{ "episodeId": "SLP666", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "blake_canfield": { "name": "Blake Canfield", "role": "guest", "tag": "BLAKE" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.12, "text": "Bitcoin's an asymmetric opportunity, and then these Bitcoin treasury companies are an asymmetric opportunity on top of Bitcoin. And the, the thought that process that a lot of Bitcoiners have is like, \"Hey, where's the yield coming from? This reminds me of FTX, and this is a GBTC-like instrument.\" And each one of those thoughts is, is kind of incorrect and relatively lazy thinking. And my hope is to get people to spend the time to see if those are accurate or inaccurate and to evaluate this based on probability and- Analysis, like what's the likelihood of this working, and then what's the upside return of these Bitcoin treasury companies, and those are enormous. So the, the risk is low and the upside is high, which we, we can get into, I'm sure, on this call." }, { "speaker": "blake_canfield", "time": "00:54", "start": 53.88, "text": "Hi everyone, welcome back to Stephan Livera podcast brought to you by Bold. American listeners, you can buy Bitcoin and sell Bitcoin over at getbold.io. Now, joining me on the show is Blake Canfield. Now, Blake and I, we actually first met in twenty nineteen around the Bitcoin twenty nineteen conference in San Francisco. So- So welcome to the show, Blake." }, { "speaker": "stephan", "time": "01:14", "start": 74.4, "text": "Happy to be here. Stephane, it's been a while. it's good to see you every once in a while, and it's great to see-- I know we were chatting at lunch one time, and you were thinking about starting a podcast, so it's good to see that it's successful." }, { "speaker": "blake_canfield", "time": "01:27", "start": 86.79, "text": "Right, yeah. So look, it's been a while, I've seen you around at different conferences, and now, you know, obviously being down the Bitcoin rabbit hole, but in, let's say, recent years, this Bitcoin treasury company is, it's almost like this its own little rabbit hole as well. And so let's hear from you, what was your interest in this Bitcoin treasury company rabbit hole?" }, { "speaker": "stephan", "time": "01:50", "start": 110.28, "text": "Yeah, I think that, taking it, the, the interest for me is how The, the debt market is going to come into Bitcoin or so the fiat market. And so the debt market to, to me, the US Treasuries and things of that nature are the most obvious to come into Bitcoin first, and that's always been my total addressable market of Bitcoin and measuring that value, if that makes sense. And so what's unique about the Bitcoin Treasury companies, they're kind of the tools or the spigots to plug into the dam to start to get that money to come into Bitcoin, and they're like a flywheel that's- Using that kind of energy and that pressure to drive Bitcoin yield and accumulate more Bitcoin per share. So that, that's what interests me, that, that general framework of, okay, they're tapping the debt markets to bring that market, that, all that debt and that currency into Bitcoin, and that just made a ton of sense to me Yeah, and so of course," }, { "speaker": "blake_canfield", "time": "02:45", "start": 164.82, "text": "addressing just kind of upfront elephants in the room, yeah, there are some obvious concerns that some people will have, so I can understand for some people on the, let's say, the cypherpunk side of things, where maybe they see this as kind of, it's against the ethos, and then maybe the other big category would be those from a- Maybe more of a religious, or ethical, let's say, aversion to this idea. So for example, if the idea is, people might be against debt or usury, and for this reason, they're against this idea. So, you know, I, I, I'm not personally against this idea of Bitcoin treasury companies, but I can understand where maybe there are other people in the Bitcoin world who might have some objections to these things. Any kind of, any thoughts from your perspective on those?" }, { "speaker": "stephan", "time": "03:30", "start": 209.94, "text": "Yeah, definitely. So the way I look at it Is you've got these very important Bitcoiners that are the hodlers of last resort, they hang on to their Bitcoin in cold storage. What these Bitcoin treasury companies are, are the teams or, Or organizations that are going forward into the capital markets and taking market share from the fiat currencies and throwing it into Bitcoin at a, at a high rate. And so it's great to sit back and kind of have that, huddle of last resort mindset, which I'm a huge fan of. But to me, there's nothing better than being proactive and going into the market, going to the debt system, and bringing that money and that capital into Bitcoin at a high rate. And that's what these companies represent to me. So it's an active process versus kind of waiting. I think for the debt market and, Bitcoin adoption to come to use. So you see a lot of these Bitcoin treasury companies influencing governance at for governments and then bringing in, and pitching, you know, hedge funds, insurance funds and things like, as well as building products to help that flow come into Bitcoin. So there is that, you know, kind of thought process, but that's how I look at it, and I'd much rather be on that kind of proactive, going out and, and bringing that capital into Bitcoin type mindset rather than just sitting back. And the beautiful thing About, about this system is you can still have, you know, some percent in your cold storage, and then you can also put some in these Bitcoin treasury companies that are taking a more proactive approach to bringing, the fiat currencies into Bitcoin." }, { "speaker": "blake_canfield", "time": "04:59", "start": 298.87, "text": "Yeah, and yeah, to be clear, I'm in favor of this, idea also. I think it is a way to help onboard new people, but I can also understand there may be people who have concerns from, you know, cycles gone past, or they think this is like, \"Oh, it's, it's that same kind of thing again,\" or people are doing this kind of, in cycles gone past, there was this kind of \"I like Bitcoin, buy my shitcoin\" kind of thing, and now this is the new, quote-unquote, \"shitcoin.\" So there's, anyway, yeah." }, { "speaker": "stephan", "time": "05:31", "start": 330.95, "text": "There's a lot of parallels, and I think what the way that I look at it is, I feel like I'm a, you know, it reminds me of being early in, you know, Bitcoin when we were in twenty nineteen at the conference, where we're trying to convince our no-fu coiner friends to buy Bitcoin, we're trying to articulate the value of it, and they're saying, \"Hey, it's too risky.\" And we're going, \"Actually, Bitcoin's not risky, and here's why. Here's the And how, how do you compare that to traditional banking systems, fiat currencies, equity markets, and things like that? Well, the same kind of thought process and logic apply for me right now, trying to convince Bitcoiners that this isn't a risky investment compared to other traditional investments of investing in Nvidia and, and some of those stocks, right? And so you have a very simple model of taking the debt from the fiat currencies and putting it into Bitcoin and, and leveraging that very simple business model. Hey, this fiat currency is depreciating by ten percent ten percent a year, and we're putting it into an asset that's appreciating by sixty percent a year. That's the model. And then the mechanics of it, we can get into, but there's all these different tools and, and, and things that, kind of impact that. And that's what it's like for me, that I, I'm trying to communicate to my Bitcoin friends that, hey, this isn't something you should sleep on. The way I think about it is Bitcoin's an asymmetric opportunity, and then these Bitcoin treasury companies are an asymmetric opportunity on top of Bitcoin." }, { "speaker": "stephan", "time": "06:58", "start": 418.47, "text": "That a lot of Bitcoiners have is like, \"Hey, where's the yield coming from? This reminds me of FTX, and this is a GBTC-like instrument.\" And each one of those thoughts is, is kind of incorrect and relatively lazy thinking. And, and my hope is to get people to spend the time to see if those are, are accurate or inaccurate and to evaluate this based on probability analysis, like, \"What's the likelihood of this working?\" And then, \"What's the upside return of these Bitcoin treasury companies?\" And those are enormous. So the, the risk is low and the upside is high, which we, we can get into, I'm sure, on this call. Sure." }, { "speaker": "blake_canfield", "time": "07:34", "start": 454.33, "text": "Okay, yeah, great. And so let's talk a little bit about setting, setting the table a little bit of like, what are the terms we're talking about here? Because there's treasury companies who merely, let's say, they merely buy Bitcoin and hold it on the balance sheet, but then there are also the Bitcoin treasury companies who actually take leverage, issue equity at the market or use some other equity and debt structures to, let's say went that way. So here we're talking about the spec-- you know, those companies. So, so I guess the way I'm understanding it, and you, I'm curious to get your thought on this as well, but the way I'm seeing it is, you know, every company should be doing at least holding Bitcoin in the balance sheet, but the question of whether, you know, every company should be using fiat leverage, maybe that's a different question. How do you see that?" }, { "speaker": "stephan", "time": "08:21", "start": 501.2, "text": "Yeah, there, there's two different things. There's one is putting your cash flows on the balance sheet, And using a judo move and throwing it into the Bitcoin space and generating yield on that. And so I think something that would resonate for most viewers is the analogy around a real estate developer developing real estate. So right now, these Bitcoin treasury companies, you can think about as a real estate development company, and right now they have, let's say, ten houses on their, in their portfolio, and th-that, those houses are growing at sixty percent a year, which is traditionally what Bitcoin does. But in addition to that, they're doubling, one company, MetaPlanet, is doubling their housing- Sack every sixty days. So not only additionally are their, their houses going up by sixty percent a year in value, but they're increasing the rate of acquiring pieces of real estate, homes, by double each, every sixty days, so every two months. in addition to that, they're using the leverage of the fiat system to do it, but they're keeping that leverage minimal. In other words, they're only, you know, Michael Seiler is, I think, about twenty percent, and then this company, Metaplanet, is only ten percent of their net asset value is in debt. So, you know, that to me doesn't sound risky, 'cause most homeowners in the United States take over eighty percent debt to buy their home, and that sounds much more risky than these companies. So, I, you