{ "episodeId": "SLP736", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.08, "text": "If that home equity that is most of it just sitting idle today had been getting Bitcoin exposure, well, Bitcoin's compound annual growth rate over those same five, ten, fifteen year periods was thirteen percent, seventy-one percent, and one hundred and sixty percent. So it's very obvious to the already orange pilled real estate owner that they're sitting on a massive amount of their net worth that isn't being put to work in the asset that they believe is gonna experience more growth and, and ultimately be the Better store of value long term." }, { "speaker": "stephan_livera", "time": "00:32", "start": 31.9, "text": "Hi everyone, and welcome back to Stephan Livera podcast. I am, coming to you on a temporary setup because I'm traveling right now, so that's why it's a slightly different setup for me, but joining me on the show today are Sanjay and Chase from Sovana, which I thought was an interesting, new, product that, the guys are coming out with or has been out, and they're now, you know, kind of talking about it. I had the chance to meet Sanjay, actually through" }, { "speaker": "stephan_livera", "time": "01:00", "start": 60.04, "text": "So that was cool, and of course, I've known Chase as well for a little bit around the traps, you know, Bitcoin conferences here and there, but, yeah, welcome to the show, guys. Thanks for having us. So I thought it was interesting, you know, the way Vijay introduced us actually. Sanjay, he, he was telling me you were the guy who orange-pilled him. So I think, listeners would love to hear that because Vijay was actually guest number two on my podcast. So, I think" }, { "speaker": "guest_2", "time": "01:29", "start": 88.66, "text": "it'd Absolutely. I get, I get partial credit for orange-pilling Vijay, but the other part of the credit goes to, the one who orange-pilled me. But this goes back to 2000. So I met Vijay, I should start there real quick. I met Vijay at Google, we had both joined what at the time was a- Almost a small startup, at most a medium-sized startup. And Vijay, I give credit for bringing me into libertarianism And so he sort of started that, and then I was a goldbug already, and when I discovered Bitcoin, we both discovered Bitcoin actually through our mutual friend Ben, and I somehow it just clicked with me instantly, and so I continued to we both lived in Seattle at the time, we were both working on a photo sharing, product that didn't really go anywhere. But the whole time that we were working on it, I was like, \"You should look more into Bitcoin, this thing's amazing, you'd love it. We should pivot, we should pivot our, at the time, startup to a Bitcoin startup.\" And, we never quite did the pivot, but, I, I was eventually able to bring VJ into Bitcoin." }, { "speaker": "stephan_livera", "time": "02:50", "start": 170.43, "text": "Fantastic. And so I, I know you've been around, you know, for a while, but I guess more recently you've just come out with this product of Sovana or this service, and, I thought it'd be, yeah, let's start with why. Like, what is the problem that you're going after with Sovana? And also, why now?" }, { "speaker": "guest_2", "time": "03:08", "start": 187.67, "text": "Yeah, absolutely. So my, my goal was basically To bring as many people into Bitcoin and enable as many people to make an allocation to Bitcoin as possible. That's where my passion within Bitcoin lies. And so The, the reason we developed Sovana the way we did is there's a lot of wealth in property equity, right? It's kind of like the old Willie Sutton quote, \"Why'd you rob banks? 'Cause that's where the money is.\" The, the reason we went after home equity is 'cause that's where the wealth is. Right? If you look at a typical, we're focused on the United States right now, if you look at the wealth of a typical, American property owner, and, you know, fifty, sixty plus percent of Americans own property, a lot of their wealth is in real estate. And so if we're trying to get- Americans to make a 1.35% allocation to Bitcoin. Real estate wealth is a very ripe target, and so that's how we chose to focus on real estate." }, { "speaker": "stephan", "time": "04:16", "start": 255.77, "text": "Yeah, let me build on that real quickly. So the market of trapped equity just in the US alone is roughly thirty-five trillion. for those in Bitcoin, we know the market cap of Bitcoin is, you know, hovering between one point five trillion ish today. And so US residential real estate over the last five years had an eight percent compound annual growth rate, over the last ten years, a roughly seven percent compound annual growth rate, and over the last fifteen years, a- That is six percent compound annual growth rate. And so if that home equity, that is most of it just sitting idle today, had been getting Bitcoin exposure, well, Bitcoin's compound annual growth rate over those same five, ten, fifteen year periods was thirteen percent, seventy-one percent, and one hundred and sixty percent. So it's very obvious to the already orange pilled real estate owner that they're sitting on a massive amount of their net worth that isn't being put to work in the asset that they believe I believe is gonna experience more growth and, and ultimately be the better store of value long term." }, { "speaker": "stephan_livera", "time": "05:18", "start": 318.25, "text": "And then the second part, why now?" }, { "speaker": "guest_2", "time": "05:20", "start": 319.98, "text": "Just one last thing, to, to the previous question, the, the idea of, I, I should, I should start with for the listeners just a very high level overview of what Sovana does. it enables A property owner to divert some of their real estate equity into Bitcoin. That is at a high level what Sovana does, just to, just to provide some context to, to what we just said." }, { "speaker": "stephan_livera", "time": "05:48", "start": 347.5, "text": "Right. Just because, I guess, in the, the way most people, if you're like a Bitcoiner who's following the industry, most of the things and products you would have heard of in this In this kind of area, you might have heard of Let In or Unchained Capital's loans and, Strike and Hoddle Hoddle Debuffy and these kinds of things, where the idea is you're putting up Bitcoin and the Bitcoin is the collateral and you're borrowing fiat. In this case, it's like you're putting up your house as the collateral and you're buying more Bitcoin and receiving some of the percentage of the upside on a five-year term. can you just explain, sort of in very quick and simple terms, like what is the" }, { "speaker": "guest_2", "time": "06:18", "start": 378.44, "text": "product, the main product? At a very high level, and actually let's, let's get into some detail. So like I said, Sovana enables property owners to tap into their real estate equity to invest in Bitcoin, but in a way, and this is a superpower of ours, in a way that requires no monthly payments and no money upfront. So you're sitting on fifty, sixty percent of your net worth in real estate, and you're thinking, \"How do I allocate a little bit more of my net worth to Bitcoin?