're seeing little pops to reprice and then we're seeing
this really boring crab market period as old investors selling
out and new investors coming in, everyone gets bored, and
then we have another little pop and we chill out
after that. And so to me, it seems pretty clear
that something has changed. I don't know if if we're
ever going to have another eighty percent bear market again,
(05:52):
if we continue this slow climb stair stepping climb, I
don't think we will. However, if we do reach some
sort of a mania Piero, let's say, in the next year,
and bitcoin really goes parabolic, I think we will have
at least a fifty percent correction.
Speaker 2 (06:06):
Yeah, it seems like if you look at a long
term chart of bitcoin, it's like the line in the
sand is sort of when the ETFs got launched, and
since the rise of the ETFs, it sort of seems
like a lot of that volatility has come out of
the market. So maybe it's that there's such a long
standing sustained bid for bitcoin that it just isn't allowed
to sort of get those twenty five or thirty percent drops,
(06:28):
as you said, because that bid is there.
Speaker 1 (06:31):
Yeah, I think that's exactly right. I think there's a
sustained bid from larger players. They know they need a position.
They're accumulating. Any dips are getting bought up, and I
think we'll see that for some time. If you look
at the market cap of bitcoin compared to let's say
there's one thousand trillion dollars in total assets in bitcoin's
two point five or something like that, this is a
(06:52):
giant whale we're going after, and Bitcoin's still a minno relatively,
so I do expect those institutional flows to continue, and
we have a lot way to go there. Now. One
thing that's very unique that I'm noticing in my personal
life is that retail does not seem to be woken
up yet. They're not coming back in large numbers. I'm
getting a few messages from contacts, but it's pretty quiet
(07:14):
compared to twenty twenty one or twenty seventeen. Are you
seeing the same?
Speaker 2 (07:19):
I would say, I would say I'm seeing about the same.
Speaker 1 (07:22):
You're right.
Speaker 2 (07:22):
I mean, typically when it starts breaking out, making new
all time highs, contacts you haven't heard from in years
start coming and sending your messages, asking you, you know,
how they can get in, if now's the time to buy,
should they wait? Those types of things, And I would
say those have been a little light right now. Maybe
it's because we've been hovering around this one hundred thousand
dollars mark for quite a while, so maybe you know,
(07:43):
we had one hundred and twenty, it's not that much higher.
It's the law of large numbers, right, It's like the
numbers have gotten so much larger that getting one hundred
hundred and twenty like what's the big deal kind of
a thing. So maybe that's it, but I would agree
with that. I'm curious what your take is. I mean,
between the ETFs, as you said, like this this sustained bid.
(08:03):
Now we have the rise of the bitcoin corporations, the
big win treasury companies acquiring you know, we've seen it
looks like five to ten times more demand than the
new incoming like mining supply. So I guess number one
the big question that everybody has is if there's all
this buying and it's outstripping supply by that much, why
(08:28):
hasn't the price moved more?
Speaker 1 (08:30):
Yeah, that's the million dollar question. You see this all
over Twitter. You see all the analysts bringing this up.
And I think I would draw from James check who
writes a newsletter check on Chain. I think he's one
of the top on chain analysts and people have opinions
about this, but I think there's some value here to
be added in your analysis. And what James Check notices
(08:51):
is that we are seeing old, large whales that have
held their coins for a very long time finally taking
some meaningful profits. And you might say, why would you
do that? Bitcoins maybe the best time ever to buy
from a risk adjusted return, why would they do that?
But if you're sitting on one hundred million or a
billion dollars in unrealized gains, maybe you want to upgrade
(09:13):
your life a little bit. And I think that's pretty reasonable.
I also think it's healthy for these coins to change
hand and not move the price very much. If you
remember that giant cell that I.
Speaker 2 (09:24):
Think Galaxy executed that Galaxy.
Speaker 1 (09:27):
Yeah, Galaxy, excuse that eighty million or I forgot the
number of.
Speaker 2 (09:30):
Eighty thousand bitcoin. I believe it was like nine billion dollars.
Speaker 1 (09:33):
There you go, it's way off. Move the market maybe
three percent that day, came back up the next day.
That's extremely bullish, and so the bid is there. We're
recycling investors. This is all healthy, and this is how
we could see a world where we don't see another
eighty percent draw down. Instead, we're more correlated to M
two growth or general macro conditions.
Speaker 2 (09:55):
Yeah, back in the day, when I first got into
bitcoin twenty five ten, twenty sixteen, then I thought, well,
it's not bitcoin, it's the blockchain. So then I'm into
the different crypto assets and I would trade these assets,
and I would sit on some of these exchanges, pullin
X I think, or bit tricks or whatever, and I'd
sit there try and trade these things, and i'd literally
watch the order books and I'd be taking the orders
(10:19):
that were the highest, so I could move my coins
without moving the market cap, without getting the slippage in
the price. And today they just dumped nine billion in
a single day, just like and it moves the market
by a couple of points. Like I literally would like
execute trade by trade by trade, you know, and just
a couple of years later you can literally have nine
billion or whatever it was in liquidity in a single day. Amazing,
(10:41):
that's wild.
Speaker 1 (10:42):
I remember the twenty seventeen market, people were selling their
kyced binance account for like twenty thousand dollars right right,
just as a sign of the times. Now you can
get a you can go buy the ETF on any
brokerage you want. The on ramps are numerous, very easy
for large volume. Times have definitely changed.
Speaker 3 (11:01):
Yeah.