know, I, I think it's, it's not inaccurate to say it's a leverage play, but to, to simplify it like that and saying they're not taking this debt, putting it into Bitcoin, acquiring more Bitcoin, their assets go up, it's this flywheel feedback, positive feedback system that is the real kind of understanding of the mechanics that you need to understand. Not just simply we're taking on debt and that's it. So, there's a lot of mechanics behind it, but that's the way I think that home analogy kinda resonates, and once you start to see it from the debt perspective, how much the asset's appreciating, sixty percent a year, and then how many more assets they're acquiring homes is doubling, for some of these companies every sixty days. And so when you put in that perspective, you start to think, okay, that doesn't sound as risky. That's a mental framework that we can comprehend easily and effectively, Nuance and details there." }, { "speaker": "blake_canfield", "time": "10:30", "start": 630.5, "text": "Sure. And I guess the other big question people have is, what are the pieces that are required to make this work, right? Like, I guess it's not just one piece, right? It's not just take out debt and buy Bitcoin. It's they might also have some form of equity financing, and they may have, in, in this case, a public company structure. So maybe if you could explain from your perspective what are the pieces required to execute this strategy, and then we can sort of get more into some of the differences and the nuances." }, { "speaker": "stephan", "time": "10:58", "start": 658.14, "text": "Yeah, of course Yeah. So taking a step back, just not in the mechanics, I like to think about the capital pools that they're leveraging or using. And what that's important, to understand is that in Japan, they have extremely, low interest rates and their equities or their stocks have done really poorly over the last forty, fifty years. Why that's important is that they're desperate to get out of their equities, their stocks, and their bonds. So they're looking for yield, and what companies like Metaplanet are doing are allow-th-allowing them to get out. How they're doing that is they're using different tools to capture that demand. So they're ha- they have, fixed income products that some of these companies are selling. So MicroStrategy's selling a fixed income product. They also have the ability to buy their, or issue more shares of their company stock when the company's overvalued compared to, The assets they have underlying, which we'll get into a little bit later, and then they also have a ability to do convertible debt and some other financial instruments. But the big aspect is just, oh, and then the, the equity market is important because these equity investors, let's say in Japan as an example, are putting money in to Metaplanet, and that's allowing them to buy more Bitcoin. So not only they're taking out debt, the equity investors are also, speculating and investing in, in the company, which allows, gives them more resources to buy more Bitcoin. Level. Does that make sense? And" }, { "speaker": "blake_canfield", "time": "12:24", "start": 744.29, "text": "so, yeah, I mean, it, it's, I think it's, it's like a whole new world to sort of understand, and it's not the typical thing that people are used to, right? Because, you know, obviously, if you're coming from the Bitcoin perspective, it's about, you know, buying and hodling. If you're coming from the traditional stock investing world, you're thinking, okay, like, what's the PE ratio of this company and is it profitable and this kind of thing. And then here, we're sort of Getting debt and sort of accessing this cheap capital, let's say relatively cheap capital compared to the appreciation rate of Bitcoin. Now, the obvious big question a lot of people have is kind of mNAV, why is, mNAV, you know, greater than one? Is it sustainable greater than one? Can you give your high level answer on this, on, you know, what is mNAV and how or why is it sustainable greater than one?" }, { "speaker": "stephan", "time": "13:16", "start": 796.12, "text": "Yeah. So the mNAV is the multiple to net asset value. So really that's a complicate-complicated way to say they're Bitcoin on their, on their books at the moment for these treasury companies. So if they have a hundred Bitcoin and the bit-- and the company's valued at, two hundred Bitcoin, the net multiple to net asset value is two. Why this is important and why it's almost irrelevant is because people are taking the old framework of the GBTC, which was a closed-end trust, so people aren't familiar with it. And so what that was For the last, I think, ten years, was a trust that would store your Bitcoin before the ETFs, and it was a one way trust that only would buy Bitcoin and would never sell it. So sometimes it was a very rigid system, and it would not-- it, it traded a slight discount and a slight premium. So a lot of Bitcoiners come in with the mindset they're waiting for that premium to increase or decrease by slightly, and they'll, they'll wait to get into the trade." }, { "speaker": "stephan", "time": "14:15", "start": 855.12, "text": "Why that's not the healthiest way to think about it is because the Bitcoin yield is vastly more important. Going back to the real estate analogy, so using the real estate as the analogy, the, the developer's company is valued at two x what the real estate is worth right now in this analogy. and so they can issue shares to buy more houses. let me, let me take a step back actually, before going back or maybe" }, { "speaker": "blake_canfield", "time": "14:42", "start": 881.78, "text": "the analogy is more like they can make more new houses, right? Like if they could" }, { "speaker": "stephan", "time": "14:48", "start": 887.64, "text": "Well, let's get into, so the, the difference between the mNAV, mindset, which is like waiting for the mNAV to, to kind of be up or, or down a little bit, 'cause I had a very famous, Bitcoiner, talk to me at the conference, and he mentioned, that he's waiting for the mNAV of MicroStrategy to reach point five, which is half the value of the Bitcoin that they have on site, which is on their books. And why that's not, not a healthy way to think about it, it's an old way thinking about it from a GPDC trust mindset. Markets are forward looking. So if the company is generating a four hundred percent yield or doubling their Bitcoin every sixty days, that means that we can do an analysis and say, okay, let's imagine that a Bitcoin company has ten Bitcoin And every year for the next ten years, or let's say five years, they're acquiring five-- or sorry, ten more Bitcoin each year. We need to ask ourselves, what is the present value of that Bitcoin company that has ten Bitcoin right now, but they're gonna acquire ten Bitcoin every year for the next five years? And so what that means is there's gonna be a premium on top of the value of that company over what they currently have. And so that's what a lot of Bitcoiners are missing, is this Bitcoin yield or ability to- To acquire Bitcoin at an annual rate is what allows the premium to exist because the market knows that these companies are acquiring Bitcoin, therefore the company is gonna be measured at a higher value than its assets. So if the assets are a hundred Bitcoin, the mNAV is one, and the value of the company is valued at a hundred Bitcoin, but if they have that ability to continue to acquire Bitcoin over the next five years at a four hundred, six hundred percent rate, that means We have to value the company at a premium today. Does that make sense?" }, { "speaker": "blake_canfield", "time": "16:40", "start": 999.71, "text": "Yeah, I'm with you. So let's, let me take another shot at explaining it in another way. The point with when we talk about BTC yield, what we're talking about here is- Is it accretive, right? It means per share, is that company acquiring more Bitcoin, even accounting for dilution? So even accounting for if they had to issue shares or they, or, you know, if there was, notes that had to convert into shares, assuming full, you know, dilution Do those shares effectively, count for more Bitcoin than they had previously? And that's obviously the point of these treasury companies, that if they aren't doing-- if they're not getting a BTC yield, then there's no point, correct?" }, { "speaker": "stephan", "time": "17:21", "start": 1041.2, "text": "Correct. Exactly. Yep. And so as a shareholder, you have one share and you expect your share of the company or the amount of Bitcoin they have per share to increase at a certain amount, and that amount is very high for companies like MicroStrategy and Metaplanet, where you're talking about a four hundred- 600% Bitcoin yield where they're, they're, you know, a-dexing their Bitcoin stack each year, per share, and so once you start to, to see that, you say, \"Wow, this is extremely valuable.\" And this should be in your portfolio on some amount. Going back to the challenge with convincing no coiners to buy Bitcoin is that they say, \"Hey, it's too volatile, I'm not gonna touch it at all,\" versus, \"Hey, maybe I should put five percent in, thinking in terms of just percent allocation versus going all in or not all in.\"" }, { "speaker": "blake_canfield", "time": "18:07", "start": 1086.55, "text": "Yeah, I see. And so I think the other question is sort of how sustainable is this kind of thing? That is it a phenomenon only now in the fiat world? Like, the way I'm seeing it is, you know, we've got this window from now until hyperbitcoinization, and none of us knows it could be twenty years, could be thirty years. And the way I'm seeing it is there's this fiat window, this regulatory arbitrage, if you will, that, that's what these treasury companies are effectively leveraging. They're using that fiat arbitrage that exists. Today and it may not exist in thirty years time, but, you know, get it, make hay while the sun shines, right?" }, { "speaker": "stephan", "time": "18:43", "start": 1123.18, "text": "Right. So the goal is to acquire more Bitcoin, right, as an individual, and these systems are allowing you to do that. One of the things I like about these Bitcoin treasury companies is this not-- is not a short term play. This system, these dynamics are gonna be at play until the debt market is gone, which is a three hundred and fifty trillion debt market. So that's the exciting thing is that these are just engineered systems to- To bring that debt, that fiat into Bitcoin and, be a one way function where they're only acquiring Bitcoin and never selling it. And they're developing all these tools in each geographic economy to be able to do that. Michael Saylor in the United States with Strategy, and then Metaplanet in Japan are two examples. Right." }, { "speaker": "blake_canfield", "time": "19:25", "start": 1164.98, "text": "And now the other obvious question that people have is, wait a second, are these-- Let's say if they issue, let's say if Michael Saylor or Dylan LeClaire, and whichever and other- The