Paper Bitcoin Summer | American HODL & Steven Lubka

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27:10So whether you're interested in mining Bitcoin or harnessing AI compute power, IREN is setting the standard. Visit iren.com to learn more, which is I-R-E-N dot com. So I definitely want to get into what happens in a bear market with these things. But HODL, before we do, like Bitcoin price is down like 7 % or something. It's like a tiny, tiny drop for a bull market, but people are freaking out. And I don't know, the read I have from that is that people are too exposed to treasury companies, which have been pretty slammed over the last few months. Like, how do you take that in? There's definitely some of that going on.

27:41I think, you know, you have this perspective with treasury companies. You know, part of my thesis has been that there's a bubble forming in treasury companies. And, you know, when I say that, people give me this pushback where they go, well, I don't see it. They're not taking too much leverage. There's only 60 ,000 coins that are outside of microstrategy. Where's the bubble? That's fair. I think we're in the infancy of a bubble. I think this is like zygote stage of a bubble. I think the bubble is going to grow because I think the average investor, what do they really want now that they understand?

28:12The Bitcoin story is implicit in the hearts and minds of almost everybody I talked to who's under 45 years of age now at this point. That's a new phenomenon. Like I went out for drinks with some friends and every single person, these are guys I know from high school, every single person at the bar knew the price of Bitcoin without me mentioning it or bringing it up. Wow. That's a big, that's a big deal. It's the first time that's ever happened. And I'm now noticing that people have realized they watched Bitcoin go from nothing to$100 ,000 and they realize that the Bitcoin story is going to happen.

28:41But for some reason they have a cognitive bias where they think that they are not going to be a participant in the Bitcoin story. So for those that do choose to participate in the Bitcoin story, what's their next thought? I'm late. I need to catch up. How do you catch up? With leverage. What are the Bitcoin treasury companies? Levered Bitcoin. So, you know, there's this sort of idea, I think, amongst the public, especially retail investors, that, you know, these treasury companies can be like a time machine back to 2017 Bitcoin prices. And that idea, I think, is the ember that grows into a massive bubble.

29:15And also, you know, Bitcoin is an idea whose time has come, and the market's starting to realize that. Similarly, you look back in history to, like, the dot-com bubble, the internet was an idea whose time had come, and everybody could see the value of the internet, but the internet had not yet been built out. And some of the promises of the internet that would later be real, like YouTube, which, you know, Mark Cuban was selling as broadcast.com, they were these kind of janky versions, or like, you know, Pets.com eventually became Chewy, and it sold to PetSmart for$3 billion. dollars. But like back in 1997, there was no ability to ship bags of dog food through the mail.

29:48Right. So like whenever there's a big Leviathan idea, like this new network that is Bitcoin, the Internet of Money, the public is not stupid. Eventually they get wise to what's happening. I think that's happening now. And, you know, that's why I say we're in the infancy of a bubble here. They get wise to what's happening. And then they start to go through the same machinations that those of us who've been in Bitcoin for a while have been going through the last 10 or 15 years where you go, oh, shit, Bitcoin's going to change everything. It's going to do this. It's going to do that. It's going to do this other thing.

30:15And then what happens? People come along to sell you those dreams for cash. I'm not saying that Nakamoto or Stephen are doing that, but I'm saying there will be companies that are going to do that. And that is going to be like sort of the formation of the bubble. Every, every big new idea ever resulted in like what you can call a bubble, like, you know, and really, what do we mean by a bubble? We need A market that goes way up and eventually contracts because it went up so high. But like HODL was saying with the internet, it's not that the internet wasn't a world-changing trend. It's just that it's rational from the perspective of the market.

30:55When there is a big new idea, what the market does is saying, hey, let's invest. Let's bring as much capital as we can as fast as we can to this. And we're going to push the boundaries and we're going to find the limits and we're going to find what works and we're going to find what doesn't work. And then we're going to cull all the stuff that doesn't work. And we're going to we're going to double down on the winners and the survivors. And that's like there's an economic logic to that. And it happened with the Internet. It happened with railroads. It happened telecom. It also happens with financial structures, investment trust, leverage buyouts, mortgage trust.

31:32So it's not just hard technology, but sometimes people invent new financial structures that are just like how to package investments in capitals, new forms of securities, REITs, private equity. The roots of private equity and the roots of REITs both found themselves like were created in what you could call bubbles in financial instruments. It wasn't so much that it was technology. It's that people were packaging assets in new forms, getting a premium on those assets and using that to raise capital and grow. It's a similar angle. I'm not saying those are exactly the same or it will end the same way, etc.

32:15I'm just saying that financial structures are economically valuable just as much as technology because they allow capital coordination. And so it's like, it's natural, I think, to assume if there is a big new idea and it's a winner, there is going to be this enthusiasm that comes into the market. And it's reasonable, I think, to expect a lot of investor interest. And but I also agree with HODL that like we're in the we're in the early stage of that. Like he made a point. There's like 60 ,000 coins outside of micro strategy. Treasury companies have not as a group deployed capital at scale yet. So, you know, to to to say that this is kind of, you know, kind of like this is the zenith, I think, is it right?

33:07I think this is a big idea, and it fundamentally is leveraging the structure of public markets to deliver a growth rate. And the structure of public markets doesn't change anytime soon, and I don't think Bitcoin stops going up. And so as long as Bitcoin keeps going up and as long as a public company can access financial tools that an individual cannot access, there's a very straightforward way to deliver incremental returns. I think my friend, Bitcoin Tina, actually is the one who nailed this when he had a heart, his thesis was called the hardest trade. And the core of that thesis was that Bitcoin is going to bore you to a million dollars.

