Nakamoto’s Next Phase with David Bailey

22:47Alex Thorn:Not just that, it's also a clear indicator. They're literally saying that like a stablecoin rewards might be such a good product that it collapses their crappy product. It's like it'd be too good to allow. If your response to like why we can't allow Uber is like think about the devastation in the taxi industry. Like that's not a good sales pitch, you know. That's right. So we have the Clarity Act. You know, I think more broadly, like this administration has removed the taboo of governments being able to embrace Bitcoin as a tool for them as well. And so, you know, I would say there's so many positive things that have been done.

23:29I mean, even even companies getting access to the public markets. I mean, think about how many IPOs there have been and how many IPOs there will be. You know, all of these deals were frozen under previous administrations.

23:39Alex Thorn:I think really it was just Coinbase went public and they happened to do it in 21, just weeks before Gensler took over. It's almost like if they hadn't done it probably before Gensler was confirmed, it's almost like if they hadn't slipped in there, they probably would still have been private until the Trump administration. I think they were the only like crypto firm that managed to get public in the quote Gensler era, but it was actually weeks before Gensler took over. You can imagine that even they probably wouldn't have been able to do it if they hadn't slipped in there before Gensler's confirmation.

24:08Yeah, and I mean... So I think they've been incredible, and the president and his administration have been such willing dance partners on the other side. They do want to work with us. I think the challenges that we've had are, there's been a myriad of challenges too, and I think that's also the opportunity that's been left on the table or still exists on the table for us to go and grab. You know, first off, I think the price being down has definitely reduced our political capital and our political leverage that we have as an industry. And I think, you know, at the end of the day, we're kind of we're seeing the extents of how far our political activity can get us how quickly.

24:57And so like the banks are pushing back really hard and the banks still have, you know, a lot to say. There will be a come a time where the banks push back really hard and no one cares. So, you know, there will be a time where, you know, instead of just authorizing a strategic reserve, we're also spending the political capital necessary to fill the strategic reserve with newly acquired Bitcoin. Like there, there are, this is a beachhead for Bitcoin in the political system. It's really not a, a mission accomplished. It's, it's like mission, mission begun. Um, so that's like my general, my general view on it.

25:31Uh, I think, uh, things I've been surprised by is like still how resistant the Democrats are to Bitcoin. I thought there would be more of a capitulation. and you know i think in general it's just challenging because it's hard to identify who exactly the leadership is of the political the different political parties so i think that's

25:49Alex Thorn:that's that's been a challenge yeah i i agree with that by the way that um it's the republicans really just didn't quite win hard enough so like even though you knock out like um charade brown and get bernie moreno which is like probably the biggest you like in congress the the single biggest Bitcoin victory, which was a big one, like still it's like 53, 47 in the Senate and, and what, like two vote majority in the house. Like, and I think that's part of the reason why they haven't capitulated as hard in Congress, the Democrats. It's, it's just so close. That's one issue. The other issue I think is the, um, uh, perceived conflicts of interest around the Trump family.

26:30And, you know, I, that's more of a political question. Uh, I think that it can be, you know, your family members are entirely their own independent people and, um, they should be free to go and conduct business and be transparent about what they're doing. And I think that the, the, the Trump, uh, uh, family, at least the parts that I interact with that have done that. But, uh, I think that that's, that's challenging. Um, yeah. And then, you know, I think the other big challenge, and I think this is a challenge the Trump administration has dealt with, is like when we built the coalition around Trump, it was driven by multiple prongs of the stakeholders.

27:10Like industry interest, user and retail interest, like, you know, it was a broad-based movement. Once you get into the negotiation room and like the, you know, let's say you've won, who gets to negotiate the peace treaty or the, you know, the treaty of Versailles, that is the corporate interest. And the corporate interest priorities can be divergent from the retail users. But at the end of the day, our power base, like, yes, our financial capital matters, but our power base comes from our ability to turn out voters and impassioned, single issue voters. And so insofar as we don't achieve the right things to mobilize the retail user audience, the Trump admin is kind of solving for the wrong problems.

28:03So or not wrong problems, just they're approaching them with maybe a distorted priority set because they're talking to one group of constituents rather than all of the constituents. and so that's not really a i mean i don't know how what else the trump admin could do differently than what they're doing on that side but i i think that's really from our side as an industry us like not necessarily telling them what they need to hear but what we want them to hear and um you know if there was one thing that i think would be the most needle moving with the base it's that u.s treasury announcing like hey like we're gonna start you know dcaing a billion dollars a quarter into Bitcoin and building this reserve.

