What Bitcoin Did - The Future of Bitcoin Treasuries | Jeff Walton

Episode Date: December 10, 2025

Jeff Walton joins the show for a deep dive into the state of Bitcoin treasury companies, the rise of digital credit, and why we may be entering the most aggressive phase of institutional Bitcoin adoption yet. We get into Paper Bitcoin Winter, why so many treasury companies are trading below 1× MNAV, and whether the original playbook of issuing equity, & buying Bitcoin may be running out of road. Jeff breaks down why the model isn’t dead, how yield markets are evolving at lightning speed, and why optionality, scale, and genuine operational talent will decide who survives the coming shakeout. THANKS TO OUR SPONSORS: IREN ANCHORWATCH BLOCKWARE LEDN BITKEY SWAN FOLLOW: Danny Knowles: https://x.com/\_DannyKnowles or https://primal.net/danny Jeff Walton: https://x.com/PunterJeff

We're running around here in the Middle East and we're talking to, you know, oil-rich countries that have tons of wealth that are exploring and looking into this stuff. FOMO is intensifying, and I think we are getting very close to a lot of noise within this marketplace. If Bitcoin increases, that gives us more capacity to issue our perpetual preferred equity. And if we issue more perpetual preferred equity, we're buying more Bitcoin with it. We're in a digital gold rush. Over the next four to eight years, we think institutional adoption increases drastically. We think sovereign adoption increases drastically. We think digital credit starts to permeate throughout the rest of the market.

So because of those dynamics, the macro environment, we see probably next four to eight years between a 30 to 50 percent compound annual growth rate for Bitcoin. Banks and pensions and insurance companies can't. We'll not be able to not hold these things. Jeff Walton, you're back, man. What's that? time on the show. Third time. You're one of the only people that's been on the show more than once who wasn't on the previous show. That's right. We're moving

fast here. You've been blowing up. Coming up. So we've only got like 45 minutes. So we're going to have to get right into it. Speed run. A treasury company's doomed, man. We're in paper Bitcoin winter. I guess so. Paper Bitcoin winner. That's the first question. What's that? What's that? Our treasury company's doomed. Are they doomed? Yeah. This has been a tough time for them. There's prices going down, lots of them trading below 1XMNAV. Is the playbooks that most treasury companies have implemented, strategy aside, is that getting tired? Yeah, I think that's a good question. The initial playbook was put Bitcoin on your balance sheet, sell equity, buy more Bitcoin.

And that's a one-shot model. And that model has evolved. And if that was your only trick, not even a trick, I would say if that was your only tool, that you need other tools in your toolkit now, right? And so whether that be operating business or running a digital credit model or earning yield on your Bitcoin in different ways in the market, and those ways are evolving.

So I don't think the Treasury model isn't dead, right? You take a step back and you look at the companies that have adopted Bitcoin to put Bitcoin in the balance sheet, and historically there were zombie companies. They were dead to begin with. This was last to Jeff to help the company survive into the future. Yeah.

And putting Bitcoin in your balance sheet helps you survive into the future. Because with Bitcoin as capital, you can do things with it, just like you could with real estate. Right? If you hold real estate, you can earn a yield on it. And now if you could hold Bitcoin, you can earn a yield on it. And just being here running around this conference, there are several ways that people are generating yield on Bitcoin. assets and those are evolving very quickly. I mean, just the last few minutes I was talking with Hunter Albright at Salt. Okay. Salt provides Bitcoin back lending products. Okay, Bitcoin back lending products. So, you know, you as a personal holder, if you wanted to monetize your Bitcoin, you can go post

some Bitcoin as collateral and get fiat dollars to go use them however you want to. Now, but there's difficult terms. You have a margin call. If the price of Bitcoin drops 50%, you've got post more collateral, and that's a risk that you may have to be willing to take. Yep. They're offering a new product called Salt Shield. And Salt Shield is effectively insurance on the margin call, where they will, if you can, you can buy this little add-on product that effectively gives you more capacity in the event that you got close to a margin call.

You effectively borrow more Bitcoin so you don't get margin call. Borrow more Bitcoin against what Bitcoin? Against your loan transaction. So even if your loan is getting to the point where the loan's value needs topping up to make sure you're not margin called, like where, so how does it get extra? You buy it up front. I see. You buy it up front. It's like an insurance policy, just like.

