TFTC: A Bitcoin Podcast - #626: Bitcoin Treasury Strategies for Real Estate Developers with Leon Wankum

Episode Date: June 4, 2025

Marty sits down with Leon Wankum to discuss the current housing market correction, how Bitcoin is outcompeting real estate as a store of value, and practical strategies for real estate developers to incorporate Bitcoin into their investment portfolios while navigating MSTR's new Strike and Stride products. Leon Wankum on Twitter: https://x.com/leonwankum Leon’s Website: https://leonwankum.com/ STACK SATS hat: https://tftcmerch.io/ Our newsletter: https://www.tftc.io/bitcoin-brief/ TFTC Elite (Ad-free & Discord): https://www.tftc.io/#/portal/signup/ Discord: https://discord.gg/VJ2dABShBz Shoutout to our sponsors: Coinkite https://coinkite.com Unchained https://unchained.com/tftc/ Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Newsletter tftc.io/bitcoin-brief/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Nostr https://primal.net/tftc Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/ STACK SATS hat: https://tftcmerch.io/ Our newsletter: https://www.tftc.io/bitcoin-brief/ TFTC Elite (Ad-free & Discord): https://www.tftc.io/#/portal/signup/ Discord: https://discord.gg/VJ2dABShBz Shoutout to our sponsors: Coinkite https://coinkite.com Unchained https://unchained.com/tftc/ Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Newsletter tftc.io/bitcoin-brief/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Nostr https://primal.net/tftc Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/

you've had a dynamic where money's become freer than free if you talk about a fed just gone nuts all all the central banks going nuts so it's all acting like safe haven i believe that in a world where central bankers are tripping over themselves to devalue their currency bitcoin wins in the world of fiat currencies bitcoin is the victor i mean And that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. We're bringing in a housing expert to talk about the real estate market and Bitcoin, corporate adoption, and the crazy frenzy that's going on right now in public markets.

Leon, welcome back to the show. Thanks for having me back. It was great seeing you, even though it was briefly in Vegas last week. caught you literally as i was running to the airport off the stage yeah and uh look and pull that back up because i think this is a good jumping off point we'll start with like a personal story i'm currently in the middle of a move right now but decided to rent a house because i was looking at the prices for housing and the places i'm looking to buy and they were they were too high not only were they too high we put a bid in on one house and it wound up going a million

dollars over asking and i think over here in the united states there's a big topic of discussion right now which is the real estate market feels a little toppy prices are still very high very sticky rates are still very high uh and that's one thing i'm trying to discern as somebody who would like to buy a house in the next few years a forever house for my family what is going on as we can see here red red fin reported earlier this week that 34 there are 34 more sellers in the market than buyers at no other point in records dating back to 2013 have sellers outnumbered buyers this much their total of 698 billion dollars worth of homes for sale in the u.s up 20.3 percent from a year ago in the highest dollar amount ever so it seems like there's a ton of people who've rode

the real estate market and they're being a bit stingy on pricing and we're waiting for a correction is that your take on this yeah we definitely need to wait for price equilibrium to build because since 2008 really since we had low interest rates um prices were skyrocketing And now with a different interest rate environment, what I personally also feel is that people are not willing to sell their houses for a price that they believe is not what they could get because they still have the prices in mind that they were able to receive two or three years ago. And the buyers are not willing to pay prices that people want because interest rates are higher, meaning the cost of capital and the cost of borrowing went up. So I think this is a healthy development. We need a price equilibrium. We need demand and supply prices to match. It's going to take a long time, I think. It also depends on interest rates.

If Powell is going to lower interest rates, which I don't think he will, even though that's something that the president would like him to do, but I don't think he will because it would cause inflation to go up again, especially in goods and services and groceries. and judging by that i think interest rates will stay above three percent at least for the foreseeable future meaning i believe that real estate prices will come down a little bit till we meet that equilibrium but something that's important to to remember which makes it a little bit odd that because as a bit corner when you look at housing i think you constantly think now it's going to

crash now it's going to crash but the reason it's not really going to crash is as soon as new money is being introduced into economy or as soon as interest rates are lowered that money is being funneled into real estate and also the existing system that is depending on real estate as collateral has an interest in propping prices up so this can go on for another 10 or 20 years i think i mean there could be there's definitely a correction that we can see right now and i personally wouldn't get into real estate development at this point if you'll ask me from the perspective what's the better investment of course that is bitcoin but i just want to make a point that this can go can go on for longer than we think because housing is limited not as

limited as bitcoin but there's something called the 18-year property cycle and it says that every 18 years we'll have a correction in housing and the reason for that is if the money supply is expanded and that money goes into land it's not going out of land because land is limited it's similar to bitcoin but what happens is that after around 14-15 years prices start to come down and then they find a new price equilibrium which is higher than when the cycle started and we are at the end of this 18-year property cycle. And I suggest that prices will fall until 2026. And then in 2026, if interest rates are lowered,

