Michael Saylor on 'Why the Bitcoin Standard Matters'

Why don't we kick off this webinar? So,

this is a webinar called Why the Bitcoin

Standard Matters. Um, it's obviously

with Michael S and Jeff Park from

Bitwise. Uh, I'm the CE of the block,

Larry Surac. Now, what is Bitcoin

standard? I'm I'm guessing mostly

everyone knows, but ultimately the

simplest definition is using Bitcoin as

a primary reserve asset, similar to how

gold or cash is used today. Um, now

obviously things have changed a lot

historically. Uh I personally have been

in the industry full-time since 2017

doing research. You know, we've gone

from like Bitcoin's going to die to

Bitcoin's volatile and wasteful to now

Bitcoin's interest into macro investors.

Then it turned into Bitcoin's now

adopted by companies as a reserve asset.

Then it has become one of the key topics

in the US presidential election. And now

it seems like we're al almost starting

to gravitate towards Bitcoin is now

starting to be interesting to nation

states. Um there's increased number of

companies including major public firms

that held Bitcoin their treasuries.

Obviously Micro Strategy Michael Sailor

here is a pioneer of that. U Micro

Strategy is now part of NASDAQ 100. It's

the first public company to adopt

Bitcoin as the reserve asset. That was

in August 2020 almost five years ago.

Seems crazy. Seems like yesterday. uh

and they now hold more more than 500,000

of Bitcoin worth $45 billion. There have

been other companies that followed Micro

Strategies lead. Um according to

Bitwise's report, there's now um uh 16%

more of Bitcoin in publicly traded

companies treasuries, almost 700,000

Bitcoin worth almost 60 billion. There's

12 new firms that joined since Q1,

including Hong Kong's Mingchi and

Japan's MetaPlanet. Um and a lot of

these companies are using the argument

of like this is a hedge against

inflation and fiat currency risks. Now

we obviously al also have Jeff on from

Bitwise. Uh Bitwise recently launched

the Bitcoin Stellar Corporations ETF

which is an ETF that includes companies

with large BTC holdings obviously Micro

Strategy one of them also Marathon Ryot

and a bunch of other companies. Now I

don't necessarily want to blabber here.

Everyone's here to listen to this

interesting discussion between M and

Jeff. Uh so I'm going to um give them uh

the time to start speaking um and and

interview. If you guys want, please ask

questions in the chat. Towards the end,

we're going to have time to ask Michael

and Jeff questions about about Bitcoin.

Bitcoin as a as a standard uh Bitcoin as

a reserve currency. So please ask any

questions and now I'll give it to Jeff

to kick off the interview. Thank you so

much everyone for joining. Well, thank

you Larry very much for that

introduction and for hosting this

incredible webinar and thank you Michael

for joining us. I just thought maybe I

would start off by sharing some some

stats that many of you may already know

which is performance of various market

indices and stocks year to date. Most of

you are not surprised to see the NASDAQ

is down for the year. I see roughly

today through down about 13%. And

Bitcoin 2 has had a rather challenging

start down about 10% as I see it through

today from the beginning of the year.

But lo and behold, strategy, formerly

known as Micro Strategy, is actually up

8%. So I think already within there is

some clues as to the kinds of

conversations we're going to be having

today. So maybe Michael, I'll open it up

with the broadest question, which is the

name of our webinar. Why does the

Bitcoin standard matter? Yeah. Well, I

mean, you could summarize it as as every

company in the world is like a type one

diabetic. that is they're unable uh to

store economic energy or they're they're

ba capital is toxic to them. They're

actually suffering from toxic shock. So

the world consists of right now of two

capital assets you could use. You either

use shortdated treasuries and they're

going to yield two to three% after tax

or you use Bitcoin which is yielding 50%

plus and the cost to capital is 12%

anywhere from 10 to 15% over the long

term. But so if your capital asset gives

you 2% and the cost of capital is 12%

that means that 10% of your capital

value gets drained out of you every

year. In essence, every company is

losing 10% of their treasury a year in

real value by using shortdated

treasuries. Um, it's uh against rags.

It's illegal for a company to capitalize

on a security. Uh, and so the general

solution would be you ought to buy the

S&P index, but they can't buy the S&P

index. So every every company that

generates cash flow right now is left

with this awful choice. I either have to

dividend the capital back to the

shareholders. I have to buy my stock

back which is surrender the capital or I

have to go and do a a acquisition with

the capital. And 95% of the acquisitions

are dilutive mergers or disastrous

mergers. you end up with these things

like you know Google wants to pay like

60 times revenue you know for a company.