And is it the same dynamics of the second loan essentially as the first? It's the same? No. No, different dynamics. I've got to look more into it. But the interesting part is the salt lending is taking capacity from corporations that hold Bitcoin on their balance sheet. And that Bitcoin can be held in an escrow account with their existing custodian, and it can be held there within that transaction.

And that loan is over collateralized. So you think about the risk of the Bitcoin collateral that's been posted, and it's a relatively de-risk product because the underlying loan is over collateralized. So the real question is, if there is a margin call whose dollar loss comes first, then it's probably the person that's taking out the loan takes the loss first.

But that's just one example of innovation that's happening in the space. There are hundreds. There are hundreds of examples that are happening in the space. So we're early days, and these treasurer companies can always wait. They have the luxury of time most of the time. And if the price of Bitcoin goes higher, now they have more capital and they can start maybe that if you get a more capital that gets you into a different echelon where you can run different strategies or access different

yield opportunities. So for us, for example, at our company Strive, we issued $200 million of perpetual preferred equity. And in order to access the perpetual preferred equity market, you kind of need about 5,000 Bitcoin, 5,000, 6,000 Bitcoin, and need to issue about $150 to 200 million of this product in order for it to be attractive to that marketplace. So there's a, as you get higher up in scale, there are more opportunities that open up to you. And so this is really all of these treasury companies, like this has always been, I think, pretty obvious 20 on watching that they're going to become some kind of Bitcoin bank. Do you think that is a sort of transition that will happen in the next three or four years? Is that a longer playbook? Can you repeat

the question? So with strategy particularly, it was always obvious they were going to become some kind of Bitcoin, financial service bank, whatever you want to call. Do you think any treasury company from here that's going to survive at good scale is probably going to do the same thing and become either a lender or not necessarily they don't they don't have to be it just it gives you it gives you power to operate the power to continue to operate into the future uh you don't have to be a bank right you look at a company like 21 or that just came out they're focusing primarily on the operating business and you know bitcoin infrastructure so having the bitcoin on their balance sheet gives them access to dollars that they can utilize in their operating business so the the real question then becomes for

for 21, does that use of those dollars, is that better off in the operating business? Like, if Bitcoin's your hurdle rate, would you rather deploy those dollars into an operating business or buying more Bitcoin? Yeah, and that's the key question. Because, like, I don't pay loads of attention to treasury companies. Apart from when I do shows on them, I talk people like you. But from the outside looking in, it doesn't seem like any of the underlying businesses are actually very important. Like, that's not why strategy's gone up in price of load. That's not why they've got to 650,000 Bitcoin or wherever they're at now. Like, do you think that's the wrong way to approach this in terms of looking at an

operating business instead of just more like pure play treasury? Yeah, like there's, I think there's just room for so many different types of companies. I mean, our future in our world is moving significantly more digital. And we don't know exactly what the future of Bitcoin backed finance looks like or even what these companies can potentially do in the future. So there's just optionality by having Bitcoin on your balance sheet. It saves you so you have the ability to operate into the future. This episode is brought to you by Anchor Watch.

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know yet. This is still very early days. But there's probably not room for a, there's not room for 100 big treasury companies. Like, that's going to be like a finite space of winners, I think. Yeah, probably. And I don't know what the kind of threshold for that is. We've not even talked about you joining Strive since we last spoke. Let's start there. So how big is Strive now?

Yeah, Strive. We have 7,525 Bitcoin. And so just, I think it's about $650 million, something like that. And yeah, we're pretty sizable. I think we're 14th largest company that holds Bitcoin on the balance sheet, and we have the similar transaction. We went through the process of acquiring similar. So once that transaction closes, I think we'll be top 10 publicly traded companies that hold Bitcoin on the balance sheet. And that gives us more ability to grow and run the digital capital digital asset treasury strategy into the future.

So I would argue that there's going to be room for different types of strategies here. A hundred, maybe, maybe more. If you look at the existing structure of the world, there are 5,000 banks, there are 5,000 insurance companies. There are 5,000 credit unions, and they all offer the exact same product. Yep. And so how do you differentiate? They all operate in different places, different locations, offer different risk return metrics,

have different pricing. And I think that's a world in which we're moving. Obviously, you're going to have strategy, which is the biggest. And their lead is just getting even larger every day, right? They bought 10,000 Bitcoin last week. Yeah, insane. Right? They bought a strive last week worth of Bitcoin.

