What Bitcoin Did - The Bitcoin Credit Gold Rush | Jeff Walton

Episode Date: May 29, 2026

“We are in the digital gold rush to acquire as much Bitcoin as humanly possible.” Jeff Walton joins the show to break down the rise of Bitcoin-backed credit, Strive’s SATA instrument, and why perpetual preferred equity could become one of the most important capital market innovations in Bitcoin. We discuss why SATA is now paying daily dividends, how Strive thinks about risk, reserves, leverage, and Bitcoin coverage, and why these new credit instruments may become a structural buyer of Bitcoin through both bull and bear markets. We also get into Strategy’s role as the market leader, the shift away from convertible debt, the future of Bitcoin treasury companies, proof of reserves, custody risk, institutional adoption, and whether Bitcoin credit could eventually reprice the entire credit market. THANKS TO OUR SPONSORS: ANCHORWATCH BLOCKWARE LEDN BITKEY SWAN CAPE FOLLOW: Danny Knowles: https://x.com/_DannyKnowles or https://primal.net/danny Jeff Walton: https://x.com/PunterJeff

Going to 2032, like this is a gold rush, right? Like we are in a, we are in the digital gold rush to acquire as much Bitcoin as humanly possible as we make this transition into a more digital world, a digital capital world, digital dollar world. Why was Bitcoin birthed? Bitcoin was birthed because we were losing trust in the existing institutions that existed on the planet. Civilization is a function of trust being extended beyond our biological capability.

One of the biggest things we're underwriting is just like the structure of Bitcoin itself, right? So the fact that the Ibit ETF exists, the fact that digital credit exists, the fact that the regulatory landscape is what it is. Good to have you back on the show. So I think it was December when we recorded. We're in Abu Dhabi. And I'm pretty sure had Sata launched then or had it maybe just launched? It was, yeah, it was about a month old. Yeah.

Okay. Just got into the market. Yeah, it was probably maybe not even a. month old. And so at that time, I think you had, Strife had something like seven and a half thousand Bitcoin and I'm pretty sure Sata was trading way below $100. And now we sat here, you know, six months later, you've got, I think you've stacked nearly 10,000 Bitcoin since then and Satas at par and crushing it, man. You've done good. Yeah, yeah, we've been, we've been working really hard. And, you know, there was a lot of, it doesn't just happen. Like, there was so much work that

happens behind the scenes to get there. I mean, we went through the acquisition was similar. That was an entirely big process. We made some adjustments to how Seda works. We changed the target range. We bolstered our cash reserves. We weathered the drawdown. We did a follow-on offering as a result of having all the similar Bitcoin on the balance sheet. So like the team has just been working so hard in that time horizon too. It's been about six months. Yeah, the team has been working crazy hard and that's a result of how hard the team's been working. So we've just been continuously pushing the envelope and then watching the leader, right? Strategies been incredibly successful with STRC and we've gotten some really good advice from the strategy team and Sailor on how to think

about these things, communicate to the market and start to establish this credit profile in the industry. Yeah, you've been getting some attention from outside just before we started recording. We were talking about the Coffee Zilla show. I thought you did really well. And that's as someone who's been like skeptical of Bitcoin Treasury companies, I still thought you absolutely crushed that. But maybe for anyone, I'm sure most people know what Satter is, but do you want to explain it and then we can get into it?

Because I've got a load of questions around some of the details. Yeah, Seda is our marquee, perpetual preferred equity. It's a digital credit instrument. We're calling this digital credit. Perpetual preferred equity is a senior equity that sits on our balance sheet. So we have two equities. We have a senior equity being SATA. It pays 13% annualized. And starting on June 16th, it will pay daily dividends every single business day. This is the first security in U.S. capital markets history to ever pay a daily dividend. So we think that's a pretty big deal. This is our marquee instrument. And then we've got our common stock, which is ASST, and that's the residual common stock like any other typical common stock. And that's it. We don't have any debt on our balance sheet.

We have those two instruments. Both of them are publicly traded. S-A-T-A-S-T-A-Publicly traded on the NASDAQ and then ASSTT also publicly traded on the NASDAQ. All right. I've got a ton of questions on both of these things, actually. But let's start on SAT. You got notes. I know.

I was just getting my notepad. I was like, I'm going to write some stuff down right now. Helpful. But so you say that there's no debt, but you do have obligations. but you do have obligations. So how do you try and like figure out your leverage profile? Because I don't know how much Sater has been issued, but like you owe a lot of money.

Yeah. In dividends. Yeah. So let's see. As of today, I think we've got about $1.3 billion of Bitcoin on our balance sheet. We hold 16,500 Bitcoin. We announced it this morning.

And then we've got $575 million of perpetual preferred equity outstanding at 13%. So I think it's just a touch over $70 million annual interest obligation. Last I checked. So we, on our balance sheet, not only do we have the 16,500 Bitcoin, but we also have 12 months of USD cash reserve and six months of STRC reserve. That's our kind of first line of defense is how you could think of it for our flexibility of being able to pay out the dividends. And then we're in this process of constantly raising capital, whether that's through

common stock ATM, whether that's through our perpetual for equity instrument data or any other business operations that are, you know, companies. engaging in. And so, so are you gone? Yeah, so there's a few ways to think about this. Amplification has been how to think about financial leverage. Amplification has been one of the standard ways to think about, you know, financial leverage on the balance sheet. And amplification is the notional preferred equity outstanding relative to the Bitcoin on the balance sheet. So our amplification as of today is, I think, around 40, 46. 47-ish percent. And so that's if you're taking the notional relative to the Bitcoin. Now,

I think a little bit of the misnomer there is these aren't debt obligations. So there's no cliff repayment on the horizon. We get this money as equity capital and we never have to pay back a principle. Okay. So that kind of changes your perspective of how you view a risk profile or financial leverage on these instruments. And in my opinion, what I think is a little bit more valuable of a view is what we like to call BCR internally. This is a Bitcoin coverage ratio. So it's how much Bitcoin do you have relative to your annual interest obligation? And so I think as of today, for us it's around 17, 18 years of just Bitcoin coverage

relative to our annual interest obligation. And I think that's a helpful perspective when you're thinking about why would somebody hold this instrument? Well, you're holding this instrument. if you're holding an equity instrument for income, you're holding it for income. You're not holding it necessarily to get your principal back. That is it. These are hybrid instruments.

These are like hybrid equity type debt instruments. They are equity. You do not get the principal repayment. And I'm not surprised that it's kind of breaking people's brains on how to think about this because it's a hybrid. It's a little bit of both. And so that changes the construct. that changes the psychology, that changes the construction of how you would design a portfolio,

that changes how you would think about liabilities into the future. And a lot of this stuff is novel, because there's never really been an instrument that's been this attractive before with that high of a yield and that high of a liquidity profile. So I would say it's hard to conceptualize because nothing like it has ever really existed before. And it's, you have to, you have to think of it slightly differently than a traditional debt instrument because it is a hybrid vehicle. Okay. And with the structure of this, can you pause dividend payments whenever you want in the same way that strategy can with stretch? Yeah, we have the ability to to pause dividend payments. That's not our, that's not our intention. Our intention is to have a very high credit quality

and very high credit profile forever. We want to be continuous. of this credit instrument. If there's a lot of psychology associated with these instruments, if there were a situation where we were to pause the dividends, that would impact the psychology of the holder. That would impact the risk profile. That would impact the people that are holding it. That would impact the common. That would impact the flywheel of the entire capital structure. So that's a, that is a tool in our toolkit. I think that's a little bit more of a break glass scenario after depleting a cash reserve or depleting all the other reserves and looking at all of the other ways to pay a dividend, you know, turning over all of the other

stones before using any of those tools. And the yearly dividend is 13%, is that right? 13% is the annualized APR with daily dividends, the annualized APY, including compounding, is 13.88%. These are return of capital instruments. So the tax equivalent yield depends on what, like, tax jurisdiction you're in, but the tax equivalent yield is something in the 20s when you're taking into consideration that tax component. Do you wish you could access cash without selling your Bitcoin? Well, Leder makes that possible. They're the global leader in Bitcoin back lending, and since 2018, they've issued over $9 billion in loans with a perfect record of protecting client assets. With Ledden, you get full custody loans with no credit checks or month of repayments,

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Meet the team at swan.com forward slash WBD, which is SWAN.com forward slash WBD. Okay, so when I first saw that you were doing the daily dividends, I kind of, because I think a little bit before that stretch had come out saying they're going to do every two weeks, semi-monthly, yeah. And I thought it was initially like a marketing thing, like a marketing thing to retail where it's like you get daily dividends. It looks more like a money market account. like you're just getting money constantly coming into your account.

Is there something more to it than that? Do you think it's more interesting than that? I think it's way more interesting than that. So first of all, yes, I think it is like a money market account. But let's, well, I think the design, it's designed to be better than a money market account. So if you think about how a money market account works, when you hold money in a money market, you accrue interest daily, but you get paid the interest monthly. So you don't actually get paid daily.