So why does the Bitcoin standard matter?

For the first time in a hundred

years companies have a capital asset

which is a commodity not a security

which returns more than the cost of

capital.

That's the same as everybody on earth

going from being a type 1 diabetic to

having insulin to actually not being a

diabetic. A a type 1 diabetic will eat

themselves to death. You can eat

continuously forever and you will starve

to death. And that's because you cannot

retain energy. Um and uh companies are

in essence starving themselves of

capital. They're all negatively

polarized to capital. They're reject

they're repulsive to capital. They

destroy all the capital they raise and

they're and they're repelling it. The

Bitcoin standard means your c your

company becomes attractive to capital.

You begin to attract it. The more

capital you raise, the more shareholder

value you create, the stronger you get.

And so, you know, the to ask the

question, why does it matter is kind of

like asking the question, why does

insulin matter to a world full of type 1

diabetics or, you know, why does why do

you need to see? You know, why do

glasses matter to people that are

nearsighted, right? It's like it's so

you can function and and that's I think

the revolutionary opportunity here. very

eloquently said and it's not often that

you get a once in a century event happen

and actually I would also note to a more

recent event that is now permitting

corporates to actually adopt this

journey in a way that is familiar to you

having pioneered the space which is that

for a long time there were fazby rules

that made it challenging for companies

to hold Bitcoin on their balance sheet

at the value that they deserved and I do

believe one of the inflections that

we're experiencing right now is that

there is more standardization being

adopted to treat Bitcoin fairly as an

asset that allows companies to begin

this journey with not the due risk that

was once upon a time the case where when

you had started for example perhaps

related to that many people know you as

uh a champion of the Bitcoin standard

but the reality is you're also a serial

entrepreneur you've been a founder in

the space for many years my question to

you is as you go out there talk to other

CEOs other founders other executives and

CFOs what are the kinds of those

personas that you see are ready to

embrace the Bitcoin standard. What are

the commonalities you see amongst the

qualities of these CEOs and founder

types that you think is at the

intersection of being an early adopter

of the trends that you've been

navigating? I think when you've

concluded that uh your conventional

financial approaches and conventional

business approaches are

hopeless like I hate to be uh what is

the word dramatic but I actually think

you need to get to the point where you

believe that it's hopeless to continue

along the present path and it it's like

asking the question um what what's the

characteristic of people that embrace a

new cancer therapy

Well, the ones that have concluded

they're going to die in 12 weeks if they

don't. So, if you have a if you've got a

zombie company or you have a company

that's if you're competing head-to-head

with uh a big tech monopoly or any kind

of

monopoly, when would you discover

Bitcoin? you run a yoga studio and the

government shuts down yoga studios for

the next four years everywhere in the

world and your revenue goes to zero then

you might discover Bitcoin. Right? If

the if the government shuts down your

business with a law with a regulation or

when a monopoly forms that makes it

impossible for you to

compete then you've got every you've got

nothing to lose, everything to gain.

You're already going to zero.

I I so I think those are the people that

embrace this, those that realize that

that they don't have a future unless

they embrace a new idea.

Of course, the trend is hopefully that

we can broaden the adoption to multiple

use cases outside of those existential

risks in the way that you can diversify

your corporate treasuries. You would

imagine at some level maybe Ryan Cohen

coming into the complex as we know it

with GameStop as nonetheless a business

that is operating today is pushing the

trend towards different ways to imagine

how Bitcoin can be additive to

somebody's uh capital stewardship

program. And maybe related to this too

is this question of the board. Um, every

company has a different type of board

dynamic and there may be some

correlation between companies that are

uh declining versus companies that are

aspirationally improving and the kinds

of board makeups that could exist. You

know, how important is the board buyin

as you've observed from your experience

of also presenting to Microsoft in the

past and the ability to shepher bitcoin

adoption at the corporate level. You

know, I think the the CEO has to

conclude that the business, you know,

doesn't have a future without a radical

new idea. Then the management team has

to buy in. So, it's really the CEO, the

CFO, and the G the general counsel.

Those are the first three. After that,

then you need to get the board to buy

in. And uh if you have one hold out

member of the board, they can completely

stop the process for

everybody

unless you know

again what kind of person goes to a

doctor and gets a prescription for

insulin

Jeff right like uh you know it's kind of

if you think of it like that you know uh

then you kind of get the idea um if the

company is healthy Like the problem with

Microsoft is Microsoft is one of the

seven the Magnificent Seven, but they're

called Magnificent Seven because they're

the seven greatest companies on earth.