And we've been working really hard, right? Damn. But there's room to innovate. within that and you look at a company like strategy they're so large and that and the responsibility that they have within the marketplace is they have to be incredibly transparent and simple if they start doing things beyond what they're doing and and that are difficult to quantify and difficult to understand the story starts to get muddied very quickly so i wouldn't necessarily look to them to be a leader or they are a leader in the professional preferred equity

that their company is absolutely killing it, but the smaller companies may have room to innovate in these little smaller niche areas of capital markets. So kind of take high risk that it wouldn't be worse strategy taking? Right. Even for example, we went through the process to acquire similar.

That's something that strategy has been very adamant that they're not going to do any M&A activity. Yeah. Because there's tail risk associated with it. But a company like us, if we want scale. If we want to issue a perpetual preferred equity, bringing in a company like similar where we're able to double our Bitcoin stack and then issue perpetual preferred equity against that, that starts to look very attractive. Yeah. And because you're essentially,

I don't know what the MNAV is, but it's below one for similar, I believe. So you're buying Bitcoin at a discount while doing that. Yeah, effectively. We, so it was an all-stock transaction. The headline number looked horrible. It looked like we were buying similar at $90 a share because our stock price at the time was trading at $4, and Semlers was trading at like 1MNAV or 0.9MNAV, something like that. So we didn't have any cash

that went out the door in that transaction. So we effectively purchased similar using the premium that existed in our stock. I see. Does that make sense? So we effectively got Bitcoin

at a discount. You could think of it that way. And so that's kind of the point I was trying to get to before where, like, what is the market right now? Like, how many can it really sustain as sort of top treasury companies? I think you can forget about the long tail. There's going to be people that try unique things in different markets that are smaller scale. They might work, they might, but they're not going to ever end up being like a strategy-sized thing. Yeah. So, like, do you think of the, say, top 20 treasury companies, maybe even top 50, we're going to see continued acquisitions?

Yeah, I think probably. in the future. Well, I think one thing I want to challenge here is that just because your stock is below one MNAV doesn't mean your company is like a failure. The company still holds Bitcoins. Everybody that works at the company, like they could liquidate the company today and it would be worth one. Yeah. But the challenge though I see, and I could be wrong here. Like I say, I don't spend all my time thinking about this is like how once it's below 1XMNAV, especially for a sustained period of time, how do you ever get it back? Because like it seems like you obviously you can't, you're going to have to either buyback shares, which you're going to have to raise debt to do or sell Bitcoin to do.

Does it become like a death spiral once it goes below on 1X for a long time? Yeah, I guess it depends on the productivity of the humans that work at the company. Yeah. Like the humans that work at the company, what business can you do? You know, can you go, you know, make phone calls and leverage your Bitcoin in different ways? Can you go park at a coin base and earn 5% yield on it? Can you go, you know, be a capacity provider for Salt Shield, right? Like, there's things that you can do.

You go to the conferences and look at all of the opportunities out there, right? You can deploy that capital in different ways. So the equity valuations are a, you know, a snapshot at a point in time. I don't think it's death spiral because it's really, it's just capital, right? If you're trading below one MNAV, you still have the money. Yeah. Right, right, there are, there are, one thing that I really like to do is compare these companies to the rest of the world. And you can go compare a lot of these smaller companies that are trading under one MNAV, and you look at their balance sheets and go compare it to an equivalent sized market cap company in the rest of the equity market.

And that, that equivalent size company and the rest of the equity market probably has a balance sheet that's one-sixteenth of the size, right? and they're in more hot water than the company that actually has the money on the balance sheet. So to the extent that they can wait or get out in the market and operate, I think they're going to be okay, like most of them. But to your point,

there's likely going to be future M&A within the market for companies that are just kind of dead in the water. Maybe they're too small, they can't get scale. they don't want to take on the risk of the opportunities. Maybe the board of directors just tired and they want to be out of there. Maybe the operating business doesn't work very much anymore. Like they're getting taken over by AI. Even at that point, your business isn't attractive M&A target.

Because the operates to the business on attractive to bring on board. Just the Bitcoin. Like think about similar. Think about similar if they didn't have the Bitcoin. Yeah. No one's buying that company. No, like just recently, they've lost some of their largest customers and the revenue strong significantly. Because they had a lawsuit or something.

