MSTR's Crazy Train: Debating Leverage & The New STRC Security

The Kid Analysts debate MicroStrategy's (MSTR) leverage and the ATM's impact. Is the stock pinned? We break down the new 'Stretch' (STRC) security.

Timestamped Overview

[00:00:00 - 00:06:35] Intro & MSTR Leverage Update

• The crew kicks off with the “crazy train” of MSTR, Bitcoin, and preferred equities.
• Jeff Walton provides the weekly leverage update: Strategy holds over 607,000 BTC, with $72B in assets.
• The leverage ratio is a low 16.3%, effectively 11.8% when accounting for in-the-money convertible debt.
• This means Bitcoin’s price would need to fall 88% to ~$14,000 before any major concerns.
• The company’s financial strength is described as “enormous” and stronger than ever.

[00:06:35 - 00:49:48] The Great MSTR Debate: Bulls vs. Bears on Volatility & The ATM

• A heated discussion on MSTR’s performance, leverage, and the need for more “juice.”
• Dan argues MSTR needs to “smoke the call sellers” by expanding upside volatility through a higher leverage ratio.
• Adrian counters that market sentiment (MNAV) is driven by macro trends and liquidity, not something Strategy can control with the ATM.
• The conversation covers the impact of passive ETF flows (like QQQ) and algorithmic trading pinning the MSTR/IBIT ratio.
• The upcoming Q2 earnings report is highlighted as a massive catalyst, with a potential $10-11 billion net income announcement that could attract new buyers.

[00:49:48 - 01:12:39] Introducing STRC (“Stretch”): A Stablecoin Killer?

• The crew dives into Strategy’s newest product, STRC, a perpetual preferred equity.
• STRC is designed to be a stable, zero-duration instrument, with its price algorithmically pinned between $99 and $101.
• It offers a high yield (starting around 9%) with cumulative monthly dividends, making it highly attractive for investors seeking stability and income.
• Ben Werkman calls it the “equity version of a stable coin,” perfect for parking cash and generating yield without capital risk.
• The target market is enormous, including US dollar bank accounts, money market funds, and retirement accounts.

[01:12:39 - 01:35:51] The Future of Bitcoin-Backed Finance

• The group discusses how these products are creating a new financial system built on Bitcoin.
• Ben explains these instruments are the “loading dock for capital coming into Bitcoin,” draining fiat from the traditional system.
• They discuss the potential for these securities to solve the retirement crisis by providing stable, high-yield income backed by the world’s best collateral.
• The conversation touches on retiring the old convertible bonds to clean up the capital structure and improve the credit quality of the preferreds.
• The difficulty of getting official credit ratings from agencies that don’t yet understand these revolutionary products is explored.

[01:35:51 - End] Final Thoughts & The Macro View

• The crew concludes that we are still incredibly early, with 99.9% of people having no idea these products exist.
• They discuss how the market structure has fundamentally changed since past cycles, with institutional buyers creating a stronger structural bid for Bitcoin.
• Tim notes that major banks like PNC are finally enabling crypto buys for customers, a sign of mainstream adoption.
• The final sentiment is that this is the “digital gold rush” and the most exciting story in all of finance.

Notable Quotes

Volatility & Performance

It's really, really, really, really important for the future of MSTR for the next, during the next move in Bitcoin, MSTR has to smoke the call sellers.

Dan Hillery @hillery_dan

MNAV & Sentiment

If volatility is vitality, then sentiment and subjectivity is a fuel for reflexivity... I always challenge people to try to justify a multiple without sentiment and without future expectations.

Adrian Morris @Adrian_R_Morris

The ATM Debate

The shorts are getting exit liquidity essentially from the ATM.

Mason Foard @MasonFoard

The Big Picture

This is the biggest story in all of finance right now. We need to talk about it. People need to talk about it. It's different.

Jeff Walton @punterjeff

The STRC Product

It's kind of like creating the equity version of a stable coin here... You can effectively get S&P 500 returns with no capital risk. I mean, just think about that.

Ben Werkman @BenWerkman

Bitcoin Onboarding

This is capital being onboarded to Bitcoin, right? This is the loading dock for capital coming into Bitcoin. If you are a bitcoin maxi and you want to drain capital out of the traditional system, this is the ramp.

Ben Werkman @BenWerkman

The Opportunity

What we're talking about... that's how early we are. It's just unbelievable when you really zoom out.

Tim Kotzman @timkotzman

Final Word

If Fiat is a melting ice cube, then strategy in the preferreds converting Fiat to Bitcoin is like glacier formation. Boom.

Nithu Sezni @nithusezni

Transcript

Jeff Walton [00:00:00]: Ozzy Osbourne.

Jeff Walton [00:00:01]: And we are about to go on the crazy train talking about preferred equities and bitcoin backed securities and MSTR and bitcoin and all of these fun things. We have got the, we’ve got a crew tonight, we’ve got a bigger crew than usual and we’re going to have the team just popping in because everybody’s got opinions. Things are, a lot of things are happening right now and a lot of things to talk about. So without further ado, we’re going to get into it. And so, so today’s agenda, we’re going to talk about MSDR leverage update Q2, Q3, we’re going to get into this, the stretch presentation which will probably be a majority of the time Quintuple threat, ATM bitcoin back, fixed income. Where is the market going?

Jeff Walton [00:00:41]: What does this look like?

Jeff Walton [00:00:42]: Bears vs Bulls, the sentiment right now and we’ll do a little pulse check on what’s going on. And then BTC treasury company landscape because we’ve got some unique perspective that we haven’t had in the past and it’s going to be a good time. And we’ve got the youngsters up in the right hand corner already giggling, having fun behind the scenes. I think they’re going to be roommates. So, you know, who knows what’s going to happen there. That’ll be interesting. And yeah, if this is your first time, first time listening to True north, the investment grade bitcoin podcast. We are here to talk about everything that’s happening on the nice edge, the bleeding edge in the bitcoin treasury landscape, the evolution of securitized finance with bitcoin and everything on that front.

Jeff Walton [00:01:24]: So without further ado, I’ll pass it over to Tim for some not financial advice.

Tim Kotzman [00:01:28]: All right, Happy July everybody. Almost August. What you’re gonna hear tonight may be amazing, but it’s not financial advice. Stock market at the all time high. Bitcoin near all time highs. Back to you Jeff.

Jeff Walton [00:01:45]: Thank you, Tim. Yeah, we’ve got but it’s a unique time in the world right now. Everything’s at all time highs. SP 500 is at all time highs. Q. Q. Q. Is at all time highs.

Jeff Walton [00:01:55]: Bitcoin is playing around with all time highs. And it’s almost like bitcoin has seemed boring at 118. Not a lot of people are talking about. It’s like the price of the bitcoin went up and it’s surprising how comfortable everybody’s feel, how comfortable everybody feels. And it’s not just like euphoria that I was expecting. So it’s a, a bit of, a bit of a unique time in this space. I know there’s a lot of bears in the space talking about mstr, its relativity, IBIT and how that’s performing. And maybe we’ll get into it, we’ll talk about it a little bit.

Jeff Walton [00:02:30]: MNAV expansion. I know Dan’s got some opinions on IBIT calls, which has gotten some attention in the market. And yeah, we’ll go through it. So without further ado, we will jump into the weekly Financial Leverage update and I will share my screen. We go through this every week here. So this is the financial leverage. So what this is showing is MSDR’s assets relative to its liabilities on its balance sheet and how the, how the assets compare. And what is the leverage ratio? What is the effective credit rating of the balance sheets? We’re looking at the goal of showing.

Jeff Walton [00:03:11]: This is to show the financial strength of the company and its ability to pay out its liabilities into the future. So starting here, 7, 23, 25. Strategy now holds 607,770 Bitcoin. At the beginning of 2025, they held 446,000 Bitcoin. Today’s Bitcoin price, about $118,750, might be a little bit lower than that. So assets held, $72 billion of assets held. And you look at the beginning of 25, there were $41 billion of assets held held. So nearly doubled the amount of assets held in almost seven months.

Jeff Walton [00:03:43]: It’s an incredibly strong financial position. Strategy has $8.2 billion of debt on the balance sheet and then $3.5 billion of preferred stock outstanding. So the net capital held on balance sheet is $60 billion. To put this in perspective, I think this is about 180th largest company by market cap. If you were to compare the size of that, just the net capital, like the actual financial strength held on the balance sheet, if you were to compare that to the market cap, which is a valuation metric to other companies in the market, it would be around 170th largest US company in the market. This is a very significant position. Thinking back to my past life in the reinsurance world, $60 billion would be the second largest reinsurance market in the entire globe. I used to work with 100 different counterparties, so.

Jeff Walton [00:04:34]: So thinking about the relativity here, this is enormous. This is so much money. This is so much money. This is so much collateral. It’s hard to kind of wrap your head around it. So when you look at the balance sheet and the strength here, you’ve got $72 billion of assets. You’ve got, what is this on a combined basis, $11.7 billion of debt. If you assume that reverse dog is technical debt.

Jeff Walton [00:04:55]: And so that gives you a liability to asset ratio, a leverage ratio of 16.3% and the debt coverage multiple of 16, 6.1%. But what do we know? We know that $3 billion of the debt, the convertible debt, is currently trading as equity because it is trading significantly in the money. And if you were to, on a pro forma basis, pull that debt off the balance sheet, the leverage ratio is actually at 11.8% and a debt coverage multiple of 8.5. So effectively, the bitcoin price can fall. In order for the assets to be worth less than the liabilities, the bitcoin price can fall, fall to $14,000 or effectively an 88% drawdown from here before there’s any potential concerns.

Jeff Walton [00:05:35]: And it’s got to.

Jeff Walton [00:05:36]: Not only does it have to fall, it’s got to stay there and stay there for an extended period of time. So we like to show this beginning because this just lays the stage here. A lot of people are bearish right now, but you zoom out and you look at the financial strength of this company and they are the strongest financial company by far. If you just look at the relativity of the assets relative to debt. And certainly the strongest, Bitcoin Bitcoin treasury company. And they have more bitcoin than the next closest company by 11 times. And continuing to extend that lead, you think about Strategy. Purchased almost 6,000 bitcoin last week.

Jeff Walton [00:06:16]: That’s more than a majority of the bitcoin treasury companies that are in the space. So a lot of positive things on the horizon. And this financial strength is. Is you can’t ignore it. This is huge. And I’ll pause there. Anybody else have anything to add? No.

Dan Hillery [00:06:35]: Well, yeah, I’m looking forward to getting into this.

Jeff Walton [00:06:40]: Okay.

Nithu Sezni [00:06:41]: I’m a. I’m a. I’m a Vol. Junkie. So I’m like, pump those numbers up. Like, I like to find strength. But yeah, I want a little more leverage.

Jeff Walton [00:06:49]: Give me more leverage. I think that’s why you’re seeing these new instruments come to market. Right. They’ve gotten to a 16% leverage ratio. And they identified that the convertible bonds aren’t the most effective form of leverage because it’s a significant amount of dilution right away. And you have these volume junkies that are trading and R being the convertible Bond and the stock back and forth every day. So it’s a significant amount of volume and algorithms that are trading within the market. So now you’re seeing the innovation here by finding these different capital pools that are going to hold these products long term, whether that be the retail market or pension funds or banks or anything like that.

Jeff Walton [00:07:30]: And that innovation is leading to more effective leverage. And it’s difficult to get those numbers up. Right. As they’re continuing to add more assets to the, the balance sheet. They’re, they’re providing these new products and their ability to issue more of these is a function of, you know, what the market compare.

Nithu Sezni [00:07:51]: Yeah. And I, I kind of thought, you know, they would, they were going to do the ATM on the common and that was good because it was accretive. And we got the convertible bonds and that was good because it was accretive. And then we got the preferreds and those were good because it was even more accretive. But I think what I was thinking was going to happen was just rattling off a bunch more convertible bond deals and we were just going to see this leverage ratio shoot up. But it seems like it’s maybe going to be more of a slow grind. They’re going to ramp it up, you know, 12, 13, 14. So I’m not sure if we’re going to see the volume spike.

Jeff Walton [00:08:33]: Say that again. You broke up there.

Nithu Sezni [00:08:34]: Yeah, yeah. I’m not sure if we’re going to see like this massive volume spike without a pump from Bitcoin itself. I mean, unless they can just get these rolling super like faster than we imagine they’re going to get, you know, the liquidity rolled out.

Adrian Morris [00:08:50]: I don’t think they can.

Jeff Walton [00:08:52]: Go ahead, go ahead, go ahead.

Adrian Morris [00:08:54]: Yeah, no, I don’t think they can. They want to roll out the converts quickly right now just because you have to balance it out with the short interest it’s going to create on the equity itself. So they want the volatility, they want the extra leverage. But if it’s going to come at the, at the expense of increasing short interest, they really do have to weigh that out over time. And I think to your point, they could be waiting for bitcoin to ramp up to give them that volatility spike, which is in all likelihood going to happen before the end of Q4 this year. We’re probably going to see a new all time, a decisive all time high in Bitcoin before Q4. And they may be, I’m just spitballing, they may be weighing the risk of the potential Short interest that would create by issuing new converse at this time. So it’s a balancing act.

Adrian Morris [00:09:41]: They want the volatility. But if, if they’re going to get a volatility spike and then it’s just going to subside and then they have all that additional potential short interest. I don’t know if it’s necessarily worth it at this time without seeing what bitcoin is going to do first. That’s just what I’m guessing.

Nithu Sezni [00:09:57]: Yeah. If the volatility is. Volatility is vitality, though, I think we need that leverage to be higher, to really jump.

Jeff Walton [00:10:11]: Need speculation. You’ve got people that are shorting the stock relentlessly that are speculating that this isn’t going to continue to exist. So you need kind of this perfect storm of all of these things happening in the market and people getting caught off sides.

Ben Werkman [00:10:26]: Right.

Adrian Morris [00:10:27]: But volatility, vitality. Volatility is vitality. But we remember we can’t dictate the direction of that volatility. So that’s true. Inadvertently create a situation where there’s more volatility to the downside versus it being a balance. And, and that’s kind of what I’m getting at. If the bitcoin cycle does what we think it’s going to do and we’re at what, 150, 175 by October or something like that. Right.

Adrian Morris [00:10:54]: Their, their situation looks decidedly different. The stock price is going to react. It’s just a matter of how much it reacts. And I think if we do see a decisive outbreak in bitcoin that isn’t like, you know, us going from 100 to 110, then 110 to 120. But if we see something like a 120 to 140, 120 to 150, I think that’s when the volatility spike will happen and that they probably assess things a little bit differently right now. I just think if they do a convert of any size, they’re just going to disproportionately increase short interest on the stock without having that bitcoin breakout. But again, I’m spitballing. I don’t, I don’t know better than what they’re doing.

