Jeff Walton shows how Bitcoin treasury firms like Strive are disrupting the $300T fixed-income market with Bitcoin-backed credit instruments.
Bitcoin treasury companies are using structured finance to push Bitcoin into the heart of capital markets, especially the $300T fixed-income arena, by issuing instruments like perpetual preferreds and convertibles that offer higher yields, heavy over-collateralization, and 24/7 mark-to-risk transparency. Jeff Walton maps his move from reinsurance to Strive to show how credit/risk skills translate directly, highlighting their cashless Semler acquisition as a blueprint for turning “zombie” firms into credit-improved, Bitcoin-backed platforms that access larger capital pools. He argues the real KPI is “Bitcoin per share,” that we’re still early, and that equity appetite is mixed while debt markets are already open. The “paper Bitcoin summer” critique is dismissed as short-term churn; the longer arc is risk repricing as capital gravitates to superior collateral and liquidity. Framed this way, Bitcoin isn’t being captured by Wall Street, Bitcoin is quietly recoding financial infrastructure.
This conversation frames Bitcoin treasury companies as the next frontier of financial innovation. Walton views them as both a lifeline for struggling firms and a disruptive force in the largest capital pools on earth. While skeptics point to volatility or “paper Bitcoin” suppression, the bigger picture is the gradual integration of Bitcoin-backed credit into global markets, creating new liquidity dynamics and repricing risk across the financial system. As Walton notes, the hated nature of this trade is precisely why it may deliver outsized returns: it challenges entrenched assumptions about equity, debt, and value storage. Ultimately, this episode underscores that Bitcoin’s destiny is not just as money, but as the backbone of a reconstructed global financial architecture.
0:00 - Intro
1:08 - Jeff at Strive
5:36 - STRK
9:46 - Semler deal structure
13:28 - Paper bitcoin summer
17:47 - Obscura & SLNT
20:06 - Institutional appetite
23:26 - Critical treasury mass affecting long term price
27:53 - What are the products providing?
32:29 - STRC and Fed/Treasury
35:00 - Bitkey & Unchained
36:33 - Reinsurance history
46:46 - Opportunity Cost
47:30 - Soft landing, disrupting fixed income
51:16 - Operating business examples
57:53 - Companies missing out, S&P comparison
1:04:41 - What does S&P inclusion mean?
(00:00) The fixed income market is a $300 trillion pool of capital. If you want to make the biggest splash in Bitcoin, you disrupt the fixed income market. MSDR has amplified Bitcoin. This is a monumental idea. Every single company on the planet will eventually be holding Bitcoin on the balance sheet. Is incredibly early days.
(00:19) Us at Strive, we're aiming to be the Metaplanet of the United States. If you look at the Bitcoin rating, the collateralization rating actually improves by over 200% on the convertible bond when you combine the two entities and the the Bitcoin back balance sheet. Similar, they were a self-proclaimed zombie company and then they started buying Bitcoin and ended up accumulating over $500 million of Bitcoin.
(00:38) Paper Bitcoin Summer, these companies are buying Bitcoin and the price isn't going up. So, there's going to be some price suppression. STRC is a effectively like a high yield savings account. What they created is effectively a refinancing mechanism that can refinance daily. Crowd strike in Bitcoin terms. They've lost 18,000 Bitcoin.
(00:56) In that same time horizon, Strategy has acquired and accumulated 638,000 Bitcoin. So many people don't understand Bitcoin in the traditional financial world. [Music] Jeff Walton, welcome back to the show. Thank you. Happy to be here. A lot has changed since the last time you were here. It was eight months ago.
(01:22) And I I believe if I recall correctly, you were telling me off air that you were about to leave your reinsurance business to jump full uh full speed ahead into the Bitcoin world, the Bitcoin treasury world. Um it's appropo that we're meeting here September 23rd. Yesterday, September 22nd, you tweeted out, "Eight months ago, I was selling reinsurance this weekend.
(01:41) and the entire Strive team worked to tirelessly worked tirelessly to acquire a company that holds 5,021 Bitcoin in a cashless transaction that will be in M&A case studies for years to come. The world is changing fast. You can just do things. You're doing things. I'm doing things. Let's talk about uh the journey from January 29th when we published the last recording um of us meeting to discuss Bitcoin treasury strategies and today a lot has changed for you personally.
(02:06) Yeah, a lot has changed for me personally. Yeah, I was previously selling reinsurance. So, I was a reinsurance broker selling insurance to insurance companies, which a lot of people think this is an insurance role, but it was really a capital markets role.
(02:25) I was uh effectively selling volatility of insurance company balance sheets to hedge funds and and capital providers across the globe. So there was a a very clear opportunity and synergy for me to focus on what was happening in the Bitcoin ecosystem in the Bitcoin world because it's effectively capital markets transactions working with investors creating structured products uh volatility tranches thinking about risk and risk profiles from a probabilistic framework.
(02:52) Literally every single thing that I was doing in the reinsurance world was applicable to the what what was happening here in the Bitcoin world. It's very funny. When I when I left my job in reinsurance, I told them I wasn't doing anything.
(03:11) I was taking a break and they're like, "What are you talking about? What what do you mean? What do you mean you're not doing anything?" I'm like, "I'm focused on Bitcoin. I don't know. I don't know what yet. I don't know what I'm going to do, but I need to spend my time and energy in this area to figure out what's what's next for me. So, yeah, it was a bit of a confusion. They were bewildered.
(03:33) Let's just let's just say they were bewildered when I when I told them I was entering the space. And so, fast forward to where we are today. Uh, I was exploring different opportunities in the market and just continuing to have conversations, going to different events. Uh, in conversations with Matt and the Strive team, they had added me to the independent board um, to help grow their future Bitcoin treasury company.
