Joining us, Mike Saylor, Michael Saylor, MicroStrategy executive chairman and founder. And I thought my first question was, 'Aren't you going to ask me about why you wear orange ties?' You got how many?
I got a few dozen. Actually, a few dozen. And that is, I guess, a salute to what you do for a living in Bitcoin. Every day is a good day for an orange tie, Joe.
You overall have a feeling about whether this—would you call this a crypto winter or crypto pseudo winter that we've been through for a while? Are we near closer to the end or do you even care?
We were at the top in October about 125. I think we bottomed at 60. I think we're moving into the spring phase. We've got decent support here in these levels. I think we'll rally from here. We're just working against a few macro headwinds right now.
What macro tailwinds are possible? What about Congress?
Well, I think the passage of the Clarity Act will be a big deal. I think even in the absence of that, the release of guidance that lets you tokenize securities and support digital assets out of the SEC, the innovation exemption, that would be a big deal as well.
For people that don't follow that closely, I mean, there are halvings that have and then it gets harder and harder to mine. At some point, even though we're getting close to the maximum number of—where are we at of the 21 million? Are we at?
The next halving is in 2 years.
And we're at what right now? Like, we're never—we—it's like asking—turn, we get towards the end, it gets harder and harder to mine any. And it'll be a couple hundred years before we get to 21 million.
Not much Bitcoin left because at this point, all of the organic supply of Bitcoin being produced by the miners is being taken up by the Bitcoin—more than was mined this year for MicroStrategy.
You bought more than was mined this year for MicroStrategy?
Yeah, we have. The formation of digital credit means that the credit market itself is absorbing all of the organic supply of Bitcoin from now to forever. Our company will probably buy all of the Bitcoin that's produced by the miners between here and the year 2140, then there's no more Bitcoin.
2140. Yeah, that's correct. You'll have to leave that theoretically for your successors to orchestrate. Talk about the credit side of things, and you've talked about it here before and my eyes kind of glaze over, but I'm getting it a little bit.
Well, you know, Wall Street firms have been creating structured products forever. They take a big stack of S&P securities and they strip the downside, they give you part of the upside and they sell it to high-net-worth individuals that would like upside with downside protection. What we've done is taken a capital asset, Bitcoin, and we're converting those capital gains into credit dividends. So, we think Bitcoin's going up more than the S&P index over time. We expect 30%, but it doesn't matter if it's 10 or 20%. We can pay 11 and a half percent dividend on a preferred stock, a credit dividend, because that represents a fraction of the long-term capital gain that we're expecting. And so, if you're disciplined about the way that you convert a capital gain into a credit dividend, the capital gain's unrealized, the credit dividend becomes return of capital and is tax deferred. So, digital credit is really synthetic yield where we're extracting the first 11 and a half percent of our expected capital appreciation of Bitcoin, we're remitting it to the credit investors via an over-collateralized preferred stock. If you've got money you don't need or you need it in the next 4 years, either put it in the money market and you get 3 and a half percent taxable, or you put it in digital credit you get 11 and a half percent tax deferred. So if you're a crypto believer and you have working capital, you want to buy digital credit because you get paid four times as much after tax.
And it's a preferred. It is a preferred stock. It is just a—I'm sorry, is there—would you have even more upside than the 11 and a half percent? In other words, do—
No. The real breakthrough with STRC—it's the biggest preferred stock in the world. It's the fastest growing preferred stock in the world. It's the most liquid—
It generates 11 and a half percent, you keep the rest if there's a—
The reason it works is because we target $100 and then we use a variable dividend rate in order to keep it at 100 and we attach a shelf registration to it. So if it trades at $100 and a penny, we sell it and so it has become the lowest volatility credit instrument and the most liquid credit instrument because in essence it's a bank account that pays you 11 and a half percent tax deferred.
