Michael Saylor Fires Back After Strategy Sold Bitcoin

If I said, I'm going to punch you in the face, would you rather have the company buy $200,000 of Bitcoin a year and sell 10,000 of Bitcoin a year, or buy no Bitcoin a year, sell no Bitcoin a year? They're not Bitcoin maximalists. They're really just Twitter trolls that are in the business of posting viral content. If you want to grow Bitcoin, what you want to do is attract $10 trillion from the credit markets and then buy Bitcoin with it. The people all around the world want a bank account that pays them 8% in francs. Yeah. What are they getting now? Nothing.

I've been in the community in the business about six years. There have been five brutal drawdowns about once every year. There's a drawdown, some worse than others, but it's not uncommon. So I don't get disillusioned by the fact that it's volatile and we have pullbacks. It's really to be expected. What's exciting this year is you see Bitcoin has never been stronger. The Bitcoin identity as the world's digital capital network, the dominant digital monetary network of the world. I think that's clear. Bitcoin dominance has been growing. If you look at Bitcoin's capital or market cap compared to the market cap of all crypto assets, not including stablecoins, it probably fell to 40% in 2021, and it has been marching up toward about 68 to 70% over five years. So Bitcoin itself is alive and healthy. It's never been more embraced. Accounting treatments, tax treatments, banking support, institutional support is greater than ever. So that's the first thing that's exciting. The second thing that's exciting is the formation of the digital credit market. Digital credit was nonexistent 12 months ago, and it has gone from nothing to more than $11 billion as an asset class. So something that's growing $1 billion a month or more is an interesting thing. And so one of the killer apps of Bitcoin is digital credit in the form of STRK and SATA digital credits. Probably it's the most liquid preferred stocks in the world. Our STRK has become the biggest preferred stock in the world. It's not even a year old, and they're trading more intensely than any other preferred stock in the world. So this has completely revitalized the preferred stock asset class. And we've created a new asset class for digital credit. There's 25,000 dividend bearing stocks. There's one that pays dividends twice a month. There's one that pays dividends every day. So these are very innovative products in the history of the capital markets. And they're bringing billions of dollars of capital into the Bitcoin ecosystem. So that's number two. Very interesting. And then number three, when we solve the problem of digital credit, we cracked the code on digital money or stablecoins backed by Bitcoin that pay yield. And so what you see right now is innovators are starting to work on yield coins in the crypto economy. The two most famous are Saturn and Apex. And Saturn has created maybe the first Bitcoin backed stablecoin. Now a lot of people dreamed about this, but no one could go directly from raw Bitcoin to a token pegged to the dollar. You can't strip a 40 vol asset to a zero vol asset in one step. What we found is that if we take two steps, if we actually go from 40 vol to 5 vol, which is sort of where digital credit is, you can go from five vol to zero vol. What does that mean? That means the market is open to create digital money products that have zero volatility pegged to the euro, the dollar, the yen, the Swiss franc, the great British pound that pay you 8% yield, maybe tax deferred 8% yield. So, you know, does the crypto market want a stablecoin that pays 8% yield? By the way, people all around the world want a bank account that pays them 8% in francs. Yeah. What are they getting now? Nothing. Nothing. Do people want 8%? They want bank accounts in Japan to pay 8% in yen, or 8% in euros in Germany, or 8% in London in pounds, or 8% in dollars in New York. Yeah. What are they getting right now? The money markets pay three and a half, after tax, 2%. So these things are anywhere from 2 to 4 times better. So, you know, what am I excited about? I'm excited about the creation of digital money that can be used as a medium of exchange, a store of value, a unit of account. But it's not the Austrian economist definition of money. They would say Bitcoin is money or gold is money, but it's the conventional tradfi, Keynesian definition of money, which is the dollars in your bank account with stable NAV and zero volatility to a fiat currency. The yield, that's a money market. So there's $300 trillion of credit. There's 30, 40, $50 trillion in these money markets. They're all getting almost nothing. We can pay two, three, four X as much. And so what do I see? I see Bitcoin as the digital transformation of capital. I see STRK is the digital transformation of credit. And I see these yield coins or other types of funds, like companies like Saturn are working on, is the digital transformation of money markets or digital money. And that's a multi-trillion dollar opportunity. And so it couldn't be clearer to me that this is going to be revolutionary for the banking business, the money management business, for equity investors, for credit markets, for capital markets in general. And ultimately, if you want to grow Bitcoin, what you want to do is attract $10 trillion from the credit markets and then buy Bitcoin with it. And the way that you're going to do that is with digital credit and digital money type instruments.