28:43That is the single most impactful thing they could do to mobilize voter turnout. Voters don't care that much about clarity.

28:50Alex Thorn:Yeah, I agree. The complex regulatory issues are not like, you know, they're not sexy for the American voter or for the Bitcoiner. Whereas, who else was going to ask you? I mean, what is the state? This, I feel like for Bitcoin voters has been a disappointment, the strategic Bitcoin reserve. We know it officially exists, but they haven't told us how much they have and they apparently haven't yet found budget neutral ways to acquire Bitcoin. Has it been a disappointment thus far in your mind? A disappointment. First off, just to reframe a little bit, the fact that we're even here having the discussion, this was so far left field.

29:33We thought this was an idea that needed another decade plus to even be seen as credible. so the fact that we're here having this discussion like hard to be disappointed by that you just got to have the right kind of zoom out a little bit um in terms of the follow-through and execution first off i think the fact that we don't know how much bitcoin we have or that we haven't started a program yet like we've identified budget neutral ways to acquire bitcoin so that has actually been figured out i think it demonstrates how big of a shit show it was before this initiative even started like them finding out how much bitcoin we have i think it was all over the place right

30:11Alex Thorn:there was like ledgers and like doj storage lockers it's a train wreck it's a train wreck and you don't even have you don't even have the the the buy-in and the you know the constructive support from the different bodies of the government because the incentives are not aligned you know these government like these different agencies they want to retain the bitcoin that they have that's their money they're not wanting to hand it over to the federal government or to the people like that's bullshit so there's kind of like a misalignment of interest and i think there's also um massive massive failures of of um fiduciary responsibility in terms of custodying this stuff i mean i think made clear by the fact that one of the united states's vendors to custody the bitcoin the son of the ceo stole the money and ran yeah so and like tweeted about it and stuff like was on snapchat and more than anything it's just like embarrassing for the reputation of america that that that that's the state of affairs and so i think like cleaning it up was more complicated than anyone understood um and then i think the other thing is that you know and this is one of the realizations i've had is like a accomplishing big things within the the bureaucracy of the government it doesn't just require leadership buy-in uh it requires downstream buy-in from the people who actually do the things that are often not political appointees.

31:33They're career people. And if career people want to, you know, grind down and stall out and slow down and not be constructive participants, they have the full capability of doing that. And so at a certain point in time, I'm not going to say that the administration doesn't have the power to get it done it just it's like almost like the capability to get it done like how do you make people do things um and like the way you answer that question is like what do you fire them you tell them like you do this thing or you're done and okay but like now this thing which is a you know in the scheme of all political priorities getting the sbr stood up has gone from okay you know this is a thing we'd like to do to like now we're firing downstream career staff because they're not doing it like this is becoming the top priority thing so um so it's just like i think it's a it's a it's an issue of of political priority and um you know having even you know with the trump administration it's not just the president it's his cabinet that are pro bitcoin which is like incredible but it's not the cabinet's not enough it's like you need their chief staffers and you know their downstream organizations to also be bought in and that's going to take time and it's going to take.

32:47It's going to take more than a president seeing, you know, a great political opportunity. It's going to take buy-in that Bitcoin actually matters for the future of the country.

32:57Alex Thorn:I think that's very well said, David. And you're right. It's a giant ship. There's sand in the, or there's sand in the gears. It's hard, right? You can't just, you know, have the president and his appointees. So I agree. I think you characterized an assessment really well. It's harder. It's also harder legally, I think, is another issue is like, can the government, does the government actually have the legal authority to divert Bitcoin into this thing? That's a political capital question because the legality of what I've come to realize also about government is that legality is not a real thing.

33:30It's like, it's like, you know, legality is in the eye of the beholder. And it's like, how much do you want to fight for your perspective on legality? It's like, if you want to invade Venezuela and arrest the president, you know, you just reframe is that legal well it becomes legal yeah yeah you know was tarp it's like yes or no was was you know i mean like so it's just it's like how much political capital do you want to spend and we've gotten a very outsized capital invested into our ecosystem versus what we've returned back and i think it's going to take time for us if we want 10 times more political capital

34:04Alex Thorn:it's going to take time yeah that makes a lot of sense uh let's shift gears we'll talk about Nakamoto. You guys are a Bitcoin company. You just finished a M &A process and a combination to bring in BTC Inc. and UTXO management into the Nakamoto family. Congratulations on that. Thank you. Thank you.