(03:58) This was last May when they announced the uh, the reverse merger transaction that they were entering in. And after further conversations, there became a very clear opportunity for me to work in a role at Strive and have some synergy and be able to spend my energy in an appropriate place. So had a ton of conversations with them, their their team and Matt and understanding like what is this opportunity here and is this where I where I want to uh want to hitch myself to to this horse, right? And ultimately, this was exactly what I was looking to do is I wanted to work within a company and buy as much Bitcoin as humanly
(04:39) possible, structure capital markets transactions, work with investors, continue with education within the marketplace, think about risk and structured credit and finance and volatility. And this became a very apparent uh win for me personally. And the the alternative is, you know, thinking about trying to go do some of this stuff on your own.
(05:07) And the reality of building a Bitcoin treasury is really difficult and you need a strong team. Like for example, we just went through this M&A transaction and and folks were working all day every day overnight. And we've got a team of I don't know 10 10 12 people that were touching different pieces of this. And that's really hard to build from scratch.
(05:30) And joining a company that was already focused and putting energy in this direction was really the lowest hanging fruit, like the best the best place to park my time and energy. Yeah. Again, it's uh it's been fun watching um from the sidelines you've been doing this and I think you're following your dreams to be a little corny, but really going after something that uh that you're passionate about.
(05:52) I I love to see people doing things that they're passionate about. And I think the last time we spoke, obviously the conversation was focused heavily on strategy. I believe they had just launched uh strike um that preferred offering uh and obviously since then they've issued more preferreds uh and we we can get into that. But I think really jumping off the conversation as it pertains to treasury companies.
(06:18) I think one of the uh topics that we discussed in January is like who is going to win in this market? What is it just going to be strategy? Is it going to be winner or take all? Are people just going to copycat? Which strategy is done and see some success or is there going to need to be a diversity of companies deploying different strategies as it comes to acquiring Bitcoin? looks like what you guys are doing at Strive is definitely differentiated and I think um this agreement to acquire Semilar is an example of that. So I think jumping into how you guys at Strive view building a
(06:52) treasury how that compares to strategy and other treasury companies out there and I guess diving into the similar deal specifically to to sort of highlight how you guys may be different differentiated. Yeah, let's let's set the landscape a little bit. There are in the United States there are 4,800 banks.
(07:13) There are 4,900 credit unions. There are 5,800 insurance companies. Just just to put that into perspective. So right now we've got what in the US uh maybe a hundred companies that have put Bitcoin on their balance sheet publicly and you know maybe it's maybe it's double triple that uh privately but um in terms of where this can potentially go I I think there's a significant room there's significant room for many publicly traded companies to hold Bitcoin on the balance sheet and then offer uh securities that are providing
(07:49) uh lower volatility a reduced volatility Bitcoin like exposure with different uh kickers, right? You could think of similar being, you know, Bitcoin exposure with a healthcare kicker. Or you could think of um you know, other different companies that have different operating businesses providing a little bit of a different risk profile and a different flavor of uh Bitcoin correlated equity.
(08:15) Ultimately, my perspective is every single company on the planet will eventually be holding Bitcoin on their balance sheet. So they will all have Bitcoin exposure here in the future. Particularly when you think about the architecture of the equity market and the risk profile of existing equities. Most existing equities are leveraged to their future cash flows. So an unknown future cash flow.
(08:40) And you think about Bitcoin treasury companies and they're leveraged to money that they already have. and the future pro the future um the return profile of the money and the asset that they already own. So they're fundamentally two different like risk profiles and different risk metrics against the existing equity market and what's happening with Bitcoin treasury companies.
(09:06) So, where we're at today, I think is incredibly early days. And I think the goal is to to acquire a Bitcoin war chest as big as possible. We're in the digital capital gold rush. And us at Strive, we're aiming to be the meta planet of the United States with a clean balance sheet offering what is an you an amplified equity product today and in the future a perpetual preferred equity providing you know two bitcoin backed bitcoin backed credit and amplified bitcoin.
(09:43) So that is our goal and I think there's significant opportunity to grow uh drastically in that space. Yeah. And so one thing that I've seen over the last 24 hours since the announcement of the Semilar deal is sort of the the structure of the deal, the fact that this was cashless all stock deal. Um where that's what's being negotiated.
(10:07) Um how is this different than what somebody like strategies done? We saw Naka um uh by by a big chunk of Metaplanet the company just mentioned as well. Um but it seems like you guys by acquiring uh Semilar and their treasury by extension not only that their operating business how how does that compare and why did you guys decide to go down this route specifically? Yeah.
(10:30) So so thinking to the to the base of how our incentive structure is structured corporately. Our incentives are to increase Bitcoin per share and this transaction is accretive in Bitcoin per share terms. So there there was, you know, 40 hours plus and five different brains working on the art and science of the deal behind the scenes uh that understood the the accretion potential of the Bitcoin per share.
(10:57) But I think there's significant synergy and opportunity moving forward here as well. Not there's this construct of the increased credit quality from the two entities combining that I think is incredibly interesting. you you almost achieve this 1 + 1 equals 2.1 sort of credit quality. So Semlar's already got a $100 million convertible bond. We have intentions to issue a perpetual for her security into the future.
(11:26) And to if you look at the the Bitcoin rating, effectively the collateralization rating of the two entities combined, you see that the collateralization rating actually improves by over 200% on the convertible bond when you combine the two entities in the the Bitcoin back balance sheet and your ability to issue larger forms of perpetual preferred securities. it it increases drastically as well.
(11:53) And you think about how the like the market the market place works and the equity market works if you're looking to access different pools of capital certain pools of capital have limited um thresholds on investments that they will take uh based on the size of your company.
(12:14) So to the extent you could take you know one company you've got a limited number of capital that can come in the door and if you've got two combined companies coming into one that access now you now get access to pools of capital that are interested in buying equities and different types of preferred securities because of that increased credit quality effectively the size of your company and the balance sheet of your company.
(12:36) So I think significant synergies there and then the the healthcare side of things it if you if you do a little bit of research our our largest shareholder is V Ramos Swami and he's got a significant background in healthcare and biotech and there's preventative healthcare is a major theme in in this make America healthy again movement and I think there's significant opportunity to um clean up the existing operating business and provide a little bit of a chair carry on top in terms of valuation accretion um by leveraging existing expertise Benfam our CEO um Matt Cole and Vav into spinning that into a um value accreating transaction on the back end too. So we
(13:20) think there's significant opportunity in this entire transaction. Yeah, that's the um cuz I don't want to beat around the bush. The paper Bitcoin summer, there's been a lot of uh there's been a lot of blowback on Bitcoin Treasury company specifically this summer was not um incredible from a performance perspective for many companies deploying a Bitcoin treasury strategy.