No, I actually think Bitcoin is one. I think that Bitcoin is one economically, technically, ethically, and is being globally embraced. The only thing that's frustrating to me maybe is that it's not always perceived by mainstream tradfi investors. They don't understand it yet. Mainstream media doesn't understand it. And then there's just a lot of dysfunctional squabbling back and forth on X or Twitter between various crypto and Bitcoin believers arguing over what I think are second and third order issues. And I think that we would be better off in the community if we just focused upon growing the industry by a factor of 100 because generally all of the arguments in the Bitcoin community are between people that 99% agree with each other that pick the last 1%, and then they fight over some third order issue that really won't matter to either of them in a decade.

Yeah, I think that's an example of what happens when you've won. The reason we're talking about quantum computers is because there's nothing else that threatens Bitcoin. Okay? So everything that people talked about, well there's political risk. The government will ban it or no one will want to buy it or companies won't ever use it, or the accounting is wrong or the tax is bad, or maybe it'll fail, or maybe it's misengineered, or the block sizes are too small, the block sizes are too big or it doesn't have enough smart contract functionality, right. The amount of FUD is off the hook. And every one of those, oh, it uses too much energy. It uses computers. The Chinese will take over it. The Chinese make too much of it. The Chinese banned it. They don't make enough of it. Right. There's like 20 types of FUD. They all kind of fail. So after there's nothing to worry about, we invented an imaginary problem to worry about. Imagine a computer that no one's ever built that it's not obvious we can build. Let's imagine that perhaps we make a scientific breakthrough and we manage to create a quantum computer. And let's imagine that it cracks our current cryptography. And let's imagine that no one reacts or addresses it, or upgrades. Then let's imagine bad things happening. It's a hypothetical problem that people imagine so that they can generate engagement on X. The only reason it gets traction is A. There are no real problems, and B we're in a bear market. And so normally the Bitcoin community, the crypto community at large, it's like hundreds of millions of people all on the same team. And the price is like the scoreboard. And when the price is high, everybody's happy. And the price is low, it's like all the blood sugars crash and it's like they lost yesterday and everybody's in a bad mood. And so in the middle of a bear market, people are in a bad mood. They want to fight about something.

I think that it's tricky. The summer is difficult because it's the AI summer where you've got $500 billion of capital getting sucked into AI deals from Anthropic, OpenAI, SpaceX, Google, etc. And so that's creating a temporary market location. I think that when we get past those deals and we come out the back end, I think we'll see a nice rotation of capital back into Bitcoin. It will recover, and I would think we'll recover by the end of the year. Right now we're just kind of in the middle of an unpleasant drawdown. New highs by the end of this year? I think we could. I think we should definitely see a recovery by the end of the year. I don't know if we'll get the new high within six months, but I would think over the next 12 months we'll make a new high.

If I knew then what I know now, I probably would have gotten to digital credit sooner. We did about 14 or 15 different capital markets transactions and credit deals. We did a senior secured loan. We did an asset backed loan. We did about eight convertible bonds. We did various types of equity deals. Then we did free perpetual preferred STRK, STRIFE, STRIDE. And then we finally discovered STRK as TRC. If I could do it again, I would just fast forward to TRC and I would skip everything else. I say the perfect digital treasury company or Bitcoin treasury company is you've just got a pile of equity capital. If you've got $1 billion of equity, you buy $1 billion of Bitcoin, you have a common stock MSTR, and then you have a preferred stock, which is like a monthly variable credit spread or variable dividend rate credit instrument like STRK or SATA. And you don't really need anything more than that, right? Because the credit instrument creates amplification for the equity. So it creates a BTC yield or amplifies the Bitcoin yield for the equity. In the same way that preferred stock on a bank balance sheet amplifies the dividend yield of the common stock. So the very simple structure is the common stock. Shareholders want more Bitcoin per share. The credit investors want overcollateralization and a dividend. The capital in the middle of the balance sheet right collateralizing the credit, the capital gain and the capital appreciation creates the gains they use for the credit dividend. And the equity investors get the value from the credit business. They get all the upside. And so I would say we have a more complicated capital structure today. We have six bonds and we have five preferred credit instruments. So there's 11 things. But we had to do each of them in order to get to the point where we now understand the best one. STRK trades 50 times as liquid as the other credit instruments, which are really good and they trade better than the bonds. And so I really think the epiphany after five years of searching was digital credit is the killer app for a publicly traded Bitcoin treasury company.

