On The Brink with Castle Island - Weekly Roundup 07/03/26 (OpenUSD announced, Binance leaves the EU, Strategy's new framework) (EP.728)

Episode Date: July 3, 2026

Matt and Nic are back with another week of news and deals. In this episode:  Saylor releases Strategy's "Digital Credit Capital Framework" MSTR stabilizes for now though STRC is still discounted Is Saylor transitioning MSTR into a Bitcoin hedge fund? Is Strategy doing anything tricky with their mNAV calculation The OpenUSD consortium is announced Is the Tether and Circle duopoly broken? Can stablecoin consortiums work? What could cause OpenUSD to fail? Trump's 2025 diclosures include a lot of crypto  Binance leaves the EU for now  The K-pop DAT ends its digital asset ambitions Why the bottom might not be in

Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated.

The federal government loans American International Group, AI, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called the Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. I guess this is the Fourth of July edition, coming at you on the High. holiday the third this year. Today is technically the second, but we're going to wish you a happy 4th of July anyway. Definitely one of them. I think it's my second favorite holiday behind Christmas.

Thanksgiving is my favorite. You like Thanksgiving? Yeah, like giving thanks. It's a popular one. I like being outside, but it's a, I just sent you a text a couple minutes ago, 126 degrees in my truck when I went out and grabbed lunch. That seems like a measurement here. It's crazy. It's 99 in Boston today. Heat index is probably 110, but if you're right in the sun, then it's going to bake.

You know, the thing about Fourth of July, I love fireworks. Do you like fireworks? I love fireworks. But I only like setting them off. I don't like watching them. Oh, really? Well, I like watching them shortly after I set them off, hopefully from a safe distance. And I've been kind of examining myself to understand why that is. So I couldn't really care less about a fireworks display. But when I'm setting fireworks off, that's fun. And I think it's because it's the thrill of potentially losing a finger. But it's the danger that makes it fun. Yeah, your high risk tolerance.

I've never been as much of a fan on setting them off just because I just know so many people, mostly celebrities, I guess. Remember when the guy in the Giants blew off his hand? Yeah, yeah, I do. They hand it up with a claw. It's a high risk move. I've seen a lot of drunk people setting off fireworks in my day too, and I just don't, I like watching them. So I think that's the aspect that draws me to fireworks.

Does Miami, is Miami known for its fireworks displays? Oh, we have them all the time. Miami has fireworks for no reason. I would say every week there's a fireworks display. Often it's the cruise ships, set them off. Really? So you had a busy week of podcasts here. You did bankless, and then you also did Fidelity.

mid-year crypto outlook. Yeah, it was a fun week. So I did bankless with David Hoffman and Jeff Dorman, talking about micro-strategy. We'll get into that, I guess. It was a busy micro-strategy week, but really enjoy the bankless podcast. So give that a lesson.

And then, yeah, I taped the Fidelity one last week. Did I tell you I had to get makeup put on my face? It was like a full-blown TV show. So this was in a studio? In a studio, yeah. So talking about just the outlook for Bitcoin and talking about stable coins mixed in a little quantum there. It was a fun discussion. So as of today, STRC is back to $87, relatively healthy. I mean, it's not $100, but it's $87.

What is your, I guess we should just get into it right now. What's your assessment of where strategy is? So micro strategy came out on Monday morning with a, what did they call? it a some new framework what's the exact terminology here digital credit capital framework and they announced five things number one was that they're making a change to their u.s. dollar reserve policy they're extending that they basically raised over 1.2 billion of at the money common equity sales so they generated cash last was that so they that wasn't just saying that they could do it they actually did do it. They actually did do it.

So now they have 17.4 months of dividend coverage for the preferreds, and they have $2.55 billion. So that was the first thing they announced is that they have more cash via these at the money offerings. The second thing they announced was that stretch, they have moved the dividend up to 12% annualized, and they asserted that their objective is to have this thing trade between $99 and $100.

