"Bitcoin Will Be $10 Million!” The Future Of Capital Markets w/ Michael Saylor

No force on earth can stop an idea whose

time has come. I think we created in

strategy the world's most taxefficient

scalable generator of fixed income. I

mean the truth is obviously I'm biased

but I think most of this credit is

garbage. The worst thing we sell is five

times over collateralized and it's been

unrated. The best investment grade bond

in the world isn't three times over

collateralized. So the worst thing we

sell is better than the best thing of

the conventional finance establishment.

>> That's dope.

[Music]

>> Let's go.

>> Michael, you've been on a bit of a tear

buying Bitcoin for a few years here. you

added 390 more Bitcoin this week you

announced bringing the total to give or

take 640,000

Bitcoin over 3% of the total supply. So

I think a natural place to start the

conversation is why Bitcoin and what is

Bitcoin to you

know I think the last 12 months

uh we've had a lot of clarity with

regard to that. Uh the digital assets

industry is kind of bifurcated into two

segments. There's digital capital

and then there's digital finance. And uh

Bitcoin has emerged as as digital gold

but a store of value. That's a capital

is a store of value. And um that started

with the SEC approving the ETFs about a

year and a half ago. But really the

catalytic event was in March at the at

the crypto summit the White House. And

at the end of that day, David Sax said,

you know, Bitcoin is digital gold. And

he said it publicly. That's the that's

the policy of the administration.

So from that point forward, you had kind

of this rippling viral go global

consensus and everything kind of just

locked into place. Okay, that's digital

gold. What's the killer app for gold?

It's gold back credit. For 300 years,

the Western world ran on currencies and

and credit instruments that were backed

by gold all the way up until Nixon took

us off the gold standard in 71. So half

the industry is digital capital, which

is Bitcoin, and then digital credit, the

credit instruments built above it. And

we've just we have just laser-like

focused upon building out that stack.

The other half of the industry which has

really exploded uh in uh vitality over

the past 12 months with the new

administration is digital finance and

it's basically the tokenization of

currencies the tokenization of stocks of

bonds of real world assets of brands

every every type of tokenized

application and that has uh been a

massive uh tailwind and source of energy

for all of the proofofstake networks.

These are not new narratives to people

who have been in the Bitcoin space for

quite a while, but we're finally seeing

it catch fire as you mentioned

>> and not only at the retail level, but at

the institutional level. And

>> a day doesn't pass anymore where you

don't get a major announcement from a

Morgan Stanley, JP Morgan, City Bank,

Wells Fargo about either custodying the

assets. JP Morgan last Friday announcing

they'll accept Bitcoin and Ethereum as

collateral. You were very early

obviously to the institutionalization of

Bitcoin. So what do you make of this

trend of institutionalization? Where are

we on that path?

>> I think for uh for Bitcoin and the

entire crypto industry for it to 10x

from here uh the major catalyst is um is

the embrace and adoption by the major

banks. So uh the actions of JP Morgan,

Bank of America,

Wells Fargo,

uh BNY Melon,

PNC Bank, um the support that's coming

from Schwab, from from boutique banks

like Texas Capital, um all of those are

big actors. uh the the actions of Morgan

Stanley in the space uh they led our bit

our IPO of stretch which was the biggest

IPO of the year and it's basically a

bitcoinbacked credit instrument so I

think probably the most auspicious thing

is uh is to see I didn't mention city

but the support that's coming from city

from JP Morgan from Wells Fargo from

bank of America all of those banks are

revising ing their crypto policies which

were were very restrictive and blanketed

as of a year ago and and they've changed

their their view toward the entire

industry and toward you know crypto

assets as collateral in the past in some

cases four weeks like so this is a very

important month

>> do you feel in your conversations that

those are a reluctant embrace or that

they're actually excited

>> you know I give them the benefit of a

doubt If you roll back to the crypto

winner, uh the regulators shut down, you

know, and I would say almost

assassinated Silvergate and Signature

Bank. Those were two good banks that

were put out of business by uh the

previous administration

>> on a Sunday.