But Microsoft arguably is like the

Magnificent One. You know, if you had to

pick one company on Earth that is

probably the single most powerful

company. They sell software. There's no

supply chain. They don't have to

manufacture anything. They don't have to

ship chips. They're even right now in

the tariff wars, they're the most

insulated of the Magnificent Seven

because ultimately they're pretty much

just licensing business process to 100

million companies with a near monopoly.

So if there's any company that doesn't

have to do anything, it would be

Microsoft. Mhm. And then uh if you want

the opposite of Microsoft, you know,

pick a company that's like a bakery in

Ukraine that sourced its products from

China, you know, across a war zone and

you know, you get an example of the

opposite extreme. Um so I think that

ultimately the board matters, but I mean

first first the business matters. You

just have to have a business where where

you you know they say with paradigm

shifts you know uh who embraces a new

paradigm it's the young or those in time

of

war you know and there's the famous

quote you know science advances one

funeral at a time. So traditionally new

ideas get embraced by the young because

they had to wait for the old guard to

die. And then certain times like those

that that don't believe in the air force

their minds are turned when they get

firebombed and then they start to

believe that maybe air power does

matter. But um in this particular case

yeah the board is a stopper. They're not

going to be helpful in changing the

company. The truth is the CEO is most

important in actually putting a company

on the Bitcoin standard.

And after

that, you know, you you might have one

hold out. My advice is if you have one

hold out, you have to get them off the

board. Like you let if you were the CEO

and you can't I have talked to boards,

by the way. I've talked to companies. I

was like, "Well, you're a billion dollar

company. If you do this, you'll be a$10

billion company. And if you and and if

you do it right, you'll be a hundred

billion dollar company." And one person

stops them. And you have to ask the

question, should you allow one person to

deprive the shareholders of a hundred

billion

dollars? Right. And the answer is you

shouldn't. But this all comes down to

clarity and courage.

Yeah. You know, and and I think Peter

Teal says he says uh courage is a much

shorter supply than genius. And he and

that's the most brilliant thing I've

ever heard. Like there's plenty there's

800,000 geniuses in the world, but how

many original thinkers are there in the

world that actually are willing to take

a courageous stance? It's a lot less

than 800,000.

This speaks volumes to me. I think in

many ways what you're alluding to is

that the journey of crypto adoption

between the individual versus the

corporate versus the sovereign is

actually more similar than we think.

Take for example the individuals that

were willing to take some risk with

Bitcoin on some margin. and they're

being radical about that choice at a

level where making different risk

preferences versus somebody as you point

out who might be complacent in the way

that life the life of that they built is

working for them in the ways that uh the

system supports. Same with sovereigns

you know as the as the US leads the path

and how thinking about the strategic

reserve and then you may find emerging

markets actually are more uh involved

because of the radical approach they

need to take to fix their fiscal

deficits. Um so why would we expect any

different from corporates? Once one one

thing to notice uh which is super

exciting to see is that the number of

public companies holding Bitcoin has

been going up. I think Larry had

mentioned it's now close to 80 plus that

uh exist and it's actually a lot more

when you include some of the global

companies. What are what are kind of the

cultural differences if you've noted any

that you see and cultural similarities

in the companies that uh at a global

level are finding their path to Bitcoin

adoption? I think generally they have uh

CEOs that are risktakers that are fairly

entrepreneurial, but also they they've

got a history uh

of struggle, right? They're not they're

not the blue bloodoods that were born

with everything

uh teed up for them, right? They had to

fight their way up. So, they're scrappy.

Uh I think you know if you look at the

at the Russell 2000 and look at the

bottom thousand of the Russell 2000

right those are the companies that are

kind of the what is the word it's like

they're kind of in this zone where where

they're successful companies by normal

standards like out of the 400 million

companies in the world they're the top

1% but

uh they're not uh the top

0.01%. You know, Jeff, you make I I feel

like it's the second sons, you know,

like who who settled the United States?

They they talk about it. They're like,

well, the second son of nobles, right?

The first son inherited the estate and

stayed in the old world and got rich and

it was kind of a guaranteed thing. And

the second son had to go off, you know,

or the third and had to make their way.

