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Speaker 1: The game of investing has changed ever since my career

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Speaker 1: started in two thousand and eight posted global financial crisis.

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Speaker 1: The world has changed where fundamental principles are becoming less important.

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Speaker 1: Many people kind of joke about whether bitcoin will ever

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Speaker 1: be not correlated to equities.

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Speaker 2: I put it the other way around.

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Speaker 1: I think, actually it's equities that's becoming more correlated with

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Speaker 1: bitcoin because equities is also becoming this place to store

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Speaker 1: your wealth to find the fastest escape velocity to the

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Speaker 1: fiscal dominance that we.

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Speaker 2: Are experiencing across the world.

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Speaker 1: People are immensely focused on bitcoin treasury companies right now

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Speaker 1: at the equity level. But the other big trend that

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Speaker 1: I'm seeing and Canter I believe, also recently announced that

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Speaker 1: they are going big in a way to provide institutional

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Speaker 1: lending that is backed by bitcoin.

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Speaker 3: So then what you're saying is that investor sort of

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Speaker 3: needs to believe in the long term vision of Bitcoin's.

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Speaker 2: All right, Jeff, thanks so much for joining me today.

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Speaker 2: Let's talk about the hottest.

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Speaker 3: Thing going in the bitcoin space right now, which is

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Speaker 3: the bitcoin treasury strategy companies. At least it seems like it.

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Speaker 3: It's like all the excitement in the air right now.

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Speaker 1: Yeah, Yeah, I can't get enough of it. There's one

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Speaker 1: popping up every day.

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Speaker 2: Let's just break it down first.

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Speaker 3: So is there a difference or how would you say

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Speaker 3: the difference is between a bitcoin treasury strategy company versus

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Speaker 3: a company putting bitcoin on the balance sheet.

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Speaker 1: Yeah, I think there are some philosophical differences as to

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Speaker 1: at least how the market is interpreting today. One might

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Speaker 1: say coin Based, for example, is a bitcoin treasury company

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Speaker 1: because they own bitcoin as part of their business, and

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Speaker 1: we have bitwise also as a private company, have a

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Speaker 1: bitcoin on our balance sheet. But what I think the

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Speaker 1: market has at this point defined to be an authentic

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Speaker 1: bitcoin treasury company is building a business around financializing bitcoin

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Speaker 1: specifically for an opportunity set that takes an arbitrage for

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Speaker 1: what corporates can do that individuals like you and I cannot.

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Speaker 3: Access, okay, which is what like the financial markets bringing

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Speaker 3: that in.

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Speaker 1: Yeah, the capital markets is deep, as you know in

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Speaker 1: the US. It is the dominant future of what I

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Speaker 1: think makes us exceptional. And the reality is if you

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Speaker 1: can access different components of the capital markets, including credit derivatives,

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Speaker 1: other forms of leverage, there's different capital efficient ways to

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Speaker 1: have bitcoin exposure and risk that you and I simply

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Speaker 1: can't really replicate.

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Speaker 3: Okay, so that's the financial engineering side of it, if

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Speaker 3: you will. So the other side of where they're just

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Speaker 3: putting bitcoin on their treasury or the balance sheet, that's

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Speaker 3: not really talking about and just real quickly though, so

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Speaker 3: you would say, I mean, obviously, big companies like an

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Speaker 3: Apple for example, that's in on billion, hundreds of billions

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Speaker 3: of cash, if they were to put ten percent of

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Speaker 3: that into bitcoin, it's good for bitcoin, but it doesn't

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Speaker 3: really change their business model.

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Speaker 1: Yeah, this is kind of the dilemma, if you will,

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Speaker 1: which is so many of our big enterprises are really

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Speaker 1: built specifically to avoid volatility in many ways. If you

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Speaker 1: think about what the CFOs and the board of directors

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Speaker 1: that these companies would preach, they're talking about wanting to

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Speaker 1: expand multiples in ways the volatile as a component can

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Speaker 1: be minimized.

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Speaker 2: Right.

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Speaker 1: It's very rare for Wall Street CFOs to embrace volatility

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Speaker 1: as a feature of something they're trying to engineer as

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Speaker 1: part of the stock of anything. They're trying to repress it.

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Speaker 1: And so the challenge is if you bring bitcoin onto

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Speaker 1: your balance sheet, it does bring volatility as we've now

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Speaker 1: seen it with micro Strategy and others, and most corporate

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Speaker 1: CFOs are not trained to embrace that as an opportunity.

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Speaker 1: They think of that more as a cost of capital

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Speaker 1: decay that otherwise their own investors may not appreciate, which is,

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Speaker 1: you know, the fundamental challenge with companies like Microsoft, where

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Speaker 1: there's a clear underwriting framework for how to think about

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Speaker 1: that valuation metric, and you don't really want to rock

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Speaker 1: that boat too hard by bringing some exogenous factors, especially

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Speaker 1: if that exogerenest factor is something that Microsoft can't control,

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Speaker 1: and of course Microsoft cannot control bitcoins price.

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Speaker 3: Is it also because you know, the market cap of

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Speaker 3: their company trillion dollars, two trillion dollars is so big

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Speaker 3: that even if they were to put ten twenty percent

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Speaker 3: of their balance sheet into bitcoin, maybe it doesn't move

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Speaker 3: it enough.

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Speaker 1: It's a little bit of, I think, both economic and

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Speaker 1: a cultural gap.

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Speaker 2: The cultural gap, I think is actually.

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Speaker 1: More important, which is that there's a little bit of

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Speaker 1: what I call the asymmetric downside to adoption for companies

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Speaker 1: like the Mac seven right, which is, there aren't many

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Speaker 1: companies who are willing to tolerate that risk as an

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Speaker 1: upside capture when they're underwriting the whole business to be

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Speaker 1: tangibly valued in a different format. And so you actually

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Speaker 1: in that fashion is what I call typically short to put,

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Speaker 1: you have a lot of downside, potentially unlimited downside, and

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Speaker 1: very little upside capture, right and so I think that

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Speaker 1: cultural gap is a big part of it. The other thing, though,

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Speaker 1: that will change over time, and I do think companies

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Speaker 1: will wake up to this as other bitcoin treasure companies

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Speaker 1: adopt these standards, is there is a generational trend that

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Speaker 1: is happening with young people growing up and young people

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Speaker 1: voting with their capital to buy stocks they like right

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Speaker 1: Game Step being a great example of that evolution that

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Speaker 1: we saw in twenty twenty and beyond. So I think

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Speaker 1: there will come a moment when these companies realize that

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Speaker 1: having bitcoin on their balance sheet, despite maybe the little

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Speaker 1: bit of the loss with the incumbent investors today, the

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Speaker 1: upside of new investors that are excited by saying, oh,

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Speaker 1: I'm aligned with this company's eat those in values because

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Speaker 1: they believe what I believe, which is bitcoin is the future.

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Speaker 1: That can also I think be a huge tailwind and

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Speaker 1: we're kind of living I think moments of these inflections,

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Speaker 1: because right now it's the very nacent companies that are

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Speaker 1: adopting it. But once they show the path, then I

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Speaker 1: think you'll start to see kind of the level ups

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Speaker 1: of other companies that are more mid tier going into it.

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Speaker 1: And of course the very last will be the most

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Speaker 1: to lose the incumbent types.

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Speaker 3: Not that this really applies to the treasure strategies, but

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Speaker 3: maybe a little bit. But here we're at the Bickcoin

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Speaker 3: conference and just this morning, the i think it was

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Speaker 3: the president of the Steak and Shake was up up

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Speaker 3: there talking on the stage and you were talking about

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Speaker 3: how they started accepting bitcoin and the uptick in business

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Speaker 3: they've got from that. Right to your point, people being

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Speaker 3: aligned ideologically with where they want to spend their money

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Speaker 3: sort of makes sense. Maybe a company like Apple, maybe

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Speaker 3: it repels as many people as the tracks or something

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Speaker 3: like that.

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Speaker 2: It's it's a little bit different.

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Speaker 3: But so then those businesses have their own finance, their

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Speaker 3: own business model. But then it seems like we see

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Speaker 3: other companies you mentioned game Stop who sort of have

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Speaker 3: like a dead business, a failing business. Maybe it's still

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Speaker 3: some revenue, some money on the balance sheet and they're

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Speaker 3: not sure what's next for them, and maybe this is

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Speaker 3: like a pretty good option for them. Are those the

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Speaker 3: companies you see that are sort of like righte for.

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Speaker 2: This, Yeah, I think so. I think that's right.

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Speaker 1: What we're seeing is a slow evolution of what people

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Speaker 1: will imagine the dynam is in behind this bitcoin treasury

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Speaker 1: companies to be right in the sense at the very beginning,

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Speaker 1: we started with strategy, which essentially is nothing but at

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Speaker 1: this point a bitcoin holding company with some financialization features.

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Speaker 1: And then I think what you're now going to see

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Speaker 1: is game stop. Even though it is a secularly challenged business,

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Speaker 1: it is a real business, is real cash flow, and

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Speaker 1: it's a consumer facing business actually unlike micro strategy, which

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Speaker 1: is B to B and so the wave of companies

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Speaker 1: that have a consumer facing aspect to which they can

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Speaker 1: onboard new customers by leveraging bitcoin as part of their

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Speaker 1: value alignment, I think.

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Speaker 2: Is what we're going to start seeing.

