Welcome back everyone.
Welcome back.
I hope you are already for what I believe will be one of the best presentations at this
year's conference.
But I must admit, as a big corner and the covering analyst on strategy stock, I'm a bit
biased.
I'm Michael and as I imagine director and crypto analyst here at HC Wainwright and I am
very excited and honored to introduce our special keynote speaker for today.
He is the founder and chairman of the world's first and largest Bitcoin Treasury company,
Strategy, a company that has accumulated nearly 640,000 Bitcoin worth over $70 billion in
just five years.
And he probably purchased another 5,000 this morning before the event.
Since launching its Bitcoin strategy in August of 2020, his company has generated significant
shareholder value with MSTR outperforming Bitcoin in every stock in the S&P 500 over the
period.
Our speaker was a true visionary, recognizing and harnessing Bitcoin's value as a Treasury
Reserve asset long before it was popular to hold on your balance sheet.
And without further ado, ladies and gentlemen, please join me in welcoming the pioneer behind
the Bitcoin Treasury strategy.
The Bitcoin Maxi of Bitcoin Maxi's, a man who needs no introduction, Michael Seller.
I'll forgive you for not wearing an orange tie, but we got extras on our company store.
Thank you for joining me today.
I'm going to speak a bit about commodities.
I'm going to speak about equity.
I'm going to speak about credit.
I'm going to talk about how to create a huge amount of shareholder value and what I find
to be most exciting in the coming four years.
Well, let's start with the commodity Bitcoin.
Bitcoin is digital capital.
And in the years 2020 to 2024, those were the crazy years where a few people would have
agreed with me.
Most people didn't agree and even more people didn't understand what that phrase meant.
I think that from 2025 to 2029, these are going to be the years of rapid institutional adoption,
acceleration.
And if you had to put your finger on one catalyst for it, it's that man right there.
The red sweep in November, catapulted the entire crypto economy into the mainstream.
The headwinds that were blowing in the face of Bitcoin and crypto in general became tailwinds.
You know, we had a president that said, never sell your Bitcoin.
I'm going to make America the Bitcoin superpower of the world.
I want us to be the crypto capital of the world.
I would say that the world view toward Bitcoin was grudging acceptance before November.
I'm going to let Gary Gensel would have said, I'll let it live.
I don't like it.
I can't kill it.
I acknowledge that it's not a Ponzi.
I hate everything else.
And after November and after these sweeps, the view became, oh, Bitcoin is a crypto.
We like a lot of things going on in the economy.
We like 24, 7, 365.
We like stable coins.
We like crypto exchanges.
We like money moving at the speed of light.
We like self custody.
We like property rights.
We like digital.
We like global.
We like the future.
This is the force of progress, right?
The entire attitude switched from one of grudging acceptance to one of enthusiastic embrace.
We had one cabinet member a year ago that would have acknowledged Bitcoin exist as a thing.
And every other cabinet member would have been ignorant, skeptical or cynical.
Now we have 12 cabinet members who are enthusiastic.
They like it.
The head of the FBI likes it.
Think about the fact that Tulsi Gobbert is a Bitcoin fan or Kelly Laughler or Robert
of Kennedy or the vice president and the president.
This is an extraordinary sea change.
Maybe the, I don't know when in the history of the Capitol markets, you went from people
not acknowledging the legitimacy of an asset class to the entire cabinet and enthusiastically
embracing an asset class, right?
That's happening.
And we're not even 12 months into this.
The White House is embracing crypto and it's embracing Bitcoin and it's driving positive
policy all throughout the government.
The ETFs, the Wall Street launched, not even two years ago are the most successful ETFs
in the history of Wall Street.
We've got 1.5 million Bitcoin held on those ETFs.
That's exploding.
Black Rock's I-Bid is just an explosive phenomena right now.
I think it's like the number four ETF.
And four to eight years, it could be the number one ETF.
That's how fast it came out of nowhere.
Our company was the first public company to buy Bitcoin in August of 2020.
We bought $250 million.
People fell off their chair, thought we'd gone insane.
That was the most amount of money it had ever been invested in the crypto network and
history of the world.
I didn't know that.
It just seemed to me like it was a good idea for us.
And so we moved.
But then it was two and then four and then 20 and then 40.
We had about 60 about a year ago and we're up to 180 publicly listed companies.
So the last 12 months has been explosive.
Even the past six months has been explosive in terms of public company adoption.
This morning we announced we bought $217 million worth of Bitcoin.
I didn't feel like it was a lot last week was a four day week.
Four day week.
But keep in mind that we spent 30, it took us 30 years to buy $250 million in August.
And so it gives you a sense of scale on how things are moving.
This chart gives you another view of this.
What's the significance of this?
Okay, well here's the significance.
When your best friend decides they want to buy Bitcoin they sweep 10% of their cash flows
into it.
When a private company wants to buy Bitcoin they sweep half their cash flows into it.
When a public company decides to buy Bitcoin they become a viral super spreader.
Meta planet was a $10 million bankrupt hotel chain in Japan a year ago.
And they have found a way to buy $2 billion worth of Bitcoin in like 12 months.
They may be the largest hotel company in the world in another 24 to 48 months.
They may be the largest company in Japan in four to eight years.
What you've got with a public company is public companies aren't limited to.
I only spend $100 million a year.
I can spend $100 million a month and double it every month.
Right?
Once it's more like, you know, I start a fire and I throw it into a gasoline warehouse
and the thing becomes self feeding and it just takes off.
So every single public company could become a billion dollar, 10 billion or 100 billion
dollar amplifier.
Right? They're all amplifiers of this movement.
