The Case For $3M Bitcoin Revealed in Exclusive Interview With Michael Saylor & Adam Back!

I'm just going to issue billions and

billions and billions of dollars of

securities and buy billions and billions

and billions of dollars of Bitcoin and

uh right I mean that's the engineering I

give you the upside you have no downside

and I pay you a dividend while you wait

to get rich okay

which is

Bitcoin goes to a million 2 million bit

as Bitcoin goes up if I own Bitcoin in

Cuba or North Korea. I'm getting rich.

Now, the interesting thing is where is

all the money in the world? There's

hundred trillion dollars of money in the

equity capital markets. There's 3002

$300 trillion of money in the credit

markets.

But the long-term durable business is to

issue BTCbacked credit instruments and

issue billions and then tens of billions

and then hundreds of billions.

And you're not competing against other

Bitcoin treasury companies and it almost

is meant to compete with IBIT. They

can't invest in something for a hundred

years. And so the Bitcoin superpower is

Oh, you go first. We'll figure it out.

All right. It's all good with me.

[Applause]

All right. Thank you everyone. Uh very

happy to be here. Very grateful to be

with legends Adam, Michael Sailor. I

think we can all be grateful to have the

privilege to spend time and get uh the

all the knowledge of Michael and of Adam

all together. But first I would like to

express my deepest gratitude to BTC

Prague. I think they have put together

an amazing event.

Thank you so much. Thank you Matias

Martin. I think we can all say every

time there is no second best, but then

you meet Matias, you say there might be

no second best and then you meet Martin

and then there is maybe.

And so thank you so much for all of

this. And uh I would like also to thank

very much Michael and Adam. I think on a

personal level uh you have changed my

life uh and my family and I think that's

the case for a lot of people here. I

think that um you are an example of

ethics, of courage and of success over

the years and that provide a lot of hope

for everyone.

Well, I guess everyone agrees. So, thank

you very much. Um I guess uh a key topic

here today will be uh the

financialization of Bitcoin. uh and

maybe we will get into how this is also

positive for Bitcoin. What are also

potentially some risks and trade-offs to

always take in mind but first I would

like to start with Michael and to ask

how is it possible that the simplest

the the the clear model for business is

actually the most effective. I asked

just before entering the stage to the

community on X what is the number one

question I should ask and the question

always I get is what is the next

business model for Bitcoin Treasury

company. Well, the business model you

already have it and so I will leave the

floor to to Michael to explain how the

model is so robust due to its simplicity

and how you can achieve amazing results

by focusing on executing it as laser

eyes focused as possible and to deliver

the best results for shareholders.

Thanks. You know, I I said um I said in

Vegas, you know, uh a corporation is uh

the most effective wealth creation

machine that we have yet devised. And if

we think about the spread of Bitcoin as

a monetary virus and as a as an idea, um

the super spreaders uh the amplifiers of

the virus are corporations. when uh

Bitcoin hits an individual, if uh bit

Bitcoin arrives, you know, at my

proverbial dentist and the dentist

clocks a couple hundred,000 a year or

whatever, they're buying a few

hundred,000 of Bitcoin. And you know, as

I said, in the in the war to determine

the future of money, right, it's going

to be fought with money, right? Right.

Right? The future of money is going to

be fought with and won with money. So

the dentist is um he's generating a few

hundred,000 or she's generating a few

hundred,000 a year. And so over 20

years, you're going to buy $4 million of

Bitcoin.

When the dentist incorporates and

becomes a company,

the dentist is going to sell a million

dollars of stock

and they're going to buy a million

dollars of Bitcoin in a month.

And when the company recapitalizes on

Bitcoin, then your real opportunity is

to any any operating company can sell

equity or sell credit, issue credit. And

uh public companies are the best. So say

you're a public company, the superpower

you have as a public company is you can

sell equity, you can issue warrants, you

can issue bonds,

convertible bonds, junk bonds, or

preferred stock.

uh and the preferred stock can have any

rights. They it can look like equity. It

can look like convertible equity. It can

look like a bond. It can have dividends

or not. So when a company adopts the

Bitcoin standard, that dentist that

becomes a company

doesn't buy a million dollars of Bitcoin

in five years, doesn't buy a million

dollars of Bitcoin in one year. The

company issues a million dollars of

equity and buys a million dollars of

Bitcoin in one month.

But it's immediately profitable, which

means in the next month the company can

issue another million. And so a company

may very well start to issue a million

dollars a month of security of equity

and it all of a sudden has bought $10

million of Bitcoin. So now the

interesting thing is where is all the

money in the world? There's a hundred

trillion dollars of money in the equity

capital markets. There's 300230 trillion

dollars of money in the credit markets.