33:57I think that's what we're living through now. And I think actually, Bitcoin Tina's story is that he got, he sold a lot of his, he got scared and sold a lot of his It really was the hardest trade for him. Yeah, I think it's ironic or, you know, it's sort of a Greek tragedy in the sense that the hardest trade was literally so hard the man who coined the hardest trade couldn't hold through the trade, right? So, like, it's going to be a very long, you know, there's an old saying idiom in Wall Street called wear them out, scare them out. And, you know, I think something that we've been grappling with in Bitcoin this year during this, like, bull market, this hasn't really been much of anything in my opinion.

34:34but like something we've been grappling with is we don't understand what's happening and that's okay and I'm just going to admit that freely is like I don't understand how the Wall Street guys think I don't understand what they're doing I don't understand the way they move capital I don't understand the way they trade these markets or the way they view them over a short medium or a long time frame and none of them talk to me they don't call me on the phone and say bro I think whereas I have a lot of conversation with four-year cycle guys who are like, dude, it's got to uptober. It's got to go up in October.

35:02It always does, man. It's always got to go up in October. So I think that we need to break off a slice of humble pie and say we're in a new phase of Bitcoin, the financialization of Bitcoin, a broader part of the speculative attack, if you will. And these treasury companies are a symptom of what's going on. And I think we need to just sit back and look and say, you know, maybe our map is not matching the territory anymore. and we need a new map, you know? It's funny because I totally agree with you. I've called this bull market boring a load of times and I speak to Checkmate pretty regularly. He's a good friend of mine.

35:37And he's always like, you just need to like manage your expectations because this is now like, we're in a different world at this point, I think. But I want you two to convince me of something because you're both saying you think this is like the early stage of this cycle, this bubble. In my opinion, and I could be completely wrong here, we're much later in that cycle than I think people understand. But like we've seen MNAVs get crushed across the board. Like I think strategies at one point, what is it, 1.4, 1.5, something like that. Metaplanets come way down. Like across the board, MNAVs are getting crushed.

36:08Like why do you think this still has legs? And just to add to that, like I think Sailor changed the game with these preferreds. And is the idea of just selling common stock to buy Bitcoin now just an old boring idea? I don't think it is at all. I think that, you know, if you look at these assets, I mean, there were numerous points where, I mean, MicroStrategy traded at a discount at one point. Like MNAVs have compressed in the past. For MetaPlanet, I think there's been three distinct periods where the MNAV compressed like materially very, very heavily. In the past, have they ever been when we're like very close to all-time highs though?

36:44MicroStrategy did peak early. It peaked early last cycle. It did peak way before. I think there's maybe one MetaPlanet correction that was definitely, I mean, maybe not at all time highs, but at very positive Bitcoin prices. I'll speak to the point you're making, though. There was a massive run up in these assets that actually happened while Bitcoin was going slightly upwards to sideways. And so what you saw was the Treasury companies in the spring, in May, they put in multiple hundreds of percent gains. Like there is a massive, massive move higher for MetaPlanet, for SmarterWeb, for H100, for all of these names.

37:27And the market is now digesting that fact. And I find it somewhat funny because Bitcoiners, when you're a Bitcoin guy, every time Bitcoin would have a drawdown, the people would come out of the woodworks to be like, look, it's down 30 percent. Bitcoin's over. Don't you feel stupid? And Bitcoin people would say, hey, you know, zoom out. It's still up this much. It's still it's gone down before it's come back. And I mean, you look at these these companies and they're still at like, you know, if you bought before, they're still generally at like very good prices. They're still they've grown tremendously.

38:03There's been a material contraction. And I don't mean to, you know, make light of that. Obviously, if you purchased it at the top or, you know, that that stings. But I just think the structure. So anyways, it's happened before. And this is a volatile asset class. And I just didn't in that. I don't see an idea or a trend that really got exhausted or that had a fundamental event occur. Like something happened that like really interrupted it. And so then they compressed. I think they just went up a tremendous amount. They had a blow off top and they are consolidating. Time will tell, of course. But the reason I like outside of just speculating on what happened in the past, the reason I'm optimistic in the future is because I do not believe that Bitcoin becomes a global asset without there being securitization along the way.

39:06Not that Bitcoin needs that. I'm not saying Bitcoin needs securitization. I'm saying you can't invest, invent the hardest monetary asset in the world and not expect it to come into securities markets and not expect Wall Street to do things with it. And the size of these things is like this big right now. Like, I don't believe that that that there was like, oh, there was a, you know, six month attempt at Bitcoin securitization. And now it's over. Like, again, time will tell. But I think this is a big idea. And I think so. I speak with a lot of investment banks on a day to day basis. Now I speak with analysts, I speak with investment banks.

39:47I was surprised, very pleasantly surprised. They all love the idea. It actually makes more sense to them than Bitcoin. Bitcoin was hard for them because there's no cash flows. There's nothing to model. You can't really plug anything into a spreadsheet. with these, it's much more speaking their language. There's capital being raised, there's a growth rate, you can calculate various metrics, you can model this out. And as I've talked with a number of investment banks, many analysts, some who understand this really quite deeply, they're all very excited. And it's still the early days for them. They're wrapping their heads around it.

40:30But they're very, I think there's a very positive reception to having something like this and being able to participate in the Bitcoin landscape from a securitization lens. Firstly, I want to put a disclaimer here and say, I'm not trying to convince anybody to buy trading. I wouldn't try and convince you of it. I don't want to convince the audience of it. I do it myself with about 20 % of my portfolio, right? Still 80 % Bitcoin. and the 20 % has grown to 20 % mainly because of MSTR's overperformance, right? And so like, that's where I'm at with it. And even, you know, the guys I talked to in the background who are like the biggest treasury guys tell me they're 50 % Bitcoin.