So, it's like I, you know, my path

forward in the old world is blocked, but

I know I'm just as smart and I'm maybe

I'm harder working than my older

brother. I'm going to get on a ship and

I'm going to sail to the new world where

I can get like 4,000 acres in the Ohio

Valley and I'm going to make uh my way.

And so the companies that adopt the

Bitcoin standard, right, this we say

it's on a need to know

basis, but yeah, there's no more

pernitious thing to hold you back then

than uh not needing to, right? Like the

the vote with the Microsoft uh board

matter was

99.5% against investigating Bitcoin.

Like 99% again, if you're comfortable,

right? If you're comfortable, then

you're just not going to. So, the first

sons aren't likely to get on the wooden

ship for four months and sail to the new

world and then risk 25%, you know, death

from this or that and the other thing

and then fight. But the second or the

third son thinks, well, I I kind of

don't have a choice. I have to. And so,

it's it's the disenfranchised, but but

it's not the completely it's not like

the 399th big millionth company. It's

actually a company that's got $100

million, a billion dollars. It's got

actual assets, but the likelihood that

it's going to displace Nvidia or like

how many companies failed competing

against Amazon? How many companies

failed competing against Microsoft? How

many companies failed competing against

Facebook, right? How many companies

failed competing against Apple? I can

give you 20,000 good companies, really

well-run companies, and they all were

smashed by Apple or smashed by Google or

smashed by

Amazon. Like, anybody ever worked in

retail? It's like 20,000 good retail

companies all destroyed by Amazon andor

Walmart. And they weren't bad people.

They were It was just hopeless. Well, I

think something interesting you're

mentioning there is uh the the

inevitable advantage of scale, right?

And the cost of financing that can also

come with large companies that are off

market to smaller uh businesses. And one

thing Bitcoin does is actually it can

turn the financing model upside down in

the ways that you can think about cost

of financing differently with Bitcoin

access that could give you an edge

differently than the big companies

relying on their tre uh incumbent

treasury uh management functions. And so

when I think about what Bitwise is doing

in this space in for example launching

an ETF that is tracking uh companies

that are buying Bitcoin on their balance

sheet is the idea that if there are

flows to consumers who want to support

companies that are involved in the space

this directly. Part of what ETFs and

indices do is actually they uh subsidize

cost of capital by allowing your equity

to uh be permitted to grow in ways that

reflect consumer values. And I think

about a world in which some CFOs may one

day decide actually, you know, inclusion

into an index, for example, will cheapen

their cost of capital because it brings

new investors that care about Bitcoin.

And those things can actually then

become more powerful to thinking about a

a cost of financing advantage from a

from a treasury service. And that to me

feels like a really important mission

that Bitwise can help steward. Uh

helping companies compete more

successfully on the financing front

against as you mentioned these big

balance sheet companies that have

offmarket terms. Maybe with that we can

pivot specifically to strategy formerly

known as Micro Strategy. uh in in your

vision of capital

stewardship, what is

your plan as you see where Micro

Strategy is going to go in the next 5

years and then let's also kind of close

your eyes and imagine a little further

10 years and and walk us through the

evolution of what you expect strategy to

look like. Our um business model is to

securitize Bitcoin. So, we're a Bitcoin

treasury company. That means we hold

Bitcoin as our primary treasury asset

and we offer uh securities uh to

investors that they need that give them

a that that slice various risks of

performance volatility and risk

uh off of Bitcoin. So some people want

lowrisk, lowvall

um low performance

uh securities

and to them we would sell them a

preferred stock like strife or or

convertible preferred like strike or a

convertible bond, right? Uh the

convertible bonds are like 70 delta

instruments and strike is a 30 delta

instrument and strife is a zero delta

fixed income instrument you know and one

of them looks like a 20 vol and one of

them looks like a 40 vault and one of

them looks like a you know 60 vault and

then when we take those the leverage uh

from selling those uh securities

uh we we feed that back into the equity

so that the equity itself ends up being

higher volume higher performance than

BTC. So we take if BTC was a a 6060 type

instrument 60 vol 60 performance we we

aim to create a 9090 equity

because uh because some people want 90

ARR and 90 ball and then we aim to give

somebody else the you know maybe we want

to give someone else the 60 ARR 40 ball

you know with a strike or or with a

convertible thing and maybe we want to

give somebody else the 30

ARR 30 volt type instrument. So we're

giving people different different

tanches of volatility, risk and return

and then of course the equity itself is

the building block for a whole host of

derivatives. So you you you can build

the entire options market and there's

like a massive like $70 billion open

interest in the options market and then

you can build other ETFs, right? The

levered

ETFs, the uh the volatility interest

generating ETFs, the short

ETFs, every other

flavor of of derivative.

