Are you already like a shadow central
bank of Bitcoin?
>> We are sort of like the central bank of
Bitcoin. We created currency that's
pegged to the dollar and then we back
that with Bitcoin.
>> How do you still respond to critics who
call this financial engineering?
>> It is financial engineering. There's
nothing to be ashamed of. No one's ever
done this.
Hello and welcome everyone to Gatecast
zero to takeoff. I'm so excited to be
your host today. My name is Maria Wchuk.
We're going to board We Were right now
at Gay.com and we have a special guest
for you. So, please welcome Michael
Sailor, executive chairman and founder
of Strategy. Michael, welcome to our
show. How are you doing today?
>> Awesome. Thank you for having me.
>> Thank you for joining. Um, Michael, you
are actually a legend and you're one of
the biggest Bitcoin advocates out there.
So, what was the exact moment that you
remember that you thought that you
realized that you're all in on Bitcoin
and there's no turning back?
>> Um, during the COVID lockdowns of 2020,
we watched Main Street shut down and the
world economy came to a the physical
economy of the world came to a grinding
halt and the financial system was turned
upside down and the financial economy
exploded. And we had a company at the
time and we were struggling to compete
and I realized that we were either going
to have a fast death or a slow death or
we were going to have to fight and
transform oursel into something new and
digital.
>> And so we discovered Bitcoin uh during
the war on COVID and the war on currency
and uh Bitcoin was our strategy to
escape uh a pretty miserable existence
and turn oursel into something digital
and modern and much better. So I would
say um everybody who's watching a micro
strategy that has become strategy right
now you are buying every dip. So some
say that it's a visionary some say it's
a reckless leverage. So what do you
think those people who uh say the second
thing
>> we've raised about $44 billion over the
last year and a half.
>> Yeah.
>> And most of that is equity. So there
there isn't really leverage. Equity is
capital that you have forever. We're
funneling that capital into the crypto
economy. We're buying Bitcoin. So to
date, we've acquired about $ 48 billion
worth of Bitcoin. We've done it through
like 88 different transactions. And we
buy the Bitcoin as soon as we raise the
capital.
>> Mhm.
>> And the capital flows to us because
people want to buy the credit
instruments or they want to buy the
equity or they believe in in Bitcoin.
Talking about buying Bitcoin, um, if I'm
not mistaken, Strategy now holds over
650,000
Bitcoin, which is more than 3% of total
supply. So, do you still believe that
you are a buyer of Bitcoin or are you
already like a you can say um shadow
central bank of Bitcoin?
>> Well, our our view is that Bitcoin is
digital capital.
>> It is the world reserve capital network.
It's it's replaced gold as as the global
non-s sovereign store of value for the
human race. And so uh banks normally buy
credit. We actually sell credit. So what
we're doing is it's the reverse of
commercial banking, retail banking. It
is sort of like central banking. We are
sort of like the central bank of
Bitcoin. Yeah.
>> In the sense that we created um a
product STRC. It's a currency that's
pegged to the dollar and then we back
that with Bitcoin and as people buy that
currency STRC, we buy Bitcoin with it
and therefore we're funding the Bitcoin
economy by linking it to the traditional
finance economy and to the money markets
of the world.
>> Actually, when you said about you're
raising capital including preferred
perpetuals to fund paybacks, buybacks to
be exact. So, how do you respond
>> to fund Bitcoin buys?
>> Okay. Bitcoin buys
>> but still how do you respond?
>> We're not buying back stock. We're
buying Bitcoin. We're actually funding
the Bitcoin network.
>> Okay. So, how do you still respond to
critics who call this financial
engineering?
>> It is financial engineering. You know,
like rocket engineering gave us SpaceX
and Starlink and we've done it through
very responsible engineering and there's
nothing to be ashamed of. We're giving
the world a better product and we're
doing it through math and engineering
and physics. H you actually strengthened
strategies operating reserves while
continuing to acquire Bitcoin. So how do
you believe your risk management has
evolved?
>> You know when we started on this journey
um the product was the equity and we
used credit and leverage in order to
improve the performance of the equity.
M. So we did a senior note which was PL
where we pledged Bitcoin collateral and
we realized that was constraint on our
growth and so we refinanced that retired
it. We retired that and we pledged never
to do that again.
>> Then we moved to nonreourse debt
convertible bonds. We became the biggest
convertible bond issuer in the world.