41:11Okay, so like that's kind of where people are at. And if you want to go 100 % in some treasury company that you just heard about, you know, in Bangladesh, like that's on you. And I'm not recommending you do that. But I think we all know that the best way to get from here to there is in self-custody, cold storage Bitcoin. That is without question. Now, some people are choosing to go further out on the risk curve, going to the casino, etc. And that's okay. They can do that. But I'm not going to promote it. The other thing here is I think when you talk about you're not quite seeing it yet. I think one thing that's been interesting to me is that, like I said, the Bitcoin story is now accepted.

41:51Bitcoin earned that. It fought tooth and nail for years and years. It scratched and clawed its way in the hearts and minds of market participants. And it proved itself, you know, indisputedly in its price performance and in its history and in its, you know, robustness, its decentralization, et cetera. And it's funny to me because even people who I don't think believe in Bitcoin, like Jim Chanos, who are shorting MicroStrategy, are out here saying, well, hey, yeah, I believe in Bitcoin, but I don't believe in MicroStrategy. So I'm arming the difference between the two. I think that the micro strategy, you know, it's interesting, like the micro strategy shareholders have been very displeased lately on Twitter.

42:27I don't know if you've noticed, but there's been a lot of whining and kvetching about the price that, you know, the ATMs and the this and that, the MNAV. I think what's going on is like we know this from being early Bitcoiners is that you're going to have to go through this process of the market, you know, the market sort of proving out why these MNAVs deserve to exist and expand into the future. And there's there's this sort of idea that, you know, having a very large horde of Bitcoin, there's a speculation that having a very large horde of Bitcoin will be very useful in the future for X, Y, Z reasons.

43:05And we don't really, nobody can really quite articulate the reasons why having a large hoard is better than having a small hoard, because theoretically you should be able to do the same thing, same things you can do with a large hoard with a small hoard. But there's this idea sort of when you invest in micro strategy that long-term like, and you know, like speaking of vibes, like this was my vibe when I first invested in micro strategy is like company with the most Bitcoin wins, dude. I don't know what to tell you. Like, that's just how, that's just how it goes. So I think that there's a process here that the market has to go through where it digests these new substrates and Bitcoin treasury companies are a new modality.

43:41And if you're an investor in MSTR, Nakamoto, whatever it is, you're going to have to go through the process as well. And it's kind of interesting. I was thinking about the MNAVs in terms of like, remember co-integration from last cycle? It's almost like the MNAVs are kind of co-integrated with the Bitcoin price. It's like, you know, the plan B gave the analogy of the drunk walking the dog. And it's like, yeah, this is levered Bitcoin, but it doesn't mean it's always like perfectly 2x levered. It's going to move around quite a bit. And you as the investor have to make sure that you can endure that volatility, which is why the spot products of these companies are probably the best long term bet rather than, you know, getting deep in the options game or some of the leveraged ETF products, et cetera.

44:24All right. I've got millions of questions in there. But Stephen, I want to go back to something you said first. Like, I agree with you that the securitization of Bitcoin is inevitable. It's going to happen. I'm not against that in any way because like Bitcoin is money for enemies. People are going to use it however they want to use it. But the question I would have is like, why are you so convinced that this is the model? Like, this is the way that Bitcoin will get securitized. And then to add to that, you also said like when Bitcoin goes down, we're all like zoom out, bro. But if you ask me, is Bitcoin going to exist in 20 years?

44:53100 % yes. Like I've quite literally, we all have like bet our lives that Bitcoin is still going to be here in 20 years. If you ask me if like XYZ penny stock treasury company is going to exist in 20 years, I'm probably at less than 5%. So like, I think there's a difference there. But like, why is this the model? Why is this how Bitcoin will be securitized? Yeah. So, I mean, I think it's, and let me, I hope I can keep all these points in mind at the same time. I first want to say my goal in coming on here is also not to tell people to go buy treasury stocks. I've never said, I've never said that.

45:24never been like, oh, yeah, man, you got to go put all your money in these things or do something like that. And I think me and David have both been very vocal of like, you know, cold storage. Bitcoin is irreplaceable. So just like throwing that out there like now to your to your question. Yeah. I mean, you're I am in no way saying that like some individual treasury stock or corporation or any corporation, really. I mean, you could even, I think Bitcoin's going to be around longer than Amazon. I think Bitcoin's going to be around longer than Ford. Like, you know what I mean? When you start talking about an individual corporation, you're talking about a corporate entity with operators, with business decisions and all these things.

46:08Those things don't last as long in many cases. Sometimes, I'm not saying no corporations stick around. And I think there's a lot of virtue in trying to build something. And we would like to be in that category of building something that lasts, but it's different than a decentralized network. Right. And so I think there's just this thing that like, I don't I'm not saying I don't I think few people are saying that. Bitcoin, the asset or Bitcoin, the network and treasury companies are comparable in the same way that they exist in the same place of the risk curve, especially if you're talking about like tiny new ventures that are just getting going.

46:48And that's to a point that I agreed with from Hoddles that this is this is early. These companies don't have a lot of coins. Like I'm a lot more confident that micro strategy will exist in some form than one of these new companies with under a thousand coins. Right. And that's just, you have a risk curve now, but the risk curve is BTC denominated. That's kind of the cool thing. And like, that's a side point. But so I agree with you. Like, these are not at all the same thing or comparable. And, but risk isn't exactly a bad thing. And I know there's a big, I think the fiat world is like, there's no savings.

47:27Savings doesn't exist. There's only investing. You have to invest to save. And Bitcoiners are like, screw that. You should be able to save your money. That's Bitcoin. I don't want to have to take like operating risk just to keep my value. That's beautiful. I love it. But if you take that all the way to the other side, all we should ever do is save. No one should ever invest in any venture. No one should ever deploy capital or go out the risk curve or anything like that. I don't think that's right, first of all. I think that's very obviously not right because if everyone did it, the entire economy would stop because no one would have businesses, right?