treasure companies are out here issuing debt. Are the buyers of that debt, are they just suckers? Like, why don't they just buy Bitcoin themselves?" }, { "speaker": "stephan", "time": "19:46", "start": 1185.54, "text": "yes, they are suckers. There's an opportunity cost where they should be buying Bitcoin, but they can't. So a lot of these systems and government structures, are designed, bond funds, insurance funds, they have mandates to, to buy debt. And Michael Saylor and these Bitcoin treasury companies are going, saying, \"Okay, you need to buy debt, I'm gonna get- Give you a percent of the upside of Bitcoin, I'm just gonna give you, let's say, a ten percent yield. Let's say Bitcoin's doing sixty percent a year, I'm just gonna give you ten percent, I'm gonna keep the fifty percent, and I'm gonna take your trillions of dollars and put it into Bitcoin over the next couple decades or a decade or so. And so he's gonna keep doing that, and the bond market is happy with that ten percent yield, or interest rate that they're getting, but they can't convince their boards and, and whole organizations Only buy Bitcoin. Now, if you're an individual, it would make much more sense instead of to buy a bond for, you know, a US Treasury or, or a Japanese bond to, to invest in, you know, Bitcoin. but a lot of these larger organizations can't do that, there's just too much of a hurdle. I see." }, { "speaker": "blake_canfield", "time": "20:54", "start": 1254.16, "text": "And it could even make sense, even for a Bitcoiner, if they were to think about, like, okay, maybe most of their stack is in Bitcoin, but maybe they are, let's say, more advanced in age towards the end of their life, and maybe they want like a small portion of this kind of Bitcoin, you know, associated, debt or some kind of preferred stock that is being issued by some of these companies. So, you know, it's not even a totally, binary, question, although of course, you know- Not your keys, not your coins. The most safe thing is Bitcoin that you are self-custodying. There, and it's important for people to understand there is an additional layer of risk versus simply holding Bitcoin, but it's not a binary zero or one. It's not like you have to be all in on treasury companies or zero. You can, you can take a small percent." }, { "speaker": "stephan", "time": "21:41", "start": 1300.69, "text": "Right. Exactly. And so one of the things that these companies are doing is offering products for people to invest in. So I've had people reach out to me that I've been trying to orange pill for a long" }, { "speaker": "stephan", "time": "21:53", "start": 1313.4, "text": "Fixed income product that MicroStrategy is offering, can I invest in that? And I go, \"Yes, that's a great product to invest in.\" So what they're doing is just providing financial products that are based off of the Bitcoin returns that people would want to consume and invest in. So whether that's investment companies or, sorry, insurance companies or individual investors that just want that money in their retirement account and generate that yield and don't really wanna do the work to understand Bitcoin, it's a very simple model for them. Hey, I want a high yield compared to what they have. In the market, the ten percent, but they don't understand Bitcoin, they're not sold on the sixty percent returns, they haven't done the homework." }, { "speaker": "blake_canfield", "time": "22:29", "start": 1349.18, "text": "This episode is brought to you by CoinKite, the makers of my favorite Bitcoin hardware wallet, the Coldcard Q. Now, some people think self-custody is too hard, but it's really about taking responsibility for your Bitcoin wealth and understanding that self-custody gives you a true feeling of liberty. The Coldcard Q has a full keyboard and big screen, it's got two secure elements and a true air gap, allowing you to go fully" }, { "speaker": "blake_canfield", "time": "22:53", "start": 1373.38, "text": "Using three triple A batteries, so you don't even have to plug it into the wall for power. You can easily use it with Sparrow Wallet for PC or Nunchok on mobile, and you can dial it into the right level of security and complexity that you choose. If you want a simple setup, just use twelve words and single signature. If you want passphrases, easy. If you want to add multisig or co-signing features, you've got those too. So go to coinkite dot com, use code livera to get ten percent off on your coldcard or other devices, This episode is brought to you by Galloy, builders of banking software for the Bitcoin age. After years of risk and uncertainty, Bitcoin and banking are colliding. The regulatory environment is rapidly shifting in favor of Bitcoin and digital assets. Fintechs and crypto-native companies can become chartered banks, and traditional banks and credit unions will launch Bitcoin products. But the legacy core banking software that many financial institutions run on wasn't built for Bitcoin. The Galloy banking infrastructure stack delivers all the key elements of a modern core banking platform. With cloud native infrastructure, event based architecture, and robust APIs coming together to meet the security, scalability, and reliability needs of banks of the future. Whether you are launching a modern financial institution from the ground up or you are adding Bitcoin backed lending or payments to your product offering, talk to the team at Galloy, visit galloy dot io, or reach out to the team at b i z at g a l o y dot io. Yeah. And now, when it comes to accumulating more Bitcoin, some of these Bitcoin treasury companies, they've, you know, they're in different Countries around the world, maybe they're accumulating at different, at a different pace, and of course, they're starting from different positions, right? Obviously, Michael Saylor is the, you know, he's got the, what's the, the six hundred pound gorilla in the room with the mic, with MicroStrategy or Strategy now. maybe some of these other treasury companies, they're coming off a smaller base, so maybe they can have a higher pace of accumulation or a higher BTC yield. How, how are you seeing that dynamic there of the different size of these different companies? as well as the different jurisdictions that they operate in." }, { "speaker": "stephan", "time": "24:54", "start": 1493.83, "text": "Right. So the, the formula to me is kind of what capital pools are they accessing? So you've got the Japanese economy, you've got the US economy, companies are popping up in Brazil, Europe, obviously, in, in a lot of other, China are, are starting up, Singapore, starting to pop up in those areas. And so what each company is is like an engineered- tool to be able to start to plug into those capital pools. So you have to understand where they are in their structure, like how, how many tools they have, do they have a fixed income product, convertible debt, can they ATM? There's governance around each geographical location, right? So there's different rules and regulations for each geographical location which you have to understand, and then that team's ability to build those products quickly or already have them. So that comes into like a velocity of the debt or the money to come into the system and the company's ability in managing team's ability to build products to br-continue to bring in that capital. So going back to my friend that has, I've been trying to orange bill for a long time, and now he reaches out to me on his own and says, \"Hey, I'm thinking about buying the financial product from Strategy to get a ten percent yield.\" So MicroStrategy's ability to offer that product allows them to bring that capital in quicker, and some companies don't have those, those different products. So it just depends on the, the demand of the geographical area for yield. Then the company's ability to create products to capture that demand." }, { "speaker": "blake_canfield", "time": "26:21", "start": 1580.84, "text": "Yeah, I see. And I think the other term I've heard used is captive pools, which you were touching on earlier, that there are some institutional investors where they have a mandate or they have various compliance things that they, you know, even if they wanted to just buy Bitcoin and put it in their cold card, they couldn't. So they are forced into looking at some of these other things. And so there's a regulatory or a compliance advantage to some of the- These things, whether it's the direct buying the equity of these Bitcoin treasury companies or buying, as in the common stock versus, let's say, preferred stock or some kind of debt offering or a convertible note or, you know, different situations in different countries, but That's part of why there is this, let's say, sustainable reason for it to exist, that, these people aren't able to just buy Bitcoin themselves, right? And I think that's probably the big mental hurdle, let's say, because if you're kind of in the online Bitcoin world, the answer is, oh, just buy Bitcoin and put it in your multisig, right? But no, there, there's actually, there, there's this whole world out there of people who can't just do that or won't just do that, and that could be for regulatory reasons or maybe" }, { "speaker": "stephan", "time": "27:31", "start": 1651.18, "text": "And I think there's also consensus, right? I think we, we forget that, that we're early bitcoiners, we're the one percent in terms of this regard. But if anyone has a board in an organization, by definition, if we're early and we're the one percent And any of those organizations, ninety-nine percent of people disagree with you and aren't Bitcoiners and aren't gonna change their whole management and archetype to be able to buy Bitcoin, 'cause they're not Bitcoiners. So these Bitcoin treasury companies were usually smaller CEO-led organizations that made that switch and now are on that path. So I think it's, it's healthy to think about that as well, because, you know, using that logic is like, \"Well, why isn't everyone doing this?\" Just because they haven't thought about it and there's not that consensus within the, the organization. We're percent adoption of Bitcoin, and, and we have to keep that in mind. And Michael Saylor and these Bitcoin treasury companies are creating financial products to be able to fit the needs of that ninety-nine percent and those three hundred trillion dollars of debt and fiat currencies to bring it into Bitcoin versus waiting for that consensus and flipping ninety-nine, you know, flipping to a consensus, flipping to consensus pretty much, where we're waiting for everyone to kind of agree with us before the money starts to come in." }, { "speaker": "blake_canfield", "time": "28:42", "start": 1721.75, "text": "Right, and as, Michael and others have said, that there was a journey to go on there, that there are times where they had to change the board or change the structure of the company to enable this kind of strategy of, number one, just buying Bitcoin and putting it on the balance sheet, and then, number two, actually using, let's say, financial engineering or some form of equity and debt offerings to accelerate the pace of Bitcoin, accumulation further than merely buying out of cash flow, right? Like it's not just buying out of cash flow So it's using these, debt and equity instruments to actually, you know, do it better. So, I guess this does come now to, you know, the-- there's been, there are different forms and ways of doing this, and so I guess here we're getting more to the question of like debt structuring and this so-called \"talk.