I got 15 minutes to talk about digital capital, digital credit, digital equity, digital money, digital yield, and then Jeff and I are going to have a fireside chat. So, I'm going to go fast. First, digital capital. Bitcoin, digital gold, store of wealth. The network has achieved, you know, global consensus as digital capital. Bitcoin's about two-thirds of all the market cap in the crypto economy. It's probably 80% of the liquidity. It's probably 90% of the economic value. We're moving back into a bull market. You should normally track the 200-day simple moving average. And you can see we bounced off it about three months ago. We're back to a slight premium, but if you look at the chart, the chart looks exactly like you would expect the chart to look if you had a 15-year time frame on this. The headwinds are restrictive trade policy, restrictive foreign policy, restrictive monetary policy. We've struggled with all three of those over the past year. And then the AI bubble or a trillion dollars of gravitational pull, a contention for capital, and the AI buildout. Those are the things that are serving as headwinds for the asset class. Bitcoin is pure capital. So anything that's bad for the capital markets, anything that's a risk-off, that's not good for equity, it's double, triple not good for Bitcoin. So it's not complicated when you declare trade war on Canada 20 times. And when you escalate another war and when the yield curves move up 100 basis points, all those things are challenges for the capital market. So what are the tailwinds? Well, right now the real drivers, the fundamentals that are going to drive the price of Bitcoin forward are bank adoption as the banks create credit on Bitcoin. Every $10 billion of credit is one year's supply. So you create a hundred billion of credit on a trillion dollar asset class, it's enormously bullish. It drives the price forward. The banks won't do it until they collateralize or until they custody the Bitcoin. So as banks custody Bitcoin, those credit networks form and that's a very bullish fundamental over the next 12 months to 24 months. The tokenization of securities is also a positive driver because a lot of times digital credit, digital equity, digital capital, they're all being tokenized and cross-traded and cross-collateralized to each other. Generally, the AI disruption is a positive because there's extreme risk in traditional businesses as all of the labor and the activity is demonetized and automated, and then there are extremely high multiples and extreme risk in all the tech plays because you don't know who's going to win and who's not going to win and you're buying in at extreme valuation. One thing is clear, we're going to automate everything. The car is going to drive itself, the robot's going to do the work. Anything you can produce with a robot or any thinking that a bot can do is going to see the marginal value go to zero. The prices are all going to collapse. That's going to be great for consumers if you want to consume things produced by robots. It's going to be awful for the producers that are actually making their money by selling those goods and services at high prices. If you're an investor, you want to buy something a robot can't make. What is that? Three acres on the beach in Palm Beach. The New England Patriots, a trophy asset. A scarce, desirable piece of property. Bitcoin is a scarce, desirable piece of property in cyberspace. So the robots can't make more Bitcoin. They can definitely make more of anything tangible in the physical world.
When CLARITY stalled, we got three positive sets of guidance from the government. The Treasury put out very positive rules for stablecoins. The SEC opened a path for tokenized securities in the US, and the CFTC greenlighted crypto derivatives to be offered to US investors. All of those things are very good for digital assets. CLARITY was 630 pages, 600 pages of restrictions. You don't really want 600 pages of restrictions. You want a bill of rights which will fit on a single page. And so the loss of CLARITY isn't really a bad thing for the industry. The best thing for the industry is just positive rules coming out of the regulators, and then you just go and build these products and sell them.