They give you the illusion that you get paid daily. You just get paid at the end of the month. Now, we're actually going to pay the dividends every single day. Okay, so that's interesting. I think it's a, you can now, you can now put them next to each other. You can now put a money market and this instrument next to each other, and you can compare them. Obviously, they're different. I'm not saying that they're exactly the same, but you can compare them.

The next piece is what I think is incredibly fascinating. It's like, we are moving into an algorithmic world. The world is getting more algorithmic every, single day. AI is getting exponentially better. It's not getting linearly better. That is working its way into trading systems. That is working its way into defy. That's working its way into finance. And the biggest incentive for algorithms is like in the financial world. It's in crypto. It's in all like take traditional finance and digitize it. Like that is we're going through a multi-decade transition of digitizing traditional finance. And we're living in the middle of it.

We are smack dab in the middle of it. Okay, so why is that important? Why is that valuable? Just give you a couple examples in DFI for a moment. What's happening in DFI, decentralized finance, is they're taking these perpetual preferred equity instruments and they're wrapping it and providing a different instrument to the DFI world. And so what they're doing in the DFI world is that what they initially did is they took the STRC instrument.

and put it in defy and they're providing daily dividends in defy and daily liquidity. So you can trade it on the weekends and you can get paid a dividend every single day. Now, when you do that, you have to take on risk. Like that secondary industry is taking on liquidity risk and they're taking on interest rate risk. Because what if liquidity comes out the door before the dividend comes out? You know, like you're taking on 29 days of risk to facilitate liquidity. Okay. Now, as that changes, as the frequency increases, the optionality and the risk profile of what you can build on top of this increases drastically.

So, for example, if you go from one day a month, you're taking on 29 days of risk. And if you go to 22 days a month, you're now taking on eight days of risk. So just by making that change, you reduce the risk profile by 70% in the secondary market. That's huge. That's massive. Like if you wanted to facilitate like a hyper liquid market that's trading on algorithms, you need a transparent risk profile. So that's a fascinating development. And I think this stuff is just going to get way faster, like way, way, way faster.

and we don't know exactly what the innovations are going to be because nothing like this has ever really existed before. But you can start to imagine this also creating more liquidity on the underlying. So this is one of the primary reasons we did this. Not only is it mathematically a better instrument, but it should facilitate a higher liquidity profile every single day for the SATA instrument. what we noticed is over time every single month, there was a spike in the trading volume that came in the door right before our record date. So people were coming in the door to get the dividend

and then they were leaving. And then the volume dried up and we would wait another 30 days and then the trading volume would ramp back up into the record date and then it would leave and then go find other opportunities. So what we wanted to do was smooth out that volatility in the trading volume. We want to increase the liquidity every single day.

So when a holder is holding this instrument, right, if you want to hold your instrument for principle, you want to get your principal back out of it, you want to know that you have the liquidity to go get your principal back out of it because there's a lot of people that are trading it. There's computers that are consistently trading it back and forth. They know that they're going to get the dividend every single day.

And it's just going on behind the scenes. Now, another thing that's really, fascinating here is the optionality of trading in this interest environment, balloons, the number of carry trades that you can perform, it goes exponential. What do I mean by that? I mean, if you wanted to short a high-yield bond, so for example, there's a, I've been obsessed with this trade. I haven't done it. If I had more time to trade, I think I would, I would try it. You can short H.I.G.

The E.T.F. It's a high-yield bond fund. It pays about 6%. Incredibly liquid. It's got about $20 billion of AUM. It's a pretty big fund. You could short H.I.G. And theoretically, buy SETA or stretch.

And you can hold it for the 29 days that H.I.G doesn't pay a dividend. And then close that position. You get paid the dividend the entire time. And then you close that short, theoretically, for whatever the price risk you took on HYG. That's an interesting trade. And you can run that trade for an extended period of time. You can have algorithms that are working back and forth

thinking about different points in time. And I think that there's just a continuous opportunity to find different things to trade. And one of the True North members, Soley, he brought up the idea of these, like day traders is, you start the day in cash and you end the day in cash. That's common with day traders. And he brought up the idea, well, what if you start the day of Seda and you end the day in Seda?

It's like, okay, well, I'm taking my car out of the garage, I go to work, and I come home and I park my car in the garage and I get my daily dividend. That's interesting. And that's, that is going to change how people work and, like, fundamentally think about these instruments. the second and third order impacts are absolutely enormous. And you think about, like, what can you build on top of this? You can think about the design of a, Saylor's called a digital money. I'm going to call it a Bitcoin dollar. I just made that up 10 seconds ago.

Like, you could design a Bitcoin dollar, and the Bitcoin dollar is a stable dollar, but it's paying you, you know, I don't know, 11% yield. what do you got? Something back there. It's called the Bitcoin dollar. I've got a book for you. The Bitcoin dollar. The Bitcoin dollar.

Yeah. So. That, yeah, I guess hopefully he's trademarked that. So I guess what I'm saying is you can build on top of this and you can design different financial instruments. And because the risk profile is unique. and you're taking on a lot less risk than having a single monthly dividend payment. So for you on your side, it smooths out that volume across the month. Does that also help you keep SATA at par?

Because you're not getting huge inflows and outflows around the end of the month? Yeah, that's the thesis. Yeah, that's the thesis, is that because there's less speculation on the I guess the single dividend payment that month. What I think will happen is we'll actually start to see volumes be a little bit dynamic every single day. So because we're going to pay out what it's going to be like about a nickel a day, we may see the instrument drop about a nickel a day

and then come back to par throughout the end of the day. So it will be interesting to see the exact dynamics. But that is, again, part of the design. of the instrument is to incentivize people to be in this in this instrument much longer and it's not even necessarily retail it's computers like we want the computers to be just incredibly fascinated with this instrument and just park their running different trading algorithms back and forth and a million miles an hour faster than the speed of light like that's that's what we want to incentivize is that that kind of structure so you want them to almost use

use SETA as like the benchmark. You start from there and then go and do other stuff throughout the day and then come back there. Yeah, or think of it as like the blood in a body, like the liquidity layer of a market. And then for the holders of SETA, like the benefit is that they're essentially, they can now do a daily DCA, assuming they're putting that money back into SETA instead of doing a monthly DCA. Daily DCA is interesting. Yeah, you can think about like a drip, right, or a drip program. If you have capital in there and having the drip, the dividend that you get every single day, you can kind of recycle it back in, have a market order goes back in every single day.

I think that structure is interesting. Yeah. And again, I mentioned earlier, this is a hybrid instrument. It's like a debt. It's like a, it is an. equity, but it's got a dividend payment. So it's a hybrid instrument. So if you're most concerned about principle to protection, you want the least amount of volatility. You want high yield, low volatility, high liquidity. That's like the trifecta. If you could get all three of those,

you could have liquidity, low vol, high yield. It's never existed before. Like go look at anything else in the traditional financial markets, you get two out of the three. Right? If you get high yield, it's going to be illiquid. If you got low volatility, it's going to be low yield. And so really, we're hitting this trifecta in the capital markets that just becomes really appealing as a trading vehicle. And so let's talk about like the makeup of SETA because it's made up largely of stretch, right?

And then what else on top? Like how do you outperform stretch in terms of like the dividend repay? payment? It's not made up largely of stretch. I mean, it's helpful to think about our balance sheet construction. Let's walk through it. We've got 16,500 Bitcoin, about $1.25 billion. Then we've got 12 months of USD cash, and we've got six months of STRC. Again, the USD cash, you can kind of think of that as like a buffer layer or like a first line of defense. The STRC, the reason we hold that on our balance sheet is because we view that as a moderate duration instrument. What do I mean by that? Like, you have duration liabilities, right? So we have, we know what our liabilities are over time.

And if our alternative is holding USD cash at three and a half percent or four percent, whatever the number is, we would rather be clipping a little bit of a higher yield when we think that the risk profile is significantly misunderstood and better, if not just as good as the U.S. treasuries that we also hold. So we hold those a little bit more protected into our balance sheet, thinking about them as a medium duration asset that's providing a higher yield than just parking in treasuries. It's like the Andrew Carnegie thing, right? Andrew Carnegie goes and builds the steel bridge and sailor goes out and walks on it, and we are too. This is good. This security is good. we're going to put it on our balance sheet.

And that's another perspective of how we view it. So this might be a funny one for people, but this is one of the areas where I kind of, I didn't necessarily agree with Coffeyzilla, but I do think it's a very valid question. In that like how do you, how do you kind of forecast Bitcoin price and make sure that this product is going to be

sort of sustainable in a medium to long term? Like, let's start with just how you look at Bitcoin price. I've heard you say you think a 30% Cagger is reasonable. Like, how do you get there? Yeah, we get there from really several different things. It's institutional structure. It's the dynamics of capital globally. It's the global debt situation in the United States.

The corporate infrastructure, the regulatory environment. It's a little bit of art and science. The, the, One of the biggest things we're underwriting is just like the structure of Bitcoin itself, right? So the fact that the Ibit ETF exists, the fact that digital credit exists, the fact that the regulatory landscape is what it is, and the incentive structure around all of these different things. And like how much capital it takes to move the price of Bitcoin. This is something that I think Check on Chain. He's done a lot of, you know, work on like, you got to bring this capital in the door to push these assets higher.