\" so is this something you-- I presume this something you've been, looking into? Maybe you can give, listeners a bit of an overview there. What is \"talk\" and how does- Is that, how, how do we think about that?" }, { "speaker": "stephan", "time": "29:44", "start": 1784.05, "text": "Yeah, so going back, hopefully you can follow my analogy, but of this dam and the pressure of these capital pools to get into yield, and their, the company's ability to create financial systems or turbines to bring that in, and each turbine or each system, the, the ATM or being able to issue shares, fixed income and the convertible debt all have different, Ability to generate Bitcoin yield in the short term and the long term, so there's a kind of a, a growth there. And so one thing on one end, it's the lowest Return is just being able to issue shares and buy Bitcoin, issue common stock and be able to buy Bitcoin because they're diluting the shares of the company, so you own those shares. They're diluting it, but they're doing it in an accretive way. In other words, they're diluting it as the whole pie to be able to give to the To be able to give to the market and be able to buy Bitcoin, but you as a shareholder are still increasing your Bitcoin. You're just not doing it as much as you could if they were to issue a fixed income product. And the nice thing about the fixed income product, and the fixed income product is just a debt instrument, where they issue that debt, let's say a billion dollars, and they give the debt market that ten percent. Why that's so accretive in what we call torque, because they're not issuing any more common share, shares, of the company, and therefore the Bitcoin yield, all that Bitcoin yield goes directly to the shareholder and not to diluting shares. And so each one of these instruments has a different impact, mo-- all are positive, but some are, are more positive than others. And the, why that matters in terms of the debt product is because the debt products can- Scale up to a hundred and three, three hundred and fifty trillion dollar market. So once that ball gets going, that turbine gets going, they can start to bring in trillions and trillions of dollars, to the Bitcoin ecosystem, and it's accretive to the shareholders, and there's absolutely no dilution in terms of issuing more shares. So it's just a, extremely accretive to the, to the, To the companies. Yeah, and so," }, { "speaker": "blake_canfield", "time": "31:57", "start": 1917.41, "text": "yeah, a-and the talk concept is, is another interesting one because again, this, it's like a whole new rabbit hole to sort of go down. So for people who maybe they're used to thinking of like public keys, private keys, and all, all this other stuff that in the cryptography and all these other elements of Bitcoin, this is now another thing to learn. So the talk, I guess the, the simple way I'm trying to understand this is If you issue common stock equity, that's the lowest end of talk. It's still good, it's still accretive as long as it's done, you know, correctly, it can be accretive to the common shareholders, but it's the lowest talk. Whereas higher forms of talk are where there is less dilution. And so everything, there's different trade-offs and different instruments, but the idea is hi-- the higher talk options are less dilutive to the common shareholders, and so that can be really interesting because then just by being a- Treasury company common stock shareholder, you can sort of benefit from those operations that the company is doing because it's kind of, it, you can sort of think of it like the company's getting a better deal or in getting you BTC yield." }, { "speaker": "stephan", "time": "33:04", "start": 1984.09, "text": "Right. And you have to compare these different companies 'cause they're generating extremely high Bitcoin yield, you know, doubling or tripling their Bitcoin stack every year, and that as a Bitcoiner should be very appealing, right? And then you should ask yourself what the risk is, because if you're be-- imagine if you're able to triple your stack, a lot of people feel, as, as almost everybody does, that they came late to the game and they wish if they woulda got in a year earlier, they woulda had X amount of more or whatnot. But the Bitcoin-- this is still early, Opportunity on top of an asymmetric opportunity where you're, you literally have the ability to put in ten Bitcoin and have it go to forty, right? And so you have to ask yourself, you know, what the value of that is and if that's worth exploring and, and doing the due diligence to understand." }, { "speaker": "blake_canfield", "time": "33:51", "start": 2030.9, "text": "Gotcha. Yeah. And just one more, one more point on the talk. So we spoke about, let's say the, let's say the bottom level of that, not, not as bad, but just, you know, it's the most dilutive, ATM equity, as in issuing" }, { "speaker": "blake_canfield", "time": "34:05", "start": 2044.75, "text": "Fixed income note, and then there are some in the middle, so maybe you, you could explain a little bit on that, like the fiat convertibles as an example, just, just so people can think through what exactly is happening there?" }, { "speaker": "stephan", "time": "34:16", "start": 2055.5, "text": "Yeah, so the, the fiat convertible debt, that you're referencing is what, traders use a, a Black-Scholes model to trade the volatility of a stock. So they, they don't care about the stock, they're not a long-term investor in the company, they don't understand Bitcoin, they just like that it's volatile. And so there's an equation that they can use to, To, to capture that volatility, and that's what the convertible debt bondholders are doing. It's a smaller market compared to the three hundred trillion that I was mentioning before, but it's a, it's a market that wants that volatility, that's ac-accessing these Bitcoin treasury companies for that volatility that they can trade on the stock market. And so that's one of the tools that they use, and that's more accre-accreative in terms of that torque, it's kind of in the middle of the road in terms of torque. The fixed income product is most accreitive Equity ATM issuance, it's kind of on the lower end, but it's still adding a lot of value to the organization. And then there's a lot more products coming out right now, so, the Bitcoin, sorry, the Blockchain Group You Adam Back's part of, they're also doing Bitcoin convertible denominated convertible, instruments. So that you give them Bitcoin, and then if the price appreciates of the stock by thirty, forty percent, then you, can capture the stock on that, and if it doesn't increase, then they give you your Bitcoin back. So what's happening is that there's all these financial instruments that are coming on the market that allow you to assess the risk, invest in it, and, and kind of continue to, to- That money, that fiat money continues to come into, into Bitcoin or leverage it in a, in a different way. So that's a general overview, and I'd just like to think about each one of these tools is how that company can suck in that demand and generate that Bitcoin yield." }, { "speaker": "blake_canfield", "time": "36:04", "start": 2163.66, "text": "I see, yeah. And so, now I think the other point here, as we, as we're talking about these different instruments, again, different countries have different options and things available to them. And so, do you wanna just outline a little bit there, like you were touching on Japan, because they have like quite a low interest rate or low, bond yields, and so, that's, I guess, one example. What about other parts of" }, { "speaker": "stephan", "time": "36:32", "start": 2192.08, "text": "the world? Right. Yeah, great question. So, one of the things that's interesting is, is trying to get an understanding of that demand. Japan has, I think, four, fourteen trillion dollars in assets, they've got negative yielding debt instruments. When you adjust for inflation, the government says, I believe the inflation is around three percent, and their debt is yielding sub one percent, so they know that their ice cube is melting versus countries like the United States, where we have like closer to a five percent treasury yield, and then our stock market It has been going up into the right for the last fifty, sixty, seventy years. So why that's important is that everybody in the United States feels like they're getting a really good return, but everyone in Japan knows they're not getting a good return. You can compare that to other capital pools like in Brazil, where they, they're, I think their treasuries are upward, or their debt is upward to like ten, eleven percent, and the same thing with their stock market, it's been up into the right, you know, getting an eight, ten percent, return, That are in those businesses that are allocating capital feel like they're getting a good return. So it, you have to look at each capital pool and understand what's going on, how close they are to high inflation or hyperinflation, and how the, those individuals would feel about capturing some type of yield" }, { "speaker": "blake_canfield", "time": "37:53", "start": 2272.68, "text": "I see. Now, I'm curious your thoughts on when there are multiple Bitcoin treasury companies in one jurisdiction, how do you compare those? Is it based on the leader? Is it based on their pace of acquisition? Is it the, their execution ability? Is it any special competitive advantages that they may hold? How do you compare them when they're in the same jurisdiction, p-especially?" }, { "speaker": "stephan", "time": "38:20", "start": 2299.65, "text": "Well, I think they're all comparable in, in a lot of different ways where it's just the, the velocity of bringing that debt or that, that equity, that, that dollar amount, that fiat amount into Bitcoin is their competitive advantage. So if you're a smaller company and you can bring in, you know, a quick billion dollars, but you're gonna cap out at a billion dollars, then that- That's all you've got, but, some of these other companies, MetaPlanet, MicroStrategy might have the ability to tap into a three hundred and fifty trillion dollar market. That's my-- That might be what they're going after. So you have to look at what capital pools are going after, how deep are those capital pools, and the velocity of that money being able to come in and that company's ability to execute on that. So those are the factors. They can be in the same area, and they can both be splitting that, but they're both bringing in so much money" }, { "speaker": "stephan", "time": "39:11", "start": 2350.61, "text": "Generating a high yield, and it's not, it, they're not exclusive in terms of like they're competing each other, they're just both trying to do a land grab of how much, Bitcoin they can get using that fiat, debt to do that, and the, the demand for the fiat debt to get out of their capital pool kinda is one of the major things that a lot of the Bitcoin treasury, companies leverage to be able to generate that Bitcoin yoder or increasing their Bitcoin stack." }, { "speaker": "blake_canfield", "time": "39:40", "start": 2379.67, "text": "And it's also worthwhile pointing out here that, yes, they're quote unquote in competition, but they're also in a sense co-opetition, right? Because everybody's buying the same thing. And so when one company in, you know, USA is buying it, that also raises the price of Bitcoin, on, you know, all things equal, it raises the price of Bitcoin for everybody. And so it is a little bit of a rising tide lifts all boats situation here, but of course- You know, people will naturally compare these different companies and they may be allocating differently to them because maybe they see it like, \"Oh, this company here, they're executing really well. Maybe this other company, they're not executing so well, or maybe they're-- it's kind of unclear about their strategy.