And that's the part that is so incredibly powerful.
There's probably nothing more powerful than putting a commodity capitalizing a public company
with a commodity and then having it public and then plugging into the capital markets.
Because at that point the company begins to issue securities whether they're equity
or credit instruments and that's a rinse and repeat trade.
Right? How much equity capital can you raise?
Well, our company had, we started with a $250 million buy and we raised $47 billion
in five years.
So, you know, what is that?
Well, I mean, at this point we raised more capital in a day than we could have generated
in earnings in a year.
Right? You're accelerating by a factor of 100 or 1000.
Which one of these companies will do that?
Well, there's no telling, but the point is they're popping up in the UK and France and
Sweden and Brazil and Japan and Canada everywhere.
And each one is a different capital market and each one of these is a super spreader
of the Bitcoin virus.
There's a Bitcoin 100 now.
Companies are racing to get into it.
They just cross, we just crossed a million Bitcoin in that group.
And that's going to probably accelerate.
A lot of the companies on the left side of the screen, you know, 21 Bitcoin standard
treasury company, they're in, they're in Nakamoto.
They're all coming out of despaqueing processes and they've been in
registration and kind of dormant.
Once they get through that process, they go active.
And at that point, they can start to issue effectively unlimited securities of equity
or credit instruments and they become amplifiers.
Now, if it turns out there's 180 companies holding Bitcoin, then you got to imagine
all the equity analysts start to have an opinion on Bitcoin.
And so this is a roundabout way of getting Bitcoin coverage in the traditional equity
capital markets and every one of these analysts is covering our stock and putting a price
target on Bitcoin.
They're all about 150,000 for the end of the year.
Thomas lead declared 200,000 for the end of the year this morning.
Tech investors, Philipp Lefant has designated Bitcoin like the number three interesting tech
idea in the world.
It used to be before 2020 people thought, well, Bitcoin, it's a crazy crypto speculative
asset.
And as long as people think of it as a crypto casino speculation, it's never going to
get respected the mainstream.
When you start to look at it as digital capital, I, you know, I took a billion dollar block
of gold, I deemed materialized that I moved at the speed of light, I vibrated a million
times a second and I distributed it through a billion microprocessors.
That becomes very interesting to people that made billions of dollars investing in Google
and Apple and Amazon and Facebook.
Of course, you know, where is all the money in the world?
A lot of the money in the world is people that bought the Mag 7 at the right time.
So Bitcoin is a technology is much more compelling than Bitcoin as a speculation or even as an
ideology.
Financial regulators have now embraced it.
You know, three, it wasn't two, three years ago that the regulators summarily assassinated
Silvergate and signature bank.
They murdered those two banks, right?
There's nothing wrong with those banks other than they were actually two crypto forward
and two innovative and they got shot in the head.
Not chilled the entire banking establishment, the credit establishment, the insurance establishment.
When my company bought Bitcoin, our insurance carriers dropped coverage.
I had to provide D&O coverage from my company because we were deemed too risky.
It took us, when we had about 50 billion dollars of hard collateral, they still thought
we were risky and it took about five years before that turned again.
So it's pretty important.
I can't overstate how important it is that now you have the head of the FDIC, the OCC,
Treasury, the Federal Reserve, all articulating pro crypto, pro Bitcoin guidance.
This opens the door for the traditional finance establishment to bank the asset class and
to support the asset class.
You can see from the guidance coming out of the SEC, this is 180 degrees switch.
You've got the CFTC and the SEC, both pro innovation, pro Bitcoin, pro digital assets.
We've gone from an environment where people were mortified to do anything to an environment
where they're enthusiastically charging forward.
So POTY directed Fannie Mae and Freddie Mac to accept Bitcoin or figure out how to accept
Bitcoin as collateral for conforming loan.
This is tremendous.
Bitcoin makes its way into the mortgage credit industry, the mortgage industry.
Then what follows next is it finds its way as good collateral in the consumer banking and
the commercial banking industry.
People ask the question, what's keeping Bitcoin from flying to 500,000?
The answer is there's $2 trillion worth of Bitcoin capital gains and people with that money
can't get a loan for a nickel.
That entire asset class is unbanked.
It's like your employees on a startup made $2 trillion and no one will give them a loan.
So they have to sell some of their stock.
What you have is a lot of crypto OG selling Bitcoin right now because the asset is not
really financial.
That's changing.
It'll probably take, I guess, four years.
Big banks are bureaucratic, risk-averse institutions and they're large institutions.
Look, I don't blame them for being risk-averse.
If the regulator literally murdered silver gate in a signature, I can see why you as the CEO
of a bank might be just a little bit conservative about touching that thing.
The tone at the top was chilling a few years ago.
This administration has gone out of its way to actually reverse the polarity on that.
We've got three bills to move through Congress.
The Genius Act has passed.
The Clarity Act is this fall and the Bitcoin Act.
The real key here is this is a very pro crypto pro digital assets, pro Bitcoin, political
environment.
There's no reason to think that will change in the next four years.
What's four years mean?
Well, we've added about $2 trillion to the crypto economy in a few months from November.
We went from $2 trillion to $4 trillion or something.
I would think that we're staring at a $10 to $20 trillion industry by 2028.
The Genius is not going to go back in the bottle.
There's no way you put a $20 trillion industry.
You've got 40, 50 million Americans that own this right now.
Give it four years with the flow into 401Ks and retirements.
Substantially every, I will go out on the limb and say, substantially every American with
assets is going to own some amount of crypto exposure and they're going to own some decent
piece of Bitcoin by 2028.
