We're in year one of this digital transformation because we didn't have global consensus on digital capital until March of this year. No one had seen digital credit instruments before January and February of this year. And even in the area of the business model, digital treasuries, it wasn't even clear in our mind exactly what the business model was long-term until just a few months ago. But just in the past few months, I think it's all clicking and I'm delighted to share it with you. So, let's start with digital capital. Well, you know, for those of you who didn't guess, Bitcoin is digital capital. Capital, economic wealth, long-term store of value. People talk about a store of value asset. It's capital. What is 20th century capital? 20th century capital is equity. We call them the equity capital markets. Equity, private equity, public equity, real estate, sometimes art held as a store of value could be capital, maybe a sports team, gold. Capital is the left hand of money. The right hand of money is currency, medium of exchange, the dollar, the peso, the yen, the euro. Stable coins are currency, Bitcoin is capital. A lot of times people come to erroneous conclusions because they think about money and they think money is currency as opposed to money is capital. But of course, money could be used, the phrase could be used to refer to currency or to capital. It just happens that a lot of people are lazy thinkers and they insist upon interpreting it as currency when it should be capital or interpreting it as capital when it should be currency. And I, 'Well, Bitcoin must be awful because I can't buy coffee with it.' But of course, Apple stock isn't awful because I can't buy coffee with it. But Apple is capital. And so, if you define Apple as currency, then Apple is an awful currency. And Apple will never be the world reserve currency and therefore, I must not value Apple. But of course, that's stupid. Of course, Apple isn't currency. Apple is capital just as Nvidia, just as a sports team is, just as gold is. You know, people never really used gold as a medium of exchange. It's always been backing some credit instrument for thousands of years. So, it's a myth to say, 'Oh yeah, we used gold as currency and as a store of value.' Generally, you would do one or the other. So, this capital idea, store of value capital, wouldn't it be great if I somehow came up with a digital way to store my economic wealth for all of eternity? Satoshi figured it out. People for 17 years couldn't agree on it. They fought over it. And the battle was decided by this administration after November 5th. On March of this year, David Sacks said, 'Bitcoin is digital gold. We recognize it as special.' And as you can see, J.D. Vance thinks it's digital gold. Donald Trump thinks it's digital gold. Think you've heard from Eric Trump this morning who agrees it's a digital gold. The head of the SEC, Paul Atkins, thinks it's digital gold. But so does the head of the National Intelligence Director. I mean, Tulsi Gabbard or Kelly Loeffler or Bill Pulte or Robert F. Kennedy or Howard Lutnick or Kash Patel. Now, those are people you wouldn't expect to have an opinion on the distinction between currency and capital and medium of exchange and store of value, right? And by the way, if I took a hundred PhD economists that are classically trained, they probably wouldn't get it right because they tend to rote recite things that they learned 40 or 50 years ago out of a textbook without thinking much about it. And according to the phrase that everyone recites without thinking much about it is 'money is a store of value, medium of exchange, and unit of account.' There. And they stop and they don't really say much more about it. But of course, if it's very obvious to every member of the cabinet, Bitcoin is digital gold, and it's obvious to the President of the United States, you know, then that's a pretty big step forward. 12 months ago, we had one member of the cabinet, well, 13 months ago, one member of the cabinet, Gary Gensler, who was a Bitcoin maximalist. You know, people, you could tell if you're sophisticated, Gary Gensler was a Bitcoin maximalist for 4 years. The only people who couldn't tell were the altcoiners. But maybe they could tell, too, which is why they didn't care for him that much. But Gensler's view was Bitcoin is a commodity. It's a digital asset. It's sort of a digital gold. He didn't care for anything else and no one else in the Biden administration had any opinion whatsoever other than a negative skeptical one. So, the November election was important. This decision to embrace Bitcoin was a very important move because that rippled everywhere in the world. What's the idea of digital gold? Gold on a bearer, non-sovereign bearer instrument store of value asset that I can teleport from here to there on a digital rail. Okay, straightforward idea. You need a network to do it. The question is which network and which protocol? And for 15 years, we all fought about which network, which protocol. And the matter is decided by political power. It's decided by financial support. The banks have embraced crypto, but specifically, they've embraced Bitcoin as digital capital. In the next 6 months, you'll see a ton of banks start to custody Bitcoin and extend credit against it. In the past 6 months, we've had about half of the major banks in the United States start to extend credit against IBIT, which is wrapped Bitcoin. So, all that's happening in this year as we speak. Money determines the winner, right? So, Wall Street embraced Bitcoin. The IBIT ETF is the most successful ETF in the history of Wall Street. I've often times said, you know, the war to determine the future of the money is going to be fought and won with money. Right? So, it's a question of how much money is going to go on to which network? Are we going to designate Dogecoin or YoYo Coin as digital capital? Are we going to designate Bitcoin? And of course, that's 140 billion from the ETFs. Companies, 200 of them capitalized on Bitcoin. They put about 100 billion in. Our companies spent a decent amount of that, but we're not the only ones. And if you were to say, 'Okay, what's the big idea?' The big idea is a bunch of rich people want to keep their money and they don't trust the bank. They don't trust the government. They don't trust each other. They don't trust anybody. And they'd like to keep their money forever. So, we create a digital bank. We put it in cyberspace. And since we don't trust each other, we all run a copy of the software. And that's a decentralized network. Okay, well, that's not a bad idea. This idea that we're going to put our money in the bank in cyberspace and we're going to run a decentralized protocol. And once