All of the equity capital in the world

is valued based upon future expectations

of fiat cash flows.

Every company in Nigeria is valued based

upon the expectation of Nigerian cash

flows. Every company in Brazil is based

on Brazilian cash flows. Every company

in the US cash flows. Okay? And we know

that those the value of that cash is

falling but we also know it's very

competitive. So so you have uh a long

heterogeneous uncertain like uh credit

risk there or or a equity risk we'll

call it. And then with credit all of the

creditors they're valued based upon the

future expectations of cash flows. I I I

borrow money. I don't have the money. I

promise you I'll pay it back. I'm going

to get the money over 10 years. Right?

So the existing markets are based upon

these future expectations

of business operation. We're valuing

real world assets. We're valuing future

cash flows. We're valuing equity uh or

or opportunities. And the Bitcoin

treasury company idea and the and the

most elegant business model is I have a

stack of Bitcoin, $10 million of

Bitcoin. I start issuing equity based

upon my ability uh to acquire more

Bitcoin. Then I issue credit, you know,

fixed credit, convertible credit, some

other credit, and then I use it to buy

Bitcoin. And of course, the point is

when MetaPlanet was a hotel, they might

be able to buy a million dollars of

Bitcoin a year, but when Met Planet

started uh issuing equity, it's able to

issue a billion dollars of equity in a

year. And so now they're buying not a

million, but a billion a year. But the

rate at which a company can issue equity

or credit

is exponential. But it's not like annual

it, you know, you might be doubling

every month, right? You might or you

might go into something like uh like on

October 30th we announced the 21 billion

ATM. We thought well that you know if we

do that in three years that'll be the

most successful equity program in the

history of the capital markets if we did

it in three years. And we did it in like

three months because because all you're

doing is you're swapping equity for

Bitcoin and you're swappering swapping

credit

for Bitcoin. Companies can do that.

Individuals can't do that. But when you

put three individuals together and they

cooperate, they become a company. So

really that I wouldn't be afraid of a

company. I would just say a company is

when, you know, one dude that knows

finance got together with one lawyer and

got together with one uh with one

leader, a CEO, a CFO, a general counsel,

now you have a Bitcoin treasury company.

If you put Bitcoin digital capital

behind it,

and now you can grow literally as fast

as you can issue the security and buy

the Bitcoin. And that is that is an

investment cycle which is 1,000 times

faster than you know a physical real

estate cycle or a business cycle. So

it's faster, it's homogeneous

and uh primarily the friction point is

the issuance of securities. So it's a

it's a legal and it's a regulatory

friction point. And it's different if

you're Japanese than if you're French.

You you you need Bitcoin treasury

companies in the UK that understand UK

law and one in France and one in Norway

and Sweden and Germany and they're all

going to have local advantages

because they're you know you know if

you're a Japanese company it's easier to

issue Japanese securities than American

company going to Japan. I know this.

I called Simon. And I said,"Simon, the

good news is you'll probably beat me to

issue preferred stock in the Japanese

market. You know, go for it." Right? And

so I I think that that's the the

simplicity uh in the business model is

I'm just going to issue billions and

billions and billions of dollars of

securities and buy billions and billions

and billions of dollars of Bitcoin and

I'm going to digitally transform the

equity and the credit capital markets

from 20th century analog physical cash

cashbased

to 21st century very digital

bitcoinbased and that's I think what we

see right now in the market. So Michael,

you have built the Bitcoin Treasury

Company bridge. You have said multiple

times the best thing to do is to

actually build the bridge, stand on the

bridge, show that the bridge works and

then invite us to come to the bridge and

you have done an amazing uh work on this

and thank you so much for all you do for

Bitcoin for corporations overall. Uh we

have the chance today to also have Adam

that has even contributed to build the

Bitcoin bridge itself through

innovations uh like hash at the time in

the 1990s and uh who is also extremely

present in the Bitcoin treasury company

analysis today. So Adam, how do you see

uh the evolution of Bitcoin and the

Bitcoin treasury company model and how

do you have a valuation framework for

the different bridges of Bitcoin

treasury company and how do you analyze

them? You have even created new metrics

how do you analyze the Bitcoin treasury

company business model? Well, it's

interesting to see how people are

looking at it because as with many new

things, the default is people are

skeptical. Okay, why why does that work?

