Michael Saylor & The Ultimate Bitcoin Strategy

We interviewed you last year around

around this time about a year ago.

[music] Bitcoin had just crossed 100K

for the first time. Today it's trading

at 87K. Why did Bitcoin underperform?

>> Most people will be followers, but

there's always going to be a leader.

This is a battle for the future of

money. In my opinion, we have the

world's greatest product. The number one

way to destroy or undermine your first

idea for the 30 trillion is to come up

with a second idea and get distracted.

You want to look at the history of

failure. It's alpha males [music] that

solved one thing and think that that's

solved and done and they come up with 10

more [music] things to solve. The most

important days of your life, the day

you're born and the day you figure out

why.

>> Welcome to Galaxy Brains.

>> An infinite amount of cash cash. I'm

your host, Alex Thorn. The US banking

system is sound and resilient. Bitcoin

made a new alltime high.

>> If you're not long, if you're not long,

you're short. Satashi's going to come on

there, laugh his darkly, go quiet. All

Bitcoin is going to be erased.

>> Bitcoin. Bitcoin is the best crypto out

there.

>> Bitcoin is going to zero.

>> Welcome back to Galaxy Brains. I'm Alex

Thornne, head of firmwide research at

Galaxy. We have a great episode for you

this week. Phineas and I have just

returned from Miami to interview Michael

Sailor uh in his home. Wait till you see

this set where we recorded. Uh we were

sitting in the red room uh at his house

in Miami and it's really a fascinating

interview. I I was frankly blown away by

the evolution in Michael's thinking and

how far beyond the other treasury

companies strategy really is and how

deep he's thinking about strategy's role

in the future uh economy. It's not just

a company buying Bitcoin and putting on

its balance sheet. I know you're going

to enjoy this interview. Um, and I

thought he was characteristically

extremely articulate and I think we

talked about AI, we talked about Bitcoin

development. I think uh people who have

been following the core versus knots

debate in Bitcoin will find his answer

on this very interesting. Also, quantum

computing. Michael's a very uh classic

optimist about things working out in

Bitcoin's favor. Look, before we get

into that interview, I need to remind

you to please refer to the link to

disclaimer in the podcast notes. And

note that none of the information in

this podcast constitutes investment

advice or an offer, recommendation, or

solicitation by Galaxy or any of its

affiliates to buy or sell any

securities.

Welcome back to Galaxy Brains. As

always, I'm your host, Alex Thor, head

of firmwide research at Galaxy Bitcoin,

not zero. We have a great episode for

you this week. Michael Sailor, chairman

and founder of Strategy. Thank you so

much for coming back on Galaxy Brands,

Michael.

>> Yeah, thanks for having me. Well,

actually, thanks for having me and us in

your home in Miami. Um, it's been quite

a ride this year. New all-time highs

now. I mean, when we interviewed you

last year around around this time, about

a year ago, Bitcoin had just crossed

100K for the first time. Um, today it's

trading at 87K. Why why did Bitcoin

underperform this year?

uh you know it's it's the world's

greatest free market in capital and uh

85% of the Bitcoin you know

notwithstanding all of the corporations

that have been acquiring it that people

talk about you know Black Rockck and

Strategy get all the publicity but 85%

of the Bitcoin is held in crypto OG

hands we can't even identify them you

know and I talk to the traders they say

that you know the the derivatives market

the perpetual market drives this much

more than spot, which means the $1.7

trillion worth of of capital that can be

20x or 30x levered is held by people

that we don't know. And so I think that

uh that in the near term their moods and

their drivers drive this market and and

I guess that's the beauty of free market

capitalism. But uh I think that the more

important point is the last 12 months

have been probably the best 12 months in

the history of the industry uh in terms

of fundamentals and it's it's profound

what's happened since December.

>> What would you put at the top of the

list there? I mean I know we've had

changes in regulatory environment,

different types of institutional

adoption. What stands out to you the

most? Well,

>> let's tick off the highlights the last

12 months. You know, you have uh a

universally supportive administration, a

supportive head of the SEC, supportive

head of the CFTC, supportive head of the

Treasury, supportive president,

supportive vice president. You have

David Saxs, you know, go out p publicly

and say, you know, Bitcoin is a digital

commodity. It's digital gold. It's an

asset without an issuer. We recognize

it's it its special nature in the world,

you know, as a technology to propagate

property rights and freedom. That

happened in March of this year, right?