I find it hard to imagine where it will be hard for them not to.
The CEO of Vanguard became very famous for saying he didn't think Bitcoin was an asset.
He didn't generate cash flows and they wouldn't let their clients buy it.
Do you know that the largest shareholder is of my company?
It's hard.
Okay.
You think about that a little bit.
Kind of hard to stop an idea whose time has come.
States are embracing it and governments are embracing it.
This is just going to get louder.
And the crypto industry in general, it went from a lot of infighting to being largely aligned
at this point.
And I think there's an appreciation amongst the crypto networks, the token, the DeFi,
the crypto exchanges, the Bitcoin advocates that the entire industry is better cooperating
with each other than they are fighting with each other.
And following November, I saw a remarkable alignment of interest and a coalescence of
a formation of a coalition.
This coalition, the entire crypto industry is probably the most powerful political actor
in the space right now because they can marshal something like 50 million voters and
they're just so distributed and diffuse and their influence and also very aggressive and
driving this forward.
So the entire industry has become very politically active.
Now that's the backdrop.
As you can imagine, I'm bullish on Bitcoin.
I'm bullish on the entire crypto industry.
I'm bullish on digital assets.
And I think that there's a surge globally worldwide.
And there really isn't, I don't see any organized resistance at this point.
They're just various degrees of bullishness at this point.
People that don't have anything good to say generally just say nothing at all.
They've learned not to walk in front of this truck.
There's no upside and standing against this.
So I think it's just about the most positive environment that we have seen in the history
of the industry.
Now what is our company?
We are a new class of company, a treasury company.
Now what's challenging for people is wrapping their head around a Bitcoin treasury company.
And that's because Bitcoin is a new asset class and treasury company is a new corporate
type.
Now why is it though, you know, what is Bitcoin?
Bitcoin is the first digital capital.
It's the first perfect money.
Well we never had perfect money in 10,000 years of economic history.
The Austrians never saw it.
The libertarians never saw it.
The political scientists never saw it.
You can't blame them for not factoring in their thinking.
They just never saw it because it was impossible to create to semi-conductors public
private key cryptography in the internet.
So Satoshi, like Galileo, you know, Galileo came up with telescope.
You know, with a telescope and all the sudden the Copernican revolution is a foot.
Well we needed Bitcoin for there to be that monetary or capital revolution.
And that's what Bitcoin is.
And most of the world still doesn't get it, but that's good because the way that you make
10 to 100 extra money is to figure something out while the majority of the world doesn't
agree with you or doesn't get it.
When they all agree with you, it'll be a not good investment.
It'll be a mainstream investment.
You need to be right, but you need to be just early enough that 95% of the people think
you're wrong.
That's how you make obscene amounts of money.
So I mean, that's Bitcoin, but we put together two novel ideas, Treasury Company.
What is a Treasury Company?
It's a company that accumulates capital and then issues securities against the capital,
especially issuing credit.
What do we do?
We're selling credit, right?
What does a bank do?
A bank buys credit.
A bank is basically buying your mortgage.
We are reversing it.
We are creating securities, Bitcoin.
We're selling an annuity.
When you buy stretch, which is like a 10% annuity, we're selling you the annuity or you buy
strife.
We'll give you 10% at par forever and you're buying it from us.
Now how are we promising to give you a dividend for 100 years?
That's a long duration liability.
We need a long duration asset.
So Bitcoin is a long duration asset, right?
You would want to hold it for a decade.
It's high volatility.
It's called a 120 month duration 50-vol 50-ARR.
It's a very powerful financial asset, but most of the world doesn't want a 120 months
of duration and they don't want 50-vol and they don't want years where they get nothing
and years where they, this year we got 100%.
They don't want that.
So a treasury company sits between that uncertain long duration, highly volatile, high energy
future crypto economy and they strip it down and they give you a one month duration,
10% yield, low-vol, low risk financial instrument out the other end.
They're securitizing digital capital or securitizing digital property.
Why is it, that's never happened before.
Why isn't there a magnificent seven treasury company?
Why can't you do this with Apple and Tesla?
It's because the SEC 40 act made any company holding more than 40% of its liquid assets
on this balance sheet and investment company.
You cannot lever 100% or 150% the balance sheet of a publicly traded company in the United
States with securities.
There is no S&P treasury company.
There is no Mag 7 treasury company.
There is no Tesla treasury company.
Would there be a market for it?
If it was legal, absolutely.
What I'm doing, what we've done, you could do with the S&P, but the challenge is not
in the current regulatory environment.
So public companies, since 1940, call it for the last 85 years, they have had to either
surrender their capital.
They can give it back as a dividend.
There's only one security that Apple can buy.
One security, it's called Apple.
They can buy their own security.
They can buy back their stock.
They can dividend out their stock.
They can hold short dated treasuries, money markets or one month treasuries or sovereign
debt.
They can buy real estate or goal, but that's illiquid or they can do some acquisition.
But you see, what makes treasury companies possible is the creation of a commodity because
you can hold 150% in commodities or 100%.
A commodity that outperforms the S&P, that is the magic trick.
I can create a digital commodity that's garbage.
If I were to inflate Bitcoin 27% a year every year at an instant item, it would be a commodity,
but it wouldn't be a good investment.
The world's full of commodities that are bad investments.
In fact, arguably every commodity other than gold has been a bad investment over the
long term, over 10 years.
So you need a commodity.
It needs to outperform the S&P and then you need to be able to lever a public company.
So when did you know for sure that that was going to work?
Well, arguably after November 5th.
So the reason this is exploding is because you had to be a believer in August of 2020,
but all you have to do is be a reader.