Seems like magical thinking. Seems

recursive logic. That kind of feel. But

if you It's quite simple really. You can

recreate the logic for yourself, which

is to go back to Michael's dentist

example. Let's say it's a private

practice. They could use their free cash

flow to buy Bitcoin, but they realize

they can take a loan and borrow Bitcoin.

because they have now accounts, they can

maybe borrow a million dollars against

the practice which has enterprise value

and buy Bitcoin and the dentist is a

friend of yours. So, he invites you to

buy 10% ownership in his practice.

But he knows that you can't get this

favorable business loan because you're

not a business. So, he asks for a

premium and you do the calculation, you

realize it's still a good deal because

if you want to do it yourself, your

credit is less scalable. you you know

you you have a worse credit risk as an

unsecured lender and so it makes sense

and so you invest in it. So now you've

proven to yourself but a treasury

company should have a premium.

Now once it it's a public company the

market will tell you what the premium

should be and once you have a premium

you can start to use a capital markets

tools. So you can sell more shares issue

more shares and sell more shares. And if

you if you look at it when there's a

positive premium that will increase the

bitcoin per share which is the uh

northstar metric that all the treasury

companies are looking at is increasing

bitcoin per share because the

shareholders are buying shares and if

they're getting more bitcoin over time

per share that's uh you know growing

their position. So I think the next next

question people come to if you if you

get them across those hurdles is you

know well am I overpaying? is has the

market bid up this uh premium or the

MNAV the market cap divided by the net

asset value of Bitcoin too far and you

know so it's something that any investor

struggles with to think you know from a

risk perspective what could go wrong if

I get too enthusiastic and I buy a very

high MNAV and that turns out to be

something that decays over time and

normalizes lower then I'm left holding

this thing so now I think there's some

interesting factors here with treasury

companies that have reduced that risk.

One is that the treasury companies are

buying Bitcoin all the time, you know,

every month, every day. And so they're

reducing your risk over time because

what what you'll see is that uh as as a

treasury company buys Bitcoin, they're

sort of uh paying for a premium. So the

example I was giving is that you know

micro strategy or strategy now is the

most wellknown the earliest treasury

company. So I had some conversations

with you know people in the banking

sector investment banking sector and

they they were you know why does this

work? I said well look it's very simple.

Micro strategy was trading at around two

times now for for some periods and you

know what yield have they achieved? How

much have they increased Bitcoin per

share since January last year? And it

about doubled the amount of Bitcoin. It

did 73 and a half% last year and about

enough this was a month or so ago during

this first two quarters of this year

that that compounds to two times. I

think if you if you bought the stock

last year, you're now the the yield has

paid for the two two times risk premium.