And I agree with that. It takes a lot of capital to push these assets higher, but I think the incentive structure is there such that a significant amount of capital can be onboarded into Bitcoin very quickly, particularly from these digital credit instruments that will attract a lot of other capital into spot Bitcoin, into the derivatives market, into the common equity of these things, looking at the landscape of how global monetary supplies changed, looking at the metallic capital in the world and just the general capital landscape.

So it's a little bit of art, a little bit of science, a combination of the two. And then thinking about the downside risk, we don't need Bitcoin to go up 30% a year for this to work. That's what we're anticipating. That's good to hear because that was like really going to be my big question. I played around and I was figuring out the, Kaga of Bitcoin and I picked January 1st, 2017. So you capture all the 2017 bull market and then

the next two. And if you bought Bitcoin every single day from the 1st of January 2017, I'm pretty sure the Kaga came out as something like 26%. And so like for me looking forward, like I'm insanely bullish Bitcoin. I've literally bet everything on it. But like if 30 was a benchmark that you needed to hit, like that's something I would be skeptical of. One data point to throw out for you, Danny. The 200 week moving average of, Bitcoin has gone up at 30% over every single return period. Go pick data points along the 200-week moving average of Bitcoin, and it's 30. Interesting.

Like every single one. Go look at it. That's one way to view the framework. Another way to view the framework is look at four-year compound annual growth rate periods and break them up into percentile distributions. That's how my brain works, I think, about the statistics, the probability analysis. If you look at four-year compound annual growth rates, there has been around 4,000, four-year compound annual growth rates in Bitcoin's history.

Every single one of them is positive. The 99th percentile of worst-performing four-year return periods is like 9 percent. So we're talking like worst one percent of four-year compound annual growth rate periods. The median is like 60. Very high. Very, very high. So you can start to think about that. that is like a distribution or a probabilistic landscape.

I think using all of those components in combination, thinking about the incentive structure, thinking about a fixed finite asset, thinking about metallic capital, thinking about how the world's moving, that's how we land on that number. The thinking about what we need, we need Bitcoin to go up around,

I think it's around 5.7 or 6% annually in order to pay our interest obligations forever. The value of the Bitcoin going up gives that additional buffer to pay the dividends forever. So that's true right now. But again, this is like if Sata absolutely blows up and you start selling an absolute shit ton of the stuff, then your obligations are going to go up and that number will increase as well. Obligations will go up, but so will the Bitcoin on our balance sheet. True.

So as soon as we sell a share of CETA. Is it one to one? As soon as we sell a share of SETA, it just depends on what our capital markets activities are like, whether that's the common stock or SETA. But we're in the market buying Bitcoin within an hour, often much faster than that. And then we own the Bitcoin very quickly. And that is a, I think that's just a fascinating element of this entire Bitcoin landscape. It's something that I learned a lot about when I jumped into this ecosystem. system, understanding how quickly you can, um, you can hold Bitcoin and have it in custody and move it.

It's just the speed is just breakneck. Totally. If you were, if you were to go raise $50 million of capital, go buy a piece of real estate, it would take you 12 months to go find a piece of real estate. Yeah. Right? Like you go raise the capital, 50 million and you're like, okay, well, let me go find a 50 million dollar property.

Well, guess what? There's not a lot of $50 million properties out there. So you got to go find one that's like for sale. and then you've got to think about, like, do I actually want that one? Is that the yield that I'm trying to get out of it? And like, it just takes forever. I can deploy $50 million in an hour if I wanted to.

It's awesome. That's crazy. And it's a capital asset and I can hold it. So I would think of it that way. It's like if SETA does very well, we're going to be in the market buying Bitcoin. we're going to be adding Bitcoin to our balance sheet, which should in theory bolster the value of the common equity.

The market cap of the common equity should be a function of what the underlying Bitcoin is on the balance sheet and our ability to continue issuing that into the future. So we think we're looking at the dynamics of all these instruments day to day very closely, sometimes second by second, how the common is trading, how the perpetual preferred equity is trading, what's happening in Bitcoin, how the rest of the Bitcoin Treasury markets are moving. We've got some very advanced analytics behind the scenes that we've got like a, I don't know,

like a 40 tab advanced analytic platform that we've made that we use behind the scenes. It's pretty killer. So if, I know you say it's variable, but like just roughly, rough numbers. If I bought a million dollars a SATA, how much Bitcoin would you be buying? I mean, we could be buying a million dollars of SAT immediately.

A million dollars of Bitcoin. Less fee. Yeah, sorry, a million dollars of Bitcoin. Less fees from our banks that sold the shares. So you're not putting any of that into like cash or anything like that? Again, like I said, it's a function of our capital markets activities and what we have going on at the time. That could be we look at everything in tandem. Right. So it's what is what does the entire position look like? What is, as you will know, if you go look at our 8Ks over the last few weeks, we have been both. bolstering our cash position in line with the growth in SETA as well to maintain our dividend reserve. So that's something that I think we're a little bit flexible in how this, and we need to manage a

little bit tighter, in my opinion, because strategy is significantly bigger. They're just on a whole other level, like another playing field. But considering we're a smaller issuer, considering we want to, you know, grow this credit quality into the future, we want to manage that reserve or that, um, that cash position a little bit tighter. And I guess tighter and what I mean by tighter is like a hawk. We're watching it very closely and how it all interacts together. Because what we really want is to foster liquidity in both of the instruments

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Is there an issue at all, or a foreseeable issue in the future with the fact that you have stretch on the, like as part of the makeup of SATA, that you're kind of at the whim of their company. in a way in terms of like the actual dividend that they're paying out. So for example, if they drop the rate, are you going to have to also drop the rate in tandem? No. It's not a part of SAT. It's just on our balance sheet. Like that's how I would view it. Anybody that's listening to this, like it's not a part of SAT, it's just a part of our balance sheet. And if they drop the interest rate, we would make an analysis of its relative interest rate relative to the other things

that we're holding, being the cash position and whether or not we, we deemed that. a worthy hold. I don't think that's incredibly likely. You don't think it's incredibly likely that they dropped the rate or? That they dropped the rate and we would want to shift into a cash position. We, our team is probably the most familiar with the actual risk profile of STRC than anybody else in the planet. I could believe that.

So because we've done all of the work on our end thinking about the risk profile of our own instrument, we've got to think about the leader, right? We're also underwriting the leader. You asked why we're anticipating a 30% cagger. Look at the leader. The leader's accumulated 800 and 840,000 Bitcoin. They're going to have a million Bitcoin in August or September. And they've got the most successful perpetual preferred equity in history. And it's, you know, trading hundreds of millions of dollars a day.

We're underwriting that. right and and so we're constantly like we have the hurdle rate podcast we literally talk about strategy every single week i have the true north podcast i talk about strategy every single week right so we we are uniquely positioned to understand the actual risk profile of that and think about how that adds value uh to our balance sheet ultimately how i think about it is like would you would you rather us hold 50 million dollars in cash or would you rather us hold 50 million dollars in STRC and extend our runway by a month. I'll be the answer.

Like what's better, what's a better credit profile? And this is something that we're navigating with the market too. I mean, there are some people that don't like it. It sounds like you've got a little bit of a concern with it. Coffeezilla obviously had a concern with it. It's not even a concern. It's just like these are questions people ask and I want to put them to you. Yeah.

Yeah. It's, uh, it's something that we're aware of. Um, again, it's, it's kind of communicating this risk profile of these instruments. Like we, we think they're, a really good moderate, we think STRC is a really good moderate duration instrument. If I were running an insurance company and I had liabilities on my balance sheet, you carry cash for some of your short-term liabilities,

and then you start to carry like equities and bonds and reinsurance for your medium-term liabilities. If I ran an insurance company, I would shake out all of the bonds on my entire balance sheet, and I would park 100% of it into stretch. now I'm not running an insurance company, right? I'm running a different capital vehicle, a digital credit vehicle, and we're parking Bitcoin on our balance sheet. But that's how I view it is it's a really good moderate duration instrument to help you manage like cash position and get a juiced yield on something that you're holding

for a medium term. So one of the other questions that I've heard asked a little bit is whether companies like you and strategy are kind of putting all the attention. mention on the preferreds and ignoring the common stock at all. And I know a minute ago you said that you're obviously looking at both of those very carefully. Like how do you kind of weigh the two off against each other? I love both of them. I love both of them. And we want to foster Amplified Bitcoin as much as we do digital credit. But obviously like when you're buying a common stock, you're buying the company. You're buying a residual claim on the assets of the company and their ability

to grow the assets of the company or grow the, the cash flow of the company. Obviously, there's a lot of market tension figuring out what the value of that is and a lot of dislocation in both directions. There are periods of time where it's rich. There are periods of time where it's very cheap. And there's a fight between the Bitcoiners and the strategy maxis and all of the like. But the, uh, how, yeah, I, I view this is that we are, we are fostering both of them.