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Speaker 1: I would almost echo that the excitement people have seen

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Speaker 1: around Nakamoto, the other bitcoin treasury company that was announced recently,

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Speaker 1: is similar, which is that that's actually a real operating business.

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Speaker 1: That's why we're here. The Bitcoin conference generates revenue. Imagine

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Speaker 1: aligning the revenue opportunity of a bitcoin centric and adjacent

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Speaker 1: company with the ability to add leverage to the bitcoin

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Speaker 1: treasury strategy. That's a one plus one dynamic for which

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Speaker 1: I think it's potentially greater than two, and we have

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Speaker 1: not yet seen it. So I think what we're going

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Speaker 1: to see is different kinds of consumer facing bitcoin centric

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Speaker 1: companies also adopt the treasury strategy because that then diagram

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Speaker 1: is actually pretty pretty powerful and overlap.

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Speaker 3: So then when I look at Strategy formerly micro Strategy,

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Speaker 3: their stock, the mstr sort of seems to be the product, right,

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Speaker 3: their stock is the product. Now they have Strike and Stripe,

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Speaker 3: so now they have like three financial products out there,

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Speaker 3: and so when I look at these, it's like, well,

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Speaker 3: I guess they're financial engineering a new product with a

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Speaker 3: new asset. But I guess maybe what you're saying is

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Speaker 3: there is probably even more synergy when you can actually

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Speaker 3: combine an actual business with that strategy, so not just

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Speaker 3: releasing the financial product, but then having some underlying business

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Speaker 3: that creates cash FLOWSTA and continue to multiply that.

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Speaker 2: Yeah, yeah, that's right.

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Speaker 1: I think strategy is so unique because the product, as

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Speaker 1: you said up perfectly is the stock and what is

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Speaker 1: the stock. It's the most liquid trading stock in the

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Speaker 1: capital markets, it has the deepest options market. It has

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Speaker 1: a lot of other financially engineered products that have come

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Speaker 1: online in the back of the stock yield strategies that

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Speaker 1: are engaged in cover cost selling, including bitwise having launched

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Speaker 1: them recently, as well as these two X celebrity tfs

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Speaker 1: and vice versa. So strategy for sure is the underlying

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Speaker 1: engine for a lot of the opportunities that are coming

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Speaker 1: a line in the capital markets through bitcoin. But that

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Speaker 1: is in itself a pretty unique advantage for being early

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Speaker 1: for saleor to have a mass that critical scale. The

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Speaker 1: next companies that come online, if you're going to compete

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Speaker 1: within the same jurisdiction, we'll have to think a little

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Speaker 1: bit differently. I do think there will be a strategy

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Speaker 1: clone per global jurisdictions everywhere in the world where there

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Speaker 1: is a deep capital markets of investors looking for bitcoin

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Speaker 1: exposure in a regulated way that they understand through securities law.

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Speaker 1: But within the US markets, for example, you're going to

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Speaker 1: have different kinds of companies come to the opportunity set

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Speaker 1: and they're going to approach it a little bit differently.

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Speaker 3: So then we have like Metaplant in Japan, so they're

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Speaker 3: sort of following just a micro strategy.

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Speaker 2: Playbook put in a different capital market.

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Speaker 3: Yeah, and so we could probably run that, and I

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Speaker 3: think actually Nakamoto has been publicly vocal about wanting to

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Speaker 3: do that in niche market. So we know there's some

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Speaker 3: popping up down in Brazil. We'll be hearing some about

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Speaker 3: India here pretty soon, and so different capital markets, but

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Speaker 3: in sort of the North American market, then they need

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Speaker 3: to have different spins on them, sort of to what

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Speaker 3: Knacomoto is doing by wrapping this business in or maybe

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Speaker 3: can't or cantor was the equity partners sort of probably

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Speaker 3: looks like some maybe financial products in there.

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Speaker 2: Yeah, something like that. Yeah, yeah, yeah, that's right.

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Speaker 1: And I think ultimately the line will start blurring where

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Speaker 1: people are going to think of bitcoin as an asset

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Speaker 1: that is beating the cost of capital that they could

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Speaker 1: potentially reinvest into the ROE. So what I mean by

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Speaker 1: this is if you have a real business and you

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Speaker 1: have the opportunity to say, hey, actually if I sell

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Speaker 1: my bitcoin to take those cash proceeds reinvest in my business,

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Speaker 1: that's going to drive a higher ROE, then potentially the

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Speaker 1: price of bitcoin in itself. You could imagine people making

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Speaker 1: those capital allocation strategies on a pretty dynamic level. Some

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Speaker 1: would argue it'd be hard to op perform bitcoin anyway,

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Speaker 1: so that Roe calculation would have to be pretty pretty

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Speaker 1: specific for that value proposition. But I think if the

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Speaker 1: companies are built on the backbone of bitcoin, where their

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Speaker 1: revenue is directly related to bitcoin price, you could imagine

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Speaker 1: that being actually fairly correlated, and you could imagine there

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Speaker 1: is a higher ROE to invest in the equity of

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Speaker 1: the business by actually selling some bitcoin, which actually historically

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Speaker 1: has never been done before, right strategy never.

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Speaker 2: Is selling the bitcoin to buy the stock back.

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Speaker 1: Not even necessarily to buy the stockback because that's a

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Speaker 1: kind of a dividend to existing investors, but I mean

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Speaker 1: even to the idea of like using that to reinvest

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Speaker 1: in the business itself in an operating level to drive

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Speaker 1: higher ROE. Got it.

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Speaker 3: Yeah, yeah, selln the bitcoin to invest in the business

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Speaker 3: and the business creates more income which than buy is

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Speaker 3: market Yeah, yeah, yeah, exactly. I think that's maybe what

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Speaker 3: sort of CP's been talking about. So now we have

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Speaker 3: it seems like, I mean, doesn't seem like there are

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Speaker 3: all these new terms and terminologies and waste and measure

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Speaker 3: these You mentioned financial metrics before, so the BPS, the torque, the.

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Speaker 2: M now, etc.

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Speaker 3: Right, So, like, what is the problem that traditional investors

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Speaker 3: have looking at these new companies and trying to understand them.

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Speaker 2: Yeah, great question.

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Speaker 1: The most significant trouble that traditional investors have is they

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Speaker 1: have never understood financial accounting with the denomination of accounting

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Speaker 1: being bitcoin based. So a lot of these metrics are

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Speaker 1: being reported in ways to retrain investors' minds to consider

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Speaker 1: the foundation of the base layer for your economic calculation

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Speaker 1: to be bitcoin itself. So everything you mentioned bitcoin for sure, bitcoin.

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Speaker 1: You know, this is this idea of accruing more bitcoin

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Speaker 1: at a level in which that rate of acceleration is

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Speaker 1: additive regardless of what the price of bitcoin itself is,

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Speaker 1: because your unit account is bitcoin.

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Speaker 2: That's a pretty challenging.

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Speaker 1: Thing because most companies are actually still traded on the

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Speaker 1: dollar basis, and investors think about their returns on a

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Speaker 1: dollar basis.

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Speaker 2: So that's the first part. The second part is before

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Speaker 2: you move to the second part.

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Speaker 3: So then what you're saying is that investor sort of

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Speaker 3: needs to believe in the long term vision of bitcoin. Yeah,

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Speaker 3: because if they're going to be on a bitcoin unit

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Speaker 3: account as opposed to a dollar then sort of regardless

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Speaker 3: of what the US dollar valuation of the stock is,

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Speaker 3: as long as the bitcoin is accumulating, then they should

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Speaker 3: be okay with that, right, And so if they don't

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Speaker 3: believe in that long term vision.

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Speaker 2: Then it's hard to get by in that.

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Speaker 1: That's right, especially if you're a long only investor and

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Speaker 1: not running a market neutral strategy. In the back of it,

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Speaker 1: it's actually critical that investors understand this is a bet.

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Speaker 2: On bitcoin ultimately. Yes. Yes.

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Speaker 1: And the second part that I think traditional investors struggle

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Speaker 1: with is that there is a classical training of how

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Speaker 1: to imagine what the capital structure should look like of

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Speaker 1: a normal operating company, which is that at the top

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Speaker 1: there as senior secured creditors. Maybe then you'll have senior

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Speaker 1: unsecured creditors, then you'll have junior, you'll have converts, you'll

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Speaker 1: have preferred equity, you'll have stock, and actually, very at

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Speaker 1: the very top, you might even have you know, customer

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Speaker 1: vendor claims things like that, which actually are the first

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Speaker 1: to be paid in the event of a bankruptcy. So

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Speaker 1: there's actually a way that traditional investors think about the

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Speaker 1: distribution of value in which different liabilities attached to the

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Speaker 1: assets with a priority waterfall. Okay, what we're seeing with

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Speaker 1: these bitcoin treasury companies is flipping that model upside down.

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Speaker 1: And that's actually what I think Sailor has been doing

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Speaker 1: in a way that has never been done before, which

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Speaker 1: is introducing these ideas of having different kinds of leans

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Speaker 1: towards that waterfall, but not necessarily having a packaged.

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Speaker 2: In the way traditional investors would expect.