Yeah, there's a lawsuit. And, you know, it was a company that was going through challenges. Okay. So if that would have happened and they didn't have the Bitcoin on the balance sheet, now the company is worthless. Yeah. Right? Like it's worth the IP and what's the IP worth? Well, the IP is worth whatever somebody's willing to pay for it, which might be a dollar.

right so that construction is everywhere within these treasury companies that you the bitcoin is worth something and if you can if you're so you've got two options if you're if you're if you're the if you're the company that's being acquired you have two options you can liquidate all the bitcoin and pay out out all of the all the equity or uh you can look at being an acquisition target for any of these other companies and, you know, getting conversations with them and say, hey, like, I'm looking to be acquired and then you can negotiate terms. If you don't like the terms, just liquidated to the Bitcoin and pay out all the equity. So there's optionality within those, just by having that Bitcoin.

Yeah. I'm not trying to give you a hot time here at all. No, I'm just trying to figure out. These are good questions. And it's something that a lot of people are trying to figure out. And there's been a lot of hatred in the market about these treasury companies. a lot of people, you know, yoloing and they've been volatile, right? These companies have been the volatility absorbers in the Bitcoin market, right?

As we've been in this, you know, mini bear market here on the price of Bitcoin dropping 30%. It's like where does all the excess liquidity come from? It comes out of the treasury companies. You've seen it with strategy. I mean, strategy's gone from a $120 billion company to $50 billion company. That's a significant amount of liquidity that's left the market. yet the company's still trading $3 billion a day. The company's still attractive to people that are trading the stock and holding the stock.

So, yeah, it's an interesting dynamic. Yeah, and like I have no problem with the Treasury company. Like I think companies going out there buying loads of Bitcoin, putting on the balance sheet, that's cool. And like, I love that there's someone out there buying a load of Bitcoin. And I think if I was running a big corporation, I would want Bitcoin on the balance sheet. So none of that is like my issue. The only place I have a slight issue is the people who are being, like, I don't know the right word. It's definitely not tricked, but they're being like incentivized to go and chase greater volatility in treasury companies because Bitcoin's been pretty flat over last year.

And like I think selling Bitcoin to buy a treasury company is a very risky take. It's essentially the same as, I think that's a bad idea. Yeah, it's essentially the same as being like, I'm going to sell Bitcoin now at $90,000 to buy back at $80,000. It's the same idea. And I think that generally doesn't play out wealth people. But I do. Well, I would also challenge that. I think you kind of, you may step back and look at your life.

There are bad entry points on all these things, becoming very obvious and very clear. There are bad entry points. I mean, I personally went in very deep to micro strategy at the time in November of 22. I thought that was a great entry. It was like, this company is solvent. you know, and everybody thinks they're dead. And I was, you know, buying tail options in early 2023.

So I thought that was a very good entry point. And, you know, in November, when the stock was trading at $540 was probably a bad entry point, and I was trading at four and a half XMNAP. But you look at the fundamentals of the company, the fundamentals of the company, like the company has literally never been stronger today. When the company is trading at $540, they had $2.00. 150,000 Bitcoin and zero preferred equity. Now the company is trading at $180 and they got $660,000

Bitcoin and five perpetual preferred equities. Which one's better? It's like the one that's $180? If you liked it at $540, it looks like a screaming deal here. Yeah, no, so I totally agree with that. And again, this is where it gets hard because like comparing strategy to some of the other ones is like they're just two different worlds. Totally.

Yeah, totally different. Because you can, like, at the same time as I totally agree with what you're saying, you can look at something like NACA and it's like, everyone's got completely wrecked. And maybe where it is right now is not a bad buy. I don't know. But the point is like, it's trading. And like I always try and tell people not to trade. And it's no different with treasury companies is with Bitcoin. Yeah. But, like, as like, there's trap pools of institutional capital, like, I think you serve, like, a really good market there. So it's not like I'm trying to give you too hard a time. And I do think that there's, well, well, let me, let's dive into this a little bit, because

if you're, I'm not recommending anybody to sell Bitcoin to do any of this stuff, but you've seen large OGs do this, right? People that have had, you know, thousands of Bitcoin. I mean, Adam Back's when they pretty much every treasure company. You look at Adam Beck. He's like, well, this is actually a really appealing opportunity if I could do this in a tax-efficient way. If you could do this in a tax-efficient way and start getting into this market, yeah, you start to look at, you know, if you've got so many Bitcoin you don't know what to do with, yeah, you might want to do. You might want to have some exposure here if you're underweight in some of these deals.