48:03So you need actors that are investing in enterprises to keep everything going. So anyway, so these things, these things are different. Now, what your question was, why does why is this the vehicle? I think this is the beginning of a shell of a vehicle. Like, I'm not even saying like this. We've got it all figured out. This is how you do it. And I think that's been evidenced in the micro strategy story where it's evolved over time. What he was doing in the beginning and what he's doing now are very different. And there are new products and there are new angles. And it's because this is in very many ways being worked out.

48:47But do I think there is a strong value in having an operating entity or a business that is touching Bitcoin directly, that has the express corporate mandate of acquiring more Bitcoin? Yes, I do. And I think there's evidence to this today. When you look at these filings, we had the largest sovereign wealth fund in the world, the Norwegian Sovereign Wealth Fund, report they doubled their micro strategy position, roughly speaking. They had a large increase in it in their last reporting. We had huge investment banks that are constantly reporting this. Why didn't they buy the ETF? Because they want to invest in equities, in corporations.

49:29There's mandates. There's tons of restrictions. There's all of these different reasons. But you see these very large pools of capital are buying micro strategy stock, in some cases also even meta planet. These represent mediums that capital allocators need. And so one of the reasons I'm confident on this is because when you understand kind of the whole investment landscape and securities landscape, there are there's just people that need something like this. And so in many ways, treasury companies are very pragmatic and they're responding to like what's right in front of us, which is that people have demand for levered Bitcoin.

50:16There are many actors that have demand for they need to buy corporate equities. They can't do the spot ETF or they don't want to do the spot ETF. And due to the structure and moment in time of fiat, of where we are, of Bitcoin and fiat, that there is value to be provided by leveraging the tools of public finance to acquire Bitcoin. And that's the thing I'm really bullish on. Like you said, why do you think these are the right vehicles? because when you think about this moment in time where capital markets are like, hey, like HODL was saying, fine, we believe you on Bitcoin. Like we believe you.

50:57It's gonna be a thing. Bitcoin's gonna be a thing. BlackRock did it and the president. And the next question is like, okay, how do we acquire enough Bitcoin? How do we acquire more Bitcoin in the most capital efficient way possible? And the answer to that question is always going to be a public vehicle, a public vehicle will have a lower cost of capital. And so in many ways, like that's the concept. And so like, I'm willing to bet on that concept. And I'm willing to say that like, if people want Bitcoin, there will be demand for capital efficiency in deploying it from the perspective of the corporation, right?

51:35Obviously, if you buy it at like the maximum MNAV and then the MNAV contracts, that wasn't capital efficient for you, but it was capital efficient for the vehicle. And that's why these things exist. And that's why I think they'll continue to exist. And I think it will evolve. That's my other point is this is not a finalized, hardened form. These vehicles, I think, will evolve dramatically. So I know I'm like a bit of a doomer on this, but I do find kind of the bear take one of the most interesting and something that people should be sort of aware of and potentially ready for. Like in a bear market, what do you think happens?

52:13And with this, I think it'd be worth separating strategy from everything else just because of like their size. And I think I think they're going to be fine. Like they're pretty under leveraged. I don't think there's a real risk that they go under any point. So let's start with strategy. What do you think happens with strategy in a bear market? Do you think they go below 1xm nav? It certainly could. It certainly could. And I will tell you, as somebody who had a large position in GBTC last time around, GBTC went 50 % below NAV, and it had been trading at a premium which was 200 % above NAV at some point.

52:51And so to go from 200 % above to 50 % below, it hurts. It stings quite a bit as an investor. And you have to be incredibly convicted in order to make it through. And what happens is with GBTC, and I can predict this will happen for MicroStrategy because we're already seeing this with like the proof of reserve comments and all this stuff is at the very bottom, when you're at your most vulnerable and most fearful and most shell-shocked, people come along and they go, they don't even have the Bitcoin, bro. They don't even have it. Fucking Michael Saylor spent it on Coke and yachts, dude. It's gone, dude.

53:26Right? Like, like that's, that's what happened with GBTC. People started saying that the Bitcoin wasn't even there. And I had to spend two days diligencing it and being like, wait a second. No, no, it has to be there because of this and this and this. And I had to go through all the facts. And of course, they did have all the Bitcoin that they purported to have. And so, you know, it got repriced when the ETFs came in and blah, blah, blah. But like, there was a tough period of time there where you had to make it through as an investor. And I think that you should be prepared if you're investing in these treasury companies for a very difficult period of time.

53:56I mean, the volatility, listen, like, like Saylor says, volatility is vitality, but like, hey, man, there's a lot of highs and lows in life. This can suck for quite a while before it gets better. So like, yeah, if we hit a deep bear market, be prepared for rocky waters ahead. The thing that I think warrants the most conviction is that there is a way to structure a public vehicle with the express purpose of acquiring as much Bitcoin as you can that makes all the sense in the world. And if you're bullish Bitcoin, you should be bullish this element. And like one of the things, and there are many kind of evolutions this market could go through.

54:41For example, if strategy or treasury company starts earning a return stream on the Bitcoin, let's say strategy starts generating 3%, like anything crazy, or 4 % or 5%, there's now a growing cash flow component that's coming that then gets a multiple. And so if they have a, you know, a hundred billion in Bitcoin or whatever it is, uh, and then they now have leveraged the treasury, they're either issuing financial products, they're earning a return from it in some way, you know, there's development in the market. They now have the value of the assets plus a multiple on the return stream, which is growing every year.

55:20And that, and that marks the equity above the NAV. Like it trades for more. That is a, you know, like a price to earnings multiple is similar and different. And, you know, I appreciate the, you know, there are people in traditional finance that would push heavily back on that a PE multiple is the same as an MNAV and they're, they're distinct, but they're both examples of the market pricing future growth to today. Like that's what a PE multiple is, is it's saying you don't get to buy my business for just the net present value. You have to pay me for how fast I'm growing, because if I hold onto the business for another five years, well, I'm worth 30 % more, right?