And so that means from here forwards as

they continue to accumulate until

Bitcoin is fully saturated, you have no

risk, you know, almost no risk because

you're you you've you've got to the

point where you have uh paid a bitcoin

for each bitcoin inside the company and

it's still operating. It's still doing a

strategy. So that thought process

basically lends itself to a new metric

which is how quickly does a given

company pay for the premium it has and

so the premiums are different for you

know due to local market dynamics due to

the market tools they have uh whether

they're using debts or ATMs and the MNAV

they they end up in a reg in a region

and so you can see that you know it was

a way for me to start to feel

comfortable buying metal plants planet

at five times premium when I was

accustomed. I was relatively early in in

buying Micro Strategy shares because I

thought that Michael's mission here to,

you know, encourage other companies to

put their treasury reserves into Bitcoin

was a was a very uh, you know, good

cause and would help companies and, you

know, it would surprise me actually it

took so long for other companies to to

come on board despite, you know,

Michael's running a annual conference to

show them and give them a playbook. So

in any case the the question for me was

well do I feel comfortable buying

MetaPlanet at five and you know because

it's higher than than Micro Strategy had

and the answer became easier what to

think about once you thought about well

how long does it take to pay for that or

it was actually you know it's varying

over time but at one point it was five

months and so then I realized well

that's actually much lower risk than it

appears intuitively because within the

within the space of five months if they

continue, you know, if nothing disrupts

their ability to raise capital with the

mechanism they're using for that period,

then they actually get to the same one

times in after a five month period and

then it's upside after that. Now, you do

have there's a lot of, you know,

judgment in the execution strength of

the management. In in my case, I knew

Alexander and I knew somebody involved

with MetaPlanet. So I had some uh

built-in trust of the people involved in

running it and that they were you know

bitcoiners interested in bitcoin for its

for its mission and so on. Um so that

that metric I expressed as the months to

cover and actually I think it was

somebody sent me a a screenshot which I

asked where it came from and it was from

the MetaPlanet quartly presentation and

they picked it up and used it within

like a few days basically. So evidently

it they thought it was useful to explain

to their investors why you should you

should buy you know why you should

invest in MetaPlanet effectively. So I

think they found it uh they have a high

MF so it it works well for them right

anyway they they adopted it and picked

it up. So it's just a way to to look at

it but I think you do have to form an

opinion about the repeatability of the

strategy the scalability of the strategy

as the company grows. you know, if it's

twice as big, ideally, it needs to be

able to raise correspondingly twice as

much or it could slow down and um

whether it will be able to continue this

at the same pace in a bare market as a

bull market. And of course, the other

factor you're looking at is what's the

debt ratio. And you know, you can see

today that strategy has a relatively low

debt ratio. I believe it's something in

the 15% range. And you know on the

Bitcoin side of things uh the blockchain

group is actually not taking on debt at

all in a normal sense because you have a

Bitcoin basis convertible note which I

think is a very interesting

uh new variant of of debt. The reason

that that is not conventional debt is

because if it fails to reach the

conversion premium over uh the 5year

period ultimately the company could just

give back to Bitcoin sitting in rig

fence in a bank subsurfree mode

custodian and so it doesn't have the

same kind of tail risk and so they were

able to at the blockchain group to to

bring in what would be staggering

amounts of debt if you if you were to do

that in euros. So it enabled the

blockchain group to grow very quickly in

its in its early period. So yeah, that's

that's what I've been looking at um in

trying to understand and get a feel for

things. I I find that generally the best

way to understand things is is to get

your your hands on to it and you know

buy invest try to analyze form an

opinion should always have your own

opinion. Shouldn't rely on other

people's opinions. If you're investing,

you should have your own valuation. What

all your own thesis for why you think

something's valuable? And another

question I get asked sometimes is how

scalable is is the treasury company

playing which is to say if lots of

companies come in will it compress the

effect lower the mnavs and exhaust

something and you know in a way that

that's a question for Michael because he

was inviting people you know trying to

encourage them to come in you know would

that compress his his strategy right and

you know my intuition when asked this

question is actually No, it won't

because it's an enormous market.

effectively the treasury play you know

everybody buying Bitcoin personally

uh every fund manager putting Bitcoin

into a pension fund and all of the

treasury companies are basically all

participating you know so everybody

owning Bitcoin is participating along

with the treasury companies and you know

sovereign wealth funds and everybody in

this huge arbitrage between the fiat

current which is mispricing Bitcoin and

the Bitcoin denominated future which you

Hal Finny in 2009

uh famously just put out the what if

that Bitcoin should be worth $200

trillion

um you know just just based on the

monetary premium in other assets and so

that still seems very plausible maybe

it's a bit higher because we've

onboarded a lot of inflation in the

different major currencies and so you

know if you look at that it's an

enormous arbitrage that will take you

know maybe decade or decades to go

through even If the big cashrich

companies get involved, it's just an

enormous pie. And there are probably

some beneficial effects of of more

players. you know, it will provide more

liquidity, more understanding, more

certainty, standardize the model, make

it work better because people people's

risk um misunderstanding will will clear

up or like react to safety and numbers

and and copying other people, seeing

other people doing things with

confidence and um so I think that you

know and of course this activity is you

know slowly bringing forward

bitcoinization of the world. So it's

generally absorbing Bitcoin. Um yeah,

another thing interesting thing about

treasury companies buying Bitcoin is

they are very mission focused on not

selling Bitcoin. So they're taking

Bitcoin off of the spot Bitcoin markets

and storing it. And while the individual

companies stock varies depending on, you

know, it uh just market psychology or

somebody shorting it temporarily, things

like that, that doesn't result in

Bitcoin. selling it just results in the

company getting compressed temporarily

while they build up lots more Bitcoin

and then they spring back. So it seems

quite resilient as well. You know, one

one theory people might have is will the

MNAV get compressed and stay low, get

stuck there? And you can see that a good

example in MetaPlanet in February this

year, um their MNAV got to 10, which was

on the high side, and then it

immediately crashed with a limit down, a

limit system in the Japanese market

under a,000 yen. It can only move 150

yen before there's a limit stop. And so

it limit down three days in a row and it

reopened almost 50% down and that that

made the market subdued for a couple of

months. But in the meantime, you know,

the Metropanet management team continued

to operate their moving strike uh ATM

like system and changed 1,760

Bitcoin into 5,000 Bitcoin in a couple

of months. And of course that that

compressed the MNAP down to two and a

half. And at that point the investors

woke up and said, "Wow, that's cheap."