And our position

is our job is to do what everybody else

can't do. So for example, you can sell

if you're a trader, you can sell covered

calls all day long. I'm not going to do

that because you can. What I'm going to

do is create a convertible preferred

stock because you can't. Mhm. So, so

what we're doing is we're creating those

uh various

securities, you know, everything from a

pure currency swap. Like for example, if

I give you 10% interest and you give me

back money and I gener I I'm generating

BTC yield and you're generating USD

yield, that's a pure currency swap. I

could do that in Canadian. I could do

that in yen. I could do that in euros. I

could do that in USD. So that's one type

of security and then above it I can

create the convert you know various

flavors of some some yield some

conversion rate all the way up to you

know pure Bitcoin or high vol high

octane high leverage Bitcoin and I you

know for us we're always going to aim to

make the equity like 1.5 to 2x Bitcoin

and I can't you know it's Not clear to

me how I get much beyond that. But then

we leave it to the rest of the financial

market to concoct 2x to

200x leverage by using all of their

option interest option tools etc. And at

the end of the day, the result is

everybody gets uh the flavor of volatil,

the amount of volatility, the amount of

performance, the amount of risk that

they want in a liquid fashion on a

compliant

marketplace, right? That that's our

mission. It's not going to change,

right? Everything we're doing you can do

at the scale of a hundred billion dollar

enterprise or $200 billion enterprise or

400 million billion dollar 800 billion

or 1.6 trillion or 3.2 trillion or 6.4

trillion. Right? It's pretty much the

same exact

structure. You're just uh creating more

of each type of security. And the thing

that makes it possible is that you're

building on top of a foundation of a

digital scarcity which is a commodity

which itself right Bitcoin can scale

from 2 trillion to 20 trillion to 200

trillion so to 400 trillion to whatever

trillion right so everything is very

scalable in all directions as long as

you maintain a balance in the capital

structure between the various

instruments. Yeah. Yeah. And you know,

it's funny to see now everyone is

copying what they call the micro

strategy playbook to imagine a similar

investing rapper for other crypto

assets. So we're seeing Salana entering

the arena in different operating company

vehicles to imagine what a levered

vehicle structure could look like.

There's discussion around a version of

that for Ethereum. And essentially what

we're talking about here uh is

um maximizing and optimizing the

volatility of the underlying asset to

create different risk preferences that

people may seek for yield in ways that

are not permissible in uh in other

traditional assets. So when you look at

a balance sheet, right, for example, you

have an asset side on the left and you

have liabilities on the right. And the

things we're discussing here are

innovations on the liability stack of

what you can create from leveraging

crypto and bitcoin in particular as the

asset. Uh I want to come back to the

liability innovations but first just

focusing on the asset side which is now

micro strategy owns over 500 uh 30k

bitcoin. It's a steward of the

ecosystem. Um I think now about 3.3% of

the total Bitcoin supply is held by

corporates and it's going to increase.

And so there's this question of

governance. I I often hear a question of

uh crypto uh community investors trying

to understand better is there going to

be an evolution from just passive

ownership towards more of an active

governance model in which people are

going to start to care about the

actual ethos of the companies behind

representing uh uh stewardship of of

Bitcoin. And I'm curious to hear your

view on um where you think strategy fits

uniquely from that perspective.

Yeah. Well, I can't let your previous

comment go

unchallenged. I'm showing you how to

build a hundtory building using

steel, you know, which is Bitcoin, a

digital scarcity. To equate Ethereum and

Salana to Bitcoin is like equating balsa

wood and clay bricks to steel.

Yeah, you can also lever them, but you

can lever balswood, but levering, you

know, you can build lots of things that

are steel containers and you can use

rubber bands, but it's not the same

thing. So uh there's a reason that uh

securities law prohibits public

companies from capitalizing on

securities and the reason

is because you can leverage a security

at 100 to one. And so if I actually

issued 1% of the float of a security, I

could take $10 million and create a $10

billion market cap company. And so you

would literally have 10 million in the

float. And then you would tell yourself

you had four billion dollars of

collateral on your balance sheet after

you levered it up. And then you would

start to act that way. And then when the

bottom of the structure comes crashing

down, you get a situation like Teral

Luna or like FTX. Both of those were

examples of companies levered on

proprietary tokens. And so Salana and

Ethereum are are, you know, they may not

be securities, but they're definitely

tokens. And as tokens, they're not a

commodity. And so I would caution

anybody listening here against levering

up on a token, right, or a proprietary

asset because it's kind of like trying

to copy my skyscraper and doing it with

bricks or with aluminum or with copper,

right? The entire thing's going to

buckle and lots of people are going to

die and it's going to be catastrophe and

you're going to take out the entire city

block. And that did happen. And it has

happened over and over again in the

crypto world. Happens all the time.