Yeah. Maybe that makes sense. But if you're like, if you've got, you know, two Bitcoin, probably doesn't make sense to sell your two Bitcoin and then buy. Like, it probably makes sense to just work more. Yeah. And like buy additional exposure when you want it. And it's just, it's the like high volatility,

the amplified part of your portfolio. That's probably more. Yeah. And there's nothing more risk-free than owning self-custy Bitcoin. Right. And Adam Back is a, like, Adam back is obviously an incredible person. But he's also like, he's always been a trader. Like he loves trading Bitcoin.

That's true. He does. He does. He does. his stick. Do you think there's kind of a dynamic going on now where as Bitcoin price is dropping, the market is almost testing a lot of these treasury companies to be, because like micro strategy went through this in 2021 or 22 whenever it was. Well, like it traded at a discount. It's like, let's see who's, you know, operational team are like on it, who's going to survive

this, who's going to position themselves really well. Do you think we're going through a bit of a stress test in that market? Yeah, yeah, a little bit. I mean, you try to compare it to 2020. and this micro strategy had less assets than they did debt on the balance sheet at that time. Now you look at the company right now and they have 12% leverage. Yeah. It's like completely completely different. Now, some of the other smaller companies, yeah, they're starting to get tested a little bit. You've seen a couple margin calls.

You saw a company like Sequins. They sold some Bitcoin to reduce the leverage from the convertible bond on the balance sheet. Yeah, that might have been a good idea. But realistically, I think what we've seen kind of going on with Bitcoin probably has more to do with just the credit environment in the broader business macro ecosystem, right? We've got interest rates coming down in a couple days, potentially in the U.S. and a lot of incentive for the economy to be roaring in 2026, right? You've got Donald Trump, you've got elections in November of 2026, midterms. He's going to want the economy halt.

You want everybody fired up. You just want everybody like, yes, I want more of this, right? Give me more of this. So there's every incentive for the economy to be riproaring in 26 and potentially replacing Jerome Powell on the, a Fed with somebody that's, you know, wants easy money and lower interest rates and the business to be booming. So I think that the four-year cycle is probably broken and you've got a lot of people that I've been selling because of, you know, four-year cycle, this is the top.

But we really haven't experienced a euphoric. Definitely no. No. No. And we haven't experienced euphoria. The market's incredibly healthy from a leverage perspective. You've got infrastructure that exists that's never existed before. You now have credit markets expanding for capital.

We're running around here in the Middle East and we're talking to oil-rich countries that have tons of wealth that are exploring and looking into this stuff. FOMO is intensifying and I think we are getting very close to a lot of noise within this marketplace, especially if interest rates come down and money returns to kind of risk assets. Let's go. I mean, I agree with you, by the way. I think that, that, you can almost, after being in Bitcoin for a while, you almost feel when things are getting ready to heat up again. And I'm getting that feeling. Bowling. It's not always right. Full disclaimer. But like, I do, I do totally see what you're saying. Is there a world where Bitcoin starts ripping and

treasury companies don't perform better? Maybe. Yes. Some of them may not. It's, it's quite possible that they underperform. It's also quite possible that a lot of them overperform because they're leveraged Bitcoin, right? So they like our company, for example, we, if Bitcoin runs up, if Bitcoin increases, that gives us more capacity to issue our perpetual preferred equity. Yeah. And if we issue more perpetual preferred equity, we're buying more Bitcoin with it. That's an attractive, that's an attractive model, right? If Bitcoin goes up, you know, 10%. We pay out our monthly dividend and we are able to issue more perpetual preferred equity. It starts to become a very attractive business model. That looks appealing. We've got amplified