you've decided that, the question is, 'Well, can a human being engineer that?' Well, yeah, they tried 50 times. Eventually, Satoshi did it with Bitcoin. It worked. It caught. And the second idea is, 'Well, you know, is that the winning network or is there another protocol that's going to supplant it?' That took about a decade to settle that question. There was the block size wars. There was a lot of struggle. But people often times they make the mistake of thinking this is an asset. It's not an asset. It's a protocol. It's a protocol that actually inspires a network. The network is hardware and software run by people. There's an asset circulating on that network. But the big idea is an economic protocol for digital capital. And the people all worry, 'Well, what if that gets hacked?' And the point that I make is English is a protocol. Why are we speaking English? Because a bunch of smart powerful people fought over this matter. And the people that spoke English won. If Napoleon had won, we'd be speaking French. If Hitler had won, we'd be speaking Germany. It turns out that the English speakers won the wars. We speak English. Why do we speak English? Because all the rich powerful people speak English. Are there other languages? Of course, there are. Can you imagine a better language? Of course, you can. Are there more beautiful languages? Of course, there are. But the point is, the rich powerful people don't speak that. The rich powerful people speak English. You have kids, you want them to be rich and powerful, teach them English. Same is true with Arabic numerals. It's not the first system of numbers. The Babylonians have a different system, right? 360 degrees, 60 minutes, base 60 type system. Okay? The Greeks had a different system. The Romans had a different system. And then the Arabic system was a four system. There's probably, who knows how many other systems of math, right? I mean, computers spoke base two, binary system. So, people that used the protocol that won, that didn't fight the war over the protocol, forget that it was a decision made. And why do we use 0 1 2 3 4 5 6 7 8 9? Because all the rich powerful people settled upon it. But by the way, not just because they settle on it, it was better. If you actually try to do math or build computers with Roman numerals versus computers with Arabic numerals, you know, or work, it just Arabic just works better, right? So, sometimes a protocol has an advantage and that advantage manifests itself. And if you look at this picture, what is this telling you? This is saying that Bitcoin is the winner because it's the most powerful electrically. It's got 24 gigawatts of electricity. It's the most powerful computationally. It's got 1,100 exahash. That's more computer power than Microsoft and Amazon and Apple can muster to attack the network right now. So, it was the most powerful computationally. It's the most powerful commercially, right? What security or stock? How many of your stocks trade on a thousand exchanges simultaneously everywhere in the world 24/7 365? That's a simple question for me to answer because the answer is none. Right? It's like I just listed a stock in Europe. We listed it STRA. We listed on the Luxembourg Stock Exchange. That's one of 27 capital markets in Europe. One of 27. I tried to actually list a euro stock on the Nasdaq. Nasdaq doesn't support euros. You can't have a euro-based stock on the Nasdaq. So, what you find is that for the most part, a lot of assets don't trade 24/7 globally. They trade very locally in the local nation, the local language, the local time zone. Bitcoin trades everywhere. So, what other kind of power does it have? Well, it has hundreds of millions of holders. Has 700 million crypto believers. Has a lot of political power. The crypto lobby tipped the election in November. They're very powerful. So, what do you want? You want political power? You want electrical power, you want computational power, you want commercial power. And then the other thing it has is economic power. There's 1.2 trillion dollars of actual dollars that have been invested in that network. My company alone put 48 billion dollars of actual cash in that network. That's probably on the order of if not 10, somewhere between 10 and a hundred times more than any other network. So, the battle to determine the world's reserve capital network was determined by what? By smart people with money. And it's been never-ending. It's been going on and what you see today is this manifestation. A lot of smart money made a decision. A lot of smart people decided they like Google or they decided they like Apple or they decided they like Amazon and you could say, 'Well, I can copy Amazon.' Or my favorite, 'Well, why New York City? I can create a city.' Yeah, you can create a city. It's not that complicated to create a city. You create another city. There's a lot of important cities. There's one New York City because all the smart people with money decided that was the one that was best for a lot of reasons. If you go to San Francisco and you look, you can see that's a pretty good natural port, too. Well, what about some other port? Well, the point is all the people with money and power picked that one. That's the network that wins the war. And so, once you understand that, you got a digital capital network, 21 million coins. There's never going to be more than 21 million coins. Then the question is, is it better than gold? Yeah, a lot better. How much better? Infinitely better. Gold has an inflation rate of 2%. Bitcoin has an inflation rate of 0%. 2% means you got a half-life of 36 years for your money. It means you live a hundred years. 0% means you have a half-life of a billion trillion infinite years, which means you're going to live infinity. Okay, one of them is a mortal. One of them is immortal, right? You're godlike or you're just a person. Right? When someone tells you 2% inflation doesn't matter, it matters. It's like I'm going to build a machine and I'm going to remove 2% of the energy every cycle on the machine. Does it matter? Of course it matters. Right? Every engineer knows you can't have 2% friction on every turn of the wheel. And yet, that's what 2% inflation is. So, gold is metallic capital. Bitcoin is digital capital. Digital capital is this idea that I just like to keep my money forever. Right? What's the product? 