Bitcoin hits new all-time highs. Listen to the True North crew break down MSTR's price action, intelligent leverage, and Saylor's digital empire. Stay ahead or get rekt.
Timestamped Overview
[00:00:00 - 00:03:41] Price Action FUD & The ATM Scapegoat
- Soleil kicks things off as Bitcoin is ripping to all-time highs, but MicroStrategy’s stock isn’t following perfectly.
- Adrian Morris tells everyone to stop crying about the ATM (at-the-market offering) being the reason for MSTR’s price lag.
- He argues that if the ATM was the problem, the price would be ripping now that it’s off.
- Adrian explains that broader market forces are at play and tells the paper-handed complainers to zoom out and be patient.
[00:03:41 - 00:07:20] Converts, ATMs, and Predatory Shorts
- Dan Hillery, the resident bear, acknowledges the ATM facility can be predatory, giving shorts an easy way to cover.
- Adrian fires back, stating the market is shorting MSTR because Wall Street dinosaurs don’t see Bitcoin as a legitimate business asset yet.
- He compares blaming the ATM to blaming the road for the direction of traffic – the shorts would exist with or without it.
[00:07:20 - 00:12:25] Should Bitcoin Gains Be “Earnings”?
- Dan questions if the appreciation of Bitcoin on the balance sheet should be treated like traditional company earnings.
- Adrian agrees that the market is currently saying “no,” which is why the stock is being valued the way it is.
- He advises focusing on the long-term Net Asset Value (NAV) instead of the Market-to-Net-Asset-Value (MNAV), which is just short-term market noise.
[00:12:25 - 00:17:46] The Future of MSTR: Evolve or Die
- Adrian argues that for MSTR to keep its lead, the business itself must evolve beyond just stacking sats.
- Dan pushes back, stating that the preferred stocks (“prefs”) are the main engine for generating more Bitcoin for shareholders right now.
- Adrian warns that the prefs, while powerful, could be siphoning some investment away from the common stock (MSTR).
- Dan makes it clear: if you own MSTR common stock, your entire investment thesis depends on the success of these preferred stocks.
[00:17:46 - 00:23:06] The Ultimate Chad Move: Lending Bitcoin?
- The group debates if Saylor would ever lend out a portion of MicroStrategy’s massive Bitcoin stack to earn yield.
- Soleil points out the huge risk, as the first company to overextend itself will get rekt.
- Adrian speculates that years down the line, with a million Bitcoin on the books, shareholder pressure to generate yield might become too strong to ignore.
- Tim Kotzman brings up Saylor’s obsession with avoiding counterparty risk, questioning if lending to the US government or JP Morgan would change the equation.
[00:23:06 - 00:28:55] Dan’s Models & The Pref Flywheel
- Dan shares his models, projecting MicroStrategy could hold 1.5 million Bitcoin by 2030 just through issuing preferred stocks.
- He explains that holding MSTR is a bet that these Bitcoin-backed securities will become a key part of the global bond market.
- He notes that Bitcoin’s volatility is decreasing, which allows for higher leverage ratios and more Bitcoin yield for shareholders.
[00:28:55 - 00:36:56] Retooling the Bitcoin Conversion Factory
- Soleil uses a brilliant analogy, comparing MSTR’s shift from convertible bonds to preferreds to Tesla shutting down a factory to retool it for higher output.
- She warns that options traders with near-term expiration dates might be in for a rough ride as this retooling takes time.
- The group discusses the new MNAV guidance for the ATM, with Adrian suggesting it was a smart investor relations move to quiet the complainers.
[00:36:56 - 00:44:51] Tim Kotzman is Building a Digital Empire
- Tim discusses the insane success of his digital Bitcoin conferences, which attract tens of thousands of viewers.
- He explains how he’s pioneering a new format for sharing alpha, dematerializing thousands of in-person meetings into a single day.
- Tim plugs his upcoming in-person “unconference” in NYC, an exclusive event where attendees can interact directly with giants like Michael Saylor.
[00:44:51 - 00:55:42] Do Bitcoin Companies Owe The Network Anything?
- Soleil asks if Bitcoin treasury companies have a duty to help protect the Bitcoin network, like running nodes to fight spam.
- Adrian believes their first duty is to shareholders, but they can’t remain silent on network threats forever, as it’s in their own self-interest to protect their main asset.
- Soleil argues they can’t just be passive stackers; if the Bitcoin they’re stacking becomes worthless, their entire strategy fails.
[00:55:42 - 01:07:23] Cooperative Stacking & Valuing MSTR
- The crew discusses Bitcoin companies investing in each other, concluding it’s a cooperative model where a rising tide lifts all boats.