I think prices can find price equilibrium and then possibly move up in nominal value. Of course, if you start now accounting for real estate and Bitcoin, it's a whole different story. I know it talked from the lens of a fiat-based system. Yeah, and that note on Powell and the Fed, is interesting is that it is very obvious Trump's wanted him to lower rates since before he even got elected. But I was reading an article yesterday that made a lot of sense to me, which is

he's not going to lower rates for multiple reasons. One of which you mentioned, which is it would reignite inflation, which nobody wants to see right now. And then number two, profit margins are going up because the productivity increases due to ai i mean and we're still at the early stages of that where you have many of the big big tech the mag 7 beginning to lay off people because they're creating all these efficiencies via ai so we're able to increase productivity and profit margins and so there's no reason to to lower rates from that perspective which is absolutely true yeah which is uh you know it'll be it's crazy the confluence of events that are happening right now whether it's real estate market looking a little toppy

at least temporarily the interest rate environment the progression of ai and the adoption by many large companies and small companies alike and then you have bitcoin sitting over here sitting over two trillion dollars establishing itself as a two trillion dollar asset and it still seems a bit fringe where um where we are certainly as bitcoiners individuals who get bitcoin you know decided that it is the best performing asset and that's where we'd like our wealth to sit but it seems like it's getting more popular but it's still on the fringe and as it pertains to real estate market do you think people are honestly beginning to weigh the opportunity cost of allocating toward real estate or bitcoin i think it's starting people

are starting also to understand what opportunity cost means because in the fiat system there was little reason to pay attention to that especially in the real estate market because if you for example bought a property that was overvalued you got a cheap loan let's say you got a loan at a percent or two you just waited another five years and the property then rose in value and due to the cheap money that you use to leverage into the property the bad deal that it was at the start over let's say five years became a good deal simply because of monetary debasement so there was little opportunity cost when you were in real estate because other than real estate there were little investments that performed better even though maybe real estate wasn't the best performing

asset bitcoin of course was since 2009 but few were aware of the existence of bitcoin and now people are aware of bitcoin it's a topic that's been publicly discussed i think the strategic bitcoin reserve also had a positive effect generally speaking on the importance that people large institutions capital allocators but also households place to bitcoin and from personal conversations judging by what i hear from people working in the real estate industry in particular they are starting to weigh the opportunity cost of not putting money into bitcoin but very few are able to comprehend the necessity of quickly investing large part of the capital base into bitcoin so a good friend of mine who is a real estate broker who i've done deals with in

the past and they've done significant deals in europe they started now to build a bitcoin treasury and that's the first real estate developer that i personally know in europe that wasn't into bitcoin let's say a year ago and now they are into bitcoin they're starting to build a bitcoin treasury but they're doing it very slowly so they're tapping into bitcoin slowly and to really tap into bitcoin with significance i think that's still rare but we do see also from the credit side products like battery finance and i see there's other products popping up that do make it easier for owners of real estate and people that own significant amounts of real estate to tap into bitcoin without needing to sell their real estate because it is true that selling real

estate and putting that money into bitcoin is the better savings or investment options but it's not that easy because think about it a property is actually a capitalist structure if we can if you take it to the abstract level real estate has been priced away from its utility value now it's being treated as a store of value meaning that large institutions that develop and hold real estate they treat it not as a good that's used for utility but as a capital structure and within Within that capital structure you have different parties with different interests. On the credit side you have banks that lend money and then on the borrowing side you have different partners that either provided capital or knowledge in developing a house.

And these different parties have different preferences. And from personal experience I know it's very difficult to juggle these different preferences. So I think it's important for the real estate sector to start to understand Bitcoin as the new hurdle rate and the opportunity cost of not participating in Bitcoin, that we have products on the credit side that make it easy to refinance existing structures. And then over time, as people become more aware of how great Bitcoin is performing, they will likely also sell off their properties and that should create more sell pressure on real estate.

But the fact that Bitcoin is a superior store of value to real estate is a little bit shadowed by the fact that it's easier to obtain credit to leverage into property developments than it is to obtain credit to buy Bitcoin. But once we reach the point where we have products on the credit side that do allow to also receive credit to buy Bitcoin, I think that will help real estate professionals and people in the real estate industry to consciously be aware of the necessity to include Bitcoin more aggressively in their capital structure. I think you highlight a couple of really important things here. I was talking to some people at this intersection of real estate credit and Bitcoin. and there's some interesting anecdotes out there where you'll have a real estate developer that'll typically raise a fund and they have lps behind them and the developers really in the bitcoin but the lps aren't on board so they the developer desperately wants to get some bitcoin

exposure and so they're creating unique structures where they themselves will will get bitcoin exposure but they'll keep their lps only exposed to the real estate because they don't want to deal the bitcoin and so you're beginning to see these different dynamics at play and i'm interested if you're willing to share just for some actionable advice or anybody in real estate who may be interested in dipping their toes in bitcoin your friend or the colleague that you spoke to that is beginning to allocate the bitcoin how are they doing that yeah i'm going to the same problem so also myself i'm at the development side and so we are actively doing the development and on the credit side we have banks of course that work with us and then we have capital partners and

our capital partners are not as bullish on bitcoin as i am for example so i had to find ways to stack bitcoin both in the company and also on the private side that is in line with what the lps expect from us as the people that receive the money and do the development so there's there's risk in giving us the capital and the money so i want them to feel comfortable of course so what we did was once we started to sell properties um and we sold this is three years ago but i've been doing this for for five years now so i'm going to share some stuff also from three years ago so three years ago we sold a property that we held together with lps And then we very simply and kindly explained to the LP that the profits that we made, we do not want to reinvest it into another property with the LP.