1/21 millionth of all the money in the world forever. That's the product. Okay, good product. Can you design it? Yeah, but is that the winning protocol? Well, I think so. It beat everybody else. Why? Because there needs to be a winner. There needs to be, I mean, because if you're smart and you have, if you got a hundred families with a billion dollars each and they want to keep their money and their choice is pick a winner or lose all their money. The Schelling point is why don't we just pick the winner? We'll all use the winning network and we get to keep our money. What's the alternative? We lose our money. We go poor, right? So, it's not a complicated idea. The game theory is pretty straightforward. The world's full of people that would like to keep their money. And who do they trust? They don't trust the French. They don't trust the Brits. They don't trust the Italians. They don't trust the Germans. They don't trust anybody in the Middle East. They don't trust anybody in Africa. They don't trust any South American company. They don't trust the Canadians. They don't trust the Australians. The Chinese don't trust the Chinese. It's illegal to take money out of China. Wonder why? Because everybody wants to do it. Okay? The Europeans don't trust the euro. They want the dollar. All the billionaire families I know live in Stahd. All the billionaires I know that have a villa in France, they'll have an apartment in Monaco. Why? Think hard about it. Okay, so who are you going to trust? Right? This is a tricky thing. Generally, the view of the world is everybody wants to move themselves and their money to the safest network, the most secure network. So, where is that? That's the United States. I want United States property. I want my kids to have United States citizenship. I want to use the US dollar. I want US equities. But the problem is, you know, the United States is not always welcoming to foreigners. Right? Certainly the Russian oligarchs don't get to move here. Right? The world is full of people that they would love to have economic security in the US. But then again, maybe your life is in Europe or your life is in Brazil and maybe your life is in Mexico. You know, I live in Miami Beach and I look across Indian Creek and I see like these big condos and they're like 95% empty. It's all the Latin Americans. They come and they buy a condo. They keep it. That was their Bitcoin. They were putting their property into a piece of foreign real estate, you know, and then their daughters get pregnant and they send them to Miami to have the child so their kid has citizenship. Whether it's Venezuelan or Mexican or Brazilian or whatever, it's not irrational. It's very rational. You can see it going on. But what does Bitcoin represent? It represents the most secure property network in the world for people that don't get to move their person or their money to the United States. And by the way, if you live in the United States, there's this blue state red state thing and a lot of people worry in the blue state that maybe their property is not so secure and they move to the red states. So, that's what's driving immigration into Florida right now. So, that's the first big idea, digital capital. The second big idea, digital treasuries, the treasury company. What happens if you capitalize on digital capital? So, we capitalized on Bitcoin. We bought it about 87 times. I want you to understand what we're doing. I believe Bitcoin's going up 30% a year for the next 20 years. It's been going up 50% for the last five years. It was going up 80% for eight years. Okay, so 30% represents a deceleration from 50% all the way down to 20 or 15% over 20 years. Every time we buy it, we're buying a digital monopoly, the world's dominant digital monetary network. Growing 30% a year one times revenue. Okay, ask any CEO, if you could buy a monopoly growing 30% a year for the next 20 years at one times revenue, would you do it? And the answer is of course you would. I mean, everyone would kill to be able to buy a company growing 30% a year at one times revenue. Okay? Well, we just did the same roll up 87 times. We're just rolling up the digital monopoly on money. And of course, once you've done it once, you're like, 'Well, what's the risk?' Well, the risk is you're wrong on Bitcoin. If I'm wrong on Bitcoin, that's the risk, right? The existential risk is Bitcoin. It's like I bet on New York City. Well, what if Bitcoin sinks beneath the waves? I'm going to lose my bet. The risk is thermonuclear warhead goes off in New York Harbor and my real estate is not that valuable or it sinks underneath the waves. The risk here is Bitcoin fails. So, let's say you assume that risk. So, what is the incremental risk on transactions one through 87? Nothing. So, in fact, the risk-free rate for us is 30%. Once you've assumed the existential risk of capitalizing on Bitcoin, then you're basically buying something at one times revenue growing 30% a year with no additional risk. It's the same risk. Okay? And you might not agree with me if you hate Bitcoin. But what matters is that the 1% of people in the world that agree with me own the equity and that's their view. They think Bitcoin's going up 30% a year. So once you get that it's like, you know, some people don't like New York City, but the ones that live in New York City, you know, you will pry their apartment from their cold dead fingers. They think the world is New York and everything else is downhill from there and they're going to live there and you can give them a million excuses or a million reasons why it's risky to live there. What if this and what if that and what if the other thing and their view is well, it's New York. You don't get it. It's New York, right? So in this particular case you buy into the risk of Bitcoin. Now you do 87 acquisitions and we ended up acquiring 649,000 Bitcoin about 3.1% of the network. It's not unlike buying 3.1% of the real estate in New York City. It's just a big REIT, right? We decided we believed in, you know, Howard Hughes bought up a lot more of Vegas, right? He came into Vegas, he bought up all of Vegas. Right? Summerlin, all the strip made insane amounts of money because he believed in Vegas. So you just buy up the real estate underlying the thing you believe in. We're about the fifth largest treasury in the S&P 500. What's the big idea here? The only company on this list that actually keeps their capital is Berkshire Hathaway. The conventional corporate finance strategy is to return capital to the shareholders or surrender the capital or decapitalize. And that's because those companies are capitalized on sovereign debt or in this case short dated treasuries. They're negatively polarized to capital. So the big idea I have here is that if you're negatively polarized to capital, you have to get rid of your capital because it's toxic. If you're positively polarized to capital then the more capital you raise, the more money you make. Once you understand that for example, the Venezuelan bolivar could be viewed as capital. And if you were capitalized on the bolivar before it lost 99.9% of its