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Speaker 1: For example, if you're a fixed and come investor, generally,

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Speaker 1: what you want to think is you want to turn

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Speaker 1: out your yields, so you want to know how much

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Speaker 1: you get paid over a duration, so you want a

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Speaker 1: maturity date. And then two, you want the ability to

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Speaker 1: have some kind of covenant or collateral to be able

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Speaker 1: to attach to the acid in the event that you

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Speaker 1: feel that gives you more protection than the juniorized equity. Right,

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Speaker 1: preferred equity as sale has issued have almost none of

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Speaker 1: those features. Right, it doesn't have an exploration date. They

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Speaker 1: are actually perpetual instruments that pay cash coupon. And then

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Speaker 1: it doesn't even have actually the ability to collateralize the

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Speaker 1: asset directly, even though you're slightly more senior than the equity.

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Speaker 1: And these are considered at this level fixed income instruments,

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Speaker 1: unconventional as it may be, and that is actually something

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Speaker 1: traditional investors have a very hard time wrapping the head around.

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Speaker 1: Is it rated by Moodies?

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Speaker 2: No? Oh, then how do I assess it? You know,

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Speaker 2: does it have a term?

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Speaker 1: You know, what's the actual corporate credits spread looking like

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Speaker 1: versus Gouvey's And you can't do those calculations easily with

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Speaker 1: these bitcoin backed bonds and companies.

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Speaker 3: What about also when you think about the growth of

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Speaker 3: these companies to your point sort of being on a

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Speaker 3: bitcoin standard, you have to believe in sort of that

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Speaker 3: long term vision. But when you're trying to think of

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Speaker 3: you know, I have a venture fund, and so we

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Speaker 3: think about what will the market size be.

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Speaker 2: In five or ten years and what percentage of that

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Speaker 2: market can we capture.

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Speaker 3: So then we have to sort of think like, Okay,

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Speaker 3: if this company's going to grow its revenue, its profits,

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Speaker 3: what markets are going into and then how big will

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Speaker 3: the bitcoin valuation of the balance sheet but also the

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Speaker 3: size of that market be in the future. To try

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Speaker 3: to think about it somehow like that, trying to sort

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Speaker 3: of future cast the price.

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Speaker 1: Yeah, yeah, I think that's a great question. It goes

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Speaker 1: back to something we started our conversation with, which is

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Speaker 1: what is the endgame for these bitcoin treasury companies?

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Speaker 2: Right?

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Speaker 1: And so for company again like Sailor and twenty one Capital,

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Speaker 1: the financialization, right, the hyper bitcoinization.

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Speaker 2: If you will, is in itself the theme.

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Speaker 1: But not everyone can do it, and there is going

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Speaker 1: to be a long tail of other companies that are

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Speaker 1: adopting the bitcoin standard, but their value propositions is going

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Speaker 1: to look different. And I think ultimately this is what

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Speaker 1: it's going to come down to. I think, as I

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Speaker 1: have seen the universe of companies who have bought piccorn

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Speaker 1: the balance sheet at a global level, there are some

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Speaker 1: common traits that exist within the corporate capital structure and

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Speaker 1: the executive team behind these f words. One is they

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Speaker 1: tend to be founder led companies because you actually can't

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Speaker 1: do this very easily without the social capital of having

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Speaker 1: been the founder of the entity to which you can

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Speaker 1: convince your board. And the second thing is these are

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Speaker 1: pretty radical individuals that are visionaries at some level about

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Speaker 1: wanting to see what the future might look different, and

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Speaker 1: so I think ultimate trend people will see is just

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Speaker 1: the same way that internet companies was not a thing

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Speaker 1: in nineteen ninety nine and beyond those who were able

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Speaker 1: to kind of still sniff around that opportunity in that moment,

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Speaker 1: despite the drawdown, we're the ones that would emerge and

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Speaker 1: be incredibly successful in the future. Right, So it's not

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Speaker 1: even about the bitcoin price anymore. At that point, you're

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Speaker 1: kind of betting on the human capital of people who

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Speaker 1: understand something very deeply about a technological breakthrough that's going

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Speaker 1: to create value for the equity in almost entirely different ways.

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Speaker 1: And so the thing that we're really excited about a

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Speaker 1: bit why, which is why we launched O and B,

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Speaker 1: which is our ETF that tracks on a rules based

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Speaker 1: companies that have more than one thousand bitcoin on their

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Speaker 1: balance sheet, is because it gives you a chance to

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Speaker 1: invest on a diversified basis a variety of these leaders.

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Speaker 3: So for companies that have more than a thousand big

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Speaker 3: one on their balance sheet, then they get included into

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Speaker 3: this the ATF fasket.

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Speaker 2: Yeah.

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Speaker 1: Yeah, So we have an index and it is the

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Speaker 1: bit Wise Bitcoin Corporate Standard Index, for which the methodology

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Speaker 1: is that we actually market kept weight their exposure based

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Speaker 1: on bitcoin holdings at a certain level.

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Speaker 2: Whether it's on the balance sheet or it's a treasury strategy, either.

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Speaker 3: Way, either way, Yeah, yeah, that must be crushing it

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Speaker 3: right now.

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Speaker 2: It's very popular.

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Speaker 1: It's very popular because I think for the theme of

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Speaker 1: what we're living in today, it is absolutely sensical that

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Speaker 1: you might want to have that kind of exposure. But

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Speaker 1: the other reason is, look, you and I we spend

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Speaker 1: our time professionally looking at these crypto markets twenty four

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Speaker 1: to seven, but a vast majority, vast majority of financial

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Speaker 1: advisors and high networks and retail investors they don't spend

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Speaker 1: that much time looking at crypto and so when you

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Speaker 1: look at the long tail of the thirty plus companies

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Speaker 1: that could exist in this index, they don't know ninety

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Speaker 1: percent of it, right, And you actually want exposure in

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Speaker 1: these smaller companies because it is the smaller companies that

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Speaker 1: actually have the chance to outperform the most based on

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Speaker 1: the capital denomination of the microcaps.

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Speaker 2: Yeah, so you know, we're seeing.

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Speaker 3: To your point that you have the index the top

402
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Speaker 3: thirty companies is about where the thousand mark is.

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Speaker 2: I guess right, thousand Bitcoin Bitcoin.

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Speaker 3: Yeah, a lot thirty companies, But it seems like, you know,

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Speaker 3: the last couple of weeks, there's been a lot of

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Speaker 3: announcements coming out. You know, obviously the Knakamoto, Kindly Nakamoto,

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Speaker 3: the CEP, et cetera. Some of the guys here at Utxosys,

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Speaker 3: they're looking at like a dozen a day of new

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Speaker 3: ones popping up. So one thing that we're hearing quite

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Speaker 3: a bit is is it getting too overinflated? Is there

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Speaker 3: a bubble coming in? Something like that? To me, it

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Speaker 3: seems way too early to be called in that. But

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Speaker 3: what would you say.

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Speaker 1: I think there is a lot of exuberance, and with exuberance,

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Speaker 1: of course, comes to notion of their potentially being a bubble.

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Speaker 1: And I think investors should definitely be careful in wanting

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Speaker 1: to approach this market with some discipline and financial principles

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Speaker 1: that are able to justify their investing strategies and efforts.

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Speaker 1: At the same time, something I've spoken about prolifically is the.

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Speaker 2: Game of investing has changed.

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Speaker 1: Actually, you know, I grew up kind of being taught

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Speaker 1: the intelligent investor Benjamin Grand model, Buffet model. But actually

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Speaker 1: I would say ever since my career started in two

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Speaker 1: thousand and eight posted global financial crisis. The world has

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Speaker 1: changed where those fundamental principles are becoming less important, and

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Speaker 1: we're actually living in.

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Speaker 2: A world where the.

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Speaker 1: Sovereign flows, the corporate flows, like these cross border flows

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Speaker 1: across the monetary order being rapidly changing, are almost the

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Speaker 1: dominant driver.

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Speaker 2: Right. You saw it with QI, you saw it with COVID.

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Speaker 1: A lot of the things that are happening is not

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Speaker 1: really anymore related to the fundamental earnings power or the

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Speaker 1: growth of these individual securities. If anything, equities have become

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Speaker 1: an indexed basket to battle inflation. So many people kind

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Speaker 1: of joke about, you know, whether bitcoin will ever be

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Speaker 1: not correlated to equities.

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Speaker 2: I put it the other way around.

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Speaker 1: I think, actually it's equities that's becoming more correlated with bitcoin,

440
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Speaker 1: because equities is also becoming this place to store your

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Speaker 1: wealth to find the fastest escape velocity to the fiscal

442
00:21:41,680 --> 00:21:44,719
Speaker 1: dominance that we are experiencing across the world. And so

443
00:21:44,960 --> 00:21:49,320
Speaker 1: from that perspective, the opportunity to invest early in those

444
00:21:49,320 --> 00:21:53,200
Speaker 1: moments and trend and momentum is a skill, and I

445
00:21:53,280 --> 00:21:57,520
Speaker 1: think young people are not necessarily blind to those having

446
00:21:57,560 --> 00:22:01,000
Speaker 1: been the more interesting ways to to participate in the

447
00:22:01,000 --> 00:22:04,840
Speaker 1: financial opportunity. So I try to be very level headed

448
00:22:04,920 --> 00:22:08,919
Speaker 1: about sharing that it does require some discipline. But at

449
00:22:08,920 --> 00:22:14,760
Speaker 1: the same time, you'd also be incorrect if you're spewing

450
00:22:14,800 --> 00:22:18,120
Speaker 1: that these companies are worthless because the DCF model dosn'

451
00:22:18,119 --> 00:22:21,560
Speaker 1: support X, y Z, when in fact there's other kind

452
00:22:21,600 --> 00:22:23,439
Speaker 1: of things that are driving the markets and ways that

453
00:22:23,440 --> 00:22:25,480
Speaker 1: I think some retail investors are very clever about.