56:08And so we discount that back to today. And I would argue there's a very similar structural thing with the MNAV because there's a growth rate. There's a growth rate on the Bitcoin per share. So maybe, you know, I mean, some of these companies are growing it at a ridiculous rate, but even if, you know, you were growing it at 30 % per year and able to do that consistently, like that's worth more than just the net present value. How much more? Who knows? Like, just like what's the right PE multiple for NVIDIA? No, nobody knows. Like these are, there's no, right answer there. But there's a simple point that you have to pay a multiple for future growth.

56:51And so if these companies get to a point where they're able to synergize the treasury with cash flows, that expands the MNAV or the valuation, which they can then use more effectively to buy more Bitcoin, which goes into the return stream, like the operating, like the cash flows. And so there's just there's a lot here. And it's again, like, I think it's early. I don't think this landscape is fleshed out. And at the end of the day, packaging Bitcoin acquisition efforts in a corporate vehicle gives you just such a wider landscape to operate from. And that's the key principle. That's the thing that I think you can be at this kind of stage, like pretty confident about.

57:38I know I'm a bit of a doomer here, but assuming strategy survives, I think that the rest of the companies would say they hold less than 100 ,000 Bitcoin. I don't know the exact figure. I don't see that as like an existential risk to Bitcoin. We saw someone come and sell like 80 ,000 Bitcoin a couple of weeks ago. But I do think the more interesting side will be what happens with those smaller companies in a bear market. it so like if you take let's say any coin any company that has less than a thousand coins like what i don't know is if there's sort of a doom loop scenario where if they're trading at a discount to nav for a long period of time if they'll ever be able to get out of that in the sense that like if if there's little liquidity on the stock and they can't just issue more common stock to buy more bitcoins try and pump nav like what happens do they end up having to sell bitcoin to repurchase their stock to drive the stock price higher like i i this is the thing that i'm i'm not very sure about.

58:32Yeah, I mean, if you're a small, a very small company with no cash flow that's trading at a discount to NAV for a long time, that's not a good position to be in. But that's a that's not that's not like a category criticism. That's a like this is a a poorly operated a company that was just not able to succeed. And I'm sure there will be many of those. And I'm sure there will be, you know, you've talked a lot about like the long tail of treasury companies. I don't know that I've ever responded to that. That long tail will almost certainly exist. There will, you know, like, I mean, we were talking about dot com and we were talking about, you know, there's always that long tail.

59:13That's that's almost certainly going to happen. I think the more interesting question is like, are there. What are the winners look like? What is the landscape for the winners. Like how, how, how many winners, like, um, what do those companies like turn out as, and what role do they play in the future? So, you know, I'm not here to, uh, put lipstick on the long tail of, you know, quick companies that don't know how to do this poorly. Like they will certainly exist and they won't be in a strong position. And like to survive a downturn, you need cash flow or you need capital or you need access to debt or you need, you know, and so on.

59:54Right. There's a number of factors that'll help a prolonged downturn in Bitcoin. Now, how prolonged are those downturns going to be? You know, one of the points HODL was making at the beginning was like, the quality of this market is different. Wall Street's here. They're operating under different rules. And God, I mean, I know every cycle people come out and they say, four year cycles over, bro, not going to happen. And then they're wrong. And so it's like incredibly like intellectually risky to take that stance. But I, I truly struggle to imagine a two year 70%. Like, I don't think you can get both.

1:00:34I don't think you can get a magnitude of a drawdown of like 70 % and a two year duration. I think you could obviously still have drawdowns. I think they're shorter lived. I think they're less extreme. I think Bitcoin at this point has, I really characterize the Bitcoin bear markets as a large segment of the market, losing conviction existentially in the asset. It's not like, oh man, this thing's gonna correct for a year and I just can't handle it. But it's like, no, it's like they think Bitcoin's over. Like it's it's it's done like and it's that sort of existential fear in the asset that I think has driven the historical Bitcoin bear markets.

1:01:21And I think with a combination of like the level of integration, the capital that's available to buy these things, like it's not just, you know, individuals that aren't seasoned investors. Like you have$90 billion in the ETFs. You know what I mean? Like there's capital that has come into this thing and it will deploy on a discount, especially in a world where given the macroeconomic environment, given the fiscal environment, given the landscape we're in, Bitcoin's a very attractive asset. And so all of that to say, like, I think companies need to be profoundly prepared for bear market conditions.

1:02:04They need to have a strategy. Like, you can't just, like, if you not having a constant, highly elevated MNAF to operate at, like, is the end. Like, you don't, you know, that's not a sufficient strategy. but also like outside of that I do expect that these the duration of these kind of moves are going to be shorter and that does make the landscape easier. I think also as we talk I've become convinced that like the small treasure the long tail like they just don't have enough coins to cause a significant correction here inside of treasure. Correct. Yeah. Yeah. No, I agree with that in terms of like Bitcoin price but HODL like one of your, maybe your second biggest meme after 6.15 is green, green, green, red.

1:02:53Do you think that that is dead? I, you know, I have to say like, I'll go out on the intellectual limb because what do I have to lose anyway? I've said every stupid thing you can say in this space. Yeah, I think it's dead. I think it's dead. I think we're in, you know, the new era of Bitcoin. Bitcoin is trading like something like Nvidia or like a tech stock. It's not trading at all in any way where I have any understanding of how it's trading. I can't anticipate how it's trading. I'm bored by it because I think I'm addicted to the dopamine of its early volatility. And, you know, by the way, I think that's a thing that we should talk about.