>> But we realized that it's not possible.
retail investors aren't allowed to buy
convertible bonds and they traded very
very cheap at a big discount to their
fair value and we couldn't deliver them
to the world and that was a constraint
and eventually we outgrew the entire
convertible bond market so we decided we
needed to move on and so the fourth
iteration was digital credit and digital
credit isn't a bond at all digital
credit is an equity a perpetual
preferred equity and so I would say in
the fourth stage we decided we don't
want to have leverage We want to have
amplification via equity. We never want
the principal to come due. We'd rather
pay a higher dividend forever.
>> I'd rather pay 10% forever than pay 5%
for 5 years. We realized the best thing
for us was to begin to retire all the
debt and then to put in place a cash
reserve. We just announced a $ 1.44
billion cash reserve for the dividends
so that all of the amplification and all
of the credit we sell in the future is
equity. It's not debt. and the company
has the option to not raise any capital
in the capital markets for up to two
years.
>> So, we've effectively stripped the
credit risk off of the business. And um
one of the nice fortunate discoveries
when we got into digital credit was we
realized that we could take those
securities public.
>> Mhm.
>> Like STRC stretch and we could put a
shelf registration on them so we can
sell them continuously to the market in
quantities of 10 million a day, 100
million a day, a billion a day without a
specific offering and they trade
globally on digital rails.
>> So how's it going with selling those?
We've sold seven billion dollars, raised
seven billion dollars in the last nine
months. Now it's about an eight billion
um outstanding credit uh industry. So no
one's ever done this. Normally a
preferred stock would trade over the
counter, $100,000 a day. A publicly
traded preferred stock would trade a
million dollar a day. Our first digital
credit instruments were trading 30
million a day.
>> And then Stretch is trading more than a
hundred million a day. So it's it's 100
times more liquid
>> and and stretch happens to be the
biggest IPO of the year, the most
successful stock offering of any company
in America in the year 2025.
>> I would like to take a small step back
because when we were talking about MSTR
in in the past, so some retail holders
who bought in the past MSTR when MNAV
was about 1.0 and they suffered because
it fell below that that price. So how do
you reassure that every shareholder who
is choosing the long-term strategy that
they are doing this right?
>> Okay. Well, if you look at the
performance of the stock MSTR versus
Bitcoin versus the S&P over the 5year
period since we began this journey
>> going back to August 10th of 2020 when
we announced
>> um
>> Bitcoin's up about 45% a year
>> for that time period and the volatility
is about 45. Mhm.
>> Uh MSTR is up about 70% a year and the
volatility is about 70.
>> Oh, even over the
>> over the 5 years.
>> 5 years. Okay.
>> The S&P is up about 14%. So onethird of
the of Bitcoin over that time period.
And and the volatility is the VIX about
15. So and gold, by the way, is up about
14 or 15% a year. And so what you what
you see is the Bitcoin is three times
the performance and the volatility of
the S&P and our company is about 150% of
Bitcoin. And what I'd say to an investor
is
>> if you have a time horizon of more than
four years, ideally 10 years.
>> Mhm.
>> And if you want enhanced exposure to
digital capital and digital credit, then
then you would buy MSTR our stock. If
you don't want to trust a counterparty,
if you just believe in digital capital,
if you believe in the crypto economy,
you believe in Bitcoin, and you would
just like to keep your money and you
have a long time horizon like four years
or longer, you should buy Bitcoin. And
if you have a shorter time horizon, if
you need the money in 12 months, if you
don't like volatility,
>> but you still believe in Bitcoin and you
believe in digital assets, because the
credit instruments were created to give
people two to four times the performance
of traditional money markets or
traditional credit
>> because they're powered by digital
capital, but they don't have the same
volatility as digital capital. And and
you see that with products like STRC. So
you mentioned once that selling Bitcoin
would be the last resort for you right
now. So can you describe one scenario
when this may happen and what will be
the reason for that?
>> Well, I'll make one point by the way.
Four months ago, Bitcoin was at an
all-time high of 125,000.
>> That's true. But that's interesting.