value, I think you can see by common sense that you're negatively polarized to capital. You have to get rid of it. You really want to, if you want to be rich in a hyper-inflating economy, the way to do it is go into debt. Borrow a billion dollars when it's worth a billion and pay it off when it's worth a million. Right? So you need negative working capital if you're negatively polarized to capital. So a rational CFO, they would just go to negative working capital. That's why you do all BOs. You borrow 10, 20, 30, 50 billion dollars because the cost of capital is lower than the monetary inflation rate and you don't want to carry the capital. If you capitalized on Bitcoin, then it's the opposite. Then you're outperforming the cost of capital. And this chart illustrates it. You see over the last 5 years, the cost of capital is 14%. It's set by the S&P. Guess what else is yielding 14%? It turns out low and behold the gold is yielding 14%. How do you like that? So 14% is your hurdle rate. The normal capital asset is short dated treasury. That's the money chart, money markets. It's 3% blended. Okay, so you're investing at three, your hurdle is 14, you're minus 11, you're destroying 11% of your treasury every year. You're negatively polarized to capital. If you could capitalize on the S&P, you could keep all your capital, meet the hurdle rate. The problem with that is it's illegal. The Investment Company Act of 1940 made it illegal for a public company to capitalize on a portfolio of securities. Not something everybody knows this. I didn't know this. I never had reason to think it. It was so ingrained that you just wouldn't do it. It never occurred to me why, but it's written into the Investment Company Act of 1940. So if you can't invest in the S&P, then you probably can't capitalize on Mag 7 stocks either. They're also securities. There's only one Mag 7 stock that Nvidia can buy. It's its own stock. There's only one stock that Apple can buy, Apple. So why do we have buybacks? Because it's the only stock that companies can buy per the SEC 40 Act. But look at Bitcoin. Bitcoin is 48%. Bitcoin is actually outperforming the cost of capital by a 34% margin. So this big idea is not that complicated. It's if I have digital gold and it's deflationary, the difference between 2% and 0% is going to give you the 48% instead of the 14%. So if I have a deflationary digital gold like Bitcoin, then I can capitalize and I can even lever the company on it. What else could you capitalize on? You could capitalize on actual gold or real estate. People tried to capitalize on gold, didn't work so well for a bunch of reasons, but you know, you can see at the end of the day there's not enough juice in it to make it worth the trouble. And real estate underperforms the S&P. Bonds don't work. Art, not going to work. You need a commodity or property to capitalize a company. So Bitcoin is a breakthrough because it's a commodity, but it's also a scarcity. You can design a commodity that inflates 10% a year. Still a commodity. It's an asset without an issuer. But Satoshi's genius is designing a commodity that's an asset without an issuer that inflates 0% a year and the limit is T goes to infinity. Right? Dogecoin is inflationary by the way, if you guys like Dogecoin. They add like 5 million or 5% a year or something like that. It's not quite a percent, but it's inflationary over time. So this chart tells you everything you need to know. In fact, this chart is pretty much the macroeconomic map for the last 5 years and what it tells you is if you're capitalized on bonds, you're in deep trouble. That's why Silicon Valley Bank went bankrupt. That's why all the banks were technically insolvent because they're just awful investments. And you can see that the secret to MSTR's performance is we fund at the cost of credit or the cost of equity, which is somewhere between 6 and 14% and then we invest at 48% and then our equity then is able to outperform Bitcoin. We've grown through a number of cycles. You know, first we used cash flows, then we used senior debt, then we used convertible debt. At one point we used some asset back debt and eventually we realized that the best sort of amplification for the equity was preferred shares that are perpetual, they never come due because that strips all the credit risk. You know, senior debt doesn't work because you have EBITDA covenants. Asset back debt doesn't work because you get margin called. Convertible bonds worked to the, you know, 10 billion dollars worth of it, but at some point you outstrip the convertible bond market. And all of those are examples of using credit as a tactic to support the equity. So the first 4 years of our company, the equity was the product. And the credit was the tactic. When you're issuing 144A debt instruments, that's a tactic to juice your equity. What happened in 2025 is we realized that we should create a credit product. And the credit became the product, not the equity. The equity became the byproduct of selling the credit. We inverted the entire business model. And strike, stretch, stream, strike and stride at the bottom, those are products. They're credit products sold to the general public that then in themselves have the value and the equity is imbued with value because of the credit instruments. And this picture helps a little bit more than that. What is the treasury business model? It's simple. I raise capital, I buy digital capital. I strip the risk, the volatility, the delta and the duration off the capital. I transform it into the currency of your choice. And I give you the pure yield. I give you a credit spread above the risk-free rate. So what you can see here is the Bitcoin is about a 48% annualized yield. It was a rolling 38 vol, but call it like a 40% yield 40% ARR 40 vol type instrument. If you walk down the street and you ask the average person, do you want to put your life savings into that instrument? The answer is generally no. If they spend 100 hours or 1,000 hours, they get convicted. And if they don't need the money for 4 years then that money they don't need for 4 years after they spend 100 hours, they might put some of that in the Bitcoin or all of that. That's the Bitcoin community. But as you can imagine you're not going to sell a product to a billion people if it takes 100 hours to understand it and if they can't use it for 4 years. Right? I have a beautiful car. You can't drive
It for four years. There's a $100 course before you can buy it, but after four years, it's going to be the best car ever. That is not a consumer product, right? That's something different. It's almost like a religious product. And if you go to Bitcoin conferences, right? We're pretty fervent. We're pretty passionate.