Adrian Morris [00:11:30]: I’m just saying what I think could be happening.

Nithu Sezni [00:11:32]: Yeah, they could be just done with the converts completely and we just got to wait for the preferreds to ramp up.

Dan Hillery [00:11:37]: Yeah. And after watching the year end review video and the stretch IPO video, I mean they’re done with the comments. They’ve literally said it so strife will be the top highest in the capital stack instrument and the rest will be junior to it. So 100. And on the volatility thing, I think that’s wicked important. Like the volatility, the whole thing with bitcoin that’s so, so valuable is the idea that the volatility increases as the price increases. That’s why we see these big bubbles, these big spikes. That’s why trading is so cool.

Dan Hillery [00:12:08]: That’s why options behave in such an incredible way. And I think it’s really important the strategy continues to maintain that high leverage ratio in order to have that upside volatility spike. And that’s why I’ve been vocal about the ATM being kind of a thing. But recently the dynamics are such that upside volatility has been limited due to certain periods of ATM issuance, which I believe to be kind of the reason. But whereas downside volatility has been extremely steep as a result of it falling in line with bitcoin, which is good, you want that downside volatility, you also need that upside volatility. I think that would be extremely help. It would be helped a lot by having more leverage ratio. And I think they’re trying to do that.

Dan Hillery [00:12:43]: The other thing I give them a lot of credit. They’re issuing as much press as they can as fast as they can that leverage ratio up. Right now they’re limited by liquidity and that’s something we can only wait for. The liquidity will build, we will push these preps and it will, will come. But you know, that takes time and they’re not going to do convert. So I’m totally cool with that. I think things are going well for the press and I think stretch, which we’ll talk about in a second, is the next step and probably will likely be the single most important product in their entire cabinet, like by orders of magnitude more than any of the other products like far and wide. And we can talk about that in a second.

Nithu Sezni [00:13:15]: Yeah, I mean I like the evolution, you know, with the, with the press I think probably being the most accretive solution that they’ve come up with. So I’m definitely down with that. And if we were headed into a bear market, this leverage ratio would probably be the perfect, you know, way to go. But if we got a couple of more spikes in bitcoin left in this cycle, I just, I need some more juice.

Dan Hillery [00:13:39]: 100% and I think everyone’s thinking the same thing and that’s actually not really good for the common because we need that ecosystem to be working. That’s something Adrian said a lot too. We need the MSTY ecosystem to be working. We need MSTY to blow out. The key is we need volume sellers to get smoked on an upside movement key here because that’s the only way to maintain unpredictability in the stock price and performance, which, which is unpredictability is just another word for volatility which allows the options premiums to be extremely high. We need them to be 1.52x that of Bitcoin. We need the IV to be that high relative. So you need to blow out the long or the short call holders.

Dan Hillery [00:14:19]: So I think it’s really, really, really, really important for the future of MSTR for the next, during the next move in Bitcoin, MSTR has to smoke the call sellers. So it has to expand in volatility. And the only way for MSTR’s volatility to expand to the upside during a rally in Bitcoin is for the M NAV to expand. That is the single only way for volatility to increase on the upside is the expansion of mnav. We’ve seen the contraction M that’s decreased, that’s increased volatility on the downside. We need it in both directions for it to continue to be a viable product.

Adrian Morris [00:14:52]: Yeah, well, so, and I, I know what I’m going to say people disagree with, but I think that, so the, the reason why I keep saying that M NAV is, is highly sentiment driven and it’s a sentiment indicator and it’s not something that can be levered up or levered down or be allowed to run is because in my view, if volatility is vitality, then sentiment and subjectivity is a fuel for reflexivity. And what I mean by that is the market sentiment is what’s going to drive them nav. That’s what’s going to drive it higher. And this sentiment is going to shift. When broader macroeconomic trends shift, which they have been, we are seeing more clarity with regards to tariffs, probably. We’re seeing more liquidity come into the market. All of that’s going to have an effect on sentiment. And all that’s going to have a downstream impact on Bitcoin and on mstr.

Adrian Morris [00:15:40]: And I think that people are trying to treat M NAV as a leverage. When M NAV is a, is a function of the market, it’s a multiple. Right? So, yeah, so because it’s a multiple and if we just think about the market and just think about all the market, the market As a whole, what justifies a multiple? I always challenge people to try to justify multiple without sentiment and without future expectations. And all future expectations are is sentiment. Even algorithms, when they trade the market. As someone that’s actually designed to written algorithms, and I went to school for it, I know for a fact that algorithms react to the market. They don’t lead and trend and push the market. So everything is downstream from sentiment and then from liquidity and then from broader macroeconomic conditions.

Adrian Morris [00:16:25]: So we just need to just let the market play out. What we’re seeing right now, we had that run up in November, we went to 543 and you saw things slam down. Right. And everyone started talking about the M Nav and everyone started talking about ATM again, but no one paid attention to the fact that global liquidity went off a collaboration cliff at the end of November. And we’re seeing global liquidity trend back up right now. And the trend is slowly but surely taking up. And Bitcoin tends to lag that. So in my view, I think, Dan, to your point, M Nav absolutely needs to.

Adrian Morris [00:16:54]: To expand, but it’s not something that that strategy can teeter up and teeter down by issuing the ATM on the preferreds versus the common. If we have enough sentiments, we have enough volume and we have enough liquidity, it’s not going to matter what they do. The market will take care of the rest.

Dan Hillery [00:17:12]: Yeah, I mean. All right, Jeff, go ahead.

Jeff Walton [00:17:17]: Yeah, I, I just. There’s a few things going on in the market right now, right? We’re in the middle of summer, we’re in the dog days of summer. Right. This is generally the least liquid time in all public equity markets.

Tim Kotzman [00:17:28]: Sideways summer.

Jeff Walton [00:17:29]: Sideways summer. It’s just, it’s just the way it goes. It’s the least liquid time. All of the rich people away, all the rich people that manage money are out at their Hamptons house, they’re out at the lake, they’re driving their boats, they’re doing things with their families and their kids and they’re doing summer camps and all those things. Like, people generally aren’t working in a summer that’s. I’m going to throw that out there.

Jeff Walton [00:17:51]: 2.

Jeff Walton [00:17:52]: We’re also coming on the single largest catalyst probably in MSTR’s history with their earnings report, their Q2 earnings report. This is the first time in history that they’re going to post a positive earnings report as a result of FASB fair value accounting. And the number is absolutely massive. Right. Like their largest earnings report ever in company history was like $400 million. And that was in, I don’t know, 21 as a result of some of the bitcoin accounting. But now we’re talking about a 10 to 11 billion dollars net income. And that’s going to be announced in the end of this month, seven days from now.

Jeff Walton [00:18:33]: And that’s going to create significant buzz. It’d be the first time qualifying for the S&P 500 technically after an earnings report. And there’s going to be people that are going to turn their heads to this. And I personally think this is an enormous event that is on the horizon that is going to change the narrative and the landscape of the space. Does it reprice instantly? No idea. I don’t think so. But it’s the, it’s the continuous noise, it’s the news cycle, it’s getting in front of people. It’s like, oh my God, everybody here on Twitter, everybody following us right now, watching this video, everybody in the X space thinks that the entire world knows what’s going on here.

Jeff Walton [00:19:13]: The reality is 99.99% of people have no fucking clue. They have no clue. Like, go talk to somebody about this stuff. Nobody has any idea. You talk about bitcoin backed credit, nobody has any idea. You talk about bit bonds, you talk about MSTR, right? 99.99% of people have no idea what’s going on here. And that’s going to change. And what is the catalyst to make a change? It’s an enormous earnings press release, right? It’s not meta planet adding 5000 bitcoin to their balance sheet.

Jeff Walton [00:19:44]: I love Meta Planet, but it’s not them adding 5000 bitcoin to their balance sheet. It’s strategy. Posting a $10 billion gain in a single quarter, that blows out, you know, 99.5% of the companies in the entire United States. Where did that come from? That’s the, that’s the. This kind of, Adrian, to your point, this like sentiment driver, like you’re going to have new buyers coming to the scene here as a function of this. And I think that’s where some of this happens, right? Like think about back to November and qqq, right? There was a ton of excitement and apparently a ton of people bought the top because people are big. People are big. And you know what? Actually I did, I did a little analysis.

Jeff Walton [00:20:26]: Maybe we’ll start with this before we go into the stretch presentation. So this is, this is the number of days that’s in the last. Within the last 1244 trading sessions, there have only been 30 days that have closed above $400. So all of those other days, if you were invested in all of those other days, you’d be in the green. So you know, we’re talking, what is this 2.4% of the trading days in the last 1244 trading days. This isn’t Bitcoin. Right? Buying MSTR is not Bitcoin. If you just want bitcoin exposure and one Bitcoin is one Bitcoin, then just buy your Bitcoin and get out of here.

Jeff Walton [00:21:10]: If you’re buying a publicly traded equity, it’s not going to have 100% correlation to Bitcoin. It’s not Bitcoin. You’re buying a company that is collateralized on Bitcoin and has the largest Bitcoin backed balance sheet in the entire world. That’s what you’re buying. And what can they do with that? What’s the optionality that they could do with it? That’s what you’re buying. I think people are confused by that. You look at the daily price, who cares?

Dan Hillery [00:21:37]: Who cares?

Jeff Walton [00:21:37]: Like this is, this is a fundamental change in how companies can be designed and capitalized into the future. Like I say this story all the time. I don’t want to be that uncle or that grandparent that sold Apple in 1989 when I could just, when you could just hold it forever. And I think people are very short sighted and not necessarily thinking about the magnitude of this story and how big this is.

Adrian Morris [00:22:05]: I agree. Because people, I think the mistake people are making is that they’re trying to act like this is a 2x ETF on Bitcoin. It’s not, it’s an equity and it’s going to move the way an equity moves. And it’s not guaranteed to give you 2x on every single day of bitcoin’s price movement. It’s designed to give you 2x or more over time. So when people talk about, well, for the last one month, three months, six months has been underperforming Bitcoin, my response to them is, okay, it’s not supposed to track 2x like a 2x ETF. So it’s, it’s the performance over time. And when you go over nine, nine months to a year to 18 months and so on and so on and so forth, it’s outperformed by hundreds if not thousands of percent.

Adrian Morris [00:22:45]: So I think you’re right that we have a lot of people that bought the top in November or near November and they’re pissed. But that’s with Any equity people bought Nvidia earlier than me and I’m not pissed at them. So I don’t, I, I don’t really look at it in the same fashion. I’m looking for a longer term investment that I hold and that’s what I’ve been doing. And I also think that if my DMs are any guide, a lot of people getting blown up on options still somehow. So we have a lot of people that are rather pissed off with how the market’s going because of how they’re acting in the market.

Jeff Walton [00:23:21]: Yeah.

Jeff Walton [00:23:21]: And to that point, Adrian, I what I did some math here just to show some perspective and we will go to 75, right. If Saylor comes out and says a MSTR is going to be 2x Bitcoin on the year. Right. Okay. So if it’s going to be 2x or 3x Bitcoin on the year, what does it look like on the daily. Right. If you, if you average this out of the time and I just took 365 days throughout the year and just say, okay, well Bitcoin is going to return 17 bips a day. Percentage gain going from 66,000 to 121,000.

Jeff Walton [00:23:55]: Just give or take. Right. That, that size and scale and to where MSTR it is today was a 408. I don’t know, it’s 412, 415, something like that. Starting at 150, that’s 28 bips. So on a daily multiple it’s supposed to be about 1.6 in order to get to 2x Bitcoin on the annual basis. So people that are thinking it’s like it’s 2x on, on the daily basis. Again you, you also have a non correlation.

Jeff Walton [00:24:23]: Right? It’s what, what is bit Bitcoin and MSTR, what like 75, 80% correlated?

Adrian Morris [00:24:28]: It’s been between 0.69 and 0.81.

Jeff Walton [00:24:31]: Okay, yeah, okay, about 70, 70 to 80% correlated. So it’s not going to be one to one again. Why is that? Because there are different capital providers that are buying these equities in passive ways that are accessing this capital differently. Right. You’ve got people that are buying qqq. Anybody that buys QQQ or sells qqq, anytime there’s a transaction there, they are selling. If they buy qqq, they’re buying MSTR shares. That is no pressure on Bitcoin.

Jeff Walton [00:25:02]: Right. It doesn’t impact bitcoin at all. If they’re selling qqq, that has impact on mstr. So you’ve got all these different buyers that are passively buying and selling MSTR via algorithms. And that’s what breaks the correlation between the two. So if you’re expecting them to be daily, you know, 100% correlated, you got, you got to wake up to the fact that they’re not, they’re not daily 100% correlated. It’s just not the way it works because there are different buyers buying the different instruments at different times in the market. And you know what, I think that might make sense to bring this up as well is this concept of the algorithms that are going to be built on this and you think about the future.

Jeff Walton [00:25:41]: I don’t know, something like 75 to 80% of the market is traded via algorithms. And there are going to be different trading pairs where you’re going to find ARB opportunities to go to balance in between all these individual different products. Like you could go from MSTR to strf, STRF to strc, STRC to Bitcoin, bitcoin to strd, STRD to strk. There’s different trading pairs in different ways and formulas of portfolio composition to arb, different pieces of all of these different components. And I’m only showing six things here. This is happening across all cryptos, all cryptos, all bitcoin treasury companies, all of these instruments and people are going in and out, bouncing around and all of that’s happening and there’s just going to be a breaking correlation. So just want to put that out there because people don’t seem to get that. It’s crazy.

Adrian Morris [00:26:42]: But also.

Ben Werkman [00:26:43]: Yeah, go ahead.

Dan Hillery [00:26:45]: Yeah, I love talking and I think that’s super important. And we talk a lot about how these different fixed income products will be targeting different markets. And one thing we’ve been noticing a lot. Am I still there? Am I good?

Jeff Walton [00:26:57]: Yeah, yeah, yeah, you’re good. I just, I moved you to the other side.

Dan Hillery [00:26:59]: Cool, Cool. One thing we’ve been talking about a lot is targeting these different investors in different markets and tapping into different pools of capital. Now we’ve seen the volatility in strike and strife be extremely high.

Jeff Walton [00:27:10]: Right.

Dan Hillery [00:27:11]: I haven’t actually measured the volatility. It’s actually on the strategy tracker website. The volatility has been very, very high relative to traditional fixed income products. And so that’s been scaring away investors. And that’s something Sailor and Fong talked about in the most recent STRC release video. And that’s why this STRC offering, so attractive to so many fixed income investors. Let’s say you want to hold a cash position. It’s actually quite nerve wracking that you’ve got all this cell pressure and different kind of fluctuating principal amounts, especially if you have a large, large position in strife or strike.