And the, I guess for us, like the base effect math is really interesting when you're thinking about like the success of SETA relative to our common equity and how much, how much Bitcoin it would take to move the relative market cap value, the 1x MNAV value of our common stock. So thinking about how much we can increase the yield, how much Bitcoin per common share, how much can we increase the potency of the common share of the common equity. And we're really focused on that. So thinking, about, again, like, you're buying, you're buying the vehicle. You're buying the corporation. And I think a lot of people lose side of that. You're buying this vehicle and its ability to operate into the future. And not necessarily the underlying assets. Like, this isn't a claim on Bitcoin, right? You buy a common stock. It's not buying Bitcoin. Like, if you want to go self-custody Bitcoin, go self-custody Bitcoin. I love that. I love that for you. I love it myself. I buy Bitcoin every single day. But like if you're buying common stock of the amplified Bitcoin version, you're buying,

you're buying the excess risk and the excess return that the preferred equity holders don't want to hold. So if you want that, that volatility has to go somewhere and that volatility goes to the common stock, you're buying that excess like amplification. That's why it's called amplification because it's moving more. than the underlying Bitcoin commodity. And it's true. The data shows it. Like our common stock, for example,

let's start with strategy. Strategy has got a beta of 1.5 relative to Bitcoin. This is going back over the last like four years. That means for every point that Bitcoin moves, MSDR moves 1.5. Okay. Our common stock has about a 1.6, 1.7 beta to Bitcoin. So every point that Bitcoin moves,

our common stock moves 1.6 to 1.7. And some people have pointed out that our common stock also has a beta to MSTR. Because our relative size, we move more than MSTR does. And we've got a higher amplification. We've got a little bit more of a pure expression of this corporate capital vehicle. Given that we don't have any debt, we only have one instrument. It's a very clean expression. I know you think I'm skeptical.

And I know why because I obviously have been skeptical in the past. I think these are really cool. Like, one of the things that I really like looking at your website is that you can see the Bitcoin that you've accumulated. And like until a couple of months ago, it was basically just like slugs of accumulation. And now you just see it like trickling up. And obviously that's with the money that's coming into SAT. And I think it's really cool that you're essentially now like DCA and Bitcoin almost constantly.

I think that's really good for Bitcoin market. I think you guys are going to do really well. But like when you talk about risks, I think we've gone through a couple of them there. But one of the obvious ones is like the custody risk of the Bitcoin. Because I imagine you're not doing that in-house at the moment. So you're kind of offloading that risk to another company. I'm sure they're incredible at what they do. I'm sure they're very well vetted.

But like it's not you doing it. Is there ever a scenario that you would take custody in-house? Man, probably I guess we'll continuously monitor what that probability looks like. We've got a few different custodians. They're institutional. They're very big names. You'd be familiar with all of them. And we are constantly monitoring what that custody of risk looks like.

We know where all of our Bitcoin is. We know we have access to all of it. We've got protocols in place to prevent it from being moved. Corporately is basically like the recipe for Coca-Cola, right? You can't have multiple people on the same airplane at the same time. Like we've got we've got all of that crazy stuff in place and we've been working on that for months. Really like September through January that was we were laser focused on that. We did an enormous DDQ process.

We had a 200, 200 question. DDQ questionnaire. We went out and just absolutely grilled all of the custodians on everything and not just price. It's like I want security like every single question you could possibly come up with. And then we had our entire finance team kind of review. view the risk profile of all of those, and that's how we selected our custodians. So it was a well-vetted, very long process. So that's point number one. Point number two on self-custody, I think it's, I think the risk profile of self-custodying Bitcoin starts to get incredibly tricky.

Not only from a corporate investment standpoint, somebody being willing to invest in the equity of your company or the credit of your company, uh, the, the risk profile of me going on an airplane and being somewhere, it, it's completely heightened. Right?

Like, uh, the risk profile of Matt or CEO being somewhere or it, it just changes the dynamics of how somebody I think could be thinking about, uh, the equity that they're holding or the, the credit that they're holding. And something that I,

like Bitcoin is trustless, right? And this is something I've been kind of steering towards a little it is trust. Trust isn't incredibly important for like humanity. And if you haven't wrapped your head around this one, it's like a pretty big idea and it kind of takes a while to kind of sink in. Trust is humans' oldest technology.

It's been around for 200,000 years, right? Before language, before writing, before any other technology existed. Like that was how, that was how humanity separated from 150 person tribes into what we see today. right like it is civilization is a function of trust being extended beyond our biological capability so one why why was bitcoin birthed bitcoin was birthed because we were losing trust in the existing

institutions that existed on the planet so how do we start to uh so so it gives you the opportunity to be trustless right you could be your own bank you could go take custody of your assets It's like, absolutely you could go do that. But it also establishes a new foundation for what trust can look like. So there are corporations that are involved in these trust networks. There are corporations that are doing custody. There are corporations that are holding the Bitcoin and issuing against, issuing credit and equity against it.

There are, so a new landscape of trust is being built. And we've got a lot of branding work to do because of the challenging trust environment that we had in 2022 with all these shit. companies that were super opaque go out of business, right? Completely, completely different environment that we're in today. We are the complete opposite, right? Like, we actually want you to see our balance sheet. We want to show it to you. And we want to show you that, like, we are good stewards of this capital. And we are going to protect these assets. And we want you to see what they look like. And part of that is, like, trust in that we've done the hard work

behind the scenes to vet our custodians that we're not going to take risky positions with how we are custodying our Bitcoin. And to us, self-custody is a little bit of a, that's a riskier proposition, despite having, you know, other custody potential in place. So that's, I think, broadly to answer your question, like on custody risk, is that we are very focused on custody risk. We spend a lot of time and effort to do it. We are incredibly incentivized to protect our assets. And we want to be fiduciaries of this capital moving forward. So, I mean, that does make sense because if you were going to bring custody in house,

you need an entire security team. You need to build this out in like a way that's – and you can just outsource that to someone else. And I understand why that makes sense. And especially when you're looking at like the investors that are potentially coming into this company, if they're not like deeply into Bitcoin, they may be questioned why you would even risk holding your own Bitcoin. So I do understand that. But there's also like a load of chatter, which by the way, I think is completely unfounded in that like does say they're actually own the Bitcoin. He does. I'm sure I'm convinced he does. Like clearly he will. But like you could just do proof of reserves to prove that. Like is that something that you would look at doing? Yeah. We've considered it. It's something that we're looking into. If there becomes an industry standard way to do it, I think it's something we're open to doing. The bigger thing is like the reserve. are less of the issue. It's the liability. And even if you did proof of reserves, like,

you still don't know what the liability is on that Bitcoin is. Like, you don't, you aren't aware of what that, what exists. Like, what is the financial structure on top of that, right? So, in my opinion, like, we get audited. We have auditors that come in and look at what our Bitcoin every single quarter. Yeah. Right. We've got to go through the whole audit process. That's part of being like a publicly traded company. You got to go do the financial colonoscopy every once in a while. And so in our opinion, having that like up-to-date dashboard of like, here's what our balance sheet looks like, here's our liability profile. I think that is far more important for like viewing the exposure of the company relative to, I guess, proof for reserves. Because

like these companies are already going to do it, right? They're already going out and they're tagging wallets and they're going to say like this is strategy's Bitcoin. They found like 90% of it. I think they've already done it with several of our wallets as well. And, you know, ideally you could hold a little bit of anonymity for some of those assets. Yeah. No, I don't disagree with that. And I know like River, obviously not a publicly traded company, but they do attempt at proof of liabilities, which I think they'd be the first to admit. It's like, it's a little bit trust me, bro, but they're like, you know, they're doing everything they can to be transparent. But like just for such an easy lift, do you not think it would

kind of just alleviate some worries that people might have? It's not hard to do a proof of reserves particularly. You know, honestly, Danny, you're the first person that's brought it up in like, I think since we've launched SADA, to be honest with you.

I know it was a bigger issue in 2025, but I think the people that are buying the credit instrument don't really care. if we had an overwhelming if we had an overwhelming demand from our credit buyers and saying we're not going to buy your credit unless you

show us proof of reserves then you know like that would be something we would heavily consider but at the moment it's you know we're seeing capital flow from you know international capital we're seeing institutional capital we're seeing retail capital coming from all different all different areas that's interested in in this type of instrument. Yeah. Fair.

Like, I mean, it's all you can do is react to the market. And if they're not demanding it, that's fair. Yeah. Yeah. So in terms of those people coming in,

like what is the makeup of it? How much is sort of retail versus institutional capital? Yeah, I think it varies. And we've got a decent view into what that looks like. I think it's a similar profile to STRC. I would say ours the lien's a little bit more institutional because we had the IPO in November and then we had to retire some of the convertible bonds that we had. There was $100 million

of convertible bond outstanding and we did some swap of the convert for the perpetual preferred equity. So I don't know the exact numbers, but I think we're probably a little bit more heavily weighted towards institutional than retail than the strategy SDRC instrument, which is like 80, 20. I think ours might be 70, 30, something like that, maybe 60, 40, not 100% sure. Yeah, because I did see, I think Fong came out and said they were 80% retail. Did that surprise you? Because the narrative has been that this is sort of driving institutional. Not at all, honestly.