\" We enable you to divert some of that real estate equity into Bitcoin. And the way we do it is as follows. Based on how much equity you have in your property, we qualify you for some maximum investment size. We can get into the math as to how we- Calculate that maximum investment size a bit later. But let's say, by way of example, a property owner qualifies for a hundred thousand dollar investment. The first step is that Sovana, using our capital, and I'll put a little asterisk on our, but from the customer's perspective, Sovana uses our capital to buy a hundred thousand dollars worth of Bitcoin. We buy that Bitcoin and we set it aside in a dedicated and segregated account for this one property, for this one deal, and we let the Bitcoin sit there It sits there for the entire duration of the term, and the term maximum length is five years. However, the property owner can end that early at any point they want. But the maximum is five years. There's no penalty though to exit early. Whenever the customer exits the deal, whether that's five years later or earlier The way we settle is the same, and that's as follows. We take a look at the final value of that Bitcoin. It started at a hundred K. If the final value has increased, we split the profit with the customer. So let's say it started at a hundred and it ends at one fifty, we would write a check for half that profit. The, the split, the default split is fifty fifty. So we would write a check for half that, a twenty-five K, exactly. Okay, so that's a happy scenario, sounds too good to be true, customer gets a twenty-five K check for putting no money into a deal. The downside scenario is if the value of the Bitcoin at the end of the term has declined, the customer has to make us whole That's right. The customer has to write us a check to make us whole if the final value is lower. So let's say the Bitcoin started at 100k, ends at 80k, the customer has to write us a check for 20k. And it's the real estate equity that secures that obligation. So at the start, we-- by the way, we call it a BIP, it's a play, but BIP also stands for Bitcoin Investment Partnership That is the product name for the product that we offer. So in a nutshell, the Sovana BIP offers a property owner half of the upside In exchange for covering all of the downside on a Bitcoin investment that you put no money into. I see." }, { "speaker": "stephan_livera", "time": "09:48", "start": 588.45, "text": "I guess obvious questions that, you know, Bitcoiners will have, where's the Bitcoin custody?" }, { "speaker": "guest_2", "time": "09:53", "start": 593.21, "text": "Absolutely. So To start, and by the way, Stefan, there's gonna be a lot of parts of our product that we want to eventually expand on. but we're starting in a certain way just to sort of walk before you run, right? And, and I started with, this is a product for American homers, we wanna eventually expand internationally. So in that same spirit, we are starting with the Bitcoin, ETF or a Bitcoin ETF, iBit. And we are custodying it at Schwab. Now, as a Bitcoiner myself, you know, I would love to hold physical Bitcoin. the reason we're-- the reason we chose to go with iBit is that We have, capital partners side of the equation too, which we'll get into a little bit later, and actually ties into your \"why now\" question. We have a capital partners side of the equation, and our capital partners, we believe, are much more comfortable with an instrument like an ETF and a custodian like a Schwab that sort of is more familiar, more native to them." }, { "speaker": "stephan_livera", "time": "10:57", "start": 657.18, "text": "Right. So in simple terms, TradFi is kind of imposing more conditions because that's just, that's where the market is for now. In- And kind of, I'm oversimplifying a little bit, but that's, that's kind of where the market is at for now. Let's talk about that, because I guess maybe it's a bit more sensitive right now because, hey, as we record this, Bitcoin price is seventy-eight K, and of course, you know, everyone remembers it's like a month or two, a few months ago, we hit a, maybe it was the bottom at sixty K, who knows? And of course, the cherry pickers, the Peter Shifts of the world will come out and say, \"Hey, Bitcoin was sixty nine K in twenty twenty one, and look here in, call it February twenty twenty six, you're down at sixty K. So, you know, you Bitcoin hodlers, you got wrecked, you got screwed.\" Now, of course, you know, we are all Bitcoin Maxies here, we all believe in Bitcoin, but is that not a risk people have to consider going forward in five years?" }, { "speaker": "stephan", "time": "11:47", "start": 706.71, "text": "I'll, I'll jump in there. So from a environment" }, { "speaker": "stephan", "time": "11:54", "start": 714.24, "text": "Prices are as high as ever. The interest rates to try to refinance or he-lock the, the equity in those homes is still quite high. We haven't seen interest rates drop as maybe we might expect in the coming year or two. And Bitcoin is very soft in terms of price, so when you convert your home equity through Sovana's product into Bitcoin today, you know, you can actually capture a lot more Bitcoin upside than you might if we were doing it at a hundred and twenty-five K Bitcoin price. So why the five year term? So actually, originally when Sanjay and Vijay an- announced the Sovana product at Bitcoin twenty five in Vegas, they announced a ten year term, but since Sanjay mentioned we do have to also appease the folks that are bringing the money to the table to fund these positions, our capital partners, our capital partners were much more favorable with a five year lockup because in their eyes, it really is a five year lockup. The real estate owner can end early, but