- Dan gets into the weeds of how to properly value MSTR now that preferred stocks exist, questioning how liabilities should be calculated.
- He explains that a common share is a future claim on the company’s Bitcoin, and how you calculate that claim is the key to understanding its value.
[01:07:23 - 01:19:29] Jeff Walton Crashes the Party with Bullish Alpha
- Jeff Walton joins and immediately dives into the math behind the preferreds, explaining the “CAGR Arb” that generates massive value for shareholders.
- He argues that the market is completely blind to this, valuing MSTR like a dinosaur company instead of a high-tech capital machine.
- Jeff states that MSTR started with $500 million and now holds $77 billion in assets, calling it the least efficient it will ever be.
[01:19:29 - 01:28:46] The Intelligent Leverage Super Mega Trend
- Jeff and Tim discuss Joe Burnett’s point that “intelligent leverage” creates a massive flywheel for Bitcoin’s price.
- As Bitcoin’s price rises, companies like MSTR can issue more debt to buy even more Bitcoin, creating a constant source of demand.
- Jeff calls this a “super mega trend” as big as the internet, with the most serious, “stone-cold killer” operators in the world leading the charge.
[01:28:46 - 01:40:07] FUD Bots, Summer Doldrums, & Insane Gains
- Jeff dismisses the recent negative sentiment around MSTR as a combination of paid FUD bots and low summer trading volume.
- He points out that MSTR is sitting on a $9.6 billion Bitcoin gain in Q3 alone, with the potential for a $26 billion gain if Bitcoin hits $150k.
- He tells people complaining about a few days of decoupling that they probably don’t own enough Bitcoin.
[01:40:07 - 01:50:36] Beta, Alts, & The Future of Valuation
- Dan explains that for trading purposes, he’s shifted away from MSTR as a pure leveraged play on Bitcoin because its behavior has changed.
- Jeff counters that long-term, passive index fund flows will inevitably push MSTR’s valuation into the stratosphere, similar to tech mega-caps.
- They discuss how the most valuable commodity on the planet has shifted from oil to data, and is now shifting to digital capital.
[01:50:36 - 02:02:11] 4D Chess: MSTR Common vs. STRF Preferred
- The stream ends with a galaxy-brained debate between Dan and Jeff about the theoretical differences between MSTR common stock and the STRF preferred stock.
- Dan questions what makes the junior claim (common stock) more valuable than the senior claim (preferred stock) when both have a “moving liquidation preference.”
- Jeff argues the situation is binary: if Bitcoin moons, MSTR moons and never gets liquidated, making the upside of the common stock the only logical choice.
Notable Quotes
Market Sentiment
The market is telling us what the market told us what it thought with those negative EPS ratings is that the market is discounting the Bitcoin altogether.
Adrian Morris @Adrian_R_Morris
Intelligent Leverage
The only reason your common is worth more than one MNAV is based on the success of the preferred stocks. Literally. Your common is fucked, buddy.
Dan Hillery @hillery_dan
Counterparty Risk
What happens when your counterparty risk is JP Morgan or the US government? Is that different? Maybe that's different.
Tim Kotzman @TimKotzman
Long-Term Vision
If you guys are options pretty heavy, I got nothing for you. Best of luck.
Adrian Morris @Adrian_R_Morris
Cooperative Model
I think that we are so used to an adversarial model that we have a hard time adopting or accepting rather a cooperative model.
Adrian Morris @Adrian_R_Morris
The Bitcoin Flywheel
If your leverage ratio is 20 to 30 percent... it's like this flywheel where, right, if you want to keep that leverage ratio... don't you by definition have to or want to... keep buying Bitcoin?
Tim Kotzman @TimKotzman
The Mega Trend
We are at the beginning of a super mega trend here. This is a complete mega trend that I think a large portion of the world just hasn't conceptualized. Like this is internet, right? Adopting digital capital is as big as the internet.
Jeff Walton @punterjeff
Bearish Sentiment
If you're complaining about this, you probably don't have enough Bitcoin. And if that's the case, you should probably not hold MSTR.
Jeff Walton @punterjeff
MSTR vs Beta
As long as you don't think in your head that the MSTR has to be levered BTC beta, then you can hold it for a long time.
Dan Hillery @hillery_dan
The Big Picture
This company started with $500 million five years ago and they're holding $77 billion. That is insane. And to use Soleil's word, this is as least efficient as they will ever be.
Jeff Walton @punterjeff
The Signal
People are bearish on this and they just raised two and a half billion dollars like a couple weeks ago. Like that is signal.
Jeff Walton @punterjeff
Questions & Answers
Question 1: Why isn’t MicroStrategy’s stock price soaring if Bitcoin just hit an all-time high?