Dan Hillery [00:27:43]: And so I think it’s going to be a product that attracts a monster pool of capital. Especially with the initial offering plus the cumulative dividends. We’ve seen that there’s clearly a demand for cumulative dividends. We’re over non cumulative dividends. If you’d seen like Stride hasn’t even traded up to its liquidation preference which is quite frankly incredible. Right. So I think this STRC offering is so extremely compelling for, for those above reasons. Especially because it’s so applicable in a world in which stable coins are becoming like a exponentially increasing transactional layer.

Dan Hillery [00:28:14]: And in the traditional capital markets T bills are used as the short duration, non interest rate sensitive store value asset. And, and now that we’re attacking like a real, real, real market with a product that has low, low, low volatility, I think it’s going to be super interesting to see the receptiveness of such an instrument.

Jeff Walton [00:28:36]: Completely agree, sure. Jump into it. It’s funny, you look in the chat and everybody’s still just bears. There are bears everywhere which is so funny. The sentiment feels even more bearish than like when the ETF was launched in February of 24. People forget that there was actually a 2 billion dollar ATM that Saylor used without transparency and 404 million shares that Saylor sold in 2024. Like the ATM like this existed in 24.

Dan Hillery [00:29:04]: I’d argue the non transparency of the ATM was a better way to do.

Jeff Walton [00:29:09]: It was better not not having it.

Dan Hillery [00:29:11]: Unpredictability I think is super key here and that’s not to be a bear. It’s just, it’s interesting. I think the unpredictable, unpredictable nature of the ATM increases all. And it’s all a question of Vol.

Jeff Walton [00:29:24]: Like quarterly reporting. Quarterly reporting your, your ATM purchases.

Adrian Morris [00:29:30]: Yeah, I mean we can, we can say that. But the thing is if you’re watching the daily, there’s guys that are watching daily trading volume and that are making assumptions when the ATM is being issued and when it’s not. So I think that sailor kind of created a. I don’t think he even created, I think by announcing to the market that the ATM was going to be a way that they facilitate bitcoin purchases. The market’s constantly looking for when it’s going to be issued regardless of if you make an announcement or not. So I think that genie is kind of maybe out of the bottle, I don’t know. But to the people that are still talking about M Nav, it’s just strange to me because with the kind of volume we were seeing last year, like around October, November 2024, I just don’t understand how people could be saying to themselves, so if Sailor has stopped selling shares, that magically would have made the market decide to make the M Nav run higher. Because that by itself would have shifted sentiment, not the other 90 to 95 of trading volume and then increased liquidity and so on and so forth.

Dan Hillery [00:30:27]: Yeah, but what do you say about passive flows? I mean.

Mason Foard [00:30:30]: Yeah, yeah, it’s price and sensitive insensitive flows. Right. So anything coming from a, any kind of funds, Q. Q. Q. Potentially S P. Right. This is, this is kind of Josh Mann’s whole idea of if you didn’t ATM it, it would just levitate, it would just go higher.

Mason Foard [00:30:49]: Because there is demand that is, you know, not determined by.

Jeff Walton [00:30:56]: Yeah.

Ben Werkman [00:30:56]: At all.

Jeff Walton [00:30:57]: They’re like capitalizing on the excess demand.

Jeff Walton [00:30:59]: They’re like. Yeah, they’re understanding the static demand.

Dan Hillery [00:31:03]: Yeah. I’m not sure. Right.

Jeff Walton [00:31:05]: If there’s a, if there’s a pop in demand, they’re capitalizing on it and buying Bitcoin.

Dan Hillery [00:31:11]: Exactly. And what’s, what’s the, and that’s something I’ve been thinking about. What are the treasury operations worth, Jeff? I think you’re right. I think the treasury operations, the preferred issuance, all of that, the Bitcoin yield is incredibly valuable, more so valuable than any sort of income generating activities of any Mag 7 company. I think they’re massively accretive Bitcoin gain, in my opinion, especially Bitcoin gain derived from convertible product, sorry from preferred products, should, should be awarded a 30x at least multiple on the US dollar gain. However that has to be realized in the stock price. So I’m, I’m, I’m not selling at 3 NA. I’m not selling it 4 NAV if the company’s not selling at 4 NAV.

Dan Hillery [00:31:51]: So that’s the, and look, it’s not that black and white. That’s the point Josh is making. I’m not sure if he’s totally right or whatever. But, but at, but if the stock is running to 3 NAV, I’m not a seller. Right. I don’t think you’re a seller. We’re the market makers. Right.

Dan Hillery [00:32:05]: We’re the owners of the equity and so we are the buyers. The margin. If the passive flows are Also adding buy pressure that NAV will run. And I’ve come to realize that I think that is true because I thought originally it was just bitcoin yield. So if Bitcoin was falling, the NAV wouldn’t, wouldn’t expand. It would just be a closed ended fund. But I’m starting to realize that both the act, the active treasury management coupled with the operating cash flow covering the liabilities, which no longer is the case, but then also the shareholders and the passive flows and the ability to be included in in ETFs makes it special. Bitcoin and something which the NF could go really high.

Dan Hillery [00:32:42]: And I think that’s kind of the point.

Mason Foard [00:32:43]: And if it did go up support to remember that would be insanely accretive if they were to atm, let’s say hypothetically to pay dividends or.

Jeff Walton [00:32:53]: I got one for you. Let’s think about the scale here. Right, so we’re talking about these preferred instruments having a total addressable market of 600 trillion, right? Enormous, massive. And they’ve issued 4 billion to date. And we think that that number can 100 x 400, 400 billion. You probably go higher. So if you think bitcoin is going to double from here you’ve got $70 billion of assets and if it doubles, you got 140 billion. If you lever that up 30%, you can issue $43 billion of this stuff.

Jeff Walton [00:33:31]: So every dollar of asset that you bring in the door early, understanding that with the idea that Bitcoin is going to move higher, gives you that much more ability to capitalize on the leverage and make the thing move faster. Right? The ability to capitalize on the fixed income side of the market. Understanding what’s going on, I think the demand here, there’s probably 1%, I’d say between 1% and 10% of the fixed income market. That $600 trillion of total addressable market can buy unrated perpetual preferred equity. I’d probably say 1%, maybe less. So we think that if these instruments get rated that number 100 x’s the number of people that could buy these instruments, 100 x’s. So you’re talking going from $4 billion of perpetual preferred equity to $400 billion perpetual preferred equity, people that could potentially buy this instrument and you need the assets to support it.

Dan Hillery [00:34:37]: No, totally, I think point. No, completely, Completely. But I do think. Yeah, I think that’s a really good point.

Jeff Walton [00:34:45]: But like people in the short term, if you’re looking. In the short term, yeah, like ATM on the common stock Adds pressure, right? It’s more liquidity in the market. There’s more shares trading, there’s more shares that could be armed. You also have $5 billion of convertible arb. That’s like in the high gamma zone of these people that are trading back and forth between the, between the price of the convert in the secondary market. So you’ve got like this massive amount of pressure that’s bigger than it’s ever been. $5 billion of convertible bonds and you’ve got ATM capitalizing on the assets coming in the door at the same time. So yeah, it’s a weird time.

Jeff Walton [00:35:23]: And on top of low liquidity in summer months and we’re in this period of time where nobody knows what the earnings are, even though everybody that’s paying attention knows what the earnings are. It hasn’t hit mainstream media, which is exactly what I was talking about. When the quarter closed, there was a lot of buzz for a day and it hasn’t been brought up again. And I think it will. Like Saylor’s gonna be on cnbc. There’s gonna be news cycles. This thing is going to hit Wall Street Journal. It’s going to be all over the place.

Adrian Morris [00:35:54]: My view is that so. Yeah, that’s all true. But my view is that I think all this is an assumption. The ATM is an easy thing to point to and I, I just, just based on my own personal view, I. And Jeff, your camera’s kind of blurry. I don’t know if you have something on it right now. There you go. I don’t know if it’s just a matter of when people bought in and when who allowed loudest voices are right now.

Adrian Morris [00:36:19]: But the, the impact of broader market trends are definitely weighing on this more in my view than the ATM or the converts or anything to that nature. That’s just my opinion. And I think that people need to stop looking for the easiest explanation and start doing some deep, deep diving on what can actually be pushing this trade. Because the bitcoin per share, bitcoin yield, all that is a function of the different ATMs that they do. So it’s, it’s all based on a model that needs the ATM to run, not just the MNAF run. Go ahead.

Dan Hillery [00:36:54]: I just think there’s a lot of people who’ve been in this thing for a really long time and are just trying to figure out, you know, performance and volatility. So I think it’s unfair to say that most people just got in at a high M nav in the fall.

Adrian Morris [00:37:05]: Well, I Don’t think most got in. I said, I think those are the loudest voices.

Dan Hillery [00:37:09]: Okay.

Adrian Morris [00:37:11]: Yeah, I think those are the loudest voices. And, and so because from my perspective, when I got into this trade, bitcoin per share was not a thing. Bitcoin yield was not a thing that was being discussed.

Jeff Walton [00:37:21]: Yeah. It was like, well, this company has a monopoly on bitcoin.

Adrian Morris [00:37:25]: And since then, yeah, none of this was being discussed. Right. And I think that to your point, Dan, people are trying to make sense of it. But in trying to make sense of it, I think that many are looking for the simplest, easiest, most quick, quick and expedient explanation. The, the fact of the matter is, is that market shared in multiple. Jeff, this is something you’ve said all the time. You have companies like Nvidia and Tesla and trading at ridiculous multiples. You just said, Dan, that you think the dollar amounts justify what a 30x.

Dan Hillery [00:37:56]: Multiple Bitcoin gain generated by preferred equity issuance deserves a 30x plus multiple.

Adrian Morris [00:38:06]: Right. So that, let’s say that’s a 4. Let’s say that’s a forward expectation of what you’re expecting. Right. The market needs to, to essentially, I think we need two things to happen. Bitcoin adoption needs to scale. And as bitcoin adoption scales and as a price of bitcoin runs, the price of the strategy equity is going to run and then all these other factors are going to start running along with it. People are treating MSTR like it’s a equity and this, this economy that exists somehow is separated from Bitcoin.

Adrian Morris [00:38:35]: As bitcoin goes, strategy is going to go.

Dan Hillery [00:38:37]: So, so you just said, but didn’t you just say that that’s not the case, that we have to, we have to not look at the correlation too closely and that this is an equity and I shouldn’t trade one to one with bitcoin.

Adrian Morris [00:38:47]: Yes, but because it doesn’t trade one to one with bitcoin, it’s not going to. It’s not that bitcoin is going to go up and then the adoption is going to go up and everything’s going to go up and then strategy must go up with it. There are too many moving parts in the strategy. Because it’s an equity. Because it’s an equity because now we have all the preferreds now and we have the common stock. There are too many moving parts that are taking place for it to just say that that is only going to be correlated to bitcoin. Bitcoin needs to move. Yes, but the strategy economy, ecosystem needs to scale out.

Adrian Morris [00:39:18]: And it needs to stabilize. The, the, the, the matter of the 2x multiple or 3x or whatever it’s going to be in time, that’s going to stabilize with time. But it, it’s not just a matter of sailors hitting the atm. And that’s preventing the atm, the MNF from running. That, that’s, that’s too simplistic.

Dan Hillery [00:39:36]: Okay. But I think it seems like the market has stabilized around a fixed, you know, it seems like it’s stabilized around a fixed mstr. I bet ratio. You look at the Mstri bit, around 6.5 and it’s been pinned there. It’s been absolutely pinned there.

Mason Foard [00:39:49]: It’s been there for like.

Dan Hillery [00:39:50]: Yeah, and there’s some, there’s algorithms, Right. I went to school for algorithms as well. And there’s some algorithm that is pinning it there. Right. There’s, there’s traders out there that are sticking it there. And how are they doing it? Right. It gets up, they sell. They sell.

Dan Hillery [00:40:03]: They borrow at a very low borrow cost because the shares are not scarce. They sell and then they buy, buy it back, but instead of having to buy back from you or I, they buy it back in a block trade from the equity. And it’s a very, it’s a very. What do you say? It’s a very profitable trade for them. They sell millions, hundreds of millions, make a nice couple million that day and buy back in a block trade that doesn’t have any new buy pressure in that single day. Is it accretive to common shareholders as a form of bitcoin yield? Absolutely, 100%. But is it kind of pinning the price and damping the volatility? Yes, it is, quite frankly, because that MSCR IBIT ratio is pinned there. The market likes it.

Dan Hillery [00:40:38]: So I think again, that is what we’re looking for.

Adrian Morris [00:40:42]: Unpredictability, perhaps. So let me ask you the question. Are you saying that the trading activity is what’s pinning the multiple?

Dan Hillery [00:40:50]: I think it’s a large proportion. Yeah. Well, obviously some form of trading activity is pinning the multiple. Right? That’s the definition of, of like trading.

Adrian Morris [00:40:59]: Well, okay, so what, what I’m trying to say is I think the market doesn’t understand the trade and the multiple has not been defined yet.

Jeff Walton [00:41:11]: Retail. Retail.

Adrian Morris [00:41:13]: Retail. Well.

Jeff Walton [00:41:17]: Institutional capital, I mean, it’s a lot of capital. Doesn’t understand the trade. A lot of capital trade.

Adrian Morris [00:41:22]: Yeah. I didn’t want to, I didn’t want to pin on one or the other because then someone’s gonna get pissed off. Right. But what, what I’m, what I’m saying is we’ve all just given opinions and our sentiment around where we think the multiple can go. And what I’m saying is the market right now, everyone’s focused on it as if MSTR is going to trade at a multiple regardless of broader market trends. And what I’m saying is there’s going to be a flow of activity. We need broader, broader macroeconomic trends to cooperate. We need market sentiment to cooperate.

Adrian Morris [00:41:55]: We need liquidity to cooperate. What we’re seeing right now is a function of the fact that we don’t have all three of those operating in tandem yet all of that’s going to impact the sentiment on the equity.

Mason Foard [00:42:09]: Said multiple times in interviews that he, he thinks MSTR should trade at a premium.

Ben Werkman [00:42:15]: Always.

Mason Foard [00:42:17]: Right. He, and he was even asked, I think was it the, the Joe Burnett interview or he was asked do you think it will go to one? And he said no. And I think, I think he. What was that in the context of a bear.

Jeff Walton [00:42:31]: Yeah, bear market.

Mason Foard [00:42:32]: Yeah, I, I think in the comments.

Adrian Morris [00:42:33]: I think another one you’re talking about. Yeah, yeah, yeah, yeah.