We are going to put it into Bitcoin. So they went forward. They invested into another property. We invested into Bitcoin. Now, after three years, they saw that the property that they invested in actually fell in nominal value. and the bitcoin that we purchased i think went from 35 000 or 40 000 to whatever the price is today so around 100k and the interesting thing is that this was a tax-free event because in germany the way that bitcoin is treated if you hold it for longer than 12 months there's no

capital gains so we know we had a better deal going into digital real estate and this helped our LPs to understand the significance of Bitcoin as the new benchmark and of Bitcoin as a digital and scarce, absolutely scarce store of value. It's superior to real estate in that perspective. And now step number two is some of the properties that we own with our LPs for the past, let's say, eight to nine years, there's significant cash flow, significant free cash flow. And we are in charge of managing the cash flow because we are also managing the property. so we are doing like a 360 degree deal where we find property we secure financing from a bank we get in a capital partner that puts in the money that we need as equity we execute the property

development and then we manage the property and the property management side we are responsible for managing the cash flow that comes in and as long everything is paid for and there are enough maintenance reserves and we pay the debt off our lps are happy and they don't ask many questions So what we did is we took some of the cash flow, around 20% of it, we put it into Bitcoin in the depths of the bear market. So, of course, these are favorable time frames that I'm referring to now. But if you have a long enough time frame, let's say five years minimum or 10 years, the numbers will look similar. So 20% of the cash flow that we put into Bitcoin is now worth more than the 80% that we did not put into Bitcoin. and the 80% we did not put into Bitcoin

actually lost around 4% to 6% purchasing power year on year. So by gradually tapping into Bitcoin and doing it in a way where we don't erode the trust with our LPs and our capital partners, specifically the banks that lend us the money to develop, we are helping them to sort of build a consciousness for what Bitcoin is. And at the beginning, I was a little bit stressed about it

and I wanted to tap into Bitcoin more aggressively. and I saw other people for example like Michael Saylor doing it so fast but I think it's also important to remember everybody's in a different situation so if you are the founder of a company and you hold more than 50% of the voting rights and the board is on your side if you're publicly listed you can do whatever you want but if you are a smaller company or if you're a publicly listed company with a board that's not on board with Bitcoin I think it's important to consciously help everyone understand what Bitcoin is, not missing the opportunity, but doing it in a way where you can align incentives. What's up, freaks? This report of TFTC was brought to you by our good

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the market go get the cold card queue it's a beautiful thing yeah incentive alignment is extremely important and i you're not the only one who senses that urgency looking at what michael saylor's strategy are doing what other bitcoin treasury companies are beginning to do in public markets you look at that and you say oh my gosh i'm falling behind but i do think in the long run being very patient very methodical and somewhat risk averse and how you get in this is going to be the best play um and there anybody out there who feels the FOMO don't worry Leon and I have been in Bitcoin for a while and we feel it too but I think having been in for 12 years is falling back to the age-old adage of stay humble stack sats and just stay in your lane blinders on just work

on your personal accumulation strategy or your business accumulation strategy is wise don't get over your skis don't get crazy overextended because it is a volatile market at times and it's important to just have a plan stick with it and as you described it seems to be working pretty well for what you're doing i think so it is and um also there is there's a there's something in having bitcoin in self-custody so if you're a publicly listed company you can stack quicker but the bitcoin are not held in self-custody i'm not taking anything anything away from that strategy and i'm happy to discuss how public companies are tapping into into bitcoin later but there's also something in owning a private company and owning bitcoin in self-custody so

there's something to that that i really like also when it comes to privacy of course or privacy in general so there's there's space for both there's space for individuals and households stacking there's a place for smaller cap companies and privately held companies to stack and then there's a place for publicly listed companies in the way that they approach bitcoin completely agree it's a good segue into the next topic i mean we were mentioning opportunity cost earlier and i think opportunity cost becomes more front of mind to people when there's more options on the market for different types of exposure we've been touching on it alluding to it companies like strategy bringing new structures to market where that's strike strife and now stride which they

launched i believe late last week and um chris drisga drisga chris sorry if i'm uh mispronouncing your last name i saw on your twitter account you retweeted him uh yesterday uh based off of a conversation you had on the block rewards podcast but i think this is an important topic to bring as well bitcoin is rapidly out competing real estate as a store of value due to its superior properties and now with products like strike and strife investors need a great reason why they would allocate capital to management and test intensive illiquid assets and so i think when you look out at the ways in which you can acquire bitcoin like you mentioned you can buy on an exchange move to self-custody obviously the etfs launched within the last two years

with massive success and now we have these publicly traded equities with proxy bitcoin exposure like strategy with 21 coming to market potentially later this year a similar scientific you can throw tesla and block in in that basket as well i guess but as the optionality expands and these products get more unique how how much does this opportunity cost rise in your mind and how should people be thinking about it yeah so first of all i just want to state that nothing beats bitcoin in self-custody just so people understand when i talk about strife and strike and stride i don't talk about it because i think they're better than bitcoin because i don't believe anything is when i talk about it what i find interesting is that they're tapping into

money that is held by people who not yet are willing to hold bitcoin in self-custody either because they don't understand Bitcoin fully yet. They have not comprehended the significance of the paradigm shift that Bitcoin brings or they have their hands tied because they are regulated in a certain jurisdiction or they're not legally allowed to own Bitcoin. And also, I think it's part of a greater monetary reset