It's their objective. The third thing they announced was a digital credit repurchase program. So they will take up to $1 billion to repurchase STRD, STRF, and STRK, the preferred securities. Notably, this is not going to be funded out of the U.S. dollar reserve. They would sell Bitcoin in order to repurchase this if they did it. The fourth thing they announced was a common equity repurchase program. They said they'll take up to $1 billion to buy back MSTR Common. stock. This will also not be funded out of the US dollar reserve. They would sell Bitcoin in order

to do this. And the fifth thing they said was that they now have a new Bitcoin monetization plan. They will sell, they could sell up to 1.25 billion worth of Bitcoin to do the digital credit repurchases and the common equity repurchases. So the net net on this is that this thing is just turning into an actively traded hedge fund for Bitcoin instruments. I mean, they could be buying equity, they could be selling equity. They could be issuing prefers. They could be buying back prefers. They could be selling Bitcoin.

They could be buying Bitcoin. So, you know, that's kind of what is out there. As I said on the bankless podcast, there's no like bankruptcy risk on this. There's no imminent disaster on the horizon. They do have the puts on the converts coming up in September of 27. They have a billion dollars that could be put back to them potentially. So I'll have to do some refinancing. transaction or somehow pay that down.

They didn't talk about the converts in this plan. But yeah, busy week. But I think the net net is that this thing is just an actively traded Bitcoin hedge fund vehicle. Here's the problem that I have with that. Sailor is potentially the worst trader in history. I hate to say it. By the numbers might be the worst trade in history.

So why would you trust him with a large book? Let's say he really is treating this as more of a hedge fund. and then just a kind of slow and steady accumulation vehicle. Why would you want him, of all people, to be running that strategy? Yeah. Jeff Dorman on the bankless pod made an interesting point that you just would never see this in an equity security because you'd be qualified as an investment company. So the fact that it's Bitcoin, it's this commodity that doesn't really fall into that SEC

jurisdiction makes this, I guess, possible. But yeah, I mean, if you want to invest in a Bitcoin, hedge fund, there's other Bitcoin hedge funds to invest in. Right. They're not available on brokerage accounts for Joe retail, but there's also a reason for that. So the thing is, if I was entrusting my money to sort of actively manage hedge fund, I would want to give it to like Jeff Park or something, you know, or like someone very quantitative, somebody who's looking at the, sailor as far as I know doesn't like spend his

days looking at, you know, Bitcoin on chain signals or anything. No, but he puts out some really good AI stuff on Twitter. Yeah, so he makes it, it makes AI illustrations of himself. So, I mean, like this isn't a disparage sailor, but his skill set, I think, is more fundraising, like getting people excited about the star. It's not really finding signals. I mean, he just wants to buy as much Bitcoin as he has to. And so this thing on Monday, this new framework, is just to give him the flexibility to survive.

But I'm sure if you really put truth serum into him, would say Bitcoin's going to go to the moon and you know you guys are worried about something that you don't need to be worried about. You're worried about me making convert payments in September of 27. And by that point, Bitcoin's going to be, you know, on Mars. Right. Well, it's a brave new world of strategy. I did look into their MNAV by the way. We talked about that last week. So it's the way that they calculate MNAV, this is going to be a little bit boring. But it's, um, It's really an enterprise value divided by gross Bitcoin value MNAV. So the way strategy calculates it is the numerator is common equity market cap, then you add debt

principle plus preferred notional, you subtract cash, and you divide that by the gross market value of Bitcoin. A more conventional MNAV calculation based on common equity is seen at a lot of the other debts, and that's just common equity market cap over Bitcoin value plus cash minus debt. minus preferred claims. And so, you know, why does this matter? Here's basically the nuts and bolts of it. Above a one point, a one-x, as the cap table is currently constructed,