Mason Foard [00:42:36]: So I, I think, I think if we think bitcoin yield deserves a multiple, then there, there needs, you need to allow a multiple to occur. And I think that’s what people are really frustrated about. And I think what Dan is saying is that the shorts are getting exit liquidity essentially from, from the atm. So it’s kind of a.

Jeff Walton [00:43:03]: Shirts are getting exit liquidity, but it’s adding assets to the balance sheet.

Dan Hillery [00:43:08]: Yes, yes. So it’s chicken or egg. Like maybe.

Jeff Walton [00:43:10]: Yeah, it’s like long term, who knows.

Dan Hillery [00:43:13]: And to Ryan’s point, to Ryan’s point, I do want to just say the stock can trade at 10 to 20 billion dollars a day. No form of buying and selling activity included. ATM is singularly influencing the price. That 1% nowadays, dollar value of ATM to liquidity. Like Dan said on Josh Space, that might be 1% of the traded volume. So the ATM may only be 1% of trade volume. 100%. I totally agree.

Dan Hillery [00:43:33]: That is so. Right. That is so correct. The problem is, and I can’t figure it out, maybe, maybe the ATM is completely relevant. But what I understand from the market dynamics is if you’re able to sell massive amounts of equity and then get the. At a certain price and you know where you want to take the stock and get that offer to buy back your, your short liquidity, then you’re essentially there’s a gravitational pin. And I think what we’ve seen is that gravitational pin has been 6.5 MSTR. Ibit and other shorts and other traders will come in and create that gravitational pin.

Dan Hillery [00:44:07]: So what we need to see is that pin be moved. It needs to be moved up. And I think the passive buying is going to do that. And so I think a little less marginal sell pressure could, could be the catalyst. Could I be totally wrong? Maybe they shut off the ATM, maybe it’s still pinned at 6.5 Ibit 100. That could be the case. That’s just where the market wants us. That’s the future expectation of bitcoin yield.

Dan Hillery [00:44:25]: But I think it’s well worth the time or experiment to see if we can move that pin up in the short term, long term, whatever.

Adrian Morris [00:44:34]: And that’s true.

Mason Foard [00:44:37]: So I’m just going to add the, the notion, I think I used to strictly believe that that bitcoin yield is the only thing that justifies multiple. But I think Josh Mann changed, changed my mind on that. Just from, from the passive flows. He’s just. It will levitate up. If you just leave it, it will levitate.

Jeff Walton [00:44:56]: That’s what I’ve been saying the whole time. Yeah, this is, this is the architecture of the market, right?

Dan Hillery [00:45:01]: Yeah, I think of the market.

Jeff Walton [00:45:03]: This is what I’ve said since the very beginning.

Jeff Walton [00:45:04]: This is going to be the largest company in the world. It’s a function of like what it takes to get there and you know, how much, how much capital is raised at different points in time depending on different catalysts in the market. Right. You’ve got very specific times where a lot more energy comes into equities at different periods of time. For, for whatever reason. Right. We saw it in November, we saw it in March. You’ve got periods of time where that happens.

Jeff Walton [00:45:28]: We haven’t seen that since November. I think that’s typical with what we’ve seen in the past. We saw it actually, it was like last July or it was July 2023 here, huge spike. March 2024, huge spike. November, huge spike. And we just, we haven’t seen one yet in 2025. And I think that’s possibly on the horizon with the catalyst. And personally when I’m thinking about the stock, like I love that we’re diving super nitty gritty into all of these different components because it’s, it’s useful to understand like all the different players in the market here and what’s going on.

Jeff Walton [00:46:03]: But personally when I’m thinking about this from a long term perspective, opportunity cost of capital is huge. What else Would you rather be in? If you’re going to sell this, if you’re going to go buy bitcoin, just go buy Bitcoin. If you just want bitcoin exposure, what are you doing here? Stop complaining, just go buy Bitcoin. So you think about opportunity, cost of capital and risk. What’s the downside? What’s the downside of all these instruments that you’re holding? What’s the downside in every scenario? What’s the downside of other Bitcoin treasury companies? What’s the downside of these preferred equity instruments? Where do you want to. It all comes. You’ve only got $1. Where do you spread that dog? And if you’re complaining about MSTR and you want to go invest in Nvidia or Apple or Tesla, go do that.

Jeff Walton [00:46:50]: I don’t know why people are just complaining so much. Because the long term here you’re thinking about what does this look like five years from now, ten years from now based on the setup and everything. You know, that’s kind of how I’m viewing it is like this is. This is an investment grade investment.

Dan Hillery [00:47:07]: Yeah.

Jeff Walton [00:47:09]: They created investment grade preferred equity instruments, Bitcoin backed credit that are revolutionary. They’re fundamentally going to change the world. And people are complaining because there’s break in correlation in the middle of the summer in 2025 when Bitcoin is 10 higher than it was, you know, a month ago.

Adrian Morris [00:47:31]: So all the Bitcoin treasury companies are experiencing downward pressure right now. So are we, so are we saying that is it the ATM in all those cases of those companies as well, or is it just the ATM in the case of microstrategy or strategy? All I just want to bring up and I just keep going to be hammering this point until people perhaps consider it. Market sentiment is not a lever that can be pushed up and pushed down, Mark. The market is going to treat it as it, as it sees fit. The multiple is the multiple. And I don’t think that what Sailor’s doing and what strategy is doing is the deciding factor. And what’s pushing the multiple down that.

Jeff Walton [00:48:12]: That’S just more shares in the market. I disagrees in the.

Adrian Morris [00:48:16]: There’s more shares in the market, but the shares in the market is not going to determine the multiple. The multiple is going to be a factor of market sentiment.

Dan Hillery [00:48:24]: And sentiment’s one input into demand.

Adrian Morris [00:48:27]: Yeah, sentiment is one input into demand. Yes. But the number of that multiple that the market is going to put, that the market is going to put on it is a function of broader dynamics than simply supply and demand. That’s all I’m saying.

Jeff Walton [00:48:39]: Yeah.

Jeff Walton [00:48:40]: Okay. So one. One other thing, thinking about the catalyst here on the horizon, potential S&P 500. I’ve talked about this a lot, but you look at some of the Mag 7, right? The S&P 500 holds 7.6-7% of any of the Mag 7 publicly traded equities. This is huge. If we’re talking about what event will happen that will significantly increase demand. It’s the S P500. Is it already priced in? Do all of the publicly traded.

Jeff Walton [00:49:09]: Do all the ETFs have S&P 500? All the shares necessary? I personally don’t think so. Like, I think this is the last biggest demand factor that we can. We can think about into the future. And I think you got to think about what Sailor knows too, right? Like, what’s he know? Like, he knows information that we don’t know. Is it. Is it government information? Is it information about what’s going on in Bitcoin? Like, there’s. There’s some information asymmetry here, Especially after being on the other side of the curtain at another company. There’s information asymmetry all over the place.

Jeff Walton [00:49:48]: So I guess just something to keep into consideration. Should we talk scratch? Go ahead.

Nithu Sezni [00:49:58]: The thing that I thought about when. What Dan said about the ATM being public and predictable, I think that kind of relates to. To Adrian’s comment about market sentiment. And. And I’m not one of the people who thinks that the. At the common ATM has like a direct fact effect, like it’s pushing the price down, literally. But there could be some second order effects. Like, you know, if anticipation of death is worth worse than death itself, then maybe the anticipation of the m.

Nithu Sezni [00:50:27]: Of the ATM is worse than the atmosphere. Like if the. If the short sellers think they can get liquidity, then they’re emboldened. And, you know, people who may or may not have bought at the top get a little bit of a demoralization effect. So I’m not sure if that. How much that factors into market sentiment or not, but it’s just something that I was thinking about when you guys were talking about it.

Jeff Walton [00:50:54]: So we jump in the stretch.

Nithu Sezni [00:50:57]: Yeah.

Dan Hillery [00:50:58]: Yeah.

Jeff Walton [00:51:00]: Let’S talk about it. Let’s jump in.

Dan Hillery [00:51:06]: Someone said in the chat Mason’s writing Dan’s notes.

Jeff Walton [00:51:11]: Is he a big brain? No.

Dan Hillery [00:51:14]: Yeah, Mason’s back to me over here.

Tim Kotzman [00:51:17]: Did World War III start today? What is going on?

Jeff Walton [00:51:21]: Yeah, we got some serious, you know.

Jeff Walton [00:51:23]: A lot of haters in the Chat, man. I mean it makes sense. I mean people are frustrated, right? Ms. The ATM is put more shares in the market. There has been pressure, but the stock is like we’re top 99 percentile of stock closes trading at 1.85m NAV. Historical ball is at all time lows. And let’s just look at the ball real quick. Historical balls at all time lows.

Jeff Walton [00:51:46]: But you look at history, right? Goes high, goes low, goes high, goes low, goes high, goes low, goes. It’s like a mean reverting statistic here and we’re at an all time low. What has historically come next when you’re at historical volatile all time lows, like where do we go from here? It’s kind of how I think about it, but let’s jump in it. Who wants, who wants to take this? Dan, you’re Mr. Preferred. Give us a, give us a rundown.

Dan Hillery [00:52:12]: All right. I just know the little maybe. Jeff, why don’t you give an overview of what this is designed to be? Because I was just like rock right into the nitty gritty perspective stuff. Yeah, I’ll take over from there.

Jeff Walton [00:52:24]: Yeah. Okay, so let’s, let’s jump into this. So this is now strategy’s fourth perpetual preferred equity that they’ve issued to the market. This is called stretch strc. So preferred equities, these are a function of, this is a function of collateralizing the capital stack such that you are now creating different risk tranches across, across the capital stack that have different risk return metrics. So in the event of a bankruptcy liquidation, the highest up on the capital stack is going to have first priority over capital coming in the door. Lowest on the capital stack has last priority on any money that’s left over. So when you think about seniority here, seniority is incredibly important because that is a function of who gets money in the event of a liquidation, which we think is an incredibly low probabilistic scenario.

Jeff Walton [00:53:15]: What’s up, Ben? We’ve got. So most senior, you’ve got convertible debt, most senior, second most senior strf. Now you have STRC stretch, then you have STRK and then strd. So it is the second most senior sits right below strf. STRF is the investment grade product that they’re looking to provide to the market. And they have strc, which is stretch. And from a duration perspective, this is effectively a zero duration instrument with a relatively high yield. And the yield is meant to float such that the price of the equity itself is relatively stable.

Jeff Walton [00:53:53]: So I will pause there and I’ll kick It over to you guys.

Jeff Walton [00:53:56]: I want to talk about this.

Dan Hillery [00:54:00]: Yeah, I mean this, this is it. So a couple of the really interesting parts, parts of the prospectus that, that from my understanding is they agreed to not issue STRC at prices either via ATM or via just secondary market offerings outside of the range of 99 and 101 dollars. So if the price gets too high, it goes to 102. They’ll stabilize the price using a couple different methods, one of which is they’ll drop the yield, which may lower the price, or they’ll issue, they’ll issue new STRC at 99. Right. And they have to issue in that range. So they have covenants in the prospectus that make it such that they have ways, specific legitimate ways in which they’ll stabilize the price. And another really, really interesting part of this prospectus you won’t read in the pitch deck here is there’s this question and a lot of people say this and it’s actually quite frustrating to me and it’s kind of a valid concern with Stride, but not really.

Dan Hillery [00:54:54]: It’s that Saylor will just stop paying the yield. Well, you read the prospectus, you figure out, no, that’s actually not valid whatsoever. So you may say, well, what if Stride just goes up and Saylor wants to drop the yield to zero and not pay any yield and we’re all left holding the bag? Okay, that’s not going to happen. So in the perspective, the covenant is such that they can’t drop the yield on a month to month basis. Again, it’s changed every month. So the new yield for the next month is announced in the last day of the prior month and they can drop it by the change in the SOFR rate over the prior month. So the SOFA rate dropped by 10 basis points. That’s the drop in SOFA rate over the prior 10 months plus 25 basis points.

Dan Hillery [00:55:33]: So that’s the maximum drop. They can drop the yield over the next month or they can only drop it to a floor of the SOFA rate. So you know the yield on stretch will never drop below the SOFA rate. This is extremely important. Liquidation preference is the same. It’s liquidation preference floor is 100. This doesn’t really matter because they’re not going to let it rise other than that. But that’s kind of the interesting protections you have.

Dan Hillery [00:55:57]: And then finally the dividends are cumulative, which is hugely important. Right? As long as the dividends are cumulative, you have protections against not having that dividend paid. And the cumulative dividend is a little bit different than STRF because the dividends compound into perpetuity. So if strategy misses a dividend payment on a month, that dividend payment then compounds against strategy at the dividend rate. So for example, let’s say they miss a 0.75% monthly payment, which annualizes out to about, you know, the 9% that we’re talking about annually. Let’s say they miss it the next month, they’ll own 0.75%. The 0.75% dividend payment that they missed times 0.75. So it compounds at a rate of the compounding dividend into perpetuity.

Dan Hillery [00:56:44]: Point being missed. Dividends compound against strategy into perpetuity. It’s highly protective strategies incentivized to pay them under all circumstances. So you have lots of protection, lots of stability, lots of mechanisms MSTR can use to stabilize the price.

Jeff Walton [00:57:02]: Boom, you hit the nail on the head. So, right, you got multiple different things that tools that you can use to pin the price in any one direction. Alternatively, you also can think here, if the price of STRC goes above 100, you’re not buying it, right? There are other people, they’re going to issue shares into the market such that the price does come down to 100. Alternatively, if the price is below 100, let’s say 98, 99, there’s an instant opportunity to go buy it at 98 or 99, knowing that they’re going to get it back up to 100 using these other instruments. This is like, Dan, to what we were talking about earlier. You’ve got this algorithm component that’s going to move back and forth, forth all the time, understanding this arb opportunity and this capital is going to be coming in the door to pin it there at 100. And I mean, I’m sure traders are thinking about the field day they’re going to have with this instrument. I think it’ll be a little bit volatile.

Jeff Walton [00:57:57]: In the beginning, it might the spread or the delta between 100 might be, you know, as it’s outlined here, a dollar or so or maybe two. But I think that will compress over time as this, the depth of this market gets significantly larger and the liquidity gets significantly larger. Like instead of being a dollar spread, it might be 10 cents. Next year. A year from now, the spread might be 10 cents. It moves up $1.10 and then down to $99.90. And then two years from now, it might be a penny. Every time it goes up a penny, somebody’s arming that penny down in volume and size.

Jeff Walton [00:58:33]: So there’s significant opportunity to get alpha in any one direction knowing that there’s an arb basically.