People forget how, you know, how uh how

that developed. We saw

we saw the spot bitcoin ETFs get

uncrippled. We uh we had Enkind creates

and redemptions. people can now swap

their Bitcoin for for uh IBIT type

shares and borrow against them and then

swap back. That was a big deal. We saw

the onshore derivatives market for IBIT

get uncrippled. It went from nothing to

10 billion and then when they actually

took the cuffs off it went to 50

billion. That's a big deal. Um we saw

guidance from the CFTC just last week.

You can now trade spot crypto assets

like Bitcoin on regulated commodities

exchanges in the US. You'll see them

start trading on the CME. We saw

guidance that you could start to use um

Bitcoin as collateral, right? Crypto

assets collateral against those

derivatives contracts and trading

contracts. That's a big deal.

We just saw guidance from the SEC that

it's possible for the DTC to uh to

tokenize their entire security

portfolio. We're talking all the

securities in the world moving on the

DTC. And the fact that that guidance

came from the SEC was a big deal. But

the fact that the CEO of the DTC got on

X and put out a video saying they're

enthusiastic about that was a big deal.

We saw favorable uh guidance come out of

uh the IRS and Treasury that made the

entire issue of unrealized capital gains

tax on crypto assets go away. That's a

big deal. We um we also saw um the

creation of the digital credit market.

my company, you know, started issuing

digital credit instruments and we did an

IPO

uh I guess it's like late January, early

February. Then we did a second, a third,

a fourth, and a fifth. We did five IPOs

of digital credit instruments and that

entire market went from nothing to 8

billion

in 10 months.

And we're and we're pioneering this

public digital credit market, but we

also saw now an avalanche of of

conventional banks. We saw the o we saw

guidance, positive guidance from the OC

and the FDIC probably every two months.

>> Yeah.

>> For the year like six salvos. And after

the sixth salvo, we started to see uh

the entire dam breaking and the banking

industry thaw. And now off the top of my

head, I think we've seen pro- digital

assets, pro pro- crypto, pro- Bitcoin

announcements from

City, Charles Schwab. Both have

announced they're going to custody and

extend credit on on Bitcoin in the

coming six months. We saw positive

announcements from JP Morgan. We saw

positive announcements from Bank of

America. We saw positive activity from

BNY Melon. We saw POS, you know, we saw

Standard Charter Bank and PNC Bank both

announce agreements with Coinbase,

>> you know, taking advantage of their

crypto as a service to custody and

handle and trade Bitcoin. We saw I think

we saw clear guidance from the OC that

it's okay for banks to handle, hold, and

trade and custody crypto assets on the

behalf of their customers.

Right? So 12 months ago, um, you could

barely get a loan against IBIT,

>> right?

>> And you couldn't get any credit against

BTC.

At this point in time, I think I can

count off the top of my head, eight

different banks that are offering credit

against IBIT, normally in the range of

sofur plus 50 basis points to sulfur

plus 75 basis points.

And we can see probably four banks or

more that are starting to starting to

suggest they'll move on to start to

issue credit against the underlying BTC

in the coming year. So that really

represents the formation of the credit

networks on top of crypto assets. So

public credit, banking credit, right?

Those were big deals. We also saw uh we

saw the first credit rating uh S&P gave

us a credit rating this year and that's

for the first time ever

and uh you know I remember uh when we

announced we were buying Bitcoin for our

balance sheet our insurance company

dropped us. We couldn't get DNO

insurance.

>> Wow. and we couldn't get it for it was

like three or four years and they

finally

unwound that you know so I'm not

underwriting the DNO insurance for my

own company anymore so you know that's a

bit a bit of a win so insurance yeah I'm

not saying we have fullthroated

insurance acceptance we certainly don't

but what we see oh and I I left out you

know the other obvious thing which is we

got fair value accounting

>> right it was impossible to recognize a

gain in a digital

asset investment until the year 2025.

And I and I guess beyond that, I guess I

would be remiss not to not to note that

I guess 200 publicly traded companies

put crypto assets of some sort on their

balance sheet this year.

>> Yep.

>> And we we went to 200 companies that

have Bitcoin on their balance sheet. So,

and I guess last last point, my company

must I think we raised 23 or 24 billion.

>> Yeah.

>> This year.

>> I think you bought more Bitcoin this

year than any year.

>> Yeah. You know, and so I I think um if I

was looking at the industry

fundamentals,

right, and and you remember what we were

talking about a year ago, right? You

couldn't have you couldn't have

predicted any of these things.