Answer: Adrian Morris explained that the reasons are complex and go beyond the simple narrative of share dilution from the ATM. He believes broader market dynamics are at play, including a general market sentiment that still discounts Bitcoin’s value on a company’s balance sheet. He also pointed out that MicroStrategy is being heavily shorted. The consensus is that investors need to be patient and focus on the long-term value accrual rather than short-term price movements.
Question 2: What is the most important factor for MicroStrategy’s future success?
Answer: Dan Hillery argued forcefully that the preferred stocks (like STRF, STRE, etc.) are the single most important part of the strategy. He explained that these instruments are the primary “Bitcoin conversion factories” that allow the company to acquire more Bitcoin and generate yield for common shareholders. He stated that the entire bull case for the common stock (MSTR) depends on the success and scaling of these preferred offerings.
Question 3: Will MicroStrategy ever lend out its Bitcoin to earn extra yield?
Answer: The group had a split opinion. Soleil Nitu and Tim Kotzman expressed concerns about the immense counterparty risk involved, citing the collapses of firms like BlockFi and FTX. However, Adrian Morris suggested that in the long term, once MicroStrategy holds an astronomical amount of Bitcoin (e.g., one million coins), the pressure from shareholders to monetize a small portion of it for yield might be too significant for the company to ignore, especially if done with reputable counterparties like major banks or even the US government.
Question 4: Do Bitcoin treasury companies have a responsibility to support the Bitcoin network itself?
Answer: Adrian Morris stated that a public company’s primary responsibility is to its shareholders. However, he and Soleil Nitu agreed that because their main asset is Bitcoin, these companies have a vested self-interest in ensuring the network’s health and survival. They concluded that while it may not be a formal obligation now, these companies will inevitably have to take a public stance and potentially a more active role in stewarding the network as their stakes grow.
Question 5: What is the “flywheel effect” that intelligent leverage creates for Bitcoin’s price?
Answer: Jeff Walton and Tim Kotzman discussed the concept where companies maintain a target leverage ratio (e.g., 30% debt-to-assets). As the price of Bitcoin goes up, their asset value increases, which automatically lowers their leverage ratio. To get back to their target, they must issue more debt to buy more Bitcoin. This creates a perpetual cycle of buying pressure from large, well-capitalized entities, acting as a massive tailwind for Bitcoin’s price.
People and Organizations Mentioned
- Michael Saylor: Founder and Chairman of MicroStrategy. He is the architect of the company’s pioneering Bitcoin treasury strategy and is considered a leading figure in the Bitcoin space. Mentioned constantly as the leader of MSTR.
- MicroStrategy ($MSTR): A business intelligence firm, famous for being the first publicly traded company to adopt a Bitcoin treasury reserve strategy. They are the largest corporate holder of Bitcoin in the world.
- MetaPlanet: A Japanese investment firm that has followed MicroStrategy’s playbook, adopting a Bitcoin treasury strategy. Mentioned as another key player in the corporate adoption space.
- Tesla: Electric vehicle company led by Elon Musk. Mentioned by Soleil in an analogy comparing MSTR’s business model shift to Tesla retooling a factory.
- JP Morgan: A multinational investment bank. Mentioned by Tim as a potential high-level counterparty if MSTR were ever to lend its Bitcoin.
- Three Arrows Capital (3AC): A defunct crypto hedge fund that collapsed spectacularly in 2022. Mentioned by Adrian as an example of the kind of counterparty risk MSTR avoids.
- Alameda Research / FTX: A defunct crypto trading firm and its associated exchange, founded by Sam Bankman-Fried, which collapsed due to fraud. Mentioned by Adrian as another example of catastrophic counterparty risk.
- BlockFi: A bankrupt crypto lending company that collapsed during the 2022 contagion. Mentioned as an example of rehypothecation risk.
- Julie Millard: A Bitcoin personality. Mentioned by Soleil as the inspiration for her question about corporate authenticity and obligations to the network, from an interview at Tim’s first conference.
- Joe Burnett: A financial analyst at Blockware Solutions, known for his research on Bitcoin. Mentioned for his take on how “intelligent leverage” from corporate treasuries creates tailwinds for Bitcoin’s price.
- Lynn Alden: An investment strategist and macro analyst. Mentioned by Jeff as someone who recently interviewed a known MSTR short-seller.
- Andy Constan: A macro strategist and founder of Damped Spring. Mentioned by Jeff as a prominent MSTR short-seller who has publicly shared his bearish thesis.
- Exxon, Chevron, BP, Shell: Major multinational oil and gas companies. Mentioned by Jeff in a historical comparison, noting that oil companies once dominated the stock market, much like tech and AI companies do today, suggesting a future where digital capital companies could rise to the top.