You just need to read the press and listen to what people are saying in the last nine
months to know that you can actually do this.
And a public company, levered on a commodity, can arbitrage the return of the commodity
versus the cost of credit or the cost of equity.
And you can do it in an almost, I'm not going to say risk-free, a very low risk way.
The most intelligent way to generate leverage on a good idea is a public company issuing
instruments like preferred shares or some kind of long-dated public debt.
It's a much better idea than say a margin loan from your local cryptographic exchange.
So we've raised $47 billion of capital a little bit at a time frame.
Most of it equity.
A little bit convertible bonds and about $6 billion is preferred equity.
And you can see it's every single quarter we're building up.
We have a little bit more than 3% of all the Bitcoin in existence.
Clearly we believe in the network.
We're basically ratcheting the network up.
And as we buy Bitcoin, we take it out of circulation and then the price has got to move up so
that people can find a willing seller at a much higher price.
Now these are all the greatest companies in the world.
We have come out of nowhere in five years to be the fifth largest treasury in the entire
S&P.
Why?
Because we are positively polarized to capital.
They are negatively polarized to capital.
If you talk to the CFO of any of those companies with the exception of one, Berkshire Hathaway,
the only company on this chart where the guy that runs it would say, I'm going to keep
my capital and invest it for the good of my shareholders is Warren Buffett at Berkshire.
Anybody else would say, we're going to return the capital to shareholders.
We have a capital return program.
We're raising the dividend.
We're raising the buy back.
And they crow about it like it's some achievement.
But I hear them say it and what I think in my mind is they're saying, we have no freaking
clue what to do with the money.
We don't have any idea.
And so we're just going to give it back to you.
You figure it out.
Like, really?
You have no idea.
OK, well, it's OK to surrender the capital unless you're in tell and you need it.
You know, it turns out that companies like Intel and DuPont, they return the capital
to shareholders.
They're worth less than the dividends.
Do you really want to run a company where you basically cashed out and you eventually
dwindled to nothingness while you leave the stream of dividends and buybacks in your
wake?
And it's like, like ashes to ashes, dust to dust.
Why do companies die?
Why do you have a 10 to 15 year life expectancy for a corporation?
And so it's because of their financial practice.
It's because they're surrendering their capital as fast as they can.
If I bled you to death, you would die quicker.
Like, if I showed up at family, you know, Thanksgiving dinner and I said, I have a great
idea for the family.
Let's give away all of our money so that our balance, she doesn't volatile.
I mean, that's kind of what's happening here.
And you'd be like, OK, great.
I guess someone else will figure out what to do with all of our money.
But what if our family needs the money?
Don't worry.
We'll just work harder.
Raise our prices and cut our salaries to our employees if we need the money.
Because that's what they do.
So that's not a good idea.
And the real revolution here is what if we actually replace share buybacks with Bitcoin
buys?
What if we actually stopped dividing out the cash flows?
What if we reinvested the cash flows?
They're like, well, I can't do it in money markets.
You're right.
You can't.
What can you do it in?
You need something that outperforms the cost of capital.
If you find that, if I can return more than the cost of capital, I can in theory raise
infinite money.
If I return less than the cost of capital, I can in theory raise no money.
I either, I'm either beating the cost.
I'll give you infinite or I'm underperforming.
I'll give you nothing.
All these companies have chosen a balance sheet strategy to underperform and therefore they
deserve nothing.
They have to give it all away.
Right.
They're just leveraging themself until they're 20, 20, 30, 40 dollars of enterprise value
for $1 tangible assets.
What happens if you have a bad quarter?
Well, you know what happens?
Stock crashes.
We raised $22 billion last year, $19 billion this year.
We are doing it with a variety of different instruments.
Right.
It's Iran.
It's not lost upon me.
The irony that every great company in the world is in the business of getting rid of their
capital as fast as they can and we're in the business of collecting it.
What if the collective geniuses running all those other companies reversed the polarity
and started collecting it instead of throwing it away.
My job would be a little bit harder.
Right.
But right now we're literally siphoning up the capital that's being pushed into the economy
by them.
We did four IPOs this year and we did the biggest IPO which was stretch a few weeks ago.
And you know, while run companies only do one IPO, my first IPO was like $35, $40 million
dollars.
Right.
And it was pretty hard.
This one was really easy.
Right.
And of course, the irony is what would happen if a Tesla or what would happen if an Apple
or a Microsoft did an IPO today?
Right.
It would be massive, but they're not doing that.
Right.
Again, they're not in the business of issuing securities.
They're in the business of buying them back.
We are building markets for our securities.
So one market is institutional active investors and other is passive investors.
The third is retail investors.
So the retail channels for our retail demand for our securities really dramatically increased
with the last IPO, I think we had really about $600 million dollars of retail demand in
two days.
And so we're building that retail business.
This chart probably is the most important chart I'm going to show you today.
If you just bear down on it, the cost of capital for the past five years is 14%.
That's the S&P.
Long dated bonds are minus 4%.
That's why every bank was in trouble financially when the fed raise interest rates.
If you had short dated money like money markets, you're probably getting 2%.
If the cost of capital is 14, then all the capital you hold is minus 12% real yield.
You're destroying 12% of your treasury a year.
That means in five years, cut it in half.
Bitcoin is 55%.
The Mag 7 is double the S&P.
Bitcoin's double that.
And our company is about 80% more.
What's the opportunity here?
Well, the opportunity is you fund your company with the cost of credit down here or with
the cost of equity.
And then you invest it into the digital ecosystem into Bitcoin and you just grab the spread.
And you can do that effectively risk free.