But you can see what Strategy is doing is we're taking the capital and we're stripping the risk in the vol, extracting the yield, and selling it as a credit instrument. The first one was Strike. It was convertible preferred, and we gave you a portion of the upside, and we gave you a liquidation preference, and we gave you a fat dividend. So, it's like a Bitcoin fellowship, right? You'll get some upside, you'll get paid a living stipend while you wait, and you get way over collateralized, and it's for someone that kind of wants to have their cake and eat it too, but doesn't want the roller coaster. And so, we did that. And that was a billion-dollar idea.
And then we did Strife, STRF, and that was 10% dividend at par, and that was, I'm just going to pay you 10% forever. You know, and here's the other interesting observation. You know, we would like to have paid 5% instead of 10%, but we realized we'd have to pay 10% to sell the preferred. And then it occurred to me that it's a lot better to pay 10% forever than 5% on a five-year note. If you pay 5% on a five-year note, you're like any of 50,000 other corporate issuers. When you pay 10% forever, you're the best if the person wanted to buy fixed income. So, what turned out to be the bug inverted to be the feature, and that's actually the theme of my entire presentation, which is the bug of Bitcoin becomes the feature. The bug of digital credit becomes the feature. Over and over again, the bug of the business model becomes the feature, and that's the innovation here.
So, we did a few other deals. We did Stride, where we stripped a cumulative right off of the instrument, and it adds about a 400 to 500 basis point credit spread. So, you either get the 10% in the investment grade bond-like instrument, or you get the 15% in the equity-like instrument, and the truth is the people that want the former don't want the latter, and the people that want the latter prefer the latter over the former, and so we just tapped into two different pools of capital there.
And while we were working through this, we tried to go do a deal in Europe, and we got stymied by a regulator, and we couldn't do something. So, in the summer, I thought, what can we sell in the US? And we thought about selling a euro instrument on the Nasdaq, but the Nasdaq wouldn't list it because they can't support foreign currencies. And then we thought about a yen, and we couldn't do that. So, we thought, well, what can we do in dollars? And we'd already done the long end of the yield curve. We sold a 10-year duration instrument. So, I thought, what about a one-month duration instrument? And we started thinking about an adjustable variable rate monthly preferred stock.
And partly it was what could we do or what we haven't done, and then partly it was people just want to get their principal back. And partly is they want cash dividends. So, we started thinking about this product stretch, and Stretch became the biggest piece of financial engineering. Stretch is like kerosene distilled from a barrel of crude oil. It's just pure liquid energy.
And as you can see, the way the tower is working right now is we've stripped the 38 to 28 to 21 to 16 and a 9 vol. There is a conservation of energy. There is no such thing as a free lunch. That's the law of thermodynamics. So, if I make the volatility go away from the credit, it has to go somewhere. And so, what it does is it floats up to the equity. And so does the excess performance. So, we end up creating a highly volatile, high-performance equity by creating lower volatility, lower performance, less risky credit instruments, and the entire company's reason for being is to actually take an asset, Bitcoin, which is call it a 10-year duration instrument with 50 vol and 50 ARR, and we carve out of that a one-month duration or one-year duration, and we carve out of that 10% ARR. And we carve out of that we strip 90% of the volatility off or 90% of the risk off, and we offer that to a credit investor.
In the process of doing that, we actually create Bitcoin per share. So, we're creating BTC yield. We're adding Bitcoin Satoshis per share every single time period. Because when I sell a billion dollars' worth of credit and buy back a billion of Bitcoin, I've issued no common stock. But I have actually bought a billion of Bitcoin, so the equity gets amplified.
And you can see here a snapshot of the capital structure. In essence, with $61 billion of Bitcoin value, we have a bit of debt, 8.2 billion of convertible debt from our last four-year period. We will equitize that over time, but that's about 13% of our hard assets. That means that Bitcoin could fall 85%, we're still covered, over collateralized on the debt. But the more interesting thing is that the dividend payments represent 1.3% of the net assets. So, that means Bitcoin has to appreciate 130 basis points a year to cover the dividends forever.
There's a perception that somehow this is risky, but the bet that we're making is we think Bitcoin will go up 1.3% a year. And if we're wrong in 77 years, we have to come up with a different idea. Right? I mean, that's if we're wrong. Like, assuming Bitcoin goes up zero. Look, if Bitcoin goes to zero tomorrow immediately forever, then of course this is not going to work. But the way the math works is you create shareholder value, and you pay the dividends forever if you get 130 basis points of BTC gain or appreciation. If Bitcoin appreciates faster than the blended dividend rate, the 10% or so, then you actually outperform Bitcoin with the equity. So, your two numbers are your minimum is you're creating value, the 10% hurdle is you're outperforming Bitcoin. And at 0% in 77 years, you run out of money.