>> And that traumatized

the entire banking establishment, right?

If you combine that with the guidance

that came from the Fed and the

regulators, I think they were all

traumatized and their view is like,

"Hey, the bank's been around for a

hundred years. I'm not going to blow it

up on my watch." And so they all took

very conservative, you know, uh,

extremely paranoid policies and maybe

the paranoia was injected into them by

the administration. I think after

November 5th, we knew there was going to

be a new a new view toward digital

assets, but I don't think people

realized how constructive and positive

it would be until you got 12 pro-

crypto, 12 pro- Bitcoin cabinet members.

And then Scott Bessant went out of his

way as the secretary of the treasury uh

to make sure that Treasury and the OC

and the FDIC and even the Federal

Reserve uh uh provided very positive

constructive guidance to those banks

that now it's safe. It's safe for them

to start the custody. It's safe for them

to start to uh to issue credit and it's

safe for them to trade and handle this

asset. And so if you look at it from a

pragmatic point of view, these are the

largest most riskadverse organizations

in the country and from the point that

it's safe to do something to expect I

would think oh it might take four years

and so the fact that it's happening um

we're not even in the first anniversary

of the election

right the fact that they're actually

moving in the 11th month

uh when it was a death sentence to move

12 months ago. I think that that's very

auspicious and and I think I you got to

take your hat off and applaud the people

that are running these trillion dollar

organizations

that that are able uh to to start to

lead their organizations to a better

place. Now, having said it, they're not

cryptonative. They're not tech

companies. They're going to move

methodically. They've got a lot of

people, a lot of moving parts, a lot of

constituencies to please. So, I think

it'll be four years of progression

before, you know, maybe the 10% tech

leaders have the kind of stack of

services that they want. Vanguard came

out and said, "Never. We will never

offer these products." That changed in

the last month. And now, to your point,

CFTC looks like we're getting a pro

bitcoin chairman. and Fed Governor

Waller last week said the crypto is

woven into the fabric of the American

financial system. These are things that

would have been absolutely mindblowing

even a few months ago, much less

>> 12 months ago, the overunder would have

been outrageous. And you know, and the

irony though is uh Vanguard was very

explicitly anti-crypto, anti- Bitcoin.

And you know, Scott, who is my biggest

shareholder?

>> I do.

>> Vanguard.

>> Okay. So, so, uh, they, you know,

no force on earth can stop an idea whose

time has come. And, uh, right now you

have 750 million people in the crypto

ecosystem.

You have, uh, you have something that I

think when I got into the space 5 years

ago, it was a 2002

200 billion to $250 billion industry. It

was $2 trillion 12 months ago. It's

four$4.5 trillion dollars right now. Uh

there's an avalanche of capital, an

avalanche of people, armies of people.

And and their view is this is an idea

whose time has come. And even you know

Vanguard got big because they invented

equity capital. the Vanguard 500, the

idea that you just want to buy a chunk

of equity without taking any

counterparty risk, you buy a mixture of

500 companies. And that was their big

thing, equity is capital. And now we've

got digital capital. And of course, you

know, it's a new paradigm. They'll be a

bit slow, but they can't help but invest

it because money is indexed to invest in

credit and is an index to invest in

equity. And once you've got 250

companies that are holding digital

assets and once you start having credit

instruments backed by digital assets,

the people that run those funds have to

own those things. They can't not. Well,

let's dig into that. Obviously, you

mentioned that STRC was the largest IPO

of the entire year. And now we're at a

point where it's not just about buying

and gathering Bitcoin. You've found

novel, creative ways to open this wall

of capital that couldn't get access to

this industry or asset class before, and

you seemingly continue to do that with

these new releases. So, maybe let's talk

about the digital credit stack that

you've built.