there's also no monthly payments, so there's very little incentive for them to end early if they believe Bitcoin is just bound to go up forever, as most of our customers do. And so our capital partners are committing to a five-year lockup, and that is really the sweet spot where we felt, okay, capital will lock up for five years. Five years, traditionally in Bitcoin, leaves you at least flat or up, when you cherry-pick dates, as you're mentioning there. But again, because the Bitcoin price is so soft right now, getting in now for your- Five year term is especially interesting and appealing to our customers, and because of that, we actually have customers that are willing to take forty percent or thirty percent upside at today's prices. And then it's worth mentioning that when you enter into this position, if Bitcoin is up at any point over the five year term, it could be up two days later, if Bitcoin's price is up, the real estate owner, the customer on that side of the trade, can let us know that they'd like to end their position, and we'll end their position. Again, with no penalty. So you're not really banking on the fact that Bitcoin's price will be up to the date five years from now, you're actually making the bet that Bitcoin price will be up at any point over the five year term." }, { "speaker": "stephan_livera", "time": "14:08", "start": 847.5, "text": "And so I guess, again, oversimplified terms, but it's, it's sort of like you're levering long on Bitcoin with your house as kind of like a collateral, but the point is that you can close that even in one year, two years, three years, it doesn't have to be at five years as long as you're up, basically But obviously, you'd be more inclined to do it when it's up." }, { "speaker": "stephan", "time": "14:27", "start": 867.34, "text": "Right. You, you have no reason to not wait out the price if price is down. And again, there is no, liquidation or margin call mechanic here. This is designed as a equity investment partnership, not something that the Bitcoin or the house are really collateral in the sense that you're gonna get margin called or liquidated if Bitcoin price drops to certain levels. So there's nothing related to the Bitcoin price that would trigger a margin call or a liquidation." }, { "speaker": "stephan_livera", "time": "14:55", "start": 894.6, "text": "Now, I guess the other question I have is, who is your target customer here? Because are you-- It sounds to me like you're mainly going for people who are already Bitcoiners or interested in having more Bitcoin exposure, or-- and these people My kind of finger in the air, my guess is this is probably a person who is, who would already consider them, themselves a hodler, someone who's bullish on Bitcoin. it's not necessarily someone who is, it's a hodler in the US who has e- positive equity in their home, compared to a just like a normie real estate investor who is interested in Bitcoin. How do you see it?" }, { "speaker": "stephan", "time": "15:31", "start": 931.33, "text": "Yeah, I'll take that, Sanjay, and you can add to it if you'd like. But, the way we see it is we're Folks to keep happy here. So on the real estate owner side, our customers are folks who have a significant amount of home equity trapped in their real estate, and they want more Bitcoin exposure because, like I mentioned, they've watched Bitcoin outperform their equity over the last five, ten, fifteen year window, and they wanna use that equity, they wanna access it, but in a way where they don't have to liquidate the home or borrow and take on a monthly debt service. So that's our customer there. In the ideal scenario For that customer, they walk away with more Bitcoin in an investment that they put no money in and didn't have to sell their house and didn't have to take on monthly payments. So for them, if they discount the risk of Bitcoin being lower five years from now, then to them it really does look like free Bitcoin, right? And on the capital partner side, what we're finding is there's a lot of capital pools, whether it's family offices, institutional, real estate credit funds, that want Bitcoin exposure Exposure, but are still nervous about potentially existential risks or the Bitcoin goes to zero type of thing, or even just duration and volatility. And so what Sovana's offering capital, and this is a, a very innovative solution both to the real estate side, but also to the capital side, is we're offering capital partners a, basically a real estate backed credit instrument where instead of earning interest, they're earning Bitcoin upside. So for them, they have comfort that the full principal Protection is real because they're very used to, you know, making investments or, or writing credit against US residential real estate, but instead of an interest rate, they're actually getting Bitcoin exposure, which as we know is asymmetric." }, { "speaker": "guest_2", "time": "17:24", "start": 1044.27, "text": "And that actually ties into a question that you asked earlier, Stefan, that we, we never got to, which is why now. right now, Bitcoin is at a point in its maturity where tradfi, a lot of tradfi capital feels like it can no longer ignore this asset. It's, it's, it's not a fad, you know, it's, it's, it's- Something that they need to consider seriously, but at the same time, it's not something that they feel comfortable dumping a huge amount of capital into. In, in other words, Bitcoin's at this sort of sweet spot in its maturity, and I think it's a sweet spot that's gonna last years, ten years, f-decades possibly, right, as Bitcoin monetizes. It's a sweet spot where there's a lot of capital out there that holds these two beliefs at the same time, what Chase just said, right? They're optimistic, they, they, they have some level of optimism, certainly some level of curiosity about Bitcoin, some feeling of, don't think we can ignore this asset as we have been, but at the same time They're still very nervous about what, in their view, not to you and me, but to them, it's still a very new asset class, right? And so they're worried, you know, what if, what if quantum? What if government threat? What if it's the my-- like, like the MySpace, right? There's so many, Reasons you and I will, will have our opinion on each, each of these, reasons, but there's, there's reasons for Tapfi to be very scared, and so what Sovana's offering comes in at just the right time. Right? It ena- it gives them that safety net, secured