So, I feel a little rugged. Pomp did not tell me that I was coming to speak at a conference. He said he was hosting a funeral for Bitcoin.
Well, that's what they all think is that I'm like somehow bearish. Not at all. Let's do this. Fong, let's start with you maybe. I think when people look at Strategy, they would say you guys are the pioneer of putting Bitcoin on the balance sheet of a publicly traded company. And I think early on the pitch was we're going to accretively acquire more Bitcoin. You guys have gone through I think a very positive evolution in terms of how do you get more capital to buy more Bitcoin. And so how do you describe today maybe the Strategy complex and the way that you guys are approaching this accretive acquisition of Bitcoin?
Thanks for having us. Thanks everyone for joining. Three phases of the company. 2020 we took $600 million or so invested in Bitcoin and I would call that a Bitcoin holding company and that's pretty much what we did. Not much different than an IBIT today. We just bought and held Bitcoin. Second phase really started beginning of 2021 is we decided to lever up and we became a Bitcoin treasury company. And the leverage was primarily through convertible notes. We dabbled a little bit in some secured loans. We even dabbled in a Bitcoin back loan with Silvergate, but primarily raised at this point in time about $12 billion in convertible notes, 0% interest on average, up 50%. Pretty successful. Those who work in the convertible complex realize that it's about 50 dudes with like PhDs or Harvard MBAs who sit across the table. They buy your converts, they short your stock. It's over the counter, which means that a retail investor can't buy a convertible note. And it's sort of a quick dopamine hit and we're able to buy a lot of Bitcoin, but at some point in time you have maturity risk, right? You're going to have the convertible notes come due. Not bad for an early Bitcoin treasury company or somebody who's just getting into the space who's trying to raise funds to buy Bitcoin, but for what we're trying to build wasn't long-term the right move. Phase three last year was digital credit became a Bitcoin credit company. And what we did is we raised about $7 billion of perpetual preferreds. And those who invest in preferreds, you know, it's a pretty small space. Primarily banks provide preferreds. People call them hybrids between equity and debt, but it's really an equity instrument, meaning we don't have to pay it back ever because it's perpetual nature. And it trades on the NASDAQ. So STRC trades 150 million bucks a day and that was the Eureka moment where we said if you want to match something like Bitcoin which has long duration high volatility we need to provide to the market a short duration low volatility product that's what STRC is. That was phase three. Learned along the way, a lot of invention along the way. But you know, Michael said it, it's our iPhone moment. It's, you know, today it's trading at 99 spot 70. Strive has done something with their Sada product. This is the future. This is the future for people who don't want the volatility of Bitcoin, but they want access to the underlying returns. They buy Stretch. I met somebody out there. They're buying the product. So constant innovation and Stretch is going to be the big thing.
Describe just real quick on this digital credit with Stretch. People will see the yield number it's much higher than treasuries etc. Maybe unpack a little bit like the plumbing in terms of how are you guys paying that yield and then certain investors buy Bitcoin versus buy Stretch and how you guys think about maybe the two different cohorts of who are buying these different assets.
Yeah. So, those who want to buy Bitcoin, they want, first of all, I'd recommend long duration investors, right? Like if you're buying Bitcoin to get the immediate pump and you want to sell it in 2 weeks, look, you can be a gambler, you could be a trader, whatever it is you want to be, I wouldn't recommend that. If you want to buy Bitcoin, you have to have long duration, call it four or five years. It's a 40 ARR product that has 40 vol, right? If you want amplified Bitcoin, then you might buy our common MSTR, right? which is now an 80 ARR something in that range product. That's cool, right? Like if Bitcoin is not enough for you, you might buy our common equity. Great. If you want something that steps down but gives the return profile of Bitcoin, right? Everybody loves Bitcoin in this room, I assume, right? But you're not up for that level of vol involved. Then you buy Stretch. So what is Stretch? You go on to the NASDAQ, you go on to Robin Hood or whatever it is, Charles Schwab or Fidelity and you can buy STRC. It's a perpetual preferred. The way the plumbing works is we pay 11% now is 11.25% cash monthly returns tax deferred if you never sell the underlying, right? It's 5x over collateralized by Bitcoin. There's no product out there like that, right? What's the equivalent if you want something paying income on a monthly basis, dividends on a monthly basis? Well, you can buy a money market. You might want to dabble in corporate bonds, long duration treasuries, but you're talking about 3, 4, 5%. There's nothing like that. You want to get up to like 11% returns. You buy a preferred for a Greek bank, you might get 11% returns, but it's not 5x over collateralized. How do we pay the dividend? We pay the dividend by issuing MSTR equity at a premium to net asset value which is accretive to our common shareholders. You're like, well, you do that already to buy Bitcoin. Yes, that's true. But if we do that to pay dividends on a product that has a billion dollars and we pay 10% dividends, it's actually more accretive to everybody. That's how we create amplification. I know it gets a little finy, wonky, but this is Bitcoin investor week. You're all investors. It's good that you understand the underlying product you're buying, but there's nothing like that out there really. There's nothing and it's, you know, we when we IPOed this last year Stretch, it was $2.5 billion, largest IPO of the year at that point in time. And we went through, you know, Morgan Stanley was the lead left. They distributed $250 million of this to their wealth management channel. Morgan Stanley is the largest wirehouse wealth manager in terms of assets of anybody out there. So, it's a legitimate exciting product.