Dan Hillery [00:58:46]: That’s a really good point, Jeff. Yeah, that that market, the more depth of liquidity, the more arbing will happen and the more stable the actual equity is. Even without strategies input. Right. The incentives are such that people will be likely to arbit back to the that kind of desired price range.

Jeff Walton [00:59:05]: Ben, what are your thoughts? You’ve been thinking about this a lot. We talked about it a bit.

Ben Werkman [00:59:10]: Yeah. I think it’s a fascinating product to put out, particularly while you were seeing some of the repricings happening for Strike and Strife over the last little period of time. But I think it’s more interesting the timing with which he’s dropping this one into the market. You know, everyone’s looking forward to to a point where rates start coming down and they’re starting to be a lot of pressure to start lowering rates and because of that they’re going to be able to lower the rates on STRC likely right out of the gate. So if he can keep this stable at 100 and raise capital at 100, but he only has to pay out, you know, say it’s $8 and 50 or 8 and a half percent or 8 and 3 quarter percent, it becomes pretty accretive to raise capital through this product. So what I’m going to be very interested in watching as this one moves forward is the size of the ATM they assign to it. You know, that’s kind of how I’m viewing all of these products because that’s telling you where they want the markets to look, where do they want them to participate in these products? And they’ve said that explicitly as well. Right.

Ben Werkman [01:00:13]: They’re limiting Strife. That’s kind of the crown jewel, top of the capital stack, you know, that one they’re keeping a very low ATM relative to the others. Strike, obviously one of the main ones that they’re trying to issue out into the market. Massive ATM against that one stride lower this one, I’m pretty interested to see where it falls because the mechanics of having something so stable like this, you know, in this area where we all love volatility, it seems really boring. Right. It’s kind of like creating the equity version of a stable coin here. And so for us, you know, we look at this, ah, well, if it’s not going to move, there’s nothing interesting there. But we’re ignoring that.

Ben Werkman [01:00:51]: The rest of the world is really looking for stability. Right. Not everyone’s been investing in, you know, options and all this other stuff that’s super high octane, a lot of people are looking for ways to generate really strong yields without capital risk. And with this one being pegged at a dollar, so they’re essentially saying, you know, you can bet that we’re going to actively manage this thing to $100 and we’re going to keep it within a range there. And we’ve got a lot of tools to make that happen. That certainty at a dividend like Stretch is carrying is going to be very attractive in these markets and not just for the pools of fixed income buyers, but for individuals as well. When you look at, you know, if you can find the slide, Jeff, that shows the categories where they’re sizing the market around. This one.

Ben Werkman [01:01:44]: Yeah, that one right there, you know, you can see the largest one they’re highlighting there is US Dollar bank accounts. So if rates start coming down and we end up back in an environment here where your high interest checking account is back to, you know, 1% or below, you know, we all remember the days when you had 0.1% interest in a lot of your, your bank accounts. This is massively attractive. But it’s going to depend on how much supply they put out there in the market. Right. How much of this is actually going to be available. And I think the demand is going to be incredibly high just because of how universally applicable this product is. When you’re not looking at capital risk.

Ben Werkman [01:02:25]: Right. It’s not going to be tied to the movements of the common stock equity. And that is going to be very important. So this one, I just, just this one fascinates me. And it fascinates me both because of its simplicity. Right. How boring it sounds, but also just because this is one that they can market to an entirely different pool of capital than we’ve been looking at with all the other preferreds. This one’s almost universally attractive if you’ve got cash sitting on the sidelines.

Ben Werkman [01:02:55]: So you could make the play just to capture what’s in money market accounts or what’s held in the cash accounts on brokerages. And if people are just settling into something that’s stable like this, but high yield. And as long as you’re settled out of a trade, but you want to sit in something that’s going to yield you something meaningful, this is a great product. So, you know, in the early days we all talked about it, I was trading and when I’d settle out of a trade, I would settle into strife and I would just sit in strife and wait for the next opportunity I was going to get into and this is effectively probably even taking the place of that for, for temporary parking of capital monthly dividends. So you’ve got much more of an opportunity to hit that. And I think that for a lot of people monthly is a huge deal. Waiting for a quarter feels like forever for those dividend checks. People are conditioned to get those quick.

Ben Werkman [01:03:43]: You know they get them with all the ETFs with MSTY and IMST. People love seeing activity. You know, if they did one of these with a weekly payout, you know, people would go crazy, crazy for it because there’s just that dopamine hit of seeing money hit your account. And so being able to get you know, quick effectively interest payments on your cash and being able to just park it without worry about, about capital risk is a huge, huge deal. So I do like this product a lot. I wasn’t expecting it at all. That is not what I was expecting them to launch as the next product was something that’s going to function as a stable coin. But you know, here it is and I think it’s a pretty brilliant move.

Ben Werkman [01:04:26]: The other thing that, that is interesting and then I’ll stop my rant here but is there’s a difference in the preferreds for qualified dividends and I don’t think a lot of people know it in the timing that you have to hold it to qualify for them. So on something that’s cumulative, I believe it’s 60 days out of 121 day period you have to be holding it get the qualified dividends. But on non cumulative products it’s 90 out of 181 days. So you have to hold the other products longer to get the qualified dividends. So just something, something I learned along the way that I’m guessing a lot of other people didn’t know as well that there is a difference between the preferred products, whether they’re cumulative or non cumulative and what it takes to qualify for the qualified dividends.

Nithu Sezni [01:05:12]: Yeah, the, the boring part is a feature, not a bug because I texted my mother today if to about stretch specifically because if her account went up 50%, yeah she’d be euphoric. But then if it went down 10% she’d be on the ledge. It doesn’t matter that she’s still up 30 or 40% if it goes down she’s freaking out and I’m like this would be perfect for her. She can just see the cash that would just be in her bank account and getting you know, insane dividend payments off of it. So I was psyched about it. You know, obviously I’m a vault junkie and she’s not, so this would be perfect for her.

Jeff Walton [01:05:57]: I think. You explained 75% of X. Yeah. Started about 50% gain and then 10% down. I think that’s a lot of what’s the. A lot of what’s going on in the chatter in the community at the moment.

Nithu Sezni [01:06:11]: Yeah, my mother’s definitely inside that big green dot right there. USD bank accounts.

Jeff Walton [01:06:16]: USD bank accounts. You know what I was thinking is like, I think there’s going to be a race right here to offer a credit card with cash back and stretch or cash back. Like, think about like acorns or any of these. Like, man, if I could convert my airline miles to stretch, I would do it in a heartbeat. Or any of these. 1. Any of these preferred equity instruments, I would do it in a heartbeat. And yeah, I gotta figure out a way to do that.

Jeff Walton [01:06:48]: I think that would be an interesting. Somebody could do that, maybe fold A fold offers a card where you get cash, cash back. And it goes into one of these instead of sats or something like that. Or you get an option, you go into sats or you go into Stretch or any of these other preferred equity instruments. But yeah, Ben, I mean, you highlighted a couple of huge things here. The capital pools are absolutely enormous that should be interested in this type of product. And I was explaining this earlier on the space with Ryan and Matt.

Jeff Walton [01:07:22]: It’s like these are.

Jeff Walton [01:07:24]: These are products that the entire world needs. Nobody can stop, and very few people understand. And it’s. It’s like I feel like I’m banging.

Jeff Walton [01:07:35]: My head against the wall most of.

Jeff Walton [01:07:36]: The time trying to explain these to people. But these are. These are going to be so pervasive in all of society over the next decade. These are going to be absolutely enormous products because they’re backed by Bitcoin. Right. The bitcoin network continuing to grow is what’s going to facilitate the growth of these instruments. And as these products get more attention and have more success over time because of the information asymmetry, as they have more success over time, that is going to draw more capital into these instruments, the yields are going to fall, which is going to lower strategy’s cost of capital and their ability to raise capital goes higher and the duration and the yield that they have to pay over time falls, which is more accretive to.

Jeff Walton [01:08:32]: Strategy’S balance sheet into the future.

Jeff Walton [01:08:35]: And that just. These are levering the coil for bitcoin to go tighter. And tighter to go more vertical because they’ve got more capital that’s able to come in the door via these instruments and drive bitcoin higher. Because they’re using Bitcoin as their permanent form of capital to back these products. I don’t think people quite get that yet. And that’s why we spend so much time on them, because they’re huge. This is going to change the world.

Ben Werkman [01:09:03]: I think people miss a big thing with these, right? They see these preferreds that are coming out and they’re constantly comparing them to mstr. And these are not mstr, right? These are entirely different products and they’re not even meant for the same reason. So, you know, I know that there’s a lot of comments that come out saying, you know, why do you even talk about the preferred? You should be talking about mstr. This is what you have to realize and appreciate about these products is if you look at just this chart right here, this is capital being onboarded to Bitcoin, right? This is the loading dock for capital coming into Bitcoin. If you are a bitcoin maxi and you want to drain capital out of the traditional system, this is the ramp. This is how that happens. So I’m not even necessarily looking at these all the time for, well, what’s the impact going to be on mstr? I mean, yes, obviously they’re raising capital, they’re buying bitcoin. It accretes bitcoin per share.

Ben Werkman [01:09:58]: I know you guys had a debate before I jumped on about volatility and all that, but you know, this, I look at it from a bigger picture. I mean, this is so such a massive movement for them to prove out these products and be able to go and say, listen, this is universally applicable. If you’re holding cash, this product applies to you, right? You’ve got. Whether you’ve got $10,000 or you’ve got $100 million, this product is applicable for you. Because if that money is sitting in a bank account, this highlights that you are now losing, right? You can effectively Get S&P 500 returns with no capital risk. I mean, just think about that, right? That’s why these products are so fun to cover. And it’s why I’m going to continue talking about these products. Because this is such a big deal.

Ben Werkman [01:10:51]: You know, we quickly moved past what was happening with strategy because now they’ve scaled up and their liquidity is so deep and people are focusing on the options and all this stuff.

Dan Hillery [01:10:59]: Stuff.

Ben Werkman [01:11:00]: I’m still looking at the fact that they are Draining massive, massive amounts of fiat capital and bringing it into the bitcoin network and into the bitcoin system. And that’s going to continue to drive that demand for bitcoin up. Bitcoin’s got the finite supply and when you’ve got a finite supply and there’s no amount of demand, that’s going to change that. The only thing that can give us the price. So I think these products deserve a lot more appreciation than they’re getting. And this is just opening the door for these. You know, more companies are going to come in and get creative in this way and find products that tailor to different people. But it’s this type of universally applicable product.

Ben Werkman [01:11:39]: This would have sounded like a dream a while ago. No capital volatility, right? Your capital is going to remain pegged. You got a 9% dividend that’s paid every month like you got an emergency fund, right? Sign me up. It’s way better than parking it in a bank account. There’s a lot of cash in bank accounts. So you know, these are a big deal. Regardless of whether you’re looking at them and you’re just tying them to the performance of mstr, the volatility or whatever it is. If you just zoom out from that, you know, there’s some appreciation that I think needs to be out there.

Ben Werkman [01:12:10]: For just how big of an idea these products were and seeing them scale out and build out this yield curve is incredibly impressive. I mean, this is going to make a huge, huge impact in the price of bitcoin long term. So I love these products and I’m going to continue to follow these because I think it’s just an amazing shift in the market and the ability to attract that capital so seamlessly into Bitcoin is just huge.

Jeff Walton [01:12:39]: This is going to solve the retirement crisis in America, I think. I personally think this will solve the retirement crisis in America. You’ve got bitcoin backed securities. When you look at the alternatives out there, there’s so much physical risk in the world. Mortgage backed securities. You’re looking at all these other fixed income products from all these other corporations. They just are piled with physical risk. They’re probably mispriced.

Jeff Walton [01:13:04]: And this is the ability to onboard the rest of the world into bitcoin backed credit, which could solve some of the retirement crisis. You think about somebody that holds 10 bitcoin, let’s just say bitcoin goes to $2 million, you now hold $20 million. Say you take half of that at a future point in time and they’re still offering strategy, still offering these products. Now you’ve got $10 million, let’s say you’ve got something that’s giving you 8% interest in fiat, that’s $800,000 a year and you still have half your bitcoin. Right? This world is going to look way different when the price of bitcoin rises and these products become more popular. Going to take time. It’s not going to happen tomorrow, right? There’s not going to be a huge rush of capital in the door into these preferred products tomorrow. No, it’s going to take time to mature, just like any new product coming to the market.

Jeff Walton [01:13:54]: Like when the iPhone came out, it took time, started with a very basic product and then it evolved over time and it got better and better and better and more people bought it. And as these products, you know, made their way into the world, everybody started talking about them. Hey, I got this iPhone, check it out. And you’re like, wow, that’s super cool. Now instead of $1,000 iPhone, you’re talking about something that you could store your economic energy in and get paid capital with bitcoin backed safety. That’s a really interesting value proposition and that takes time to penetrate the market. That’s why we’re talking about it. This is the biggest story, this is the biggest story in all of finance right now.

Jeff Walton [01:14:39]: We need to talk about it. People need to talk about it. It’s different.

Mason Foard [01:14:44]: I kind of want to, I just want to double tap what Ben said. Just the fact that now if you are holding cash, the in my opinion the best thing that you could do with no capital risk, no volatility, 9% return. As Ben said, almost beating the S P 500 is put it into stretch, right? And then that leads to buy pressure on bitcoin beyond strategy. That just made me so incredibly bullish for bitcoin. When you think about, and I tweeted this, when you think about all the people selling the top and then they have all this cash, it’s like, what are you going to do with that cash?

Jeff Walton [01:15:25]: Where does it go? You’re selling for dollars, you don’t want dollars. You’re a bitcoiner. What do you want? So, okay, well I can actually, if I think it’s. Everything’s looking super toppy here. I could sell and you can move into these other instruments and you’re like, great, this is over collateralized. It’s senior in the capital stack. I think the probability of this going to zero is incredibly low. It’s over collateralized and it’s still bitcoin backed exposure.

Jeff Walton [01:15:49]: I just want to put, you know, push the clutch in. You can now push the clutch in and still be bitcoin related in a bitcoin related security. Yeah, but that’s never existed before.

Mason Foard [01:16:01]: It’s, it’s just ironic if you, if you’re selling, if you’re selling bitcoin to try to profit and then go into this and strategy is just going to ATM and then buy the bitcoin that you just sold.

Jeff Walton [01:16:11]: Yes.

Mason Foard [01:16:12]: It’s like, what do you, what are you really doing that?