\" Maybe a good example here might be the GameStop thing because people were sort of maybe a little disappointed with what, With the way, the GameStop management were speaking about, things in terms of Bitcoin and their strategy, whereas other companies have really been very consistently executing, I'm curious if you have any comment on that?" }, { "speaker": "stephan", "time": "40:42", "start": 2441.81, "text": "No, you know, that's a great example. One company kind of took one debt instrument and they just did it one time, and they don't have a high velocity of new incoming debt or incoming cash flow to continue to buy Bitcoin, and so they're not gonna be able to generate a yield. And so that's where this, this Bitcoin treasury comparison starts to get interesting. How committed is the management team to taking that debt or that fi- that fiat currency in the equity market and using the different tools they have available to bring that in, and what is your belief? If you m- do the math on that, how much, how much can they bring in, and how big the company is? GameStop's a bigger company, so they need to bring in a lot more capital at a lot higher velocity than, say, a million dollar company or a company that's only valued at five hundred thousand that's getting kind of that quick scale up, and they can start to touch those capital pools that are in high demand maybe very quickly, and so that, that's all a function of the size of the company, how much money they're bringing in, how quick," }, { "speaker": "stephan", "time": "41:42", "start": 2501.69, "text": "and of course, GameStop isn't committed to, to using that debt market to generate a Bitcoin yield, while Metaplanet MicroStrategy clearly are. They've articulated that in their vision, and they've been executing on that. Where I believe, MicroStrategy has a ninety percent twa-trailing twelve month, Bitcoin yield and MicroStrategy has close to a thousand percent, Bitcoin yield, which is all-obviously very high numbers." }, { "speaker": "blake_canfield", "time": "42:07", "start": 2526.56, "text": "You mean Metaplanet, yeah?" }, { "speaker": "stephan", "time": "42:08", "start": 2527.86, "text": "Sorry, yeah, Metaplanet, excuse me. Yeah, yeah, gotcha. Yeah, yeah. But, but" }, { "speaker": "blake_canfield", "time": "42:11", "start": 2531.02, "text": "again, it's, it's a new, it's relatively a new thing, right? Because, Metaplanet, I think only started their strategy like a year and two or three months ago exact date, but we're talking like March or April of twenty twenty-four, something like that, for Metaplanet. Now, and yes, they, they've come off a small base, but they've been really accelerating, and as you said, they ha-- they are in a very favorable jurisdiction, Japan, and so maybe that's a, a factor in their favor. And so I guess coming back to this kind of mNAV greater than one conversation, which, you know, it's- I guess that comes down to how do you justify it and, and as to, to what, to, to the point of what you were saying and what we're talking about here. It's like if they're really good at executing, if they're in a jurisdiction that is favorable for this, they can sustain this mNAV greater than one. You know, for good reason, because again, they are achieving BTC yield, right? That's the bottom line, isn't it?" }, { "speaker": "stephan", "time": "43:10", "start": 2589.63, "text": "Yeah, e-exactly. the, you know, if you do the math, and I've got written an article and it's pinned to my, Twitter thread or, account, Twitter account, and it graphs the Bitcoin yield for MetaPlanet, rough numbers, and then the mNAV around it. So if, if the company, going back to the kind of housing analogy or developer analogy that we used before, if the organization is doubling the amount of houses they have every sixty days or every, even every year, and you're waiting for the stock price to dip by five percent or ten percent to have that mNAV drop or multiple to net asset value, you're gonna be You're waiting a long time because in sixty days, they've-- let's say the mNAV is one, they've doubled their asset value in sixty days, therefore their stock is double what it was before, and you're still waiting for the mNAV to drop by five or ten percent, and you think that's an entry point as opposed to graphing out their Bitcoin asset accumulation over three years and seeing that they're doubling every sixty days, therefore if you're waiting... You know, sixty days, you've, you've missed out on-- You've missed out. Yeah. The gains if the mNAV is one, consisted in this whole algorithm. So it shows you that like, it's like, it needs to be greater than one. We can now, of course, dialogue about why it needs to be greater than one. In addition, these companies have tools to buy back their own shares, to, to do other kind of hedging strategies, so it always would stay in that one, one range. They can kind of, again, buy back their" }, { "speaker": "blake_canfield", "time": "44:43", "start": 2682.53, "text": "own shares I thought this would be a good, just to explain and get your reaction as well. it's like the equivalent of, you know, when you're trying to talk to a no coiner and they're saying, like, you know, like Dumburg, \"I'll buy some when it goes under five thousand.\" It's like, well, if you're waiting for that, you're gonna miss out on, you know, all of this upside because you were, you didn't understand correctly what was the phenomenon at play here. and so it, it can seem so crazy Too good to be true, but it's like the way I'm thinking about it is, there's, the world right now, it's, you know, if you think about this crisis BTC, the Jesse Myers kind of chart of like one thousand trillion financial assets, and Bitcoin is only two trillion. Like we're just so early, that's just why there's this massive opportunity right now. Of course, there are risks, it's not, it's not risk free, but there's a huge opportunity for this market to grow, and I think it's important that we, as Bitcoiners, try to Understand it." }, { "speaker": "stephan", "time": "45:42", "start": 2741.75, "text": "Right. And it is the, the same kind of framework where, people are, are hoping that they're gonna-- the price of Bitcoin's gonna drop back down to five thousand because they heard about it at three thousand, they missed the opportunity at five thousand, and now they're kind of like, \"Well, I hope it's gonna drop back down. \" You know, it's one hundred and ten thousand. They're not asking the question, \"Is what, is the value of this company, or sorry, of this company, of this, of Bitcoin in five to ten years on this current run rate?\" And the real risk is, is missing out on that, all that upside gain. And they haven't thought about it from that framework. They just want to get it at a lower rate than what they heard about it when they first heard about it. So they're, they're waiting for it to drop back down, which is an unhealthy perspective." }, { "speaker": "stephan", "time": "46:27", "start": 2787.44, "text": "If I don't get in now and it goes to a million, ten million, twenty million, and because we're on the sub one percent adoption curve, and it usually-- there's an inflection point around eight to ten percent Arguably, adoption is gonna go up and not down, so it's gonna that these numbers are gonna increase and not decrease once we get to that adoption and inflection curve. So that what, what I'm saying is the, the real risk is not being in this 'cause you're gonna miss out on it. And b-both that logic applies to both the Bitcoin Treasury companies and to Bitcoin." }, { "speaker": "blake_canfield", "time": "47:00", "start": 2820.4, "text": "Yeah, and to Bitcoin itself, right? I see. and so I think the other point that's probably good to clarify for people and, to hear your explanation on this is the interaction of mNAV and BTC yield, right? Because the common- Like, if you're not- Thinking about this, you might just sort of think, \"Oh, I need to buy it at this particular mNAV and then sell it at two x mNAV,\" like, but that's not quite right, because in this case, what we're talking about here is, did that company achieve BTC yield in the time that you were holding it? That's, that's bottom line, isn't it?" }, { "speaker": "stephan", "time": "47:36", "start": 2855.69, "text": "Right, that's the major factor is what yield they're generating, and because these companies are generating such a high Bitcoin yield, they're multiplying their stacks so quickly, going back to, to MetaPlanet, about every sixty days they're doubling their, their Bitcoin stack You're gonna be waiting a long time for it to get under that mNAV. First of all, it, it, markets are forward looking, so that mNAV is never gonna go negative. And so if you're waiting for that to-- you're playing off that mNAV amount, or instead of doing the math on a three hundred percent increase. Or five hundred percent increase for these Bitcoin treasury companies, that the value of their stock should be increasing by five hundred percent a year if the mNAV stays at one. In addition, you can have the mNAV also continue to play off that and increase that. And so That is, again, going back to the Bitcoin example, that, that's the unhealthy way to think about it. They're not thinking about the rate of growth and, and factoring that in and kind of, I don't want to say the risk models, but their purchase entry prices for the asset. And so this is the ultimate time in the market versus timing the market asset. You don't want to try to time this, you know, maybe in a week or two, but you want to plan to get in in a, in a short timeframe and not wait for some kind of long