(13:51) But um I think it's a bit too early to um put a nail in the coffin or even determine that whether or not these are successful or not. What would you say to the naysayers that that would say that these strategies whether it's strategy strive um what's happening over in London Metanet uh they say it's too good to be true.
(14:17) You can't just you can't just acquire Bitcoin and expect good things to happen. Yeah. It it's equivalent to saying, you know, uh I bought Bitcoin at $100 in 2011 and then it goes down to $3 and it's dead. And what I'm trying to emphasize is this is very early days of these things. And it's so funny like the people the the people that are the loudest maybe the Bitcoiners uh they take a four-year perspective when holding Bitcoin like I buy every single day I DCA and I I've got to hold it for four years.
(14:52) If you're not holding it for four years what are you what are you doing? And now that then they look at the equity market and think it's this like overnight get-rich uh scenario. Maybe maybe that's non- Bitcoiners that are thinking this is an overnight get-richqu kind of scenario, but I don't see why you wouldn't be taking the very same perspective that you would with holding the underlying Bitcoin of uh holding for a four like a long-term four-year horizon. You think about the incentive structure of these companies is to increase Bitcoin per share.
(15:22) And if you're aligned with that narrative and that story, then you you'd think that taking a longer term perspective and longer term timeline uh would be the most appropriate framework to take here. So I I I think this is such early days. At the end of the day, the companies that hold Bitcoin on their balance sheet hold real money and you can do things with that real money.
(15:50) Now, might some of these companies be hamstringed at certain points in time and not be able to do anything? Sure. But that's okay. Like, you could sit on your hands and focus on your operating business. And as long as you are managing the volatility and the structure and the risk of your balance sheet, you you can just weigh things out.
(16:13) Um or look at strategic opportunities to hitch your wagon to some other Bitcoin treasury company via M&A transaction to um you know get on a different path and a different trajectory. So I think there's significant optionality here in even looking at Semler and where they were a year and a half ago before they started their Bitcoin journey.
(16:38) They were a self-proclaimed zombie company and then they started buying Bitcoin and ended up accumulating over $500 million of Bitcoin and that provided them significant optionality to operate not only operate their business but focus on other accretion. um other other other ways to provide value and it provided them like effectively downside protection on their balance sheet because they would be interesting to any Bitcoin accumulation company.
(17:10) So yeah, this I think that the market is evolving drastically and it's going to take time. It's going to take time to explain the risk profile. It's going to take time for the market to understand the risk profile. It's going to take time for these things to mature. Aside from strategy, most of these are, you know, under two billion dollar companies or three billion dollar companies.
(17:31) Like what other $3 billion company do do people have significant interest in in the equity market? We're talking like lowest 1,000 companies in the Russell 2000 in the United States. Like that these are these are small tiny market cap companies with a lot of volatility. Sup? This was brought to you by our good friends at Obscura.
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(20:23) Yeah, there's definitely appetite for Bitcoin exposure via these equities and preferred. And I think that's probably where the signal lies in this whole discussion is what are the allocators saying about this? what is their interest doing as more of these offerings are coming to the market? Is it increasing? Is it waning? What have you seen uh in terms of institutional um appetite for for more of these offerings? Yeah, I think uh on the equity side, I I think the there's obviously some hesitancy. There's a lot of shiny things in the market right now. You've got companies uh a lot of AI buzz in the
(20:57) marketplace. So, I think a lot of capital is is flying over in that direction. Um, so I know that there like the the equity side has tightened a little bit, but on the on the debt side, there's multiple different types of debt. So there's convertible bonds. I think that market is wide open for business and additional capital is interested in issuing and providing convertible bonds.
(21:24) That being said, the terms are tighter than they have been historically, and I think they're particularly tighter than anything that strategy uh can demand or get in the marketplace. So, it's just something to be aware of. The the terms associated with convertible debt are are worth a review. And in the uh perpetual preferred equity space, there's there's opportunity for a second mover here.
(21:51) And I I think there there's significant interest in this type of instrument provided to the market. And um yeah, I'll leave it at that. I think there's enough interest for additional IPOs in the space. And one interesting thing that I've just kind of heard through the grape vine is the a majority maybe not a majority but uh a rough percentage of the participants in the perpetual preferred IPOs that strategies done is uh they haven't necessarily been interested in the risk profile of the product themselves. They've just been interested in the arbitrage of the repericing event. So you can almost
(22:31) think of like every single one of these IPOs having their own merger arbitrage capital that's coming in the door to uh buy these at a discount and sell them at par. And so the the question then becomes who's the buyer on the other side? Is it retail are are fixed income uh capital managers buying these products or is it retail investors looking to uh bolster returns in their retirement portfolios or you know what what exactly is that and I think that's evolving and the reality is these securities are so new they're only 6 months old 7
(23:10) months old it's going to take so much time to explain the risk profile and what these can what are the benefits? Um, how do I rate these? What's the credit quality? What are the risks, etc. Yeah, that makes sense. And turning conversely to the uh the effect companies like Strive, Strategy, Knock Met Planet have on Bitcoin, I think it's something we've talked about um before and something that many people are believing is that like if you have a critical mass of of companies going out there attempting to acquire as much Bitcoin as possible on their balance
(23:48) sheets, it's going to have an effect on the Bitcoin price in the long term. Going back to what we said earlier, I think people have looked at Bitcoin price action uh through the summer leading into fall and to many it's been been a bit lackluster despite the fact that we're up almost 100% yearonear. Um and there are many people saying there's a paper Bitcoin summer like these companies are buying Bitcoin and the price isn't going up. So there's got to be some price suppression somewhere. Um I don't know. I I I don't think I'd
(24:20) buy that. I really like James Czech's analysis is onchain data and I think it's been pretty clear that there have been a number of whales that have been selling into the Bitcoin price running up to 124,000 and that's to be expected.