David, I think that your career is very simultaneous to Bitcoin, right? If you think that first time you and I met, you had the Bitcoin conference and you and I probably looked alike. We both had on t-shirts, we were running around having a blast. Now, we're sitting up here with suits and ties on and I think Bitcoin...
Yeah. And Bitcoin has kind of graduated or grown up through the last, you know, 10-15 years. Talk a little bit about, you know, you I think really have a great pulse on the hardcore Bitcoiner that has been coming to the Bitcoin conference year after year after year. You today have a public company as well. And so there's kind of this some would say paradox, I would say, you know, complimentary component of there are still those hardcore Bitcoiners that are there that maybe not even like the Wall Street stuff, right? But obviously there are plenty of people who work inside of these organizations whether it's me, you, Fong etc. go and talk to these funds and it's like I always tell the story I got on a call one time on a zoom call and the analyst had a Bitcoin you know Zoom background. I was like I got it right. So talk about maybe you know Bitcoin's kind of graduation to the stage that it's at today and how you've kind of navigated this as an entrepreneur.
You know, it's interesting. It's changed a lot and you know, even in the past couple years, the new investors that are coming in are primarily coming in through the TradFi system and Rails and they know a lot less about Bitcoin, the technology, the network, etc. which there is I do have a little bit of concern maybe about how successful Wall Street has been at taking those flows and kind of putting it in its own box. You know for me I agree with you. I mean it is a little bit of a juxtaposition from you know 2012 down with the banks to running a public company. You know, when I've looked back over time though, like the underlying driving passion of the entrepreneurs that were building Bitcoin was about making Bitcoin real. And you know, there was no reality where making Bitcoin real meant that companies and corporations wouldn't own Bitcoin. Like if Bitcoin is going to become real, all parts of the economy, all economic actors have to be brought into the Bitcoin ecosystem, into the Bitcoin financial system. And so, you know, Nakamoto, Pro Cap, it's really about taking Bitcoin to the market and kind of forcing the TradFi world to acknowledge and embrace and trade with or against or whatever. It's just like you cannot like us, but you can't really ignore us. And, you know, Bitcoin just keeps leveling up through that process. So right now it's public companies but maybe four years from now we'll be launching our own countries and you know competing on that scale.
So yeah Fong one of the things that people have been very interested in is monetary policy just in the economy in general. I do think that there has been a connection between monetary policy and Bitcoin over the years. But I do think it is a little weird right now, like we're cutting rates into high GDP growth, stocks hitting, you know, all-time highs, Bitcoin going down. How much do you guys pay attention to maybe what like a macro investor would be paying attention to versus from the outside people are just like they're crazy. They just buy Bitcoin every week. They don't give a you know, what's going on with Fed policy?
You know what's cool about Bitcoin is it converges old strategy, MicroStrategy, which is a software company, a new strategy, which is much more interested in Bitcoin as a long-term store of value. And Bitcoin has this sort of it plays two roles. It's a long-term store of value which is very impacted by monetary policy and in the short term it trades like a speculative tech stock right which MicroStrategy has been in the past. So you know when you see software companies go down Bitcoin goes down when you see expansionary monetary policy maybe Bitcoin goes up. All that said we don't sit around and stare at economic indicators. We stare at ratios that determine if we issue equity or we issue preferreds like is it accretive? That's it. That's basically what we look at and like every second of every day we're staring at that. But you know it's like a whirlwind trying to figure out what our government let alone all the other governments around the world are doing on monetary policy. So no we're like that's long term. Short term, it's really just about how our stock trades versus how Bitcoin trades.
The maybe trillion dollar question, when would you guys sell the Bitcoin, if ever?
We're not selling our Bitcoin. We've stated that there are circumstances, you know, if Bitcoin trades down to 8,000 bucks for five years straight, we might need to sell our Bitcoin. But I don't think anyone thinks, you know, people ask this question. I was on Fox News yesterday. Mike was on CNBC this morning and they're all like, 'What happens if Bitcoin goes down 90% for 5 years?' And they like when they interview Tim Cook, they're what happens if Apple stock goes down 90% and sits there for 5 years. They never ask that question. So I find it there's still a lot of people out there antagonistic and they want to know what's the situation in which you'll sell Bitcoin. It's like what's the situation that Apple is going to sell to Google, right? Who asked that question, right? Not that I mind you asking that question because you're well educated, but that is the question people ask.