>> We've only been 12 weeks during uh
during this draw down. And of course
there are already people that you know
four months ago they thought Bitcoin's
going to going to go to the moon and in
12 weeks they're all very uh very
pessimistic. that is the marketplace. Uh
in the crypto economy, the market is
very manic and people go from extreme
high highs to extreme low lows and mood
shifts and and so you have to always
take a time period of like four years to
8 years because if you focus on four
months, you're like either going to the
moon or you know you're going to the
earth. Um our company is constructed to
be pretty robust. I mean it's a fortress
balance sheet. So, for example, we could
go for a year and a half and not access
the capital markets and we could just uh
run off of our US dollar reserves.
>> Mhm.
>> We've uh built the business so that we
can fund the dividends in three
different ways.
>> We can either sell equity,
>> Yeah.
>> which is MSTR. Or we can sell Bitcoin
BTC, the comm that's a commodity.
>> Or we can sell a derivative. That would
be a call option, a put option, a
futures trade on the Bitcoin commodity.
As you can imagine, uh our equity is
actually a derivative of Bitcoin. So
sometimes our equity is priced at a
premium to Bitcoin. When it is, we'll
sell the equity. When is it a discount
to Bitcoin? We wouldn't sell the equity.
Then we would switch and we would
consider it. Do we sell the commodity or
do we sell the volatility?
>> Okay. Well, sometimes volatility is
priced very cheap. You would want to
sell the commodity. Sometimes the
volatility is priced very expensively.
If the market were to trade our equity
at a discount to Bitcoin for two years
and if the volatility was cheap. So if
the equity is at a discount and the
volatility is a discount, we would sell
the commodity and what that means is we
might take 25 basis point of our bitcoin
and then we would sell the most
appreciated
trunch of that. So, Bitcoin that we had
purchased, Bitcoin you bought at at
200,000 a coin. If Bitcoin is trading at
150,000, you would sell the Bitcoin at
200,000. You would capture the tax
credit.
>> Can you also say to those people who are
um in this case sometimes saying what if
you're since you're buying Bitcoin so
why should I buy MSDR if I can buy a
Bitcoin which is in this case underlying
asset?
>> Yeah. So
>> maybe maybe for me it's more valuable.
>> If you want raw capital, digital
capital, you should buy the Bitcoin.
>> And the advantage of that is you don't
have to trust. You have no counterparty
risk to a currency, to a nation state,
to a company, to our company, to a bank,
to anybody, to a custodian. That's
definitely what you should do. If you're
an equity investor, then and you're
looking for enhanced or amplified
Bitcoin exposure, you might buy MSTR.
Another way to say it is there are
capital investors and credit investors.
Let's say you have a 4-year-old child.
>> You could give them a million of real
estate or you could give them an annuity
that pays them $10,000 DM a month
forever. It's a trust fund, right? It's
instant gratification. It's easy. That's
a capital investment. It pays you no
yield, no dividend. Maybe you'll grow up
and you'll want to build a building on
it and work very hard and form a company
to turn it into income. But there are
some people that are capital investors
and some people that are credit
investors. What I would say is the world
is built on capital.
>> Yeah.
>> The world runs on credit.
>> Right. You need both.
>> Yes.
>> Bitcoin is digital capital. The world
will be built on digital capital. But
the world will run on digital credit.
And everybody in the world can figure
out why they might want to have $10,000
a month for the rest of their life,
right, without effort. It's a very
simple idea.
>> Yeah. you actually really really bullish
on MSTR because you truly believe that
it's going to last
>> let's say you have a new investor 18
years old and you're saying they're
going to receive dividends every month
for the rest of their lives. Yeah. So
>> are you that bullish on your company?
>> Okay, that's what digital credit is. So
the product we've created is called
Stretch.
>> Yes,
>> you can buy it on Robin Hood.
>> It is like a tokenized money market
>> powered by digital capital. Mhm.
>> So, Stretch currently pays a dividend of
10.75%
at PAR. PAR is $100
>> and so the company pays that monthly and
we adjust the dividend up if if stretch
is trading below 100 and then we can
adjust it down if there's too much
demand. So, it is a variable credit
instrument, the first in the world. And
so, how do you fix the credit market or
the money markets? The way you fix it is
you create a better product powered by
digital assets or in this case by a
digital asset called Bitcoin. Coming
back to your former your your first
question, why buy strategy stock instead
of Bitcoin? Well, Bitcoin is a
commodity. It's like 20 acres of land in
Manhattan. It's not doing anything
>> virtual though.
>> It's you're owning part of cyber
Manhattan.