Speaker 2 (11:02):
Now, when you look at the demand outstripping the supply,
I mean, obviously there's always supply. I'm talking about the
new supply, the new mining supply. When you look at
the demand outstripping the supply by five or ten times,
how much do you think this four your having cycle
really matters. When the demand is already outstripping the new
(11:22):
supply by so much, what difference does it make if
it drops by another fifty percent?
Speaker 1 (11:26):
Yeah, I think it's a good point. What people would say,
let's rewind a year or two ago, is bitcoin as
a having cycle every four years. We know that soon
after the having cycle we see a price run. And
the conclusion for most people during that period would be
because the inflation is cut in half, that just cycles
through the market and there's less supply being created. So
(11:49):
if you have steady demand and less supply, price goes up. However,
those were very different times. In the first four years
in bitcoin's life, fifty percent of the coins were issued.
This is a very large inflation rate. Next cycle, twenty
five percent of the total coins were issued, Right, that's
a lot of supply, and you meant you bring it
up to today. We're less than two percent new issuance
(12:11):
per year today and the next HAVING cycle will be
less than one percent. And if you look at that
total dollar amount like you mentioned, those are peanuts relative
to average trading volume or new new buyers. However you
want to look at that. And so just looking at
the mining supply d dynamics, I think it has almost
no impact going forward, and increasingly so each cycle. Now,
(12:32):
I think there's another bigger question here, which is was
there ever actually a cycle that was catalyzed by these
supply reductions? And if you look up an M two
money chart relative to Bitcoin's price, Bitcoin's extremely correlated to
M two meaning money printer goes burr. Where does the
new money go? Bitcoin gets an unfair or outsized percentage
(12:56):
of those new flows. And so I'm leaning to there
never was a HAVING cycle. However, it's hard to say.
I don't think we'll ever know.
Speaker 2 (13:06):
Yeah, Well, you mentioned global liquidity, and it's something that
I spend an enormous amount of time watching and reporting on.
I talk about it on almost every one of my videos.
And I would probably agree to the point that I
think you're proposing. I don't know if that's your review,
but I would agree. I think the global equity cycle
is the dog wagging the tail. It's not the four
you're having cycle. I think Michael Howell is the goat.
(13:29):
I subscribe I paid a subscribe to. It was newsletter.
I read that Nick Body at the Bitcoin Layer they
do a really good global equity cycle charts. Ral Paul
of Our Real Vision does some really good ones. And
it was actually Ralph Paul that sort of brought me
onto this idea. So getting credit where it's due. You know,
we're in a debt based monetary system, so obviously the
debt always has to expand, and debt could be termed
(13:49):
from months to up to thirty years, and so all
around the world you have all these different rates of debt.
And there's this really interesting phenomenon where you take a metronome,
which is supposed to keep perfect time for music, and
if I put like one hundred metronomes on this table
and started them at all different times in a period of time,
they would all sync up because of the way the
table vibrates or whatever. And so you have all this
(14:10):
debt around the world at these different terms and rates.
But in two thousand and eight, when we had the
Great Financial Crash, the entire world dropped rates to zero
and everybody called the banker and refinanced basically, right, So
all the debts got synced up. And if you look
at the profile of the debt today, seventy five percent
of the debt is termed between three to five years,
(14:33):
which means four years now. That started in two thousand
and eight, twenty twelve, twenty sixteen, twenty twenty, twenty twenty four,
which just so happens to be the four year having cycle,
which just so happens to be the four year presidential
election cycle, which just so happens to be the four
year business cycle, all on the same cycle. And so
(14:58):
certainly we think about are they trying to stimulate the
economy going into a presidential cycle. I mean, I saw
some talk today about Jerome Powell and potentially trying to
get some easy for the midterms next year. So there's
certainly the four year election cycle, certainly the global liquidy cycle.
So I tend to kind of think that is the
dog that's wagging the tail and I remember, you know,
(15:19):
going into the last cycle.
Speaker 3 (15:22):
No, this can't be the top.
Speaker 2 (15:23):
Michael Sailor said, all my models are destroyed. Sixty nine
or wherever it was in the sixty thousand. It's not
high enough. It needs to be higher. It's got to go,
gotta go, gotta go. But right on point November twenty
twenty one, it made it high. But it was Jerome
Powell that went out on the news and said we're
going to start raising rates, and he said he gave
(15:45):
forward guidance, he said in January will raise rates, and
just like that, Bitcoin and then NASDAC and then S
and P five hundred drew down. So I think back
to the point that you're making. You look at the
M two. It was Jerome Powell coming out saying we're
going to because he had said we're not even thinking
about thinking about raising rates. He said, we're not going
to raise rates for four years. But then he came
(16:06):
out and said, okay, we're going to tighten, and then
Bitcoin's sold off. So then the question is is Jerome
Powell going to come out in November and tell us
they're going to tighten and start raising rates.
Speaker 1 (16:17):
It's a good question I'm no fed hawk. I don't
keep an eye too much day to day. I just
pick up the scraps on Twitter. But his recent comments
today are him signaling that the two percent's gone, two
percent target's gone, and markets are screaming. So as far
as I can tell, we're going to be printing until
further notice. And if so, Bitcoin's going to do extremely well.
Speaker 2 (16:39):
I mean, I just think about Trump seems to kind
of get his way. He's been banging on Fed chair
Powell to lower rates. He wants them down like three
and a half points. And if he doesn't get Powell
to drop him either way, Powell's gone next year and
he'll replace him with someone who will bring.
Speaker 3 (16:56):
Them down three and a half points.
Speaker 2 (16:58):
So it was a rhetorical question, you know, and rather
than Jerome Power raising rates, I mean, potentially he could
before he's gone, but by this time next year he'll
be gone. Most betting odds are that Trump will replace
him with a dove and those rates are going to
be down by several points, and so that changes the
global equity cycle, and it changes that for your having cycle.