Bitcoin and we've got digital credit. We've got two products. And so do you already have a preferred out there in the market? Yes, we do. Yeah, and SATA. And what are the terms on that? Yeah, so SATA is 12% on par. So it pays $12 per share currently. It pays $12 per share. It's a variable rate interest perpetual preferred, very similar to stretch. So we have the ability to adjust the interest rate up and down, depending on how it's trading. We want it to be within a target range between $95 and $105. So it's got a little bit of a wider band than strategy stretch product, which from a mathematical standpoint stretches out the duration a little bit further. But we want this to be a more stable version. Well, it will likely be a little bit less stable

than stretch, so a little bit more volatile than stretch, but still providing a significantly high yield relative to everything else that's out in the market. Yeah. So our company, how we manage this, one of the biggest questions is how do you pay the dividends, right? And we pay the dividends by managing the risk on our balance sheet. Okay, so that's something I do want to get into. Well, let's talk about it. But quickly, just quickly, before we do that, you went for 12% presumably just to be higher than strategy because otherwise you're not going to be able to compete with them. Well, we're much smaller. So we've got a different risk profile. The other thing that's unique about our product and our structure of the design, we do not have any convertible

debt on our balance sheet. So this product is senior on our balance sheet. So we've got the perpetual preferred equity, and that's it. So that's a unique capital structure compared to strategy. Now, we can also take, we can, we can be a little bit more flexible with the design of that product. What if you could lower your tax bill and stack Bitcoin at the same time? Well, by mining Bitcoin with Blockware, you can. New tax guidelines from the Big Beautiful Bill allow American miners to write off 100% of the cost of their mining hardware in a single tax year. That's right, 100% write off.

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I don't know if you listened to that one, but... I did. Yeah, it was great. Yeah, great show. And that was the question I had for him is, like, if you have this interest payment that you have to pay out every year, I don't know how high yours is. I think strategies is around 750 million. Yeah. In a scenario where your shares, prices trading at less than one XM nav, how do you pay that back? Because you can't really dilute shareholders at that point. So you either issue more preferreds or you sell Bitcoin.

Yeah. And like, what if the demand for the preferred isn't there? Yeah. There's a few different things. You can also enter the derivatives market for Bitcoin. You've got Bitcoin in your balance sheet. You can enter the derivatives market. What does that mean?

What do you do? So there's multiple things that you can do. So there's you can sell covered calls. That's the clear one that most people can wrap their heads around. But there's also the futures trade. You can earn yield through that environment. There's also other yield producing ways that you can use your Bitcoin. coin as collateral for, you know, just little tiny pieces of yield to help pay those dividends.

And then you also have operating business. So operating business, any cash flow that comes in the door, you can use that to pay dividends as well. But also another thing that is unique to us, and it's cool seeing strategy follow behind us here, is we came out to market with 12 months of cash to pay our dividends. So we had a 12-month cash reserve. That's quite cool. So we actually led strategy in that. And then just this last week, or, you know, they come out with a $1.44 billion cash reserve to pay, you know, 18 months' worth of dividends into the future to kind of mute this concern of how do you pay the dividends. So it's like what, and you could also sell common stock ATM, but again, if your common stock ATM is below one, you would tap these other pools of capital

that you kind of think of it as a line of defense. It's like the first line of defense. Like I've got the cash. Okay, I've got the cash reserve. And then I've got meanwhile, if I have to dip into this cash reserve because my stock's trading under one MNAV, I'm also going to go explore these other options to rebuild and fill back up that cash reserve. And if the stock recovers at that point of time, then I can, you know, start, you know, dipping back into that. Is there who like, it would almost be a great problem to have, but is there a potential problem, especially as like a younger treasury company, that the preferred is so popular and the common share price doesn't raise enough that you can like tap the ATM that your interest payments get so large that you

kind of get forced to sell Bitcoin. Well, we can control that. We control how much preferred we have outstanding. So we're constantly monitoring our leverage, right? Right now, we're about 30% amplified. So our notional outstanding is about 30% of our Bitcoin balance sheet. So our annual interest payment is $24 million. We have at $200 million outstanding at 12% interest rate.

So that's $24 million. If you look at the interest, if you were to break down the interest payable by day in the trading days throughout the year, our daily interest payable is about $100,000 if you were to break it down daily. Lately, our stock has been trading between $50 and $100 million a day. So if I just need to raise $100,000 on our stock's trading. It's not much, right? Like, it's like, yeah, I could go issue $100,000 of stock a day. And that's, you know, that's an interesting way to look at it. Yeah.

So that's, so we're constantly, yeah, you brought up the champagne problem, right? You've got so much interest in the perpetual preferred equity that, you know, you can't sell enough of it or the price gaps up, right? Right now it's trading at $91. And, you know, if it goes above our estimated trading range, We can issue more of it to bring it back down to 100, which we would absolutely do. But to the extent that we got too amplified, we would look at, you know, can we issue more equity to bolster our balance sheet to reduce the amplification? Or can we look at taking on a tail hedge? Can we purchase a tail hedge where we can pull off downside risk on the balance sheet?