454
00:22:25,680 --> 00:22:29,680
Speaker 3: Yeah, I would say, to the point of it being

455
00:22:29,720 --> 00:22:32,800
Speaker 3: a bubble. At the same time too, it's like how

456
00:22:32,880 --> 00:22:36,480
Speaker 3: much of the ecosystem does X even represent? And Bigcoe

457
00:22:36,520 --> 00:22:38,760
Speaker 3: represent of that? And then child your companies even of that,

458
00:22:38,880 --> 00:22:40,760
Speaker 3: and so while it seems like the echo chamber is allowed,

459
00:22:40,760 --> 00:22:42,320
Speaker 3: at the same time it's like relatively small.

460
00:22:42,840 --> 00:22:43,560
Speaker 2: But I'm curious.

461
00:22:44,800 --> 00:22:48,399
Speaker 3: So if micro strategy of MSCR is the product, and

462
00:22:48,400 --> 00:22:51,440
Speaker 3: then strike and strife are the products, and then each

463
00:22:51,480 --> 00:22:54,200
Speaker 3: one of these companies is sort of a new product,

464
00:22:54,280 --> 00:22:57,120
Speaker 3: if you will, Right, So they have some little differences

465
00:22:57,160 --> 00:22:59,680
Speaker 3: in the underlying business model and the difference in there's

466
00:22:59,720 --> 00:23:01,520
Speaker 3: treasure strategy, but then at the end of the day,

467
00:23:01,520 --> 00:23:04,880
Speaker 3: they're like financial the chicker basically is the product, right,

468
00:23:04,920 --> 00:23:07,479
Speaker 3: So then how many financial products can we have in

469
00:23:07,480 --> 00:23:10,200
Speaker 3: the market, Like if I almost look at them, almost

470
00:23:10,200 --> 00:23:12,119
Speaker 3: like I don't want to say an ETF, but you

471
00:23:12,119 --> 00:23:13,240
Speaker 3: know it's a new financial product.

472
00:23:13,320 --> 00:23:15,240
Speaker 2: Like how many of those can the market? There? Totally?

473
00:23:15,320 --> 00:23:18,320
Speaker 1: Totally, And this goes back to what the bubble we're

474
00:23:18,359 --> 00:23:21,240
Speaker 1: talking about actually is. I would say the bubble is

475
00:23:21,280 --> 00:23:25,240
Speaker 1: actually the hyper financialization of the capital markets in itself. Right, consider,

476
00:23:25,280 --> 00:23:28,040
Speaker 1: for example, that some of the most successful ETFs that

477
00:23:28,040 --> 00:23:33,080
Speaker 1: are coming to market these days are in conduits, investing

478
00:23:33,160 --> 00:23:38,080
Speaker 1: conduits to make all kinds of different bets that historically

479
00:23:38,080 --> 00:23:40,920
Speaker 1: have no correlation to that idea of a diversified basket

480
00:23:41,520 --> 00:23:45,200
Speaker 1: two x celebrity tfs, right, Actually, one of the most

481
00:23:45,600 --> 00:23:47,920
Speaker 1: high performing ETF I think the one that was the

482
00:23:48,000 --> 00:23:51,440
Speaker 1: highest performing ATF that actually beat bitcoins priced last year

483
00:23:52,080 --> 00:23:53,159
Speaker 1: was the Nvidia.

484
00:23:52,800 --> 00:23:55,359
Speaker 2: Two x celebritytf Yeah, it makes sense.

485
00:23:55,400 --> 00:24:00,119
Speaker 1: And so that hyper financialization in itself is in it

486
00:24:00,160 --> 00:24:03,080
Speaker 1: is a reflection of kind of the state of our

487
00:24:03,080 --> 00:24:04,879
Speaker 1: society today, whether you like it or not.

488
00:24:04,920 --> 00:24:07,880
Speaker 2: I mean, we're in Vegas, just walk out, that's exactly right.

489
00:24:08,240 --> 00:24:11,520
Speaker 1: And I mean think about zero day experty options as well.

490
00:24:11,800 --> 00:24:14,639
Speaker 1: Those things have become popularized last year, and I believe

491
00:24:14,720 --> 00:24:18,440
Speaker 1: at last summer the zero day expery options for both

492
00:24:18,480 --> 00:24:20,840
Speaker 1: the SMP and AS that now account for more than

493
00:24:20,880 --> 00:24:24,480
Speaker 1: fifty percent of the options volume in total. Imagine that

494
00:24:24,520 --> 00:24:28,520
Speaker 1: people are now treading zero day expery options and there's

495
00:24:28,560 --> 00:24:33,879
Speaker 1: now conversations in DC to permit singlely options that are

496
00:24:33,920 --> 00:24:37,240
Speaker 1: going to have Monday experis, Wednesday experts and Friday expertis.

497
00:24:38,040 --> 00:24:40,280
Speaker 2: Some would say, wow, isn't that a little too much?

498
00:24:40,359 --> 00:24:41,000
Speaker 2: Like why do we.

499
00:24:40,920 --> 00:24:44,560
Speaker 1: Need such specificity about managing risk at this level? But

500
00:24:45,080 --> 00:24:47,760
Speaker 1: if you are arguing about that, you're already lost. That's

501
00:24:47,800 --> 00:24:51,240
Speaker 1: where the world is going. And so in a way,

502
00:24:51,920 --> 00:24:56,280
Speaker 1: strategy and these companies that are financializing the product as

503
00:24:56,320 --> 00:24:59,960
Speaker 1: the stock, it's not new in the sense that those

504
00:25:00,080 --> 00:25:02,800
Speaker 1: signs have already been present for a long time in

505
00:25:02,880 --> 00:25:04,119
Speaker 1: where the capital markets.

506
00:25:03,880 --> 00:25:05,719
Speaker 2: Is evolving into It just happens.

507
00:25:05,720 --> 00:25:08,719
Speaker 1: So that bitcoin is the best asset to do this

508
00:25:08,840 --> 00:25:11,960
Speaker 1: because one it's extremely volatile, which is very good for

509
00:25:12,040 --> 00:25:16,320
Speaker 1: hyper financialization, and two, the belief that bitcoin can also

510
00:25:16,359 --> 00:25:20,160
Speaker 1: be pristine collateral, unlike stocks themselves, lend you the ability

511
00:25:20,160 --> 00:25:23,680
Speaker 1: to imagine it like a credit asset, and credit assets

512
00:25:23,720 --> 00:25:27,240
Speaker 1: generally are not very volatile. So bitcoin gets the opportunity

513
00:25:27,359 --> 00:25:30,400
Speaker 1: to live in both worlds where you imagine it's pristine collateral,

514
00:25:30,760 --> 00:25:32,760
Speaker 1: but I'm also going to give you a heck of

515
00:25:32,800 --> 00:25:35,720
Speaker 1: a volatility for you to optimize around your beforeier construction.

516
00:25:36,320 --> 00:25:39,080
Speaker 3: So would you say that we have the first new

517
00:25:39,119 --> 00:25:43,240
Speaker 3: financial asset in whatever five hundred years, and when we

518
00:25:43,280 --> 00:25:45,520
Speaker 3: try to understand those things as humans, we compare them

519
00:25:45,520 --> 00:25:46,800
Speaker 3: so it's sort of like this, it's sort of like this,

520
00:25:46,960 --> 00:25:48,879
Speaker 3: sort of like this, but it's actually something completely different.

521
00:25:48,880 --> 00:25:50,280
Speaker 3: And then that gives us a new set of building

522
00:25:50,280 --> 00:25:52,520
Speaker 3: blocks to build things that we haven't imagined before. And

523
00:25:52,600 --> 00:25:55,600
Speaker 3: so we're maybe just barely scratching the surface of what

524
00:25:55,640 --> 00:25:56,920
Speaker 3: we could do with an asset like this.

525
00:25:57,960 --> 00:25:58,720
Speaker 2: Exactly right.