Strategies Convention would actually report a smaller premium. Once it goes below 1X, it reports a smaller discount. And so if you had calculated it, what I would think would be the normal way, the common equity MNAV, they should be showing a lower MNAV number, but they're not because of this enterprise value calc. So that's the answer to that question. And am I right that they change the MNAB methodology? I don't think they changed. I couldn't find evidence that they changed the MNAV calculation, but they did change the methodology around Bitcoin yield, you know, in a couple other metrics, but I didn't see the MNAV change. It's possible they did. So I guess the crisis

This is effectively over. I mean, they kind of did the hard thing, or they at least gestured at doing the hard thing, which is selling Bitcoin. So that information should be percolating into the market. They haven't actually sold any Bitcoin yet, be on that 32BDC slug, right? They haven't disclosed it.

It's possible that there's a Monday filing that says we sold some Bitcoin. But I don't know. I mean, they still have this issue. They just kind of kicked it down the road, right? Yeah. They're just hoping the price of Bitcoin goes up. The various preferred instruments are not trading particularly well, frankly.

Beyond just stretch, it's stride and strike and strife. They're all off the $100 mark. Yeah. So they've recovered, but the market is still feeling a little weird about it. Agreed. Should we hop into the deals of the week? Yeah, first up with deals, it's Venice AI. This is Eric Forhe's privacy-focused AI platform. There is $65 million from Dragonfly, Coinbase Ventures and North Island Ventures. Then it's Tech Dollar. This is a stable coin-based credit platform for private company shareholders. There is $3 million from No Limit Holdings and Reforge.

Then we have orthogonal. That's an infrastructure layer for AI agents. There is $4.3 million from Pantera, I Combinator, and others. Adjacent is a prediction market index platform that raised 2.5 million from Knight Capital, Vanek Ventures, UFO Holdings, and others. UFO Holdings. That's a cool name. Interesting. Never seen that one before. Framework, the Crypto Venture Capital firm, they raised $400 million for their new fund. Congrats to Vance and the whole team over there at Framework. Yeah, it's psyched for these guys, Vance, Michael, done a really good job over at Framework. So congrats on that raise. And then the last deal of the week is securitized. This is a tokenization infrastructure company. They went public via a SPAC merger this week.

I guess it was today, this morning. $400 million deal. So congratulations to Carlos and the team that securitize. So aside from strategies machinations, there's really only one other news item this week, which is OpenUSD. Open USDA. And yeah, so a consortium,

has been founded here. It is 140 different firms are signed up for a new stable coin called OUSD. It will be a classic consortium, I guess. It will be governed by its members. The initial CEO is Zach Abrams, who founded Bridge and later sold that to Stripe. The backer list is longer than we'll name on this podcast, but it includes Stripe Visa, MasterCard, BlackRock, Boney, Yellow Card. I mean, a lot of players here. it's positioned as a neutral rival to circle and tether. It's going to share the economics with the participants. The exact mechanism is a little bit unclear here.

What do you make of this? Yeah, this has been a really interesting announcement. I mean, haven't we always said we thought something like this would happen? Yeah. We've long thought that the model where the issuers keep the float revenue, that probably won't persist indefinitely. And I wrote a post over a year ago, saying the stable coin duopoly is ending.

Though I thought the form it would take would be more issuers rolling their own stable coin and more float providers like fintech rolling their own stable coin. This is a little bit like that, but it's more efficient because there's just one big stable coin. And to the degree that you provide float that your users deposit into it, you get the value with the, I guess, a small like maintenance fee. I think it's very smart. I think it's, you know, people are contesting the value of all the names on the press release.

It's like over 100, I think. And just saying, well, it's easy to sign a press release. That is true. But, and, you know, everyone's saying, well, all these consortiums have failed, you know, what's the other global dollar didn't really take? Yeah, global dollar now. And the Libra didn't. work, but like when consortiums work, they really work, you know? So fees is obviously the canonical example.