David, you had a very big hand in orange pilling President Trump and I think a lot of the administration. It's pretty interesting that it is not just one person. I think almost every cabinet member at some point disclosed either they liked Bitcoin, they owned Bitcoin, etc. Talk about, you know, that process and the importance of the administration being so supportive of Bitcoin.
Well, first off, I would say going back to the question about you know, how has the industry changed over time? It's like we hate politicians, we hate the political system. That's the whole point of Bitcoin is disrupted. And here we are, you know, deal making with political parties. You know, I think it's the same answer of the drum beat of Bitcoin becoming real. All political parties will eventually have to integrate Bitcoin into it in the same way that being the party that stands against the internet is just not a viable position. Like if you have a position where the anti-internet party, you're not going to get elected. And so over time, all the parties will embrace Bitcoin in their own way and integrate it into their platform. You know, one of the things that's really surprised me through this process is really, maybe it shouldn't have, but how influential specifically President Trump is and United States policy as a whole is on the world. And you know, when the president first embraced Bitcoin and you know, we host conferences we have one coming up in Vegas, which by the way, all of y'all should go to if you're not planning to go to it. Subtle subtle shill, but we host a conference in Hong Kong. We host one in Abu Dhabi. We host one in Amsterdam. And so I actually get a nice flavor of perspectives from around the global community. And you know, I kind of thought maybe when Trump got on the Bitcoin train, it'd be like a flash and then it would kind of fade out. But as I've talked to people, it's actually it's like it's building a slow momentum. Like the gears of policy, you know, just move slower. And so I would say there's actually more excitement about Trump and what he's going to do now when I go internationally than there was even, you know, a year ago. You know, I think though, like one thing we can't get carried away with, and I am deeply loyal to the president for everything he's done for our industry, for everything he's done for Ross Ulbricht, for a lot of causes that he's championed for us. This is the first politician that's ever, you know, championed our worldview. But at the end of the day, you know, liking Bitcoin is not enough. Like people I keep reading this commentary like, 'Oh, well, you know, all the regulatory barriers have been swept away. You know, there's nothing preventing Bitcoin from, you know, reaching a million dollars of Bitcoin.' Well, just because you like Bitcoin doesn't mean that you've invested the political capital necessary for things to happen. And so, you know, we're sitting here a year later, the strategic Bitcoin reserve was signed into an executive order. You know, last I've checked, we still don't even know how much Bitcoin we have exactly. And so unless you're willing to bring to bear the political capital necessary to mobilize all the different gears of government necessary to move the ball forward, then at the end of the day, it's like you can like Bitcoin, you cannot like Bitcoin, you're going to get the same outcome achieved. So I think that the Trump administration was a very important first step but you know there is so much further for us to go and not just in talk but in actual delivery and substance and so I'm bullish I think on what we can accomplish in this administration but if we really want the progress to continue we need more people to own Bitcoin every year. We need more voters to own Bitcoin every year. And then it's just an inevitability. Whether it's four years from now or 10 years from now or 20 years from now, we will get to the point where we actually have a government that is conducive to the rules we need for Bitcoin to be successful. And Bitcoin, let me pause there. Bitcoin will be successful with or without the government. So, it's not like that we need the government to cater to us for Bitcoin to be successful. The government's realizing it's in their own best interest to work with us. And so that's really what we want is a willing dance partner on the other side to make rational sound policy decisions that's in the United States strategic interest.
Fong, you guys are the pioneer of this you know put Bitcoin on the balance sheet. There's a lot of people who followed good or bad and I think maybe what is unique is that I see you, Michael, many other people at Strategy continue to be supporters and even to a degree bring awareness to a lot of these other folks. Why do you guys do that? I think a lot of people would say, 'Hey, you know, they're competition and you could easily just ignore them and try to go and, you know, take the whole market.'
I think it's very early for Bitcoin and you know when I'm not talking about Strategy or Bitcoin treasury companies I'm meeting with friends, family and telling everybody you can about Bitcoin. I know you guys are too. So I'll start with that is it's still very much an education process that needs to occur. Great thing I love about Bitcoin, the ethos is Bitcoin is it's not like you have more coins than I do. Therefore you've won or you know my enemy has Bitcoin therefore I shouldn't. It's an everybody wins ethos. Everybody helps, everybody educates. It's, you know, back to the technology world. Technology works best when it's open source. A good financial strategy works best when it's open source. So the more Bitcoin treasury companies, the better. And you guys are leading Bitcoin Treasury companies. Thank you very much.
We're getting ass kicked to be honest. Pomp. It's been ugly.
Well, I was going to ask you what does it feel like?
Well, you know, first off, it sucks, you know, to be down a lot of money.