(24:38) People have made billions of dollars and they want to secure uh their financial future and fiat. That's their own decision. They can do that and I think we just have to be um sort of agnostic market observers and just recognize that this is happening. But I think long-term, I mean, I was in Nashville. I was telling you before we hit record at the Imagine if conference, I was speaking with Andrew Hones from Battery Finance talking about private market structure credit and this forward duration curve that can be built out.
(25:03) Um, if these products hit critical mass, you'll know that there's a certain amount of Bitcoin locked up for certain periods of time. And I like to believe and I think it makes sense to me fundamentally that this will have a positive effect on price. Yeah. you you think about the the behavioral aspect here.
(25:20) If you've got an individual that sold 80,000 coins, right? Um that those coins are moving from weak hands to strong hands in these companies that are holding Bitcoin as permanent capital. Like what we're trying to do and what Strategy is doing is build a corporation that can last a century.
(25:48) And how do you do that? you hold capital that can last a century and and taking intelligent leverage against that capital to continue to add those assets over time. It's effectively a long-term carry trade or a swap uh of USD for Bitcoin like exposure. So, um I I'm I'm very very bullish on that future of these companies helping to improve the overall long-term Bitcoin price.
(26:17) And I think the reality, the the sad reality is that it's going to take a long time for more of the general population to buy Bitcoin itself, like the the hard commodity. And I I think we're bumping up against like critical mass of people that want to buy the hard commodity. So because there's this educational component, there's this need component, there's this educational component that makes Bitcoin unattractive and then you also got nominal bias.
(26:48) So I think that from the psychological perspective, uh we may we we may be bumping up against some caps there. But where you can bring this capital in the door is through these alternative like instruments that are provided to people in ways that they typically hold um their assets. So I don't know probably 75% of Americans in the US maybe like 60 probably hold equities.
(27:20) So now if you can provide them a high yield savings account in equity format with a dollar sign ticker in front of it that becomes incredibly attractive um if you're able to you know move in and out of this capital quickly in just a a port a brokerage portfolio that you check every day that becomes incredibly attractive. So I think that um that's effectively what these Bitcoin treasury companies are doing are are providing these products in locations with that people typically interact in and I think that market is enormous.
(27:54) Well, yeah. On that note, I think it's important to dive into what those products are competing with from a risk profile perspective, from a return profile perspective. like what are products like strategy strike strife stride stretch uh ass now uh we got XXI coming to market like what are these providing um to that large pool of capital that is for better or worse just conditioned to access capital markets via via accounts like this. Yeah, this is and this has evolved tremendously since last time we
(28:34) talked. I think uh last time we talked, they just announced Strike I think an hour before we hopped on. So, we were like diving through it uh real time. Well, what's incredibly interesting here, so let's just focus on strategy, right? They've got five instruments.
(28:51) They've got four perpetual preferred equities and then they've got uh MSTR, which is the equity. So, you could think of MSTR as amplified Bitcoin. these other perpetual preferred instruments, they sit senior in the capital structure of MSTR. So in the event of a bankruptcy or liquidation, uh the seniority in the capital structure gets paid out first if there's any money left and then all equity holders get paid out last.
(29:14) So the real novel thing that strategy has done here is that they have uh monetized and collateralized the positioning within the capital stack into different risk return trotes that are appealing to different capital pools. So this is a monumental idea has never really been done before or it's never been done on a uh offensive perspective before.
(29:40) typically in the past perpetual preferred equity has been a defensive move and this is an offensive move by strategy and the if you think about let's say uh let's focus on STRF the most senior one first so STRF pays $10 perpetual uh dividend in into perpetuity $10 per share priced at $100. Currently it's trading at 110.
(30:05) So it's about a 9 and a half% all right n about 9 9% interest rate on uh on STRF. And what what that provides is seniority in the capital structure. I I believe STRF is around eight times over collateralized. So they have eight times more assets than they have on the balance sheet than they have notional liability for STRF.
(30:33) So their ability to um pay off just just the interest alone is drastic. I think they could pay over a hundred years of STR STRF dividends if they were to rely on just the um just the existing capital structure alone to pay off dividends into the future. Um so the the other strategy instruments are are different flavors in different risk profiles and different um different tanches.
(31:05) So you think about the second one and I won't go through all of them but I'll focus on STRC because I think this is the most unique there was the most amount of demand and interest in the equity in the market for this uh is STRC. So STRC is a effectively like a high yield savings account and it provides uh it it provides it the goal of STRC is to provide stable principal value and provide a dividend each month to people that are holding this particular instrument.
(31:40) So that that's what I mean is it's supposed to be an an alternative to a high yield savings account. You park your dollars there, you get paid a dividend each month. And Strategy has the unique ability to peg that instrument into a target zone to keep it stable. So if the price goes above $101, they have the ability to ATM uh effectively issue more shares to the market to bring it back down to 100 and and or drop the interest rate.
(32:12) And if the price is below 100 and where it's at today, 97, they have the ability to increase the interest rate uh to boost the effective price up to 100. So they're they have uh mechanisms in place to keep the principle stable while keep able to uh get that dividend into perpetuity. Go ahead. Well, I was going to say I think Stretch is really fascinating too because you see like a free market response to Fed Treasury dynamics here.
(32:38) Yeah, you see a free you see a free market response to Fed Treasury dynamics and the uh the relative risk is an interesting dynamic. So you look at you think about risk profile of these different instruments and you start to ask what is the risk? So there's two questions.
(33:05) So what is the risk and how do the dividends get paid? Those are the those are the two big ones that uh the the market has been particularly interested in and the risk is um bitcoin risk volatility risk. So the risk is the price of Bitcoin falls you 80 90% and stays there for an extended period of time 4 years and then strategy wouldn't have the ability to pay out the dividends into into the future.
(33:31) If that were the case anybody that's listening to this podcast and is interested in Bitcoin would likely have bigger issues um bigger bigger issues at play. And so that's that's kind of the risk profile. And it it's this evolution of risk that I think is particularly interesting. You're not you're not taking on physical risk.