by actual, like Chase said, real estate that they no one understand. But also access to this asset class." }, { "speaker": "stephan_livera", "time": "19:15", "start": 1155.18, "text": "Yeah, a couple quick questions. On the five-year question, is it possible that you would over time offer a longer term, like a ten-year? Like, is it, is it just, as you mentioned, that they're currently not comfortable with the ten-year period, but maybe in a few years' time, maybe they would be comfortable with a ten-year period and then that you would offer that product?" }, { "speaker": "guest_2", "time": "19:33", "start": 1172.69, "text": "Absolutely. It, it's another one of those walk before you run. and in this one, we'd also love to get actual data ourselves. How Real estate customers actually hold onto these positions. If, a customer initiates a position, originates a position today at Bitcoin seventy-eight K, seventy-nine K, what do they actually do if Bitcoin a month, not maybe not a month? You know, six months later, a year later, you know, doubles in price. do they, do they end that position? As Chase said, there are reasons to end it, there are reasons to hold it, right? And so as we collect more data, we can show capital investors, yes, we give our customers the option of a five-year term or the option of a ten-year term, but our data shows that in reality, here's how they-- here's how, how, how, how it breaks down into when folks actually end the term. And so once we're equipped with that, once we're armed with that data, we'll feel a lot better about doing things like, extending, the duration." }, { "speaker": "stephan", "time": "20:39", "start": 1238.71, "text": "Yeah, and, and behind the scenes, you can think of Sovana as really having two main levers to pull to match capital against the real estate owner's property, and that's duration and upside split. If we have a capital partner that says, \"Yeah, sure, I'm okay with a seven-year term,\" well, then the real estate owner's gonna take that every time because there's no cost from up From five to seven years, so that would be a win for the real estate owner. Like a, a," }, { "speaker": "stephan_livera", "time": "21:03", "start": 1263.24, "text": "a better option that he got, that he's got. Yeah," }, { "speaker": "stephan", "time": "21:05", "start": 1265.42, "text": "exactly. And if we have capital that says, \"You know, I'm really only comfortable doing this right now at a sixty percent split in my favor, forty percent for the real estate owner,\" but we have soft prices as we're seeing today, we have plenty of real estate owners on the waitlist who are saying, \"Yeah, okay, I'll do it at forty percent instead of waiting for fifty percent.\" So, you List today, some at a seventy thirty split, some at a sixty forty, and soon our entire waitlist at the fifty fifty." }, { "speaker": "stephan_livera", "time": "21:37", "start": 1297.2, "text": "The question, when we were talking as an example, Sanjay, you gave the example of a, of a one hundred K loan. I presume the idea is that the, on the customer side, the real estate side, they can select how much they wanna do. Like as an example, let's say they've got a million dollars of property equity, but they only wanna use You know, three hundred K of that equity or something, you know, but they can, they can select that amount, right?" }, { "speaker": "guest_2", "time": "22:01", "start": 1320.8, "text": "Absolutely, yeah. So one of, one of the guiding principles when we designed the product was customer control, and we want the customer, the property owner, to be in control of when to exit, but also how much to allocate. So we'll qualify them for some maximum based on our, Calculations, but they're, they're free to invest less than that." }, { "speaker": "stephan_livera", "time": "22:24", "start": 1344.01, "text": "Got" }, { "speaker": "guest_2", "time": "22:24", "start": 1344.21, "text": "it." }, { "speaker": "stephan_livera", "time": "22:24", "start": 1344.44, "text": "Okay. Yeah. Now, the, the obvious other point is that leverage and Bitcoin, like, there's been, as I'm sure you guys know, you've been around for a while yourselves, everyone will kind of think of, oh, but, you know, whatever, FTX and BlockFi and Celsius and all these things, and, people, and it's, it's maybe there's been a reaction fully the other way of people who are just saying, hey, just no debt, A lot of these in the, let's say, the Bitcoin collateralized lending market, that's, it's grown quite a lot, there's no question. so where do you see all that shaking out? Does increasing leverage, does that create more risk of things like a deleveraging or maybe more risk in terms of centralized custodianship? How do you guys see that?" }, { "speaker": "guest_2", "time": "23:10", "start": 1390.5, "text": "So there's a lot of different pieces in that that come with their own risks. So for example, there's the, there's the act of g- you know, giving your Bitcoin to someone else, not your keys, not your coin, right? And a lot of the Celsius, a lot of, you know, what happened last cycle, A lot of the regrets are around, I, I, I just sh- shouldn't give out my Bitcoin 'cause if I do, I, I, I don't know if I get it back, right? So, so that doesn't apply, that doesn't apply to Sovana. In that, on the customer side, the whole point is for them to not put anything into the deal, right? it's our capital. and, and, and so on the physical Bitcoin, this is quickly related to your question earlier about Are you buying physical Bitcoin or, or what? It doesn't actually matter in a way to the property owner, or it doesn't matter in a big way to the property owner, because regardless, that Bitcoin is, is not going to be, is, is going to be held in some sort of a secure, right, way so, so that the Homeowner, the property owner, and our capital provider have, both have comfort that the, the Bitcoin is, in a way that neither one of them can sort of disappear, right? So that's, that's one, one thing you mentioned. Another one is, is keep in mind that on the, when it comes to leverage, keep in mind that on the property owner side, their maximum loss is The original investment. So in the hundred K example, the maximum loss to the property owner is a hundred K, no worse than if they had bought the Bitcoin themselves." }, { "speaker": "stephan_livera", "time": "25:01", "start": 1500.69, "text": "And actually, that brings up another question I had in mind. I guess