We just managed to get a credit rating from the S&P. This is challenging given the Basel Accords, Basel framework valued Bitcoin as zero. But as Basel gets updated, and it looks like it'll get updated, I think we'll move our way up this credit stack. The advantage of getting the credit rating is it tripled the addressable market for our credit instruments overnight, so that was good. There's a lot of people that like digital assets and believe in Bitcoin, but they couldn't buy without a credit rating, and so this was very important to them.
And so, now we get to the third part, digital credit. Well, these are the products, right? What is Strike? Well, it's got an equity component, it's got an effective yield, and it's 4x over collateralized. What is Stride? It's a long duration, high-yield instrument, so it has an effective yield of 14%. Tax equivalent yield of 22. Why is it tax equivalent yield of 22%? Because it's a return of capital dividend, a ROC dividend. It means that it's tax deferred until you've reduced your basis to zero. So, one of the elegant things about digital credit is they're all ROC dividends if they're issued by a treasury company.
You can see what you're competing against, but I think you guys know what you can get in the market. Normal junk bonds or private credit are half of that. Strife pays 9.5%, even 10%. The tax equivalent yield is 15. It's the most highly over collateralized. It's the longest duration instrument. And Stretch is treasury credit. So, if you think about if you were to say, what I think is the perfect product? The perfect product is 600 to 800 basis points of pure yield over the risk-free rate in the currency of your liabilities in a stable instrument. Like, that's what it's a high-yield bank account. Who wants that? Everybody wants that. Right? The only question is, what's the catch? And the catch is you have to believe in Bitcoin. That's your first risk, and then you have to trust the issuer. Right? If you trust the issuer, you believe in Bitcoin, then you're probably going to ask, well, what is the vol, and what is the liquidity to decide can you get 20 million in and out of it, or is it 2 million in and out, or 200,000 in and out? But the idea of treasury credit is just a fortunate, serendipitous discovery. We tripped over it.
Nobody in the history of the capital markets has created a monthly variable rate preferred stock. It's not that it's illegal. It's not that you can't. The security law lets you do it. You can do just about anything with a preferred stock. It's just that no well-run company ever thought to do it or had a motive to do it or a reason to do it. And so when you put together digital capital with AI with a publicly listed preferred with a shelf registration with an ATM, now we blended all the best elements of crypto and ETFs and public companies and ATMs all of them together with a digital distribution channel and now it seems like a pretty obvious idea.
But I can even say I don't think this was developed over the weekend by me out of frustration of not being able to do anything else using an AI. And if I had not had an AI and I hadn't had the other experiences of having done Strike and Strife and Stride and done the 30 billion dollars of ATM revenue, and if it hadn't all come together the same time we never would have found this. So it's a simple thing to do in the year 2025 with all the right technology, but in the year 2022 or 2019 it would never happen.
Stream is the deal we did just two weeks ago. It's basically a version of Strife that's in euros, 100 euro par value, pays 10% at par. It turns out that we were like one of the first issuers of preferred stock in Europe because most of the time fixed income in Europe is hybrids. They're bond instruments. And they're bond instruments because the companies that issue them want to be able to deduct the dividends as interest because it's to their advantage.
And here you stumble on another very important theme which is most credit instruments are issued to the benefit of the issuer or they're crippled because the credit is issued tactically to fund a project, an automobile, a building, a service, a stock buyback. People are issuing credit to benefit the equity or the product or the service. Let me invert your worldview. What if you issued the credit as the product? What if the goal was I want to create the best credit instrument for someone to buy? Well, for what purpose? Well, just to do it. What are you going to do with the money? I'm going to buy Bitcoin. Haven't you done that before? Yeah, 100 times before. So what's the unique product? There's no unique project. So what are you trying to do? I'm trying to create the credit which is the best in the world. So now you invert, you're like I'm not going to the credit. I'm actually going to make the credit fly. I want to empower it.
So with Stretch we created it, it came out at 90 and it's on this path to stabilize at 100, and we have a lot of tools to do it. Partly time does it, partly as the AUM grows it gets stable, partly it's marketing, partly we adjust the dividend up if it's weak and if it trades above 100 we can exercise the ATM to trim the vol off the side. So there's a lot of things going on here as it approaches par and stabilizes, but that's the first four months.
So this is our digital credit line and what you can see is we kind of went from a zero dollar business to 7.6 billion dollar business in 10 months. And I joke with people, you know, it took me a decade to come up with a billion dollar idea and take the company public. Then I spent 20 years trying to come up with the second billion dollar idea, could not find it. I tried 20 things, they all didn't work. And then the COVID lockdowns came and we discovered digital capital and that was the second billion dollar idea, and then converts were the third billion dollar idea, and then the ATMs were the fourth billion dollar idea. And that all happened over the next four years, and then in 2025 we combined AI with preferreds with credit and we came up with Strike, Strife, Stride, Stretch, and Stream, and it was literally a billion dollar idea every eight weeks. A billion dollar business.
Right? And so why we're combining digital capital, digital intelligence to create digital credit. And what market are you targeting? You're targeting the 300 trillion dollar credit market.
So what's special about these things? Well, they're the most liquid preferred stocks in the history of the world. Right? You can see the liquidity which started at 70 million and we're up to like 387 million a week. And so they're starting to trade in same volumes. The normal preferred stock trades 100,000 dollars a day over the counter. The public listed hybrid or preferred trades a million dollars a day. The first tries we had were trading 20 million or 30 million, 20 to 30x that, and then Stretch traded 100x that. And now it's moving to 200x that. And it's first year. So we really have line of sight to something that trades a billion dollars a day.