34:26Alex Thorn:I've seen and worked on corporate M &A, especially for a public company like Nakamoto is. Very complicated, that stuff. Very complicated. And for the audience who may not know, although they probably do. BTC Inc. is the parent company of Bitcoin Magazine, the Bitcoin Conferences, Bitcoin for Corporations, maybe some other stuff I'm forgetting. And then UTXO Management is an asset management firm that you operate. So you are the CEO of both, or certainly of Bitcoin Inc. already, but now all of that under the Nakamoto, where do you guys go from here? I mean, now that you're one of the only treasury companies that actually has operating businesses under it, which I find quite interesting.

35:06I actually think we're the first that is endemic to the industry.

35:10Alex Thorn:Yeah. Well, how do you view the synergy now that you guys are all sort of under one roof? I think it's super cool. I'm very excited. I mean, I'm very excited to see how these, the, having the operating companies that are endemic amplify and create, what's the right term? Well, I'll use, I'll use Saylor's term, amplification of our Bitcoin balance sheet. And I think that there are a lot of concepts that have been thoroughly explored by private equity and private credit that have really not been explored yet in an intellectual sense as it relates to Bitcoin treasury companies. and so everyone's kind of like building their model around the sailor approach which the sailor approach is a brilliant and genius approach but it's not the only approach um for uh ultimately how to grow a bitcoin treasury and and um there's all sorts of old school valuation methodologies and ways to value uh income and way to value durability on income and just you know uh uh lots of ways to assess what the actual book value of something is and to go and execute those strategies in the public markets.

36:23And so it's fun to kind of get a chart a little bit of a different way and explore that. But I think there's so much ground there, I guess blue sky to explore, that I think as we make progress, there's going to be more people coming behind us that are also going to take this operating company approach. And I think it's going to get very interesting.

36:41Alex Thorn:Yeah, I think that's right. I think Saylor, it's clearly working. In fact, I believe last week, what they announced on Monday, so we're recording on Wednesday, March 18th, so it would have been Monday, March 16th, was actually Saylor's second largest buy at like$1.5 billion in a bear market, supposedly. So whatever Michael Saylor is doing, it's working for MicroStrategy. I think that's very clear. I don't think it can be totally – he's in a pretty privileged, unique position. One, because he's so good at it. But two, because he is the flag bearer, the biggest one. I'm not sure that many others can replicate what he's done.

37:21Alex Thorn:And so I've thought that most treasury companies or digital asset, you know, DATS, they're also called, you know, when you fold in the broader crypto ecosystem that has these as well, will have to adopt true operating business models, most likely, because they won't be able to solely do what Saylor has been doing. And so I feel like that's a trend we're going to see continue, most likely. And you guys are sort of at the forefront of that. It does feel to me like you guys, I mean, the Bitcoin conference is one example. It is still the premier, you know, IRL convening for the Bitcoin community has been now for, you know, 10 years.

38:00Alex Thorn:And so that seems like a pretty strong flywheel of a media and events business promoting Bitcoin, like alongside of a treasury company. Yeah, I mean, absolutely. One of the most logical tie-ups. Yeah, and that's probably, like, I would describe the past year. When we set out to build Nakamoto, the milestone that we were working for, and it was like a two-phased approach, was merging in these operating companies, having operating income. Once you have operating income, that gives you a lot of optionality of what to do with your balance sheet. It just opens up a lot of possibilities. And so we just got there.

38:36Like that's like this kind of almost like phase one complete. And so now that we have actually gotten the transaction done, it's all about integration and how we bring the businesses together in a way that amplifies each other's value. And this is like the first time in 14 years that all my businesses have all been owned under the same legal structure, cap table, you know, incentives. I've always had mal-aligned incentives where I've been trying to get different parts of my businesses to work together. And it's like, because they don't have the same shareholders, et cetera, it's challenging. So, but now we've been spending all of our time on integration and it's a lot of fun.

39:11It's all more fun than managing, you know, working through capital markets. And so, you know, what is integration? It's like, okay, well, when we bring all these businesses together, how do we want them to operate and function? What's our operating management style going to be? what is the compounding flywheel that these businesses build together and how do we crystallize and define it in such a way that we can develop very clear north stars that we can use to drive our M &A strategy going forward. Because these two businesses are just at the start. We want to build a complete portfolio of Bitcoin companies providing different sources of proprietary data on Bitcoin, different perspectives on Bitcoin, vertical integration of our Bitcoin stack.