Speaker 1 (17:21):
I think I agree. If so, if we went with
the four your having cycle, the market should be pretty
exhausted by this time next year. But if we have
some right decreases starting this year maybe next year, there's
no way that the cycle will be over if we're
correlating to M two. So I'm on the train selling
(17:42):
now is crazy. Hold your bitcoin, folks.
Speaker 3 (17:45):
Yeah.
Speaker 2 (17:46):
Now, the other big phenomenon is not just do we
have these ETFs buying massive amounts of bitcoin, but we
also have the bitcoin treasury companies buying them. And so
these are companies like Michael Saylor started Strategy micro Strategy,
which is now Strategy, and they're basically leveraging public deechn
equity markets to buy bitcoin. And now there's a sustained bid,
not just a sustained bid, which there.
Speaker 3 (18:07):
Is, but a race, if you will.
Speaker 2 (18:10):
What's your take on that sort of situation that's been
setting up in the markets.
Speaker 1 (18:14):
Yeah, absolutely, So I love this topic. First of all,
I've been in bitcoin full time for about eight years now,
and you know, you kind of go through these different
periods where you're excited about bitcoin and then you kind
of get bored, and then you go learn about mining
and that's fun, and then you go learn about something else.
And for me, treasury companies is the latest fascination and
(18:36):
most of my mental cycles outside of work and family
are going this way, and so I think it's I
think it genuinely is the most exciting story in corporate
finance and at least a decade, maybe generations. So it's
definitely something to pay attention to. But before we go
into analysis and different ways to slice this, I want
to be very clear, there's nothing better than bitcoin and
(18:56):
your cold storage. It has the best risk adjusted return.
That should be the foundation of anyone's portfolio. Now, if
you want to take some additional risk, and there is
significant additional risk, then you should explore the treasury companies
and attempt to outperform Bitcoin. Some of these absolutely will,
just like Michael Saylor has shown, not all of them will.
(19:18):
Maybe some of them will over different time periods. But
point being, Bitcoin and cold swords is the foundation. Take
additional risk on top of that as you see fit.
That's that. So what's going on here? Okay? Capital is
trapped under different mandates. You may be only able to
invest in fixed income, you may be only able to
(19:39):
invest in equities, all these different structures, right, and if
you look around the world, bitcoin is the best performing asset,
and those trap pools the capital have no way of
getting some of that upside. And so what does Michael
Saylor do. Michael Sailor accumulates bitcoin on his balance sheet
so that he can create securities that fulfill the mandate
(20:01):
of that trapped capital. He has a whole portfolio of
these things now, and he packages them up for different
types of investors. He sells those securities, and he's bringing
new capital, which ultimately lands in Bitcoin, from those trapped
capital pools. And we talked about this earlier. Bitcoin's two
and a half trillion. Fixed incomes in the hundreds of trillions,
(20:22):
and so there's a lot of capital chasing yield right now,
and there aren't many good options for fixed income guys,
and so enter these preferred equity products that Sailor's creating,
and it's just a far better product for the fixed
income guys. And what are they doing. They're buying it
in volume. And so I suspect that this trend is
going to continue for a long time, and I think
(20:44):
it's important to maybe differentiate in the types of these entities.
I think micro strategy. Now strategy is in a league
of its own. It's almost silly to compare it to
the others. But I think there's roughly three different types
of these companies that I think it's important that we differentiate.
So number one is the peer play treasury companies. This
(21:04):
is micro strategy. This is more or less Metaplanet, but
essentially the operating business is either nothing or marginal. The
whole game is accumulate bitcoin issue securities to accumulate more bitcoin.
Then you have the second category, which I call Bitcoin
forward operating companies. This might be a bitcoin minor like Mara,
(21:24):
This might be fold, This might be there's tons of these,
but they have core operations that are totally related to bitcoin.
They're exposed to bitcoin, and they also accumulate bitcoin for
their treasury, so it's kind of a hybrid. And the
third one is just an operating business that maybe has
nothing to do with bitcoin, but they generate free cash
flows and they put a percentage of their free cash
(21:46):
flows into bitcoin as one of their treasury assets. This
could be Tesla. This could be Figma, which we saw recently,
and the market treats these three categories very differently. Operating
business with a bitcoin treasury Figma Tesla essentially no premium
on those on that holdings. Now, the Bitcoin Forward operating companies,
(22:09):
they're not getting much premium either here right now, the folds,
the Maras, there's many others, but the peer play treasury.
Speaker 2 (22:15):
Where would you put similar scientific in that.
Speaker 1 (22:18):
It's a good question. They do have free cash flow
generating operations, not technically Bitcoin Forward, and they also do
some novel different finance games to try and accumulate. I
think they're kind of in category two, but it's not
technically Yeah, it's not technically a bitcoin operating business, right,
and so maybe I expand that category to just say,
(22:40):
a free cash flow generating operating business that also does
financial engineering.
Speaker 2 (22:45):
Yeah, and it's a great breakdown. That's exactly the way
that I look at it in those three categories as well.
One of the things I told you before we started
recording was it two months ago or so a couple
months ago, I was in Prague a keynote at Bitcoin Prague.
Got there and I got to have a small intimate
dinner with Michael Saylor and Alexander from the Blockchain Group,
(23:06):
and Adam Back and Eves from Tobain and Eric White,
you know, a small little group, and he gave us
a you know, three hour masterclass on on what's going
on and bigwin treasuries and and I was telling you
how it sort of reframed my entire brain as to
what was going on. And what you just laid out
is one of those and I can give you more,
(23:26):
but one of those things. And and and he really
kind of gave me the difference of at least those
two tiers of the peer play versus a business that has.
