Mike Belshe and Dylan LeClair on Bitcoin's Cycle, Quantum, and Public Markets

We appreciate everyone that's still here. This is the last panel, I believe. So, where should we kick it off? We were just talking about the public markets. Bitcoin to the public markets this year. How are things? How are you feeling about Bitcoin, the cycle? You've seen this before. A lot of people haven't. What's the lay of the land?

Let's see. This is a Bitcoin related topic tonight. So, I'll only mention IPO a little bit. I think the last crew mentioned it. Obviously, we have traditional markets with direct access to Bitcoin by way of BlackRock and a dozen other ETFs. We got it through the DATs, etc. I think right now, of course, the public markets are kind of cool on crypto. I think number one factor is really AI. It's just so damn sexy that it is just unstoppable for now. But secondarily, I think people are a little bit worried about Bitcoin. I think actually quantum is a topic. I kind of hate to say it. I'm not actually afraid of quantum. I don't think it's a significant threat, but when we did the road show for the IPO, I spoke to a lot of investors, traditional investors. They don't usually talk to crypto companies. They can barely spell BTC. They're trying to figure out what we do. And it was a top three question: what's going on with quantum computing? I was actually really surprised because I mean we talk about it a little bit but it's not that big of a deal. So I think we have actually as an industry we should pull together like ASAP and get a quantum resistant algorithm in the protocol. And then of course there's going to be other things to figure out with Satoshi's coins and wallets upgrading, etc. But as soon as that thing is in, it's just going to take this massive thing off the table. And obviously there's debate about what's the best version to do it, what's space efficient and all that in terms of quantum. I think we should just put all that aside and just put one in and get going on it. And I think it'll be fine. So obviously you don't want to mess up the crypto. It does have to be sufficiently reviewed. I don't mean to be cavalier about it, but I think it's really important that we get that done fast.

Yeah, and I agree there. In the context of my opinion, I'm not a cryptographer, but you run into this with your investors: they ask this question.

Yeah, and our feedback is that we're paying attention to all of the stuff and all of the development, but I think in our view the perceived left tail risk is actually greater than the realized tail.

Yeah, I think we've been in this industry a long time and there's always the current FUD, and this is it. Whether it's real or not doesn't matter. If we can just keep knocking them down, we'll keep winning over the long term. So, yeah, it's good.

All right. Let's see. I guess digital asset treasuries. I mean, I guess you know something about those.

Yeah, I agree with you. The public markets are very cool right now.

Now by the way, your investor base: what percent is retail?

In numbers, 99%, but in share count, I would probably say 50-50% or 60%, but that's still really high, right?

Yeah.

Okay. Yeah. I mean the previous crew was talking a little bit about needing institutional investors to kind of lead for retail. So back to the IPO process: I think Bitcoin could demonstrate across multiple products, products like yours, products like the ETFs, maybe companies like ours, that that whole old school way of doing it through the institutions may not be the best way to take a company public. So if you look at companies going public, the first six months is a lockup period. They should call it the hedge fund play period. Every company goes through it. You can look at even Coinbase, this super strong company, hasn't reached its IPO opening price. So I know the institutional guys like to sell their book and the pricing mechanisms that they use, but I wonder if it's really serving us today. And then on the retail side, I'll tell you: we allocated 25% to retail. I kind of wish I'd been brave enough to give 100% to retail. Somebody's got to run that experiment. The bankers will tell you it won't work. They don't really know. They'll tell you it doesn't work because that's in their vested interest, but they don't really know. But what you get from the retail teams, and we had Fidelity, SoFi, Weeble, Mumu, we had about five different retail venues that contributed. They give you daily stats of exactly what the retail interest in your product is. It was four or five times oversubscribed on the total amount just by retail. Didn't need any institutional. Could have fully filled the IPO. And that's money that gets committed upfront. Then the hedge funds, they got big accounts at the banks, and the long-long guys are credit worthy, but retail puts the money up. So anyway, they give you daily stats. It's way better than what the bankers do, and very interesting.

Turning the corner on this bear market, do you think the bottom is going to be driven by the retail crazy hodler maxi crowd, or is it going to be the institutional big money saying, 'All right, time to dip my toe in here under the 200 week. Let's allocate.'

I don't know. I don't know if it's too smart or not smart enough to predict price. It could go any which way. It could go down for a while. Those of us who have been in the industry, we're usually kind of hardened to this part. I think it's more frustrating for the business because you're trying to move the business forward and we kind of have to wait until the industry catches up a little bit. But I don't know if we're at the bottom yet. It could go lower. If it does, it's fine. The thesis of Bitcoin is still completely intact. So, we're in New York here. Raise your hand if you voted for mom Donnie. What? You guys elected him? All right. So, look, the governments are going to do what the governments are going to do, and they're going to continue to prove our thesis every single day of the week. That'll shine through in the end. I think when people are thinking about where the price is today or tomorrow, you kind of lose why we are really doing this. And then the governments of the world need a way to settle transactions between them. People are learning that if we have dollars, the US could decide they don't like you because of whatever whimsical reason and then they'll just take your money. That's a difficult place to be for most countries. If you're Saudi Arabia right now, you've got to be thinking, 'Geez, we want to be holding a bunch of these dollars.' So look, I'm not trying to predict that's going to change anytime soon. It's a complicated question, but over the long arc of time, you cannot have a currency that people take away from you and yet still have it be the settlement currency. All right, so the thesis is still strong. I don't know where the price is. I don't know.