40:00So we want to have a methodology that really helps us identify what's next. And we have a pipeline of opportunities. So it's really about prioritizing what matters to us. And so, yeah, when you look at the flywheel, it's like, okay, well, there's really kind of like two things that we're really trying to, let's say, strengthen right now. One is, you know, we want to capture all this data across all of our businesses. We want to integrate all that data into one common backend. And we want to have the most context and the most proprietary data on Bitcoin than anyone in the world has. Like we want to be the number one holder of the most context and insights about Bitcoin.

40:43And so what's interesting about having a media company, especially a conference, is like we have real world people, real users that we can authenticate in meatspace. that we interact with and we are able to, you know, model and create, you know, a forecast from or analyze, you know, activity from. And it's like real authentic data. Whereas like in today's age, I mean, I don't know about you, but my social media is slowly becoming just bot replies for everything. Yeah, slop. There's a lot of slop out there. It's like, how are you supposed to, you know, learn about what Bitcoiners want or who they are or what they need?

41:23if 75 % of your data set is actually just like AI, you know, slop bots just posting. So it's like we actually have real authenticated, verified users across our product. And, you know, we also have, not only do we have great data that no one else has, going back 14 years, I mean, going back to the beginning of Bitcoin, basically.

41:44Alex Thorn:I mean, you've got the attendee list from Bitcoin 2019 in San Francisco, right? I mean, you've got... Going back all the way, you know, all the way. Yeah, yeah. I actually uploaded my cell phone the other day to Claude, like a backup of my cell phone, and it had all my text messages going back to 2014. Wow. 440 ,000 text messages, and it analyzed them. Oh, man. And it was like, oh, my gosh, this is like a book. So now you can query your own agent to look into your past message. Hey, what did I talk to, you know, Alex about 10 years ago or whatever? Oh, yeah. These are how many text messages you send per year.

42:20This is the trajectory of your communication growth. this is who you're spending the most time with. Here's your social graph. Here's who the relationships you're neglecting relationships that you're spending time. Like it's unbelievable.

42:31Alex Thorn:There's security issues with giving it access to stuff like that. But that is a fascinating use case. I also have set up, by the way, a whole open claw set up. I'm building, you know, personally, we're also building a lot here. I'm assuming you guys with all this. Oh my gosh, we're, I'm that rabbit hole. I mean, ever since open, I'm like a vibe coding like every day. Yeah, no, I mean, it's like, you know, we either deal with the implications of AI for the rest of the history of the business and we're fighting against the tide, or we just embrace it and lean into it and make it work for us. So that's my general view is lean in.

43:06Alex Thorn:That's what smart businesses are doing. You've got to lean in. I think you can't obstruct. You're going to get taken for a ride by this thing. And I, you know, as a professional researcher, I'm building a giant research platform for this, scraping like PACER dockets and government economic data and social information, right? So that I can just query my, you know, we're making bots and like I've got ingestion scripts for like almost everything I can come up with, right? Just because like I'm going to be 10 times as good at research as my competitor, as my goal, using this as like an amplification of productivity.

43:39Well, if your moat is the context that you have that no one else has, and like that's what's going to make your AI agent spit out the best results and most accurate insights, well, then it's all about having that context. And if we can have context no one else has, then you're going to want to plug your research product into our context. That's interesting. And if you think about that from an M &A perspective, what businesses are sitting out there that have huge proprietary data sets that... Right. maybe aren't even functioning businesses anymore that could be acquired.

44:10Alex Thorn:Yeah, just as an example, not that they're not functioning, but that they have this data set, people didn't realize. You remember Niantic, the guys that make Pokemon Go? I don't know if you saw the story a couple weeks ago, but apparently they have, the consequence of all the millions of people that played Pokemon Go means they have street-level, high-quality video and pictures of everywhere on Earth, and now that's a proprietary data set they're selling to like robotics companies so that like, like I think the first thing they mentioned was robot delivery companies because like they know like the current status of like every sidewalk in America.

44:47Alex Thorn:And I was like, I mean, the way people are monetizing their proprietary information is so fascinating now. Well, you know, if you take the perspective that Bitcoin is going to be the global reserve currency of the world and that one day the entire global economy will operate off of Bitcoin, then to know who the Bitcoiners are and what they want and what they need is to know who the people are that have money and what people with money want and need. And that is a very valuable thing to know. And so, yeah, I think if there's one place for us to drill deep on owning a proprietary data set, it's on that.