>> If I had predicted all this, you know,

you would have said, "You're being too

optimistic." And I don't think I would

have been

>> I don't think I would have been

ambitious, you know, or aspirational

enough to predict everything that

happened. But I would say it's exceeded

my expectations at a fundamental level

across the board. We couldn't have a

more favorable setup for global adoption

and institutional adoption of digital

assets in general. And and by the way,

I've been very Bitcoin ccentric here of

course

>> and we went on talked about digital

securities. You had the head of the SEC

saying we expect that all securities

will be tokenized on chain. You know

that you know that crypto task force was

a big deal. The head of the crypto task

force taking over the CFTC is big deal.

>> Mike Celig. Yeah.

>> Right. Um, and I think um I think the

the embrace and the success of digital

currency, the stable coins is a big

deal.

>> Yep.

And uh I just got back from the Middle

East and I met with all the sovereigns

and the banking regulators and you know

and and all the digital assets

innovators and it couldn't be clearer to

me that you know as enthusiastic as we

are in the US about digital assets at

this point they're just as enthusiastic

if not more enthusiastic and so I think

uh I I think we end the year with just a

lot of things to be grateful for in this

industry.

>> With that setup, what will be that you

think I mean that's so many things that

if you'd seen one of those headlines two

three years ago would have you'd see

you'd see a 20% candle or something on

Bitcoin price like what what will to be

the catalyst then for next year with

such a good setup. Is it just a matter

of you know working through some of

those like like you were talking about

the free market some of those OG sellers

or you know markets take time to change

their tune. I mean what's going to take

us higher? You know, I think the drivers

would be my checklist would be you watch

the derivatives market and the way it

forms and that's the offshore

derivatives market, the crypto native

derivatives market like you know

perpetuals, you know, 20x perpetuals

that forming onshore, you know, that's a

big deal. Uh cross margin, you know,

Bitcoin is collateral against

derivatives in the United States on

regulated exchange will be a big deal.

So the formation of the commodities

markets and the derivatives market and

how how we integrate regulated markets

with offshore markets. I think that'll

be a driver. I think the second driver

will be the formation of the bank credit

networks.

You know we you know when when Bitcoin's

90,000 a coin and you're selling 450

coins a day into the market, that's like

$40 million of natural supply,

>> right? you know, and and you worked it

out and it's like what 16 15 16 billion

a year or something of supply available

from the miners. So 16 billion dollars

is a year of supply. Every time a bank

creates $16 billion of credit, that's

one year supply taken out of

circulation. So, we're now getting to

the point where banks like City and Bank

of America and JP Morgan and Wells Fargo

or Schwab, any of those can create that

entire $16 billion worth of credit in 12

months. So, you're you're watching the

formation of major credit networks and

um you're looking at a $2 trillion asset

class that's been unbanked. Mhm.

>> And so as you watch the formation of

banking credit, you know, and corporate

credit uh instruments on top of that

asset class, that's going to be a big

driver.

I think the the growth of digital

credit, public credit like ST STRC

stretch,

>> yep,

>> it's big driver because in theory,

you've got $300 trillion of credit. If

you look at the credit markets, you

know, bank credit pays you nothing.

Treasury credit or money markets, you

know, they're paying you 50 basis points

in Japan and 100 basis points in Europe

and nothing in Switzerland and 370 basis

points in the US and it's probably

headed south. Mhm.

>> corporate credit, junk credit, private

credit, mortgage back credit, municipal

credit. These things are all indexed to

the risk-free rates in all those

nations. So you look at the traditional

credit markets,

most people what they'd like is a bank

account that pays them 8%. With no

duration, no delta, no credit risk,

right? They don't that's what they'd

like.

What they're getting is a bank account

that pays them zero or a money market

that pays them 2%.

And then they're reaching for yield. And

they're reaching for a yield by

accepting credit risk from a junk bond

issuer. Or they're going to go buy a

20-year bond they don't want. Nobody

wants a 20-year bond or a 10-year bond.

What they want is just not to lose their

money, right?

>> So, the existing credit markets have a

lot of very awful choices for people.

Either you've got to wait 30 years to

get paid and take 30 years of inflation

risk or you've got to bet on some going

out of business junk bond

uncolateralized issuer.