526
00:25:59,280 --> 00:26:03,600
Speaker 1: I think challenge that investors have faced so far is

527
00:26:04,119 --> 00:26:07,840
Speaker 1: because bitcoin is so volatile, and because it's also technically

528
00:26:07,880 --> 00:26:10,320
Speaker 1: a very unproductive asset today in the sense that it

529
00:26:10,320 --> 00:26:14,840
Speaker 1: doesn't really generate yield, it's actually not participating in the

530
00:26:14,960 --> 00:26:20,439
Speaker 1: actual growth economy in a tangible contribution. There hasn't been

531
00:26:20,480 --> 00:26:24,000
Speaker 1: an ability to imagine credit provisioning for bitcoin in a

532
00:26:24,040 --> 00:26:28,720
Speaker 1: sound way, and so I think, as we all know,

533
00:26:28,800 --> 00:26:31,920
Speaker 1: the credit markets actually the fuel that drives a lot

534
00:26:31,960 --> 00:26:37,760
Speaker 1: of the opportunities, especially when it comes to securitization models

535
00:26:39,440 --> 00:26:43,560
Speaker 1: and long term investors that are insurance companies who want

536
00:26:43,560 --> 00:26:46,760
Speaker 1: something more stable to earn off of something like bitcoin,

537
00:26:47,000 --> 00:26:50,040
Speaker 1: and we haven't seen those opportunities yet. And the challenge

538
00:26:50,080 --> 00:26:54,080
Speaker 1: is there's really two credit models that are groomed within

539
00:26:54,119 --> 00:26:59,800
Speaker 1: the traditional finance industry. One is the Moody's SMP version

540
00:27:00,080 --> 00:27:03,959
Speaker 1: based on the strength of the operating company, So if

541
00:27:03,960 --> 00:27:07,119
Speaker 1: the operating company has cash flows that is underwriteable, you

542
00:27:07,200 --> 00:27:09,640
Speaker 1: can assign some kind of credit rating to that according

543
00:27:09,680 --> 00:27:13,879
Speaker 1: to their capitalization. The other model is the asset backed model,

544
00:27:14,280 --> 00:27:16,679
Speaker 1: which is the business of actually taking a bunch of

545
00:27:16,680 --> 00:27:20,159
Speaker 1: different collaterals that are asset backed and securitizing it in

546
00:27:20,160 --> 00:27:23,200
Speaker 1: the ways you can give ratings based on the structure

547
00:27:23,440 --> 00:27:26,199
Speaker 1: and the soundness of that structure in itself, which now

548
00:27:26,240 --> 00:27:30,800
Speaker 1: we're talking about collateralized asset lending, and to date we

549
00:27:30,880 --> 00:27:34,000
Speaker 1: haven't seen a lot of collateralized lending on bitcoin assets

550
00:27:34,000 --> 00:27:36,919
Speaker 1: come to market in a very institutional way. But I

551
00:27:36,920 --> 00:27:39,640
Speaker 1: think that's the other big trend that is happening. People

552
00:27:39,680 --> 00:27:42,240
Speaker 1: are immensely focused on bitcoin treasury companies right now, at

553
00:27:42,280 --> 00:27:44,480
Speaker 1: the equity level. But the other big trend that I'm

554
00:27:44,480 --> 00:27:47,880
Speaker 1: seeing and Canter I believe, also recently announced that they

555
00:27:47,920 --> 00:27:51,160
Speaker 1: are going big in a way to provide institutional lending

556
00:27:51,200 --> 00:27:54,399
Speaker 1: that is backed by bitcoin. That is the other big

557
00:27:54,480 --> 00:27:56,880
Speaker 1: tam that is going to be unlocked by bitcoin.

558
00:27:57,160 --> 00:27:58,480
Speaker 2: Let's stick into that a little bit.

559
00:27:58,520 --> 00:28:01,679
Speaker 3: So it was actually, I think last year at this

560
00:28:01,720 --> 00:28:05,159
Speaker 3: conference a two billion dollar line bitcoin credit line, and

561
00:28:05,240 --> 00:28:05,640
Speaker 3: I think it.

562
00:28:05,600 --> 00:28:07,879
Speaker 2: Was too sort of unlost started unlocking.

563
00:28:07,400 --> 00:28:10,679
Speaker 3: Some of this bitcoin liquidity that's in these corporate balance sheets.

564
00:28:12,440 --> 00:28:15,000
Speaker 2: But I mean, bitcoin lending is nothing new. We have

565
00:28:15,040 --> 00:28:16,800
Speaker 2: plenty of companies that are loaning against bitcoin.

566
00:28:17,040 --> 00:28:19,240
Speaker 3: Are you talking about it more from like pairing it

567
00:28:19,280 --> 00:28:22,520
Speaker 3: with other like loan products like real estate products, auto products,

568
00:28:22,560 --> 00:28:25,040
Speaker 3: things like that, or like how are you seeing that that, Pam.

569
00:28:25,040 --> 00:28:26,680
Speaker 2: Yeah, great question. Yeah.

570
00:28:26,800 --> 00:28:30,040
Speaker 1: Historically, the problem and the challenges with bitcoin in the

571
00:28:30,080 --> 00:28:33,480
Speaker 1: credit market has been that there really aren't many borrowers

572
00:28:33,520 --> 00:28:38,360
Speaker 1: looking for termed exposure to borrow the bitcoin or even

573
00:28:38,520 --> 00:28:40,920
Speaker 1: barrow dollars against it with termed.

574
00:28:40,680 --> 00:28:42,640
Speaker 2: Exposure that's the collateralized it. Yeah.

575
00:28:42,800 --> 00:28:46,120
Speaker 1: Yeah, yeah, because you know, take for example, the housing market.

576
00:28:46,160 --> 00:28:48,600
Speaker 1: The reason the mortgage market works is because people are

577
00:28:48,640 --> 00:28:51,920
Speaker 1: committing to borrow for thirty years in a fixed basis.

578
00:28:52,000 --> 00:28:54,600
Speaker 1: Of course there's refine and prepaid you can go forward with,

579
00:28:54,680 --> 00:28:59,560
Speaker 1: but the contract is long dated. Historically, the folks who

580
00:28:59,560 --> 00:29:03,680
Speaker 1: have been engage in these markets were not long term borrowers.

581
00:29:03,720 --> 00:29:08,080
Speaker 1: They tend to be market makers or traders who are

582
00:29:08,160 --> 00:29:11,800
Speaker 1: kind of coming for the fast moving opportunity set of arbitraging,

583
00:29:11,960 --> 00:29:15,479
Speaker 1: the inefficient yield ecosystem that can exist in DeFi and

584
00:29:15,480 --> 00:29:18,440
Speaker 1: potentially translated to the centralized finance system as well.

585
00:29:18,560 --> 00:29:18,880
Speaker 2: And so.

586
00:29:20,440 --> 00:29:23,200
Speaker 1: The only way to change the credit market is you

587
00:29:23,240 --> 00:29:28,000
Speaker 1: have to create a real demand function for long tenored borrowing.

588
00:29:30,080 --> 00:29:33,040
Speaker 1: And I think at some level that's a calculation on

589
00:29:33,040 --> 00:29:35,960
Speaker 1: an LTV basis as to how much you're willing to

590
00:29:35,960 --> 00:29:40,000
Speaker 1: take the possibility of default and impairment risk that institutions

591
00:29:40,000 --> 00:29:43,520
Speaker 1: are very good at underwriting these things for so, I

592
00:29:43,560 --> 00:29:45,520
Speaker 1: think the unlock you will come to see is that

593
00:29:45,600 --> 00:29:48,360
Speaker 1: hopefully there will be people that are borrowing with more

594
00:29:48,440 --> 00:29:53,080
Speaker 1: termed exposure than kind of the overnight or the spot

595
00:29:53,160 --> 00:29:56,280
Speaker 1: market in which you can't actually build a yield curve

596
00:29:56,640 --> 00:29:59,160
Speaker 1: on the back of bitcoin. So once you have a

597
00:29:59,240 --> 00:30:02,160
Speaker 1: yield curve on the back of bitcoin. I think that's

598
00:30:02,200 --> 00:30:04,080
Speaker 1: when you're going to see a lot of more interesting things.

599
00:30:04,560 --> 00:30:07,920
Speaker 3: I guess the problem would be because of the volatility

600
00:30:08,040 --> 00:30:10,120
Speaker 3: and not knowing where that appreciation is going to go

601
00:30:10,160 --> 00:30:12,760
Speaker 3: over the next term whatever three, five, ten, twenty years.

602
00:30:13,040 --> 00:30:15,480
Speaker 3: Then it's probably hard to set that interest rate without

603
00:30:15,520 --> 00:30:18,680
Speaker 3: knowing what that appreciation rate will be because I guess

604
00:30:18,760 --> 00:30:22,240
Speaker 3: number one and then number two, like typically we want

605
00:30:22,240 --> 00:30:25,360
Speaker 3: to borrow in FIAT because it's appreciating asset versus borrowing

606
00:30:25,400 --> 00:30:26,400
Speaker 3: and appreciating assets.

607
00:30:26,520 --> 00:30:28,680
Speaker 2: I think are those two challenges that you would see

608
00:30:28,680 --> 00:30:28,880
Speaker 2: in that.

609
00:30:29,480 --> 00:30:31,920
Speaker 1: Yeah, I think that is at the core the problem,

610
00:30:32,040 --> 00:30:38,560
Speaker 1: which is credit is generally not provisioned for very volatile assets.

611
00:30:37,800 --> 00:30:42,680
Speaker 1: And this is also I think the opportunity with DeFi,

612
00:30:42,840 --> 00:30:45,520
Speaker 1: which is that part of why credit underwriting is so

613
00:30:45,640 --> 00:30:50,760
Speaker 1: challenging for volatile assets is because it's historically been challenging

614
00:30:50,920 --> 00:30:55,600
Speaker 1: to liquidate those in ways to imagine avoidance of impairment, right,

615
00:30:55,680 --> 00:30:59,280
Speaker 1: you don't have real time visibility into the underlying performance

616
00:30:59,320 --> 00:31:03,640
Speaker 1: metrics of these receivables or these corporates. So if you

617
00:31:03,680 --> 00:31:08,760
Speaker 1: think about like student loan securitization or credit card receivable securitization,

618
00:31:09,520 --> 00:31:11,600
Speaker 1: it's on a lagging basis. You get to see the

619
00:31:11,680 --> 00:31:15,200
Speaker 1: underperformance of some of these loans, but the reporting is

620
00:31:15,240 --> 00:31:18,320
Speaker 1: delayed and it's not very accurate, and it can be fudged,

621
00:31:18,440 --> 00:31:20,160
Speaker 1: and there's a lot of things you have to build.