process." }, { "speaker": "blake_canfield", "time": "48:46", "start": 2926.1, "text": "I" }, { "speaker": "blake_canfield", "time": "48:49", "start": 2928.72, "text": "Those big numbers you were giving before, I would say that, to be fair though, that relates more to the smaller ones, right? Not to MicroStrategy, because obviously MicroStrategy's not gonna be hitting like three hundred percent BTC yield, but maybe a Metaplanet or some of the smaller ones, rel-- I say small, they're still, they're still big, but, relative to MicroStrategy, they're, they're smaller, right? So therefore, the, the yield possibility is greater, but maybe the risk is also higher too." }, { "speaker": "stephan", "time": "49:16", "start": 2955.78, "text": "Well, and we should dive into the risks as well, and kind of go through that. But I think it's, it's, it's hard to say the size, again, that the, the velocity and the size of the company matter, and my-- the velocity of the income coming in or the debt coming in, the, their ability to, to use the tools that they have to put that into Bitcoin to generate their yield matters. So right now, I'd argue that, MicroStrategy kind of hit a little bit of a wall. They're trying to generate these fixed income products Our fixed income market, that debt market, but let's say that they offered them half the, the returns of Bitcoin, let's just say that's thirty percent, they could start to generate extremely high demand for the fixed income product tomorrow. So why that's important is because let's say that they did that and the three hundred and fifty trillion dollars of that that's starving for yield goes, hey, that's ten times higher than I'm currently getting, I'll give it to you all now, and, and that's the end of the game. So like- That's an extreme obvious example, but it's an example that is possible, but of course, comes back to like shows the importance of the velocity of that money coming in and how they structure these products. So MicroStrategy could still have a higher yield than some of these other companies, it just depends on how quickly they can bring in that fixed income debt from one of the largest markets in the world. And of course, the, the size of the company matters. If you can, if you're a smaller company, a million dollar company And you can offer fixed income products to those three hundred and fifty trillion dollars, like that's the, that's the perfect scenario, right? But, right. But I guess the" }, { "speaker": "blake_canfield", "time": "50:54", "start": 3054.17, "text": "argument would be micro strategy or strategies ones are eas- more easily able to get a credit rating and because of their size, they're more investable for some of these larger pools of capital. so maybe, yeah, the argument would be, look, mSTR and their associated, instruments are- Kind of playing at a different level, and so they can access these bigger pools of capital, but also they are so much bigger. So it's just, it's just a lot harder to move, you know, to sort of dramatically get these kind of crazy, you know, metaplanet level numbers because they're already so big. that's how I'm thinking about it. But let's, let's go to the risk question as well because we don't want to just be totally, you know, rah-rah, it's pan-- you know, there's no risks," }, { "speaker": "blake_canfield", "time": "51:46", "start": 3105.57, "text": "let's talk about the risks. What can go wrong here with these treasury companies?" }, { "speaker": "stephan", "time": "51:50", "start": 3110.27, "text": "Right, that's a great question. So I think the first thing is we have to assess is like the, the governance and how How, how good a company is that? This isn't an FTX. They are public, these are publicly traded companies on their respective stock exchanges, they've got governance models, they've got, they've got, Auditors, so you, you really have to kind of at least not associate the FTX and the GPTCs with, with these companies and kind of pull back layer, which I guess is what we're doing now, is to understand those particular risks. So each one of these companies has different risk 'cause they're in different jurisdictions, right? There's obviously government risk if the governments try to, to take over the companies, there's a risk there. So they do add a, an additional layer of risk But the thinking about how the system can kind of break down, so to speak, for both Metaplanet MicroStrategy, going back to the real estate analogy MicroStrategy has about twenty percent debt of their assets, and then MicroStrategy has about ten percent debt of their Bitcoin assets. So going back to the, the developer This developer only has ten percent debt, is increasing his base of houses by, you know, five to ten x each year. And then in the worst case scenario, if we have a huge drawdown, he might have to sell a few of his houses to pay off that ten percent of, of his debt, or maybe ten percent of his stack to pay off that debt. And that's in a worst case scenario. and going back to Mic-MicroStrategy, they have, debt instruments or contracts that are five, five years long, so a, a full cycle, which is a pretty good amount of time. So there's- Even if the Bitcoin pro-price were to drop to, let's say, five thousand, MicroStrategy can weather that storm for a very long time before even having to sell the Bitcoin. That sounds kinda risky, you know, one wants to sell their Bitcoin. But you have to keep in mind that, these companies requiring so much Bitcoin that even if they have to sell ten percent of their stack in two years, you're still gonna be up by some form or function of, of Bitcoin, your Bitcoin stack. So MetaPlanet's doubling their, their Bitcoin every sixty days, you know, if they have to sell ten percent of their stack in two years, you're still up dramatically in that scenario, and the engine just stopped or something. Styled in terms of this flywheel, it didn't explode, if that makes sense." }, { "speaker": "blake_canfield", "time": "54:20", "start": 3259.76, "text": "The lead sponsor of this show is Bold, the best place to buy, sell, and save Bitcoin. For listeners in the US, Bold lets you secure your financial future with complete peace of mind by integrating a low fee Bitcoin only brokerage with next gen multisig vaults. With Bold, you can smash buy Bitcoin or set a DCA plan for only zero point nine nine percent fees and seamlessly deposit the Bitcoin direct to your Bold Vault. The Bold Vault is a two or three collaborative multisig Where you hold two keys and bold holds one as a redundant backup, protecting against loss or theft. You can use Trezor, Ledger or cold card hardware wallets to spin up a bold vault in just a few minutes, and the bold vault is the only collaborative custody vault available with zero monthly fees. They're also offering zero fees on your first ten thousand dollars of Bitcoin buys and twenty five dollars of free Bitcoin when you buy a hundred dollars of Bitcoin or more. Try bold today and upgrade your stacking experience over at getbold dot io. And now back to To the show. Okay, yeah. So the risk might be that they, let's say, it's a bear market and they aren't able to accumulate at the same pace in that bear market, and I guess that's maybe one thing where out of all these treasury companies, it's only Strategy who was around in the la- who was doing this in the last bear cycle. I believe they only ever had to sell one time, and that was like a tax-loss harvesting thing where they kind of sold and rebought and something like this, but other than that, they've not sold. So I For people. of course, there is that debate also about if the-- if these companies have their mNAV go below one, would it actually be to their benefit to sell some Bitcoin and buy shares to increase the BPS? So the argument there might be, \"Oh, well, there's a contradiction between this idea of never sell your Bitcoin and on the other hand, this idea of always increase BPS.\" Maybe in a bear market with mNAV great-- lower than one, there's a potential, but again, it comes back to what other ways the different companies are gonna manage that? Are some of them gonna try to do like fiat debt to buy back company shares to raise VPS that way? Like, there's just different ways that those scenarios could play out, but I guess the big one most people will be thinking about is the typical, you know, FTX-style sort of cascading lever-- cascading liquidations, right? That if, you know- For some reason, you know, maybe not the well-known, the big ones, but maybe lesser ones or maybe ones that haven't been managed so well, ones that were too aggressively levered, maybe they're the ones at risk. What do you think?" }, { "speaker": "stephan", "time": "56:49", "start": 3409.11, "text": "I, we'd have to get specific, right? Like, I mean, I think that's the, the thinking that a lot of people have when they're entering Bitcoin, they're like, \"Well, what if this happens? What if this happens?\" Like, let's play out that scenario. There's no companies that I'm really aware of that aren't taking on too much leverage going back to the yield versus their leverage. If they're doubling their Bitcoin stack every sixty days, or doubling it every year, and they only have ten, twenty percent leverage, that's not too risky for me It's inflating away and putting it in an asset that's growing and is scarce, and that's a very simple, very basic business model that I can get on board with. And so we have to, we'd have to, you know, address each individual new Bitcoin treasury company, but you'd hope and you could argue that these Bitcoin treasury companies get smarter with each generation, but you could also argue that they get a little bit more risky 'cause they're trying to out, out, out-compete each other for, for attention and desire and whatnot. So the, What I'm talking about, Metaplanet and MicroStrategy just have that ten percent. And so we'd have to get into specifics. If there, there's a company that's doing two hundred percent and they're marked to market, you know, and, and they're, they're, they don't have as much collateral, they're not collateralized, then, yeah, you could, you can argue, and then you'd have to just do the math on all those dynamics and, and what type of yield they're generating compared to the opportunity cost of some of these other Bitcoin treasury companies" }, { "speaker": "stephan", "time": "58:19", "start": 3498.51, "text": "It's extremely high reward, and we know where the yield's coming from. So compared to where FTX and some of these token, crypto, token systems were, that were supposedly generating le- yield, it was really just a Ponzi scheme. This, on the other hand, we know exactly where the yield is coming from. We're taking out fiat debt that's inflating away and we're putting it into Bitcoin that's appreciating. And if, you know, that's a very simple thing, I think most Bitcoiners can get their, their heads around. And Jesse Myers, Some of their articles around how to use fiat debt to put into Bitcoin and the kind of math behind that." }, { "speaker": "blake_canfield", "time": "58:55", "start": 3535.16, "text": "Yeah, I see. And, is there anything on, like, a dilution risk? Like, is there a way that, you know, the common shareholders are just gonna get diluted in a way that's not accretive? Or does that just come down to professional management and just making sure that you are doing it in a way that's accretive?" }, { "speaker": "stephan", "time": "59:14", "start": 3553.79, "text": "Yeah, I think it doesn't come down to professional management. The nice thing about this model, it's a simple model. If it's not accretive, you can do the math, it's almost basic algebra, and if it's not accretive to your shareholders, you don't do it. It's something that, if you put me in charge of MicroStrategy, I can do the calculation, say, \"Hey, if this debt's not coming on and accretive to our shareholders in some capacity, then we're not gonna do it.