where Bitcoin is becoming the new standard where every investment product, for example, fixed income, has to now also compete with Bitcoin. If you look at the payouts, the distributions of Stride and Strike, which are between 8% to 10% on par. So in Strike, which is a preferred stock with a conversion option, and in Strike you have the option to convert 10 strikes into one MSTR common share if MSTR hits $1,000. and that would be a conversion price of $100 per strike and based on that you get an 8%

payout. If strike goes up in price that yield goes down obviously percentage-wise and if strike goes down in price that yield goes up percentage-wise. In the strife you have a 10% yield on $100 par. There's no option to convert into common shores but the payouts are cumulative meaning if the payout is not happening they they have to be paid out at a later time so it's almost like an investment grade fixed income product based on bitcoin and then stride which i'm aware of since yesterday and i did watch the the clip of sailor explaining how it works it's non cumulative so it sits below um strife and strike in the capital structure and it's almost like a junk rate fixed income product based on bitcoin so now you have three fixed income products based

on bitcoin one has a convertible option which is strike and they are all yielding higher returns than the average bond so that means that bitcoin as a near perfect form of money that has a compound annual growth rate of around 50 percent is starting to become the new hurdle rate that that all other financial products have to abide to and it's setting a standard so instead of buying a regular bond issued by a nation state now as a allocator of capital you can actually buy a fixed income product issued by strategy and you have a higher return on that and i as a somebody that comes from real estate and i've tweeted about this multiple times and i'll explain it again i find strike extremely interesting and a light bulb moment happened for me i was at

strategy world and i was listening to feng li and he was explaining how he has neighbors he was telling a story about his neighbors it's a couple that retired and they have real estate and they are not developers they're not particularly interested in managing their properties and keep them intact but they have to and they bought the property because they wanted cash flow after stopping to work so there's a lot of people that get into real estate they are kind of unaware of the tax benefits they do know about the leverage and the upside but they are primarily there for cash flow so if they are there for cash flow they could buy strike because strike has a similar cash flow year on year like a property but obviously it has less upside you can't buy it

on leverage there are also no tax advantages i'm aware of that but let's say you also want some upside you are not just interested in real estate because of the cash flow you're also interested in real estate because you want some upside strike also has upside because you do have the option if mstr common stock hits a thousand dollars you do have the option to convert 10 strike into one as msdr common stock and that option becomes particularly interesting if we go through a bear market because strike was sold at a price of 85 dollars right i think now it's trading above 100 dollars because there's large demand for it but now let's imagine there's a 60 percent drawdown in bitcoin and strike goes down to 60 dollars that's a possibility i'm not saying it's going

to happen today or tomorrow i'm just saying this is a possibility if that happens the way i would look at it is the following if i'm a real estate investor that did not 100 understand bitcoin i'm looking to generate upside and cash flow i want to make a good deal so now i'm looking at the possibilities in real estate with high interest rates high cost of capital the leverage becomes less interesting and now i look at strike and i can buy strike for let's say 60 dollars which is 40% below the conversion rate of $100 and I get still $8 in distribution. So now I bought an instrument let's say I buy 10 strikes for $600 that cost me 40% less than if I would buy it on par but I still get $8 cash flow and if MicroStrategy then in the next bull market

goes to a thousand dollars i do have the option to convert strike into msdr i don't have to maybe people don't want you because you sit higher in the capital structure meaning if strategy goes bust the holders of the preferred stocks are being paid out first and then the holders of the common stock but let's say i do want to convert i could and that is for me coming from the world of real estate and applying how i was told to think about real estate a better deal than the average real estate deal because i can buy an asset 40 below its value so to say and i still get distribution so i still have the cash flow so there's an upside potential here there's the cash flow element and i think that i don't know in particular but i'm

assuming that sailor is very much aware of this and fong lee as well because they discussed it on stage at strategy world that this is a product that could potentially tap into the real estate market and i'm not saying that 80 or 90 percent of the people that invest into real estate would buy this product but it's if it's just one percent that's three trillion that's enough and i think that the bond market of course will now be faced with the reality that there are products that heal the higher return because they are based on bitcoin which will lead to people that invest into bonds to start considering also these products like strife and stride that are fixed income products based on bitcoin they will start to ask why can they yield higher returns

than a nation state and then they start i think also to understand maybe bitcoin and the bitcoin network which is the central bank of bitcoin as an analogy is more trustworthy than a nation state because they can yield higher returns and now if you say they tap into one percent of the bond market that's 3 trillion which is a lot that's more than the market cap of bitcoin and now let's assume there's also half a percentage of the people that would put their money into real estate now are willing to put their money into a strike that's 1.5 trillion so i don't think that the amount of people that invest into real estate and hold their capital in real estate needs to be that large to have a significant impact on the ability of mstr to raise capital and then put that money

into Bitcoin. The US now has a strategic Bitcoin reserve. That's not clickbait. It's a policy directive. Unchained and the Bitcoin Policy Institute just dropped a new report and are hosting a live event to unpack it. It's called the Strategic Bitcoin Reserve Era Begins. We've got Congressman Nick Bejic, Matthew Pines, and Joe Burnett breaking down how the first 100 days of the new administration flipped the policy script on Bitcoin. Go to unchained.com slash tftc to register and read the full report that's unchained.com slash tftc a few questions here one comment and a few questions one comment being like bond investors looking at these strategy products i mean like why are they yielding higher than the nation state debt and then you look at