So I don't see why it couldn't work. I know everyone says it's hard to create a new stable coin from scratch and that's true. That's why you need a big consortium, you know? So assuming they have the incentives right and I think the incentives look good to me, I think it can totally work. Yeah, but here's the thing. Like the incentives are not. not fully understood here. And I think these incentives could actually push towards more of what you're saying around a balkanized approach. Because if you're a member of this network and you're, say, you know, 135th out of 140

in terms of the float that you're bringing to the network, you're not going to be making much by way of economics here. So you could see a world where just rolling your own. There's some equilibrium there. But you're making your, you're making your pro rata share. Pro rata share, but. You make what you bring to the table. You make what you bring to the table.

But what is the tipping point? And I guess it comes down to what is the OPEX to keep this thing up and running. There's going to be some logical equilibrium where trying to roll your own or doing some white label would make more sense. And so I think they're going to have to really. So you're saying certain firms might find the fixed cost membership prohibitive relative to their earnings from the system. Yeah. And it might be cheaper to roll their own with a. anchorage or something like that.

Yeah. Or it might be more advantageous to cut a bilateral deal with Circle and just use Circle on your platform. Yeah. I mean, the secret is that Circle does share revenue with, I guess, other companies that bring float into the system. But it's kind of arbitrary and negotiated each time as opposed to, in theory, I guess, Open USD would be more standard.

It was very interesting to see Jeremy Miller, you know, come out and directly address this. Well, yeah, the circle stock sold off pretty aggressively. What was it down like 10, 12 percent or something on the day? So he had a long tweet kind of, he highlighted some things I think are very real around. Okay, so you're saying that you're going to have zero cost to mint redeem, but you can't just have the window open to everyone. There's a huge compliance cost there. So Circle does need to make some money to just service the compliance. obligation. There's also just a huge liquidity and network effect there. And, you know, there's not a

great track record of consortiums in the stable coin space to date. So he's saying what he's paid to say, but a lot of that has validity. Yeah. I'm happy to see it as a somewhat neutral. Are we neutral? Third party? I think we're neutral, right? We're not invested in circle and we're not invested in stripes. Yeah. I think this is great. It is interesting. I mean, do you think that this is a stripe thing beneath the hood? This is a stripe thing. I mean, Zach Abrams is running it. Yeah, Zach Abrams is running it.

I'm sure this will run on tempo as well. I think that could actually be the undoing if it's seen as being too favorable to tempo or the paradigm by extension. So I think they need to be careful to keep it neutral. Yeah, I agree with that. But you know, you think about who could really benefit here in terms of just bringing assets on the platform,

Stripe would be in a great position, right? So this could be a big, big moneymaker for Stripe. I mean, this list of names is like the market map of all companies that use stable coins. And now, it really does. Plus an additional 50 banks that I've never heard of. A bunch of banks that aren't really doing much in the crypto space either. Who are the, some of these banks I've never heard of in my life.

Yeah, bank loomy. non-guup card bank of Transylvania Devi Vienda There's a pretty exotic name Freedom Bank Kazakhstan Yeah maybe they're just making up banks Who knows Maya Bank

That's a real one I think Oh sorry for not knowing Maya Bank I mean I'm impressed I'm genuinely impressed It's like all the Stablecoin native companies All the Stablecoin Fintex All of the Fintex

All the remitters a ton of asset managers, a ton of banks, and a bunch of tech companies. I mean, it's a great, I'm impressed by the, I know people say don't be impressed by the press release. I'm impressed. Yeah, I don't know. This is where I come down on, all right, if you can get 140 different companies to put their name on a press release for consortium, that just tells me you guys haven't gotten into the details yet because it's so easy to just say, yeah, we're committed to using this thing.

but if you actually had a consortium that was in production, I don't think you'd have this many out of the gate. I mean, maybe that's just me seeing these things in a trad-fi context and being super skeptical. But I think where people fall off of this is when you start to get to the nuts and bolts of how much does it cost to do this

and then how much money will I make. So you remember DeHawks book? Did you read it? I did, yeah. The Chaotic organization? the rise of the chaotic. I mean, he spent a very long time setting up because it was like, I want to say the better part of a decade, really. Yeah.