And if you ask the average sales person in finance what do you think about prefs? They think well these things are all kind of dogs. They're boring. They're complicated. I mean it's all kind of garbage. Like I think it's garbage. It's like you're yielding 6% and it's issued by one of 5,000 regional banks. It's heterogeneous credit. You don't have any bond guarantees. The yield isn't that good. It's over the counter traded. You can't find it. You need a Bloomberg and a CUSIP number to figure out what's going on. It's almost like constructed to make it difficult for people to buy it. And that's what happens when you think the credit is the tactic as opposed to the credit is the product.
Now I talked about serendipity. We kept stumbling upon things, right? Credit on Bitcoin is better. ATMs are better. Four letter tickers are better. Shelf registrations are better. And then we stumbled on the fact that all of our dividends are tax free. Tax deferred technically. When we pay you the dividend it's a return of capital which means if you're a retail investor you don't pay city tax, state tax or federal tax on it. You just reduce your basis. So your 10% is a 10% cash dividend.
How do you do that? Well, you have to have negative earnings and profit. So as a practical matter no well-run bank can do that. They're always going to be taxable. No well-run company can do that. You have to build a treasury company from the beginning that was never to generate earnings and profit in order to do this. So the bug becomes the feature. Again, that's the theme. The bug is the feature. You guys, how do you pay the dividends? Well, you either sell the capital that you bought, right? You buy Bitcoin at 10,000, it goes to 100,000, you sell some of it, you pay the dividend, that is a return of capital. Or you sell the equity back, buy the Bitcoin, and that is a return of capital. And how long can you do that? Well, you can do that forever. What do you need? You need Bitcoin to go up more than 130 basis points. Is that sustainable? Of course it is.
Now that has some profound consequences. The first is now you've got a path to amplify your equity, right? If you just start selling, if you have 60 billion of Bitcoin, you sell 6 billion dollars of credit, you've generated 10% yield and you've generated an amplification and you end up accreting Bitcoin per share. So you just sell the credit in order to outperform Bitcoin. It's a pretty straightforward thing. But I don't really want to talk about the equity so much. The equity used to be the product, now the credit is the product. I think the most interesting thing is digital credit.
So let's talk a little bit about the theory of digital credit. Well, digital credit's built on Bitcoin. That's an appreciating asset. Mortgage back credit is built on someone's house. It's a depreciating house or commercial credit or it's backed by products and services of a company. So a lot of collateral is depreciating but Bitcoin is appreciating.
When you're holding a billion dollars of mortgage back securities that you know you're backed by 8,000 loans. It's heterogeneous. It's opaque. It's discrete. When you're holding a billion dollars of Bitcoin credit is backed by Bitcoin. It's transparent. It's homogeneous and continuous. On our website we have our credit model. We update it every 15 seconds. You can go to the credit tab. You can type in the vol volatility forecast. You can type in your ARR. It loads with the current vol, the current price of Bitcoin every 15 seconds. You can type in your own assumptions and it'll spit out the credit spreads, the risk, etc. You can't do that with commercial credit, retail credit, credit card credit. You can't do it with sovereign credit. The credit risk on a Ukrainian bond it tends to discreetly change depending upon the disposition of politics and the war.
So the third big, by the way, and each time we do something like that, we can pay a higher yield. So, the reason these digital credit instruments pay a higher yield is because structurally, they're just better. For example, bank credit is a bank deposit. Bank deposits are two-day loans. The bank has to give you back your money in 48 hours or 24 hours if you want it back. It's overnight money. Corporate debt is three to five-year duration capital. So, what you have is overnight money or short duration capital in most credit instruments. They amplify risk. It's kind of obvious. If I basically take $10 billion of bank deposits and then I issue $10 billion of mortgages for 20 years, I have borrowed short, I have lent long. That's why I get the run on the bank. If I go in the repo market and I borrow the money for two weeks or a month and then I go and buy mortgages or I lever up, that's what Lehman Brothers did. You're just borrowing short, lending long, you blow yourself up.
But, the beauty of preferred equity is first of all, it's not debt, it's equity. It's literally not leverage. It never comes due. And so, equity mitigates risk, it doesn't amplify risk. It's still credit. It's equity credit, not debt credit, not deposit credit. Most people think of credit in the form of deposits. Those companies in Europe, they want to issue debt so they can get the tax treatment, but they're actually making them liabilities, not assets. Well, we took it one step further. We actually made the equity perpetual. So, it never comes due. You could put call provisions and refinance provisions in a preferred stock that make it look shorter duration. But, if you want to invest the money in Bitcoin forever, then you'd like to have the money forever and then you match your durations. So, you've got an indefinite duration liability and an indefinite duration asset.
And then how do you make it better? Well, you know, you hear a lot about private credit. Private credit is illiquid, unbranded, local, and difficult to access. Public credit, STRC is public credit. It's got a ticker. You can buy it in London or any stock exchange. It's branded, it's got a happy name, Stretch. It's global. It's easy to access, you can buy it on Robinhood. So, it seems pretty clear that the difference between JPM 19972 Q-sip on a Bloomberg versus STRC is night and day for the retail investor.