\" Now, there's al-obviously the opportunity" }, { "speaker": "stephan", "time": "59:44", "start": 3583.67, "text": "Increase Bitcoin per share for our shareholders over time, and if it's not accretive to that, we're not gonna do it. Everyone of these management teams understands the game, especially Michael Saylor. Acquire more Bitcoin, the only thing better than Bitcoin is more Bitcoin, and so that's on what he's, he's going to do, and he knows there's a gold rush for the next ten years to take this debt, fiat debt, the three hundred and fifty trillion, and put it into Bitcoin through his company. I see." }, { "speaker": "blake_canfield", "time": "01:00:09", "start": 3609.04, "text": "And what about, interest coverage, so when, as an example, the preferred shares of, mSTR. So I think they've got, was it Strife and Strike? I'm not sure if Strife is, yeah, anyway, they've got those different products. I'm not Totally, up on exact specifics of those, but they, they pay out, I think it's eight percent or ten percent, right? And so, what about that? What do you-- What are your thoughts there? Would that- could that come back to be difficult for mSTR during a bear cycle or something like this?" }, { "speaker": "stephan", "time": "01:00:45", "start": 3645.18, "text": "I think it's going back to that example of like, okay, let's say if we had to sell ten percent of our Bitcoin to pay off this debt That's a total, that's not ideal, and you wouldn't not be happy with Michael Saylor or MetaPlan, especially as a Bitcoiner, you'd be like, \"How'd you mess this up? Took a little bit too much risk.\" But again, it's not the worst case scenario, because you're, you're doubling, tripling your Bitcoin stack depending on what happens, but" }, { "speaker": "blake_canfield", "time": "01:01:07", "start": 3667.2, "text": "just not as much is what you, is what you're saying." }, { "speaker": "stephan", "time": "01:01:09", "start": 3669.98, "text": "Right. And, you know, that doesn't sound like a risk to me, it sounds like a plan. And, you know Even if that was part of the plan, I personally would be okay with that because my Bitcoin has increased per share over that time. And so as long as my Bitcoin is growing, my stack is growing, I'm excited about that, right? And so even, even saying the worst case scenario is a planned scenario, I personally am okay with that because I'm still increasing my Bitcoin per share, the amount of Bitcoin that I own." }, { "speaker": "blake_canfield", "time": "01:01:44", "start": 3704.08, "text": "Yeah, okay. So I guess assessing this and trying to zoom out and trying to be objective about it, what are the biggest risks here? Is it just like state capture, state seizure risk, like that the government just seizes the coins? Like, what do you see as the higher, the, the biggest risks here? that's" }, { "speaker": "stephan", "time": "01:02:01", "start": 3721.18, "text": "tough. the state capture one seems to resonate with me, where this could be a honeypot for different geographical locations, right? So some of these companies are starting up in, in China or Hong Kong, you know, I'm sure there's gonna be ones popping up in Russia, right? That could be a risk, and you have to assess that risk and that probability, especially compared to the yield that you're gonna be getting for the Bitcoin, treasury company. So, you have to assess that risk, but that would probably- Probably the number one risk because, yeah, I'll, I'll leave it there." }, { "speaker": "blake_canfield", "time": "01:02:33", "start": 3753.74, "text": "Yeah, fair enough. and so from a, let's say from a personal perspective, right? Like from you or me or just everyday individuals, everyday hodlers who wanna, who wanna do this kind of play. How do you think about this idea of taking profit into Bitcoin, right? Like where Bitcoin maxes, Bitcoin, one Bitcoin is one Bitcoin. W- do you, would you see this as like you would periodically put some into a treasury company and then try to- Take some back into your, you know, like sell some, turn it into Bitcoin, withdraw to your multisig or like how, how are you thinking about this idea of taking profits?" }, { "speaker": "stephan", "time": "01:03:11", "start": 3791.02, "text": "Yeah, I personally am not thinking about taking profits. There's a stack that I have that's staying in these Bitcoin treasury companies, and we'll stay in there until fiat's gone, so until hyperbitcoinization is, is here, and then, you know, I might take that out. But even then, I think there's a lot of things, you can do, these companies can do, become an insurance company, you know, become an insurance company is a, is a great example. So I don't plan on, on, on taking any of that money out, For that opportunity cost, besides maybe some living expenses and, you know, buying a Ferrari or something like that, I'm just kidding. but that, that's how I think about it. I think this scales to until fiat's gone, at least the fiat debt market is gone. So I plan to be in these businesses for a very long time. and then in terms of, These models and the opportunity, how do you think about the opportunity of allocation? There's something called the Kelly criterion. Are you familiar with that? Yeah, yeah. Yeah." }, { "speaker": "blake_canfield", "time": "01:04:08", "start": 3848.57, "text": "It's known as, ga-- it's a way of, there's two forms, as I understand, there's one that's about gamblers avoiding ruin, and there's another form that's used for investments. But the idea is like, how much of your portfolio should you kind of place, y- kind of like, where should you place, how much of a percent should you place bets, kind" }, { "speaker": "stephan", "time": "01:04:29", "start": 3869.44, "text": "of thing The risk of failure or, or losing the money or, or the drawdown, as well as the upside potential, as well as how many opportunities you're gonna get, and the opportunities is an interesting one because I don't think there's gonna be ever a better asymmetric upside than these two opportunities. So you have to fit Bitcoin and then Bitcoin Treasury companies. so when you do the math in your own assessment of the risk, let's say of a Bitcoin Treasury company, and then the upside of the Bitcoin Treasury company, then you can do the portfolio allocation That makes the most sense based off of your needs. So you mentioned a risk of ruin, you definitely wanna think about a scenario of risk of ruin. You don't wanna put all your eggs in one basket in this sense because there's a potential risk of ruin, even if it's a very, very, very, very small percentage, you don't wanna do that because you don't wanna end up You know, ruined. and so the model shows you how you can, put different, different assets and allocate them based off of the probability of them failing and then succeeding and how many bets you're gonna get. So the number of bets is an important one, 'cause I don't think we're gonna get a lot of, great bets here. The average investor, the average retail investor isn't gonna see much better opportunity than these two opportunities. Maybe if you're a venture capitalist and you're getting into the next Uber, the next Google, you might play the cards a little bit differently, but most retail investors, these are gonna be the best two opportunities, asymmetric opportunities." }, { "speaker": "blake_canfield", "time": "01:05:58", "start": 3958.95, "text": "I see." }, { "speaker": "stephan", "time": "01:05:59", "start": 3959.61, "text": "And so," }, { "speaker": "blake_canfield", "time": "01:06:02", "start": 3962.09, "text": "I guess the other element of this, it-- so, I mean, none of us are, you know, tax or legal advisors here, but as an example or financial advisors, but as an example, people may decide their allocation of like, okay, I'm gonna keep, you know, maybe most of my stuff is in Bitcoin cold storage, and then like a small percent goes into- One of these treasury companies and another percent into another treasury company, and that's kind of, that's how I'm thinking about it. Or, I, I, and the other, I guess the other thing to layer on as well is tax considerations, right? Because again, if you're, d-depending on, again, d-depending on the jurisdiction, depending on capital gains taxes Trying to flip around between these can cause, more tax inefficiency because of capital gains taxes. So how are you thinking about that capital gains issue?" }, { "speaker": "stephan", "time": "01:06:50", "start": 4010.44, "text": "Well, the capital gains you have to do the math on yourself doing each one of these trades in the upside opportunity, which adds another level of drag. But there's a lot of money tied up in, tax deferred investment accounts, In the United States and around the world. So that, that seems like an obvious way to get into these companies quickly and effectively, and you-- because you can always get out, for some reason, if you change your mind, this sounds like a great idea, you put some money in, oh, wait a minute, we're wrong, you, you know, you do some more analysis, you can pull it out, on, you know, without a tax issue. So, yeah, I, I think-- I forget your first part of your question, but that's- Right. Yeah, I was just" }, { "speaker": "blake_canfield", "time": "01:07:29", "start": 4049.57, "text": "talking a bit about like, kind of allocation and how you're thinking about it. And I guess the other way to think about it is, is it might be, you might just be stacking and just thinking, okay, well, I've got some fiat income, I've already got some coins that are in my cold storage, and maybe now with some new fiat income, I'm gonna allocate some of that into Bitcoin treasury companies because I believe they will outperform Bitcoin on" }, { "speaker": "blake_canfield", "time": "01:07:54", "start": 4074.63, "text": "You do it, or as you said, in these retirement accounts and pension accounts and things like this where people can, otherwise stuck in underperforming assets, well then hey, yeah, go for Bitcoin and Bitcoin equities, and that can help you outperform this kind of underperforming indexes and, fiat bonds" }, { "speaker": "stephan", "time": "01:08:14", "start": 