People think that they discovered

leverage. And this and what I'm

doing is not an intelligent or brilliant

idea because I'm using leverage. The

reason it works is because I'm putting

leverage on steel. I'm doing it with the

right material. I'm actually using a

product which doesn't deflect. Right?

And so Bitcoin is a crypto asset which

does not deflect. That's why you can

lean on it with 10 billion dollars of

leverage or hundred billion dollars of

leverage. And if you do the same thing

with FTT token or Luna or picking pick

your favorite token, if you do the same

thing, you're going to find it will

buckle at some point. And when it

buckles, there's going to be

catastrophe. Ultimately, that is why

this webinar is called the Bitcoin

standard mattering. and not crypto

standards mattering. I for one do agree

with you that the hardest money, the

scarcest capital that we know today is

exclusively Bitcoin and the leverage you

can build on Bitcoin is fundamentally

proprietary to Bitcoin versus others. So

would echo the same sentiment back right

at you. You know, after 10,000 years,

people haven't come up with a better

material to build a ship with or or a

building with than steel. It's like

there's a lot of other metals and a lot

of other materials and a gazillion

million whatever alloys. But but it

oftentimes happens in nature that there

is one best answer and the best answer

is good for

98% of all the applications and

everybody that ever came up with it

different, you know, the crystal ship

and the diamond ship and the rubber ship

and the wooden ship and the aluminum

ship and the whatever. And it's just

like it was good for a little bit of

time and then it hits a hurricane and it

snaps in half and it sinks and everybody

dies and they're like well I got you

know never done that before you know so

so uh I caution that degree of

innovation right like you have an answer

god gave you the

answer you know you can either embrace

the answer or you can insist on being

different right and I would advise that

if you want to build a different city.

Don't innovate in the dimension of

steel. Keep the steel, right? Pick a

different way to innovate. Maybe make

the boulevards wider or something like

that, right? Yep. Um, so coming back to

Bitcoin companies, I look, I think the

key the key with Bitcoin is the protocol

itself is is

stable. Nobody can censor the network.

It's distributed enough. No one can no

one can censor or corrupt the protocol.

No one can can control the price. It is

is sufficiently decentralized and global

that no company, no country, no

capitalist has enough influence to be

able to put it at risk and and it is the

one thing that we can all agree on in

that regard. So when we go to the

question of companies adopting the

Bitcoin standard, Jeeoff, I think the

the primary guiding principle is you

want to do this

well. Um the question

is are you going to adopt Bitcoin as

your primary treasury reserve asset?

That means like flip 90% of your uh

long-term capital to Bitcoin, right? Uh

5% 2% doesn't really do the job. You

really want the vast majority of your

long-term capital substantially. You

want a 100% of long-term capital to be

in Bitcoin. And I define that as you've

got working capital. If you need $50

million in working capital, then you

hold that in the in the fiat currency of

your

liabilities. Everything else is

long-term capital. You flip that to

Bitcoin. And then after that,

um after that, right, you've got you've

got two parts of the business. you've

got the operating business and then

you've got the uh the the treasury or

you've got the balance sheet part of the

business. I don't have any advice to

people on the operating part of the

business. Every single operating

business is different. The only thing

you can say is that.1% of operating

businesses are good and

99.9% of operating businesses struggle

at all times. I mean that's the big

piece of wisdom I have for you. If you

feel like your business is under

pressure and is difficult and

challenging, that makes you one of, you

know, of the

99.9% that feels the same way. The only

people that don't feel that way are the

ones that that run the monopolies that

are either state sanctioned monopolies

or digital monopolies. And everybody

else struggles. And so there's no simple

unlock there. I'm going to tell you, get

a monopoly from the government of the

local country you operate in. That's my

suggestion. or maybe you're lucky enough

to be Apple or Google or Microsoft, but

if you're if you're not, then the

operating business is all about finding

a monopoly. And and it's not easy to fix

that. It's pretty obvious, right? It's

it's it's quite obvious. It's hard to be

better than Amazon or Microsoft or

Apple. So the real advice is focus upon

the balance sheet where it is very easy

to be better than the US dollar standard

or the fiat standard company. So that's

the part of your business you can fix.