So they start buying it. Once you get

some some buying going, a lot of people

are momentum traders. They see they see

something's happening. They build it up.

And you know, now within not too many

weeks, their MNAP is back at seven. So

you can see the MNAV can get reanimated.

And the thing that causes that is the

buildup of pressure of more Bitcoin

being piled in making it, you know,

reducing the risk because it gets

cheaper and cheaper in terms of the

premium. Um, so very interesting to see

those, you know, fears be proven again

in the market over time. So get

confidence in in how this type of

instrument, this type of company can

behave in the market. So Adam, you

mentioned that we are going to a BTC

denominated world, the 200 trillion

dollars opportunity in today's dollars

and the future of as well the accretion

and the bitcoin per share and the mnav

and the premiums and so on. Many of

these maker you have been pioneering the

BTC denominated capital markets with the

KPIs, the BTC KPIs, the BTC yield, the

BTC gain uh and the torque and you have

been put putting together a lot of

metrics for the financial industry

overall to be able to value Bitcoin

treasury companies and you are also

aggressively now tapping into credit

markets and you are issuing new products

that allow to maybe challenge this form

of consensus view that the premium

should go to one over time or something

like this. Effectively with the

instruments that you are leveraging

potentially you are uh enabling the

premium to continue to stabilize or even

go up. Um so how are you uh able to uh

provide a financial engineering in a in

a best-in-class manner to tap into those

capital markets and have the best

performing preferred and have the

ability to make an announcement of

10,000 bitcoin um in a week and uh how

how are you able to do that and how this

is shaping the new wave of um adoption

for financial markets with the

instruments of Bitcoin treasury

companies.

You know, I I think our first um

challenge was to develop a set of

metrics that you could use to value uh

BTC backed equity. And because you're on

a Bitcoin standard, uh, simple USD, uh,

US dollar accounting doesn't really work

because US dollar accounting is geared

toward companies that generate their

earnings via operations. And so, you

know, we created BTC yield, which is

basically the accretion of Bitcoin per

share in a percentage. And the idea of

that is if you've got a 20% BTC yield,

you could put a multiple of it on it

like 10 and you could you could come to

a 200% premium to NAV. It's a very

simple way to get to what should the

premium to NAV be. Well, it comes down

to whether the whether the company

generates 220%

yield or 10 or 200% yield, right? And a

bond that pays 200% interest after tax

is worth a lot more than a bond that

pays 5% interest after tax. Right? So,

um the yield metric was an equity

metric. Uh BTC gain or dollar gain is an

equity metric. A BTC dollar gain is

basically the earnings equivalent for a

Bitcoin company. It's it's on a Bitcoin

standard basis. If you generated a

hund00 million of BTC dollar gain, it's

like $100 million of after tax earnings.

um it goes direct to shareholder equity.

It bypasses the P&L. But a company that

can generate a billion dollars of of BTC

dollar gain is like a company that

generates a billion dollars of earnings,

right? And you could use a P to E on

that and say, well, I'll assign a PTE of

10 or 20 or 30 or whatever times that

gain and that gives me an enterprise

value for the operation and their

ability to do it. Now the question

becomes how do you generate BTC yield

and how do you generate BTC uh dollar

gain or BTC gain and there's three

obvious ways to do it. One way is

operating cash flows. I take my

operating profit and I sweep it into BTC

and that becomes a yield and that

becomes a gain.

that is uh have $100 million of

operating cash flow and I buy Bitcoin

with it. Uh then I have $100 million of

BTC uh dollar gain without any

shareholder dilution, right? And so

that's you know that's one way to do it.

Uh you need an operating company that

generates a lot of cash to do it. The

second way to do it is is if you sell

equity at a premium to NAV, you know,

when you're selling a $100 million of

equity at a 2 MNAB, then you capture a

$50 million BTC

dollar gain. And of course, if you sell

equity at a discount to MNAB, you're

actually diluting the shareholder. So,

you would have a negative yield, a

negative gain. I think the reason that

BTC yield and BTC gains matter is it's a

very simple, transparent, instantaneous

way for an investor to see whether the

management team uh took an accretive

transaction or a dilutive transaction on

any given day. Any public company can

raise almost any amount of money if

they're willing to dilute their

shareholders. And the real trick is to

do it accreatively. So those two

metrics, you know, are important, but

now we've moved through this issue. I've

run out of cash flow. What do you do if

the BTC um if the MNAV is 10 or five or

eight? This is not a complicated

question. when you're on fire with an

MNAV of eight, you sell the equity, you

buy the Bitcoin, you know, at an MNAV of

of 10, you've got like a 90% spread,

right? So, you're generating $900

million of gains for every billion

dollars of of equity you're selling.