4094.92, "text": "Yeah, and I, I think, you know, one of the things that, you know, if, if I, I've always thought about is like the risk, depending on your age, but let's say you're twenty-five years old and you've got thirty years of working life and you're making two hundred thousand dollars a year, all that future cash flow denominated for you is in fiat currencies, right? And so there's a huge risk that all, a lot of that money will be worthless, and it depends on kind of what job you have, if you're in a government job" }, { "speaker": "stephan", "time": "01:08:44", "start": 4124.56, "text": "And you don't have the ability to negotiate that, then you have a real fiat currency risk, for the next thirty years, right? Especially if you're starting your career, you've got, you're making two hundred thousand dollars a year, that's, two million every ten years, and that's inflating away. And let's say that you only had ten thousand dollars, is it risky to put it all into, to Bitcoin? But if you-- I would argue no, even though it's a hundred percent of your portfolio, especially when you compare it to the cash flows of your life in terms of income. So I think that needs to be factored in both, that helps you think about how to invest in Bitcoin, but also Bitcoin treasury companies, especially when you're on the younger end, and when you're on the, you're older end, it kinda inverts a little bit, but you can still apply that model because you're gonna be getting social security and pensions and things of that nature." }, { "speaker": "blake_canfield", "time": "01:09:35", "start": 4175.04, "text": "Yeah. And I think maybe, and also if you're older, it might make more sense just to look at some of these things like Strife and Stride and Stri- you know, some of those as well, because maybe that's where you actually, you are more risk-averse at that point, and you want-- you're, you're okay with getting a bit less return, but you want it to be a bit le- a bit more safe. I guess the other thing is maybe people might feel like, \"Hey, these things are all a bit new, so maybe" }, { "speaker": "blake_canfield", "time": "01:10:05", "start": 4205.38, "text": "Before you're ready to sort of commit to them, but to your point, it's early now and the opportunity is also the asymmetric opportunity is now also. So these are things everybody has to think for themselves, of course, listeners. I'm, not dictating anything to you, listeners. You are big boys and big girls. You have to make your own decisions. but, Yeah, I think those are some of the key points. Of course, I wanna get your comment on this. We're seeing a ton of new, you know, companies coming out and doing these announcements. Of course, we're still early, but what do you make of this? Like, ha- is it, you know, how early are we? What, what do you make of all these new companies coming out and basically saying, \"Yeah, we're doing this too. We're doing the Bitcoin Treasury company playbook, or we're buying Bitcoin.\"" }, { "speaker": "stephan", "time": "01:10:51", "start": 4251.87, "text": "yeah, I mean, I think, I think they're all trying to capitalize on this very simple business model that Michael Saylor is, is put out there, right? You're taking the fiat debt and you're putting it into Bitcoin, you're taking the loan out, you're putting it into Bitcoin, an asset that's appreciating at sixty percent a year, and you're, and you're leveraging the different regional capital pools to do that. And I think any company would be silly not to do it, right? it'd be silly not to put their cash flows into Bitcoin, and So, yeah, and, and because the capital pools are so large and so deep, that we're in the first, you know, at bat of this game, so to speak, like it's, it's, you know, if we haven't touched the three hundred and fifty trillion, which we haven't, there's still opportunity. And even if there's just a one trillion dollars left, you know, say we're ninety percent through this process, you still got a trillion dollars to capitalize to bring into Bitcoin. That's a lot of money, that's a ton of money to bring in These companies are, are, I think Mike O'Seiler in particular is really understanding that, and that's why he's developing the different products he has, and he's really pushing for the regulators to approve, or the, the, The credit agencies to kind of approve his different instruments so he can, appeal to these, institutions and, and bring that yield in. So I think it makes a ton of sense, and it's just about their ability-- I don't think you have to think about it as like a competitive moat, in the short term, it's just their ability to acquire more Bitcoin and have that Bitcoin yield on a risk-adjusted basis. Obviously, you have to do a little bit of due diligence and make sure they're not doing anything crazy, but, and Factor than the, the actual, the actual Bitcoin yield. And one of the things I like about MetaPlanet is they just increased their guidance, for their Bitcoin yield to about four hundred percent for the next two years, their CEO did that. And so, you know, that, that gives me confidence to start to see kind of forward guidance from some of these executives of what they expect to, to generate in terms of yield, because as an individual investor, obviously, it's, it's a little complicated, and the proof is in the pudding in terms of what they've been able Be able to continue to generate, to be forward-looking in terms of the, the cash flows." }, { "speaker": "blake_canfield", "time": "01:13:08", "start": 4388.01, "text": "Yeah." }, { "speaker": "stephan", "time": "01:13:08", "start": 4388.69, "text": "And" }, { "speaker": "blake_canfield", "time": "01:13:08", "start": 4388.97, "text": "I think the other comment that I'm, at least, I'm seeing this, how I'm seeing this, and I wanna get your reaction as well, but the way I'm think-- I'm thinking about it is like, this is like a new top of funnel, because there'll be new people who come in, they come in, they buy something on their app, like the stock ticker of one of these treasury companies, and then they might start learning about Bitcoin and sort of coming" }, { "speaker": "blake_canfield", "time": "01:13:32", "start": 4412.31, "text": "Supports the Bitcoin network effect as opposed to altcoins and things like this. So that's certainly interesting to me, yeah. But I guess, do you have any, reactions on that or any closing thoughts for listeners?" }, { "speaker": "stephan", "time": "01:13:46", "start": 4426.45, "text": "Yeah, two thoughts on that. One, it's interesting to look at the, the-- back to the analogy of the dam and these companies being the spigot to, to break into the dam. And these capital pools, these fixed income capital pools are gonna be very steady. and so I think that'll mute some of the, the cycle stuff that we had before, because before you couldn't do a discounted cash flow analysis on these Bitcoin treasury companies, they weren't accessing the fixed income market. So the cycles were very raw, where it'd just be a hype cycle because some- Heard about it, the network effect starts going, it starts getting in the media, people start dump-dumping money in, and then all of a sudden, the halving kind of takes effect and, and, or the supply equalizes at a new, a new amount, and you kind of have an eighty percent drawdown. I think it's interesting to think about the game theory about, imagine just a huge capital pool just coming into Bitcoin through these treasury companies now, and how that might change the dynamic. so I think that's an interesting thing to think about, A little bit. But then additionally, you know, one of the things that excites me about these Bitcoin treasury companies, kind of going back to our analogy at the beginning, is like, it's cool to be a huddle of last resort and own it in cold storage, but there's something that's really cool to-- for me to be on the forefront of these, these ideas and thoughts that are going into these fiat systems and bringing capital from them into Bitcoin. It's a proactive process. We're going out there and, and making that change and, and creating financial product. To be able to do that, and that to me is kind of really cool, and is, is kind of the ethos of, of what I'm about is being able to, to kind of create that hyperbitcoinization in a little bit more proactive way versus more of a reactive way as a ho-hodler of last resort. And I think that's something to, to keep in mind, because, you know, sometimes I make the analogy to myself that, you know, you think about all the generations that had to fight for freedom, in the trenches, pick a side, go to And Bitcoin is the most freedom technology out there, and we're not asking anyone to risk their lives, we're just asking them to risk their capital, take their bank account, put it into Bitcoin, and, and have it there. And to me, that's exciting, and it, it kind of- I feel like I have a sense of obligation to evaluate this, to try to make Bitcoin happen faster, if that makes sense, where these people tried to make the world a better place through, through fighting, and Bitcoin is a technology that will help create peace and freedom, and if we can Help structure these products, bring these products into market, it brings, Bitcoin into the ecosystem or into the world at a, at a quicker pace, and that's something that like morally excites me and, and, and kind of gets my, my passion going" }, { "speaker": "blake_canfield", "time": "01:16:31", "start": 4591.71, "text": "Excellent." }, { "speaker": "stephan", "time": "01:16:32", "start": 4592.37, "text": "Yeah, I think" }, { "speaker": "blake_canfield", "time": "01:16:32", "start": 4592.89, "text": "it's, I think it's a whole new phenomenon. I think we have to try to understand it, and I, I'm, I'm bullish on this category, personally, but, we'll just have to see how things go and how things, develop. but, I guess that's a good spot to leave it there. We've done a bit of an overview for listeners. so, you know, I guess, you know, the key takeaway really is just to underst-- is to Yield and understand what are some of the risks of this, what are some of the benefits of this, and, you know, make your decision, based on that. so before we let you go, Blake, p-people, for people who wanna follow you online, where's the best place?" }, { "speaker": "stephan", "time": "01:17:15", "start": 4635.33, "text": "Yeah, they can follow me on Twitter X. my Twitter handle is logical bitcoin, the letter R, so logical bitcoin R, on, on that. And I have some articles pinned to, Pin to my profile that you can read that kind of talk about this a little bit further, and I'm always, tweeting about it, so that's the best place to, to follow me." }, { "speaker": "blake_canfield", "time": "01:17:35", "start": 4655.61, "text": "Fantastic. Well, Blake, it was great to chat with you, and, listeners, make sure you share this episode if you found it interesting, informative, and go and follow Blake. All the links will be in the show notes. Thank you. Thanks again, Stefan." } ] }