So you've got a few things. You've got tools that you can use to manage that circumstance. Yeah, because when I asked Fong that question, he said, like, he wasn't shy about saying there is a scenario where they may have to sell Bitcoin. They don't want to. It might be that. It's possible. And I get he's got a fiduciary duty.

Like, he has to say that. Yeah. But do you think there's, like, obviously selling Bitcoin as a treasury company is a strange signal to the market, I think. But do you think that changes over time and it becomes a more commonplace thing? Yeah, it's capital. It's the most liquid capital on the planet. Like, imagine if you're over leveraged and you've got a real estate portfolio, you're screwed.

Yeah. Right? Like, oh, let me go liquidate the stadium real quick. You know, right? It's like, it's like not going to happen. Three years later you might get rid of it. Yeah, but you could go sell. Like, like I said, our annual interest obligation is $24 million.

Yeah. Bitcoin trades $60 billion a day. Like, if I can, I, I, I, I, I, I, I, If I needed to sell $2 million a Bitcoin, I could do, the Bitcoin price isn't going to move a penny. And it would clear, like that would clear the market. So it's a tool. And when you start to run mathematics on the perpetual preferred equity,

if you take a very conservative view of the math, and let's just assume that you sold Bitcoin to pay the interest, obligations, the model still works. So let me pose a question to you. I think this is fun. If I gave you a Bitcoin today, would you be willing to pay me $10,000 in fiat for the rest of your life? $10,000 a year in fiat for the rest of your life?

Yes. That's effectively what we're doing in the perpetual preferred. Because I was trying to figure out what the interest rate on that is and if it's the best decision. but it's let's just say let's just make it just make it 12,000 dollars a year yeah yeah okay so if i gave you 100 000 and you bought bitcoin with it today and you had to pay me 12 000 a year for the rest of your life would you would you would you take that risk i it's a it's an interesting way to think about it right like the it's it's it's a you've got a fiat liability that you got to pay

into perpetuity and if we entered that transaction, you'd figure it out. We aren't in this transaction. You'd figure it out. Yeah. Even if the price of Bitcoin went down, you would, you know, do more podcasts and make more money and, you know, you figured out. You'd pay me cash, maybe next year.

And instead, maybe you sell a little of the Bitcoin, but because you're like, I didn't make enough cash, right? You would go through the process and you'd figure it out. So that's effectively what we're doing on a larger scale. Anytime we issue professional preferred equity, somebody is giving us cash. and we're plowing it into Bitcoin, and we are, our company is taking on the risk of how we pay on the dividends.

So one big criticism that comes out a lot that mainly in like traditional financial media is Bitcoin's not a yield-bearing asset. Which is not. It's not, but neither is real estate. Yeah. And that's a big statement that a lot of people disagree with.

And you look at real estate by itself. A house isn't yield-bearing. house isn't yield-bearing. The house doesn't create more little mini-houses next to it. You have to take risk. You have to put work into it. Okay. Bitcoin is not yield-bearing.

You have to take risk. You got to put work into it. And that's the big distinction is that our company is risk-taking. Right? Like we are risk-taking to buy more Bitcoin. We are taking on that risk of paying that dividend into perpetuity. So apart from the prefers which you're offering a similar product to stretch, which I actually think is the most interesting of strategy's products anyway. It's really appealing, yeah.

And you're issuing a slightly higher interest rate, understandably, like, otherwise you just won't compete with strategy. Yeah. How else are you trying to differentiate yourself? Yeah. Well, I think one thing that's a big differentiator for us is that, you know, we are a bit smaller and we offer a different risk return metric. There's going to be hundreds.

Let me put this into perspective. So when we went out to market with Seda, we had just came off of a 30%. This is right after October 10th, the big liquidation event. And we went out to market right after that. Bad timing. Bad timing, probably is like some of the worst timing you probably could have had. And we came out with this product and we're going to pay 12% interest. And still at this point, strategy hasn't raised any cashed.

And we went to the market and we're saying, hey, we're going to have a cash reserve. We are, our business is an asset management company. Everybody that works at the company are finance people. We're going to operate in the financial markets. We're going to explore yield opportunities. We're going to find ways to generate Bitcoin yield that are maybe a little bit more niche than what strategy may do. For example, like the M&A, which was part of our original value proposition.