It didn't surprise me at all because you think about what's happened with Bitcoin in the last 15 years. Like, did it start with institutions? No. No, the institutions show up until 2020 and the ETF didn't show up until 2024. So any retail investor that got in in 2015, 2016, 17, they, they just front ran everybody for seven years, right? I think we're in a very similar type situation where institutions are going to be late to adopt this stuff by design. Like, that's what they do. And there's an opportunity of alpha here, a period of time between

retail being here to when institutions show up. And this is something that, like, our firm is uniquely familiar with because we are an asset manager. So we've got 13 ETFs out in the market. We started in 2022. So they're all starting to get to this like three year track record of seasoning. You kind of have to season an ETF for institutions that start to be interested in them. And so we're starting to hit this three year track record. And that's where you hit this like, what the industry is known as like a hockey stick growth pattern or many of these institutions have like a three year filter. So they'll go in there like any of the assets they could buy. It's like filter greater than three years. And it's like, okay, those are the assets that pop up.

And why is that? Is that because, like, if it's survived three years, the risk is reduced, or is it to do with, like, liquidity? What's the reason? Yeah, I think Saylor brought this up in a recent interview as well. It's like, it's called the Lindy effect. If you think it's been around for a year, you think it can last another year. If you think it's been around, like, in New York, if a restaurant's been around for 10 years, you think it's going to last another 10 years. And so there's this kind of like seasoning, seasoning bias. If you think it's, you know, made its way through three years, it's going to make its way through another three years. and that kind of compounds on itself. And I mean, you think about it, like look at the noise in the market right now, right? Like everybody, everybody's running around with their heads cut off thinking the strategy is going to go bankrupt. They have it on 9% leverage ratio. And like they've got the ability to pay, they've got 30 plus years of Bitcoin and their balance sheet to pay dividends, right? They're probably the most financially secure company in the market.

maybe aside from Berkshire Hathaway, Apple, and any other huge cash cow, right? Like, this company is very financially secure relative to many of the other thousands of publicly traded companies out in the market. So, yeah, I think it's just going to take some time. And the things are going to be built on top of this very quickly. Like we're seeing it in Defi land already. the fact that this instrument's gone from two and a half billion to 10 billion in under a year, or not even at the one year anniversary of STRC, and it just takes time to like go into the market and communicate this to people.

Yeah. And the track record. So I'll give you an example of track record as well. We went to Risk World like a month ago. That sounds like the NERI's conference about the hurdle. Oh man. It was it was nerdy. So Risk World is like the leading insurance industry conference of like,

people that are taking financial risk, right? So you got all these balance sheet companies, you got CNA, the Hartford, Berkeley, Alleyons, Nationwide, Liberty, all these companies are there, and they're all, like, you know, working. And we went there this year, and we got a booth. And we're like, let's go to risk world because we're doing something unique with risk, right? We're taking on financial risk. We want to go tell people about this. And we got this tiny little booth and it's just me and two other employees that were sitting there working at. And we're just trying to talk to people. We were like walking around trying to talk to people.

We had people walk by call us a scam. Like people are like, you're a scam. And I was like, hey, let's talk about our $1 billion Bitcoin balance sheet. And they're like, yeah, okay, buddy. For you. So like, we had a couple of good conversations, but they're all also several very, very skeptical conversations. And we had like a TV screen.

It said 13% paid, uh, paid, uh, paid, uh, paid, uh, paid monthly, 13% annualized paid monthly. And we almost, we probably would have been better off if we would have said 8% annually paid monthly. Like people would have thought it was like not too good to be true. Like the people that we did talk to, they're like, this is too good to be true. I don't believe you. Like that's what everybody started with. But here's the thing. We're going to go back next year. We're going to have paid all of our dividends. The interest rate might still be at 13%. We're going to be paying it daily, and we're going to get 25 more people that are going to show up. And they're going to be like, wow, you're the crazy guys that were here last year that had a billion dollar balance sheet.

And we're like, yeah, we're here again. And we've got, I don't know, $5 billion balance sheet, whatever the number is. And so that's year two track record. Okay, then the next year, we're going to pay our dividends again for an entire year. We're going to show back up. And maybe there's 50 or 75 people. And they're like, wait, I've heard of you. My neighbor holds your product, you know, like those types of things.

And so that that's like, it's really boots on the ground, man. Like you've got to go talk to these people. You got to infiltrate trust networks. And that just takes so much time. These are, we're selling trust. Right? Like these are trust products. Any credit instrument is a trust product.

Right? You're selling a trust product. You're selling education as well. And so how do you do that? You've got to go talk to other people that are trustworthy. And the people that are trustworthy that are interested in these products, if they start using them, they're trustworthy in their communities. They go start talking to their communities about, hey, these are trustworthy products,

these work, like, you know, all of that stuff. So really, it's going to be like an infection, like a wildfire, just like Bitcoin was in the early days of, you know, spreading and spreading like a wildfire. These things are far more attractive, in my opinion, to like the Normie, the Pleb population. if you think about the dynamics of going to sell Bitcoin to somebody, like your relative, everybody's had this story, right? You go on Thanksgiving, you go sell your family on Bitcoin. Inevitably, it's at the all-time high.

And, you know, your family, your uncle buys Bitcoin. And then it drops 70%. And he sells it at the bottom. He hates you. You no longer talk to him. You ruin family Thanksgiving forever. And then you come back at the Thanksgiving next year and it's like all-time highs. And you're like riding high.

again and then that family member still hates you. Yeah. I did this in 2017 and now I never told everybody's got it. Everybody's got it. Like I've had the same experience. Now, okay, there's there's risk. There's like family risk associated with like getting people involved in Bitcoin, right? You have like really get them plugged in. Hard to do. Now going to tell your family member like your 65, like my father-in-law, like I'm having conversations with my father-in-law. all the time. It's like, hey, you're 65, you're starting to enter retirement, you're going to start drawing on your retirement. Like, these might be interesting to have in your portfolio. And he's not going to kill me if it, like, you're talking about a 13% instrument that's

going to be relatively stable. Our goal is to keep that stable. Our goal is to pay the 13%. Yeah, there's risk associated with it. This is a risk product just like any other financial instrument in the entire planet. But the price risk, the principal risk associated with a position is significantly different than taking Bitcoin principal risk when you're looking at like 20 years of life left. Completely different. Completely different conversation. Yeah.

So, and then who's got all the money, right? The boomers, the older generations have all the money. Like they screwed all of us, right? They bought all the homes. They're holding all the homes. They bought all the equity before we had a chance to make a time. ton of money, right? And that's how do you facilitate that, that transfer? You create a product that is perfect for them. Low volatility, high yield, go live out the rest of your life,

and, you know, transfer. When you look at like how this is going to mature over the next few years, what do you think the interest rate that you'll be able to offer will be? I imagine you think it's going to drop, but like how quickly do you think it's going to drop over time? It's tough to say. I mean, it all is a function of Bitcoin price performance, the relative market scale, like how fast Bitcoin moves, what the U.S. debt situation looks like, what the interest rate environment looks like, the rest of the credit world, the rest of the equity market. You know, I wouldn't be surprised if the interest rate stayed relatively high for quite a while. I mean, six, eight years, I wouldn't be surprised. Like, you're going to 2032. Like this is a gold rush, right? Like we are in a, we are in the digital gold rush to acquire as much Bitcoin

as humanly possible as we make this transition into a more digital world, a digital capital world, digital dollar world. So, it's so hard to speculate. I think the probability

that you could bring the interest rate down is probably pretty high. Yeah, just, time will tell. Time will tell. And do you think that this, I remember when we spoke in December, we were talking about like how the kind of raise, like issuing debt to buy Bitcoin's side of the Bitcoin treasury market, a treasury company market had kind of slowed down. We've seen like you've obviously retired some converts.

Saylor just recently bought some of his own bonds. Like do you think that part of the industry, like we've moved on from that part of the sort of this growth phase? I mean, the ideal is that you have a. a clean sheet of paper and a perpetual preferred equity and no debt. I think that's the perfect, perfect scenario in my opinion. Can I ask you a question on that? Because this might be silly.

But like, why is that more attractive? Because the cost of capital is higher than all the converts. The converts have a cliff maturity. So you can think about the like, okay, a convertible bond, the strategy's got a bunch of zeros, right? There's zero convertible bonds.

There's no interest rate. Okay. but the interest rate is priced into the conversion premium. So it's how many shares are you giving up for that instrument? And there's a cliff maturity risk. So there's two ways to look at it. Like with the convert, you've got the cliff maturity risk. So you've got to take the risk that your common stock doesn't move.

Right? And then if it doesn't move and it doesn't convert, then you've got to figure out how to come up with capital. And that's either that's either sell Bitcoin or figure out like refrience the debt or do something. You have to make a decision. Okay.

So are the incentives worse in that scenario then? 100%. Most, yeah, 100%. The incentives are worse. There's a few different things. The convertible bonds also have several of them from the smaller Bitcoin treasury companies. Terrible covenants.

Like margin requirements. They've got a post margin if the Bitcoin hits a certain price. They've got like liquidation preferences where the Bitcoin will actually get sold. They've got collateralization. There are several different requirements on a lot of the convertible bonds right now. The terms were very bad, which is why we didn't take any. When Strive went and raised $750 million equity capital, they could have raised a billion and taken on $250 million of convertible debt, but they didn't like the terms.