>> Yeah. Well, say say Bitcoin is like a a

45 V 45 ARR asset and uh you can't you

can't like uh hold money that you need

in two weeks in Bitcoin because you

might have a lot or or not as much. So,

Bitcoin is a long duration asset. You

want to hold it for 10 years, 120

months, and you're going to be on a 45

volatility roller coaster and you're

going to make a lot of money and you got

to believe in it. You get on the street

and you ask a hundred people, do you

want that? Most of them don't want that.

Your retire, your grand, you know, your

father, your retirees, fixed income,

they don't want that. So, um, what do

they want? Well, some people think, I

want to have my cake and eat it too. Can

I just have 75% of the upside,

none, no downside,

and uh, just give me the rest as a fat

dividend, like 8% dividend. and and

that's kind of interesting to people and

we created that that's called that's a

convertible preferred stock called

strike strk that was the first digital

credit instrument we created like upside

a lot you know 80% of the upside 10% of

the downside and a fat dividend while

you wait um and then the next thing uh

we created was a 10% dividend forever

how do you pay a 10% dividend forever.

Um, you won't find Apple or Microsoft.

If the CFO of Microsoft walked into the

boardroom and said, "I want to pay a 10%

dividend forever." He'd get fired. Okay?

So, we created that because the reason

we wanted it is we intend to invest the

money forever. We're going to take the

billion dollars and we're going to buy a

billion of Bitcoin. And my forecast is

Bitcoin goes up 30% for the next 20

years. It goes up 20% forever after

that. So our long-term forecast is we

know we're going to do double maybe

triple that and we want the money

forever. So if you have the best use of

proceeds or the best collateral then you

can offer the highest yield. And so we

did that and that was the next deal and

that was more successful than strike.

And then we created a third deal uh a

third instrument called ST strD stride.

And there we stripped, this is a joke,

we stripped the investor protections off

it. We said Strife was a cumulative

preferred with penalties if we missed

the dividend. And Stride was a

non-cumulative preferred, no penalties

if we missed the dividend. And you're

like, well, why would anybody want to

buy that one? It's because the Strife

product traded above par and it was

yielding 9% and we sold Stride below par

and it yields 12 and a half%. And so if

you actually believe in Bitcoin and you

like the company, you're getting paid

350 basis points extra. And if you just

want the extra three paragraphs, you

give up three and a half% dividend

forever. And so we created a junk

instrument on purpose. and and along the

way we realize that what people really

want is they just want a high yield bank

account. They want a money market that

pays them triple. And so the fourth the

fourth exercise was stretch STRC. And

it's the one I wish I did first, but I

couldn't have done it first without

doing the other three to figure out what

people wanted. So the idea of stretch is

you pay a monthly dividend that's cash.

That's uh right now it's 10.25%.

When we took the thing public it was 9%.

But we pay a dividend. We target par

value. So we target the instrument to

trade between 99 and 101. And it's

trading about 98 spot 7 or almost 99

right now. And the idea was we're going

to strip away the delta. There's no

upside from Bitcoin. We're going to

strip away the risk. We're going to 7x

or 10x overcolateralize it. We're going

to strip away the volatility. The V of

Bitcoin was 50. Strike got to 30.

Stride or Strife got to 20. Stride got

to 15. And this got to like five to

seven. So we stripped the volatility

away and then we stripped the duration

away. instead of you holding it for 120

months. Like, how many people want to

buy a 20-year bond? Not Not many. How

many people want to buy a 20-year crypto

bond? Not many, but how many people want

a money market that pays them 10%

instead of 4%. A lot of people want

that. So, we and we just kind of created

something that looks like a money market

instrument. one month a one-mon Bitcoin

bond that right now pays about 10%. And

while we did it, in order to do it, we

created a variable dividend where the

company can change the dividend every

month. And so if it's trading weak, we

raise the dividend. If it's trading too

strong, we lower the dividend. So we

kind of created our own currency, Scott,

like the pound or the euro. But if you

wanted a Bitcoin backed or the crypto a

crypto dollar, we created that

instrument with the risk-free rate or

the the the rate of 10.25%.