And we went to the market, and initially we were going to market to raise $125 million. dollars we upsized the deal up to 200 million dollars because there was significant demand and at the two hundred million dollars at a at a price of 80 dollars we actually had nearly 500 million dollars of demand so we had we could have issued even even more than that so there's significant demand from that perspective and and we we think this marketplace is going to expand drastically especially as we start making inroads within the rating agencies as the rating agency start to wrap their heads around Bitcoin and digital credit. Then we can start having real conversations with some of my old colleagues in the insurance

and reinsurance world about adding these instruments to their balance sheet to protect against debasement and long-tail liabilities that they're not doing a great job in managing right now. Yeah. We've not had enough time here, Jeff. We've only got a four minutes. We'll do a fourth one down the road. But I do have a question for you before you go. So strategy obviously have their like Bitcoin.

projections, where they think Bitcoin will go, like they have a bull bear case. How do you think about Bitcoin right now? Because I know you are a Bitcoiner, but you've been very heavily in the treasury world for the last year and a bit. What do you kind of project out for Bitcoin? A short term or short term, long term. Whatever you're thinking about. Yeah, we view that over the next, we're in a digital gold rush. Over the next four to eight years, we think institutional adoption increases drastically. We think sovereign adoption increases drastically. We think digital credit starts to permeate throughout the rest of the market. And because of that, those dynamics, you've got, even the Bitcoin ETF being the most successful ETF in history, those dynamics are, that success

is going to breed more success. And it already has. So because of those dynamics, the macro environment, we see probably next four to eight years between a 30 to 50 percent compound annual growth rate for Bitcoin. And we think that we'll start to taper off as economies of scale and large economies of scale start to come into play. Once Bitcoin's at a $10 trillion asset, it's probably going to be significantly less volatile. And the compound annual growth rate will be reducing over time into the future. But you think we get 30 to 50 percent over the next decade? Yeah. I'll take it. Yeah. I'll take that. Right. I mean, you look at the last seven years and it's been like 70, 70% compound annual growth, right? Even what in 2022 is at 16,000 and what we're in

90,000 right now. What is, what is that? That's a lot. A lot. Annualize that. That's, that's 80, you know, 70, 80% probably. And I don't think it takes a lot of capital to move it, to move it much higher. So one of the interesting things in the treasury world is that like when strategy came out, started this whole genre, it took quite a long time for the companies to do the same thing, which always surprised me. Like when Saylor first came out and started doing this thing, I thought there was going to be essentially like a gold rush of corporations trying to earn Bitcoin. And it wasn't really until 12 months ago, maybe 18 months ago, that really kicked off.

If you were to look out another four years, how do you think these business models will have evolved? And what kind of market will they be fulfilling that? Yeah. Yeah, the market will evolve significantly. I think there will be another doubling of the number of companies that hold Bitcoin on the balance sheet and then it'll double again, right? I think that will happen. There are millions of companies out in the world. I think small, medium enterprises will start to adopt Bitcoin as well out of necessity. And I think digital credit is a multi-trillion dollar idea and that that will probably take off like a wildfire and it will likely get to a point where some of these large, or capital institutions will have no other option but to own it. You compare it to some of the other debt in the market, and these products are so much better on a risk return basis that banks and pensions and insurance companies can't, will not be able to not hold these things, especially if they get rated appropriately.

So, yeah, I think we've got a lot of excitement on the horizon. And the yield generating opportunities are going to expand as well. If you think about if the price of Bitcoin goes from, 100,000 to 500,000, the number of people that are interested in taking out a Bitcoin back loan is going to 5x. Yeah, that's not just going to double.

That's not going to double. It's going to 5x, right? And that if that happens, that provides more opportunity for these other type of yield environments or credit environments where the infrastructure can support itself, as long as the risk is managed appropriately, which I think is incredibly important. And we now have institutional actors that are operating the traditional financial markets with risk backgrounds that view

their responsibility is very large, right? So Sailor and the strategy team and our team at Strive, we have a really big responsibility here. And we are laser-like focused on making sure that we manage our liabilities into perpetuity are, you know, every, every part of the company is aligned for that. And we want to be the second largest issuer of digital credit on the planet. Awesome. I'm sorry we have to speed run this one so quick. We've been really good on time, but I love talking to you, Jeff. We definitely should do it again. Appreciate it. Thank you. Thank you.