(33:53) You're taking on adoption and volatility risk of a of a new technology that's already a $2.5 trillion asset and thinking about okay what is my what is my probability that the price falls 80%. What's the company's ability to pay off the dividend in that particular point in time? So that there's a mathematical formula that can be calculated 24/7 365 which makes these products incredibly unique.
(34:22) Whereas typical fixed income instruments in the fixed income market rely on quarterly earnings reports to understand what the risk profile is. So that makes these instruments illquid. Now you have this new digitally Bitcoin backed credit instrument that where you can calculate the credit 24/7 365 and there's no physical risk and the yield is significantly higher than anything else in the fixed income market.
(34:46) It's easy to see very quickly the discrepancy in the risk return metrics between the physical world and the digital world. And the digital world is providing a significantly better product to the marketplace than the physical risk world. Sup freaks, this rip of TFTC was brought to you by our good friends at BitKey. Bit Key makes Bitcoin easy to use and hard to lose.
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(36:34) Funny is there a lot of people that would deride the treasury play and I'll admit I've been critical of it. I don't think to the point of I think it's completely stupid, but I worry that they're uh the the long tale of copycats are going to have a hard time. I think I've been pretty clear.
(36:52) I think there's going to be a paro distribution of those who succeed and succeed massively and those who sort of taper along and get acquired maybe. Yeah. And get acquired ultimately. Um, but to your point about like Bitcoin being introduced into these unique capital structures one that were once being used as defensive measures but are now being used as offensive measures.
(37:14) The the idea of Bitcoin trading 24/7 365 being the most liquid market in the world because it is always open. Um, I think that value prop and that feature of Bitcoin shines very bright in these examples. Um, you don't have to you don't have to wait for quarterly financials. You don't have to assume what's going to happen.
(37:38) You can just look at the look at the market, look at the price, look at the depth of the order book, look at the ledger, see blocks coming in and and understand what's happening at any given point in time. Yeah. Uh, there's there's just so many fascinating things about this. Um, and maybe I'll give like a little like history background.
(37:55) One of the one of the reasons that the reinsurance market exists today is because the insurance companies hold assets relative to future liabilities. And if there is a catastrophic event that happens, the insurance companies don't want to liquidate their illquid assets to pay off the claims. So they buy reinsurance from reinsurance counterparties across the globe to reduce the volatility and so they don't have this uh liquidity shock of having to go liquidate a bunch of you know corporate bonds they're paying 7% and there's no buyer on the other side of them. So that's why the reinsurance market exists. And now if you understand
(38:37) this framework of how this is evolving, if this marketplace 10xes, if the perpetual preferred marketplace 10xes 20x's and they have, you know, credit ratings on these instruments moving forward in the future, the reliance of these insurance companies on uh liquidity in those, you know, in those catastrophic events, that that changes that that entire equation changes and there should be a premium on these highly liquid uh digital credit instruments as opposed to uh you know having a higher a higher cost. So I I personally think that
(39:15) there's going to be a repricing of physical risk relative to digital risk at some point in the future. It's going to take probably a decade but um the entire financial world as we know it can be recalculated and restructured with these different instruments uh in different ways. So that that's incredibly appealing to me.
(39:38) And then the the other really unique nuance um with how strategy is paying these dividends, which has been a a big controversy into the future is uh they their operating business makes a little bit of money, but it's not the operating business doesn't cover uh the entirety of the dividend liability moving into the future. So you've got multiple ways that you could go pay the dividends.
(40:03) one, you can raise capital via the ATM. So, if there's premium in your equity, you can go issue shares to the market and use that those premium dollars to pay the dividend. Just to put it in perspective, I think Strategy's annual dividend liability is around $600 million.
(40:20) Um, just a couple weeks ago, they raised $500 million in a week on their MSTR stock. So their their ability to raise capital in MSTR ATM is is very high. And if you think about these the structure and the dynamic of this is you're bringing in this capital today to buy Bitcoin and you you incur the dilution over time via the MSTR ATM.
(40:56) Whereas the alternative forms of debt in the market like a convertible bond, if you issue a convertible bond, the convertible bond holder is shorting shorting your stock by 70% of the notional value on day one. So you actually incur the dilution on day one. So when you think about the form of leverage and the behavior of the holder, this the perpetual preferred equities are far more effective form of leverage and that should compound um to the MSTR equity product over time as the excess return and the excess risk of these perpetual preferred instruments is returned and delivered to the MSTR shareholder. So it provides more
(41:35) amplified Bitcoin exposure to the MSTR shareholder. So that's one way they could pay the uh the dividends into the future. The the other way is other capital markets activity. So these these companies because they hold so much capital, you have the effective ability to go refinance at any point in time.
(42:01) And so you can go I if they ever needed to, let's just say the price of Bitcoin fell 50%. And MSTR starts trading at a discount to NAV, they still they still have an incredibly good credit profile. So they would be able to go issue convertible bond if they needed to to go pay off the dividend for the next four years and withstand, you know, any market volatility into the future.
(42:28) Alternatively, one of the real big unlocks with uh these perpetual preferred equities is that they put ATMs on top of them as well. So, what they created is effectively a refinancing mechanism that can refinance daily and you could bring that capital in the door daily, which is monumental.
(42:54) Historically, if you wanted to go refinance any of your debt, you would need to put together a presentation, get your credit profile, thinking about proform of financials, go take it around the market, go run to New York, run to Bermuda, run to all these different cap capital places and find somebody that's willing to give you good terms.
(43:12) And now, you know, and you can tap your cost of debt capital daily if you like the terms. And that's not priced in yet. I don't think people quite recognize how how powerful that is and uh I think that will just continue to grow. So this is something they just baked into the design of the product and the perspectives that yeah they baked it in.