For example, we have a product stride STRD.
We pay 12%.
It's a non cumulative preferred.
We'll give you 12% at infinite item.
We buy Bitcoin.
It's a perpetual swap.
We're going to get everything more than 12%.
We'll compound it.
We'll get to 12.
We could sell $100 billion there.
We could sell a trillion dollars of that.
Why?
Because it's non cumulative and we could suspend the dividend and we never repay the principle.
So you've created as a public company a risk free unlimited scalable swap.
But to the extent that Bitcoin performs at the S&P or better, it's a screaming winner.
You know, Bitcoin could underperform the 12% and by selling the volatility and utilizing the float,
we would still make money on it.
But if Bitcoin performs more than that 12%, then we start to compound it at an extreme rate.
And that's the kind of instrument that you can't make unless you're a publicly traded company.
And you can issue securities.
So our business is, let's outperform Bitcoin and then let's find a way to tap into the right side of this chart.
You can probably, you can see why there are no gold treasury companies or real estate and gold or hard is because they don't outperform the S&P.
It's a little bit challenging.
But to the extent that you make money in real estate, you can see the way you do it is you lever it four to one.
Right, when you look at that chart, if you can lever real estate two to one three to one four to one five to one 10 to one, right, then you could probably make money.
Nobody's figured out how to lever gold.
This is the last year.
And you can see, you know, Bitcoin's up 100%.
How do we measure success?
Well, our business is to generate additional Bitcoin per share every year.
So if you're buying strategy stock, you own a certain amount of Bitcoin and then we add more last year, we added 67,000 Satoshi's per share.
And then this year we've added 41,000 Satoshi's per share.
So you're making money by increasing the Bitcoin per share and then the Bitcoin price is going up.
But ultimately the difference between a Bitcoin treasury company and a Bitcoin ETF is an ETF like BlackRock is going to have a certain amount of Bitcoin on you lose 20 basis points a year.
That's the fee.
You're never going to have any more.
But an operating company, you'll have a certain amount of Bitcoin and then you'll have more each period thereafter.
We call that increased BTC yield Bitcoin yield.
And so this year to date, we've had 25.8% increase in Bitcoin per share.
Right.
Our target was 25% for the year.
You know, so if a company said, well, we're going to increase the share, the share of Bitcoin, the amount of Bitcoin you have per share by 25%.
Then you would think, well, it's worth a premium to the underlying asset.
So you're you're valuing the company at a premium to the reserve because it is a creating Bitcoin through its operation.
For the longest time, Exxon mobile was valued at a premium to its oil reserves on a similar logical basis.
Here's a snapshot of our business model.
On the left side is the crypto economy.
We start with Bitcoin and trade 60 to 70 billion a day.
It's this long duration volatile high energy high performance, very scary asset.
And it's global and it doesn't stop.
And the traditional finance economy doesn't want it.
Can't buy it.
What they want is they want an equity or an option or credit instrument in a wrapper that they can deal with.
So if you buy just wrap Bitcoin, you're buying Ibit, which is black rocks, big ETF.
And that's been very successful.
But what you'll get is the volatility, the duration and the performance of Bitcoin.
What we've done is create credit instruments that strip the ball, strip the duration, strip the risk,
strip the performance off of it.
And we sell that as convertible bond or convertible preferred or a fixed long duration preferred or this stride instrument,
which is a non-cumin preferred or the latest thing we did, which is stretch, which is a money market.
What's the idea?
Well, strike is structured Bitcoin.
I'm going to give you the upside downside protection and a guaranteed dividend while you're waiting.
Right. So think of it for more conservative investors.
They don't want the roller coaster ride.
What they want is like a guaranteed 8.4% yield and they want to be senior over collateralized in the capital structure.
And they want like a 3540 delta instrument.
They'll get 40% of the upside of MSTR stock, but they won't be getting the downside.
And they give up that performance for that principal protection.
What are we competing against?
We're not competing against a company.
We're actually selling this to people that would otherwise buy the S&P index or they buy commercial real estate or they buy into a hedge fund.
So strike is that is that hedged upside with an 8.4% effective yield and you could buy that instead of buying real estate.
You know, and then and you can see the performance and the size of the market.
It's a $90 trillion market.
I mean, people just kind of want.
They want some hedged upside and a guarantee.
What's interesting about this?
What's interesting is we can create billions and billions of dollars of this instrument.
Right. We're we're not just selling it.
We're originating it.
We're backward integrated.
So when you buy when you buy into a real estate fund,
they have to go and develop the property.
When you buy this instrument, we created in seconds.
Right. So so we can create it a thousand times faster.
It's all homogeneous.
So digital credit, right?
What's strife?
It's long duration credit.
It's like a it's like a perpetual bond.
And so if you want a certain yield,
you want 9% yield for the next 100 years.
That's what you want.
That's a you know, it's effectively 12 14 year duration,
which means that if sulfur dives,
you're going to want to hone this because this thing is going to be yielding 9%
when sulfur is 2% or 1%.
So it's like 100 year bond way over collateralized,
7.6 times over collateralized in BTC.
A mortgage-backed security is 1.3, 1.5.
So the perception is these things are risky, but the reality is they're not,
you know, they're the most over collateralized credit instruments in the market.
Who are you aiming that at?
Well, we're aiming that at long dated investors,
most of whom are looking at a forehandle, 4%, 5%, 3%,
and we give them 9%.
If you're that long dated credit investor, stride, it's high yield credit.
So we're aiming that at the junk market.
It has a 12.7% effective yield,
but it's nearly 5X over collateralized.
So loan to value would be like 20%.
