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