1:03:30One of the things that's causing people to go into treasury companies, OG Bitcoiners to go into treasury companies, is the addiction to dopamine. Because as Bitcoin matures and the vol recedes and the returns are more stable, early Bitcoiners are like, this sucks. This is unbearable. I want to get 10 times more wealthy every four years. I'm getting wealthier every day. It's unbearable, Danny. I can't stand it. I need to be poor and then rich again and then poor again and then rich again. So I think that's part of the behavior that's motivating people to take more risk, more leverage, higher volatility.

1:04:06We're addicted to it. We're addicted to it. I totally agree. And one of the funny things is like, I've not been in this as long as you. I But normally you just get a vibe of what's going to happen. And I don't have the vibe anymore. I don't know what's happening. It's because Larry Fink doesn't call us up and be like, hey, bros. We're out of the loop. We're out of the conversation. We have no clue what's going on. It's going to be wild. I do agree, though. I don't think that these are going to cause any real impact on Bitcoin, assuming strategy survives, which I think it does. Stephen, what's your take over the next few years on Bitcoin?

1:04:42What do you think is going to happen? I know HODL's got a big bet with Pete, which we can talk about. I'll point out something. You know, many times in this conversation, and I'll answer your question, but many times in this conversation, you've been like, I think strategy is fine. In that is like, there's a little bit of an admission there that is saying, well, if you get big enough, if you get X, Y, Z, then this thing can work. And, you know, then it's kind of - Can I clarify my point there? Because you are right. I do think it's size. I think size is probably the most important factor. And I don't know what the right size to hit is.

1:05:15But I think also it's, I'm, bullish might be the wrong word, but I'm very confident that their preferreds are going to work pretty well. I think that's tapping into a huge market. It's exciting. Are the preferreds something that you would look to do at Nakamoto? Carry on your answer, but also. Yeah, absolutely. And I think the preferreds are very exciting. And that's an example, like this reinforces the thesis I've been trying to present that But only an institution with a large enough balance sheet of Bitcoin can issue those products because you need a counterparty that's taking the directional risk.

1:05:53And Goldman's not going to do it. And JP Morgan's not going to do it. They're not going to hold$100 billion of balance sheet. They can't, first of all, because of regulation. So you need an institution that says, hey, we'll stomach the vol for you, volatility as a service. and then we'll peel off some of that excess return for you so you can make your 9%. And that's a Bitcoin collateralized financial product. I think you see more of those things. I think that's part of what's evolving here. And this is what I mean by the securitization of Bitcoin. I didn't just mean treasury companies. I mean products, security products that treasury companies produce that require Bitcoin collateral.

1:06:35If you really think Bitcoin becomes a crucial part of the global financial system, these sort of things need to happen. You need actual Bitcoin financial products and securities and things. And I think this is the early stage. I don't know where it all ends up. I don't know what it all looks like. But I agree with you. And I think it's important. And I think it's part of the it is a real product they're producing. And Saylor has said this. I'm iterating his phrasing. phrasing, but he's called it refining. This is what Solomon Brothers did. There was a tranching of bonds, but in traditional finance, there's something similar here where they broke out the bonds into different buckets for different risk profiles and categories of investors.

1:07:24This is something with a history where you take an asset class and you extract certain properties from it and you bundle it up. And that's what sailors looking to do here. And I think there's a lot more room for that of kind of taking some of the properties from Bitcoin and giving different investors different buckets. Yeah. These are the CDOs of Bitcoin. That's what we're doing here. No, I'm just kidding. And Nakamoto is like a CDO of a CDO. It's a synthetic CDO, yeah. I'm looking at Bitcoin Treasuries, shout out MVK. um so 21 i've got like 40 000 coins adam back's company is 30 you guys are at 5.7 000 yeah like what is big enough do you think that's the question right so like coming back to you know where i tangent is it like you know you you said like yeah size is what allows you know you're gonna make it if you get big enough the answer is nobody knows like where where is that bar but um But if you handed me, I mean, if you handed me or if I handed an operator a structure that had a couple billion dollars of Bitcoin in it and said, no more equity sales, you can't use an ATM, you can't do any of this stuff, sink or swim, can they make it?

1:08:46I think so. I think if you get handed an operating structure and you're somebody that understands the ecosystem, that understands Bitcoin, could you take a $5 billion wrapper without doing an ATM and without doing some of these things and make a company? I think you could. That's a lot of capital, especially if you're bullish Bitcoin and Bitcoin's growing. And you say, hey, I mean, in a few years anyways, this thing is worth quite a bit more. So nobody knows where that kind of threshold is, but I don't think it's anywhere near strategy. I don't think you have to get to strategy scale. I don't think it's like, if you don't have$100 billion in Bitcoin, you're in trouble.

1:09:27I would think it's substantially lower. Now, is it 200 coins in a micro cap stock XYZ? Probably not. That's not sufficient scale if suddenly all of these other advantages turned off. But I think, you know, I think as that kind of grows, you get a couple billion dollars and I think it's probably closer to that mark. But I'm also like, there's a theoretical there, which is we're saying like these other factors kind of go away and you kind of can't use the current playbook. I'm obviously bullish that the current playbook persists. I know me and Hoddle have both said we don't really have a great vibe check on this bull market, Stephen, But how much of an impact are the treasury companies having in terms of buy side pressure?

1:10:13Obviously, there's an answer to that question with and without without micro strategy. I'm just going to like exclude micro strategy here. And I don't think it's been very material at all because I don't think there's been a huge amount of Bitcoin bought. And, you know, when you look at that listing that you read off, some of those were existing coins. Right. So in some of the structures, there wasn't like buy pressure that came in there. It was just coins into a structure that's still pending. So of the ones that actually have done buys, I think it's, I mean, it's less than the galaxy seller.