So we said, okay, we're going to go equity only and we're going to figure it out. And luckily, the Pref model was kind of evolving and we were learning a lot of. and we were learning a lot about it and how it could work and we can manage the capital. And that's the route that we took. Will it exist? I think the convertible bond market will exist for some of these moving forward into the future. It's like it's how strategy scaled the balance sheet. Yeah.

They wouldn't be where they are today without them. So I think that they were a necessary part of strategy's growth. I think other companies will make the risk calculus on whether or not they want to use a convertible bond. The really interesting thing, Danny, about the converts relative to the prefs, is the holder's incentive. So a couple things. Convertible bond trades 144A. So it's a private instrument that you can't buy. You know who could buy it?

It's 40 dudes that trade in the back alley at a high rise in Manhattan. Right? That's who buys and trades 144A. Now the pref equity, you could buy. it. Right? Like, it's exchange traded on NASDAQ. Okay, it's now available to 8 billion people theoretically.

Right? Okay, so it's 30 people in a high rise in Manhattan or 8 billion people, which is better. I'd probably take the 8 billion people that would be interested in the instrument. They could be designed very similar, right? Like strike, STRK is very similar to convertible bond. It's just in a preff form. And it's now available in an exchange trade of ticker to everybody. Okay, that's interesting.

The next piece is the convertible bond market is very interested in the volatility of your underlying common stock. So they're hedging every single day. So they're longing to the stock, they're shorting the stock. And immediately, when you go out to market for a convertible bond, you can watch this like clockwork. When the deals get priced, the price of the stock falls because the convertible bond holder is shorting the stock right on the moment to like delta hedge the position. So there's consistent hedging, and the convertible bondholder is long the volatility, and they don't give a shit about the common. They don't give a shit about the common. They don't get a shit about the credit quality. They know that they're senior in the capital stack, and they just want the common stock to be volatile because that's what they're trading on. Now, the pref equity, you think about the incentive structure, the pref equity is not long the volatility of MSTR or long the volatility of ASSSD. They're long the credit quality. of your company. They only want you to have a high credit quality. They want to know that they're going to get paid and they want to know that you're going to manage this instrument. So the incentive

structure, not only is it like 33 dudes in a back alley in Manhattan, the incentive structure is not aligned with the convert. Okay, so the PEP, the incentive structure, the people are aligned with the credit quality of your company. And so you have hypothetically, significantly less hedging exposure, people that are shorting your common stock. That makes sense. With the PEPF equity. So it's better for everybody. It's better for the equity holder.

It's better for the PEPF holder. Everybody's aligned on the capital structure. That makes total sense. You brought up strike before their strategies, one of their other preferred. Like, stretch has taken so, like all the headlines, and I don't really hear much about the rest of them now. I understand what Saylor was trying to do. Like, he's obviously issued, is it five preferreds he has? Like, what's happening with the other ones?

Are they also being successful? Their trading liquidity is far lower. I think they're great products. I think the other preferreds are great products. Stretch is just the best right now. It's the best product. It's a variable rate, stable price. That's where a lot of the retail demand is, right?

Like the retail demand wants something that's stable and they're just going to get paid the interest rate. The Sailor calls it like a bank account, right? It's like a bank account that just pays you 11%, 11.5%. I think the other products are very good, like very good. I think they're super interesting in creating an entire risk profile. But they're like before their time. They're like too good. They're too good that the market doesn't know what to do with them yet.

And the market will know what to do with them in like four years, in my opinion. That's because... This is when you're talking about almost like the yield curve of Bitcoin. Yeah, yeah, because, right, STRF is senior to STRC. So it should trade, the interest rate that it trades at should be lower. So it's going to be, the price is going to be volatile. STRK has got the conversion premium into MSTR, so it should have significantly more convex upside. That should be a very interesting product.

You effectively have structured Bitcoin. exposure with an 8% downside, right now as of today, I think it's around 8 to 10% interest rate that you get to have a protected downside, and then you've got Bitcoin Convexity upside. It's an interesting product for somebody that wants like income and Convexity, so my father-in-law holds that one. And then you've got STRD and Stream. And STRD is interesting, right? It's the junk bond version, right?

It's the lowest on the totem pole. But its relative risk profile is still really high. It's a non-cumulative instrument, so it's got one different feature than the others. What I'm getting at is they have unique features. I think they're all very interesting, and I think the liquidity profiles of them will increase in the future as the world starts to wrap their heads around these.

How I imagine this is there's never existed a period a time where you have a credit instrument that's backed by Bitcoin and you can calculate the risk 24-7-365. So theoretically, you should be able to price all of those instruments and parity with each other every single day. There is a technical, mathematical risk parity every single day. And you should also theoretically be able to calculate a mathematical risk parity between everything else in the credit market and those instruments every single day. So there should be like a balancing mechanism that's happening all the time. That's not really happening right now. There's there's a disconnect between some of the other pref equities, the risk profile and sDRC and our instrument and then

everything else in the credit market. And another unique thing is because these are exchange traded, it creates another unique nuance. Like if you're to go hold a bond, if you're going to go buy a bond of any other company. One, again, that also trades 144A, but it's illiquid. And you can't, like, you can't go, you know, in and out of that instrument very easily. And that, that's a, that's a challenge for the existing credit market that I think will kind of iron itself out over time as the world starts to move a little bit like faster and quicker, like having some more transparency on credit instruments. I think that will attract more capital into the transparent credit instruments. And I think it's going to make the world a lot more difficult to go raise credit capital

because you're competing against this. So I think these instruments are going to re-rate the entire cost of capital for the entire credit market, which is a big idea, like a really big idea. If you're a company, think about it, if you're like, I don't know, you're a startup. Okay. And you're like, I want to go raise debt capital. why as an investor would you take anything less than whatever STRC is paying?

Yeah. Makes no sense. It becomes, like you say, it comes the new hurdle rate. It's the new hurdle rate. It's like, do you think your business is going to outperform,

your cash flow of your business is going to outperform STRC or SDRC? Or SETA, right? Like, what's the risk profile of that proposal, that proposition relative to this? Does the ultimate hurdle rate not remain Bitcoin, though? Bitcoin's our hurdle rate.

I think that's our hurdle rate for capital deployment. And our ultimate goal is to increase Bitcoin exposure per share. So the potency of the common stock, but the credit markets. Yeah. Yeah, the credit, like the credit markets, which is a huge market, $300 trillion market, I think that the hurdle rate is going to move to these credit instruments. Like you have to outperform these credit instruments. or you're not going to get access to money.

That might take five years, might take a decade, but I think that's where the world is going to trend a little bit. So with the strategy you preferred, it's like the tools are good, the tools are there. It's just the market doesn't really know how to use them yet, I guess, is kind of what you're saying. Yeah. There's probably a good arbitrage option there if these are inefficient and not being used properly. Yeah, I think there's alpha there. But again, the other tricky part is that there's, they're just,

Relatively illiquid, the other ones. So, for example, I've got a little data. Strategy, Stretch traded $189 million today. Seda traded $59 million. Wow. Strike traded eight. Okay, so the time in comparison. And Strife traded seven.

So Seda traded eight times more than Strike, Stride, and Strife today. and it traded double what they all traded combined. Wow. Seta, our instrument. Yeah, yeah. That's impressive. Right. So that liquidity profile makes them a little bit more challenging as an investment instrument.

So like I was talking about duration a little bit earlier, you might have to take a longer duration view on those instruments. Again, these are complex financial concepts that we're like trying to talk to people about. a lot of people can wrap their head around STRC and SATA. And as they're more liquid, people are a little bit less concerned. They don't have to learn as much. But if you're interested in the other instruments, there's like a little bit more of a learning curve. And I think it's a bit more difficult.

Would you strive look at doing these other preferreds with different durations and different seniorities in the stack? Or are you kind of happy with what you've got at the moment? I love what we have at the moment. It's very clean, it's very pure. The market can wrap their head around having one senior perpetual preferred equity and one common stock, and it's like a very pure expression of both. That being said, I think we're open to it at different market times and different market conditions. If the market need is there, we've said that we will not issue another perpetual preferred equity within 12 months of launching SATA.

So you will not see one from us before November of 2026. So you could put that on your radar, but that's something we'd consider. We've kicked it around internally. I think there's some ideas that are interesting, but we're not going to rush. We think we're we could have these two instruments for 20 years. We could be damn near final form of what this instrument looks like. Paying daily. Like we can scale this from where we're at right now.

We have 31 people that operate its drive, you know, let alone the similar business. We can scale this 10x without any additional people. Like, we don't have to change anything we're doing. You know what I mean? It's interesting to hear, though, that you think you could have this for 20 years because, like, sailors shaking the market up completely twice. Like, essentially when he first started doing the Treasury play, and then I think the preferreds were huge.

And to be fair, like, I've always thought since they came out with the Preferreds, that That was like a killer feature that if you didn't have that as a treasury company, I thought you were going to struggle against the others. But are you saying we've like reached the killer product now and this won't, you know, there's nothing new novel coming in the future. Like if you think this can be a 20 year thing, like do you think this is it or do you think there's more to come? I think that's like building on top of this is it.