You've got $5 a Bitcoin for every dollar of this asset that's issued.
If Bitcoin would have crashed 80%, you're still collateralized.
If you think Bitcoin's going to go to zero, you don't want to buy any of this stuff.
But if you actually think Bitcoin is just volatile and it may go up and down,
then all this stuff is within your wheelhouse.
What's the universe of comparable assets?
Well, there's $2 trillion of money invested in, closed in,
fund, high yield corporate bonds, you know, preferred stock ETFs.
And you can see for the most part,
the liquid things you can buy are six or seven hand or we're offering 12.
And what is stretch?
Stretch is the most aggressive piece of financial engineering we've done.
Because with stretch, what we did is we took that 120 months of duration to one month.
And we took the idea was, I don't want volatility, I don't want principal risk.
All I just want is something that pays 400 basis points or 500 basis points more
than my bank account.
And I want the money back when I ask for it, high yield bank account, high yield money market.
So we target price stability 100%.
And of course, if you walk down the street, you say to 100 people,
do you want a 30 year Bitcoin bond that yields 9%.
You know, you get like one, two, three out of 100.
But if you say, would you like a high yield bank account that pays you 10%.
Well, that's like 95 out of 100.
Everybody wants their bank to pay them 10% instead of 4%.
So this is a much simpler idea.
To do it, we had to create a completely variable monthly rate.
And this for the most part is like the first time anybody's done this on a crypto asset,
there might have been one company that created a variable rate in last 30 years.
But this is fairly innovative to create a preferred stock where the dividend rate changes every month.
No one else had a reason to.
In essence, we're creating, we're becoming like the central bankers of the crypto economy.
We're creating a currency, we're setting the rate for the currency, and we're pegging it to the dollar.
Right.
And that's what's going on here.
So if we trade below parity, we'll raise the rate.
If we trade above parity, we'll lower the rate above par.
And what are we aiming at?
Well, we're aiming at $30 trillion of money market type instruments, right?
Your bank accounts, your money market funds, your short term treasuries, your commercial paper.
And what are the yielding 4% in the US right now, but probably not 4% for much longer.
There'll probably be with a three handle shortly.
So this pays two to three times as much.
You just have to believe the Bitcoin's not going to zero tomorrow.
This picture shows you the engineering we've done.
What you can see here is that MSTR has got a 56% trailing ball.
That's the high ball equity.
That's the highest performance security.
That's the roller coaster.
That's Bitcoin with rocket fuel.
Strike is 37 ball.
Strike is 27.
Strike is 20 stretches 14.
There's still in the first six months, it's the first year.
So we're seasoning them.
But our goal is to season them and then move, move stretch down to below five, right?
We want it, we want to get all of these to like fall into the right price performance,
volatility category.
And over the long term, we've laid the framework so that we can build out the entire yield curve
and the entire risk curve.
So if you studied the insurance business and thought about or the mortgage back security
business, you're tranching risk and you're tranching duration,
we could create a preferred that would give you the yield with a trailing 12 month delay.
And it becomes a perfect 12 month instrument perpetually rolling forward.
And we create a perfect 36 month instrument, just rolling forward perpetually each month.
Right?
And so if you want to create a perfect one year, three year, five year, seven year,
nine year, 10 year instrument, you can do it on this framework.
And the beauty is the very precise and the credit risk is substantially.
I don't know if I want to say an order of magnitude less, but it's some large factor less
than using a bond because bonds come due, but perpetual preferred never come due.
And you can see the near effect of these, we take them public, we put a shelf registration on them.
This is our preferred versus the liquidity of all the others.
You can see most preferred stocks are illiquid, right?
They're illiquid under collateralized opaque heterogeneous credit.
Why would you want to buy it?
The answer is you wouldn't and so people don't.
But what if they did, right?
What if we created one that was not defective?
Right?
What if we created a $50 billion preferred to trade a $23 billion a day, and it actually offered 400 basis points more yield?
Well, why wouldn't you want that?
Right?
And this is the collateralization of perfords.
And you can see here, most stuff is under collateralized and we can over collateralized because of Bitcoin.
If you look at the ETF environment, you see handles of six or seven.
Now, it's very difficult to pay much more than that when the source of your credit is real estate or corporate junk or unrated corporations.
But the source of our credit is digital capital.
And my long term forecast is about 29% a year for 20 years.
My bear case is, you know, better than the S&P.
So we actually can offer much higher rates without concern.
Let's look at the universe of comparable assets.
So you see, you look at treasuries or agencies or investment grade bonds.
You can see collateral coverage, one, two, one, one, four, right?
They're all under collateralized.
The durations, if you want long duration, they're not long enough.
You know, if you want short, they're not short enough.
If you want liquidity, you can almost never get enough.
It's very difficult to get the right combination of durational liquidity and yield.
But you put all those things together and all of the volatility and the performance, we strip off the credit instruments, accrues right to the equity.
So that's how we create amplified Bitcoin.
And the result speak for themselves.
We've got a 92% a year return for the last five years running.
And that's allowed us to create the most vibrant options market.
That's what allows us to generate the overall return.
It's what allows us to attract capital.
And what's the target for the equity?
Well, we target the, you know, the S&P 500, the mag seven people that might love Bitcoin.
Well, what's more better than Bitcoin, more Bitcoin, right?
So you're like, maybe you buy the Bitcoin spot.
And what's the result?
Well, we're up 16% year to date 181% in a year, 92% every year for five years.
How does the amplification work?
Okay.
So I have 200,000 Satoshi's a share.