the size of strategies bitcoin treasury and i think in aggregate it's larger than all nation state treasuries combined and so we're in the beginning stages of them amassing enough economic or an amount of economic power that will rival nation states at some point down the road if bitcoin gets when bitcoin gets mass adoption we're going to manifest here um and then two what are the risks in terms of so that that income that the cash flow that that really appeals to you as a real estate investor where can that slip up how is that cash flow being produced for strike investors and is there any potential for that to dry up sure i do have to state though for me personally i don't own these products and i just own bitcoin to be honest with you and i'm not

interested in the cash flow because the year-on-year growth of bitcoin outperforms any rate of cash flow so i think it's important to state that so people are aware of how i look at this but i do have like in my back of my mind i have the education of a real estate investor that things like that and then i try to evaluate how other people that are in real estate think about that right so they don't understand that the compound annual growth rate of bitcoin beats any cash flow that you can get you can receive and the idea of having cash flow is actually kind of also based on the idea of outperforming inflation like in the personal conversations that i have with people that are really interested in cash flow there's two people now one it's people which also applies to me i

guess um when we do talk about cash flow once you stop working um you need to have some cash flow right and it's and then real estate becomes interesting in that regard but but generally speaking from an investment uh standpoint people that want cash flow often think in fiat terms and they want to outperform the rate of monetary inflation you don't need to do that with bitcoin so you don't necessarily need cash flow on bitcoin but people want cash flow right and how is the cash flow being paid how are the distributions on strife strike and stride are being met they're being met through the issuance of equity so i actually i was looking into it yesterday and i made some notes notes on that so if you think about it that

strategy has enough bitcoin holdings to cover the dividends on the preferreds for over 200 years so at the moment it's around 250 million on a year by year but it's gonna grow because there's a plan to issue 21 billion in fixed income and then it will be obviously significantly more but at that point of time the bitcoin stack will also be worth significantly more so assuming it would take strategy another cycle in order to really fill i think that will be very fast but let's say in the next cycle the next four years strategy is able to fill demand for 21 billion in fixed income by that time the bitcoin treasury will be worth now it's 60 billion it will be worth maybe two three hundred billion and then they won't have 200 years in btc holdings to cover

deliverance of the preferred maybe it's 10 20 30 40 50 years but they are still significantly in a good position to to issue to issue stock to pay the distribution and payouts and also that's important to mention strategy is a company with a business line that is working so the the credit rating of strategy is also tied to its ability to generate cash flow to its mainland of business which is business intelligence and ai services so i think it's important because if you come as a bitcoin treasury company and meta planet works a little bit different and i still believe that they have a good strategy same goes for for strife a sst for example who only focus on bitcoin but if you are a zombie company because strategy was kind of a zombie company actually if

you're a zombie company that only buys bitcoin and you don't think about having a major business line or you don't think about trading demand for your stock even in a downturn i think you have you you might run into problems paying out those distributions and i think that in this bull market even though i'm very much interested in the different offerings especially of strategy and also the way that meta planet is is raising capital there's a high potential that this bull market the treasury companies will create a sort of a bubble and i believe that is because leverage generally speaking always needs to be liquidated at some point and over the past two bull markets the leverage took place on exchanges so we had in the last bull market there's a number of exchanges

that went bust and all these different yield strategies that were offered on exchanges and now we have the leverage in the equity market but just because the leverage now happens on let's say the institutional level in a threat fight does not mean there's no risk in it And the risk is specifically centered around the fact that the payouts and the distributions that are offered by Bitcoin treasury companies are met by issuing stock. And strategy has such a large customer base and such a large Bitcoin base that even if Bitcoin now drops 60%, they can easily fill the distribution. but companies and zombie companies that are just starting with a bitcoin treasury model they have a very low bitcoin treasury and then maybe they have no line of business if they go in very very hard if they over leverage they might not be able to pay the

distribution and that could create a cascade of selling pressure and that could then lead into the next bear market potentially and is that only the case if they issue strike like preferred stock offerings with a cash flow kicker i do i i would say uh the to the comment i just made i would say yes but i would think it's very important that they have a cash flow kicker because if think about it the only reason for somebody from TREDFY for example Allianz an insurer from Germany that's very conservative the only reason for them to buy convertibles or preferred stock offerings of strategy is because they believe that whatever strategy has to offer in that case the payout is higher than what they can get somewhere else in the market right and that's tied also to bitcoin's

performance. But if you're a Bitcoin treasury company and you say, oh, I offer a convertible bond without the option to convert at the premium, or I offer a preferred stock that yields less than the bond of a nation state, nobody will buy it. So you need to offer a distribution that is higher than whatever nation state offers for people to get interested in that preferred stock offering yeah crazy times it's really uh it's a really exciting time to be in bitcoin but also unnerving in a in a certain sense because the magnitude the order of magnitude of of flows coming into these products is is all inspiring um and that's why when you consider something like 21 backed by tether bitfenix and softbank maybe that's a formidable competitor

who knows how integrated tether's operating business will be with with 21 obviously that's cash flowing pretty heavily um yeah and in terms of the other question i wanted to ask in terms of of like real estate developers looking at the return profile and the risk profile of these of these offerings and allocating to it do you get the sense that they would literally sell some of the real estate assets to get exposure to this or would they incorporate it and um and sort of like a a multi not a multi-strap but like um last night we were at the bitcoin meet up here in philadelphia and somebody was saying like an easy etf to launch would be basically an s&p index etf with a two percent bitcoin allocation just to juice returns would do you imagine a