Speaker 3 (23:36):
A bitcoin treasury strategy.
Speaker 2 (23:39):
And the big difference that I saw and that completely
changed my mind on this is and and is well
there's two there's two parts of it. So number one,
when when micro Strategy started, they started using convertible debt,
and there was all this noise in the market and
(24:01):
the ecosystem of they took on this debt and what
if they can't afford the debt and how they'll be
able to afford it, and what if it comes do
and all these things right, but don't worry because they
have an underlying business model that throws off free cash.
And as long as the debt doesn't exceed what the
business can do with free cash, they can, right.
Speaker 3 (24:16):
So remember that whole narrative.
Speaker 2 (24:18):
But what he sort of. He didn't say in as
many words, but what he basically told me is that
when he changed micro Strategy into Strategy, he also changed
the strategy. He headfaked the whole industry. Hey check this out.
Speaker 3 (24:32):
Oh, but I'm gonna go do this over here.
Speaker 2 (24:34):
So Strategy employees a completely different model. So Strategy doesn't
use convertible debt anymore. Now they use preferreds. And what
he told me, if I started over, if I could
start over again, I would never do the converts. I
would just do the preferreds. And so that's all he's
doing now. He's trying to get the converts. At their
last meeting, he talked about getting that off. But here's
(24:56):
here's what I want to add on to what you
just said with the pure play versus the stage two,
I think you called it like a similar. So what
he said was that the market wants to see me
as more volatile than Bitcoin. The market wants to know
that I move with Bitcoin in a more volatile fashion
so they know how to position around me. He said
(25:18):
that if he used an example, he said, if God
came and spoke to me tonight and told me the
market was going to crash tomorrow, and I woke up
and hedged my position so we didn't crash. That'd be great, right, No,
the market wants me to crash. If bitcoin crashes, the
market wants me to move up and down. They need
to know how to position around me. If I'm two
(25:41):
times as volatile, they knew how to position. But if
I changed volatility, they don't want that. They would rather
change their position size. And so what it did is
it made me reframe if I'm similar, not to throw
similar science scientific under the bus, but they have an
underlying business model in the medical world. Will they get
a new invention and a new patent and will that
(26:02):
bring up their revenue or will they get this DOJ
lawsuit and will it bring them down? We don't know.
But that unknown makes the stock move differently than with
the price of bitcoin. And so all of a sudden
I have to like, well, how do I evaluate a
business and how do I evaluate the bitcoin? And I'm
not sure. I don't typically invest into medical businesses, so
(26:24):
I'm not you know, versus like just looking as a
pure place. That was one big mental shift that I got.
Speaker 1 (26:29):
That's absolutely fascinating. It also brings up the point that
sailor always hammers, which is volatility is vitality, right, he
wants the volatility. But I hadn't thought about what you
just mentioned, that how complex security analysis becomes if you
have to analyze a business and a bitcoin market and
(26:50):
their ability to raise capital in a creative way. That's
way too complex for most people. And it's also fascinating
to say when bitcoin's down ten percent and strategy should
be down twenty percent, and that actually rewards him in
the long term. Counterintuitive and fascinating.
Speaker 2 (27:07):
Yeah, now you mentioned Checkmate earlier, James, I also agree
with you. He's brilliant. I love his is on chain analysis.
He's been pretty critical of these bigcoin treasury companies. He
seems he calls them Ponzi adjacent, not quite calling them
a Ponzi scheme or a Ponzi's game or whatever, but
I think that was him used the word Ponzi adjacent.
(27:30):
What's your take on that.
Speaker 1 (27:31):
Yeah, I think his primary argument is that, first of all,
micros strategy is separate and unrelated. He thinks that's too
big to fail, doesn't have the same risk. But I
think his primary point is targeting the upstart treasury companies
that quickly get to market and try to follow in
the footsteps. And if I'm capturing his argument, well hopefully
(27:53):
i am. He believes that we're going to have too
many of these things relative to the demand, and if
you have a sitch situation like that, mnavs can press
so low that the smaller treasury companies essentially don't have
any moves left because without some sort of hype in
their stock price, it's very hard to raise capital in
(28:13):
a way that's a creative to shareholders. And I think
it's a fair argument. I think that there's some truth
to that. I think what I would say in response
is that timing is very challenging here. Right. If we
look at the timeline of these things for four years
twenty twenty to twenty twenty four, it was only Sailor.
(28:33):
Then we got Metaplanet, I think in twenty twenty four,
and people were not confident about Metaplanet coming out. They
were mocking Metaplanet. Obviously, Metaplanet absolutely crushed, and I think
once Metaplanet performed, well that's really when the game started.
Now we see a bunch of these things coming out
with different strategies, different jurisdictions. There's a lot of different
(28:55):
ways you can go to market, and most of those
are still small. They're obviously small compared to strategy, but
they're small compared to their potential. And many of the
larger ones haven't even acquired any Bitcoin yet, such as
twenty one or atom Back's new one bstr or whatever
that is. And so we're essentially at the very very
(29:16):
beginning of this thing. So while I think James Check
might be right in the long run, between here and
there could be years, and if you took his advice today,
maybe you'll miss out on some opportunities in the midterm.
Speaker 2 (29:30):
What you brought up the I think is really interesting
talking about the m navs. That's the multiple to the
net asset valuation. So the company is trading at a multiple,
so it's trading at one times the net asset value
or two times the net asset value. But what I
see as this duration mismatch, where bitcoin is like a
long term asset. You've got to be looking at it,
(29:51):
you know, over years, not over not over weeks or months.