If I did nothing, if the company stopped, if we all went on vacation, we've got a $72 billion business growing 55% a year.
That's what the business is.
We'd keep that Satoshi's per share.
But if we issue credit to leverage it up 10%, if we, if we basically issue $7 billion worth of credit on $70 billion a Bitcoin,
you can see the Satoshi's per share start to accrete.
When you crank that up to 20%, you go to $15 billion, then it accretes much faster.
And if you get to 30% leverage, you know, and, and you could do 30% leverage pretty easily with prefers, even without risk, because the prefers never come due.
So you're actually on the hook for the dividend, but not for the principle.
So you can see here, you get an amplification factor of 2.8.
So you're getting on the back into this 2.8 times more Bitcoin than you started with.
If you put these into tables, what you can see is that when you run with 30x leverage of Bitcoin grows 30% a year, you're going to actually get three times as much as if you held the underlying ETF.
So what's the source of the premium?
It's the credit amplification.
Where does the amplification kick in?
Well, this is kind of, you'll recognize this from the banking model.
If you understand banks and why how they use preferred or any kind of leveraged finance model.
The amplification kicks in as you get more leverage.
It kicks in if the underlying Bitcoin grows faster, because you're compounding that.
It kicks in if the dividend rate falls or the cost of capital falls, right?
If you're a meta planet and you go to Japan and you wish you a preferred stock in Japanese yen at 5%.
You're going to get a lot more leverage and you're going to get and you'll get more amplification.
You can see it here, right?
You go from from 10% to 5%, you go from 1.9 to 2.3.
And so what you can see here is that by using intelligent leverage, you can find a way to generate 2, 3, 4x, the normal Bitcoin performance.
And that just leads you to the question of credit risk.
Like what is the risk?
So this is a credit model.
This is actually the capital structure of our company.
And what we've done is created a model.
We put it on our website.
You can run it.
Just go to the credit tab of strategy.com.
You plug in the price of Bitcoin.
It updates every 15 seconds, by the way.
And you can overwrite it.
You can plug in your expected volatility and your expected Bitcoin growth.
And if you're a skeptic, you think Bitcoin is going nowhere for 100 years.
Then you would plug in 0%.
And what you would see here is that all the convertible bonds are investment grade in terms of their risk.
And then half the preferred are mezzanine.
The other half prefer to high yield.
But when the volatility falls from 40 to 35, you can see they all start to get upgraded.
And if the wall falls to 30.
And Bitcoin trailing 30 day vol was 30.
Just a few days ago.
If the volatility of Bitcoin falls to 30, you see that the credit starts to improve on all these.
Even if you're a skeptic about the future of the asset.
So the inputs are the price, the vol.
And then the outlook.
Now, if you're not a skeptic, if you're a trader, if you think Bitcoin is as good as the S&P.
But a bit more volatile.
You can see most of this stuff starts to look investment grade.
All you all you have to believe is that Bitcoin is as good as the S&P.
For you to engineer all of these things and find what are extraordinary spread premiums, right?
Like just extraordinary.
And Bitcoin goes up 20% a year.
You see all the risk that stripped off of this.
And, you know, the the fair credit spreads fall to, you know, a few basis points.
And that's what the market doesn't quite appreciate yet, but that's the opportunity.
As credit rating agencies get involved as people start to look at this.
This is a digital credit.
Think about the difference between digital credit and real credit.
If I show you 100 billion dollars of mortgage back securities and there's like 100,000 different homes and there's all these tranches, it's all heterogeneous.
But when I show you Bitcoin, you're getting a quote everywhere in the world every second 24, 7365.
It's all transparent.
So so in the digital credit world, there's no reason to wait for a year for a credit rating agency to write a report and deliver it to you.
You can literally plug in your own outlook and generate your own risk profile and make your own decision.
And so this is a to say it's an order of magnitude more transparent might be an understatement.
Now, if you're a maximalist, if you believe in Bitcoin, i.e. you know, someone that holds our equity.
When you plug those numbers in, even in a volatile environment, what you see is the risk drops away and every single thing on this table becomes investment grade.
Now, you might say, well, yeah, Mike, but if I believe in Bitcoin, I'd only buy Bitcoin.
Well, not not quite because there are a lot of Bitcoin believers that need money for the next 12 months.
They have a treasury, they have a working capital needs, they have families, they have to pay their kids tuition in the fall.
So they believe in Bitcoin, but they still need instruments that are more stable than Bitcoin.
And there's a lot of Bitcoin, maximum, less believe or not, the one credit funds.
They run equity funds, they run fixed income funds, they run credit funds, they worked for a living.
You know, and in their case, they'd like to buy something with this kind of exposure and when they look at this, what do they see.
You see strides showing at 868 basis point spread premium.
That's mispriced risk. That means you're getting paid 8.6% for no risk.
If you had a fund and could invest in that and you believe in Bitcoin, then that's easy money for you.
So from our point of view, you know, it's not complicated where we head.
What we do is we gradually just park the preferred above a hard capital layer of Bitcoin and then we build the equity out.
We equitize the convertible bonds over time. So the converts half of them are in the money.
So we'll just let them become equity because they don't trade in the public market and we build up the stack of preferred instruments and we grow those instruments.
We become the leading issuer Bitcoin back credit, right? And just as an interesting thought experiment.
What happens if we equitize all the convertible bonds and this is a skeptic looking on our preferred stack after the bonds disappear.
And you see the top two preferred look investment grade.
What happens when you're not when you're a trader and you think Bitcoin's going to 10% a year, they're all investment grade.
So what happens next well, then you can go to 30% leverage.