So who was the D. Hawk that went around and negotiated? Or is that just beginning? Has that process not even begun? I think it's going to be Zach Abrams, don't you think? I mean, I think it seems like it's day one, really. I think the easy part is just getting people to say they're doing a blockchain initiative here. And the hard part is actually bringing this to production. But I like that they're trying something ambitious like this.

Like, of course, a consortium has a low chances of success. But if it does succeed, it's going to win. 100%. For a sir, it's going to win. So I'm glad they're doing it. We should try hard things. I agree. I agree.

This is a hard thing to do. I wish them success. I still think that there's going to be a lot of stable coins. So it doesn't really change my outlook for now. But this would be an argument in favor. of a consolidation. Yeah. And I like this from a producer surplus point of view.

Maybe I'm using that term wrong. I like this from the point of view of the individual fintechs and et cetera's that would like to use stable coins and want a better deal. Yeah. So I'm actually very glad to see this kind of initiative. I think it's right. I totally agree. All right.

Let's move on to this turned into a big news story for good reason. President Trump's 2025 financial disclosure reported $1.4 billion of crypto income for the year 2025, led by $635 million in royalties from, quote, celebration coins. I guess that must be like Trump and Melanian coins. $500 million from World Liberty financial token sales. Whoof, kind of not helping the market structure push here. I saw some funny tweets about this like Trump is the only guy to make money in crypto in 2025

Yeah, probably not far from the truth, right? I love that they call them celebration coins That's incredible Yeah Everybody knows what we think of this You can just go back to the foundation of World Liberty Financial and look it up But this was very obvious

That it would go this way I hope in my heart that you know, deep inside of Trump, there's still an abiding affection for crypto that has nothing to do with his personal financial interests, but I don't know if that's true. No, I don't know if it's true. I also don't know if it matters, but we just need him to sign a market structure bill here, but we also need that market structure bill to get out of the Senate. Yeah, it'd have been much better for us if he had just adopted a relatively pro-crypto stance and then never thought about crypto ever again.

Yeah. It would have been, now we have to deal with a fallout of this for years to come, unfortunately. In other news, Robin Hood, they officially launched Robin Hood chain. I guess they had a big event this week. It's an Arbituram-based L2. They have 24-7 tokenized stocks going. There's a morpho-powered USDG lending platform called Robin Hood Earn. There looks like there's an Athena integration.

There's perpetual futures built on lighter. There's a lot of crypto-native stuff on this Robin Hood. chain. It's interesting because their crypto business has been suffering a little bit, right? Yeah, suffering with volumes. I think, you know, coin base volumes are down a lot too. It's a, I think post-10-10, this market just took a big step back as it related to crypto trading. Speaking of 10-10, Mika in the EU has, I guess, I don't know, I don't want to say banned Binance, but Binance has not been able to transition. to the new MECA regime and they are forced to, I guess,

wind down services in the EU. Is that right? Yeah, I think there's a deadline to get into this new framework and it doesn't seem like they made the deadline. I don't think by bit did either. So my understanding is that they just don't have authorization to operate in the EU right now. So I wonder if that's how they enforce that.

I guess they just do the shutdowns based on the IP addresses. That is pretty tough for Binance. So they've suspended all activity for U.S., for EE residents. 210 crypto firms were authorized. So Coinbase Cracken and Oakex all made the cut in Europe. Binances said they're going to reapply through France. Hmm. I trust Binance about as far as I can throw them.