another obvious question for some Bitcoiners who wanna, let's say, take a DIY approach, let's say you were to take a, a quote-unquote DIY, Sovana approach, you were to-- you were an American Bitcoin hodler who has some property equity, who is thinking about taking out like a HELOC to sort of, kind of manually do it themselves, how should we contrast that? I presume now obvious trade-offs there would be, there's more fiat obligations, there's credit checks, you know, there's, there's a cash flow impact because if you're A US hodler trying to do a HELOC and buy Bitcoin with that. So could you explain a bit about that, like how does Sovana contrast with the HELOC DIY approach?" }, { "speaker": "guest_2", "time": "25:44", "start": 1544.46, "text": "Absolutely. And I'll high level preface by saying, I love Bitcoin, I love people buying Bitcoin for me. There's no wrong way to acquire Bitcoin. Okay, maybe you can, like you said, with leverage, you know, as long as" }, { "speaker": "stephan_livera", "time": "25:57", "start": 1557.47, "text": "you're not unethically scamming and frauding and whatever, fine. Yeah. Right? But" }, { "speaker": "guest_2", "time": "26:01", "start": 1560.89, "text": "aside from that, any, any path to Bitcoin, I celebrate And I'm happy, I'm just happy you're buying Bitcoin, right? And so, yeah, you could absolutely do that. You could-- It's in, in fact, Stefan, it's the second question on our FAQ is why wouldn't I just take a loan? Not only that, but it's actually what I did. It was the inspiration or an inspiration to building Sovana. So in 2022, I think it was 2022, the last collapse, right? Bitcoin had, peaked at 69K and was on its way down ultimately to 15, 16K. About halfway through, a little, a little bit more than halfway through that collapse, at about 30K I remember thinking to myself, I have to buy more Bitcoin, but I had no money, I had no liquidity. I did have a property, a rental, that was fully paid off, and so I thought, let me tap into that equity. I ended up getting a, I'd end up doing a cash out refinance, interest only loan that I'm paying to this day, interest only, right? So the balance is still sitting there And I remember going, you know, \"Boy, is this hard, and monthly payment isn't something that, you know, fortunately I was able to service a monthly payment, but...\" Remember thinking to myself like, you could have a property like this and the equity is trapped if you can't make a, a, a huge monthly payment. So that was sort of one realization, another one was after I bought the Bitcoin, I think by the time it all happened, it was like late twenties, late twenty K. I remember it getting cut in half and me going like, \"Oh crap, I just bought so much Bitcoin, borrowed money, and the investment's cut in half, right? \" Not, not fun. Not fun. And so Sovana really sought to- Target both of those things. so, so, so to your point, the one advantage of Sovana is you don't make that monthly payment. If you can make a monthly payment and you don't mind borrowing money, having, you know, an interest payment that you're paying and, and, and, and, and the, and the hurdle rate that goes with it Then that's absolutely a path to acquiring Bitcoin, leveraging your real estate. now there's, there's Horizon, that offers another alternative, right, where You're, it's not, it's not expressed this way, but in essence, my understanding is you are selling a portion of your home today, call it ten percent of your home. You're selling equity in your home today, you're getting cash and you're buying Bitcoin Now your counterparty owns a portion of your home and the appreciation that goes with it, but hey, that might be right for, for some people, right? And so there's different ways to-- and, and like you said, yes, if you borrow and you service a debt payment, you will capture a hundred percent of the upside. so there's different paths, to Bitcoin, different paths using real estate to Bitcoin, and, and, and we celebrate all of them." }, { "speaker": "stephan_livera", "time": "29:04", "start": 1743.85, "text": "Another quick question I got, I, I didn't think of this before, but what about a capital gains impact Are you gonna pay the capital gains tax or do-- does the property holder and your capital provider or Savana share that too? How does the capital gains impact, here?" }, { "speaker": "guest_2", "time": "29:19", "start": 1758.74, "text": "Yeah, so it" }, { "speaker": "stephan_livera", "time": "29:19", "start": 1759.36, "text": "will be-- Yeah, so" }, { "speaker": "guest_2", "time": "29:21", "start": 1761.06, "text": "this is another walk before you run. We do want to see what optimization we can do here later, But for the moment, it will be, capital gain on both the property owner side and the, capital side. Yeah." }, { "speaker": "stephan", "time": "29:36", "start": 1776.27, "text": "Yeah, the-- We, go ahead, Chris. Yeah, just to add to that. So again, this is in its current phase, iBit sitting in a Charles Schwab account. So when the position is exited and we're settling, we will liquidate inside of Charles Schwab, pay back the principal to the capital partner, and then split according to the upside splits and then write a, a check to dish out. The, the payment to both sides, and that will have already, will have already captured the capital gains hit there. But as Sanjay's kind of, you know, pointed at and, and Stefan, you obviously are kind of dancing around this topic, when we get to dealing in physical Bitcoin, we can actually go ahead and settle and send the physical Bitcoin to both, both counterparties, whether they want USD or Bitcoin, but in the case that they want Bitcoin, they can hold onto that and continue to ride that investment and deal- Deal with a, a liquidation or capital gains, you know, at their own discretion in the future." }, { "speaker": "stephan_livera", "time": "30:32", "start": 1831.52, "text": "So they can push that capital, capital gains disposal event into the future, thus kind of deferring the taxes, which obviously gets them to enjoy more of the upside, let's say. but I guess for now, I guess as for-- I'm not an American, but you guys have what is it, short-term capital gains and long-term capital gains. So basically, if you've been holding for a longer time, it's a slightly lower tax rate, and then I guess there" }, { "speaker": "stephan_livera", "time": "30:57", "start": 1857.06, "text": "Do you deal with that or