45:21And so, yeah, I think it's super interesting. But the other thing that we're looking for also is things that give us, you know, strategic compounding value over time. So for example, like we want to have the best distribution channels possible. We want to be able to buy new businesses, plug them into our flywheel and instantly expand their revenue by plugging them into our distribution. So, you know, those are some of the things that we're thinking about is like, okay, if we buy this business, they come with licenses. Does that mean that those licenses can then be repurposed across the portfolio of companies so that we could go speed to market much faster or like, you know, there's a lot of ways to just think about like what gives us this compounding flywheel.

46:06And, you know, when you think about what is the purpose of a treasury company, like we're trying to deliver convexity to our investors. Like we want the upside to be dramatically greater than the, uh, the, the parallel downside. And so when you own operating companies, that's fundamentally what an operating company gives you. It gives you, um, continuous optionality. It gives you the ability to launch new products that have unlimited upside, but their downside is shutting them down. Their downside is, you know, running out of whatever you see them with. And so, uh, that's, that is convexity. And, and I think the more optionality our operating companies can create, the more we can monetize that optionality, whether it's either directly through cash flow or whether it's monetizing it through the public markets and the markets reacting to whatever business or cash flow or income stream that we're generating.

47:05And so, yeah, like my job is kind of be a chaos agent of like creating optionality, you know, and creating these asymmetric convex outcomes.

47:16Alex Thorn:That makes a lot of sense. And especially as sort of a treasury company 2.0, which feels like where we are now because so many launched last year and really like last June to September, there were so many, I mean, hundreds, not just in Bitcoin, but across the crypto stack. I feel somewhat responsible for it because it's like when Saylor did it, it was like, okay, you know, Saylor's a genius. Like, of course he did it like it, you know, that doesn't apply to anyone else. When we did it, it was like, oh, wow, anyone can do this. David can do it. So I feel like when we went live, there was like a dozen of us.

47:49And then, And, you know, by the time we actually closed our transaction and went public, there was hundreds. Yeah. And I think it got definitely a little bit too wild. It did. Yeah. But I also think like, you know, a lot of people don't know what they've signed up for. And, you know, I'd even include that myself in that category in the sense of like, okay, you know, we were doing public companies, but we're like, okay, you know, we want to bring an operating company in. Let's just do an M &A deal. You know, it's related party. And so people assume that related party means like, oh, that's going to be easier.

48:23It's going to be a friendly transaction. You know, I had no idea until going into it, like, you know, how unfriendly a related party transaction is. How difficult. It's very difficult. It was, you know, there was a lot of factors at play, but it was very challenging to get closed. And so, you know, there's a lot of these treasury companies that like now their plan is like, let's go find operating companies to acquire. And we've talked to tons of them that are intending to do that. But it's also like, not as easy as it looks to get an operating company. Just because you have the money and just because you have the target, there is a lot of distance between there and it being an actual done deal, closed, wrapped.

49:01And so we'll see which teams have the ability to execute. I think some of them are obvious. Some of them are less obvious at this point. But we'll know, I think, by the end of this year, which ones are able to operate in any market conditions they can find opportunity. and I would bet on those companies because those companies are the ones that are going to be positioned to consolidate and everyone else is going to be under litigation. If you're sitting on your hands and your stock is getting torpedoed and you have no plan to articulate or execution or follow through, your shareholders are going to sue you and that's not fun.

49:39And so people are going to be like, okay, I'm out. I'm out on this.

49:44Alex Thorn:I think the frothiness of launching the treasury companies last summer, obviously the public market has punished a lot of those stocks. Obviously Nakamoto, not an exception there. We've been punished more than anything, I think. Yeah, but I think you're totally right. It is now about adapt to survive, right? And because like Nakamoto as well, but many of them have a good balance sheet or a lot of assets and you've got operating companies that generate good revenue that have extensibility across the rest of your business. I think those that don't, that aren't Sailor, basically, I really believe he may be the only, there are some jurisdictional things.

50:24Alex Thorn:I think Metaplanet's another good example where they have a sort of a unique advantage in a similar way that Sailor does. But the vast majority will have to figure out how to do these complicated things of either building or buying businesses that actually do stuff. So I think that's what's so exciting, I think, about your combination is that you're really the first one that I've seen actually have an interesting, like, complementary M &A transaction succeed. Yeah. I think you have to go that route. Not everyone can be Michael Saylor. Yeah, I know. And, you know, it's also interesting, like, having access to the public markets.