You can fix your balance sheet. And most

people don't like most people don't

focus on that. They they put 98% or 99%

of their effort into their P&L and

they're basically pouring 99% of their

focus and their energy in a losing cause

and they're not going to win and they're

putting 1% into their balance sheet

where they're 90 you're 99% likely to

succeed on the balance sheet under the

Bitcoin standard and you're 99% likely

to fail. Yeah. in the operating business

on the fiat standard. But conventional

wisdom is to focus on the operation and

dismiss the balance sheet. And if you

want to escape from that dilemma, you

have to invert that and you have to

fixate on the balance sheet. And you

ought to play defense with the P&L.

You're a dentist. You're going to keep

being a dentist. You're not going to

grow 25% a year forever. You're not

going to crush Apple and Amazon and

Google. You're a dentist. just run a

profitable dentist practice and then

take all the money from the profitable

dentist practice and buy Bitcoin with

it. And if somebody wants to give you a

massive loan against your dental

practice, borrow mortgage the dental

practice to the hilt. Borrow $10

million, buy Bitcoin with it, and you'll

wake up and you'll be a billionaire not

because you made a billion dollars in

dental fees. you'll be a billionaire

because you were smart enough to borrow

money against a dental practice, buy

Bitcoin, and it tend to 100x from there.

See, I think what you're alluding to is

that there's so much uh permutations

within financial engineering that can be

done upon the ability to just own

Bitcoin. And uh the thing that I'm

really excited about is that there isn't

one way to do it correctly. I think

everyone can do it in different ways.

and you for example have built a

diversified liability stack across

preferred equities to convert Bitcoin.

Some may choose not to do some of those

instruments or all of them and different

uh ways there's discretion but also on

the asset side you mentioned Bitcoin

bank as one of the journeys that

strategy is on and that means actually

the assets have to start maybe becoming

productive too right we're talking about

the idea of actually making even more

incremental yield on the provisioning of

the assets and you can start imagining

different companies approaching that

yield bogey in a different way maybe

it's some kind of lending business Maybe

it's some kind of volatility harvesting

business on top of the asset ownership.

Maybe it's actually doing things in the

layer 2 side chain ecosystem of Bitcoin

as it continues to grow as a security

model. And and there's all these kinds

of clever toolings that companies can

start doing. And it'll actually, I

think, come to a world where everyone

will say, I'm a Bitcoin standard

company, but then if we're all doing our

homework, if we're all leveling up, the

next question will be asking, well, what

kind of Bitcoin standard company are

you? And then those are the things uh I

think that could be really interesting

over the next few years as more

companies adopt to it. In terms of the

asset side, do you think strategy will

one day do more things with the Bitcoin

to have it yield productivity or do you

like the fact that it's a clean knowable

kind of cold custody proxy Bitcoin risk

for the market to feel a security

guarantee that you think is actually

better relatively? I think all the

rehypothecation experiments have all

crashed and burned over the last decade.

So I don't think I don't think that

they've got a good track record. I think

that all the layer 2 type applications

they're always very interesting to

programmers but no one's figured out how

to scale them without uh without uh some

uh technical instability.

you you run into massive amount of

technical problems, massive amount of

security issues and then massive amount

of regulatory issues to do that. So I I

think that the best um way to generate

yield and generate a return is you buy

the Bitcoin, you hold the Bitcoin in

coal storage and then you sell equity at

a premium. That's the risk. You know,

when you're selling equity at three

times NAV, you're literally selling

dollar bills for three bucks all day

long. You have a money printer. Okay?

It's a risk-free money printer. So, why

would you do anything else if you could

literally sell dollar bills for $3 all

day long? And so the the basic the

creation of high volatility, high

optionality, public equity and then

bonds, convertible bonds, fixed bond,

corporate bonds, or preferred

stocks. All of those are by far the best

lowest risk way to generate yield off of

the underlying Bitcoin. They solve the

compliance issues, right? because you're

selling on you're selling a compliant

security on a compliant exchange. So you

don't you don't run into this issue

where you did something really cool that

is illegal in the state of New York,

right? Or it's illegal somewhere. So So

they solved the compliance issues and

then they also solved the scale issues.