(43:38) So they have the ability to issue more shares of any of these instruments at any point in time um if if they like the if they like the terms of these instruments. Um so that that's the again to the uniqueness of the liquidity profile the interest of people that are trading these instruments in different ways or identifying risk arbitrage across different risk markets and and I think that the the way this world evolves like this this world is getting more digital that is that is a that's just a fact and I think these typical fixed income instruments are are very illquid because they're not like digitally traded, they're over the
(44:14) counter. Uh, and I think that will start to change and evolve um as capital structures of corporations evolve over time. Uh because nobody's going to want to buy jet blue corporate debt, junk corporate debt at 7% interest when they could buy 10x over collateralized perpetual preferred uh highly liquid uh bitcoin back digital security from strategy.
(44:45) Uh that's paying more. It's more liquid. is less risky, more collateralized, no risk of future cash flow, you know, like the just the entire risk profile is completely just in every every single aspect you look at it is way better. Yeah, it makes a lot of sense. And again, it it drives back to one of the core value props that Bitcoiners have been talking about for well over a decade, almost two decades now.
(45:10) Bitcoin is this neutral uncorrelated asset that's not beholden to the whims of corporate boardrooms and management decisions and um it may shortterm be affected by broader market movements but over the long term it's proven to be uncorrelated and if you have this neutral scarce digital asset it makes sense that you would want to design and construct products around it financialized products around it um and I think it scares a lot of Bitcoiners is like, "Oh, the suit's taking over Bitcoin." But I think I like to flip the framing. It's like, "No, actually,
(45:46) Bitcoin's taking over financial infrastructure," which is a good thing. They're beginning to recap the whole financial system with Bitcoin, which is something that you should want. This is what living on a Bitcoin center looks like. Yeah. And Sailor said this really well the other day at the end conference.
(46:04) He said, "Well, Bitcoin fixed the money, and you can't just sit on your sit on Twitter and tweet about this and, you know, fix the fix the rest of the world. You need to you need to fix the capital markets. You need to fix the credit markets. You need to fix the insurance markets. You need to fix uh every single aspect of of finance in different ways.
(46:24) You need to reconstruct your the entire world of the capital market in order for this to infiltrate. Like it's this can't not happen. Like if you want Bitcoin to be successful, like this can't not happen. It needs to be pervasive in everywhere in all capital markets. And I think a lot of people really miss miss that.
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(47:34) Not only that, I I think and I was definitely guilty of this, especially in my early days of Bitcoin where I thought financial system is going to collapse. We got to go to Bitcoin. We'll let It's like a we'll let everything collapse. We'll build back up. But I think I said this on stage with Andrew in Nashville on Saturday. I've been saying it a lot.
(47:56) I think the meme of the soft landing that was put out there by Janet Yellen um and others during the Biden administration and and at the Fed um particularly talking about how we're going to sort of manufacture a smooth landing of the economy after all the stimulus that was injected into the economy postco I don't think that the Fed the Treasury sort of have the ability to do that um certainly not without Bitcoin and this is the way I view the bitcoinization of finances you the free market sort of creating the soft landing by refying and recapitalizing uh the system with better collateral. Yeah. And that that better collateral
(48:31) will just infiltrate everywhere because you can't not you can't not hold these things. And uh I think that will that's going to play out over time. So I was talking about this a little bit earlier. You've got all of these folks that manage fixed income portfolios for retirees or um pension funds or or whatever.
(49:00) And let's just say they do things the traditional way and they make their, you know, 5 and a half% interest annually. And then their competitor across the street has fully adopted the Bitcoinbacked credit treasury model and they provide 7 points of return annually and outperform the other fixed income instruments by 150 bips. Capital will move to where it's treated best.
(49:33) And so that that capital will then move to the better capital manager that's leaning into these new types of products. And there's a like understanding the risk risk return profile there. The the crazy part is that that new investment manager that's adopting Bitcoin back credit and outperforming the existing fixed income money market manager is probably doing so with significantly less risk as well.
(49:57) And uh if you think about the scale of uh the entire capital world, the fixed income market is one of the biggest pools. It's a 300 trillion pool of capital. You think of the equity market, it's about 130 trillion. You think about the money market, it's I don't know 22 22 trillion, something like that.
(50:22) And so if you want to make the biggest splash in Bitcoin, you make you disrupt the fixed income market. And these these products that are hitting the market now are disrupting the fixed income market. And as they start to bounce around different parts of the fixed income world, they're going to make more noise and more noise and more noise and more adoption.
(50:48) And that will be probably a similar adoption curve to uh to Bitcoin where you see it just like slowly like grad gradually then suddenly sort of thing whereas just a few people have these in their their portfolios and 5 years from now it's probably 10x maybe 20x and then 10 years from now it's probably 100x.
(51:14) Yeah, that ties into a good question, which I mean I won't say I'm asking good questions here, but uh at what point do you think at what point do you think companies that aren't Bitcoin focused the thing that really gets me going is operating businesses that really get this and go to execute on it? And I think we had a good example of this with Figma's IPO. Obviously, their S1 had disclosed their financials.
(51:38) Uh we came to find out that they had $70 million of IBID exposure. I believe and the intent to buy $30 million more of spot Bitcoin. To me, that was an incredible validation signal. You have this darling in Silicon Valley that is really incredible product used by millions of people that people love and the um the sort of leadership there decided to build a Bitcoin treasury.
(52:02) I believe it was more than 10% of their um of their cash and cash equivalents was in Bitcoin, which is incredible to see. And what I'm curious to see is at what point do companies that nobody would suspect that really aren't Bitcoin first and um led by Bitcoiners that are thinking about this Treasury strategy and really going after it um aggressively sort of from a Bitcoin perspective.
(52:27) But at what point do we begin to see the Figmas of the world um begin to leverage these type of of credit instruments and utilize capital markets in this way? Do we see it? And if we do, um what does that mean for for the normalization of this? Yeah, the great part is they don't have to. If they if they have good they have a good operating business and they are adopting a treasury strategy and keeping Bitcoin, you're you're de-risking your balance sheet.
(52:59) uh you're storing your energy in a commodity that can withstand the the new digital future and not not losing uh purchasing power of your stored stored treasury. And I think this is uh this this kind of comes down to these weird in incentive structures in the existing equity market. Uh to your to your question, I think those companies will see it as opportunity that they need to take advantage of.