Or even 50% leverage. So you see how do you get to 50% leverage you have a hundred billion of Bitcoin you wish you 50 billion dollars it prefers the 50 billion never comes due.
You got to come up with three four billion dollars worth of dividends the company trades up to 250 300 billion you dilute half a percent or 1% a year.
And you roll the thing for where the equity holders get two to four X Bitcoin return.
What's the risk Bitcoin crashes there's no credit incident there's no credit risk and it this becomes an extremely robust or anti fragile balance sheet so I'll end just with a few thoughts.
What why do we trade at a premium why do we exist what is the logic of a Bitcoin treasury company well it starts with credit amplification you need an operating company to sell credit.
The world once credit right the credit amplification gives the equity two to four times the underlying for the performance of the underlying asset.
That creates the options advantage you end up with a much deeper more vibrant options market then you're able to tap into passive flows and institutions.
Now how important is that these are the global credit markets.
Take a look at that 75 you know 90 trillion dollars you get 4% yield in the US you get 2% in Europe you get one and a half in Japan you get 55 basis points in Switzerland.
The credit markets are sick like they're not healthy these people are yield starved it's getting worse right so selling the credit is like well how much are you going to sell.
We'll take 1% of that is 800 billion dollars worth of credit instruments so so the market is massive there and they all want to be paid 400 basis points more than that number.
How important is passive index money.
There's 17 trillion dollars of capital and passive funds 85% of it is equity indexes 15% is credit indexes nobody thinks that long term capital is investing in a commodity index.
The commodity index funds are 0.1% 10 basis points that is to say every commodity other than gold or silver as a dog and anybody in gold or silver is not in index fund they're in gold or they're in silver.
So what's the significance of this.
The indexes the credit index need to buy credit the equity indexes need to buy equity the 17 trillion dollars.
This is my this is my shareholders space look at the top 100 shareholders.
57% of the shares are held by passive indexes so Vanguard BlackRock two of my five biggest investors they're passive they're not active only 43% of those shares are held by active managers.
Now that's just a sample of the top 100 but the top 100 cover 46% of the company shares.
What that's telling you is there's going to be a substantial flow of credit and equity capital to Bitcoin Treasury companies because this is not going to unwind itself people aren't going to wake up and say oops I think I should just like not allocate to the S&P or the NASDAQ 100.
So this is structural.
And this is structural if you look at manage capital 60 trillion is credit to 35 trillion is equity only three trillion is commodities but the commodities are mostly gold held by central banks they're not selling.
So ultimately you have maybe 700 billion dollars of capital that might find his way into a commodity like Bitcoin.
The world wants equity and credit and the only way to create equity and credit is to take an operating company public build a huge capital base a big equity base and then start to tranche off you know BTC 10 rated five rated three rated instruments and you know when we.
If you ever seen like a big block of lucite and a computer generated milling machine you put your image into the computer and it it mills it out of the lucite you get this beautiful sculpture.
That's what I think when I think about what we're doing we take a block of digital capital Bitcoin.
We take digital intelligence and we design a preferred security you tell me what yield what duration.
What kind of risk what collateralization what do you want it to look like and we generate the digital credit from the digital capital we sell it to the market and we can sell it as much as the market wants to buy.
I want to buy 500 million right now I say you 500 million right now I will create it on the fly you want to buy five billion you want to buy 50 billion right we have certain rails like you know at some point we'd be under collateralized so I can't just you know slam it to a BTC rating of two overnight if it's supposed to be a senior instrument but to a much greater degree than any issue of credit in the modern world.
Bitcoin Treasury companies especially a well capitalized one can create the most compelling high performance credit instruments and do it fastest and quickest and that's what the market wants so I'll just end with this slide our principles are simple we buy Bitcoin we hold Bitcoin we're exclusive we want to be homogeneous credit risk we want to be homogeneous in our capital strategy.
We prioritize long term value creation for the equity so everything we're doing think I hold the equity look out 10 years is this a good idea for 10 years from now if I'm an equity investor we ask that question.
We treat all of our investors with respect if we told you we're going to do something we do that thing and we structure the equity to outperform Bitcoin you know if we can do two X we'll do it if we do three X we'll do it if we can do 1.5 X that's what we'll do and then we can tell you acquire Bitcoin as long as it's a creative right there's none of these transactions are ever diluted we're always generating yield we're always selling securities to the premium.
We're always selling securities to the premium to the underlying asset nav and then otherwise you know week by week day by day we react to the market the credit markets the macro markets are changing all the time they can change from the morning to the afternoon I can I've seen them change from the point that Jerome Powell starts a press conference to when he finishes answering questions they'll go this way in that way twice we're reacting to that all the time in all of our capital programs and you know I'm going to do that.
And you know ultimately we don't have to do anything we have the option to just do nothing for three months or six months and if we did nothing we have a 72 billion dollar company growing 50% a year which is just about better than anything else I've ever seen in this market so our default is not bad so do no harm when we see an opportunity to do something good we do it.
And in the meantime we promote global adoption of Bitcoin as a treasury reserve asset and why.
Because I think all the companies in the world are type one diabetics I think they can't retain their economic capital or energy.
And and if you want your company to live forever or you want to live healthier or happier.
Then you want to capitalize that allows you to retain your cash flows and grow your shareholder value without surrendering capital it's a very simple idea.
But it's a powerful idea that will work for a private company or a public company and and if you've ever seen a great company brought to its knees and torn to pieces because was under capitalized.
Or you are on the receiving end of of that situation as an investor or an employee or a customer or a constituent then you understand what I mean.
And so with that I want to thank everybody for your time and your attention. Appreciate it.