I think the key point here is the company is in the business of selling digital credit. The credit is backed by capital. Bitcoin is capital. And to the extent that the credit is compelling, then the equity shareholders create a spread and they get the benefit. It's a very simple business in that regard. You could build this business with real estate. You could build a business with gold. You could build a business with equity. But let's just take real estate. If you went to a bank and you said, I want to borrow money to buy some real estate, but I'm not willing to ever sell the real estate or pledge it to you, but just give me the money. And they said, well, how are you going to pay me back? I said, well, I'll just sell equity, but I won't sell the real estate. Well, the bank wouldn't give you the loan. And if you go to any bank, you said, I want to borrow money for a house, but I'm not going to actually sign the mortgage. I'm not going to pledge the house. The bank won't give you the loan. Right. And so you're not going to be able to sell credit unless the people that are buying the credit believe you're going to pay the dividend. The only way to pay the dividend is either to sell the Bitcoin or to sell equity or a derivative of the Bitcoin. If you unilaterally say you won't sell the Bitcoin, the credit rating agencies think, well that's an impaired asset since they won't sell it, I'll mark it to zero. And then that means you can't get a good credit rating. So you can't really create good credit if you unilaterally impair the asset. And then if you go to the equity capital markets and you said, well, we've got a good business selling credit and they're like, well, but you said that you're not going to use the Bitcoin to pay back the credit. How are you going to sell any? Well, the equity capital markets wouldn't believe in the credit business. If the credit fails, the equity won't work. And so the first order issue is if you're not willing to use the capital to back the credit, then the business isn't going to be able to sell credit. And therefore you don't have a digital credit business. But the second order effect is a short seller would say, well, it looks like you have to sell equity to pay the dividend then. So I'm going to short the equity because you have to sell it. And I'm going to short it down until you trade at a discount to the asset value of the Bitcoin. And if you unilaterally tell them that's okay, you'll keep selling even though the equity is undervalued. If you went to the market and said, I will sell the equity and never defend it. Like if I said, I'm going to punch you in the face and your kid, and unless you defend yourself, you're like, well, I'll never defend myself. At some point you invite. I'm not saying I would do it, but I'm saying criminals and malefactors, evil people will attack you if you don't defend yourself. So if you're a short seller and you're a malefactor and you want to attack the company, if the company won't defend itself, then it's worse than just. It's like I have $1 billion of Bitcoin, but I'm not going to defend it. You can have it if you come and break into my house and steal it. I'll leave the door open. And then you tweet that you're not just going to have one criminal, you're going to have every criminal in the country visit you, right? You're going to attract malefactors. So a public company that's unwilling to defend its equity is going to attract short sellers. And then you would have everybody shorting the stock. Would you invest in such a company that's unwilling to defend itself? By the way, I'm running a restaurant. I give away all the food for free. People can steal from me. Would you like to be my investor? And this is common sense, right? You're not going to invest in a company that will not defend its property, right? Will not defend itself. And you're not going to buy the credit if the company won't pay the dividend. You're not going to believe the company can pay the dividend if they only use equity. If the company won't defend the equity. Now will you? So if the company's policy is that we won't sell the Bitcoin, the credit won't have value and the equity won't have value. And if those two don't have value, then instead of the company buying $64 billion of Bitcoin, which is what we've done, the company raises no money and buys no Bitcoin. And so in this case, would you rather have the company buy 200,000 of Bitcoin a year and sell 10,000 of Bitcoin a year, or buy no Bitcoin a year, sell no Bitcoin a year? Yeah. This is not really controversial. Any rational person. And no equity investor in the company thinks this is a bad idea. They're like obviously no credit investor thinks this is about, oh, you said that you would sell your assets to pay your obligation. I would you pledge the assets to sell me the credit? Of course you're going to sell them. It's like we have a fiduciary obligation to credit investors and to equity investors. And it is not abandoning Bitcoin principles. It's stating the obvious, which is you're better off to buy 20 Bitcoin and sell one Bitcoin than to buy zero, to raise no money, buy zero Bitcoin, sell zero Bitcoin. And so what we're doing is good for the Bitcoin community. It's good for the credit community. It's good for the equity community. I think some of the pure Bitcoiners where we're pointing at the never sell phrase. I don't think it's the pure, the purist Bitcoiners, the fundamentalists have been criticizing me for being unwilling to sell the Bitcoin. The fundamentalists take the position that Bitcoin is money and a medium of exchange, and you're supposed to pay for things with it. So, in fact, I would say the fundamentalists would take the position that, yeah, you should use it as a medium of exchange. And this is a good thing. I would say that the Twitter trolls, it's really just very loud Twitter trolls who are in the business of gotcha saying, I see that once you tweeted never sell your Bitcoin. And I also see your company sold Bitcoin. This looks hypocritical. I'm going to make a big deal out of this and feign indignation. They're not Bitcoin fundamentalists. They're not Bitcoin maximalists. They're not equity investors. They're not credit investors. They're not even investors. They're really just Twitter trolls that are in the business of posting viral content. And what you see on X is stuff runs viral. The more you feign indignation. And anyone that's followed me knows that for five years, we've never promised not to sell the Bitcoin. In fact, we've sold Bitcoin back four years ago. We sold Bitcoin and we've said very clearly, of course we'll sell the Bitcoin. So anyone that's a serious investor knows this. We've been talking about this on conference calls. And so there's nothing surprising about this in the least. This is just a convenient opportunity for people to grandstand on social media and get their stuff to run viral with a headline.