622
00:31:20,160 --> 00:31:22,880
Speaker 1: Then a risk premium for the beauty of bitcoin is

623
00:31:22,920 --> 00:31:25,160
Speaker 1: actually you don't any of that. It's very transparent with

624
00:31:25,280 --> 00:31:28,160
Speaker 1: the prices, it's actually very easy to take ownership of

625
00:31:28,160 --> 00:31:30,840
Speaker 1: the collateral if you're structuring it the right way on

626
00:31:30,880 --> 00:31:35,200
Speaker 1: a custodial basis. And for all those reasons, you can

627
00:31:35,240 --> 00:31:41,320
Speaker 1: imagine despite the volatility, the ability to actually seize liquidation

628
00:31:41,680 --> 00:31:45,479
Speaker 1: in a way to avoid impairment as the lender in

629
00:31:45,520 --> 00:31:48,960
Speaker 1: itself is the unique feature too. People just haven't been

630
00:31:48,960 --> 00:31:51,200
Speaker 1: able to price that yet because we haven't been able

631
00:31:51,240 --> 00:31:56,960
Speaker 1: to bring those forthcoming abilities of DeFi for risk management purposes.

632
00:31:58,200 --> 00:32:02,160
Speaker 1: So people would say, yes, the volatility is higher, but

633
00:32:02,400 --> 00:32:04,520
Speaker 1: maybe it's offset by the fact that I can liquidate

634
00:32:04,560 --> 00:32:08,880
Speaker 1: this thing much more easily, much more transparently, without having

635
00:32:08,960 --> 00:32:11,120
Speaker 1: to enter into some kind of tri party agreement with

636
00:32:11,200 --> 00:32:13,480
Speaker 1: a creditor that I don't know. No, you're facing a

637
00:32:13,480 --> 00:32:16,000
Speaker 1: smart contract. Those kinds of things I think will be

638
00:32:16,040 --> 00:32:17,440
Speaker 1: unlocks we just haven't seen yet.

639
00:32:17,480 --> 00:32:21,600
Speaker 3: Yeah, yeah, it's gonna It's going to evolve pretty rapidly.

640
00:32:21,640 --> 00:32:23,000
Speaker 2: So now we have these treasury companies.

641
00:32:23,000 --> 00:32:25,600
Speaker 3: Going to go back to that topic something again your

642
00:32:25,600 --> 00:32:28,680
Speaker 3: fund bit. Why is you're tracking that as we talked about,

643
00:32:28,680 --> 00:32:30,320
Speaker 3: we have all these new companies that are popping in

644
00:32:30,520 --> 00:32:32,880
Speaker 3: and we're seeing them pop you know, three hundred percent,

645
00:32:33,000 --> 00:32:36,280
Speaker 3: five hundred percent, one thousand percent like relatively quickly. Like

646
00:32:36,320 --> 00:32:38,440
Speaker 3: I said, talk of the bubble and whatnot, a lot

647
00:32:38,480 --> 00:32:41,440
Speaker 3: of people think that sort of the fact you mentioned Benjaminraham,

648
00:32:41,520 --> 00:32:43,280
Speaker 3: sort of like a warm buffet quote, right, the rising

649
00:32:43,320 --> 00:32:44,959
Speaker 3: tide lifts all boats and when it when it goes out,

650
00:32:45,000 --> 00:32:49,440
Speaker 3: you seuse for me naked. So back to Bickuin's volatility

651
00:32:49,720 --> 00:32:52,200
Speaker 3: for your cycles maybe whatever that is a lot of

652
00:32:52,240 --> 00:32:53,960
Speaker 3: people are afraid of what may happen, you know, in

653
00:32:54,000 --> 00:32:55,680
Speaker 3: a big woing pullback, and how many of these companies

654
00:32:55,720 --> 00:32:56,480
Speaker 3: will be exposed.

655
00:32:57,240 --> 00:32:59,640
Speaker 2: It seems like strategy. I mean, there was.

656
00:32:59,640 --> 00:33:02,760
Speaker 3: Plenty calling for them they're going to be liquidated, Michael

657
00:33:02,760 --> 00:33:05,120
Speaker 3: Sims be forced to sell. Of course that wasn't the case,

658
00:33:05,160 --> 00:33:07,560
Speaker 3: but a lot of these newer ones maybe won't be

659
00:33:07,960 --> 00:33:10,720
Speaker 3: as safe. So what are you looking at in regards

660
00:33:10,760 --> 00:33:13,080
Speaker 3: to like risk management and potential dangers.

661
00:33:13,600 --> 00:33:14,600
Speaker 2: Yeah, great question.

662
00:33:16,000 --> 00:33:18,840
Speaker 1: You're absolutely correct that generally.

663
00:33:20,120 --> 00:33:21,880
Speaker 2: We live in a world where the.

664
00:33:21,840 --> 00:33:23,920
Speaker 1: Worst things you could ever imagine, we'll probably at some

665
00:33:24,040 --> 00:33:26,280
Speaker 1: level be abused by somebody. So you always have to

666
00:33:26,320 --> 00:33:28,040
Speaker 1: have that doubt in the back of your mind that

667
00:33:28,160 --> 00:33:29,760
Speaker 1: even though you want to avoid it, someone's going to

668
00:33:29,840 --> 00:33:31,800
Speaker 1: do it, and you have to prepare for that moment.

669
00:33:32,880 --> 00:33:35,040
Speaker 1: And that's kind of the entropy of the capital markets anyway.

670
00:33:35,080 --> 00:33:38,000
Speaker 1: This isn't even like a crypto specific thing. It just happens.

671
00:33:38,000 --> 00:33:42,360
Speaker 1: So when you have a creative financial market like the

672
00:33:42,440 --> 00:33:44,560
Speaker 1: United States promoting a lot of these virtues.

673
00:33:45,040 --> 00:33:51,680
Speaker 2: So the thing that I would highlight is really the long.

674
00:33:51,480 --> 00:33:56,320
Speaker 1: Term winner of these treasury companies are going to essentially

675
00:33:57,160 --> 00:33:59,600
Speaker 1: be able to garner investors who are a bitcoin aligned.

676
00:34:00,720 --> 00:34:03,880
Speaker 1: So I think it's going to be more critical, more

677
00:34:03,920 --> 00:34:07,680
Speaker 1: important than ever that the bitcoin treasure companies are able

678
00:34:07,720 --> 00:34:10,960
Speaker 1: to honor the things that bitcoiners really care about, which

679
00:34:11,000 --> 00:34:15,960
Speaker 1: is security and transparency. And then the third thing, which

680
00:34:15,960 --> 00:34:19,120
Speaker 1: I think is the most important thing, sovereignty. And we're

681
00:34:19,160 --> 00:34:21,799
Speaker 1: going to see a wave of companies that may not

682
00:34:21,840 --> 00:34:25,759
Speaker 1: recognize these features and may in fact abuse it. And

683
00:34:25,840 --> 00:34:29,520
Speaker 1: so from that perspective, I think just understanding what bitcoin

684
00:34:29,560 --> 00:34:32,000
Speaker 1: represents to us in ways that corporates can also adopt

685
00:34:32,000 --> 00:34:35,360
Speaker 1: it with similar alignment will be a pretty easy limits

686
00:34:35,480 --> 00:34:39,200
Speaker 1: test to understand how you want to navigate that journey security,

687
00:34:39,200 --> 00:34:42,520
Speaker 1: for example, being a situation where Hoddle being the driver

688
00:34:42,640 --> 00:34:46,000
Speaker 1: of how investors invest. You don't really want to invest

689
00:34:46,000 --> 00:34:50,440
Speaker 1: in a bitcoin treasure company that is engaging in re hypothication, right.

690
00:34:50,480 --> 00:34:53,400
Speaker 1: You don't want to have the situation where their creditors

691
00:34:53,440 --> 00:34:55,839
Speaker 1: do actually have leans against the bitcoin asset and can

692
00:34:55,840 --> 00:34:56,440
Speaker 1: liquidate you.

693
00:34:56,640 --> 00:34:58,839
Speaker 2: That's not what Hoddle is about. So that's not going

694
00:34:58,880 --> 00:35:00,360
Speaker 2: to fly. Transparen parncy.

695
00:35:01,040 --> 00:35:03,960
Speaker 1: There's been a lot of conversations about whether proof of

696
00:35:04,040 --> 00:35:07,120
Speaker 1: reserves should be brought upon for treasury companies, as it

697
00:35:07,160 --> 00:35:10,040
Speaker 1: has been brought on for exchanges as well, And there's

698
00:35:10,080 --> 00:35:14,160
Speaker 1: nuances to this conversation, which is that on the pro side,

699
00:35:14,280 --> 00:35:16,960
Speaker 1: there is something virtuous about what bitcoin unlocks in the

700
00:35:17,000 --> 00:35:20,359
Speaker 1: ability for us to have life transparency into holdings. But

701
00:35:20,520 --> 00:35:23,960
Speaker 1: these are also securities, right. These are not actually non

702
00:35:24,040 --> 00:35:27,400
Speaker 1: custodial wallets you and I have. These are securities, which

703
00:35:27,480 --> 00:35:30,920
Speaker 1: means there's a lot of other liabilities even away from

704
00:35:30,960 --> 00:35:33,760
Speaker 1: the proof of reserves that can exist in the corporate

705
00:35:33,800 --> 00:35:36,120
Speaker 1: structure that has nothing to do with crypto.