But yet the Bitcoin treasury companies, it's it's a it's
a big build. They got to build this engine, they
got to acquire the asset base. They got to spin
up the financial assets on top of that.
Speaker 3 (30:06):
It's going to take time.
Speaker 2 (30:07):
But the market in the security space is marketing them
to market on a daily basis and a weekly basis,
and so it's not allowing them the grace period of
allowing them to get this engine up and running. And
it's like, really interesting that everyone's so focused on the
net asset value, which I think is wrong in a
couple of ways. And I want your opinion on this,
(30:29):
but in my opinion, it's like number one, most growth
companies aren't being judged on their net asset value. They're
being judged on their forward potential future valuation. Number two.
The net asset value wall, it's certainly an important metric.
I don't think it's everything because, for example, if I
add one more bitcoin, my net asset value drops, or
(30:51):
my multiple drops because I added one more bitcoin, unless
the price of the stock also goes up with it.
But those don't happen on a one to one day
mirrored basis. So it's like I added more bitcoin, congratulations,
that instantly shows up right now today, My need asset
value drops now maybe in a couple weeks or a
couple of months when the market realizes that my stock
(31:12):
price goes up and now it's too late. What's your
take on using that MNAV as his indicator.
Speaker 1 (31:18):
Yeah, it's a good one to bring up. So MNEV
became popular over the last three to six months or
something like that broadly across all these things. Yeah, and
the naive investor would just look at a simple metric,
what is MNAV. If it's low, then you should buy.
If it's high, you shouldn't buy. But that's extremely flawed
for the reasons you mentioned, and I'll share a few more.
(31:38):
So Metaplanet has done extremely well. Their MNAV was like
ten or maybe more at one point. And if you
go look at their price chart, buying Metaplanet at an
MNAV above five to seven ten, something in that range
in the early days would have performed extremely well. And
the primary reason there is because MNEV doesn't tell the
(32:00):
whole story. You need to look at their current size
and what is their ability to acquire more in the future.
You hinted at the forward potential. So how do we
price securities? Well, we normally price them to a price
to earning ratio. How long does it take to earn
enough to make back my investment. And in bitcoin we
kind of sort of use MNAV, but again that's forward looking.
(32:22):
So MNAV should be high for companies that you believe
will accumulate multiples theoretically of their current position, and so
the smaller ones MNAV should be high if they can perform. However,
you're looking at Sailor. Sailor should never have an m
NAB above five ever, again because the ability to accumulate
(32:43):
that much bitcoin going forward is going to be hard,
simply do the law of large numbers. And he bought
most of his bitcoin, well, he bought most of his
bitcoin recently, but that's sort of a distraction point I'll
skip for now. And so what I see here is
mnav's useful, but not in isolation. To have the rest
in context, and I think going tying back to our
(33:04):
point on the bare case from checkmate, is that I
think what you're really betting on here if you want
to go invest in these smaller microcaps, which have extreme
potential also some risk, is that who do you think
can actually get to the endgame. And let's just assume
the endgame at this point is the preferred equity, because
as far as we can tell that's the most accretive
(33:26):
way to raise capital. Maybe Sailor comes out with new
things in the future. I wouldn't bet against him, but
for now, that appears to be the mature phase. And
so really you have to accumulate a large enough bitcoin
that the preferred equity investors will take you seriously. Right,
If you have one hundred bitcoin, you can't issue a
preferred equity. If you have a thousand bitcoin, you can't
(33:46):
issue it. But at some stage higher you will be
able to issue those vehicles, and I think that's when
these treasury companies start to be de risked in a
meaningful way. Sailor has a whole portfolio of these things,
and you can think about it as different tools to
apply at different market conditions. If the market's screaming hot,
(34:07):
he can sell his shares into the market and raise cash.
If the market's a little bit more bearish, maybe he'll
use one of his preferred equity tools, and vice versa.
So essentially he's creating a whole toolbox to keep his
engine moving regardless of the market conditions. And so I
think that's when you're mature, that's when you're safe. And
so just to rewind a full circle, you'd be betting
(34:29):
on who can get to scale and execute that effectively.
Speaker 2 (34:34):
So I'm curious, how do you look at all these
new entrants into the market. So I have a new
company that's entered the market, Satsuma in the UK, so
we have a new jurisdiction. The UK market one of
the largest oldest financial centers of the world on a
percentage basis. It has the highest fixed income to the
(34:54):
overall market on a percentage basis, similar characteristics to Japan.
You with Swan obviously you're involved with Sikwans and what
they're doing over there. Congratulations, you guys did a very
big raised three hundred and some million.
Speaker 3 (35:07):
I think.
Speaker 2 (35:09):
We did two hundred and some million. But now there's
all types of entrants all the way down who raised five.
Speaker 3 (35:13):
Or ten million?
Speaker 2 (35:14):
Right? I mean you have the h one hundred and
smarter Web they start with a couple bitcoin, right. How
do you look at all these new entrants and then
think about which ones could get to that level?
Speaker 1 (35:25):
Yeah, it's a good question. It seems like there's kind
of two sides to this game, and the first side
is do you have experience in capital markets specifically public
capital markets and can you actually generate the cash needed
to keep the engine going, And so someone on the
team needs to have deep experience there. The second side,
(35:48):
which is I think where checkmate he calls it Ponzi adjacent,
is that there is a retail element here and you
have to be careful around securities law. But Michael Saylor
did really well by creating an army of retail investors
that would be buying his stock and resharing his information.