And then you've got the digital creation. If you want to buy a billion dollars of mortgage-backed securities at 3:55 in the afternoon on Thursday, how do you create a billion dollars worth of the loans? Like, how much effort does it take to issue a billion dollars worth of commercial credit or retail credit or mortgage-backed credit? It's a lot of work. That's why there are 50,000, 100,000 employees working at a bank. There's a lot of paperwork. But, in this particular case, if you want to buy a billion dollars worth of digital credit at 3:55, we literally print the thing and then we hedge it out that day. By 8:00 a.m. the next morning, we have backed the billion dollars of credit with another billion dollars of new collateral and we're generating these instruments digitally in real time. And that's a big breakthrough, right? I mean, that you don't see that with other forms of credit.
And then the last big breakthrough is their ROC dividends. And return of capital dividends, they've been around since 1910. You see them used by real estate companies, oil pipeline companies, master limited partnerships, REITs sometimes, but normally, you're limited to three, four, five percent dividend and you're capped out by your amount of capital you can depreciate and it's very difficult to scale those things. No one's ever created a 10% dividend-paying preferred that was a ROC dividend and they definitely never figured out how to pay a hundred billion dollars of them. And so, what's really interesting here is this treasury model, which is the capital is raised tax deferred, the earnings are generated tax deferred, the dividends are paid tax deferred. The entire thing's a massive flywheel. It's the most tax-efficient way to generate fixed income in the world. And I think that the profound insight we had, and really this is an aha moment over the past 12 weeks, is that we inadvertently created the most tax-efficient generator of fixed income in the world. Like, no one else is going to tell you they can pay billions of dollars a year worth of dividends that are all returns of capital.
So, the company is a digital credit factory. If you understand swaps, if you've ever traded interest rate swaps or any kind of swap, what's going on here is we're giving credit investors a USD yield and we're swapping that into a BTC yield for the equity investor. The equity people want to outperform Bitcoin, the credit investor wants to outperform the money market. And so, how do you do that scalably with no credit risk? You need to do it with a perpetual preferred equity publicly listed. Right? There are other ways to create that swap, but if it's not publicly listed, you have redemption risk, you have all sorts of other scalable problems. And so, we figured out a way to create scalable swaps and we can do it in US dollars, we can do it in euros, we could do it in any currency in theory. It just happens probably the most important ones are the top ones.
You can quantify the value of return of capital dividends. You know, if you're holding the instrument for 10 years and you're a retail investor, you get 64% more money if you're using ROC dividends or receiving them than if you're a taxpayer in California, for example, owning a money market.
And so, if we boil down the opportunities, this is a snapshot of Stretch yield versus other credit instruments in the US market. And you can see what's going on here is we're paying two and a half times as much as a money market, but we're paying four times as much on a tax-equivalent basis if you're a Florida resident. If you're a New York resident, it turns out that we're paying five times as much. Right? If you live in New York City, it's like a bank account that yields 22%. If you live in San Francisco, like 21%. So, you can see the competitor's the money market. The money market has one advantage, it's a very low volatility and it's well distributed. And what we're offering is something which is just four times better if you can get over the risk.
This is what Stream looks like in Europe. There, the 10-year rate is 260 basis points, we're paying 12.5. The money markets pay 1.5% taxable. Tax-equivalent yield there is nearly 20%. And now, that's what it looks like to someone in Vienna. Think about that, a bank account that pays you 27.8% in Vienna versus what the bank actually pays, which is nothing. So, this is new, but you look at it, you're like, 'Well, what's the catch?' It's like, do you trust Bitcoin? Do you trust the issuer? Right? Where you can see we're on an evangelical campaign. We need to preach the merits of digital credit.
If you look across all those credit instruments, what you can see is they're all twice as good as private credit. They're like four times or five times as good as money markets. They're 10 times as good as European money markets. Right? What's the monetary revolution? It's why don't we give a billion people a bank account that pays 10% tax deferred? Right? It doesn't take a hundred hours to figure that out. And here's a snapshot of currencies in the world. You see, the US has actually got the highest risk-free rate. But, look at Singapore, 140 basis points. Japan, 50 basis points. So, what's the travesty? The travesty is somebody in Japan is collecting nothing on their life savings and they could be collecting 10%. Right? That's the travesty.
So, all told, when you put these together, like, if what you want is enhanced exposure to digital capital and digital credit, and you're an equity investor, and you can handle long time frames and a lot of volatility, you would buy our equity. If you don't trust anybody and you want to just invest in digital capital with no counterparty risk, just buy Bitcoin. If you want a blend of both, you buy the convert. If you want maximum cash flows, you buy that high-yield junior instrument. If you want the highest seniority, you take the senior instrument. And if you just want stability and you want a high-yield bank account, you buy the treasury instrument. And if you don't know what you want, you want Stretch, right? If you don't know what you want, this is 15 seconds. That's the offer. That's the product.
I've spent the last five years giving hundreds of hours of talks about Bitcoin. Trust me, it takes a long time to get Bitcoin, but again, Bitcoin is the perfect product as long as you don't need to use it for four years. And this is the product for someone that needs their money back in four weeks that has a short attention span. And at this point, you know, Stretch is one basis point, 1% of 1% of the Treasury market in the US. So, if we can be 1%, it could be 100 times as big. It could be a $300 billion AUM if we just get to 1% of the Treasury market. And that is the campaign. So, with that I want to thank you all for your time and your attention. Appreciate it.