Now, um that's the one we're most

excited about because that's the highest

degree of financial engineering we've

done. It's like it's like extracting

kerosene from a barrel of crude oil.

It's like pure jet fuel or rocket fuel.

Now, um, along the way, so we ended up

creating instruments that yield 9 to

12%,

which is like double or triple most

credit. But then we tripped over this

very interesting magical thing. We

didn't expect it. What we realized is if

you sell equity to pay the dividend, the

dividend becomes tax-free.

So the dividends are return of capital

dividends, rock dividends we call them.

So what you're doing is you're returning

the capital to the sh to the shareholder

or the creditor. So stretch is not a

bank account that pays 10.25%. The tax

equivalent yield is 17% if you live in

Florida and it's 20% if you're a New

Yorker. So, we created a bank account

that pays 17 to 20%

by combining digital capital with a

digital credit instrument with a digital

treasury company that issues securities

to pay the dividend. And uh I'd love to

tell you that I had figured it all out

before we started, but we really tripped

over digital capital and then we

developed digital credit out of

desperation to avoid credit risk and

then we and then we used the ATM to fund

the dividend. Then we discovered it was

all going to be return of capital

dividend and and the punchline is I

think we created in strategy the world's

most taxefficient scalable generator of

fixed income. Can you put that in

context of what else is available in the

market? People obviously see their

savings account yielding 1% in an

environment where bonds are four or 5%.

Obviously, you talked about a 20 or a 10

or a 30-year bond. This is crushing all

of those.

>> Yeah. So um you know so far the US

dollar uh rate short like one month rate

or short-term rate is the highest in the

western world is 400 410 basis points

right now or something and uh money

markets are kind of tied to sofur and

USD but the banks banks are paying on

average 40 basis points like if a lot of

banks give you 10 20 30 40 basis points

in the US they're giving you nothing.

Um, after the money markets, corporate

credit rates are tied to it. So,

investment grade will get you to five,

four and a half, 5%.

Bank preferreds are yielding 5 and a

half, 6%. Junk bonds are 6 and a2.

Private credit is 7 and a half. So,

conventional credit in the United States

is anywhere from 4% in a money market to

7% for private credit. And the banks are

giving you very little. But that's the

best it's going to be in the Western

world because when you go to Canada, it

goes ratchets down to 3%. When you go to

Europe, it ratchets down to to 1.8%.

When you go to Japan, it ratchets down

to 50 basis points. In UAE, it might be

three. In Singapore, it might be two or

less. Uh, and in Switzerland, it's

negative. And so these rates are pretty

much they're all headed to 200 basis

points or less. And so what we're

talking about is an effective yield of

5x more than that, but a tax equivalent

yield of 10x more than that.

And the thing that's uh interesting

about our company is our product is the

credit. Like that is the product. So, if

you said to me, Mike, you can uh sell

10% yielding euro credit uh and sell $10

billion of it, or you can uh price it at

5% yielding and sell a billion. The

conventional company would take the 5%

and sell a billion. But we would take

the 10%, market it, and then go look to

sell a 100red billion because we want to

ship the yield because our use of

proceeds is paying us 20. And so for us,

we're probably the probably the biggest

well-run company who's intentionally

keeping the capital to invest in Bitcoin

and trying to pay the highest possible

credit yields. And what we do

intentionally, enthusiastically, would

get you fired if you worked at Apple or

Amazon or Google or Microsoft. So, we're

repricing the cost of capital, working

to invert the world order for corporate

finance. And our mission is we want

everyone to get paid 10% after tax or

10% tax deferred on their short-term

treasury holdings. That stretch IPO is

the biggest IPO of the year. It was one

basis point of the treasury market in

the US. It's 1/100th of 1%. Our goal is

to be 1%. And if we're 1%, you know, the

company's going to be a trillion dollar

company and we're going to buy $300

billion dollars worth of Bitcoin

just with that one little instrument.