Part of that is to educate the market broadly, because
(36:09):
most people still don't know what's going on. But having
retail buy your stock increases your m NAB, which allows
you to issue more shares and makes your stock more volatile.
And so I think the two parts are a capital
market experience and also the ability to communicate with retail
investors to explain your vision, and that comes with some transparency,
(36:31):
that comes with a plan, that comes with hiring spokespeople
that are well trusted and that are in it for
the long game. So that's my two.
Speaker 2 (36:40):
Another metric that people use along with the m NAB
is the bitcoin yield, and so that's the percentage of
how fast you're able to grow your bitcoin stack. And
kind of the point that you made about micro strategy.
They have so much bitcoin, it's very hard to grow
that even though they're even though you know sailors buying
more bitcoin in one perchase. Then number two Metaplanet has
(37:02):
bought you know, all year for example, as a percentage,
it's a small yield versus you take another company who
starts with one bitcoin and buys a second bitcoin. They
have one hundred percent yield. Now, recently I saw I
won't throw them. I won't, I won't throw them out there.
Speaker 3 (37:21):
But someone came out of a new metric called p bid, which.
Speaker 2 (37:25):
Basically measures what that yield is how fast they're acquiring
that that bitcoin. To me, that seems like the wrong
metric to use, at least isolated on its own, because
again I went from one to two, I went from
one to five. I have a five hundred percent yield.
I'm better than Michael Saylor because he only grew.
Speaker 3 (37:43):
At fifteen percent. How do you think about that metric?
Speaker 1 (37:47):
Yeah, it's a good point. I think you critiqued it
pretty well here in that none of these metrics tell
the whole story, and so as a savvy investor, you
need to take these things into account, and there's a
bunch of subjective stuff that's not to reduce down to
a simple number, even though humans love simple numbers. And
so I think yield is useful. I think it shows
the growth and I think it could predict or help
(38:10):
predict where the stock price could go. The other wildcard
here is that if a metric is flawed, however everyone
uses it in a way, it creates its own reality.
Right Like you look at the thacharts, everybody knows a
two hundred week moving average. Does that magically make the
price go up? Or does all the market participants think
(38:31):
it does, in which case it does, right, And so
there's some interesting dynamics there. One more point I forgot
to add on how do we evaluate these, especially the upstarts,
is their geography. You touched on the benefits of the UK.
Japan has some major benefits. Brazil has different tax treatment
whether you're owning an equity or bitcoin, and so I
(38:53):
think that's a very important element here. If you have
a structural advantage in that geography, that would lead to
an increased percentage of flows, that's obviously a good thing. Now,
the one caveat is how long do these geographies stay
roughly isolated. And for example, if metaplanets trading everywhere in
the world, does that change anything? Right? And then one
(39:17):
last point here, sorry I'm scattered, is the fact that
we're squabbling over the different metrics and new ones are
popping up every week. I think that says something important here,
which is that this is an entirely new way to
look at securities. It's a new type of company. And
we're early in this thing because we don't even have
agreed upon ways to evaluate these things.
Speaker 2 (39:39):
And that is our opportunity, the thing that I wrestle
with and I haven't quite figured out, and we won't
figure out yet. But I think, as somebody who believes
in the long term vision of bitcoin, I believe what
happens in studying history and technology. What happens is we
try to take something new, like this electricity and what
(40:03):
is it? So we try to compare it to something
that we already know to grasp it. Well, it's sort
of like a digital candle. Well it was at the
time that was the killer app, but of course electricity
was more so what is this bitcoin? And I think
it's going to make us rethink what capital is, what
assets are. You know, with the gap change on the
FASB rule, we're starting to rethink what income is. And
(40:25):
so when you sort of break these things down into
first principles metrics or first principles thinking, I should say,
I think it's going to change the entire way we
look at these companies. So for example, you know, companies
typically give you a bond and they're going to have
some sort of credit rating based off of their ability
to create the income in the future to pay you.
(40:48):
They don't have the income, but maybe hopefully you think
I can get the income and I can pay you,
versus micro strategy has the assets right now today to
pay you. So like just even a little thing like that,
but the rating agencies don't consider that to be a
factor in giving them a credit rating. So I might
be able to make the money, maybe I can make
(41:10):
the money in the future to pay you, but you
have the money to pay, but you're not as safe
as I am. Right, So, I think all of these
ways that we look at companies and we look at risk,
and we understand income and we understand asks, all of
that changes, and it's really hard for us to understand that.
I think the outlier. Well, let me ask you a
question before I lay out the outlier. Do you think
(41:30):
the good companies? Yeah? Maybe it's a two part question.
Number one, do you think the good companies will be
able to outpace bitcoin over a long term? And when
I say long term, call it five years? And number two,
how many good of those types of good companies do
(41:50):
you think we could see in five or ten years?
Speaker 1 (41:54):
Yeah? Good question. I do think the good ones will
outperform Bitcoin over a five year period. I hesitate to
go much further than that because it's really hard to
speculate on when this. It is an arbitrage right, Eventually
something in the market will change, And so is it
five years, is it twenty years, is it two years?
(42:15):
I don't know. I think five is pretty safe where
I feel comfortable placing bets in some of these companies
in over five years. Maybe some fail, but the others
do extremely well and do outperform Bitcoin, So I think
that's fair to say. Now the next question is how
many could we see? And that's really tricky. Right on
one side of the argument, people say it's a winner
(42:36):
take all market. Eventually strategy will be available and everyone's
brokerage all around the world and they'll only pick the
best one. I think that's absolutely wrong. On the other side,
you could say there's going to be thousands of these
things and they're all going to be winners. That's also
obviously wrong, And so I lean towards a winner take
(42:56):
most market, and I winner take most, with a caveat
that jurisdictions still will matter in the future because there
will be slight rule changes depending on where you are.