>> Right? Or you've got to accept nothing

and be happy about it. Right? And so

digital credit is spreading through that

market. And the promise of digital

credit is you know first and foremost if

you're willing to accept five or 10 V

maybe you get to 10% dividend right you

might get 10% dividend tax deferred you

know that's kind of the promise of an

STRC

>> right

>> but

I think the profound idea right the the

the big dream of everybody in the

Bitcoin industry everybody in crypto has

always been fix the money fix the world

right

>> the profound idea is rebuild build the

entire world's monetary order on digital

technology. So you start with this idea

of digital assets which offer the

promise of you know

speed of light between 8 billion

computers and 8 billion computers a

million times an hour and self-custody

on an Android phone 24/7 365 everywhere

right that's the digital asset vision

and that applies to digital tokens

digital securities digital commodities

you know digital currencies right that's

what holds the entire entire digital

industry together. And then the next

piece of that is building a digital

capital structure on top of a digital

commodity. That that's that's Bitcoin is

store of value.

And once you get digital capital, you

start thinking the third idea is digital

credit. What if I strip 90% of the risk

and 90% of the va off the digital

capital by overcolateralizing it 10 to1?

Mhm.

>> What if you issue $1 of digital credit

for every $10 of digital capital every

year? Right. And then [clears throat]

the last mile,

the last mile is what if we just build

digital money? And and [clears throat]

by digital money I mean what if we strip

the last five or 10 V off the instrument

and we make it zero V and maybe instead

of 10% 10V what if I get to 8% zero V or

7% zero V digital money and that's the

vision of a Bitcoin back stable coin

right

>> in the crypto industry like what if I

had a stable coin that paid you 8%

backed by Bitcoin I can't do that backed

by sovereign capital. I can't do it with

fiat credit. The best you'll ever get to

there is 4% or 3%. The risk-free rate,

but if I built it on digital capital

that was appreciating, I could go to 8%.

And I don't know whether I don't know

what the magic number is eight or seven

or six, but but I think the magic number

is 4% better than everything else.

Interesting. So if you're getting zero

in Japan and someone gives you 4% in yen

or 1% in euros, you get 5% in the euro

or 3% in dollars and you get to 7% in

dollars, I think you've just created

digital money and it it it checks the

box of is it a medium of exchange? Yeah,

sure it is. Right. It's completely

stable versus the world reserve currency

or against whatever you're spending in,

right? The euro, the yen.

>> Is it a store of value? Well, you know,

at the point that you start to clip to 7

8%, you're actually tracking the true

theoretical monetary inflation rate and

you're out you're outperforming the CPI.

So, regardless of what you think of of

what the true natural inflation is, the

general public will perceive it to be a

store of value, right? And and so now

you've got unit account, store of value,

medium of exchange built on digital

capital, and you know, how do you get

there? Well, you take digital credit, a

bit of digital credit like STRC, and

then you mix that with uh currency

equivalents. You know, the the stuff you

put in a stable coin. I'm going to give

you uh one month T bills, 20 20% T bills

and cash equivalents, 80% credit, get to

a blended rate of 9%.

>> Interesting. maybe uh layer on a

currency uh reserve a volatility reserve

buffer of 10% and you use that you know

to adjust for the the the five ball or

the 10 ball that's in the digital credit

instrument. You put shock absorbers

right on the credit to create money.

Now,

if you do that, you c you can any fund

manager, right? Anybody that knows how

to run a money market fund or any active

fund manager, private fund manager,

public fund manager, anybody could do

this. This is not rocket science. You

know, you take a hundred million by 80

million of digital credit, 20 million of

currency equivalents, layer $10 million

of a cash reserve on it, and then every

day at the end of the day, you draw down

the reserve to hit the nav to get the

nav to be $1.

>> Right. Right. And and on days when the

credit trades up, you replenish the

reserve and you can continuously re you

know fund the reserve with like maybe

you take 100 basis points off the top of

the credit and you fund the reserve. Now

if you do that

you can create a stable coin. We can't

call it a stable coin. You call it a

moneycoin.

>> Yeah.

>> You create a digital moneycoin that has

a nav of a dollar. you get the approval

of a digital assets regulator

and now you've just tokenized digital

money,

>> right?

>> And now you release that into the crypto

ecosystem and now you've got, you know,

something that competes with stable

coins that pays you 8%.

>> It's pretty interesting.

>> Or you create an ETF. We have we have

ETF money market funds. They have stable

nav. They pay you 4% or 3.8% or 3.5%,

right? It's not a new idea. Vanguard,

Black Rockck,

>> you know, Bitwise. Yeah. Anybody could

create a digital money fund. But now the

digital money fund is zero volt stable

NAV, $1 NAV

pays you eight, right? And and uh you

could even I mean the value added there

is you convert the monthly dividend of

say a stretch into a daily dividend,

right? You strip the ball, then you get

the regulatory approval, you put it on

the platform, right? And now you're now

you're circulating on the ETF rails.