similar strategy arising in real estate where you have these real estate development funds with their typical real estate cash flows and return profiles with just like a five percent allocation to these preferred stock offerings or convertible notes to to get a kicker on the returns that i just had a conversation with someone that actually sent me a business plan for that so the the idea was you could lend against your property you invested into um into strike which gives you upside option and you have a payout a dividend distribution and so i think that there's different approaches for it but judging by the conversations i have on a day-by-day basis the people that are like hardcore bitcoiners by now they have sold their

properties or they sell their properties so over the past two or three years i've met many bitcoiners that own properties because they saved in real estate and they had a fiat job let's say and they stack btc as well but over the past 10 20 years they build a real estate portfolio these individuals usually sell off their properties quickly and make the switch into bitcoin because they are only responsible for themselves so to say and there are investors that invested their own money now talking about larger institutions and larger companies where you have different lps and different partners i see that people number one they use the cash flow from the rental properties to buy bitcoin to protect the cash flow from inflation so i think bitcoin is

the best store of value for real estate and something I also see is and that's something I came to realize if you look at high net worth individuals when they make new investments usually they don't sell they borrow against the existing asset base that they have and then they make that investment and with real estate that works particularly well so I have seen a number of individuals a number of companies that refinanced the properties that they own instead of selling it and then they took that money and allocated it to bitcoin and now the question is if you understand bitcoin but you are not somebody that's in real estate development because you bring the capital let's say you bring the knowledge right so you bring the knowledge as a developer somebody else

brings the capital you build a property and for the work you receive 50 equity in the property right so that would be us for example for these individuals i see that they are starting to incorporate bitcoin and capital raising so i've been working on it myself it's pretty difficult and due to regulation and banks not willing to take the risk but we are working on a deal right now where for the next development we are taking on additional cash additional capital additional money sorry we're raising more money and we're buying bitcoin with that money and that's something i believe is like a very smart thing to do you add satoshis and not just fiat in your capital raising so you can build a bitcoin treasury from the beginning and then it takes away the stress

it takes away the reliance on interest rates and on a central planner it gives a bit more freedom and the way you construct your properties and i also see people that now are offering new real estate investment products where they also publicly say that they take the money put it into the cash flow excuse me and put it into into into bitcoin to juice up the returns So there's different practical ways of merging Bitcoin and real estate. And if you want to stay in real estate because you're a good developer and you have fun, I highly suggest to start now chatting with the institutions that you work with and suggest to also raise some sets, not just fiat, for your next capital raise to build that Bitcoin treasury.

Because a Bitcoin treasury by itself might be a business model if you're publicly listed Because you can leverage the ability to issue stock, to raise money and dilute your shareholders, which in this fact is not ad because you increase the BTC per share. So being a publicly listed company, having a BTC treasury actually becomes a business model. But if you're a private company, you can still hold a Bitcoin treasury. It won't be the main line of your business, but it will support you in whatever you do. Completely agree. I mean, that's something we've done at 1031 since we launched is hold some of the money we raise in our funds and in Bitcoin as reserves. And that's that's benefited us massively over the life cycle of our funds and highly recommend, particularly if you have like a 10 year fund.

At the very least, it makes a ton of sense to allocate a portion of your raise to Bitcoin. I mean, it's something we advocate that any of the companies we invest in, they take a portion of the raise from the proceeds that we get. them, put it into Bitcoin. And we've seen just that simple practice of raising money, putting a portion into Bitcoin, depending on what your particular company is, where your revenue profile is, where your profit profile is. It's different for everybody. But I think even a small toe dip into a Bitcoin treasury has paid off massive benefits. We have a number of companies that their bitcoin treasury is now worth more than all the money they've they've ever raised which is which is insane to think and they don't have to go back to market to raise again because they have

have this treasury that is great and that will also allow the founders to keep more of their share distribution you don't need to dilute yourself as a founder exactly exactly very founder friendly way of way of thinking about managing your treasury in the long run but But beating on this topic of the intersection of real estate and the opportunity costs that exist between real estate and opportunity costs, you've mentioned it multiple times. You're a Bitcoiner. You prefer to hold Bitcoin in cold storage. You get it and you are allocating as aggressively as possible.

I would put myself in the same bucket there. Obviously, there's a spectrum of people and their comfortability with Bitcoin specifically. But for the market overall, what do you think is the best path forward or the best outcome moving forward with all these options on the table and all these strategies that we're discussing? Like to me, what we've been talking about, we've been describing makes me incredibly optimistic because it paints a clear path towards a somewhat a somewhat smooth transition to a Bitcoin standard where everybody's not going out and dumping the real estate all at once. crashing the real estate market which collateralizes a lot of the global economy um basically beginning to toe dip whether it's doing a a juice return profile by having your typical real estate portfolio and adding something like strike or just a little bitcoin allocation um how do you see the the optimal path forward is it everybody going to dump their real estate allocate to

bitcoin let things reprice rather quickly or would you prefer like a smooth transition where people just begin slowly but surely getting a little bitcoin exposure at first but increasing that exposure over time yeah most definitely i'm i would also prefer a smooth transition i really like the article that you wrote so for the listeners um i would highly recommend reading that marty wrote an article of the dual collateralization of bitcoin real estate and importance of that and that's also why i'm beating the drum on that because i do not want to see a state of the world of chaos i i often go back to what happened after weimar being a german i'm very aware of the negative effects of inflation and the information problem and the calculation problem