no?" }, { "speaker": "guest_2", "time": "30:59", "start": 1858.58, "text": "It, it, it just is what it is. If you live in a state, it's, it's essentially what Chase said, right now we're liquidating and so you will incur whatever capital gains regime you're under, But our goal is to allow both sides to defer that, as much as possible beyond the end of the-- Gotcha." }, { "speaker": "stephan_livera", "time": "31:19", "start": 1878.57, "text": "Yeah. so broadly speaking, I think it'd be good to shift now to talk about just contrasting property rate of growth versus Bitcoin rate of growth. Now, I know, Chase, you mentioned this earlier, but I think it'd be interesting to just get your thoughts on this because I guess that's really the-- That's the big question for most people, like, what is Bitcoin gonna do over the next five years? And what is property in the US gonna do? Over the next five years. if you were to project out, and I'm sure you guys have done this, like, have you done some kind of rough projections out based on past, you know, numbers? What does that look like? talk to us a bit about that." }, { "speaker": "stephan", "time": "31:56", "start": 1916.42, "text": "I'll start. I think Sanjay and I, and probably everybody at Sovana has their own different idea of what Bitcoin's future growth rate will look like and what real estate's future growth rate will look like. So because of that, we do try to rely on past performance as kind of our indicators when designing this product. but at a very high level, when you look at real estate today, you see the baby boomer generation who owns these, these properties that are, you know, have increased massively and value. And if you ask yourself a simple question of who's gonna own these properties next, who's gonna come in to buy these properties? To me, as a millennial, it's very difficult for me to see millennials coming up with the capital to purchase these homes the way that maybe the baby, baby boomer generation are expecting. Especially when you take into account the still relatively high interest rates, on mortgages. So to me, it's hard to see a path where home price appreciation accelerates from here. I think it's much more likely that we maintain this five to seven percent annual Kager that is essentially just keeping up with the monetary debasement that we're seeing. But of course, on the other side, Bitcoin is entering, perhaps, I would argue, its, its S-curve Of adoption, where we have all kinds of new regulatory regime, government acceptance, corporate treasury adoption, all sorts of new capital pools that are entering the Bitcoin protocol, and, and it's, it's very hard for me to see more people not adopting Bitcoin as their store of value long term, especially once you start to contrast ownership of the two assets. I mean, it's very easy to hold and own Bitcoin, whereas with real estate, there come- comes the maintenance cost, landscaping, you know, dealing with renters, the, the risk to your property if you're in a hurricane or a flood zone or a fire zone, as we saw in California over the past couple years. So there are a lot of risks to holding physical property that Bitcoin doesn't have. You also obviously can't just pick up your house and move to another jurisdiction, if, say, like me, who's moved recently from California to Brazil. if I'm trying to escape what I believe To be absurdly high taxes or perhaps increased crime in my area, whatever it is, you can't just take your home and run with it. And in California right now, you're gonna lose about forty percent of your home if you try to sell it just to state tax." }, { "speaker": "stephan", "time": "34:29", "start": 2069.27, "text": "yeah, because of these reasons, we believe at Sovana, and this is what the S O V in Sovana stands for, is store of value. We believe that Bitcoin is emerging as the superior store of value, that more and more real estate owners are gonna appreciate that over the long term, but that in the near term, they're gonna at least see it as a faster appreciating asset class than the equity that's trapped in their home. And so that's really the trade. Sovana wants to sit in between the enormous thirty- five trillion dollar US residential real estate market and the Bitcoin network and create the simplest, easiest, most frictionless, most painless way for capital to flood from real estate into Bitcoin." }, { "speaker": "guest_2", "time": "35:11", "start": 2111.0, "text": "Yeah, to add to that, and, you know, part of your question was on the future of real estate, and its growth. It's gonna be really-- It's, it's, it's, it's such a great unknown, In terms of how AI is gonna impact, the real estate market, right? in a number of ways. A, you know, if, if the, if the job destruction or the near term job disruption comes to fruition, then you're gonna have a whole lot of people who are unable to pay mortgages. so what's that gonna do to prices? another is if, You know, it's self-driving, in AI in that sense, right? Driving the vehicles, if that enables people to live further away from work, remote work. I, I know remote work had a bit of a peak and now it's sort of receding a bit, but like that could make a comeback thanks to AI. So there's a lot of potential, disruptors, when it comes to, the real estate market, but when it comes to Bitcoin, I think we all agree that AI is really a tailwind, right? AI is only going Increase, hasten this, the, the, the pace of monetization. just ask all of them, it's a fun exercise, right? Ask all of them, and they'll all tell you that Bitcoin is the, is going to be the preferred store of value. And poke at it, are you sure you wouldn't invent your own, right? are you sure you won't be able to hack it? AI Is a headwind in the real estate asset class or in the real residential real estate asset class and a, and a tailwind, when it comes to Bitcoin." }, { "speaker": "stephan_livera", "time": "36:51", "start": 2211.09, "text": "Certainly, it'll be interesting to see what happens with, like, AI and robotics and, I, I guess longer term, I mean, even five years out or ten years out, will we start to see like this kind of crazy combo of AI and robotics, you know, cheaply creating a lot of housing? Yeah. at the same time that there's all this demographic stuff happening too, that, you know- It, it's, who knows? Really don't know." }, { "speaker": "guest_2", "time": "37:13", "start": 2232.93, "text": "Yeah, that's a, that's a great one. That's a third one, right? It's