That's digital money fund. But the most

ambitious idea which I you know it's

like the heavens open for me this year

and I just like click click click. You

know a year ago I didn't see digital

credit and I you know and so if you

can't see if you don't see digital

credit you can't see digital money. But

now what I realized is you go to a bank

and you create a digital money account.

You just get you get the approval of

your banking regulator to offer a

digital money account. Zero vault

powered by digital capital and digital

credit, right?

>> And now uh you just put your money in

the digital money account and you get

paid 8% daily on the banking system,

right? and Barkclays or B of A or JP

Morgan or Morgan Stanley or you know

First Bank of Abuhabi or Emirates Bank

or fill in your favorite bank you know

like would they do that? I think in the

UAE or the USA you actually have pro-

digital assets banking regulators,

right? If you have pro, by the way, if

you have pro- digital assets crypto

regulators, check. If you have pro-

digital asset security regulators,

check. And if you have pro digital

assets banking regulators, check. It

won't happen everywhere.

But the question is, will it happen

anywhere? Because

you want to be the digital banking

center of the 21st century.

The big idea is my bank offers a digital

money account and we pay 400 basis

points more than every other bank on

earth. And then you're not talking about

crypto billionaires wiring you billions

of dollars. You're talking about fiat

billionaires. You're talking about

everybody. And then that goes back into

the digital moneycoin stack. Does that

eventually flow into Bitcoin itself?

>> You buy 10 billion dollars of digital

money from your bank and $8 billion

flows into digital credit and that $8

billion goes into digital capital and

that goes into Bitcoin.

>> Interesting,

>> right? And and uh there's no reason I

mean what's the market? There's $200

trillion.

>> Yeah.

>> Right. There's $200 trillion of bank

credit, money market credit, and and

corporate, you know, type investment

credit, and it's all yielding 200 basis

points on average though for the ability

of sovereigns to issue debt to fund

their governments. Surely, I wouldn't

want to buy the, you know, one, two,

10year Treasury if I could buy this. If

you're if you're in the UAE, aren't you

really thinking that my bank offers

these bank accounts and foreigners wire

me 20 trillion dollars to my bank?

>> It's good for them, but is it good for

>> Well, the point is it's good.

>> Yeah,

>> it's good for the people that do it.

>> That's right.

>> Well, like you're you're asking the

question, if I if I invent coal fusion

and I have unlimited free electricity,

is that bad for people that sell

expensive oil?

>> Yeah, right. But it's good for the

people that create the unlimited free

electricity.

>> So then the the

>> we're talking about a we're talking

about the digital transformation of the

credit markets.

If if we offer digital credit that's 5x

over collateralized that pays 10%

dividends, what's that do for the junk

bond issuers that want to pay you 5%

uncolateralized?

>> Well, look, here's the good news. The

world doesn't it doesn't rationalize

overnight. If I gave you, you know, the

the perfect situation, it still takes a

decade before 10% of the world discovers

the perfect thing.

>> So there's time for debt issuers,

whether sovereigns or corporates, to

>> take place over 20 years.

>> Yeah. To adapt,

>> right? It's the world the world's going

to gradually adapt.

>> So you've been you amassed this treasury

of Bitcoin. Now you've been issuing

these digital credit instruments,

Stretch, Stride, Strive. Yeah. Uh it

>> so that's the middle part of the stack

to the digital money coin you're talking

about. Is strategy going to take steps?

Are you taking steps to issue this money

coin or is it something that you

envision as you've described that an

asset manager or a bank might issue

using your credit?

>> The way I see the industry evolving is

there's three layers. There's digital

capital, there's digital credit, and

there's digital money.

>> Yeah.

>> Okay. Our company strategy we exist to

create the digital credit. In essence,

the whole mission of the company is to

convert capital into credit. I think I

think it's reasonable for us to strip 80

to 90% of the risk and 80 to 90% of the

volatility off of the capital, right?

You know, if you're if you're being very

simplistic, right? I mean, I start with

$10 of Bitcoin. I issue $1 of credit.

Right.

>> All right. So, we can we can uh step it

down from, you know, a 50 V 50 ARR asset

and turn it into a 10 V 10

uh 10 ARR, right? A a 10% dividend

yield.