706
00:35:35,840 --> 00:35:37,680
Speaker 3: That could impair those even if we saw the accidens

707
00:35:37,719 --> 00:35:39,080
Speaker 3: there that they could be impaired.

708
00:35:38,800 --> 00:35:41,520
Speaker 1: By just the same way that the centralized exchanges would

709
00:35:41,560 --> 00:35:43,600
Speaker 1: show proof of reserve. But you knew that it meant

710
00:35:43,600 --> 00:35:45,400
Speaker 1: nothing two years ago because you don't know what's on

711
00:35:45,400 --> 00:35:48,160
Speaker 1: the other side of the liabilities, and so it's actually

712
00:35:48,239 --> 00:35:49,240
Speaker 1: not that useful.

713
00:35:50,960 --> 00:35:52,760
Speaker 2: But I think big coinners really.

714
00:35:52,600 --> 00:35:57,640
Speaker 1: Care about this, which is that whole motto of you know,

715
00:35:57,680 --> 00:36:02,600
Speaker 1: trust but verify, and you're going to see more companies

716
00:36:02,640 --> 00:36:05,440
Speaker 1: I think, innovate upon this custodial model as well to

717
00:36:05,480 --> 00:36:08,640
Speaker 1: show some level of transparency, and we're going to keep

718
00:36:08,640 --> 00:36:11,800
Speaker 1: pushing the curve on what's possible. They're mindful, of course,

719
00:36:11,920 --> 00:36:15,880
Speaker 1: of the securities law, for which there's unique challenges that

720
00:36:15,960 --> 00:36:19,640
Speaker 1: also come through the audit and the financial filings, the

721
00:36:19,680 --> 00:36:20,919
Speaker 1: tenk k's, the ten queues, etc.

722
00:36:21,840 --> 00:36:22,759
Speaker 2: And the sovereignty thing.

723
00:36:22,680 --> 00:36:26,080
Speaker 1: I think is really important because people really want to

724
00:36:26,120 --> 00:36:29,640
Speaker 1: know that when they buy a stock that you're buying

725
00:36:29,680 --> 00:36:32,480
Speaker 1: the stock and support of the management team who is

726
00:36:32,520 --> 00:36:37,520
Speaker 1: supporting bitcoin and not necessarily for another purpose. And I

727
00:36:37,560 --> 00:36:41,040
Speaker 1: think there's going to be more conversations around what exactly

728
00:36:41,080 --> 00:36:43,560
Speaker 1: how are you supporting bitcoin? You know, what kind of

729
00:36:43,560 --> 00:36:46,560
Speaker 1: contributions are you making to the community at large, whether

730
00:36:46,600 --> 00:36:49,759
Speaker 1: it's the developers or whether it's some kind of nonprofit

731
00:36:49,840 --> 00:36:52,319
Speaker 1: endeavors that are going on to help the ecosystem of

732
00:36:52,360 --> 00:36:54,920
Speaker 1: new entrepreneurs. But these things are going to become, I think,

733
00:36:55,239 --> 00:36:57,560
Speaker 1: a little bit more value aligned, the same way like

734
00:36:57,800 --> 00:37:01,040
Speaker 1: ESG investors were driven by values, right you bought companies

735
00:37:01,040 --> 00:37:03,920
Speaker 1: who bought into this estreet construct because it reflected what

736
00:37:03,960 --> 00:37:08,279
Speaker 1: you believed in promoting good environment, social governance factors. And

737
00:37:08,320 --> 00:37:10,160
Speaker 1: I think the same will be true, which is when

738
00:37:10,160 --> 00:37:13,440
Speaker 1: you say you're a bitcoin treasury, how are you promoting

739
00:37:13,440 --> 00:37:14,440
Speaker 1: bitcoin in the space.

740
00:37:15,200 --> 00:37:17,479
Speaker 3: And so we need to make sure that the team

741
00:37:17,600 --> 00:37:21,239
Speaker 3: is aligned a founder and the board because otherwise they

742
00:37:21,239 --> 00:37:23,840
Speaker 3: could sell or liquidate early.

743
00:37:24,200 --> 00:37:26,520
Speaker 2: Need to make sure that the investor base is also.

744
00:37:26,360 --> 00:37:29,279
Speaker 3: Aligned with the founder and the board and they have

745
00:37:29,360 --> 00:37:31,120
Speaker 3: that long term vision. If you get too many short

746
00:37:31,200 --> 00:37:33,480
Speaker 3: term thinkers and traders in there, then that could wreck things.

747
00:37:34,200 --> 00:37:35,560
Speaker 2: And then maybe the third thing though.

748
00:37:35,400 --> 00:37:37,360
Speaker 3: That I'm sort of thinking about, is like, if they're

749
00:37:38,320 --> 00:37:41,680
Speaker 3: leveraging up and they're taking on debt to do these things,

750
00:37:42,080 --> 00:37:45,520
Speaker 3: you know, potential term lengths of the debt, you know,

751
00:37:46,640 --> 00:37:48,279
Speaker 3: things like that that can cause a problem. So if

752
00:37:48,360 --> 00:37:51,080
Speaker 3: you know it came to as a recourse loan, it

753
00:37:51,120 --> 00:37:53,280
Speaker 3: came to you know, in a downturn of the market cycle,

754
00:37:53,360 --> 00:37:55,520
Speaker 3: something like that, do you look at look at look

755
00:37:55,520 --> 00:37:56,200
Speaker 3: at those factors.

756
00:37:56,480 --> 00:37:56,640
Speaker 2: Yeah.

757
00:37:56,640 --> 00:37:59,040
Speaker 1: Absolutely, I think that's why Sailor was brilliant when he

758
00:37:59,120 --> 00:38:02,399
Speaker 1: was able to finances capital structure. Once upon a time

759
00:38:02,400 --> 00:38:04,480
Speaker 1: in history. You may know he did have recourse loans

760
00:38:04,719 --> 00:38:07,800
Speaker 1: and those were removed in honor of now having convertible

761
00:38:07,800 --> 00:38:10,400
Speaker 1: bonds which have no claim and then the preferred equity

762
00:38:10,440 --> 00:38:11,879
Speaker 1: securities which have zero claim.

763
00:38:12,360 --> 00:38:12,719
Speaker 2: And so.

764
00:38:14,239 --> 00:38:17,600
Speaker 1: Those are the alignment features that are now coming online

765
00:38:17,600 --> 00:38:20,080
Speaker 1: that maybe people didn't perceive to be important.

766
00:38:19,719 --> 00:38:20,799
Speaker 2: For five years ago.

767
00:38:21,320 --> 00:38:24,880
Speaker 1: So I think the conversation is constantly changing, and we

768
00:38:24,960 --> 00:38:28,880
Speaker 1: have to also be mindful that bitcoiners are not the

769
00:38:28,880 --> 00:38:30,160
Speaker 1: easiest people to navigate.

770
00:38:30,280 --> 00:38:31,560
Speaker 2: They have a lot of views, and.

771
00:38:31,480 --> 00:38:34,839
Speaker 1: Sometimes their views are also very pure in ways where

772
00:38:34,880 --> 00:38:38,480
Speaker 1: they don't like the idea of hyper financializing bitcoin in itself.

773
00:38:39,080 --> 00:38:42,040
Speaker 1: I remember when the options market opened up for the

774
00:38:42,040 --> 00:38:46,400
Speaker 1: ETF in December last year, that a lot of bitcoin

775
00:38:46,480 --> 00:38:52,360
Speaker 1: investors were very anti options. Basically thought it was paper

776
00:38:52,400 --> 00:38:57,279
Speaker 1: bitcoin synthetic in ways that it wouldn't reflect true scarcity

777
00:38:57,400 --> 00:38:58,160
Speaker 1: in the ways.

778
00:38:57,880 --> 00:38:59,560
Speaker 2: That is part of the narrative.

779
00:39:00,920 --> 00:39:02,880
Speaker 1: But I think over time they've come to realize, actually,

780
00:39:02,960 --> 00:39:06,239
Speaker 1: there's a world in which options market is additive to

781
00:39:06,280 --> 00:39:10,040
Speaker 1: bitcoin's price discovery, which we all know is higher, and

782
00:39:10,120 --> 00:39:12,759
Speaker 1: those things can also accelerate demand for a new kind

783
00:39:12,800 --> 00:39:16,400
Speaker 1: of investors that historically would never have touched bitcoin. For instance,

784
00:39:16,440 --> 00:39:19,839
Speaker 1: these convert buyers that are buying micro Strategy bonds.

785
00:39:20,160 --> 00:39:21,440
Speaker 2: They're not interested in bitcoin.