Jeff Walton [01:16:15]: It’s, it’s the, it’s the same thing as the etf, right? It’s the kick yourself in the dick trade, right. Like a lot of this happened in, in February of 24 when everybody’s saying, oh, MSTR is dead, I’m going to sell MSTR and I’m going to buy the bitcoin etf. And it’s like, well, do you realize what you’re doing, right? Like you’re selling the thing to buy the thing that makes the thing that you just sold more valuable. And it’s the same concept, right? And like we’re going to see this, right? People are going to be moving to all of these different instruments at different times in the cycle just depending on what they think is going on, right? People are going to be in MSTR and they’re like, okay, I think I’m going to peel off a little bit on MSTR and maybe I go to some strike and strife because I want some more safety. But maybe I do that with 10 and if it was higher, maybe I maybe Change that from 10 to 20 and you’re just kind of like constantly moving between these pieces and maybe I’m peeling off some into bitcoin all the time and there’s, there’s just so many different permutations and combinations of these different instruments that you can hold at any one given time based on what you think market expectations are for the future. And like, and all of it flows into bitcoin, right? It is the defense strategy, the Pentagon, it’s the, the bitcoin defense strategies, all these different ATMs. So it’s, it’s interesting to think about. You know what Sailor said, Winter’s not coming back.

Jeff Walton [01:17:50]: Does that mean there’s not going to be bear market drawdowns? No. Are there going to be extended periods of time where things are as bad as they were? Maybe in 22 with FDX clubs maybe.

Jeff Walton [01:18:02]: Different, Right?

Jeff Walton [01:18:03]: It may look completely different. And the plumbing has changed. Right? This infrastructure didn’t exist previously. If you look back in history in 2017, if you wanted to buy bitcoin, if you wanted bitcoin exposure, you had to take your money from a bank account, move it over to some sketchy exchange that you didn’t know how it worked, and then figure out how to do it and then buy some thing on the Internet that, no, that’s just untested and move it over to a flash drive. It was a tough sell, really tough sell. Now 2020, you have MSTR, buys Bitcoin and you’re like, okay, now I could get correlated exposure in an equity. 24 comes and now I can buy a Bitcoin ETF from all of these different institutions. And now 25 comes and you’ve got bitcoin backed credit, fixed income instruments that are still tied and correlated to bitcoin.

Jeff Walton [01:18:52]: That is a fundamental change in the architecture and the plumbing of the market that didn’t exist previously. Fundamental and that’s exciting. So do I think we’re going to get an 85% drawdown? I don’t think so. I don’t think it’s going to happen because there’s these different instruments, like the architecture has changed and now there’s opportunity to stay within bitcoin as opposed to moving to altcoins or dollars or pushing the clutch in. You have alternatives that you can go into and that’s what I’m excited about. I’m getting accused of being a perma bull, which is fine because I am incredibly bullish on all of these different instruments. I’m incredibly bullish on all the new capital coming in the door. And this is the biggest story in all of finance and I’m going to hang my hat on that.

Ben Werkman [01:19:42]: Well, I’m always going to be bullish all of these because I’m so bearish. Our politicians and the fiat monetary system, that’s the only thing I need to continue to be bullish on products coming out in the bitcoin space. This is the other side of the trade of fiat currencies. You know, if they’re out there with their unlimited supplies, you know, able to manipulate it to try to create the economy and stimulate growth and keep everything rolling, keeping people spending as consumers. You know, I want to opt out of that and I want something that’s got a completely fixed supply where no matter the demand, the only thing that’s going to be able to give is the price. And it depends on what you’re going to view as risk. Right. People look at, you know, bear markets and shake ups in the markets and they say, well, you know, there’s going to be a flight to safety.

Ben Werkman [01:20:30]: Well, what do you think safety is going to be in 10 years? Like, I don’t know if people are looking at all these spending bills that are coming and everything that’s happening out there, but I’m not thinking that parking back in US Dollars is going to be safe. At some point, I think you’re going to want to opt out of that. Whatever the country is us to. I don’t care what country you’re in. Right, whatever. I think that the world is evolving to a point where people are going to really start valuing true decentralization. And that I think is still massively underpriced in bitcoin. So, you know, I don’t even look at these to tell people to buy them.

Ben Werkman [01:21:10]: Right. I don’t. I don’t think these belong in everyone’s portfolios. A lot of people still have really long time frames. And bitcoin’s probably the better bet because if you’ve got a long time horizon, you’re accumulating wealth like the money printing is not stopping. So you might want to get in bitcoin instead and ride that for the long haul. But I also try to put myself in other people’s positions. And what we have right now is a massive amount of people exiting the workforce, and that is huge.

Ben Werkman [01:21:38]: You know, my boomer financial advisors, you know, I hear all the time about the aging of his clientele, right? And it’s not getting replaced. The next generations don’t have nearly the capital available. It hasn’t changed hands, it hasn’t changed generations. So you’ve got this huge cohort of people that are hitting retirement. And we all live in this space where we’re constantly seeing people make huge wealth on all these trades. And we’ve all been finding bitcoin early and doing well. We live in a very unique bubble of affluence. But not everyone’s in that bubble.

Ben Werkman [01:22:11]: And you got to realize that not everyone is out here able to be speculators. Not everyone out here is going to try to yolo into Mason’s 1080s at the end of July. You know, not everyone’s going to be doing all these things. Some people, what they need is stability and something they can depend on because they have bills and they have finite resources with which they can fund them. They cannot take the same risks that the younger generation can. And it’s because of that cohort that I look at these products and go, this is a huge win for people that are in that spot, right? And if you can get that capital stability and a 9% interest rate, that’s life changing for a lot of people. You know, if you’re living on Social Security and you’ve got a small asset pool, but you can augment it, if you’ve got 9% coming in on it, right, maybe you’ve saved 200 grand and that $18,000 a year makes a huge difference in paying your bills. That’s massive.

Ben Werkman [01:23:05]: So, you know, not everything is about trades and 10,000% returns, right. Some people, some still have lives they have to live. And these products, if they find them, right, which is the other thing, we also live in a small world where we know these exist. There’s a lot of people that don’t, but if they find them, these could be very impactful. And creating a product like Stretch is one of the ones that I think would be that first stopping point. I used to always think it was strife, but now you’re seeing the value of that move around. I think that does make people nervous. Even though it went up right now, they’re going to be nervous that it comes down.

Ben Werkman [01:23:39]: But something like Stretch, where they’re saying explicitly, we’re trying to hold it at $100, that’s more dependable for people to dip their toe in. And it might lead them to the point where they say, well, I want some directional, long exposure. So maybe I’m moving into some of it, into strike now. And they start moving out that risk curve if they’re comfortable with it. But, you know, that’s, that’s what I really appreciate about these, is these are, these are products that you can weave into your everyday life if you need to. It’s not for everybody, right? It very much depends on where you’re at in your life, what you’ve managed to accumulate through your career, you know, what you’ve got available to you to support yourself in retirement, and how much risk you can take with that nest egg that you built. But there’s a massive cohort of people that are not in the position to take big swings. And because of that, something that’s stable, pays out monthly and is giving you effectively the return of the S&P 500.

Ben Werkman [01:24:32]: That’s powerful and that’s important to a lot of people.

Jeff Walton [01:24:38]: A lot of people. And institutions. Yeah, and institutions is what I’m. I’m excited for. That’s where my background is, identifying, you know, term liabilities with different durations and identifying how to get there. So talked about this on the last couple of podcasts I’ve been on. Where I think stretch is really interesting is this is an alternative to a U.S. treasury.

Jeff Walton [01:25:05]: And so my background was working in collateralized finance. So in collateralized finance you got to take assets, you got to take assets and pledge them as collateral for a future point in time. So let’s just say a duration of, you know, two or three years for a reinsurance contract. Let’s say you post $100 million of U.S. treasury bills and that those treasury bills sit there for two years or three years and the entity that is taking on that capacity in case of a loss for risk, they want stability that that $100 million is going to be there at a future point in time. So now here’s an alternate, here’s a new product that strategies created a bitcoin backed credit instrument that can be stable and will effectively be stable at a future point in time assuming the market agrees. And that can now be used as collateral and those types of instruments. And that, that’s, you know, that’s a big function of the insurance and reinsurance market is this collateralized world that’s, that’s evolving and changing pretty rapidly and growing very quickly.

Jeff Walton [01:26:10]: So that’s exciting and it’s going to take a while for these things to get in there. But like that’s the future of these things. These, these have use cases that people aren’t aware of yet. And that’s going to evolve and, and that’s where there’s a lot of opportunity in the space for people to think about how to use these in different ways and go talk in those different marketplaces, like go contaminate all of your other financial realms with these products in different ways.

Ben Werkman [01:26:35]: You know, Dan’s got a lot of models there in the background. Imagine Dan has to reset all of his risk free rates to 9%. What do you think that does to the returns for a lot of things you’re evaluating?

Jeff Walton [01:26:47]: Right.

Ben Werkman [01:26:47]: If your risk free rate’s 9% and you’re, I don’t know, say you’re eight times over collateralized on that position, you know, that changes the formulas in a pretty big way. So it’s, it’s a powerful, powerful product that they’re putting out there in the market and I, I think it’s going to do quite well. And I think that you’re going to see this one probably, maybe it’s going to be second to strike in terms of how much of it they’re trying to raise, you know, I don’t think they’re probably going to put out a $21 billion ATM on it, but I could see it being a 10 to 12 billion dollar ATM and having this be the second largest that they’re trying to raise through. Because that carry cost can go down if you’re betting on rates going down. You know, it’s going to adjust down with sofr, you know, so the carry on these can be lower than it can be on a lot of the other ones that are purely fixed. So I think it’s going to be one they’re going to lean on pretty heavily. Yeah.

Nithu Sezni [01:27:43]: How is it not a direct swap for US Treasuries? In every case where you have the ability to do that, it just.

Jeff Walton [01:27:50]: Well, it’s market acceptability of the strength of the collateral or the collateralization level and the security. Right. Like the US treasury is backed by the US Government. The strength of the US Government. So is strategy stronger than the US Government? In Bitcoin terms, yes. But in other terms, no.

Ben Werkman [01:28:16]: Leverage ratio.

Jeff Walton [01:28:17]: Yeah, just think of leverage ratio and Bitcoin terms. Yes, and leverage terms, absolutely. So it definitely changes your cost of capital. Mechanics, like all of your weighted average cost of capital requires the risk free rate. So if you start plugging in the risk free rate at 9 using those instruments, your models are upside down. This is rewriting finance with different instruments and different perspectives. One thing that would be really interesting and maybe Dan, you might want to follow this or somebody else in the community, like just can, can build this, is tracking the volume of these instruments over time because that might indicate where things are moving and like, I guess the relative volume of all these instruments next to each other. So then you might be able to see where energy is flowing into.

Jeff Walton [01:29:05]: Is it, is it moving into strc? Like, is that, is that a bearish indicator? Is it moving into strk? Is that a bullish indicator? Is it like what is the relativity of all of these volumes together over time and how does that change? And that might be an indicator of sentiment or market movement. That could be interesting to follow.

Nithu Sezni [01:29:27]: Yeah, it makes me a little bit sick to my stomach that the, the ETFs can’t hold something like this. They have to hold the treasuries. There’s like $400 billion of treasuries held by ETFs. And you know, like if Misty could hold str C instead of US treasuries, they, you know, they might not have NAV erosion.

Jeff Walton [01:29:51]: Yeah, there’s, there’s a lot, a lot of things that can be used for here. Yeah, go ahead, Ben.

Ben Werkman [01:29:55]: I was just going to say it does change. You know, we always talk about Bitcoin being the hurdle rate, right? And, and it should be. But for a lot of people, if you just look at your traditional investment portfolio now, now you look at these products and you know, this is the hurdle rate if you can effectively sit, you know, risk free and risk is always in quotes, right? Because there’s always risk to everything. But, you know, if you can sit risk free at 9%, you got to evaluate everything else you’re holding, right? How much risk are you taking on to outperform that 9%? And if you’re just. And you got to look at the tax treatment of it and figure out what that net performance is. So, you know, it does change your mindset when you look at it. When you’ve got something that’s built to be stable, you can monitor that collateral position in real time. So, you know, if you’re starting to lose credit quality on the, on the instruments you’re holding and you can make adjustments through the liquid market, right? Trade them like equities in and out, very easy.

Ben Werkman [01:30:48]: You know, it’s. They’re good products. And I think that when people discover them, there’s going to be a lot of people that, you know, might kind of reset their portfolio and go, if this is where I’m gonna settle and park in the base and then I’ll move in and out of this. But every time I settle back out, I’m not settling into a money market fund anymore. I’m just gonna settle into these. So, you know, everything’s got risk, clearly, right? I mean, there’s. You’ve got risk with any corporation that’s issuing any securities. Wow, that’s a new.

Ben Werkman [01:31:15]: The darkest, the darkest ride with this for a while. Timer lights. But, but they’re pretty powerful because they already have the assets that are backing them. So I did hear on, on one of the spaces, I think it was when you were on Jeff, and I think it was Quran that was talking about it, about the potential in the future where they might have to actually carve bitcoin out collateral to collateralize the preferred products in order to try to get ratings, which would be pretty interesting because now you would have direct collateral tied behind these instead of just, you know, the entire pool that would be segmented out by product. So I thought that was an interesting conversation.

Jeff Walton [01:31:58]: Yeah, it’s. It’s possible. The rating agencies are interesting and that’s that’s something that we talked about a little bit earlier, but I think it’s helpful to hit on again. These rating agencies are for profit entities. And the people that work at these rating agencies are not like these aren’t the smartest people of the bunch.

Ben Werkman [01:32:16]: Right.

Jeff Walton [01:32:17]: Like if you’re, if you’re really brilliant in finance, you work for a company to go make a lot of money, you don’t go work for a rating agency. So the fact that they haven’t rated these products yet is not a surprise. They probably are having a hard time wrapping their head around it. They also have a target on their back after the financial crisis when all these products that were AAA rated collapsed. And they’re probably a little bit skittish about issuing a credit rating on something that doesn’t have a ton of history, despite it being significantly over collateralized. So there’s work to be done there in order to get the credit rating agencies around. And you know, maybe it’s something like that, Ben, where you’ve got a special purpose vehicle that’s got different collateral in each one of these different buckets and that’s how you go get the ratings in the door. That’s possible, but ultimately it’s going to take time and other people in the market just continuing to pound the table.

Jeff Walton [01:33:07]: And when the, when the products themselves reprice to different levels, that’s when the, the rating agencies will also have an easier time to rate these products. So right now, if you know, strategy wants STRF to be rated investment grade, well, it’s got an 8% yield right now. That’s not an investment grade yield. Now if it reprices to 160 or 180 and it drops to 5, maybe that’s an easier message to go into the rating agencies and have that conversation. Or if there’s a dozen other of these companies and you have some relativity, that’s the other thing that the market is missing right now is a relativity. You can compare this to other preferred equities, but they’re not the same because it’s not some expectation of future cash flow. It’s a function of balance sheet strength and ability to raise capital. It’s a different beast and a different animal.