10-10, we still haven't gotten to the bottom of what happened there. Yeah, I don't know if the crypto ecosystem is going to forgive finance for that one. In other news, Metamask has launched a money account. It's a self-custody wallet based on Monad blockchain. It offers a 4% yield on M-USD stablecoin. So here's an example of a new stable coin. I guess this would support the balkanized approach. Did you see that Twitter is also launching its own, like,

finance, I guess, X.com is launching its own like personal finance product. and potentially card and payment processor and everything. No, I didn't notice that. I did know they had MTLs. I didn't know it was going to be that type of a product, though. Yeah, it looks to be like effectively neobank style product. Very interesting. The rumor is that they're going to offer 6% yield,

which obviously a loss for them, but paying for users. Huh. I don't know if that's how I think about X. There's a financial services app. That's not how I use it. That's what Elon wanted for Macs in the early 2000s. I think the first thing that I'm going to need to see before I go in that direction is just a way to cut down on these like bot accounts. It just feels like it's overrun.

So did you ever follow this dot K-wave media? I did not. So they are a NASDAQ list of Korean K-pop company? Oh, I think we talked about this. So they announced, a year ago in July, 2025, they announced a billion dollars

in financing capacity. Their objective was to scale their holdings towards 10,000 Bitcoin. Guess how much Bitcoin they bought in the end? So they were going for 10,000 Bitcoins? Yeah. Did they get 10% of the way there? They got 88.

88 Bitcoins. Yep. So unfortunately, they had to sell them later. And they later sold them. Oh, no. So they're not a dat anymore. They are now doing,

they're doing GPU compute. So they're doing AI infrastructure. Sometimes you just got to pivot to the hot thing, don't you? Yeah, so that's just one of many dads that have ceased to be dads. There are many more need to go.

But that's your dat failure of the week. I'm sure there'll be one next week too. I'm getting a kick out of these four-year cycle people that are saying, look, any minute now it's going to be the bottom. Just look at the four-year cycle. It feels so hard to bottom without these dats just going out of business. Don't you feel like that's part of the healing? We just got to get rid of the dats.

It's a little bit superstitious to think that, like, to have a good harvest, we have to, like, sacrifice someone, you know? It is. But also I think it's true in a sense that there is a capital cycle. of tacking on leverage and then de-levering. So that's the real cycle. And so when people explode, that's because there's de-leveraging.

Right. And we still haven't worked out the leverage because there's still coins sloshing around in these debts that need to be spit out. There is. Now, I guess the other thing, though, is every cycle when we kind of bottom out, we think that all of the phony companies get washed out.

And there's always a few that make it through. That's true. Not everyone goes away. Not every lender collapsed in 2022. Right. And not every debt will collapse. I mean, Sailor was around in 2022. It just traded a discount, I think.

Not every lender collapsed, but a lot of the lenders collapsed and not every one of them actually went into liquidation, is what I would say. In my subjective view, not enough of the debts have been wound up in whatever that mean, whatever form that'll take. Not enough of them have done it. for just to signal bottom, my opinion. Yeah, and I think some of these things end up just getting stuck in purgatory because I don't know if they're big enough for like a who you'd expect an activist,

like an Elliott or Dan Loeb or someone to come in and or, you know, who is it? Saba capital to come in and like just rough these things up and make them liquidate. But there's a lot of risk in that trade. And I'm sure there's other trades that are more interesting and just regular way equities. So I think they could just be in purgatory for a while at these debts. Yeah. And there's an incentive on the part of the management team to keep it going just to harvest whatever it is, the 3% a year. Oh, plus a salary.

I mean, yeah, you can just be sitting on this melting ice cube for the next, you know, seven, ten years maybe. Yeah, and I guess there's just not that many legal mechanisms to crack these things open. You could certainly go after some of the public statements. some of the public statements from people that operate these debts are preposterous. Yeah, I mean, there's enough class action lawyers, I think, are just going to have a ball here. I know. All right. So I think that is it for the week.

You have any fourth plans? I'll set off some fireworks and hopefully I report back with all my 10 fingers. All right. Well, be safe. And listeners be safe. Have a safe and healthy weekend. We will see on Monday.