We do see an acceleration of bank adoption. We track the Bitcoin banking index. A lot of positive announcements by all the banks you know and love. We've seen the index move from 9% to 34%. You can get all the details on our website if you want. Let me say a few words about credit. You know, the Bank of England was founded. They raised a bunch of capital. They bought a bunch of gold. They issued credit against the gold. If you own a mountain of gold, you can sell credit that pays three or 5% a year forever. That's the console. That's the British sovereign debt. The French did it with the rente. The entire Western world was based upon that gold credit standard, which arguably lasted, you know, till Nixon took us off the gold standard in '71, but that's a good 300-year run or something. So, the idea of credit built on gold is built into Western civilization. If Bitcoin is digital gold, then digital credit is just credit built on digital gold. It's a very simple idea. If you think that gold was going to go up 10% a year, you could sell a credit instrument that paid five. If you thought that Bitcoin was going to go up 20% a year, you could sell a credit instrument that pays 10. That's what digital credit is. We actually brought the British console back to life in the form of a perpetual preferred stock that we just sell to the general public. So, what we've done is we've created a product, STRC. It pays a dividend. Right now, it's twice a month. It'll eventually be, it'll probably be every day after the vote at the end of the month. So, we're paying a stream of income, and then we back it with the underlying capital asset, Bitcoin. We list it publicly. We let you buy and sell it on the NASDAQ. And, you know, today it pays 12%. The company sells it above 100. We buy it below 100. So, the target price is $100 a share. By the way, the British console was 100 pounds. Like, this is not a new idea. The idea of having a $100 par value goes back hundreds of years. We have about 48 years' worth of dividends in our capital structure. Today, it's about 8.8 billion outstanding. It trades 150 million a day. That would be the most liquid preferred stock in the world. It's the most liquid preferred stock in the world within 18, actually within six months of being launched. It was the most liquid preferred stock in the world. And it's six times over-collateralized. So, for every dollar of STRC we have outstanding, we have $6.20 of Bitcoin that we're holding. Plus, we have a bunch of cash as well. It's the strongest credit in the world. It's paying double most other credits. It's 12% effective yield right now as a return of capital, which means if you're a New York City resident, this is a bank account that pays you 24%. Who would want a bank account that pays them 24%? Well, who wouldn't want a bank account that pays you 24%? This is the rest of the stuff that's trading on the market. Private credit might pay you 9%. It's illiquid and gated. This is transparent and it's completely liquid. Who owns it? The credit indexes like BlackRock and VanEck have it as one of their top one or top three holdings. It's being heavily tokenized. It's being built into ETFs. There are corporate holders. Yeah, you know, if you're a treasurer, you put it on your balance sheet. Look, if you needed your money back in four months, you should just go buy a money market. If you need the money back in less than four months, it is. If you have four months to four years, then probably you could hold the digital credit because it should hit par within a few months if it falls off of par. If you don't need the money for four years or more and you don't trust anybody, you're a capital investor, just buy Bitcoin. And if you want to outperform Bitcoin, you buy the digital equity.
STRC fell away from par at the beginning of the summer. We had to step in the market. We put in place a large, like a three-year US dollar dividend reserve, and then we put in place a buyback program, and we bought back about one and a half billion dollars of it to drive it back to par. It's now within a few cents of par. We learned along the way that the marketplace really values US dollar duration more than Bitcoin. Like it would rather see us have three years of dollars than 30 years of Bitcoin. And so there are diminishing returns. The difference between 10 years of Bitcoin and 100 years of Bitcoin is diminishing. Maybe it's not even relevant. It may not be material. The difference between having 10 months or five months of cash versus three years of cash is huge to a credit investor. So we learned that digital credit is an alloy of capital and cash, or capital and currency. You know, and you know, if you created it as 98% Bitcoin and 2% cash, it tends to buckle. If you make it 70% Bitcoin and 30% cash, think of stainless steel is 30% chromium, a little bit of carbon, and you know, the rest iron. And so we are metallurgists, and we have basically been developing the strongest possible credit in a dialogue with the market. If we get it right, we find out the thing just pegs at 100 with large liquidity and no vol. And if we get it wrong, we find out. So we have been evolving pretty rapidly. And one thing we realize is we should just drive the US dollar duration up. So today we have about three and a half years' worth of dividends in cash. We're continually upgrading the credit instrument. So it was an innovation to pay a monthly dividend. And then it was an innovation to put a shelf registration on it to sell it above par. And then it was another innovation to put in place the USD reserve, and another innovation to be able to vary the dividend rate on a monthly basis. Then we went to semi-monthly dividends. And then we went to a dedicated US dollar reserve that is dedicated just for dividends and no other use. And right now we're in the process of taking it to daily. And the idea behind daily is we're moving toward a world where everything trades 365 days a year, any minute and anywhere. So why not create a fixed income instrument that pays you every single day with 365 dividend events or income events? This would be the ideal thing to tokenize. But if you want to cross-trade or you want to arbitrage between the UAE markets, the European markets, the Chinese markets, the Hong Kong markets, the US markets, and do it on the weekend and do it in a tokenized economy, then you'd like an instrument where it's in your interest to buy it on Saturday morning, sell it on Sunday morning, buy it back on Sunday night, right, in whatever currency. And so that's why we're going to daily. We expect it'll increase liquidity and strip volatility and increase optionality, attract new pools of capital, allow a lot of higher-speed trading strategies that makes it better for the credit, that makes it better for the equity, it makes it better for the investor. So what is digital equity? Well, digital equity is the residual after you take the difference between the cost of the credit and the return of the capital. So if I'm offering you 12% and I'm expecting to return 30%, then the extra 18% spread accrues to the equity, and that's what our company does. So we're the largest holder of digital capital in the world. We have about 4% of all the Bitcoin that will ever exist. It's about $75 billion of capital, most of it Bitcoin, some of it six billion in cash or five billion in cash, 70 billion in Bitcoin. We raised $21 billion this year. We raised 25 billion last year. We raised 24 billion the year before, you know. So generally we've got capital flows of 300 million, 500 million a week sometimes. And when we get into bull markets, could be a billion a week. We've had a billion a day. It's a one-way thing. The capital comes in, and we decide whether we want to distribute it or recapitalize.