50:59it gives you so many possibilities that you can just make happen. I mean, for UTXO, for example, that's an asset manager we've operated since 2019, is one of the best performing funds in the world over that time period. I think net of fees since inception, we've done something like 60 % returns or something. Like, I mean, even this year, we're beating Bitcoin by like 30%. So I should probably put a disclaimer. This is not financial advice, and I am not promoting returns or whatever.

51:29Alex Thorn:These are not audited gap financials. This is just David recalling. That's fine. We have this great asset management business. And the biggest weakness that we've had in the business is like the operators of it. We know Bitcoin. We don't know the markets. And it's like any other experienced operator running an asset manager who has a track record of beating Bitcoin over six years by 60 % annually. Like they should be managing billions of dollars. And so like when you have a platform like a public company plus the track record to bring, the possibilities of what open up really grow. And so like we want to grow UTXO to a billion dollar asset manager.

52:04Like how quickly can we get to a billion in AUM? And it, you know, would have been a grind to get there as a private company. I think as a public company, we can do it much faster. Yeah.

52:15Alex Thorn:Very interesting. Yeah. And I think also on these preferred structures, I think we're still watching that play out. I think that there it's, it's like, I'm, I'm a, uh, thanking sailor for the free, you know, uh, uh, build in public and let everyone kind of, yeah. So the free education he's giving us all, but, um, uh, you know, it's very interesting. I've actually, we've been pitched quite a few different preferreds, you know, we're, we're really still just assessing what the possibilities are out there, but we've seen some very original, unique designs that are fundamentally different than what is out there.

52:55And so I actually think the design universe of preferreds, converts,

53:03some of these things that Sailor has already done, but people maybe are focused on cloning him exactly, there's a design universe that's much larger there. And maybe there could actually be fundamental improvements on the design that could give one of these companies a much more rapid growth trajectory than what it took Saylor to get to where he is. Like, you know, like STRC has done incredibly well very fast. I mean, it's only been out in the market for what? A year?

53:38Alex Thorn:Yeah, in nine months. I'm not sure. Yeah, about it'd be called a year. Yeah. And he's issued$7 billion on it? And he's able to, I think, the vast majority of the buy that they announced this week, which I, again, I believe, don't hold me to this, but we were checking, I think it might be the second largest weekly buy in all of MicroStrategy's history, in a supposed bear market, I think was mostly funded with proceeds from STRC, from Stretch, which is incredible. Yeah. It's fascinating, right? Previously, like through most of the recent MicroStrategy history, he's been doing it through converts or from at-the-money offerings of MSTR stock, But now he's got this other engine running, as he describes it, an engine.

54:22Alex Thorn:Watching his development has been fascinating. Yeah, no, I mean, so I think for someone to create an STRC competitor, but that has a different design characteristics, the fixed income universe that this is going after is so large and so broad and has so many different types of participants in it that I think someone could launch something similar but different. and get$10 billion of AUM under that product in one year time. I think that he's opened up that possibility. He walked so we could run. Yeah, exactly. So I'm excited to see that, but it takes people, you know, people are so, what's the term, deferential to Sailor?

55:08Like, you know, yeah, like we follow behind in his shadow. and you know i think sailor's trying to encourage people like okay you know go and sprint ahead and design as many things as possible and and uh so i think people need to bring more creativity to the table it can't just be sailor being creative yeah fascinating um before we wrap let's talk

55:29Alex Thorn:about this upcoming bitcoin conference btc 26 in vegas the last week of april uh at the venetian which was where it was last year which was quite fun um i really had a great i'd never really been to Vegas. I think I went once for a micro strategy conference, but I was there like for 36 hours, had a really fun time. I'll be there, of course. And I think I'm speaking, although I'm not quite sure about what yet, but I'm super excited. I've gone to every formal Bitcoin conference since 2019. I guess where I'll start is, well, just what are you guys excited about specifically for this year. And maybe another way of asking the question is, again, last year we were on the cusp of Valhalla.

56:14Alex Thorn:This year it's more deflated than last year. But of course, you guys have been throwing that conference across all market conditions. What does the vibe feel like for a boisterous pro-Bitcoin conference in 2026? Well, you still have to act like you're depressed, So that way, you know, misery wants company. But, you know, to your point, I mean, we put on Bitcoin 2019. The price of Bitcoin was like$6 ,000, you know. Yeah. And we've handled every different flavor of it. You know, it's not going to be as boisterous as last year. I mean, we'll see. We'll see what it's like. I think the major trend that's developing a narrative point, narrative arc, is AI and Bitcoin.