It's risk-free instant earnings. In

essence, that's not complicated. The

question is, what if MNAV goes to one or

it goes below one? How do you j what if

you don't have any cash flow and mnav

goes to one but you have a billion

dollars of bitcoin on the balance sheet

well if you're a closedin trust like

gayscale right or if you're an ETF uh

but especially a closedin trust you

can't do anything so you'll trade at a

discount to mnav and that's always the

thing people wanted to avoid

the special power that an operating

company has is to issue credit

instruments though. And so the way that

you actually pull yourself out of a hole

if you trade at a discount or you trade

down to normal MNAV is you start to sell

credit instruments you collateralized on

the on the assets of the company. So

that takes us to the idea of uh of BTC

credit models. If I have a billion

dollars of Bitcoin, I can sell a hund00

million of a bond or a hundred billion,

let's say, $100 million of preferred

stock that yields 10% dividend yield.

It's 10 times over collateralized. So

therefore, the BTC rating is 10. You can

now calculate the risk. The risk would

be the risk that your billion dollars of

Bitcoin trades to less than a hundred

million by the time of maturity of the

instrument.

You can calculate that statistically the

same way you calculate Black Scholes

models. You plug in the volatility, you

plug in the BTC rating, a risk pops out.

Um and uh then you can calculate a

credit spread, what we call BTC credit.

What is the what is the theoretical

credit spread above the risk-free rate

that you need to offset the risk? And of

course, the credit spread if the BTC

rating of is two is higher than if it's

10. And if Bitcoin volatility is

forecast at 50, then the the credit

spread has to be higher than if the

Bitcoin volatility is 30. So if you plug

into your model your expectation of

Bitcoin return or ARR over a decade and

you plug in your expectation of

volatility of Bitcoin and you plug in

the price of Bitcoin, you get a BTC

rating, the risk pops out, the BTC

credit model pops out. Um what we have

done is used that in order to start to

issue Bitcoin back credit instruments.

Our our idea is we want to sell

securities into a market that's uh

orthogonal to the equity market and to

the Bitcoin market or uh an uncorrelated

market. So the market for uh for US

dollar yield right amongst retirees

there are a lot of people that don't

know what Bitcoin is, don't know what uh

strategy is. They don't know anything

about our business model. But if we

offer them like we offered a a a

preferred stock that yields 10% dividend

at par, we offer you 10% dividend yield

and a qualified income distribution, a

QID or QDI qualified

um type instrument. If you make less

than $48,000 a year, you can buy the

instrument and collect 10% dividend

yield taxree in the US. Okay. Well,

that's interesting. A lot of people want

10%.

Now the issue is is it risky? Well, if

it's 5x or 10x over collateralized, then

it doesn't look that risky if you if you

think Bitcoin is a real thing. So, the

idea of giving someone extremely low

risk but high yield uh fixed income is a

is a simple idea. I think it's kind of a

killer application for Bitcoin as

collateral. What we did at Strategy is

we created a convertible preferred

called strike which gives you 40% of the

upside of the stock and an 8% dividend

at par. And then we created a senior um

preferred called Strife that gives you

10% at par that is uh cumulative. It

means the dividends if you ever miss

them they accumulate and there are

penalties. So it's and it's senior to

all the other preferred and u those two

were the two most successful preferred

stocks in the century that is the most

liquid the highest performing they all

traded up 25% when the other preferred

were trading down 5%. And of course,

they're the most successful because

anything any security backed by pure

Bitcoin is always better, right? The

options are more valuable, the equity is

more valuable, the convertible bonds are

more valuable, these preferred are more

valuable because you're plugging in an

asset which is going up 55% a year with

55 vol. And so if you plug in something

which is spinning at 55 RPM that's clock

that's that's going 55 miles an hour

there's a lot of energy in it. So we

just plug that into those instruments.

They were very successful.

We we uh floated them in the public

market on NASDAQ and we attached a shelf

registration to them. And the idea is

now we can just we can sell people we

can sell people 40% of the upside of the

stock and that might be 80% of the

upside of Bitcoin but with downside

protection and a guaranteed dividend. So

we call strike it's like a it's like a

Bitcoin fellowship. It's like you get a

living stipen you get protection and you

get to ride the upside and you can hold

it forever. And that's for the Bitcoin

curious that are afraid to get on the

roller coaster, which is Bitcoin, or the

hyper roller coaster, which is the

equity, the turbocharged Bitcoin, MSTR.