1:10:46So we saw in real time, someone unload 80 ,000 with a negligible, you know, one or two or 3%, right? And so that's got to be one of the most bullish things that's happened this cycle. Yeah. That made very little difference. Absolutely. I mean, it's yeah. And I'll be I have to be careful what I say here. But like, we recently did a large purchase, right? Like, like we did it. It's a liquid market. Like that. That's what I'll say is like, it's a liquid, it's a real liquid market. And that's great. And so, you know, if you just take all those treasury companies and, you know, add it up, it's it's sub it's sub the the galaxy seller, or at least it was when I I did these calculations last time.

1:11:33So I don't think it's been, uh, mechanically like a big component. Maybe the narrative has added a little special sauce to it where everyone's like, Whoa, there's all these treasury companies. Let me buy some more Bitcoin. But, um, I think it's, I think it, I don't think it's been a huge driver on like the price of Bitcoin, which has been, I think it's had a great year, but it's been lower volatility. Uh, and then I think this is a point HODL made that I wanted to jump on. Yeah, I think these companies, like in some ways, like volatility as a service or they're a way to go get higher vol on Bitcoin.

1:12:13And like Bitcoin's trading at lower vol. In some reasons, in some ways, you could even like including micro strategy, you could argue that the treasury companies are stabilizing it a little bit. They're almost exporting the vol. They're saying, hey, we're going to bid Bitcoin every week, no matter what. And that's going to stabilize Bitcoin. And then we're going to trade at a higher volatility. Do I think that that has really happened at scale yet? Not to a huge degree, but I think it absolutely could be part of the landscape you're looking at. Well, I guess that also plays into the hands of your narrative in the sense that if the category of Bitcoin is dropping over time, that makes the treasury plays more interesting.

1:12:57yeah i yeah i think i think there's after so many years i think there's demand for higher volatility than what bitcoin's currently given i think there's interest that's not saying go put all your money in this or xyz but it's saying hey like hot like let's put five percent ten percent i'm gonna i'm gonna take a portion of my portfolio let me do it on a higher vol asset like i think there is demand for that yeah hodl you've got a million dollar bitcoin bet with pete by the end of 2027 how confident you feel i feel decently confident in that actually still still so you think we get a 10x basically i have until january 1st 2028 so i get okay i get all that bad 2027 so I got two years and change for that bet to pay off.

1:13:48I mean, after having been in Bitcoin for a long time, that's not that big of a move from here to there. I mean, we just went 15K to 124K. It's pretty damn close to the same amount needed to go from here to there. So really, it's contingent on is the four-year cycle over. right and so i i guess you know implicitly and explicitly i'm i'm in on that thesis with the bet with uh pete you know the thing that i could see playing into your hands i don't know if it'd be anywhere near big enough to get to a million dollars in two years but like i think trump is going to run things insanely hot next year uh everybody thinks like going into the midterms i yeah like i maybe that's the problem maybe everyone thinks that and it won't actually happen but um that's a scenario i could see playing out why do you think it can hit a million in such a short period of time?

1:14:40Well, just I think that, I mean, first of all, that's, you know, it's not that short of a period of time. It's two years, right? Which is like the same amount of time it took to go from here to there. And I think, again, like the four-year cycle could be over. And so that's the reason why is because this is trading in an entirely new way that's, you know, unknown to most of the actors in the space. So like, yeah, if we get the right macro environment, that could definitely happen. I think right now the bet would be to fade me and think Pete is going to win the bet. But I'm, I don't know. I still feel like I have a decent 50-50 odds in order to win.

1:15:19I fucking hope you win that bet. Well, we all hope. We all hope I win that bet, right? Even Pete hopes you win that bet. All right, before we close out, anything you want to finish on? This maybe isn't the closing note, but you mentioned running it hot. you have to like you have to that that's also part of the landscape here is we tried to rein in the spending we tried to cut we tried to rein it in we tried to shore it up the market pitch to fit um it was politically challenging to do uh and i mean you know like it's you know it's a it's a a valiant effort in in in many ways but like what ended up happening was the reality of like you got to grow your way out of it or at least try like try to grow your way out of it uh and you're seeing that messaging coming out of the treasury that's this whole stable coin like the state it's like a it's like a twin stable coin ai bet where it's like we're gonna get a lot more buyers for the debt we're gonna issue a ton more debt we're gonna invest a astronomically huge amount of money into like AI infrastructure and data centers.

1:16:37And like, we're gonna we're gonna try to drive growth. And that means like a huge amount of money coming to the market. It's very bullish for Bitcoin. And it's, you know, it's it's at a time where I think there are significant uncertainties in the larger world that are both like fiscal and macro that are reasons why you'd want to own Bitcoin, like expanding fiscal deficits, more money. Also, AI in a way I think that people aren't talking about of like if you do actually get like the bullish AI scenario where there is like a real disruption of like certain jobs and things that That puts a whole lot of variability into like equities, right?

1:17:26Like there could be a lot of equities that their future earnings are very unpredictable. Like if AI starts moving fast enough, it's very hard for me to be like, well, this database company, like what are they going to be like in five years? Or McKinsey, is McKinsey going to be around in five? Like, I mean, if AI goes fast enough, I legitimately don't know. Will that happen? I don't know. But all of that to say, it gives you a kind of unique thing where it's like, well, do you want to keep betting on the forecasting of specific earnings or do you want to own a fixed supply monetary asset that's just going to kind of broadly benefit from these net trends, right?

1:18:12I think that becomes a more compelling pitch to somebody, right? I think it just, it's more reasonable. It's got the backing of BlackRock. There's institutional level liquidity. It's accepted now. So all of that to say, like, I do think one of the other stories in this whole thing is that we're in an incredibly constructive environment for Bitcoin's growth. and Bitcoin keeps growing robustly. It's not hard to bet on companies that are just saying, hey, we're going to pull all the levers we can to buy more Bitcoin. You know what I mean? Like, obviously things are tougher in a big Bitcoin bear market and all those sort of things.