56:57And I think that that is, you know, it sounds so cliche to say that. Like, you know, I don't want that to be the case. But it's like, it's just reality. It's like, open clause changes the game. AI agents can use Bitcoin.

57:12Alex Thorn:You probably saw that Bitcoin Policy Institute study that, you know, our friends Grant and David and team over there released about an empirical study showing, you know, across 9 ,000 queries and written very unbiased. at each of the different frontier models. And the net is that they basically choose stablecoins for spending and Bitcoin for saving, specifically, like by a wide margin. And so they not only can spend and use Bitcoin, but they want to, it appears, which makes a lot of sense, right? Because the digital substrate upon which Bitcoin operates is obviously native to AI, right? AI needs a digital platform to operate on.

57:55Well, back in our day, we used to call it machine-to-machine payments. And that was one of the big features that we said, in the future, this will come. And this is really that. And I think even on the stablecoin side, they say they'll use stablecoins now, but just wait. As soon as the internet digital payments landscape is as fucked up as the fiat landscape, why is your AI agent going to want to use USD stablecoin if it means every Russian vendor, every Chinese vendor, every Iranian vendor, you know, all of a sudden it can't do commerce with their agents online. And, you know, I don't think we're at the stage where all of these governments that have spent thousands of years investing into controlling the money supply are going to be like, hey, AI agents in China, you know, Taobao, launch your AI agents and they're going to be using USDC or USDT.

58:45Like, they're not going to be chill with that. So you're going to have the same politics brought into the digital realm that exists in the physical. And then that's going to make it a minefield for agents to be able, it's going to just inject so much inefficiency in agents being able to frictionlessly do business with other agents, that it's better for the agents to just use Bitcoin amongst themselves. and then as they interface with you, maybe it's like a user-to-agent interface might be stablecoins, but agent-to-agent, it's like, why would they introduce that?

59:20Alex Thorn:Yeah, that's a fair point. That's quite interesting, right? The non-sovereign global permissionless nature does also apply here, right? And is very germane to the AI, even in transacting, not just in saving. Yeah, and I mean, and once the AI can start colluding, you know, the obvious game theory play is for AI to collude, corner the market on Bitcoin, only use Bitcoin. And then it's like, who works for who now? Like if the AI has the majority of the Bitcoin, it's like they're the biggest shareholders in the economy or the wealth of humanity. But yeah, I think AI is the interesting newest topic du jour.

59:56You know, my focus at the conference, which has kind of been a role change for me this year, is like, how does Nakamoto fit into the conference? And, you know, I'm wanting to make Nakamoto's brand. I want Nakamoto to be the world's most globally recognizable Bitcoin company. And so I want Nakamoto to be investing and supporting and driving the things that move the entire industry and entire intellectual space around Bitcoin forward. and so you know i want to do more orange pill the president of the united states you know i want to do more orange pill fortune 500 companies and so how can we use the conference as a platform for uh nakamoto to be able to um push that agenda forward and and um uh you know use it as a chance for nakamoto to show what it's doing every year to drive forward adoption and then i'm also taking on like a personal project.

1:01:00Have you heard about Deal Day? No. All right. Well, so Amanda needs to catch you up to speed on this, but I have decided that we need to have an investment banking conference for Bitcoin as well. And so we're strapping on like this is a year one beta, but we're strapping on a one day private event the day before the conference that is we're calling Deal Day. And it's for companies that are either newly public or in the process of going public to meet with underwriters, investors that would want to participate. And so, you know, there's such a bridge still between crypto native and TradFi Wall Street.

1:01:42Like I see it every day because like now my life has transitioned to only talking to crypto native people to like I'd say two thirds of my life now is talking to TradFi people. and so the chasm is still like massive there's only a handful of people that can speak to both markets you're one of the few people that can speak to both markets and so it is a wide chasm by the way i agree and so like the going through the process of of i'm gonna call it the ringer of going public we've learned so much about how the game is played in terms of from wall street and how issuers are churned and burned and used and abused and what things you should or shouldn't do, what's true and what someone lying through their smile to you.

1:02:29And so I feel like we're in a unique spot to be able to help bridge those two worlds as more companies come behind us and go public of these are the people you should work with, these are the people you shouldn't work with, these are the mistakes you should avoid. and for us to like facilitate that conduit. And so we're starting it this year. We're going to have, I think we have something like 15 companies participating that are planning to go public, which is insane. And we have investment banks and institutional capital who are attending the conference or who do deals with us separately that are going to participate.