786
00:39:22,760 --> 00:39:25,480
Speaker 1: They're not buying convertible bonds on micro Strategy because they're

787
00:39:25,480 --> 00:39:28,920
Speaker 1: Bitcoin maxis. They're buying it because they see the tremendous

788
00:39:29,000 --> 00:39:33,040
Speaker 1: yield opportunity to harvest the volatility in a way that

789
00:39:33,080 --> 00:39:36,400
Speaker 1: the convertible market permits by having the ability to trade

790
00:39:36,400 --> 00:39:39,759
Speaker 1: the GAMA exposure on the calls and find that to

791
00:39:39,800 --> 00:39:43,440
Speaker 1: be a valuable endeavor. And those investors would never have

792
00:39:43,520 --> 00:39:46,320
Speaker 1: come online to buy billions of dollars of the paper

793
00:39:46,760 --> 00:39:49,520
Speaker 1: where they're willing to then dilute and convert themselves into

794
00:39:49,560 --> 00:39:53,120
Speaker 1: micro Strategy in their version to a profit, but actually

795
00:39:53,120 --> 00:39:56,880
Speaker 1: the greatest profit opportunity was bitcoiners, because the only reason

796
00:39:57,239 --> 00:40:00,440
Speaker 1: micro Strategy went up in value is presumably because bitcoin

797
00:40:00,480 --> 00:40:01,080
Speaker 1: did as well.

798
00:40:01,160 --> 00:40:04,200
Speaker 3: Right, Yeah, And there's so many more questions I'd love

799
00:40:04,239 --> 00:40:06,799
Speaker 3: to dig into. Run out of time though, but I'd

800
00:40:06,840 --> 00:40:08,640
Speaker 3: love to find out more about, you know, sort of

801
00:40:08,640 --> 00:40:12,480
Speaker 3: the credit thing you talked about potentially the opportunity to

802
00:40:12,560 --> 00:40:14,359
Speaker 3: tam of putting that.

803
00:40:14,280 --> 00:40:16,359
Speaker 2: Bitcoin back out there some sort of flatteralized debt.

804
00:40:16,440 --> 00:40:17,960
Speaker 3: I know, in the bit wise folder that was being

805
00:40:17,960 --> 00:40:20,879
Speaker 3: passed around yesterday at the event, I talked about ways

806
00:40:20,920 --> 00:40:22,759
Speaker 3: to earn yield on bitcoint and how you might see

807
00:40:22,760 --> 00:40:24,680
Speaker 3: that as a growing space sort of in this DeFi space.

808
00:40:25,160 --> 00:40:27,080
Speaker 2: But then that also then sort of maybe leads back

809
00:40:27,080 --> 00:40:29,040
Speaker 2: into the qualification conversations.

810
00:40:29,040 --> 00:40:30,400
Speaker 3: So anyway, there's a lot we could dig into in

811
00:40:30,400 --> 00:40:32,600
Speaker 3: regards to that, but are out of time, so let's

812
00:40:32,640 --> 00:40:35,920
Speaker 3: just end it with them. Where do you see this space,

813
00:40:37,440 --> 00:40:40,479
Speaker 3: the bitcoin treasury space in five years thirty.

814
00:40:41,640 --> 00:40:44,719
Speaker 1: I think it's a big market, and I think it's

815
00:40:44,760 --> 00:40:49,799
Speaker 1: going to be one in which it'll fundamentally alter the

816
00:40:49,800 --> 00:40:52,880
Speaker 1: fabric of retail investing.

817
00:40:52,960 --> 00:40:54,160
Speaker 2: And Institute Investing.

818
00:40:54,640 --> 00:40:57,279
Speaker 1: Think about Coinbase having entered the S and P five

819
00:40:57,360 --> 00:41:02,280
Speaker 1: hundred micro strategy, having entered NASDAC, it means by definition,

820
00:41:02,320 --> 00:41:05,040
Speaker 1: at this point, every American owns crypto. And there's something

821
00:41:05,080 --> 00:41:08,839
Speaker 1: profound there, which is that no matter your view, your politics,

822
00:41:08,880 --> 00:41:11,160
Speaker 1: whether you like it or you dislike it, or whether

823
00:41:11,200 --> 00:41:13,480
Speaker 1: you believe it or you don't believe it, it doesn't matter.

824
00:41:13,800 --> 00:41:16,560
Speaker 1: It's in your portfolio. And I think Bitcoin Treasury Companies

825
00:41:16,560 --> 00:41:19,480
Speaker 1: is inevitable. In the same way that these two new

826
00:41:19,600 --> 00:41:23,000
Speaker 1: entrants made a dent into your index exposure. We're just

827
00:41:23,040 --> 00:41:25,680
Speaker 1: going to see a lot more people have bitcoin as

828
00:41:25,680 --> 00:41:28,720
Speaker 1: a component of their cultural alignment as a business model,

829
00:41:29,120 --> 00:41:31,040
Speaker 1: and so I think the conversation is changing when I

830
00:41:31,040 --> 00:41:33,759
Speaker 1: think about the investment leadership of an asset management firm

831
00:41:33,800 --> 00:41:37,600
Speaker 1: like bitwise and others. It's now past the stage of

832
00:41:38,040 --> 00:41:41,760
Speaker 1: preaching why bitcoin is important. That was very useful for

833
00:41:42,000 --> 00:41:45,560
Speaker 1: over ten years when people were skeptical. But we are

834
00:41:45,600 --> 00:41:49,600
Speaker 1: now here at a moment where bitcoin's gone pretty mainstream.

835
00:41:49,960 --> 00:41:52,960
Speaker 1: We have jadad vance coming here we speak tomorrow. We

836
00:41:53,000 --> 00:41:55,960
Speaker 1: have Senator Loomis talking about the Strategic Reserve Bill. It

837
00:41:56,040 --> 00:41:59,120
Speaker 1: is no longer controversial to really think about bitcoin as

838
00:41:59,120 --> 00:42:03,040
Speaker 1: an asset. The next wave of investment leadership will come

839
00:42:03,080 --> 00:42:06,240
Speaker 1: from those who are able to financialize that even beyond

840
00:42:06,719 --> 00:42:10,040
Speaker 1: the data exposure to more alpha centric opportunities. As you've said,

841
00:42:10,719 --> 00:42:13,239
Speaker 1: how do you generate yield on bitcoin? How do you

842
00:42:13,719 --> 00:42:16,560
Speaker 1: participate in the credit market on bitcoin? How do I

843
00:42:16,680 --> 00:42:20,400
Speaker 1: thoughtfully execute cover call strategies on bitcoin? How do I

844
00:42:20,520 --> 00:42:24,640
Speaker 1: participate in the layer two ecosystem like Babylon and Core

845
00:42:24,880 --> 00:42:29,520
Speaker 1: and earn unchain opportunities that enhance the security model for

846
00:42:29,600 --> 00:42:32,800
Speaker 1: the Bitcoin network. Those things are all going to actually

847
00:42:32,800 --> 00:42:36,200
Speaker 1: be the next wave of ideological upgrades, and I'm just

848
00:42:36,200 --> 00:42:38,480
Speaker 1: super excited to be a part of that conversation on

849
00:42:38,520 --> 00:42:41,160
Speaker 1: behalf of bitwise, but of course also here with you

850
00:42:41,360 --> 00:42:42,960
Speaker 1: and the Bitcoin conference.

851
00:42:43,080 --> 00:42:46,160
Speaker 3: Yeah, anything about bitwise you want to tell us about

852
00:42:46,280 --> 00:42:47,439
Speaker 3: or just go check it out?

853
00:42:47,960 --> 00:42:49,160
Speaker 2: Yeah, no, come check us.

854
00:42:49,239 --> 00:42:52,520
Speaker 1: That we've been around for now eight years, which in

855
00:42:52,560 --> 00:42:55,479
Speaker 1: itself in crypto, as you might know, is a long time.

856
00:42:55,840 --> 00:42:58,160
Speaker 1: And I think the one thing I'm really proud of

857
00:42:58,280 --> 00:43:03,719
Speaker 1: bitwise for is we have always always put the importance

858
00:43:03,760 --> 00:43:05,680
Speaker 1: of a duce of your duty at the top of

859
00:43:05,920 --> 00:43:09,920
Speaker 1: navigating this journey. So our largest index fund, which is

860
00:43:10,280 --> 00:43:14,799
Speaker 1: the Bitwise ten index fund publicly traded own's top ten

861
00:43:14,840 --> 00:43:19,719
Speaker 1: market exploded exposure and the way you construct those can

862
00:43:19,760 --> 00:43:25,560
Speaker 1: also include difficult exposures like FTT or Luna, and I'm

863
00:43:25,640 --> 00:43:28,279
Speaker 1: very proud that we historically have avoided all of those

864
00:43:28,280 --> 00:43:30,480
Speaker 1: things on behalf of our investors because we care very

865
00:43:30,520 --> 00:43:33,400
Speaker 1: deeply about stewarding the crypto ecosystem and the way that

866
00:43:33,400 --> 00:43:35,920
Speaker 1: we believe it should go. And so I know it's

867
00:43:35,960 --> 00:43:38,719
Speaker 1: easy to talk about the financial opportunities a lot, and

868
00:43:38,760 --> 00:43:40,520
Speaker 1: that's certainly what gets me out of bed as a

869
00:43:40,560 --> 00:43:42,919
Speaker 1: trader myself, but it's really important to keep in mind

870
00:43:42,960 --> 00:43:45,360
Speaker 1: we're all in this not just for the profit opportunity,

871
00:43:45,400 --> 00:43:48,680
Speaker 1: but we have to care and nurture the actual stewardship

872
00:43:48,719 --> 00:43:51,120
Speaker 1: of where the business of the crypto industry will go.

873
00:43:52,200 --> 00:43:54,479
Speaker 1: And that's actually what's going to be leaving a mark

874
00:43:54,520 --> 00:43:56,680
Speaker 1: on the history of our participation here.

875
00:43:57,040 --> 00:43:59,640
Speaker 2: Awesome, all right, thanks so much, thanks for having me