Jeff Walton [01:34:01]: So, so yeah, that future is going to take some work. And the weird dynamic here is that these rating agencies are for profit entities and you have to pay to go get those products rated every year. You’re paying to get those products rated every year. It’s just an interesting element of how these things work. So they could probably get those products rated, you know, B plus rated or something right now, but they don’t agree with that rating. So they don’t want to go out and go get a B plus rating and then be benchmarked against all of the other B plus product products out there and have this kind of peg on what the yield should be if they think the yield should go significantly lower, which would lower their cost of capital. So there’s this like chicken and egg component with those rating agencies as well. It’s unique.

Jeff Walton [01:34:54]: One thing that’s also interesting to think about the future here is like the tokenization of all of these assets or equities in general, and your ability to use them as currency. And if that’s the case, you now have a direct competitor for some of these stable coins that is paying a yield where these other stable coins don’t currently pay a yield. Right. If STRS STRC is a tokenized product that is transactable peer to peer, that changes. How come, like society can work? I don’t think it’s gonna happen tomorrow. I don’t think it’s going to happen next year. But it’s, it’s a unique, unique concept to think about these, these instruments as currency as well. Something less volatile.

Jeff Walton [01:35:42]: I don’t know.

Adrian Morris [01:35:44]: All right, guys, I gotta drop.

Jeff Walton [01:35:45]: All right, Adrian. See Adrian stuff.

Jeff Walton [01:35:49]: Later.

Jeff Walton [01:35:51]: Should we talk about the, should we talk about the retirement of the converts? I think that’s, that’s valuable.

Ben Werkman [01:35:57]: Yeah, this, this was really the first time where they, I mean, they, he’d mentioned it a few times already on podcast that they were moving away from the convert market and he wasn’t even suggesting new entrants come into the convert market. But this was the first time that they really outlined that concretely. Is the plan effectively just saying we’re going to completely clean the capital structure and it’s going to be built around preferreds and commons and that’s the way that we’re going to structure this out. So I thought it was very interesting for them to call this out directly and show, you know, yeah, when you equitize these convertible bonds, you know, that’s going to boost the credit quality in all of these preferred products. And if they’re not going to replace them, what’s going to be interesting is that’s going to leave a vacuum in the convertible bond market. I got to imagine that these convertible bond buyers have gotten used to the volatility of these. Even if the volatility is dampened recently, these have been massive Return accelerators for the guys trading convertible bonds. If you’re out traditionally going and trading convertible bonds on equities that have 20 to 30 volume.

Ben Werkman [01:37:04]: Even getting a convertible bond on something with a 60 is going to greatly accelerate your ability to generate your returns through your delta hedging trades. So I do think that it’s actually going to open up a market for a lot of these other treasury companies where I think they will fill the demand in the convertible bond market. But you know, I mean taking. What do they have out there? Eight point. I can’t remember how much it was in convertible bonds but a little over 8 billion. 8.4 billion or something. Oh yeah.

Jeff Walton [01:37:33]: 8 billion. 8.2 billion.

Ben Werkman [01:37:35]: 8.2 billion.

Jeff Walton [01:37:36]: Yep.

Ben Werkman [01:37:36]: I mean that’s a lot, that’s a lot of demand to replace particularly because you don’t have any other real players at major scale. I mean you saw Marathon issue one but you know there’s, there’s going to be a void there and I think that that demand perhaps it, it drives some better terms. Maybe there’s some better premiums to be had out there for some of these smaller issuers that are going to offer them. But it’s clear strategy is shifting off of that. I could still see a world where if they weren’t able to drive liquidity into these preferreds fast enough and they got really under levered that you could see them go pull on this lever again to get an injection. But they’re pretty clear at the moment that that’s not the primary path they’re going to be taking.

Jeff Walton [01:38:22]: Right. They, they put. This was the first time they did this as well. They put a pro forma BTC credit rating in here without the converts as if they did roll them up off which would show the credit quality of the instruments. Assuming the conversion of all the in. In the money convertible notes and you see that that improves drastically. Like STRF goes from. I don’t know was it like a 6 or 7x 7.7x BTC rating to a 11.8x BTC rating.

Jeff Walton [01:38:51]: And all of these other instruments increase drastically too. So significantly over collateralized. The importance there is they can withstand a significant drawdown and still have capital left to pay off the, the obligation. There’s just, there’s just so much money on the balance sheet that this isn’t that big of a deal.

Dan Hillery [01:39:13]: Yeah. Do you mind if I hop in and just talk about the definition of cum notional value or cumulative value? Yeah, I did, I did a little post on this and because I didn’t know what it was. And. And it’s just the amount. It’s the amount of senior capital above that instrument. Including that instrument. So for like First Strife, for example, you can see the outstanding liabilities. This is obviously pro forma, so it’s different.

Dan Hillery [01:39:38]: But the cumulative notional value is. The cumulative notional is just the. All the converts plus the outstanding strife liquidation preference total of strife outstanding. And that’s essentially what is prioritized in the case of liquidation, including that liability. So it’s just a cool way to look at it. And then you can use the drawdown scenarios to kind of put your own Bitcoin rating assumption. It’s all kind of saying the same thing with different words. Bitcoin rating this, bitcoin backed collateral, all of that.

Dan Hillery [01:40:08]: It’s all very similar.

Jeff Walton [01:40:12]: Yeah. It’s to provide perspective on the asset relative to the liability. It’s. That’s what, that’s how you get to the bc. The BTC rating is by summing the cumulative notion. Yeah. Bingo.

Dan Hillery [01:40:28]: Okay, sorry guys, it’s getting late over here.

Jeff Walton [01:40:30]: It’s getting late.

Ben Werkman [01:40:31]: Grow up. Chat.

Jeff Walton [01:40:35]: Oh, man.

Jeff Walton [01:40:37]: Okay, strc’s low volatility, short duration. Okay, so before we end, where’s the next one? Mason’s got some, some thoughts on where the next one fits in the, in this bucket here.

Ben Werkman [01:40:50]: Where are we gonna put Stratus, guys? Stratus is next.

Dan Hillery [01:40:55]: Stratosphere. That’s the high. The high leverage.

Ben Werkman [01:40:59]: Stru. Stratus. Yeah, but it’s going to be the lowest, you know.

Dan Hillery [01:41:04]: Yeah.

Ben Werkman [01:41:05]: Just kicks.

Jeff Walton [01:41:08]: Someone.

Dan Hillery [01:41:08]: Someone when they announced STRC was like, no way. 9% monthly dividend. This is a missing. I was like, it’s funny.

Ben Werkman [01:41:19]: 9% monthly dividend might have been a little concerning that.

Jeff Walton [01:41:23]: Yeah, I would, I would be bearish on that. Yeah, I would be bearish on that product. Yeah, that would.

Ben Werkman [01:41:29]: That would raise some questions.

Jeff Walton [01:41:30]: That would probably. That would flip me to the other side for sure.

Dan Hillery [01:41:34]: I mean, Josh and I would have a field day.

Jeff Walton [01:41:36]: Yeah. Join. I would join forces. I would be concerned at that point.

Nithu Sezni [01:41:42]: Go to slide 19. I think that’s the one that Jesse shared. And there’s a bunch of room in between STRC and strd. So I don’t know. It’s got to be some kind of effective duration between two and eight years. You can stick two more in there.

Jeff Walton [01:41:59]: Yeah, you could stick. You can stick quite a few. Yeah. Quite a few in here. Building out this whole duration curve, which again, my background, thinking about insurance. Right. Average duration on like a workers comp. Claim might be a decade, like six to, six to eight years.

Jeff Walton [01:42:17]: And that means you want, you want products that have a duration of six to eight years and you’re going to get paid out over time for a six to eight year liability. And that’s how I see the world is this duration curve where you need to have assets that match to that specific duration. This is big. This is really important to wrap your head around this duration component. I’m still learning it, I’m still figuring it out.

Nithu Sezni [01:42:46]: When we were talking about what the potentials were for the next ones, I think we mentioned something about a variable rate one. But the, the fixed price was shocking to me that that wasn’t on my radar at all. But. So could there be another one that’s variable but not pegged to 100 or does that, does it need to be pegged to something for this to make.

Jeff Walton [01:43:07]: It to be variable? That’s interesting. I’m not sure. Not really. It could be variable. You just remove the. Maybe it’s. Maybe it’s SOFR plus something and it’s just always, always floating.

Nithu Sezni [01:43:29]: Do we need to have predictions on how many more preferreds?

Jeff Walton [01:43:32]: Oh, man, no. It’s gonna be, it’s gonna be a lot. I think, I think there’s gonna be a whole catalog. It’s gonna be like, you know, getting the East Bay catalog to get cleats back in the day. You’re just gonna like, look through all of them. You’re like a different color. Different color. Nike, Adidas.

Jeff Walton [01:43:49]: You know, that’s kind of how I’m thinking about it. And man, I mean, when, when there are, I mean, Semler is already in their, their filing. They’ve already looked, I think in the shareholder vote they’re going to look to approve an increase in preferred equity shares. So they’re signaling that they’re going to offer perpetual preferred equities. There are going to be dozens of these companies that are going to do this. These Bitcoin treasury companies are going to do this and we’re going to have this like yield curve that strategy is creating here. And I hope everybody’s prepared to talk about these products forever because there’s going to be a hundred of them, there’s going to be 200 of them, and they’re all going to be competing for the same space. And.

Ben Werkman [01:44:36]: I do like where it’s pushing us, you know, as an industry though, right. I mean, it’s showing a lot of maturing in this industry when, you know, this is moving people away from saying we’re going to compete and doesn’t mean someone’s still not going to go try to compete on this. But we’re not necessarily competing for how much leverage we can apply. What we’re starting to focus on competing on is credit quality, products we can offer into the market. And you know, that’s a much more responsible way to scale. And I think that that’s a pretty good message to put out there. Now you’re still definitely going to have the other side of this. There’s still certainly going to be companies that come out and try to really lever up and you know, Bitcoin’s moving sideways.

Ben Werkman [01:45:19]: They’re going to try to find a way to, to get their equity moving and kind of be the val play. But largely for the players that are achieving scale, they’re showing that, you know, do this unencumbered, right? Don’t stack on a lot of, a lot of debt and then focus on the credit quality of the securities you can issue out into the market. And if you want to go compete with the products that strategy is putting out, well, one way to do that is to have better credit quality on them than they do, right? Have them be more over collateralized than the product that strategy has out in market. And maybe some companies will only focus on one or maybe two products and you know, that’s really where they’ll try to dominate by keeping them with a very high credit quality. I mean, we’ll see how this evolves. But I do like that that’s becoming the focus, right? It’s on quality now. It’s not necessarily on that credit quality. If you want that, you’re going to have to go, you know, further out on the risk curve and you’re going to have to go chase the emerging companies.

Ben Werkman [01:46:16]: You know, there’s still a lot of, a lot of plays out there where there’s a lot of volatility. I think people are feeling that right now, you know, which is, which is always interesting. There’s been a lot in a lot of these smaller cap plays where you had some serious volatility happening in the last couple of weeks. But you know, it’s, it’s still out there. But strategies reaching such a scale where, you know, clearly with this depth of liquidity, it’s not going to be nearly as volatile as some of those small plays are going to be. So if people are chasing the, the super high volatility, I think a lot of people are going to be rotating capital into smaller plays to chase that.

Dan Hillery [01:46:51]: I think you’re Right. And I think it’s so important. It was something I was listening to Saylor talk about on an recent interview is why are there volatility sellers and what do options participants want on an equity? And I know a lot of these other smaller companies don’t have options markets, but it’s something I’ve been reflecting on a lot too. It’s like, why. Why is the volatility of MSTR more valuable than maybe the volatility of, of Nvidia or some other equity in the market? He says you want liquidity. Obviously MSR has that. Volatility obviously has been dying a little bit. And you want durability.

Dan Hillery [01:47:21]: And I think durability is the key here, right? You have an equity backed by the hardest asset known to man that has an upward trajectory of 30 keg or plus. So I think those things combined make an incredibly attractive equity and pool for option selling and that sort of those dynamics. So I just think it’s really important that we don’t forget those things. And that’s why MSTR is valuable in the first place. All of that is huge. And a lot of these smaller bitcoin treasuries don’t have that necessarily.

Ben Werkman [01:47:48]: Right. And that’s. It’s kind of funny because this goes both ways, right? A lot of times the people that are also trading around strategy are also selling options on strategy and they’re going, well, where’s the volatility? Right? Well, you’re selling the volatility, right? So now imagine thousands of other people are also selling the volatility. Now add on the ETFs that are selling the volatility, right? You’re going to get these periods in time where things go sideways, right? I mean, you’re going to get these gamma pins that are out there and it’s going to stall things out. And you know, everyone that’s selling volatility contributes to that, but it’s a feature. And I think you said something earlier, Dan, when I was just listening to it, where you said, at some point there’s going to have to be a moment where all these volume sellers get blown out. And I do think that will happen. You know, these are the types of plays where you get lulled to sleep and you think it’s over and then overnight, you know it, all of a sudden you wake up and you’ve got a lot less shares than you had the day before.

Ben Werkman [01:48:47]: So I think that day’s still coming.

Nithu Sezni [01:48:49]: Okay. Now I feel personally attacked.

Ben Werkman [01:48:53]: Well, it was kind of direct at had you Wasn’t it? Yeah, I think so.

Nithu Sezni [01:49:01]: I keep crossing my fingers, hoping, hoping the shorts will get blown out because I’m still so freaking irresponsibly long that I need an excuse to take off the friggin leverage.

Ben Werkman [01:49:09]: Those are always my favorite days to go watch your show. Soleil is when I knew you had to scratch scramble because you were getting blown out of the water because things move so quick. Those are my favorite days to watch. It’s always fun to watch panic move.

Jeff Walton [01:49:25]: The, the move here on the price from what was it like 380 to 4:30. And it moved just in the last like two weeks. The Vol didn’t move at all. Implied ball didn’t move at all.

Nithu Sezni [01:49:39]: I noticed.

Jeff Walton [01:49:43]: Which is interesting. It’s quiet.

Ben Werkman [01:49:48]: It also feels like bitcoin’s kind of loading up. Right. I’ve never been more bored at 120000 or whatever we’re at right now, 119 000. You know, even though just go back a couple months and we would have been super excited on that move. Now it got here and it’s just kind of to that point. Well you just expected it to happen, right? Like it should have been here a long time ago. We were more surprised it wasn’t. So now it’s here and you’re going all right, well where’s 150?