1:03:04So we'd love to have Galaxy there. And yeah, we should get y 'all there.

1:03:08Alex Thorn:I'll be there for sure. I can't wait. I think that's really interesting. Again, another step back, a sign of the times. My goodness, like the idea that you could even have 15 companies that do Bitcoin stuff, think about going public, how far we've come. That's the other thing, just before we wrap, like, I mean, this bear market, you know, which technically, if you use like a 20 % drawdown as the metric, it surely is one. But I'm sitting here looking at Bitcoin at 71K as we record this. Like that is also a sign of the times. Yeah, it's not that bad. And, you know, what's your just the overall vibes?

1:03:42Alex Thorn:How does this compare to like the, you know, the conference in 23 was just a few months after FTX collapse and SVB went down and stuff and Silvergate and whatnot. You know, 2019, you're right, was like we hadn't, we were not back. And it eventually took another 18 months for Bitcoin to retake its prior all time high at that point. Like, how do you, what were the vibes like? You know, there's also, especially with you traversing the chasm between crypto native and TradFi, a lot of people talk about this delta between institutional sentiment, which has like never been more bullish, and retail sentiment, which is still, you know, bearish.

1:04:16Alex Thorn:How do you characterize this bear market, David, overall? So I would agree with that divide in sentiment, though I'm of the suspicion that the sentiment on, I've developed the view that institutional capital follows retail capital. And so it's like sharks following minnows, you know, they need, that's what they feast on. And so, and like liquidity is life, you know, like that's like, that's where you have to play. And so I think institutional sentiment trails the industry or retail sentiment. And if retail is depressed a year from now, institutions will get depressed a year from now because the dollars they see is really the fees they're going to make on all the retail.

1:05:00so you know but i do there is definitely a divide and there's definitely a more sophisticated view from the institutional crowd of like hey like uh the drumbeat of inevitability marches marches forward i think this this cycle has been um i mean we've seen it all i've seen it all since i've been in bitcoin so like you know i wouldn't even say this is that fundamentally unique but what's different between this cycle and like the 2023 2022 is like it was so easy to identify a catalyst for the sell-off. And here the catalyst is not clear. And the price didn't appreciate to the point where it matches other past market cycles.

1:05:44So I think what's interesting right now, what we're about to discover is Bitcoin didn't have its blow off the top, which I'm going to go ahead and guess is because if there's not something really bad behind the scenes that happened. It's because of how big the derivative market has gotten around Bitcoin. And just like, there's just too much liquidity available for the blow off the tops. But that should also, if that's the case, the flip side should be true as well, which is like, we can't have the 70 % drawdowns, 80 % drawdowns, because there's too much liquidity at the bottom. And so we're seeing that kind of play out.

1:06:23You know, when we hit the$60 ,000 range, that's basically like the high of the last cycle. And typically that's a pretty fun, like important level in general. Like if you go back through history of Bitcoin. So, you know, either the market recovers here and I think we're kind of in like a new normal dynamic. Or if the market holds the patterns of the past and it goes lower, well we kind of have to reconcile like why do we have the same amount of downside but not the same amount of upside so i think those are like those are uh um new dynamics at play and there's uncertainty from those dynamics and whenever there's uncertainty people generally are risk off and so that's like but the flip side is uncertainty can play the other way too if if things are uncertain but they they go in a way that is like okay we start heading back up in the price of Bitcoin and this is not playing out any other pattern.

1:07:20Well, now it's like, okay, new normal, what's the thesis of how to play and invest, go forward from this moment? So yeah, I think if there was a time for Bitcoin to rally too, it would be when there's war and solvency crises, credit crises, liquidity crises. If Bitcoin rallied here, it'd be very interesting. but yeah I think sentiment is rough I think sentiment is going to stay rough and sentiment will come back when you know the beatings will continue until the price of Bitcoin comes back

1:07:55Alex Thorn:well said David Bailey the CEO of Nakamoto thank you so much for coming back on Galaxy Brains David yeah Alex thank you for having me that's it for this week's episode of Galaxy Brains thank you to my guest David Bailey CEO of Nakamoto and our good friend Bimnetta BB from Galaxy Trading everyone have a safe and happy week and we will see you next time.

1:08:19Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X at Intangible Coins. Follow Galaxy Research on X at GLXY Research. Read our written reports at galaxy.com slash research. And don't forget, if you like Galaxy Brains, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time.