But then there's a lot of people that

don't want Bitcoin exposure. They just

want US dollar yield or euro yield or

JPY yield. And so, you know, how is

that? How many people is that? Well,

that's like every retiree in the world.

That's like that's like everybody.

There's no one that doesn't want eight

or 10% dividend yield at extremely low

risk. That's why the credit markets,

fixed income markets are bigger than the

equity markets. So what we did there is

we're just using Bitcoin to generate

that. And um if Bitcoin is going up,

it's been going up 55%. So you can

pretty much slice any amount of yield

out of 50 less than 55% and you can give

it to an investor

and uh you know I think a Bitcoin

maximalist long-term forecast is 30%.

But I I figure Bitcoin's got to yield

between 20 and 60% a year for ever.

And as long as Bitcoin is returning 20%

or more, you can always sell these

instruments offering 6 7 8 9 10% and

swap it into 20 30 40%.

Capture the difference for the equity

investors and that way the equity

outperforms Bitcoin.

The convertible you can probably and and

here's our engineering. We're basically

engineering the company for the equity

to outperform Bitcoin by 50 to 100%.

Then you've got Bitcoin. If you want

straight Bitcoin, you buy it from IBIT

or you buy the BTC and you hold it

yourself. And then we're engineering,

but you're getting you're getting all

the upside and the downside of Bitcoin,

all the volatility. Then strike the

convertible instrument is engineered to

give you 80 to 100% of the performance

of Bitcoin but with 10% of the downside.

So we want 80% of the upside, 10% of the

downside and a guaranteed dividend. So

that's for people that kind of want to

have their cake and eat it too and they

don't want the roller coaster.

And it almost is meant to compete with

IBIT. You know, if you think about it,

it's like instead of 100% of the upside,

100% of the downside, and no dividend,

what if I gave you 80 to 100% of the

upside? I don't know if it'll be exactly

100%, but the the more we lever the

equity, then the more likely the

convertible equity becomes equal to

Bitcoin performance. So, we're shooting

to get the convert to perform the same

as Bitcoin over the long term, but with

principal protection and liquidation

preference. and with the guaranteed

dividend stream. And that's that thing.

And it seems like there's a market for

people that want the upside without the

downside, right? And uh Right. I mean,

that's the engineering. I give you the

upside, you have no downside, and I pay

you a dividend while you wait to get

rich. Okay?

Which is

[Applause]

the the smart financial engineers in my

opinion agree with me. They're like,

"Oh, wow. This is a good idea." But a

lot of people haven't quite they haven't

quite figured it out yet because

because um nobody's ever issued a

perpetual uh convertible preferred

stock. They're the the last 10 preferred

stocks issued in the last four years.

The top three of the 10 were ours and

they're all perpetual and all the other

seven aren't. People don't normally sell

a perpetual dividend or a perpetual call

option because they don't have a

perpetual use of proceeds. They they

they can't invest in something for a

hundred years. And so the Bitcoin

superpower is if you believe if you're a

Bitcoin believer, you think Bitcoin is

going to outperform the S&P index

forever.

And if Bitcoin outperforms the S&P index

forever, you can sell a dividend that's

less than the S&P forever. And then you

can also sell a a convertible preferred

that outperforms, right? That that's

good forever. So, so we engineered that.

And then the idea with the the fixed is

is we're going to give someone an

infinite duration dividend yielding. and

and and the conventional thinking is

you're crazy. You should have a call

option in so you can retire it if

interest rates fall. And that's a way a

convent a conventional banker is like

they all like you should put a call

option and then you call it if if if the

interest rates fall 200 basis points.

You'll call it and you'll refinance it.

But that's the way you think if you sell

144a over-the-counter instruments with a

three-year duration to trade in the

over-thecounter market. But those are

all crippled 20th century instruments.

The way you think in the 21st century is

I'm going to put strife into the market

and I don't care how much I sell in the

first week. I'm m I I'm creating the

instrument so that I will maximize the

amount of capital I raise over the next

decade or 20 years. So we wanted uh to

create the instrument so that if if

Jerome Pal drops the interest rates 200

basis points strife trades up to 150 or

and when it trades up to 150 the cost

the the yield falls to 6%. And when the

you know so instead of 10 it falls to

six and then we're we're able to then

sell it. I'm not buying it back.

I'm selling it. Right? The whole idea is

when the interest rates fall, I will be

selling billions and billions of dollars

of that instrument via the ATM at 150 or

200.