Our priority is to continue to accumulate Bitcoin and do it in a manner that's accretive to our shareholders over the long term. What happens, practically speaking, is in the bull market it's very easy. We sold $21 billion of equity at a massive premium in about 16 weeks and bought Bitcoin. Very easy. So in a bull market it's easy to sell credit, easy to sell equity. It's easy to do all of these things. And a bear market it's a little bit harder. But for example, this year we've been the biggest buyer of Bitcoin in the world, and we bought a lot of it, $10 billion of it or something. So in a bear market, you probably have to do it with credit and a little bit of equity, but more your credit focus. And the amount of credit you can sell will contract and expand. Right. The business is naturally going to accelerate and we're going to acquire more Bitcoin and generate more Bitcoin yield generally. In bull markets we'll acquire less Bitcoin. And we may or may not generate as much Bitcoin yield. But probably the growth rate of the company slows down in bear markets. I mean that's okay. I mean look, Warren Buffett's the most successful investor in the last century in the 20th century and maybe for 50 years. He's very famous for saying, I'll just sit around and do nothing for a year. If there's nothing to be done, then do nothing. It's like you can stand at bat. His famous anecdote was you can stand at bat and watch 100 pitches go by and not swing at any of them if they're all bad pitches. You don't have to do something. So we generally have acquired Bitcoin every quarter. And we're generating good Bitcoin yield. We're like 12.8, 12.5% or something BTC yield this year so far, even in a bear market, which exceeds our expectations. But we're not afraid to slow down if we need to slow down.

I think it would be a benefit to do so, but I don't think they need to do so. I think that there's good advocacy for Bitcoin Reserve on Capitol Hill. I think that David Sax and Patrick Witt have showed good leadership. And I think we see with Nicholas Begich and Cynthia Lummis, they've also shown good leadership. And there are a number of bills and initiatives that they're working on. I think they'll do something over time. The truth of the matter is the US has won in the Bitcoin world. If you look at who are the companies that hold the most Bitcoin, United States companies: Strategy, Strive, right? They're all in the US capital markets. If you look at who's creating the most Bitcoin securities, BlackRock is a US company. Fidelity is a US company. Grayscale is a US company. Morgan Stanley is a US company. If you look at the banks that are most Bitcoin friendly, the Charles Schwab of the world, the Citigroup, the Morgan Stanleys of the world. And so I think the US banking establishment, the money management establishment, the operating companies. And if you look at the investors and you say, well, who are the investors that are holding digital equity, digital capital, digital credit, it's mostly US based investors. So I think that the industry is centered in the United States. The investors are in the United States, the corporate actors are in the United States. The US is going to benefit one way or the other. And I've been very famous for going on record saying the US ought to buy 5% of the network if they can and pay off the debt. But on the other hand, another thing that they can do is just be supportive of Bitcoin investors and Bitcoin corporations and Bitcoin exchanges, and have supportive laws and supportive tax and accounting rules, which we do have. We have the most supportive set of regulators at the Fed, at Treasury, at the SEC, at the CFTC and the White House. We have by far the most supportive set of regulators in the history of the Bitcoin network. There are a lot of good things that are happening for Bitcoin in the US. The United States will win either because its corporate citizens and individual citizens are the winners, or it'll win because it takes principal interest in Bitcoin. What happens is above my pay grade, but I'm not worked up over it. Everything is working according to plan. There's so much more exciting things going on. I mean, the real story here is digital credit is exploding, billions of dollars, a billion a month or more. And bank credit on Bitcoin is exploding. All these banks are coming online and we're creating digital money. And those things are revolutionary to the entire capital markets and money markets and finance space and the credit markets. And what we'll see is trillions and trillions of dollars flow onto the Bitcoin network because of that. We don't really need any particular government or central bank to buy this asset. I think gold, for example, needs the support of central banks. I don't think Bitcoin does. I think Bitcoin is much more of a ground up phenomenon being driven by individual investors and corporations and being driven by technology, technical superiority and technical economic superiority. And so I think organically it's just going to grow and it'll grow without anybody's help because it is the best engineered monetary product.