a third distinct sort of how AI could disrupt housing, yeah. Good point." }, { "speaker": "stephan_livera", "time": "37:20", "start": 2239.69, "text": "Yeah. So I guess theoretically, a customer of Sovana is interest-- obviously, they wanna see the price of Bitcoin go up, and I guess- maybe if it's their own house or their own property value, they don't necessarily want to see it go down, but it's sort of like, I guess the way you, you might think of it is, I, I need to rebalance out of housing into Bitcoin, and so that if I can acquire more Bitcoin and have, you know, increased the percentage of Bitcoin in my, in their net worth or their po-portfolio percentage, then that's helping them, deal with this, with this shift, that may be coming." }, { "speaker": "guest_2", "time": "37:57", "start": 2277.26, "text": "That's right. That's exactly Exactly right, yeah. Even in a world where there was no reason to worry about the future of real estate, appreciation or values, even in that world, we would be equally motivated. We as the Sovana team would be equally motivated To, in, you know, g-give a way for folks to divert being overallocated to real estate into Bitcoin where they're s-underallocated, we believe, right? The, the potential threats to real estate simply add a tailwind, right? We'd be doing this anyway, right? and so, and in fact, I should, I should say, I should, I should say real quick, like This is, this has been deeply mission-driven to me and the Sovana team. Like this is sort of fourteen years of me, and many years of, of chase Trying to get people into Bitcoin, but realizing two things. A, either on one side, they don't have the capital, right, to make a serious investment into Bitcoin. Of course, you know, most people have the capital to put a few hundred bucks, a few thousand bucks, but not a lot of people have the capital to divert without incurring a serious capital gains event, right? or, or running into liquidity issues. Not a lot of people have the ability to- Divert quickly and easily one, three, five, ten percent of their net worth into Bitcoin. So that was a capital issue, but we've, we've also learned through, you know, over a decade of trying to get people into Bitcoin, that another obstacle that prevents people coming into Bitcoin is conviction. Right? If you don't have the conviction, if you're perennially worried about all those existential threats or potential existential threats that I mentioned earlier, it's also really hard to come into Bitcoin. And if you still manage to come into Bitcoin, it's hard to stay in Bitcoin. Right? Without conviction, you're gonna sell when it collapses, and you're gonna sell when it two, three x's. You need the conviction To stay in the asset class, and that's actually one thing I, one of many things I love about Sovana is, it's the high conviction side that has the ability to exit. The capital side doesn't. The capital side can see the investment double, triple, and want to exit because they don't have as much conviction," }, { "speaker": "stephan_livera", "time": "40:29", "start": 2428.7, "text": "but the option is on the homeowner side." }, { "speaker": "guest_2", "time": "40:32", "start": 2431.86, "text": "You want that option to be on the side where the conviction is, because we, we all-- The famous story, right? The famous tweet. Back then it was a tweet of, I, you know, I'm so sad that I sold my Bitcoin at a dollar thirty, now it's at five dollars. I don't know if you remember that tweet, but some, someone had bought it in, you know, the sub-dollar range and was lamenting on Twitter that they sold it for a two X gain when they could have held it on till the current price of five dollars. And so that conviction, you either get out at a horrible time, sorry, you either get out when it's collapsed or you, you get out when it's three Xed. And that's, that's another way of thinking of Sovana, which is that we, we bring together capital that lacks conviction And conviction that lacks capital. And by partnering" }, { "speaker": "stephan_livera", "time": "41:33", "start": 2492.58, "text": "capital," }, { "speaker": "guest_2", "time": "41:34", "start": 2493.58, "text": "yeah, by partnering cap-- capital's not coming in 'cause they don't have the conviction They've got the money, but they don't have the conviction. And the homeowner, the property owner, wants to come in. They got tons of conviction. They've already sold all their chairs, right? but they don't have more capital And so by bringing these two together, we unlock more capital and people into Bitcoin, which is ultimately, and has always been the goal of Sovana. Gotcha." }, { "speaker": "stephan_livera", "time": "42:04", "start": 2523.62, "text": "So you were touching on this before around the capital provider side of this. So do you wanna elaborate a little bit on the capital provider side of this equation, like who are these people who are putting up, fiat to not buy Bitcoin with?" }, { "speaker": "guest_2", "time": "42:16", "start": 2536.33, "text": "Yeah, absolutely. So These, these are folks, we touched on this a little bit earlier, these are folks who are, we think of as bit-bitcoin curious, but also bitcoin cautious. So they sit in a sweet spot of wanting to- So, so they're being tempted to enter Bitcoin, but they've always been on the sidelines because there's one or two or three questions or concerns that make them hesitate. and, and, and, and therefore not take the plunge into Bitcoin. And so they do sit at a sweet spot. So we, we, you know, we've talked to a lot of capital partners, and we find one of three, we find one of three types of capital partners. you know, on the, on the, some every, every so often you, you, you bump into folks who still think Bitcoin is rat poison, you know, sort of the, the Peter Shifts of the world who don't want anything to do with it. maybe they've been burned, maybe they-- maybe it's cope, for, for not having paid attention sooner. So that's an easy sort of, okay, we're probably not right for you. But, and, and this is sort of obvious once you think about it, but not if you don't You don't want your capital partner to love Bitcoin too much. If your capital partner loves Bitcoin too much, then they're like, \"Yeah, I got a lot of capital, but I don't need the downside protection, right? I don't need the downside protection.\" they, they actually say, \"Hey, I actually would love to be a customer of yours. I wanna be on-- I got some real estate too. Can I, can I get more into Bitcoin, right?