>> Yeah. Strategy is a company that's in
the business of creating credit based on
that commodity asset. So if you believe
it's a good idea to give a billion
people a 10% bank account
>> Mhm.
>> then you need a company to do it.
>> Our company has got $60 billion of
digital capital. We've sold about $8
billion of digital credit this year. We
expect to sell and create billions and
billions of dollars of digital credit.
And the value proposition is if you
don't want to gamble your money in the
stock market
>> and if you don't want to get on the
Bitcoin roller coaster of 45 V and if
you don't want to get paid zero by your
bank or 2% by a money market you can buy
digital credit that pays you 10%.
>> What was so far the biggest I would say
the toughest objection inside strategy
and how did you overcome that? Well,
initially the biggest transformation was
to recapitalize the company on Bitcoin
instead of uh shortdated treasuries or
money market instruments.
And to do that, we had to convince the
all of the officers of directors and all
the officers and all of the the
directors of the company that that was a
good idea. That took about three months.
>> And then once we all became convinced
that was a good idea, it was a two-step
process with our shareholders. We
announced that we were going to buy $250
million of Bitcoin and we were going to
buy back $250 million of the stock from
any outside shareholder that didn't
agree with the strategy.
>> So, it was a Dutch tender offer in order
to rotate the shareholder base. And
following that tender offer, all the
shareholders were fully aligned with the
vision of of the company holding Bitcoin
as its primary treasury reserve asset.
That all took place between August and
September of 2020. That was the hardest
most challenging thing. Um and then
after that we never looked back and and
from that point forward it was just a
series of innovations and enhancements
to the business model to get us from
there to where we are today. Actually
you've mastered corporate Bitcoin
strategy I would say from what you were
telling us what's one mistake you would
warn every Fortune 500 CEO about that if
they want to follow your path what they
should maybe there's something that they
should not be doing. Well, I I I'm a big
advocate to to adopt Bitcoin as a
Treasury reserve asset. Whether or not
you put 10% of your treasury or 90% of
your treasury into Bitcoin is an
elective choice. But I think that it's a
mistake to have zero.
>> And I think that the reason why is if
you're capitalized on money market
instruments, you're normally generating
anywhere from 0 to 3%. Uh and the cost
of capital, the S&P indexes return is
about 14%. So if you're using money
market instruments, you underperform the
cost of capital, which means that you
really have to surrender your capital
back to the shareholders
>> and you end up decapizing the company.
So the biggest mistake a company can
make is to give away all of their money.
>> But by the way, it's like if you were to
say, what's the advice you should give
to a family? I would say don't give away
your money.
>> Okay?
>> What's the advice you give to an
investor? Don't give away all your
money. Right? I mean, money is economic
energy. So if you capitalize on Bitcoin,
then instead of having endlessly
divoting out your capital or doing share
buybacks, you can actually keep the
capital and accumulate capital. And most
companies that fail, they fail because
they have a bad quarter or two bad
quarters and they're under capitalized
and they and they can't handle the
stress and they go bankrupt. So for the
longest time, it was cool uh to do
leverage buyouts or to put debt on a
balance sheet. I think that the smart
thing to do would be to replace your uh
buybacks with Bitcoin purchases and to
and to replace dividends with the with
the acquisition of capital because that
way the company is able to weather any
storm and it can invest in anything it
needs to invest in uh should
circumstances dictate that.
>> If Bitcoin thesis still were wrong, what
do you think? What will be the first
warning sign that you'll be looking for?
No, if Bitcoin underperforms the S&P for
four years, that would be a warning
sign. If it underperforms for a decade,
right, that would be a warning sign. I
think Bitcoin will will generally always
outperform the S&P index over the long
term.
>> But you also mentioned that we already
not following we don't see the four-year
cycle as it used to be. Is that correct?
Has that cycle changed? The pattern of
each uh Bitcoin cycle has changed over
the years. I think the four-year cycles
were most pronounced in the first 12
years of the existence of Bitcoin
because half of the Bitcoin was mined in
the first four years and then 25% of the
Bitcoin is mined in the next four years
and then 12.5% of the Bitcoin is mined
in the next four years. But then we got
down to 6.25%
of the Bitcoin.
>> And so you can see that the amount of
Bitcoin being mined and sold on the
market by miners is is exponentially
falling. and the demand and the
liquidity in the market is exponentially
increasing. So at this point uh the
amount of Bitcoin being mined is is
becoming a second order issue. If you go
out another 4 to 8 years it'll be a
third order issue.