And what you're offering is incredibly

compelling, obviously, in the current

environment, but we know that regardless

of what PAL does in a couple months,

there's going to likely be a uh Fed

chairman who's accommodative as far as

rates going down. So, isn't that going

to open even a wider ocean between what

you're offering and what's readily

available? Also, there's $7.5 trillion

right now just sitting in money markets

waiting

>> for an excuse to enter whatever asset uh

is that investor's favorite flavor of

the month.

>> When sofur falls 100 basis points, all

your money markets immediately get

repriced down 100 basis points. All the

corporate bonds will be repriced down

100 basis points. mortgage back

securities, all of the conventional

credit instruments of the 20th century,

corporate credit, real estate credit,

sovereign credit, it will all be

repriced down.

Us, we will actually just uh enjoy the

spread and our message will be look now

we're even 100 points better than we

were because at the end of the day,

again, doomsday for us is oh, Bitcoin

goes up 20% a year instead of 30% a year

or 40. So, so I I think the big idea is

conventional credit is crippled by

design. Like why would a company pay you

more than the bare minimum? They don't

want to. But also, conventional credit

is built on crumbling depreciating

assets. Like like the credit is backed

by hardware that depreciates. It's

backed by a house that depreciates. It's

backed by an iPhone 17, which would be

obsolete by the iPhone 19. it's backed

by a company that's, you know, got a

depreciating interest and or it's backed

by currencies that are, you know, being

debased. So, I think that digital

capital rewrites the playbook for

digital for for credit and digital

credit. And um I, you know, you know me,

Scott, I've never really looked at this

as a competitive game where the

companies in the crypto market are

competing with each other. What I you

know my view is

we are competing with 20th century

credit instruments and 20th century

equities and 20th century financial

entities right and so if you come up

with a better way to to

how many people in the world want to get

paid you know 10 or 12% after tax on

their capital well like everybody.

So who's losing? And the loser is going

to be whoever is selling the junk

crippled credit instrument that's backed

by a weak company. They'll have to pay a

higher rate or they won't get the

capital. But the winner will be the

investor and the winner will be the

nation state. The winner will be the

companies that that bring these new

products to the market. So I think in in

in defi and digital finance the idea is

hey let's just do everything a million

times faster. Move the money at the

speed of light. let the computers, you

know, trade it a million times a second

on the weekend and let 400 million

companies raise capital over the weekend

by selling a token instead of taking

four years and $40 million of lawyers.

That that's the idea. Smarter, faster,

stronger, you know, and in the capital

markets and the credit markets, the same

idea. It's like make the capital work

smarter, make it faster, make it

stronger, right? And the loser is going

to be the 20th century. And the 20th

century deserves to lose.

>> Buyers of these instruments, who do they

have to be? Do they have to have a deep

belief in Bitcoin like you do to believe

in these instruments and purchase them?

Who do you see as the future buyer of

these of digital credit?

>> The beauty of digital credit is we took

all four of those things public on

NASDAQ. So any place where you can buy a

NASDAQ stock, you can buy them. If

you've got money locked up in a

retirement account in Australia or UK or

Europe or a 401k, you can buy them. Uh

they just got listed on Robin Hood. We

lobbyed Robin Hood for about nine months

and those are the first four preferred

stocks that Robin Hood ever listed about

two three weeks ago. So you can buy them

anywhere. You can buy any security and

they're totally compliant. And in terms

of the risk you're taking, well, it's

kind of simple. It's it's backed by

Bitcoin. So if you think Bitcoin's going

to zero tomorrow forever, then your

collateral is bad. So you don't want to

buy it. It's like buying New York real

estate. If you think New York's going to

sink under the ocean next week. If if if

you believe that Bitcoin is solid, a

solid capital asset, then that's the

first thing. And then the second thing

is you have to trust the issuer, which

is we're a hundred billion dollar

company in business public since 1998.