How about you? Do you think we're at the bottoms yet?

Yeah, tough question. But it looks like the interesting data we went over a bit earlier: in terms of the amount of the network and the amount of coins and UTXOs that are at losses or capitulating at a loss right now, it's actually greater than what we saw in 2022, but a much lesser drawdown, right? So maybe it was sort of a rounded top or a two-year kind of bull, and a lot of institutional capital. I think it was something like 80% of the actual dollars invested in the network, not the market cap, was higher. So these are the levels you see towards the kind of rounded end of a bear. That doesn't mean it's a moonshot to all-time highs. It probably means six months or 12 months of boredom if you're just looking historically. We'll see what happens. There's a macro-driven effect here of is it rate hikes, rate cuts? That's all tea leaves, and that's probably the only thing harder than Bitcoin to predict is what the Fed's going to do next. So it's a multifaceted question, but I think 60K, if you're waking up today with zero Bitcoin allocation, it's a damn good time to start an allocation.

Yeah. Let's see. What do you think? Do you think corporations are going to pick up Bitcoin more or less now given what's going on with the Bitcoin market?

Yeah, I mean I think what would probably the next

And by the way, do you get non-DATs asking you for advice about whether they should put Bitcoin on their balance sheet?

Yes. Less so over the last six months. There was a lot of inbound passive inbound in Japan. After we kind of started our business and into the bull market, an interesting tidbit, and this is not so much an American culture thing, about seven or eight of the companies that have been following MetPlanet and the treasury strategy in Japan have come out, apologized, and have pivoted. So it's like 50 asset, these things happen, but there's not so much of an appetite for that in the public markets it seems.

Well, I look, I know exactly what's going on. So, we're public now, right? You can look at our financials, and we've got our revenue and then you've got where your income comes in. Of course, on the income, if Bitcoin takes a big loss, we maintain about 2500ish maybe a little more bitcoins on the balance sheet. We're not a DAT. We're an operating company, and it's what we think works well for our managing of our treasury assets. But yeah, there are some people, when you're a public company, some people are your fans, some people want to take shots. So you got to show a negative number just because Bitcoin didn't do so well, and they'll pick that one out. So if you're a public company CFO, it takes some hard skin to tolerate that because you just don't want that. You could have a stellar performance, but if you have a substantial amount of Bitcoin, you're still going to have this big negative number that you wish people didn't have to see, and people misinterpret it. As much as the SEC tries to make all of this easy for retail investors, the level of sophistication around financial statements is pretty low.

You can make any narrative you want.

Does Bitco on the lending front? What are your thoughts on Bitcoin collateralized lending? What are your thoughts on this market has kind of gone from very early stage to now becoming more institutional, and the cost of capital from everything I can see seems to be slowly but surely drifting closer to SOFR, but still we got a long way to go relative to what you can get on regular asset-backed securities lending. So just thoughts on the lending market. Is this, obviously in every bear market there's a lot of leverage that gets wiped out. In a bull market, everybody's a genius with leverage, and Bitcoin's a volatile asset. So that comes in phases. But on a long time frame, do you view Bitcoin as this digital capital collateral that's great for, that's plugged in everywhere in the financial system, or it's just no leverage, spot hodl? How do you think of it? What's your philosophy?

What else? We had some notes earlier. What else did we miss? There's a

Said stretch.

Yeah, stretch. Yeah, the talk of the town. I mean, I think we were number two to pioneer the treasury strategy and adopt it as a core asset. Companies 4 through 60 for the debt trade happened within months after. Sailor kind of spent four years, and we were kind of alone with him for a year or so in the public markets doing raising capital to acquire Bitcoin. I think it happened so fast. There was so much with companies 3 through 100. I think a lot of those companies weren't really fundamental believers of Bitcoin. It's just opportunistic: the capital markets are open, it's time for a Dylancoin treasury company. So there was a lot of froth there. I think that's been washed out. Obviously the performance has been tough for Bitcoin, has been tough for any public equity with exposure to Bitcoin, whether that's an operating business or just a physical asset itself. But I think the fundamental thesis is the same. The reason that people have been allocating to Bitcoin in the public markets for the last six years, or Bitcoin exposure rather, is unchanged. The retail base is definitely hardening in terms of conviction. There's a lot of hot money that's come in and come out. But the actual investor base understands: well, why is the stock down? Well, Bitcoin is down. So there's things we can control and execute on, and there's things we can't control. But long term, our conviction and our thesis hasn't changed.

It's a good way to wrap it up. I appreciate everyone's time here, and thanks, Mike, for being here.