Individuals sometimes have national pride, and maybe the countries will
provide advantages for their citizens to invest locally or something
like that, and so I think geography matters. I think
(43:19):
it'll be a winner take most in most markets. Now,
I don't think like I don't want to even name
a country, country X that's small close to the US,
that isn't that different from the US. I don't think
that they need their own treasury companies. I don't think
there's a geo arbitrage there, and so I think the
(43:39):
US absorbs a lot of the flows. It's still number one,
but I would expect on the order of twenty to fifty.
That's kind of what feels right to me right now.
Speaker 2 (43:51):
Now.
Speaker 1 (43:51):
The other thing we don't know about is are we
in a world where the FIAT long debt cycle is
unwinding and there's pandemonium in markets because that sort of
blows everything out the window.
Speaker 2 (44:03):
If people are reaching that I think I lean that way.
Speaker 1 (44:06):
Yeah, if we're leaning that way, which I also do timing. Sorry,
if we lean that way, the number could be much
higher as people are just reaching for exits. It's kind
of a waffle answer, but I'm going to say twenty
to fifty feels about right.
Speaker 2 (44:23):
My take on it is is the winner take most.
I mean, certainly we always have winners that take a
majority of market share. But the way I sort of
think about it is Strategy has already released four different
products that each reach a different type of a person
that's looking for a different risk and credit profile. Each
(44:43):
company could create another flavor, another version, another basket, another whatever,
another way to do this. In the United States, there's
thirty nine hundred ETFs thirty nine hundred that are each
doing something just a little bit different. It's a little
bit of a different basket than the other one. There's
(45:04):
I believe another five thousand types of bonds, from junk
bonds to HYO credit bonds, to institutional grade. Right, each
one of those bonds has a little bit of a
different profile. So we're talking ten thousand just in the
US alone, not including what's in another country. So why
(45:27):
can there only be ten or twelve or twenty or fifty.
We have ten thousand right now in the US, So
I take a little bit of a different view. I
think Number one, right now we can see there's over
ten thousand products in this type just in the US alone.
Number two, I think it also requires what does success
look like? So I know it's atsuma in our initial rays,
(45:49):
which we haven't even fully got up and going it
gives us enough bitcoin just from here if we were
to never and actually going back to the dinner with Sailor,
he was asked a very direct question. Don't think he
liked the question. He probably gets asked it all the time,
but he gave a good answer, so I'm gonna repeat it.
Speaker 3 (46:04):
He was asked, what goes wrong?
Speaker 2 (46:08):
What's the risk? What is the thing that you haven't
considered that could potentially go wrong? He said? He said,
the worst case scenario is we can never raise another
penny ever again. Okay, so let's say that. So with Withsatsuma,
let's just hypothetically say that we can never raise another
(46:30):
penny ever again for whatever reason. Let's just say that, Okay,
well we got a couple thousand bitcoin in five years
from now. That puts us to a three or four
billion dollar valuation. You know, how many companies ever make
it to a billion dollar valuation point zero zero two?
I would say that's the success. So, like, what is
(46:54):
the level of success, right? How many products can be bear?
So that's sort of my frame. Certainly there's going to
be a top dogs. Certainly, no one's going to surpass
the amount of bitcoin that micro or Strategy has, Like,
certainly they've won before the game even got started. They've won.
And so the winner take most, sure certainly, But I
think there could be hundreds or thousands of different types
(47:15):
of products out in the market. I think the market
can bear that. And I do think that we can see,
you know, a bunch of these companies have some level
of success if you call that becoming a unicorn as well.
But certainly I do agree with the winner take most.
That's how the world works, right, and so we'll certainly
see that. Certainly there will be the winners in each jurisdiction.
I agree with that, but a little bit of nuance there.
Speaker 1 (47:37):
Yeah, I think that's interesting. And yeah, is it so
bad that you own part of a company that has
a lot of bitcoin? I agree, That's not the end
of the world. It's not the same type of risk
is taking a bed on an operating company that fails
their execution or market changes or they get swallowed up
by a competitor. Right, It's a very different type of risk.
(48:00):
I think. I think when I think about winners, I
think about they have the Fiat arbitrage or the financial
engineering tools to continue this thing for a while. Sure,
I guess that's how I define it. But yeah, the
worst case scenario, you have a pile of bitcoin, you
could do something with that. I think that's yeah.
Speaker 2 (48:18):
Yeah, Unlike you know the risk of going into an ico,
for example, and then you found out it was just vaporware,
the protocol got abandoned, the anonymous founder, rugbold, the treasury
or whatever. Right, Like, there's a lot of risk there
traditional trad fy you know, I po to your point,
they could have operational risk. It could you know, the
patent could wear out, someone could duplicate whatever. So here
(48:41):
it's like, as long as they hold the bitcoin, it
kind of de risks that position. So I hate to
use this word, I have to kind of think about it.
But when I look at like investing into early stage
traditional companies and doing IPOs, or I look at crypto
doing icos, and then I look at these companies, I
would say they're the safer of those three because at
(49:02):
the end of the day, if the company holds the bitcoin,
it's gonna be worth something in the future.
Speaker 3 (49:08):
Anyway, fun stuff, fun stuff.
Speaker 1 (49:11):
I think that's true. With the only caveat that retail
investors can buy some of the microcaps time it poorly
misunderstand the market. Sure, and although the company itself is
secure with let's just say MNAV one, the investor might
have invested at a much higher m NAV and so
if they don't time it right, they could get wrecked.