(53:29) I I'm sure people will approach companies like Figma that are holding Bitcoin on their balance sheet and say, "Hey, look, you could go raise, you know, x amount of capital and go, you know, 10x your operating business if you go issue this security and you've got the security of your balance sheet to cover it.
(53:48) " that it there will be pitches to those companies that just make so much sense that they can't nod to it. So, I'm incredibly bullish for what that looks like. But, um, one unique incentive structure that I'm seeing in the equity world, I I truly believe that risk is mispriced globally across equities and fixed income. And when you look at these companies balance sheets, uh well they're uh their operating businesses are leveraged to future risk.
(54:22) So uh you look at a company like Nvidia with a $4 trillion valuation only holds $54 billion of capital on the balance sheet. So that's a that's a significant risk gap between the amount of actual capital that the company holds relative to this reliance on future cash flows. And that's uh there's a significant list of risks that can disrupt those future cash flows.
(54:48) And I think that the market in general is mispricing that that risk of future cash flows relative to actual capital stored and the value stored on the balance sheet. And I I think there could be a really big concern um particularly in frothy markets with high PE ratios and high price to book ratios on these tech companies where that there's a blowoff top and the equities see a a a correction and they don't have strong enough balance sheets to ever regain that position that position of strength that they were previously in. And I think that risk
(55:28) is probably mispriced uh globally. Yeah, it's something I've been discussing on this show the last few weeks specifically is I I don't think people are looking at forward-looking PE ratios approaching and in some cases surpassing.
(55:46) com era levels and I don't think they're taking the risk seriously and just looking uh I just Google Finance they have their beta I guess they they've implemented uh Gemini so I can ask a question now as of September 23rd 2025 the trailing PE ratio for Nvidia is 50.95 and was 51 one, which is pretty high.
(56:06) And then people are complaining about MNAVs of Bitcoin Treasury companies being one and a half. Yeah. It's like it's like what what you're trading at 50 times. So how far how forward-looking is that, right? I mean that's uh there's the company has value, right? They're they're I don't know what their revenue is like hundred billion dollars a year, which is huge.
(56:31) But one of the unique reasons that these uh these companies are valued so high is because they're doing these stock buybacks as well. So they'll take that excess cash and do a stock buyback. And what they're indicating at that point in time is I have no better place to put this cash. So I'll buy the stock back. And and alternatively, they could be buying Bitcoin, which is a effectively buying Bitcoin and d-risking their future balance sheet with something that has significant growth potential and can provide long-term longevity for the company. So it's a I think a dynamic that is that
(57:12) will be really hard to break because all of these institutional holders of these equity instruments even the design of the passive uh market structure is going to be difficult to get anybody to tell them to not do share buybacks. So I think this movement from these smaller companies that are adopting Bitcoin treasury companies is kind of what needs to happen here because the incentives are not aligned for a you know hundred billion dollar plus company to not do a sh not do a stock stock buyback and buy
(57:44) Bitcoin instead. So I I really think this uh this you know shift of uh capital is happening over the long term. Yeah. And just I mean when you when you talk about stock buybacks in my mind the I don't want to say worst but I mean the most aggressive company to be buy buying back their stock is Apple.
(58:07) And just did a quick search uh estimates range to according to uh Google Finance LLM uh between 604 and 704 billion in the last 10 years. to think of like going back to Bitcoin in 2016. Obviously, it would have been patently absurd for Apple to do it in 2016 at the time, but in retrospect would have been a great decision.
(58:33) But imagine if they were able to put 70% of a trillion dollars in a Bitcoin. Yeah, you you when you reframe your entire world from a Bitcoin lens, these numbers look absurd. And the uh one thing that I've been looking at recently and we're kind of building out a a little bit of a a a technical uh perspective on is go look at earnings of all of these companies priced in Bitcoin at the point of time where they released their earnings.
(59:02) So if you look at earnings priced in fiat, everything is going up to the right. But if you look at historical earnings price in Bitcoin at that point in time, there's actually a lot of volat volatility and all of them are going down and to the right. So it's the same concept of like looking at a price of a home over time in price in Bitcoin.
(59:18) Do the same with quarterly earnings of corporate balance sheets and you're like, "Wow, there's actually a lot of volatility here and they're all going down for the most part, you know, except the your your leaders in AI like Nvidia and a couple others.
(59:35) But I I guarantee you you could go look at 99% of equities in the market and if you were to price their earnings in Bitcoin, they're all going down to the right. Yeah, that's that's an interesting that's an interesting perspective to take. Oh, one other thing on the buybacks. Uh Chevron 2000 2021 uh did a $70 billion buyback. I was doing some analysis on this.
(59:57) If they would have spent 25% of that on Bitcoin, the value of the Bitcoin today would be worth more than their market cap today. That's insane. Yeah. So, it's uh when when you start to do the math on some of these, it looks uh pretty blatantly obvious. Yeah. Well, that's um that's why we launched the opportunity cost uh browser extension is to help people recognize this this sort of Bitcoin depreciation in their everyday lives and the fiat debasement.
(1:00:28) But I I think from a met from a mimemetic perspective and from a marketing perspective that's something over the last year I think particularly in the the realm of Bitcoin treasury companies and strategy most importantly really beginning to drive that home. Bitcoin per share.
(1:00:46) And I think pricing earnings reports in Bitcoin and tracking that over time is going to be incredibly mimemetically powerful to really drive home to people like you are actually not doing as well as you think you are. It's so funny. You look at a company like Crowdstrike. Uh Crowdstrike, I don't know what their market cap is today, but it's around 110 billion. Okay.
(1:01:05) Over the last 21 quarters, they've technically in Bitcoin terms, they've lost 18,000 Bitcoin. In that same time horizon, Strategy has acquired and accumulated 638,000 Bitcoin. Strategy's priced at $94 billion market cap. Crowd Strike's priced at a $110 billion market cap. and crowd strikes in the S&P 500 and strategies not in the S&P 500.
(1:01:35) And you start to look at that and again my my brain goes to risk is mispriced globally, right? This is a these are fundamentally different risk return metric products that just the market just broadly doesn't understand. No, not at all. I mean on that point that was one question I wanted to make sure we cover and obviously it's top of mind for a lot of people.