I mean, this chart probably is the most important chart, you know, for an investor. If you look over the past six years, since August of 2020, that's the beginning of the Bitcoin standard era. That's when we bought our first Bitcoin. What you can see is bonds are a loser. Money markets are paying you 3%. Real estate's 5%. Gold is 13%. S&P is 15% a year. The Mag 7 is outdoing that. Bitcoin's up 37% a year. MSTR is up 51% a year. It's, you know, pretty straightforward, right? I mean, if you were to create credit based on the S&P index, you could probably pay 7% against the 15% expected, except that the Investment Company Act of 1940 makes it illegal. And so the reason no one does credit on equity capital is because the 40 Act prohibits it. You could do credit on gold. Good idea. Well, I mean, literally, it was the idea for 300 years. You could argue it was the idea for 3,000 years, right? I mean, gold-backed credit goes back to Roman times. So it's, yeah, it's been done. What we're doing is just, you know, if gold performed at 37% a year instead of 13% a year, it'd be a better idea, right? We could pay 12. Gold-backed credit could pay four. Four is not all that interesting. 12 is interesting. That's why digital credit works. Our company's the most tokenized company in the market right now because of the extreme volatility and the cross-correlations between the equity, the credit, the capital, and the derivatives everywhere in the world. We're just a structured finance company. What we're doing is we're either amplifying, we're either creating V and performance for equity and derivatives investors, or we're stripping vol and extracting yield for credit investors, right? And so that's the company. This chart kind of tells the story, right? The basic volatility of Bitcoin is 39. We've stripped it down to less than eight on the strong credit. We've amped it up to 87 on the equity. There's conservation of energy. If the vol goes away from the credit, it must thereby go to the equity. Well, it's also the performance. If we offer 12% performance in the credit, the remaining spread goes to the equity. We're simply structuring and tunching that risk and tunching that performance. So, MSTR, the common stock, how do we win? When you sell $10 billion of credit and you beat your hurdle rate, which is about 10%, that means you just made $10 billion. If Bitcoin performs at 20%, that means you made 10 billion up front and you'll make another 10 billion over the next seven years. If Bitcoin's 30%, you're getting 10 billion up front and you're making 20 billion over the next seven years. So, it's a fairly straightforward thing. The more credit we sell, the more amplification we get, the more effective Bitcoin per share we create. A bank would lever up with mezzanine capital in order to create earnings per share for its common. We lever up with the same mezzanine capital to create Bitcoin per share. And it's just that simple. And I guess I'll just end here so we can get on to our fireside chat and say what we're doing is creating like a triple flywheel. We sell the credit, we buy the Bitcoin, we drive up the price of the Bitcoin, we drive up the premium in the common stock. We can issue the common stock. We can buy the Bitcoin, drive up the price of the Bitcoin. As the Bitcoin goes up, the reserves go up. The risk on the credit goes down. The credit spreads compress. We sell more credit. We buy more Bitcoin. Right? And why does it work? Because Bitcoin is a commodity. And because it's capped at 21 million. And we by ourselves can buy all the Bitcoin produced in the world forever. Just our company. Strive in the last two weeks has bought all the Bitcoin produced in the world. One other company. You get 10 companies doing the same thing. Then, you know, if we bought 10x as much gold as was mined each year, you think the price of gold would go up. It's like, it's not complicated, right? It's a financial ratchet. We're just building the system right now. It's about a one and a half to two trillion dollar system. You can scale this up to be a 10 trillion, 20 trillion, 50 trillion, 100 trillion dollar system. And when it gets going, it gets going very fast. For example, Strive went from nothing to 500 million a year ago and went from 500 million to $3.5 billion of capital in 12 months. We were a $600 million enterprise value company six years ago. We're an $80 billion enterprise value today, 100x in six years. So, we'll see where we go next. But thank you for your time.