We can't create digital capital, right?

I mean, that's the world, right? You

need 700 million people in the crypto

industry and you need all of the

decentralized holders and the people we

don't know and the people we know and

all the buyers and and uh it goes

without saying, you know, it's an asset

without an issuer. We're the

beneficiary. It's very clear to me,

right? I can buy a billion dollars a

week for the past two weeks. The price

isn't paying attention to what I'm

doing, right? And that's good. That's a

good thing, right? uh it wouldn't be a

stable digital capital network if

anybody could influence it, right?

>> And so and so the digital capital layer

is a global phenomenon that's been

running since the since Satoshi, you

know, dropped the white paper and it

will keep running and there will always

be actors entering the space. the CFTC,

the SEC, the Black Rocks, the Vanguards,

the JP Morgans. I mean, they're all

players in the space. The foreigners,

the people you don't know, you know.

Didn't we just hear the Chinese shut

down a bunch of Bitcoin miners?

>> Saw that yet again.

>> They banned Bitcoin mining for what, the

sixth time?

>> Yeah.

>> In 12 years. It's like seems like every

two years or three years they like shut

it down. But it just doesn't go away

now, does it? So digital capital is a

global phenomena. We are beneficiaries

and we are we acknowledge that and we

build our company on that. our job is

converted to digital credit and I think

I think that's the one thing we can do

well and if you want to create digital

credit you need to be monmaniacally

focused on digital capital and you know

for every $10 of Bitcoin I hold on my

balance sheet I can probably create $1

credit you know you might even say if

you're being conser per year by you

might say for every $10 of equity

capital. I can probably create $1 a

credit per year, right? And I can do

that responsibly. And so over time, you

know, Bitcoin's growing. We're we're

layering on more credit. We're feeding

the bit the digital capital ecosystem.

We're building our balance sheet, etc.

But now that third step, creating

digital money,

you need the crypto entrepreneurs, you

need the crypto exchanges, maybe you

need the Binances, you need the

Coinbases, you need maybe you need the

proof ofstake chains, maybe you need the

crypto, you know, how many different

entrepreneurs are created a stable coin?

>> Yeah,

>> right. You need them. You need fund

managers, right? You need the private

fund managers, the Bloomberg jockeyies.

like I got hit with, you know, $150

million of redemption today. I'm going

to sell down the currency equivalents.

All of a sudden, I'm 95% credit, 5%

currency. Now, I have to rebalance back

to 80% credit, 20% currency. I'm

trading, I'm managing, I'm hedging. And

so, you need the fund managers. Then you

need, you know, you need the fund

managers, either private or public

public managers, uh, to actually create

the digital money fund. Then you need

the, you know, a a crypto entrepreneur

to create a crypto coin. You need a

public ETF manager to take your fund

public,

>> right? A pretty big idea is I take

private funds public. We, you know, we

forget, but the original tokenized fund

was an ETF. That's right.

>> Right. I mean, it's And it's And believe

it or not,

>> the world's still full of a lot of asset

classes that yet to be put on an ETF.

>> You know, go try to buy an ETF that

reflects a bunch of old master's

paintings.

>> Yeah.

>> You know, can't do it, right?

>> Try to buy an ETF that reflects New York

City real estate and passes you through

a dividend which reflects the rents.

Not I mean

>> I don't know of one.

>> Yeah. But I mean the point is there's a

lot of financialization to be done on

traditional ETF rails.

>> So we shouldn't be surprised that we're

not there yet on Bitcoin rails. That

that's the 10 years 20 years we're

talking about.

>> Yeah. I mean Black Rockck's done what a

thousand ETFs but they still haven't

done you know the 10 that I want.

>> Right. Right. Right.

>> Right. I mean and then um and then of

course you need the banks.

Right. What's the value added of a bank?

Well, okay, the bank bring first they

got 10,000 salespeople. Then they have a

brand. Then they get the the banking

regulator to approve it. Then you've got

the platform, right? I mean, all sorts

of, you know, platforms. Then you've

you've got um the account you stripped

of all

you uh and then you dispense daily doses

of dividends. You deal with the tax

compliance, the legal compliance, the

KYC compliance. Some dude wants to buy10

billion dollars of digital money and

there, you know, bank, believe it or

not, you know, if if you're the first

bank to offer digital money in the

Middle East and some guy wants to wire

you 10 billion dollars to buy it, you

still have the AML, KYC, the

>> the compliance issue and you got to jump

through hoops to do it. So the way I see

the industry evolving is the first layer

is completely decentralized.