Like these are, this is a new substrate to like build a new foundation. Right. So you got Bitcoin the commodity and we've split it into two. Right now you've got. the senior professor preferred equity in the common stock. Well, now you can take this senior instrument. It's happening already. I had a conversation earlier today.

A pendle is like taking STRC and splitting it into a principal piece and a yield piece. Okay, so that's, now you can have a principal protection at a lower interest rate and a yield, a yield strip at a higher interest rate. And you're like protecting the senior instrument. That's, that construction is super fascinating. and I think that could be that those business ideas, like that idea of splitting it into a senior tranche

and a junior tranche, that example I just explained is in defy. You can also do that in TradFi. And the market to do it in TradFi is enormous. Yeah. So like this is a perpetual preferred equity, right? It lasts forever. So is Bitcoin.

Bitcoin's a perpetual. Last forever. A lot of Tradfai actually, surely can't wrap their head around that, like a perpetual credit instrument. So what they need for their mandates is a term, a true term, credit instrument. Okay, so you could start to think about, well, let's trunch this into a different layer and have a senior instrument of STRC, let's call it investment-grade digital credit and amplified digital credit.

You could split it into two again. You could like tranche it again. And you could slap a term on it. So now you have a, let's just say a four-year term, $50 million tranche, and you can go get it rated by a rating agency. And the junior tranche is just taking the perpetual risk, like everything out the side of four years,

and then also the equity risk of the instrument, like, depagging from 100. That's interesting. I think there's infinite demand for both of those things. I think there's infinite demand for investment-grade digital credit, and I think there's infinite demand for, like, amplified digital credit. So that's happening in DFI right now.

And that's like I think that concept is a hundred billion dollar idea. Like you can go create a hundred billion dollar business. I think doing just that. Just taking these instruments and tranching them again and just doing what we do, but doing it with a perpetual preferred equity as opposed to Bitcoin. Interesting. So you're asking me like could this happen? for 20 years, yes, I think the scale, like the amount of scaled capital that you could bring

onto this, and you think about if that were to work, imagine this, you've got hundreds, it was 16,000 insurance companies, I think, in the world, 16,000. None of them hold Bitcoin right now, and like maybe five, hold STRC, 16,000 insurance companies. Okay, well, they don't want to hold a perpetual, but if there's, if there's, uh, Somebody that's issuing investment grade digital credit, they could do $50 million tranches. I can issue infinite of it. I can issue infinite. Because what am I doing?

I'm going to take that capital. I'm going to buy Bitcoin with it. I could issue infinite of it, Danny. How crazy is that? Think about that. Like Microsoft, Boeing, they can only issue a certain amount of investment grade credit. Yeah. Right?

Like they can only, because it's a function of like how big can their business go? Like, I can only get so big if I'm Amazon, like, I can only sell so many iPhones. I can only send so many packages to homes, right? I can only get so big where you're like, I can't issue any more IG credit. Sorry, insurance company. Like, you're, your shit out of luck. I can issue infinite credit because I'm just going to take that energy and I'm going to shove it into Bitcoin. As someone who holds Bitcoin, this is music to my ears.

That means the price of Bitcoin goes very high. Yes. Yes. So like this is, it's like we've, we've, we've turned on the spigot to bring this like credit capital in the door. And now we want to, we want to like cut it open so it's like a funnel of capital that comes in the door. And so how do you do that? You've got to build on top of it of you've got to like structured in a slightly different way to make it attractive to a different pool of capital and, you know, all of those, all of those different things. So we're early.

a lot of this stuff is moving like ideas are moving forward we're having conversations with people every single day we're crazy busy moving on all this stuff and uh and those are just like we don't know what we don't know yet either

like the innovation that that we don't even we haven't even heard of yet and we've got several off the wall ideas that uh that we've bat that around so yeah there's there's a lot more here so I'm going to ask you the question that um say the kind of shout at me for asking. But like one of the things that at least from my perspective,

obviously you're spending way more time than I am looking at treasury companies, but it seems like the long tail is getting left behind. Like there's the companies like you like obviously strategy. I think there's probably five, six other companies that are like holding significant amounts of Bitcoin that are doing interesting things. Like how do the smaller ones compete? And one of the things that say they got annoyed at me for saying was compete. But like you are competing. heating over capital and buying Bitcoin. Like, like they, they seem like competition to me. And like, do you think that long tail is just going to get more and more insignificant? The long tail. What, like, what do you mean by the long tail?

I mean the smaller treasury companies that aren't able to go out on issue preferred and do the novel things that you're doing. I think we will be cheerful and constructive did it. The, uh, I just, I think there's so much opportunity for all, like any of these other companies,

a lot of these companies that went in, went in purchased Bitcoin, um, let's just say they're operating business. A lot of them were already dead, right? They're already zombie companies and they went and go put Bitcoin on balance sheet.

And it's like, that's better than not. Like, you're going to be around. You've got some optionality. You can do something with it. And like, there will always be investors that will be buying different stuff in,

in the marketplace. And the reality is, Many of these companies are small. Like, what, we're the seventh largest holder of Bitcoin? Yeah, so you ever took Coinbase, by the way, which is very embarrassing. As a company that's been in this space since 2012. Yes. You've done very well.

But so we're, the reason I bring that out is we're number seven and we have a $1.37 trillion market cap. So we are like the 1,750th largest company or something like that. Right. Okay. So there's seven. That means all of the other companies are smaller than us. So you're already talking about like very, very tiny companies that traditionally, even if they didn't have Bitcoin on their balance sheet, you would never even have heard of them.

So the fact that they have Bitcoin on the balance sheet, you've heard of them. Yep. Right? They're at least on the Bitcoin Treasury dashboard. So there's a likelihood that they've got more holders of their common equity than if they were to not held Bitcoin. So that's probably better off. I'm not really thought about that. they're just so small, right?

Like, go look at, I, one website that I really like is, what's it called? Like, US companies ranked by market cap. And so I'm constantly looking at it's like, where's our company rank relative to these other companies? And I, like, I haven't heard of any of them, any of them. The companies, there's three around us right now that I've heard of. And I've, like, had to scroll through a couple pages. Coles, Wendy's, and, oh, there's one other one, lazy boy, like the couches.

Coles as in like the Australian supermarket, Coles. It's like a supermarket here. It's, uh, K-O-H-L-S. It's, uh, okay, okay. It's like, uh, they sell clothes. Okay. It's like a Kmart or something like that. You know, it's just like, it's just a crappy brand store.

And like those, um, those are the three that are just notable. But around us, there's just like, I've never heard of any of these companies. And they're so small. Like the fact that they're, any of these are buying Bitcoin is probably good for their optionality into the future. So I don't, I think many of these other companies are going to be buying Bitcoin. Is there optionality for them to take on financial risk with the Bitcoin on the balance sheet?

Sure. Like, is there, is there common equity going to be like massively outperform? It just like, like, depends on. what they do with it. Yeah. Like, are they going to go run an operating business? Are they going to take out a loan and go start like a, a food truck that absolutely kills it and, you know, like, go raise a bunch of money

and go do that thing? Like, maybe, maybe it happens. I don't, I don't think we've hit the pinnacle. We're going to see, we're going to see thousands of companies add Bitcoin to the balance sheet in the next decade. Yeah. I think the companies are more likely to add digital credit to their balance sheet before they add Bitcoin.

Well, I was going to say, like, I agree that they, I'm sure we'll see. these companies add Bitcoin to their balance sheet at some point, but they're not going to do it the same way you are. And like you say, I could imagine them adding something like SATA or stretch their balance sheet before Bitcoin. Probably. I think that's far more likely. Again, it's like the same, like go convince your board to add Bitcoin on the balance sheet. And they smash by the peak of top and they get hammered and you're like, well, the CEO's fired, CFO's fired. Like I hate everybody now. Like nobody wants to take that career risk. Like that's a difficult proposition. Digital credit is a much easier value proposition for like a board to discuss the I think there will be other issues of

perpetual preferred equity in the market like that again we're a 1.37 trillion dollar company like if there were a 5 trillion or sorry not trillion a billion one point three seven billion dollar company hopefully we're a trillion dollar company in the future yeah that would be yes that's our goal but I mean there could be a five 10 billion dollar company. company that comes to market and starts to convert their balance sheet into Bitcoin and start issuing credit against it. I think we are going to see more of these. And I think that's good for the market. Like I think the market can handle having several issuers out there. Again, like I said, we're pounding the pay. We're going to events. So more people at events,

like creating with trustworthy, like high quality products in the market is good for the entire industry. Like us being there helps strategy. Every Bitcoin. Bitcoin we buy helps pump strategies bags. It also, us existing helps provide them some flexibility, like financial flexibility. Just like they're underwriting the Bitcoin ecosystem, they're underwriting that we exist. I think the fact that we exist has allowed them to rethink how they manage their bond exposure. Interesting. Like, we went out in the market and we retired $100 million of convertible bonds.