1:18:55And I do believe fundamentally, like you need a management team that has a plan for that, that is preparing for that, that doesn't, like the whole business isn't betting on this going up forever. That being said, I think it's a very constructive landscape, and it would not surprise me at all to see Bitcoin up this year, next year, the year after. I just wouldn't surprise me. Green, green, green, green, green, green. That's the new meme. No, I'll close with this. When we were in Vegas together, you asked me about the morality of treasury companies. And there was kind of this pause in the conversation where me and you were both like, hmm.

1:19:38I've thought about that a lot since. I've thought about it a lot since that moment too. And I think I've come to a conclusion, which is if you look at this from the outside, I mean, let's just call it what it is. This is shit coining. It's a form of shit coining. Everything that's not Bitcoin is a shit coin. So this is in some sense a form of shit coin. and some of the things that are going on in treasury companies, they mirror what went on in shitcoins, right? Like with the private placements, insider access.

1:20:08The most uncharitable view of treasury companies I could give you is that it's a classic, you send me one Bitcoin, I send you two Bitcoin back scam, but the two Bitcoin is in the form of the MNAV, right? So that's the most possibly uncharitable view I could give. I don't believe that to be true. I think it is like a straight up game and that's why it's, you know, morally defensible to play. But then I thought about, you know, the conversation that me and you had and I was thinking, what is the deeper meta here? Why do I have a feeling that this is OK? Whereas when we were participating in the markets a few years ago, I had a feeling that it was immoral to shitcoin.

1:20:44Right. And I think a part of it is about alignment. So we have had a tremendously, all of us, we've had a tremendously difficult time getting horses to drink. We've been leading people to the water, but we cannot make people drink. So like we, you know, we're all the annoying, probably everybody that listens to this podcast, unless they're brand new, is the annoying Bitcoin guy in their friend circle or their family circle. And you've been giving the rant and, you know, Jay Powell's going to do this. And the geopolitics of the situation in the Ukraine are this. And, oh, did you know that Bitcoin is strictly limited to 21 million?

1:21:19And, oh, by the way, Satoshi Nakamoto, this and that, blah, blah, blah. We're all that guy, right? And, you know, to be frank, most of our family members look at us like we're a combination of insane and retarded. And then they choose not to buy any Bitcoin because we kind of are unkempt and unwashed and uncouth and, you know, just not really well-mannered in society. And that's on us. You know, maybe some of us should take a shower and put on a nice shirt every once in a while, you know. But I was thinking about this and I was like, okay, like it actually pains me that I can't save people. Call it what you want.

1:21:54It's survivor's guilt. It's this or that. But I'm actually kind of unwilling to leave people behind. And I was like, what does all this have to do with the treasury companies is that via passive indexation, we are embedding a shitload of Bitcoin in the public markets. There's 162 million Americans that invest in the public markets, either in the form of straight up stock investment, 401ks or pensions. So we are giving those people 162 million Americans, plus investors from foreign markets who invest in the American markets, either via their sovereign wealth fund, you know, or straight up. We are giving them access to Bitcoin exposure.

1:22:30So they are getting Bitcoin, whether they like it or not. And we're able to actually put them in a lifeboat because we know the Titanic hit the iceberg two hours ago and the water's up to our ankles and we're not going to be in denial about it. We're going to get people in the lifeboat. And I think that's part of what is going on in treasury companies is we're embedding Bitcoin in the markets in a way that's accessible to a vast majority of passive indexation investors, right? And of which there are 162 million. So that plus combined with the SBR is how you get the rest of the Americans in. And then you basically, you get to live in a world in which your Bitcoin goes way up, but you don't have to, you don't have to suffer and watch everyone else suffer alongside you as you're getting richer.

1:23:12because that's not a world that anybody actually wants to live in. I don't want to, like, that's Citadel theory. I don't want to live in a Citadel while people are dying outside the walls of the Citadel. I want to do my best to ensure that the people that live around me are taken care of and, you know, that everything is going to be copacetic. Now, okay, I can hear the people being, like, awfully high-minded bullshit for a shit corner. Dude, what happened to you, dude? I used to listen to you, dude. I brown bagged my lunch because of you, American HODL, dude. I fucking, I named my kid after you, dude.

1:23:41I live my life by some of your mottos, dude. I have 6.15. What happened to you, dude? You think it's okay to do treasury companies? Fuck you, dude. Fuck you, man. Fucking piece of shit. So I can hear that. I understand. But that said, that said, I do think that this is the meta on the morality of shickling treasury companies. And to be, I said, that's a Freudian slip there. I said, shickling treasury companies. But to be honest, there's alignment with us too, because if Bitcoin goes up tremendously and our friends and neighbors and family don't have any Bitcoin, they're going to want to kill us and take our Bitcoin.

1:24:23So let's prevent that from happening by embedding Bitcoin deep in the public market so later it can be seized by the government. Y 'all, I'm American Hot. It was great to be here. I hope you have me back. What a way to close out. Stephen, any last things? Where can people find you where do people find out more about nakamoto yeah show your links huddle that was fucking amazing yeah i'm on twitter uh steven luka look up my name dms are open reach out anytime nakamoto also on twitter nakamoto.com we got a great url um yeah just uh i i run investor relations so if you have questions or you want to learn more i'm the right guy to reach out to and uh happy to chat and go to primal.net forward slash hodl for hodl's daily vlogs this was amazing thank you guys appreciate it yeah absolutely good to be here i don't give a shit because i'm on a paper bitcoin summer steven and danny walk by i'm dead inside i remain my kid i ain't know about that treasury Company Danny's so bald We can see his thoughts And they not good Treasury Company What Bitcoin did Do and shit caught it But it's cool now Cause it's Treasury Company The American Heart Elf You're dead to me Steven Lofka can walk on by Q1 and O

1:25:59Q &A