that can result from it people are not capable of of making once money loses value most things lose value including human lives right people don't value things or don't value themselves they make bad decisions they start to vote very weirdly why is it that during times of high inflation which is driven by central planners people tend to to vote for central planners it's there's a this contradictory paradox where people kind of dig their own grave so to say and now if bitcoin is being included as a hard asset into the global financial infrastructure it can create some resilience that we all benefit from and generally speaking i do take like the austrian perspective where i try not to judge how things are i kind of just try to look at it and understand

it without necessarily judging it and i think bitcoin is near perfect money is being used wherever it's needed most and in the less developed world bitcoin is being used as a medium of exchange predominantly because they are just very bad payment infrastructure in the developed world bitcoin is also used as a medium of exchange but it's all it's predominantly used as a store of value and i believe the reason for that is currency does not represent the bulk of the world's money right first of all the money exists on screens in in digits and then also certain asset classes like real estate bonds art and collectibles they've taken on a monetary role due to decades of monetary inflation that has decimated people's purchasing power and they now

sit on corporate balance sheets so all over the world companies stored their productivity in asset classes like real estate and government bonds that are actually bad forms of storing value and productivity. And now Bitcoin is kind of tapping into these pools of capital and is demonetizing these forms of money. So I think it's a net positive. And I don't think it's mutually exclusive. In my opinion, Bitcoin can be both a medium of exchange and a store of value

because it's just money. bitcoin is money and money fulfills these different roles we just kind of forgot what money is because we were living on such a bad monetary standard for the past couple of decades that sometimes it's shocking what bitcoin is being used for but then when i think about it i understand wow this is actually a monetary use case that i totally underestimated because i myself had a distorted view of what money is yeah thank you for i'm glad you're reading the newsletter and uh that you like that one in particular because no it's again i am similar yeah i try to prognosticate and and project forward but always fall back to first

principles of that's where i would like things to go but let's just dissect things as they are and make rational judgments based off of that market can stay irrational far far longer than And you can say solvent and every other sort of disclaimer trope that you have there. But it is I've been talking about it for multiple years now. And after having had many conversations with yourself, Andrew Hones, Kelly Lennon, others, it just makes sense to me that if you want a smooth transition, the best way to do that is this dual collateralized credit structure that allows the borrower to participate in the upside of the Bitcoin. Because I think if, God forbid, this train doesn't stop, nothing stops this train, and you do have some sort of high inflationary to hyperinflationary event at some point down the line, hopefully it's later rather than sooner, and a sufficient amount of the market is engaged in these types of dual collateralized products, That creates somewhat of a safety net for people exposed to those products, which allows you to reorient and restructure the economy in a more, in a more, this is what I'm looking for, regimented and sort of less chaotic way. Yeah.

there would be the greatest outcome for the greatest amount of people i guess done through bitcoin and that would be good yeah so what do you think is this cycle different than last i had a long very tense discussion with a very good friend of mine yesterday he's anonymous but he's been in bitcoin for over a decade as well and he's been he said Leon you're misjudging it now that's the point where we are going into some form of he didn't call it super cycle but he said that the volatility can't be bigger than 60 percent because large institutions and bitcoin treasury companies are buying so much bitcoin and they're huddling it they're not willing to sell it that even if let's say the leverage is being washed out at some point

he can't see a drawdown more than 40 percent and I personally sort of have the opinion that Bitcoin is doing what Bitcoin did and does every single cycle and it's a net positive because it builds resilience so I wouldn't be able to pinpoint my finger into let's say it's going to happen November December or in the first quarter of 2026 but just judging by my intuition I think that bitcoin at some point needs to wash out leverage and that creates like resilience because on the fiat system we've got these boom and bust cycles whereas over time once the market experiences a downturn new money is being created it's being funneled into the market to stop the downturn from happening but over time there's a there's a bust like an 08 or you had one in you know we had

one in 29 that's also very known of course and you had various boom and bust cycles throughout the years and throughout the last century and with bitcoin because bitcoin naturally washes out leverage it builds resilience and we don't go through these crazy boom and bust cycles we go through bull and bear markets and i think that's a net positive also for the mentality of the stackers and the hodlers it wouldn't be good if bitcoin would just now go on an upward trajectory but judging by also the last three years things are changing where for example in about a year and a half ago we had a bull market in miners so if we talk about clean sparks for example clean sparks i think in december of 2023 please check the timeline here but clean sparks peaked

around 23 24 25 dollars and now it hoovers around 10 dollars and some of the other miners like riot and marathon they went through a small bull market at that time shortly before in the summer we had an ordinance bull market so which is interesting is that in specific asset classes that are tied to bitcoin like collectibles on bitcoin or miners we have bull markets that are not in line with the general price directory of bitcoin so that's something that i personally haven't seen before and i am paying attention to that because what it tells me is that the bitcoin bull market is extended in a way bitcoin is not crashing from let's say 90 000 to 10 000 right but it still has volatility and it went from 100 to 30 to 82 just a couple of weeks ago

and i do expect we'll have a 60 percent drawdown at the end of this bull cycle as well just to wash out some leverage i'm sure bad players will enter the market like like always so i don't believe in some sort of super cycle or the liquidity squeeze or supply squeeze happening like immediately but i do believe that there's there's a change that we can see the asset is maturing the understanding of the asset from large pools of capital is maturing like sailor is not going to sell his stack right and he's holding over two percent i think of the total stack at this point and as these companies are stacking volatility will dampen but i don't think it will go away and that's a beautiful thing it really is and i would agree i think there's definitely

going to be a correction at some point is it going to be the magnitude of the 2017 correction or the 2013 correction 2014 correction probably not but as you mentioned uh humans are incredibly social beings that her mentality does take over people make bad decisions and leverage has to get wiped out but one thing i mentioned in that piece that you brought up and was actually tweeting about yesterday one of the things i'm looking at whether it's these dual collateralized credit structures with longer durations or now bit bonds are becoming more of a topic of discussion He had the mayor of New York City announce that he would like to launch a municipal BitBond in New York. And yesterday, you had Russia's largest bank, Sberbank, launch a structured bond tied to Bitcoin.