So, we're we're lucky to be reasonably

well known and creditw worthy and we've

got $75 billion of capital. But, uh, on

that note, right, today was a big

milestone for us because S&P just gave,

uh, its first credit rating to a Bitcoin

treasury company when they gave us a

credit rating this afternoon. So, we're

getting we're getting support from the

credit rating agencies. We're getting

uh, support from our our equity

investors. And if you trust if you trust

the company and you trust Bitcoin, then

it's fairly straightforward. It's like

at that point your choice is, you know,

do I want 3% for my money market, you

know, or do I want 10% or 20% tax

equivalent from one of these

instruments?

>> How big of a signal is that from S&P to

give you such positive credit rating?

Doesn't that actually abstract away a

lot of the risk to people that I asked

you about? Yeah, I I mean I think we did

the we've been doing the math and there

was like $600 billion dollars of capital

that could buy unrated credit

instruments and and that gets tripled or

something uh just by this one rating. So

we'll tap into a pool of a trillion

dollars of additional capital. uh you

know we've made good progress so far

like uh in the first six months uh Black

Rockck's PFF which is a $15 billion uh

ETF that holds credit and generates

yield they actually uh allocated like

three and a half% of that fund to our

credit instruments. So we managed to get

I think they became one of the biggest

investors in Stretch. They bought 200

million dollars plus of it in one day at

one point. So, we got some support from

credit investors, but I met a lot of

insurance companies and a lot of fixed

income investors and they said, "Tell us

when you get a credit rating because

then we can buy it." But right now, the

mandate on our fund is we can only

invest in in rated credit. So, you know,

credit investors are the most

riskadverse investors in the world. And

so if the endowment said do this, but

make sure you you've got no more than 5%

or 10% allocated to this rating level,

then as soon as you get that rating

level, well, now we actually pay two to

three times the yield of everything

else. I mean, the truth is, you know,

and obviously I'm biased, but I think

most of this credit is garbage. It's

like preferred stocks from 5,000 banks

and it's they're all opaque illquid

assets and they yield you 4% after tax

and it's like why would you buy that

stuff right when you could have

something two or three times better or

four time our our preferreds one

stretches 100 times to 200 times more

liquid than the stuff that people

actually put in your portfolio. So I

think it's the the things will speak for

themsel but we fight against you know

the prejudice against crypto

>> and you you know it's like well it's a

crypto thing it might be the wor the the

the worst thing we sell is five times

over collateralized and it's been

unrated. The best investment grade bond

in the world isn't three times over

collateralized. So the worst thing we

sell is better than the best thing in

the conventional finance establishment.

But you know as we say the struggle is

real and um you know and and we have to

like walk before we run. And so this is

a never-ending non-stop campaign charm

offensive to persuade the politicians,

persuade the regulators, persuade

persuade the credit rating agencies, p

persuade the big money managers,

persuade the mega banks, persu Morgan

Stanley. The first deal they did where

they were the lead underwriter for us

was stretch.

Took us five years before we got Morgan

Stanley to lead our IPL. So we're

winning. But I guess the good news for

everybody is we're going to keep winning

for the next 10 years. And there's 40

quarters during which Vanguard will

first accidentally own my stock, then

they will grudgingly let you buy it,

then they will allocate 1% to it, and

then they'll be like, "Well, it's uh I

guess it's a good idea." And what I say,

and I've said it, Scott, and you've

heard it, it's like, by the time the

bankers tell you it's it's okay to buy

it, it'll cost you a million dollars of

Bitcoin. And when they tell you it's a

good idea, it'll cost 10 million of

Bitcoin. So, you're getting a 99%

discount right now to do the work

yourself and show some courage

and you get a 99 a 90% discount. You

know, when they make it easy for you,

but you'll pay 10 times more.

>> Well, it's been a pleasure watching you

do the work for the last 5 years. Ladies

and gentlemen, Michael Sailor.

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