If you have a good if you have a good

bond, someone will buy I've had meetings

where someone gave me a $500 million

order after the meeting. Yeah. Like, can

you sell $50 million of something in 20

minutes? I've sold $250 million of

something in 20 minutes. So if you want

to if you want to scale the business, if

you want it to be compliant, if you want

to if you want to uh generate

substantial material yields, then I

think you want to do it by issuing

securities. And of course there's one uh

ladder of securities in Japan which are

different than securities in America or

US which would be different than Brazil.

Mhm. That would be different in France,

different in the UK, different in

Germany, different in

Switzerland, right? Uh different

everywhere in the world in Canada. So,

basically securitizing Bitcoin

uh in some kind of rapper, you know, it

it could be as simple as, okay, here's

an ETF, but it could be here's a 2x ETF.

It could be here's a a Bitcoin back bond

ETF. It could be here's the bond. It

could be something else. It could be

here's the option. Those are all the the

the most compelling ways. I think I

think the reason that certain people in

the crypto industry don't embrace it is

they don't have uh they don't have the

technical financial capability to create

these compliant instruments in these

markets. So they go for the crypto token

approaches or quote unquote

cryptonative. But the bottom line is the

cryptonative approaches are only 1% of

the opportunity and they're 100 times as

hard. And so the real money here is

going to be made by uh more conventional

financial

firms that are going to issue a hundred

billion dollar worth of Bitcoin back

bonds and then a trillion of Bitcoin

back bonds. And then when people go,

"Oh, well, a trillion I guess is

saturated." then they're going to issue

10

trillion of Bitcoin back bonds and and

people watching are going to complain

that it just seems too

simple, right? It's like and and what I

see a lot, Jeff, in this market is I run

into crypto people that have been the

business for a decade and they have very

complicated ideas that don't work. Yes.

And and I offer them a simple idea. I'm

like like here's an idea. You're a

public company. Sell your equity. Buy

the Bitcoin. They're like, "No, that'll

never work." Okay. Well, I guess it

might work. Well, what if the Bitcoin

goes down? Well, blah, blah, blah. Okay,

I guess it worked. You know, and you

know what the latest push back is, Jeff?

Let's hear it. Latest push back is well,

it worked for you and it worked so well

that you're the winner and there's no

room for another company to do it in the

market. So, we literally went from I

don't think it'll work at all to it

might to it did. Oh, it worked too well.

That's my excuse for why I'm not going

to do it. Yeah. And people just come up

with these gigabrain excuses for why

they want don't want to do the simplest

thing in the world. And the reason it

works, by the way, is everybody wants to

be able to buy the equity and borrow

against the equity uh from their

existing wirehouse.

So like MSTR, you can borrow against it

from a big bank. They want to be able to

sell the volatility to generate yield on

us. You can do that by selling the

covered calls, right? They want to be

able to they want to solve the custody

issue. I, you know, I want to call my

Maril Lynch broker and buy $10 million

worth of it in like 15 seconds.

So if I can, you know, it's convenient

compliance, you know, it's it's

conservative, it's simple, you know,

we're just solving these very simple

ideas. It's like, well, how about this

one? I just like to buy the upside with

no

downside. Uh like our our convertible

bonds are outperforming Bitcoin right

now. Like lit. So why wouldn't you buy

something which performs which

outperforms Bitcoin but you have you

have a credit guarantee and and you're

senior in the capital structure. So

they're simp the simple ideas are

working. Simple compliant ideas. The

hyper complicated ideas. They're 100

times as hard. They're 1% as valuable.

They're not working. And my advice to

anybody is don't try to do those things.

focus on the simple ideas. I love what

you said there. I think so much of the

crypto journey for companies and people

begin with a little bit of a profit

motive and wanting to make money and

then that's uh tooling to start

understanding what's actually happening

underneath the hood, right? And you

know, we talked so much today about the

financial engineering innovation to draw

investors in because that's kind of what

Wall Street cares about. they care about

these numbers and it's it's it's it's a

little bit of like a mouse trap, but in

the end, what they're going to walk away

realizing is that there is a very strong

values commitment to the Bitcoin

standard, too. So, to the push back

you've gotten around companies saying,

hey, you know, I can't succeed now

because you're the game in town, so why

would I do it? What I would challenge

back and why I think it's so important

that Bitwise leads the mission with the

Bitcoin Standard Corporation's ETF and

index is because there's going to be a

moment where consumers actually start

caring about the companies that they

support in the ways that they buy