(49:32):
And I do expect a bunch of retail to plow
in at the wrong time, just like we do in
every type of hype cycle.
Speaker 2 (49:38):
And so let's play that out, thoughts. Let's play that out.
So let's say that let's say that I invest for
easy numbers because I'm not good at math on the
fly I invest at a company at two times at NAV,
so the NAV is worth a million dollars, and I
invested at two times, so the company is worth two
million dollars. When I invest the m NAV compresses to one,
(50:01):
so the million of assets they have. So I lost
fifty percent of my equity, right, or my equity valuation.
But let's say in five years from now that million
dollars becomes worth ten million dollars a bitcoin and it's
still traded at a one time z m NAV. I
(50:21):
went from owning a percentage of a company with a
million dollars of assets to now on a percentage of
company with ten.
Speaker 3 (50:26):
Million in assets.
Speaker 1 (50:28):
That's right.
Speaker 2 (50:30):
So over time, even though even though in the short
term my equity took a hit because of the compression
of the NAVE, over time that equity comes back up.
Speaker 1 (50:40):
That's right. I think in that case, your equity investment
would be returning positively. But you essentially bought at twice
the market price on day one, right, That'd be another
way to look at it. So you have less upside.
You harvested less upside because of that m NAV compression,
but you didn't lose more because at the end of
(51:01):
the day. Bitcoin is the engine here, and that does
de risk a lot of this stuff to your point,
assuming an investor would hold through that long period.
Speaker 2 (51:09):
Right, But here's where I think this differentiation matters. You
and I are bitcoiners, So to me, Bitcoin is my
base assets. Bitcoin is my hurdle rate.
Speaker 3 (51:20):
I look at.
Speaker 2 (51:20):
Anything that I could potentially put money into, and if
it can't beat fifty percent a year, I'm not interested.
So for me, if it's not going to outperform Bitcoin,
I don't want to do it. So when I look
at that m NAV, if it's only doing a one
time z M NAB, it's not beating bitcoin, why would
I do it? So to what I just laid out,
I bought it at two times, I ended up at
(51:40):
a one times, and in fiat terms, I made a
lot of money in fiat terms, but in bitcoin terms,
I maybe never got back potentially. Right, That's the way
I'm looking at it. I think that's the way master
us as bitcoiners look at it. But the problem is
it's not the problem. The reality is the majority of
the world doesn't look at things like that. They're trying
(52:02):
to beat either CPI or the S and P five
hundred bitcoin is not their unit of account, and so
they don't look at it that way. So they go,
I put one hundred dollars in in five years, that's
worth a thousand dollars.
Speaker 3 (52:15):
That's good.
Speaker 2 (52:16):
And so I just try to kind of pull back
a little bit and think, because again, we have a
public company now we're trying to sell to retail. The
bitcoiners are just a small percentage and hardly any of
the buyers. These are really for trad fi investors. These
are for fiat maximilis, right. These are for people trying
to beat the SMPR or a CPI, and so from
that level, i'd say it's pretty safe for them. As
(52:38):
a bitcoiner, as you started out, and I'm gonna maybe
wrap this up by a green with what you said
and reiterating it one more time. These are not a
replacement for owning bitcoin in cold storage. Buy your bitcoin,
put it in cold storage if you want a little
bit of extra risk. These are fun to play with. Ultimately,
these are trad fi tools for people who can't buy
(52:59):
cold storage bitcoin.
Speaker 1 (53:01):
Yeah, well said Mark. I think that's a really important point.
And if you go out on Twitter sometimes you see
people fighting over these things, and I think if everyone
understood that point, which I've seen you tweet multiple times,
I think the tension would come down between the paper
Bitcoin summer and the haters or whatever we're calling these tribes.
Speaker 2 (53:19):
Yeah, because it's you know, you've been doing this for
a long time and you help high net worth people
come into bitcoin, and it's easy for us to go
just just buy the bitcoin, and that is the right answer.
But that doesn't take into account the reality that most
people have money locked up.
Speaker 3 (53:33):
In pensions and four one gains and they can't do that.
Speaker 2 (53:36):
So it's like, thank you, but I can't write, and
so this this is a solution for that. Let's go
ahead and wrap it up here. Brandon, any last thoughts
or anything you want to draw attention to where they
can follow, or anything that you're working on.
Speaker 1 (53:49):
Yeah. Absolutely. I was going to say one more point
on Sailor's elegance here, and it's drawing from the unit
of account conversation we just had. So what is Sailor doing. Okay,
he's putting bitcoin on the balance sheet, so his assets
are in bitcoin, and he's paying out some fixed income
through his preferred equities in dollars, so assets in bitcoin
(54:12):
dollar liabilities. That's the game, and that's the engine for
a lot of shareholder value. So that's just a beautiful
thing to see. And if you're too late to switching
your unit of account to bitcoin, well you pay the
price for that. So yeah, there's a little cheeky ending
for that. You can find me on Twitter at b
quitm b in my last name. All my essays are
(54:32):
brandonqu dot com. I've been at swan for five and
a half years. We're a US focused bitcoin wealth platform.
So if you want to buy some bitcoin and a
personal account, a retirement account, an entity account, if you
want to get a two of three collaborative multi sig,
you want someone to hold your hand through any of
this stuff, come to swan dot com and check us
(54:52):
out there.
Speaker 2 (54:53):
Yeah cool, all right, Brandon, thanks so much.
Speaker 1 (54:56):
Thanks Mark at
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Mark Moss
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