\" I, I love to hear that because, you know, I love to meet another Bitcoiner, but And, and also to your question, it's all of the above, Stefan. It's individuals, it's high net worths, you know, it's, it's, it's real estate, credit firms, all, it's, it's really all of the above, Who, are intrigued by our product and curious about it, but they all sit in that sweet spot in the middle." }, { "speaker": "stephan", "time": "44:26", "start": 2665.68, "text": "Yeah, and, and one thing I would add to that is because this is principal protected Bitcoin, this isn't like what you're seeing with the banks and wealth advisors who are out there recommending, you know, a one to three percent allocation. When we talk to capital, they see very little downside risk because they're very familiar with the lien enforcement and the US residential real estate State and conservative loan-to-values that we're funding these qualified properties against. So they're, they're very comfortable with the real estate as collateral and their ability to recoup their principal in the downside scenario. And so because of that, they're looking at Sovana and they're saying, \"Well, why wouldn't I allocate twenty-five or thirty percent of my entire portfolio to this?\" So what's interesting here is the amount of capital that is unlocked, even from people who are skeptical of Bitcoin, is more Much higher than even folks who, you know, these wealth managers are talking to today and recommending these one to three percent allocations." }, { "speaker": "stephan_livera", "time": "45:27", "start": 2727.0, "text": "Fascinating. I think it's just, I mean, just zooming out and kind of summing up a little bit, it's like, as you said, there's all this capital in, just in the US property market, not to mention the global property market, eventually that this-- that either you guys or someone else are doing in those other markets, that there's all this capital just sitting there and it's not allocated to Bitcoin, and obviously- We're all bullish on Bitcoin, we think it's going up so much more, and it's, it's, it's a great time to sort of," }, { "speaker": "stephan_livera", "time": "45:57", "start": 2756.68, "text": "to buy Bitcoin during these bear cycles. And so it's, it's, it just seems so obvious if you're like really into Bitcoin, but obviously there's a lot of people who sort of haven't gone down that rabbit hole as much. But it just seems like a massive opportunity screaming there, for all these people that, you know, they could access and buy more Bitcoin and get, get some exposure, even if it's Policy sometimes of people comparing to the, hey, what if I got a hundred percent of the upside? Well, there's a reason, you know, there, there are trade-offs of all these things. So, I guess that's how I'm seeing it. I'm obviously I'm not American and I don't have, you know, American, property, equity, but, otherwise I'd probably look at this kind of thing for myself. so anyway, closing thoughts and where can people find you?" }, { "speaker": "guest_2", "time": "46:39", "start": 2799.47, "text": "Yeah, absolutely. cl-cl Bitcoin, Michael Saylor has bought in his most recent purchase, you know, whatever, whatever, billions it is, and I think to myself like, one day Sovana's gonna get there, one day Sovana's gonna get there, but You know, we, if, if we work really hard to get like, you know, a billion, two billion, into, into Bitcoin in our first few years, are we really making an impact in terms of capital coming in when one guy in one week can do that and more? And to, and, and to that, you know, the, the way I think about that, and, and, and this is how I've always thought about it, and our good friend Vijay talks about this as well, is around this idea of like sort of regulatory capture, and political capture. Our goal is to get Bitcoin into the hands of the many Right? It's, it's all well and good. I, I, I love, I love what Michael Saylor's doing, don't get me wrong, and I want him to keep buying more. But the more Bitcoin is distributed into the hands of everyday folks, the more our political leaders will Make sure that they don't, right, like Donald Trump coming to the Bitcoin convention a few years ago, right? The more our political leaders will be like, \"Okay, my constituents are...\" Bitcoin holders, right? And they're not gonna want me to be against Bitcoin, so you need that breadth, not just depth, one person entity buying a ton of Bitcoin, but you really need the depth. And so as a closing thought, like that's, that's one more thing we're really trying to do with Sovana" }, { "speaker": "stephan", "time": "48:22", "start": 2901.83, "text": "Yeah, and, and I guess I would close it out by reminding us of kind of what our core thesis is, which is that Bitcoin itself kind of represents this pure monetary premium, and that it will continue to take away monetary premium from many of the other asset classes that are flawed in nature when it comes to their ability to store value because of those properties that we like to highlight that Bitcoin has improved upon gold in. And so if you believe that Bitcoin is It's going to attract monetary premium away from real estate, well then you should also believe that real estate is going to underperform Bitcoin, and you should take a product like Sovana seriously as a homeowner. And so, when it comes to how you can reach out to us, we've begun releasing folks off the waitlist. So if you're a real estate owner and you go to sovana dot io, you can add your property information to the waitlist, everything from, you know, your address to the upside split you would take, et cetera, and we will reach out to you as soon as we have capital that is ready to fund your position. So, you know, we do wanna reward the folks that sign up earliest, so please do visit sovana dot io to sign up as a real estate owner. And if you are a person with capital, that could be even just an accredited investor with a high Sees value in principal protected Bitcoin exposure, you can go to sovana.io/capital and sign up there. And then to follow along, you can also find us on LinkedIn and Twitter. On Twitter, we are at sovanaHQ." }, { "speaker": "stephan_livera", "time": "49:52", "start": 2992.48, "text": "Excellent. Well, Sanjay and Chase, thanks for joining me and, listeners, links will be in the show notes as always. Thank you guys. Thanks, Stefan. Thank you, Stefan." } ] }