>> The primary drivers in the market now
are structural support from the ETFs.
The ETFs are big buyers. They didn't
exist two years ago and and now they're
massive buyers. Uh Bitcoin uh treasury
companies like ours be have become
massive buyers. As I said, we raised
something like 40 44 to 45 billion in
capital in the last two years. Uh, a
third big driver will be banking
support. As the banks begin to create
credit against Bitcoin, for example,
there's only there's only say 16 to$18
billion of Bitcoin that's mined every
year for sale.
>> Well, one bank like JP Morgan could
create $18 billion worth of
Bitcoinbacked credit for their customers
in one year. So, as a big bank comes
into the market and they begin to offer
loans against Bitcoin or against Bitcoin
ETFs, that will be the equivalent of an
entire year of Bitcoin mining. And so
really the big the big uh structural
development right now is mega banks in
the world beginning to bank Bitcoin and
offer credit against it.
>> Thank you. Um now our show slogan is now
boarding web3 takeoff at gay.com. You
also called Bitcoin perfect money, but
web3 argues that money should be
programmable. So, is programmable money
is a breakthrough or is it still a
distraction?
>> Um, I I think that there's uh an entire
explosive dynamic in the crypto economy
right now around the uh industry of
digital finance. Yeah.
>> So, half of the crypto economy is
digital capital and digital credit. The
other half of the economy is digital
finance. And so I think the future of
the world is a billion AIs talking to a
billion AIS a billion times a minute.
And those digital assets will be
tokenized securities, tokenized
currencies like the digital dollar, like
stable coins. And also they'll want to
settle in digital capital, digital gold,
which is what Bitcoin is.
>> So the most promising uh products are
going to be digital capital, digital
securities, digital currency, and
digital derivatives. and and the world
needs those innovations.
>> Thank you, Michael. Um, we're going to
wrap up with a quick lightning round.
So, just say the first thing that comes
to your mind. Okay. Are you ready?
>> Okay.
>> Okay. Michael, Bitcoin in 2030, digital
gold or global reserve asset,
>> digital gold.
>> One word to describe Bitcoin critics.
>> Uh, uninformed.
If you could pick up any historic figure
to explain Bitcoin to, who would it be?
>> One historic figure.
>> Yes. Your choice.
>> I would probably uh pick
Lord Van Mises.
>> Oh, interesting. Why?
>> Because he's the father of the school of
Austrian economics and Bitcoin
represents a digital manifestation of
Austrian economics.
>> Yes. Do you believe that he would
imagine that this something like this
could happen? Could have happened. I
think he would be very very happy to see
the development.
>> Okay.
>> Ecstatic because the Austrian school
were the theorist
>> that theorized perfect money and the
benefits of of free markets and and and
perfect capital markets with integrity.
And it wasn't until Satoshi that we had
the engineering and we had the
technology to realize their vision.
>> Do you believe that Bitcoin is the only
form of sound money?
I think Bitcoin is the first truly sound
money in the history of the human race.
>> True or false? Every Fortune 500 company
will hold Bitcoin within the decade.
>> False.
>> True or false? Bitcoin will one day be
more stable than the US dollar.
>> True or false. We'll see a trillion
dollar company built purely on Web3
principles in the next 5 years.
True.
>> Okay. True or false? Strategy will hold
Bitcoin forever no matter what.
>> True.
>> Okay. In 10 years, now I'm filling the
gap. In 10 years, people will say, "I
can't believe they didn't realize it."
This about Bitcoin in 2025, what would
it be?
>> I think in 10 years, people will say,
"We didn't realize it was the world's
reserve capital network,
>> the foundation of the digital economy."
And one last fun one, Michael. If
Bitcoin were an airline and web 3 was a
destination, what's the inflight movie
we'll all be watching on the way there?
>> Atlas shrugged.
>> Interesting. Thank you so much, Michael.
>> Thank you.
>> Today, we had a special guest, Michael
Sailor, founder and executive chairman
of Strategy. And don't forget to like,
subscribe, and watch every episode of
our new show, Gatecast, Zero to Takeoff.
We're going to have the top leading
voices in web 3 now boarding web 3 take
off at gay.com together with me your
host Maria Bochuk. I'll see you in the
next episode.