Yeah. Well, I mean, the first preferreds we put out in the market were quarterly because the convention was pay a dividend every quarter. So you pay a $2.50 dividend in a quarter, and what happens is everyone waits until the last moment to buy it, and then it trades down $2.50, 50 cents the day afterwards, and you end up with the market frozen for 60 out of 90 days in the quarter or 75 out of 90 days because there's, you know, everybody has a reason to wait and wait and wait. So the liquidity dries up, and you end up with these volatile events four times a year. And so we thought we'll go to monthly when we went to STRC because we wanted to create a product good for the retail population, and who wants to get paid once every three months, right? Go to your... Has any employee ever in the history of the world said to their boss, 'Just pay me once every three months?' No. So we went to once a month, and that was very popular. We thought there was an innovation, and we were, you know, the first company to do anything like that, and that was much more successful. I mean, that instrument became 20 times as liquid. And then we realized that we could go faster. So we go every two weeks because most people get paid every two weeks. And we thought that was the fastest we could go because there was a 10-day NASDAQ requirement between when you announce a dividend and when you pay it. So our lawyers told us we could do that. And so we did the best we could do. And then after we did that, Strive came out and they figured out a way to do it every business day. And, you know, you could imagine I was a little bit irate with the legal advice that I had received that told me that that was only impossible. But the good thing about free markets is oftentimes, you know, your attorneys and your bankers will tell you it's impossible. It's impossible. And then someone does it and say, 'Well, yeah, I guess it's possible.' And so Strive did it. We're like, 'Okay, well, let's see if something breaks and what happens.' And what we found is their turnover was 3x ours. Like, clearly they tapped in a new pool of capital. And you could imagine what it might be. I mean, look, you could sell our product, buy their product, pick up 10 days' worth of dividends, trade back into our product, and just do high-frequency trading. Or maybe you might sell their product in the morning, do a bunch of trading for six hours, and buy their product back in the evening. And so there was a reason to buy and sell. And you could go and capture and arb this. And we found there are a lot of pools of capital that they could classify a daily dividend as a different money instrument. And so there are pools of capital that will buy it that would not buy a monthly or quarterly instrument. So after their success, we thought, well, we should do something similar. And then we considered the entire world's going to 365-day tokenized. So rather than every business day, we might as well make it every calendar day because that way you have an incentive to buy it on Saturday morning or buy it on Sunday morning or, you know, or disincentive to sell it on Sunday morning. And it just seemed like that was just a better way to do it. So we're just pushing the envelope, you know, as we joke, if we could pay hourly, we'd pay hourly. But, you know, right now what we want to do is we want to increase liquidity. And so when there's 365 times when you might want to buy it or you might want to sell it, that's better than four times a year. So we want to increase the liquidity. We want to strip the volatility. You know, if you pay a 50-cent dividend, the thing will trade down 40 cents or 50 cents. Well, if we pay a one-penny dividend, it might trade down one penny. I'd much rather have it trade down one penny on a $100 base than trade down 50. So this is all just about perfecting the credit instrument, and partly it's just the right thing to do in the tradfi markets, and then also it's the right thing to do to get ready for the DeFi markets and the digital tokenized markets. And we've seen this explosion in tokenized STRC, and because it's like, if you're going to feed 4% T-bills into a lever, wouldn't it be better to feed 10 or 12% digital credit into a levered environment? I mean, who doesn't want a stablecoin that pays 8% instead of zero? Or wouldn't you rather have a money market that pays you 10 instead of four? And so we see that tokenizing taking off, and we feel like after talking to all of our partners, people that are doing it like Apex and Saturn, it's pretty clear it's beneficial for them if we go to daily because we strip that vol. And the next step, which I didn't get to, is how do you create digital money? And digital money would be pegged to the dollar, zero vol, paying six, seven, or eight percent. That's the mythical Bitcoin-backed stablecoin that pays you 8%. And if you had a stablecoin that paid you 8%, why in the world would you hold $350 billion of stablecoin that pays you nothing, right? So we're all chasing after that money market instrument where you could buy a hundred million of it on a Thursday, collect 8%, and then get liquid and get all your money back on Monday. You know, a two- or three-day duration instrument. That makes it perfected money. It's a medium of exchange, unit of account, store of value, and you can use it for payments, collateral, trading, and you can hold it. And so that's what we're chasing after. This is part of that step, right?