The second layer digital credit is going

to be created by companies like strategy

or metaplanet or strive

>> right a treasury company that's

monomomaniacally focused on creating

digital credit instruments. And then the

third layer is really up for grabs.

There's a thousand banks that could do

it. There's a thousand fund managers

that can do it. there's a thousand

crypto investors or or entrepreneurs

that can do it. And the truth is they

are all adding value, right? I mean

there whether it's technical, right? Do

you have the technique to put it on the

platform? Everybody's got a platform.

We'll debate what's the right platform,

right? There's going to be a big debate.

Is it a crypto exchange? Is it a proof

ofstake network? Is it Aladdin that

Black Rockck runs? Is it uh is it the

in-house JP Morgan or Morgan Stanley or

Goldman Sachs network? Is it a regulated

digital exchange?

There's, you know, Europe has got one

currency, 27 sets of regulators, 27

different exchanges and 27 capital

markets and you're thinking you want to

distribute there. Yeah. Right. So, I

think that um the exciting thing for us

is what we realized is our mission is

create the digital credit, but we have

an incredibly compelling partnership

opportunity or a partnership proposal.

If you're if you're the most digital

forward bank in Australia, you want to

create digital money in Australia, I

have a deal for you.

>> Interesting,

>> right? If you if you're the most uh

ambitious bank in the Middle East and

you want to create digital money, well,

the first bank that does it is going to

attract trillion dollars of capital. Do

you want to be that bank? Do you want to

be that citystate? Right.

>> Some people, some city states will miss

it. Yeah. You you've got nations that

are more concerned about losing control.

They would rather shut down the

technology because they're afraid it

might be too useful. Right. Yeah. Yeah.

So, you have some that won't move. You

have some that don't even get it, right?

They don't even notice it's happening.

You know, what is the digital asset

thing anyway? What is this good for? And

they're like digital beanie babies,

right? And then you have some people

that get it. It's like, oh, money moving

at the speed of light, economic

immortality, and maybe we can program it

to think a billion times a second,

right? And I think that the ones that

get it now, it's going to be a

competition there. there's going to be a

question of who wins and um it's team

sport. You need the bank, you need the

bank regulator, you need the fund

manager, you need the partnerships.

>> Right.

>> Right. And then you need to coordinate,

you know, all of those. And then there's

a technical component and there's a

question of are you willing to take a

risk and can you market it and uh you

know the the likelihood that is that

most people will be followers

but there's always going to be a leader

you know or a couple of leaders and this

is a battle for the future of money and

we're talking about you know easily $200

trillion up for grabs there but it's

going to be $400 trillion in 10 years

and whoever actually creates digital

money is going to grab 10 20% of it for

sure. You won't you won't convince

>> everybody. There's going to be a world

of people are going to think, well, I

just don't trust that. That's too good

to be true. But, you know, roll the

clock back. When people talked about

Bitcoin, they're like, yeah, well, it

won't work. Oh, well, if it works, it's

too good to be true, and the government

will take away from you.

>> I mean, eventually the horsedrawn

carriage uh pilot still buys a car one

day. But imagine a world where 10% of

that money flows into digital funds and

digital banks and digital, you know,

digital bank accounts. And that's a

profoundly disruptive world. And we will

create

the Switzerland of the 21st century.

It'll be the world banking capital. And

I'm hopeful it's in the US. I think I I

don't know why it wouldn't be in the US,

but if it's not in the US, I wouldn't be

surprised if it doesn't pop up in the

Middle East. Because if you appreciate

technology and you understand digital

assets and you appreciate banking and

you like money,

uh the most profound idea I have for you

it's

why don't you just attract all of the

capital in the world into your bank into

your state because Lord knows right now

you're the traditional 20th century

banking establishment has a proposal

which is give us your money and we'll

give you nothing.

>> Yeah.

>> We're going to offer you returnfree risk

for all of your assets. You're taking

duration and credit risk that does not

offset you with yield that does not

offset the duration risk and the credit

risk. So pretty much you have hundreds

of trillions of dollars which is

returning you know inflation adjusted

nothing.