And the small thinker thinks, oh, I have

to buy it back, refinance it, go back

and do a 144A deal with the investment

bank with a huge, huge commission to

refinance it, and then that'll be

illquid and crippled. And so I don't

want to issue a series of crippled,

illlquid securities. And by by the way,

what I'm describing

the entire preferred stock market, all

of the preferred stocks, in my opinion,

are garbage, right? to all this this

you're you're buying these garbage

instruments that are illlquid that trade

$400,000 a day that yield 6% that have

the credit of a midsize regional bank in

a state you've never been to with

mortgage portfolios you don't understand

and you're supposed to accept 6% illquid

over-the-counter

that nobody can buy you know instead of

something which yields more which is

100xes liquid that everybody can buy.

And of course, the problem is all that

corporate credit, all of that preferred,

it's all 20th century ideas on 20th

century credit models. So, what we did

is we concluded the killer app for a

Bitcoin treasury company

is to issue credit Bitcoin, you know,

Bitcoinbacked equity. That's the first

app. And yeah, you can do that for a

while, but the long-term durable

business is to issue BTCbacked credit

instruments and issue billions and then

tens of billions and then hundreds of

billions. And you're not competing

against other Bitcoin treasury

companies. You're competing against

every junk bond sold by every company

with no money, every corporate bond sold

by an investment grade company. And

guess what? We're more collateralized

than the best investment grade companies

issuing corporate bonds. We have better

collateral. So, we're competing against

corporate bonds, investment grade bonds,

junk bonds, private credit, and then

against preferred stock in that market.

And the idea is we're just going to sell

something that is more creditw worthy,

less risky, better collateralized, that

yields more, that's more liquid, that

everybody understands.

And ultimately the goal is

we're, you know, instead of a market of

a thousand preferred stocks with 500

million in the float each that are

illquid, that are garbage,

how about one preferred stock with $50

billion in the float that trades $2

billion a day that yields more that

everybody's heard of that's backed by

Bitcoin, right? And and to do that, you

just kind of adopt those metrics. And

what I just described, every Bitcoin

treasury company can copy. I invite you

to copy it. You know, I encourage you to

copy it because just like 20 BTC

companies issuing equity legitimizes

Bitcoin. and Bitcoin equity. 20

companies issuing Bitcoin backed credit

instruments will legitimize Bitcoin back

credit will accelerate the digital

transformation of all the credit markets

and create a stampede of capital out of

the 20th century defective crippled

credit instruments into the digital

credit instruments of the 21st century

and uh S&P and Moody's and Fitch they'll

all just start to cover that everybody's

view of credit risk will evolve. Uh the

retirees get 200 basis points more yield

on something which is an order of

magnitude less risky.

Bitcoin goes to a million 2 million bit.

As Bitcoin goes up, the collateral goes

up. The markets all evolve. And what

you're what I'm describing is the way

that I see the digital transformation of

the capital markets driven by these BTC

companies. Thank you so much for

all right so we have about 30 minutes

left um I will ask a last question to

Adam and then open to the Q&A so please

prepare your questions um what we are

witnessing really is Bitcoin as the

standard store of value for capital

markets Bitcoin treasury companies that

are securitizing ing Bitcoin and

providing access to various capital

pools and have you seen very well

described by Michael like the ability of

Bitcoinary companies to create new

financial instruments for various pools

of capital and of course that's a

monstrous opportunity and as you

mentioned Michael it's not a competition

we are collaborating and creating an

industry and on the same mission to uh

get Bitcoin at the core of the capital

markets And Adam here with us has been

working for a long time on digital

capital markets as well. So we would

like to get your perspective Adam on uh

potentially first uh some risks and

trade-off to take into account when it

comes to Bitcoin capital markets and how

you've built also solutions for 247 365

uh capital markets and how do you see

the evolution of the role of Bitcoin

treasury companies uh within the

transformation as well of Blockstream

within the asset management industry for

the adoption of Bitcoin And how do you

see this impact of Bitcoin treasury

companies overall into capital markets?

Yeah. So um as I might have mentioned, I

think that Bitcoin is the hurdle rate.

So that's that's effectively, you know,

the fiat currencies are suffering a lot

of inflation and Bitcoin is best

performing asset class of the last

decade. And so you know if you realize

that you don't want to invest in

anything that isn't competing with

Bitcoin very very hard to compete with

Bitcoin. So the obvious solution is to

redenominate the companies in Bitcoin,

base their treasuries on Bitcoin and you

know use the profits from their