Before that, they hadn't talked about retiring. convertible bonds. Okay, so we went out and we showed them like, hey, we could do it. You could go negotiate. This is what it looked like. We've had conversations about it. And that provides them a little bit. Now they can make that decision as opposed to having to wait until 2027 or

28 to like change or move or evaluate the market. Having multiple people that are operating in the same direction is just super helpful. It's going to be helpful for rating agencies. Yep. like having two companies coming at you if it's just one company it's like wow you're crazy if it's two it's like wow

both of you guys are crazy but I need to take you seriously now right? Yeah. And ETF issuers if you're creating or designing an ETF there's constraints on how much exposure you can have to one company.

Okay well if you got two companies three or four or five companies that are doing this and we're like okay that actually starts to help the entire ecosystem because everything can be built around it. Diversity in the DeFi ecosystem.

You know, several, it's good for the market to have more issuers. There will be more issuers. How long will it take? I think a long time. Will the products be exactly the same? No. Everybody's going to do a completely different flavor of it. Will there be a market for all of them?

There will be a market for all of them. Because think about STRC versus SATA, they're different products. St.RC has STRF that's senior to it. They have convertible debt. They also have 840,000 Bitcoin. Incredible. Right? Like, that's a lot.

But ours is a senior product. We don't have any convertible debt. There's nothing in front of it. But it's also our only product. There's nothing else. So you don't have to worry about the capital structure. It also pays 13%. It's going to pay daily.

That's different. It's a different risk return profile. We also have 16,500 Bitcoin. It's like there's different reasons to hold those. If you're an institutional capital manager, you would be holding different ones for different reasons and managing a liability profile as a function of that. Yeah, that makes sense. I think it's really cool. You're buying a lot of Bitcoin.

You're helping pump my bags. I think it's, I really do. We're aligned. We're aligned, Danny. Yeah, there you go. Can I ask you one more slightly fun question to end it out? Sure. There's obviously there are companies out there that are struggling.

We don't need to necessarily go into the details of them, but like a knacker, for example, like they've had a really rough time. Like if you were to take your strive hat off and you went into a company like that, what would you do to try and like right turn the shit? Man. Just keep pounding the pavement and try to ignore the haters and try to communicate with your equity partners and your credit partners as cleanly as possible. try to communicate the mission, your capital structure.

It's, yeah, there are some companies that are challenged out there at the moment, certainly. Do you think they will be able to turn that around? Yeah, I think right now you look at their balance sheet. Well, I guess it depends on the drag of the company, depends on the revenue, depends on the price of Bitcoin. I think they do have like a, I think they have a 58K liquidation preference or something on their, or not a liquidation preference, but a margin call on their convertible bond. I haven't looked at it recently. I looked at it a few months ago. So, yeah, I mean, the market cap is trading at a fraction of what the underlying net assets on the balance sheet are.

I think there's opportunity there for some arbitrage opportunity. But, yeah, I mean, it's tough, right? Like, if Bitcoin moves the other direction, then rising tide is going to float all the boats. And the debt gets inflated away, convertible bond becomes less of an issue. And, you know, everybody forgets about everything that's happened. I think that one of the biggest, one of the biggest challenges, and this is like a totally misconstrued data point, is they do it on our common equity as well. They look at the trading history of the common equity before we were part of the company.

Yeah. Because there's a pump before like any, like just on the news of. something potentially happening. Right. So let's think about this for a moment. We announced that we were raising $750 million to run a Bitcoin strategy. In May, we just passed the one-year anniversary, is May of 2025. Okay.

We raised $750 million of capital to shove into this tiny company. The Target company was a shell company, and they had a $15 million market cap. So think about how many shares are available outstanding for a $15, million market cap. It's not very many. So there was a ton of speculation, right? A ton of speculation ran into this tiny company. And so the price of the common stock like ballooned. We, we weren't part of the company. That was our target. Our deal didn't close until September 15th, something like that. So you look at the price of the stock and it's like all over the place. What it did, we had no control over, right? It was pure speculation. It had nothing to do with, like, we didn't, we weren't part of the company. On September 15th, we effectively got the keys to the company and we adopted the capital structure that the target company had. So we took $750 million of equity capital and we shoved it into a tiny $15 million company. So if you actually go overlay the price history relative to the market capital,

cap, completely different stories. We just hit a market cap all-time high of $1.37 trillion. And when the price of our stock, billions, billion, I'm thinking about where strategies going, I'm like, yeah, one point, yeah, $1.37 billion. Our market cap hit $1.37 billion. But in July, when our, when the price of ASST peaked, the market caps like 50, 50 million or something like that. Like it's a fraction of where it is today.

So it's like not all of the shares were trading. No, like there was, it was an institutionally complex product, right? You're talking about a reverse merger arbitrage scenario where everybody's speculating on the stock and moving in and out and on a tiny float of a company that's going to be literally, like 50x larger than it was. So that's greatly misconstrued, also with NACA, any of these like pipe transaction deals, the same dynamics exist. Like the market cap relative to the price history is, they're two different stories. Yeah.

And not if like you look at the average cost basis of looking at the volume turnover relative to price on most of these instruments. And they're not nearly what everybody makes them out to be. So the company actually, like you officially sort of got the keys to the company, September 15th, I think you said. So you only actually had like three weeks of a ball market before this whole thing sort of turned on its head. Oh, yeah.

And like the thing that's impressive, though, is that you're still trading above MNAV, above 1XMNAV. And like this prefers obviously crushing at the moment. I bet you're so excited to see what happens in a bull market. Yeah, yeah. It's one of my, one of the things that I'm most excited about is we have, we have an ability to buy Bitcoin when the price of Bitcoin is down 40% from an all-time high. Like historically in past cycles, strategy had access to the capital markets when everything

was booming in the equity markets were booming. And when in the bear market in 2022, they bought hardly any Bitcoin. Like damn near zero. And now both of us are buying Bitcoin when the price is down 40%. The architecture of the market is fundamentally changed. Like these instruments are like I'm thinking of them as like the buyers of last resort. Like we've created a product where there's capital that's able to come in the door without the equity markets booming.

And that changes, in my opinion, the structure, the future trajectory and the structure of what Bitcoin can look like. So, yeah, the cool thing with the firds is it's not even just buyer of last resort. It's the buyer. It's just the buyer. It's just the buyer. It's just the buy it. Always be buying, right? Always be buying. Yeah. And we haven't seen what a perpetual preferred equity bull market. We haven't seen what strategy can do in a perpetual, like last bull market

strategy had, or when everything went crazy, November of 24, strategy had what was it? 331,000 Bitcoin. That's crazy. Now they're 850. They now have 843,000. Okay, check this data.

When Bitcoin goes back to an all-time high, strategy will have $109 billion balance sheet. That's assuming they buy zero more Bitcoin. Crazy. So when Bitcoin goes back to an all-time high, they will have the second largest balance sheet on the planet behind Berkshire Hathaway.

Holy shit, that's wild. Yes. So, like, that's what's on the horizon, and the amount of noise that's going to make, right, is going to be absolutely insane. And then it's like, we're in a perpetual preferred equity model where all of the investors are aligned. You're not launching convertible bonds

that are out there shorting your common stock right away. You've got the credit. As the price of Bitcoin rises, the risk profile, the credit improves. It gets consistently better. Your amplification drops, your capacity to issue more increases.

So there's a lot of things to look forward to on the rise. And when we see this stuff move, it's, I think it'll be electric. The crazy thing on the strategy side is I saw a tweet the other day. They've bought some like, is it 130,000 Bitcoin this year? Is it something ridiculous like that?

Yeah, yeah, yeah. So they started the year with 300, wait, no, hold on. They started the year with 672,000. Yeah, they're like over 150,000, 175,000 Bitcoin this year. Crazy. Do you think they'll get over a million in 2026? Like August or September. Holy shit.

I mean, that's incredible. Does it get to a point where you worry about the concentration? of Bitcoin in. I know like the Bitcoin isn't necessarily strategies. It's the shareholders. But like, do you worry about that at all? Not really. Hopefully we've, we've got a couple basis points of the of the market by that point. I think we've got the ability to grow incredibly quickly here. Right. We've just got, we bought, we increased our Bitcoin stack 7% last week. That's crazy. Yeah. So if we can keep up this trajectory and if daily dividends, you know, provides the, The, you know, the structure that we think that it can provide, I think we can scale the business very quickly.

And ideally, you've got at least a couple pretty big issuers out in the market that are, you know, vying for a very large portion of the network. Honestly, I think the credit issuers could be a very large portion of the Bitcoin network. I mean, it seems like it. It's happening. Like, it could, it could be 20%. like of the Bitcoin network like long term. I don't know how that makes me feel.

This is like, what's that? I don't know how that makes me feel. Well, it's 20 years from now, right? Like what does this look like? You've got universal Bitcoin income. Everybody's just getting paid by these instruments that I don't know,

I don't know what that looks like. But yeah, look forward to being part of it. Yeah. Well, it's awesome to see it. You're crushing man. I think. Thank you. I'm really glad that there's another product that's like alongside strategy in this.

I think having multiple is definitely better than having one. You're doing really well. I'm very, very impressed, man. It's cool. Thank you. Thank you for buying all the Bitcoin and pumping my bags. Happy to. We'll have to catch up again in a few months' time, but this has been cool.

Thank you, Jeff. Cool. Yeah, thanks, Danny. Appreciate it.