(1:02:00) um strategies lack of inclusion in the S&P 500. I guess what is the justification for them to be in it and why haven't they they joined the S&P 500 yet? Yeah, I'm not I'm not surprised. Uh the companies typically when they uh some companies when they first get qualified, they do get added, but some of the more controversial companies have it's been a couple quarters before they've gotten added to the S&P 500.
(1:02:29) you go back look historically like Tesla I think they first qualified after Q2 in 2020 they didn't get included until Q4 uh so it was they got skipped by a quarter some other companies looking at uh like apploven and Robin Hood were not included in the S&P 500 for various different reasons and I think ultimately comes down to the fact that there's a committee there's people that have to make a decision on to onto whether or not uh a company gets included or not which is so funny and ironic for the S&P 500, right? Like the S&P 500 is supposed to be a passive index and then you have
(1:03:01) people that are actively making decisions about what goes in and out of the index. And there if if you look uh it's interesting to compare the performance of uh like the Bloomberg 500 relative to the S&P 500 which doesn't have a this active committee component and the performance is interesting and I think that's also why we've seen a significant increase in uh the index funds like QQQ getting a lot more popularity and growing in popularity because it's more technical there are technical considerations on
(1:03:38) whether a company could get in or not and no committee. So it removes this element of uh lack of uh just understanding what's happening in the market, right? It's it's more of does this company qualify? Yes, it's in as opposed to um does this committee that has an average age of 60 understand what's happening in the digital market and how quickly things are moving and evolving and adopt and and advancing into the future.
(1:04:15) So, um yeah, it's just it's it's unique. I I do think they will be included. You've already got two companies in the S&P 500 that hold Bitcoin on their balance sheet. So, I know it's not that just the Bitcoin, right? They're not going to not include Tesla. They're not going to not include Coinbase or uh even Block. Oh, so Block. So So there are three.
(1:04:31) And so yeah, I think it's just a matter of time and there will be uh dozens, I think, within, you know, four, eight years. Yeah. And one of and I I think we talked about this in January when we last met, but like just to reiterate, what does getting included in the S&P mean? I mean, you mentioned it's a passive index, but that does unlock significant amount of passive um flows for for companies that are included. Correct.
(1:05:03) Yeah. Yeah. That that's a I I will caveat this with everybody is front running everybody all of the time. So in terms of whether or not these passive flows that come into any one of these individual equities, you have no idea when it's actually coming in the door. uh but structurally I think this is a very important consideration for multitude of reasons for a company like strategy because the the architecture of these funds as the market cap of these funds increase even if you subscribe to bitcoin is
(1:05:38) going up as the market cap goes up relative to the underlying bitcoin holdings the amount of uh passive flows that are coming in the door on that particular instrument don't increase linearly they increase exponentially And so that results in more uh reflexive positivity of capital that's coming in the door. It enforces the premium on the underlying equity and continues to push it push it higher.
(1:06:03) Although there is reflexivity in the opposite direction as well. Uh so there's a multitude of different factors at play here. But and then the other component is as that balance sheet grows, as the market cap grows, so does the credit quality. And I think being included in the S&P 500 is a is a bit of a a trophy to put on your wall and also helps with communication with credit agencies with the S&P being one of the largest credit rating agencies in the market. So if you're including the S&P 500, then you start to need to look at what are the ratings of
(1:06:37) the provincial preferred equities of this company that's included in the S&P 500. That helps in conversations with Moody's and Fitch on the the instruments. you've got a significantly larger capital base. The committee has approved you as a company to be included in this index. So, I think the narrative and the story, the story goes a really long way.
(1:07:01) Um, on top of the forecasted cash flows that would be coming in the door. Yeah. Wild times. Yeah. When we met in when we met in January, you called it the most hated rally, most hated trade uh strategy specifically. But now the the market for Bitcoin treasury companies has expanded.
(1:07:18) Do you do you still hold that belief that it is the most hated trade out there? Yeah, I I I do. This is uh this is so hated because people don't understand uh so many people don't understand Bitcoin in the traditional financial world and but they understand leverage finance and then so many of the Bitcoiners don't understand uh they don't understand leverage finance.
(1:07:39) So, you've got these two worlds that are kind of colliding and the you've got everybody outside of the Bitcoin ecosystem that's looking at everything they've already known and you're you're trying to you're trying to turn their world upside down and they can't even conceptualize why a company that's accreing value consistently should trade at a premium to the underlying holdings on their balance sheet.
(1:08:05) just then you look at the then you look at the risk profile of everything else out in the market. It just none none of this makes any sense. And it's the the reason I think it's it will be the it will be the most hated rally.
(1:08:23) I think that the next decade of these will be the most hated rally is because you're literally turning everybody's world upside down and reshaping it. And these companies aren't going to stop. Strategy is not going to stop. We're not going to stop. There are going to be dozens of other companies that are doing this and they're not going to stop.
(1:08:41) And the this is why I say risk is mispriced globally is I think there will be a risk repricing over time that is just going to confuse so many people and require accelerated educational periods for um different corners of the marketplace to understand this. And they're going to hate it at first and then they're going to, you know, think about it and then start to understand it. And that's just going to take a really long period of time.
(1:09:04) Yeah, we're rebuilding the world around Bitcoin freaks. Going to be hated at first. It's been hated for 16 years. And uh no, the the Bitcoinization of finance is upon us. And Jeeoff, you were at the forefront. Again, congrats on all the success you've had this year. Your life has changed drastically since we last met in January. And like I said, it's been fun to watch.
(1:09:28) Um, so I thank you for taking some time out of what I'm sure is an incredibly busy week for you to come discuss this with us. Yeah, you should look at my calendar tomorrow. I think I've got uh 12 12 calls tomorrow. It's pretty crazy. It's back to back to back to back. Um, a lot of things cooking. All right. Well, make sure you get some good sleep tonight and hopefully we can do this again at some point next year.
(1:09:47) Peace and love, freaks. Okay. Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there.
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(1:10:37) Thank you for your time and until next time.