Nithu Sezni [01:50:14]: Yeah. Where’s the rest of it moving?

Jeff Walton [01:50:17]: And people are calling for double Top. It’s like here we are, Double Top. It’s like there’s so much more money like on the horizon.

Ben Werkman [01:50:24]: It is a different market. I mean people do need to look back at the prior cycles and you know, I’m not gonna say there will never be a bear market again but the probabilities seem to be going down because you got to look at the types of buyers that we have now, right. In the past cycles you had massive leverage trading in Bitcoin primarily from all these offshore exchanges. You had all the collateral getting passed around behind the scenes for you know, all these bad actor firms that were out there. You had VCs that were really some of the ones that were trading out here. So it was very driven by retail VC activity. But now you’ve got these directionally long accumulators, not traders that are just putting buy pressure into the market. You’ve got the people holding it in their brokerage through ETFs like IBIT and they’ve been holding pretty strong and accumulating consistently.

Ben Werkman [01:51:23]: So while of course there’s gonna be bear markets at some point. I just think the severity of them is what’s probably going to change here.

Jeff Walton [01:51:31]: Agree.

Ben Werkman [01:51:32]: You know, it’s not to say that we don’t get a 30 or 40% drawdown. We might. But I think that you have so many people lined up to buy these days and you’re seeing more and more of that buy pressure building up and you’re seeing more and more weakness out there surrounding the US dollar and the narrative there that I think it’s drawing more attention as the asset class grows. So you know, yeah, we might get a hit. 200 come down to 150. You know, that kind of stuff that can certainly still happen. You can still have these blow off tops. But it just seems like the structural bid is building over time and I’m not necessarily seeing where that slows down yet.

Ben Werkman [01:52:15]: This is still such a small, small piece of the markets out there relative to where all the other capital is that I think that this space is going to continue to build.

Mason Foard [01:52:27]: I agree with that, Ben. And I think a lot of people who are calling for double tops have crypto ptsd and I think what they’re not realizing is exactly what you’re saying about, about the structural change here, which is Sailor and, and the other bitcoin treasury companies globally are tapping into a $300 trillion capital pool that has, has yet to be touched by Bitcoin. And they are personally. All right, sailors personally. And these other companies are personally opening up the floodgates to, to allow that capital to come in. And Bitcoin’s only $2 trillion. Right. I keep on looking at Nvidia.

Mason Foard [01:53:15]: Bitcoin’s not even as big as, as the, the largest equities in the U.S. right. We’re at a unique moment here.

Ben Werkman [01:53:26]: Yeah, we really are. And you know, when you look at this, I do think that there’s still a potential for some weakness. Like it hasn’t. The bitcoin treasury companies have not reached escape velocity. You’ve really got one primary player of scale, right? That strategy, you’ve got others coming to the market. But a lot of the capital raising is dependent on the availability of capital from these institutional investors. And so it can slow down significantly. Right.

Ben Werkman [01:53:54]: You can get a period where there’s just not capital readily available for these companies to raise to go buy bitcoin with. So right now I think you’re kind of in a race for scale. I think you’re seeing a lot of these treasury companies that are trying to accumulate quickly try to get to that billion dollar Mark, where you can get these products out into the market, where you’ve got control over how you’re raising capital versus, you know, being out there and being held to the terms that comes with a lot of these institutional capital raises. And in that market, you’re largely dependent on how the prior raises for them went. Right? So if you get a pipe transaction that really doesn’t perform, those investors become skittish about reloading for another one. So that can dry up capital for a while until excitement comes back into the space. The other thing you get is because you have so many of these companies going through these, you know, with things like mergers and SPACs and all this is you’ve got a lot of these institutions that are already allocated in this space and that capital hasn’t freed back up to rotate into other deals. So it’s not like every institution on earth is out here trying to invest money in these, these bitcoin treasury company deals, but the ones that are, you know, are trying to get out of positions that they’re already in and then they can reload if that position performed.

Ben Werkman [01:55:12]: So, you know, there’s, there’s still certainly we’re not really even fully out of the gates here until my opinion. We have several companies that have, you know, billion dollar Treasuries out there and more products where they’re able to raise directly versus going through and raising, you know, doing the sales rounds and raising money from these institutions. So I think that’s going to be very important to this, really taking off. But the other area that I’m still very bullish on is not even these active accumulators. Right. To me it’s the fact that we haven’t even started on the companies just moving treasury assets into Bitcoin as a hedge. We kind of skipped past that. I always assumed that was coming first, that companies would kind of dip their toe in the water.

Ben Werkman [01:56:01]: They’d start converting some of the cash or some of the US Treasuries they were holding into Bitcoin even as a hedge. And then eventually you might get more people that follow the microstrategy model. But we kind of bypassed that and everyone jumped straight to trying to reinvent themselves and trying to do the leveraged play. And they’re creating companies out of nothing and raising capital and getting off the ground with treasury operations. But I still think the big wave is when corporations start viewing weakness in the US dollar and in the US economy and they decide to start rotating into truly sovereign assets and there’s a massive amount of capital sitting on balance sheets that hasn’t even begun to migrate. So that’s actually the way if I look at and say there’s still a lot of demand coming right now, it’s a lot of excitement for all the capital raising and the leverage being applied to go out and buy and acquire Bitcoin. And people are excited about bitcoin yield and all the new market or all the new metrics. But it’s really going to be when it becomes mainstream, when these companies just start doing it purely as a hedge.

Ben Werkman [01:57:07]: And I’ve said for a very long time that’s something I would applaud very loudly because just that alone is an incredibly, my opinion responsible move for a corporation to take. And I think it’s becoming fairly obvious that that should be the next step for a lot of corporations. Even if it’s 5%, right? Get off zero, you know, see the impact of an asset that has a truly fixed supply on your balance sheet. You’re doing your shareholders a favor and you’re protecting the value you’ve created through your operations. And I think that’s where the next really big wave of capital comes, comes from. Treasury companies are going to continue to scale very bullish on that space, obviously. But I just, I’m not sure that that’s necessarily long term, the major rush capital coming in. I still think it’s going to come from companies that are just holding cash on their balance sheet that are about to have a very unignorable problem.

Tim Kotzman [01:58:04]: Hey, Ben. Ben, quick question for you. I just saw this. I can’t believe it happened six, seven hours ago and I’m just seeing it. Fidelity filed to amend its spot Bitcoin ETF to allow in kind redemptions and creations. Like what does that mean? Does it even matter anymore? Like are we past that? Or like what, what are the implications there?

Ben Werkman [01:58:26]: I would have to look at that. I haven’t read through that yet to see what it was. I mean, I saw some of those before where it only applied to the aps. But Jeff, I don’t know if you’ve looked at that one or not yet to see what they actually put in there. You’re on mute, Jeff.

Jeff Walton [01:58:41]: Oh, shoot. No, I have not looked into it. I was just looking it up here. Fidelity in kind ETFs. Yeah, no, I haven’t seen this yet. Better take a peek. I mean that would be, that would be pretty big, right? Because I know a lot of people are concerned. That’d be pretty big because I know a lot of people Are concerned, concerned about, you know, these institutions actually holding this capital and you have the ability to roll.

Jeff Walton [01:59:11]: I know Josh would love this. He’s been talking about this a lot. Basically, if you’ve got options that are, that you exercise, you’re exercising options and getting the bitcoin in kind, which would put a lot of pressure, pressure on the remaining supply, especially if there’s no ability to go get that bitcoin because we’re already hearing rumblings of OTC deaths, are having trouble filling big orders and if they’re having trouble filling big orders and you’ve got a, a big movement in bitcoin and all of these call buyers are exercising their IBIT calls or their fidelity bitcoin calls and then demanding it be returned in kind. That changes, that changes the landscape. There’s no temporary moment in time or like buffer period where they can go find the bitcoin that they don’t necessarily have or borrow it on the balance sheet or, you know, whatever that may be. I think that makes things a bit more complicated. So. Yeah, that’s an interesting, interesting Tim, thanks for sharing.

Jeff Walton [02:00:25]: Okay, we’ve got just four of us. There we go. Dan Mason popped off. Appreciate it. We’re at two hours, so let’s run around. Final thoughts. We’ll pass it to Soleil. We’ll start with you and pass around.

Nithu Sezni [02:00:36]: Yeah, I’ll keep it short and sweet. If Fiat is a melting ice cube, then strategy in the preferred is converting Fiat to be bitcoin is the, is like glacier formation boom deep.

Jeff Walton [02:00:52]: Ben, go for it.

Ben Werkman [02:00:54]: I’m good, man. I, I think I’ve ranted enough for Cruise.

Jeff Walton [02:00:57]: We’ve got 10,000.

Ben Werkman [02:00:57]: Always bullish on the space. I love it. There’s no better place to be, Tim.

Tim Kotzman [02:01:04]: I mean when you zoom out and you realize that the stock market hit an all time high today, like everybody listening right now, raise your hand. We can see all 10,000 of you. Raise your hand. If you had anyone in your life sit, run around like a crazy person and say, whoo, my stock portfolio is at an all time high. Like, like no one’s paying attention. And then think about like one out of a hundred of those people that aren’t paying attention to the stock market are paying attention to bitcoin. And then one out of a hundred of those, those one people that, that actually know about bitcoin are paying attention to what we’re talking about. Like that’s how early we are.

Tim Kotzman [02:01:44]: It’s just unbelievable when you really zoom.

Jeff Walton [02:01:46]: Out 100% to that point. We need an update of the image. Right. The number of people that understand Bitcoin 1 out of 100. The number of people that understand MSTR 1 out of 100. The number of people that understand STRK 1 out of 100. The number OF people that understand STR. If you could just do it all the way down the road, right.

Jeff Walton [02:02:03]: In order to understand these pref products you got to understand all of them. Yeah, I think it’s just, it’s really early. Completely agree, Tim. Nobody know, nobody knows what’s going on here. Go talk to anybody. Yeah, I mean they’re buying xrp. They think XRP is going to be the financial rails of America. They don’t realize the, the dis, the.

Jeff Walton [02:02:22]: The cognitive dissonance there is just insane.

Ben Werkman [02:02:25]: We’ve got an XRP treasury company now, right? We’ve got a dogecoin treasury company.

Tim Kotzman [02:02:30]: I mean, mean yeah, I mean yeah. I mean it’s been a really super interesting day. First you have the hurdle rate come out. Then you have a josh man ryquant space. Then you have a strive space. Then you have a grain of salt space. Then you have true north. I probably missed a few things and like it’s after midnight on the east coast.

Tim Kotzman [02:02:52]: But the thing is there’s only 5, 10, 100,000 people listening to these things. Right. You think about pomps event, you think about Orlando. I mean you’re talking about like 500 people in a room. That’s where we are right now. It’s like super interesting when you just zoom out and think about that. Pretty wild.

Ben Werkman [02:03:14]: I kept hearing so many people asking if the space was saturated already.

Jeff Walton [02:03:20]: Right.

Ben Werkman [02:03:20]: And you know that tells me what a very small bubble we live in. Because the minute you step outside of the communities we’ve got on X or you know, a lot of us working in bitcoin jobs and you start talking to just normal people out there that aren’t fully orange ped already. No idea any of this exists. Like there is a massive addressable market out there still for all of this stuff and there’s a lot of education to do. Right. Because getting people, you know, I’ll just say onboarding them to bitcoin is, could be one of those defining decisions that they make in their life. So it’s always going to be a worthy cause. We happen to have the luxury, you know, as a group to be able to sit down and think about these things and look at the macro environment and study the dollar and the way that they manage the monetary systems to see the problems not Everyone has that luxury, right? Some people are white knuckle in it, paycheck to paycheck, they’re a little busy to go out and try to figure out, you know, what, what it, what Bitcoin is addressing in their personal lives.

Ben Werkman [02:04:27]: So yeah, keep talking to people, keep pushing the message out there. It’s important, you know, that’s it’s going to help a lot of people.

Jeff Walton [02:04:35]: That’s my takeaway too. I’m. I’ve been working in the space now for seven months now, officially for three weeks. And I’ve been talking to people about Bitcoin institutionally for years. And I can confirm even behind the curtain over here, people that have issued thousands of preferred equities in their lives have still. I had to explain the Strategy Products Day 1 for Sunday for somebody that has issued thousands of preferred equities before like that, oh my God. How do you not understand what’s going on here? It’s just crazy. So, yeah, I would emphasize that it’s just still incredibly early.

Jeff Walton [02:05:15]: And that’s why I continue to be permeable. I’m here for the long run, right? I’m not gonna evaporate off the planet. Like I’m here to work in the space. This is gonna be a ton of fun. The next decade is gonna be, is the gold rush. We are in the digital gold rush. And I’m gonna be working here for a decade because it’s the best place to be. It is the most exciting place to be and that’s why I’m permeable.

Jeff Walton [02:05:42]: And yes, and I’ve got a conversation with Amit tomorrow that’ll be cool.

Tim Kotzman [02:05:46]: So super quick, Jeff, the news came out, I want to say today, unless I just missed it, maybe it was a few days ago, that PNC bank is something, something, something. I don’t working with Coinbase to let their customers buy crypto. I mean that was a headline several years ago and I would go into PNC branches, they’re like, oh no, not happening, it’s not happening. And obviously we know now why many reasons why it wasn’t happening. But I think that’s one of the things I’m most bullish on is as soon as banks offer it, whether it’s through Coinbase, some other partnership, some other exchange or natively and you can buy Bitcoin, you can borrow against your Bitcoin at your local branch. I think it’s going to change the game. I mean, right, you’re not going to have to have half a million dollars or a million dollars to get into the finance department at one of these big exchanges, you’re not going to have to pay 14% interest. I think it’s really going to be a huge catalyst.

Ben Werkman [02:06:45]: It’s one of those things that people need, right. They don’t understand necessarily that bitcoin having the utility of outpacing monetary debasements, a pretty powerful utility in and of itself, but the ability to go borrow against that asset is what’s really going to drive it home for individuals and corporations. I think that that is one of those catalysts that drives the next wave. So. And it’s closer than we think. And it’s high, high quality collateral, I can tell you that. I’ve chased a lot of collateral around in my life, and I would have loved to have bitcoin as collateral. So that’ll drive the rates down.

Ben Werkman [02:07:23]: It’ll make it very cheap to borrow against, and that’s going to make it worthwhile for a lot of companies to hold just for that reason. A of lot loan, quick access to capital.

Jeff Walton [02:07:33]: Bingo. All right, we gotta end the stream. I gotta take my dog out. Bobo says hi.

Tim Kotzman [02:07:38]: We love puppies. Good night, everybody.

Jeff Walton [02:07:41]: All right. Yeah.