>> Yeah. Well you have below real

inflation. you I want to ask you a

question Michael you said that um you

strategy is monoomaniacally focused on

this digital credit creation is that a

reason why you wouldn't maybe use some

of your Bitcoin to buy a Bitcoin

business that could generate more

Bitcoin is it too is it not pristine

enough to be the credit issuer if you

also have other operating businesses

okay

>> inside strategy

>> put simply we expect Bitcoin to

appreciate 30% a year for the next 20

That is our riskfree rate.

Like that is literally the hurdle rate.

I can I can acquire Bitcoin at one times

revenue.

It's a monopoly on on digital capital. I

can res I can acquire the world's

reserve capital network at one times

revenue growing 30% a year for the next

20 years risk-free integration free

overnight. No questions asked. What

could be better than that? Right?

Nothing could be better than that for

us. Right? Once you've actually uh

established, you know, yourself on the

Bitcoin standard

and once you've rotated your shareholder

base, right? The important point is not

that it's not that everybody agrees with

me. The important point is that all my

equity investors agree with me. You see,

our company exists to acquire Bitcoin.

So if you brought me another option, you

said, "Well, Mike, I've got this great

startup and it's going to return, it's

going to grow 40% a year for the next 20

years and emerge as a monopoly in the

world." And I'm like, "Okay, that's

great, Alex, but it doesn't sound as

good as the deal I already have going."

Like, what are the odds that you just

found the next monopoly on money in the

world growing 40% a year for the next 20

years? And by the way, let's say that

you're a genius and you found it. What

are the odds I can convince all my

equity shareholders that it's better

than Bitcoin?

>> Unlikely.

>> Yeah. Yeah. And and why would you? And

by the way, why would you want to,

right? I mean, if you already have a

risk-free rate

of 30%, if you can buy it at one times

revenue and if you can integrate it

overnight,

why would you do anything else? So, so

um I think for example, let's say

there's a hundred companies out there

that are trading at a discount than NAV.

>> Yeah.

>> Okay. Well, the world's full of private

equity funds that have a mandate to

invest in 20 non-correlated investments

and their hurdle rate is 10 or 15%. And

they're actually suited up to deal with

all the social issues and the headaches,

right? They they sit on boards, you

know, they hire and fire entrepreneurs.

They integrate people. They lay off

people. They fight with lawsuits, right?

So, it makes perfect sense for a private

equity fund or a public company with a

rollup strategy to, you know, to buy a

bunch of businesses if you believe in

diversification.

Right. We don't. Right.

>> Right.

>> We don't believe in d, you know,

>> you said uh what was that great quote

you had? Um, what do you have? One

screen. You only have one screen. You

have one chair.

>> I got one chair.

>> You're sitting on one chair right now. I

got one chair. I don't believe in

diversifying the fuel source that flows

into your jet engine.

>> Yeah.

>> I believe in kerosene. Y I don't believe

in diversifying the metals that make up

the airplane wing. I believe in

aluminum.

>> I don't believe in diversifying, you

know, the composition of your

semiconductor chip. You know, right?

>> It's like like you ever seen an Nvidia

data center? How diversified is the

chipset in the Nvidia data center?

>> Yeah.

>> Right. And I actually believe that when

you find the solution,

then you pursue it. But my point really

is the world's full of people that have

large pools of capital and their mission

is to make diversified investments and

their hurdle rate is 10%. And if they

actually clocked 12% a year after loss

of effort, they would declare victory

and their limited partners would say

that was a great year. Right.

>> Yeah.

>> But here for us, that's not us. And

here's the problem. My hurdle rate's 30%

integration free, risk-f free. I've done

the same deal 90 times in a row.

>> And and the product of the company, it's

digital credit. What we're offering is

STRC. We're offering you uh a product

that's going to pay you a 10% dividend

yield with a very taxefficient return of

capital dividend,

right? And so if I'm offering you

something that pays you 10% dividends in

a credit universe that offers you 4%.

Give me one reason why you wouldn't buy

that. Why is it that the entire world

wouldn't sell their hundred trillion

dollars of garbage credit that yields

you onethird of what we're offering

after tax? Why would you why wouldn't

you just sell it all and by stretch?

Give me the one reason.

>> I'm not going to come up with one on on

the spot, I don't think.

>> Okay. Well, so I'm going to give you two

reasons.

>> Okay, let's hear them.

>> You haven't heard of it. You don't

understand it.

>> Yep.

>> And the second reason is you think that

the issuer has a credit risk.

So,

>> yeah,

>> when we're going off, you know, we we

you bring me 10 good deals and I buy 10

companies and I get distracted by that.

I'm so distracted by that. I'm on CNBC

talking about all those other things.