And that's one thing I'm trying to wrap my head around, get a better understanding of, is if you have these structured credit products and bond products, BitBond products come to market and they reach a critical scale, they reach scale, like that has to do something for volatility because you have this forward looking duration curve that you can point at and say, OK, I know that X amount of Bitcoin are locked up for Y amount of time. So that supply is unlikely outside of bankruptcy to come to the market to be sold. And that has to give institutional investors some peace of mind from a volatility perspective saying all right at least i know this portion of the bitcoin supply is going to be locked up for

for this amount of time and so then you try to calculate what the free float is beyond that and what effect that could have on price and i don't know if there's a question there but just something i'm paying attention to this is this forward-looking duration curve begin to affect the psychology of people and their comfortability with bitcoin yeah i think that is in line with bitcoin being part of this greater monetary reset where as near perfect money it's it finds its way into every capital structure basically yeah it's exciting times and then it's something and then i've been jokingly tongue-in-cheek saying super cycle for a year just to trigger people on rabbit hole recap but we've been saying it on that show for years too it's like when wall street comes like if you

thought degens on bitmex and binance trading at 100x leverage where we're uh degenerate just wait till tradfi gets in and tries to create products around this and i think we're at the very early days but i don't think i don't think people should discount the the degeneracy uh the levels of degeneracy to which wall street and high finance can can engage in as well that is true it's a very good point because sometimes people make the argument saying Treadfire is not coming to Bitcoin. And then I would say, well,

that it's not a good thing necessarily. It's definitely a good thing that you have companies, Bitcoin treasury companies that are buying Bitcoin in large bulks and they're holding it. Sure. There's also custodian risk to that. It's another topic that, that is worth discussion,

but Treadfire coming to Bitcoin, I think Bitcoin will give Treadfire a big slap in the face. and that is being done through washing out leverage and that means downside volatility yeah and you had sorry there's somebody mowing the lawn outside so i want to make sure i'm on mute when you're talking but you had uh you had a pretty long tweet um and i won't read the whole thing but i think probably a good point to end on uh it's your tweet the truth stings at first I've been on building sites since my teens and have spent my early career turning dirt into concrete cash flow. And as I told myself, lasting wealth, it took years as a bruised ego to accept that no asset, not even prime real estate, can compete with Bitcoin's long-term performance and absolute scarcity.

Markets don't care about our feelings and math won't bend to sentiment. The sooner we face the reality, the sooner we can position ourselves to benefit from Bitcoin. Then you explain how you see it. But to any of the real estate developers who are listening or watching this interview because they're interested on your perspective as somebody in real estate who has gone all in on Bitcoin or incorporated Bitcoin into your strategy, what would you say to the skeptics out there? How do they get off zero or what questions should they be asking themselves? I think the question you should ask yourself is start measuring your wealth on Bitcoin. Take the value of the properties you own year by year, month by month, from any time that you would like to choose, four years in the past until today,

and I can guarantee you, you'll be shocked by how rapidly the properties that you own are losing value. And I think that's what you should do. You heard it here first. should we tease the book at all are you keeping that close to the chest not at all not at all i'd be happy to um yeah so i'm writing a book by the working title digital real estate hopefully it'll be released by the end of this year i've been working on it for around three years it's just it's taking a lot of time i'm spending a lot of time on it thinking about it a lot and it's going to be released with with bitcoin magazine and the idea is i have three chapters in the book that i also have smaller paragraphs of course the first chapter is

explaining bitcoin as digital real estate the investment thesis behind real estate and bitcoin being very similar and then the second chapter i take you deep into very practical strategies for using bitcoin in the real estate industry for real estate development for protecting cash flow using me to using mining to generate heat and also offsetting increased energy cost and also eventually if you want to going into the public markets tapping into that and the effect of corporate adoption on bitcoin and in the final chapter i go into the socio-economic effects of bitcoin replacing real estate and then becoming the bedrock of the global financial system and becoming hopefully the new hurdle rate well leon thank you for your

time thank you for writing this book i can't wait to read it it's always great catching up with you I think you're on the cutting edge of this intersection of real estate, Bitcoin, and then just beyond that, thinking of Bitcoin generally more broadly and thinking of ways to dip your toe in, get more exposure in a somewhat smooth transition. So thank you for coming on, having this conversation. I hope to see you in person at some point soon. i know you're over in germany but hopefully next time i'm not running out of a conference when i see you in person yes i hope so too thank you for having me on i appreciate it all right peace and love freaks freaks thank you for listening to the show i hope you liked it if you did like it please make sure you subscribe rate review the show it helps us out a lot and also if you like these

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