You don't make $2 billion a year. You're not doing anything productive in the economy to produce cash flow that can afford the money.
Digital credit product, Bitcoin backed credit product are literally the fastest growing credit products in history.
It feels like when it comes to financing these dividend payments like someone is burdening that cost right now.
Call me an idiot. I don't understand the... to this panel. It is called Bitcoin per share from defensive holding to offensive capital strategy. My name is Michael How. I am head of strategy for Bitwise in Europe. Thank you so much for coming and for your attention and to the panelists. Thank you very much guys for your time and your responses. I think you're all relatively well known to everyone in the room. So I don't think we need to do a laborious intro process. However, as you're answering the first question, maybe you could do 10-20 seconds intro just to help everyone orient themselves. Okay, with that, I think I'll dive in. I'll begin with you, Jack. So the defensive case for holding Bitcoin has been won, so we can skip that debate. But what is a more aggressive offensive version of a Bitcoin capital strategy look like? How have you seen it in the companies you're familiar with?
Offensive strategy meaning what? Buy, buy, buy Bitcoin.
I think buying Bitcoin would be the minimum.
And more than that, more aggressive are the options we're interested in.
Yeah. Okay. So my name is Jack. I've been working on Bitcoin for almost 14 years now. I do that predominantly through Strike and 21. I think as the Bitcoin and the capital markets and the Bitcoin treasury strategy has evolved, I currently sit in the camp of wanting to build a cash flow business alongside a Bitcoin treasury. I think that they complement each other the best. Ultimately, even just from an Austrian economic standpoint, I believe in being productive in the marketplace, producing profit. I believe that to be an ethical good and an economic good. And I also think it's the most scalable way to build a large Bitcoin treasury. If you have growing high margin cash flow and you're producing products productively for customers alongside an ability to find leverage and stuff. And so we actually have not pursued what's described as digital credit and such. Not a bad... hopefully this isn't Twitter. Not trying to get in a fight, unless you want to. But that's where I sit. So Strike optimizes to be a high growth, profitable, cash generating business. And then we're not afraid of leverage, but ideally, I think the dream for all businesses is to not finance their future with dilution. Because at the end of the day, if you're not producing profit, you have to ask the philosophical question of who's financing your worldview, who's financing your future if it's not your own productivity. And you know, could you get away with a heavy dose of financial engineering and perfectly financially engineer your way through that? Maybe. I would prefer to build a business alongside that. Not that one's right or wrong, but I would say that's more my interest in both of my businesses.
Got it. Thank you, Ben. Any similarities, differences from what you're seeing in your...
Well, I think that there's actually more similarities than people would think, right? I don't think Jack's view is a very controversial one. I don't view doing the digital credit strategy as being the only pursuit of Bitcoin. I think we need an entire ecosystem out there being built around Bitcoin. And that's going to mean building great products and great services that expand the value Bitcoin brings into everybody's lives. And we've all got our different opinions on how that works. And a lot of that is going to depend on what it is you're trying to achieve as a corporation. For us at Strive, we were the second issuer of a digital credit route. So we did go that path. We're also an asset manager. We manage almost $3 billion in our ETF business. So that talking point gets lost a little bit in the conversations, but our approach is we're trying to maximize the long-term return of Bitcoin. We are amplified to Bitcoin. The way we chose to do that is as we raise capital, we deploy it into the asset we think is going to perform the best over decades long time horizons. We're targeting capturing the maximum amount of value for our shareholders over that period. But that being said, we shouldn't be discouraging businesses from being built on Bitcoin. And I feel like it's kind of gotten to that point recently where everyone's arguing about what is the one optimal strategy every corporation should be going down. But we need the products and services that make Bitcoin successful for individuals in their lives, for corporations to use it, whether that's as collateral or any other uses that they want to use. So I don't think that that should be a controversial take. We just have different opinions and different objectives with our organization for how we're trying to deliver value to our shareholders. So I'm rooting for Jack to build the greatest financial services firm Bitcoin's ever seen. Why would I not want that to be an outcome? So I'm not trying to push Jack to do what we do. We had the benefit of going second behind Michael Saylor. We got to watch them move through the evolution of using convertible bonds, moving into digital credit, watching all the different types of products come out. And because of that, we were able to select the one that we thought was going to have the most demand out there in the market. And that was clear when we saw Strategy, when we saw the size of the IPO, when we saw the demand come after it was already launched. And that's the path that we decided to go. And so we've been pursuing that. Our strategy is very clean. We've got our amplified Bitcoin in the common equity. We have our digital credit yield product in Seda. That's the path we pursued. I would expect for Jack, he's watching everything happening in the Bitcoin space. And if we end up doing something he really loves, I'm sure he'll step into it. But until then, we're all on our own journeys around this path.
Yep. Thanks, Ben. Alexandra, what about you? I'm curious. If you reverse a year ago, what would you have thought of as an offensive capital strategy for Bitcoin? And how has that changed now? Because a lot has happened in 12 months.
Well, first of all, I'm not sure I would accept the framing of the idea that the Bitcoin holding defensive strategy has been won. I think that battle has not been won yet. I think Bitcoin adoption is just at its very early beginnings and there is a debate online right now on whether the Bitcoin treasury companies and the digital credit products that experience extreme growth contribute in a positive way to Bitcoin adoption. Some say that this can distract people from the case of Bitcoin and some say that no, this is additive and this is bringing a new cohort of people into the Bitcoin ecosystem and that this drives demand for Bitcoin and that at some point people can find out about Bitcoin through digital credit. Potentially the truth is behind those two. And in my view, and that's also the publication of Michael about the different types of Bitcoiners, I think it's not to make categories and tag people in one category, but you can see that everybody has all of those properties and more focus of one of them between the maximalist, the capitalist, the fundamentalist, the technologist. And what I see is that anytime that you feel interested about Bitcoin treasury companies or digital credit because you have heard of it because of course we communicate a lot about those potential opportunities, I think it's important to ask yourself why not Bitcoin first? Why shouldn't I learn about Bitcoin? The defensive case as you said because in some circumstances Bitcoin itself is the offensive strategy because in case of additional risk that you don't know about and in case of a future that you don't know about, having a decentralized direct access to Bitcoin is something that I think everybody in the room may have gone through and if you have not, I think it's important to consider that. Then in terms of the growth of the market, in terms of the capital markets, I think we've gone through three phases and they are not replacing each other but adding on top of themselves. The first one is Bitcoin backed equity. So it's the simple idea that a publicly listed corporation that has Bitcoin on the balance sheet will outperform all other corporations that don't have Bitcoin on the balance sheet. Simple idea. Then the other idea is why not go into the Bitcoin backed credit that is either non-listed or fairly less accessible to the broader audience of investors and that's been the convertible notes and all of the different innovations that have come in the space. We have done the Bitcoin denominated convertible notes and now we are entering the third phase of perpetual digital credit product, Bitcoin backed credit product listed in the market and that are literally the fastest growing credit products in history. So at least that brings attention. I think in terms of an investor perspective with a long-term bull view on Bitcoin, the aggressive standpoint is likely going towards the companies that are able to increase the fastest the number of Bitcoin per share. And that can definitely come from the P&L and that can definitely come from balance sheet accretion and probably companies will go through both over time. It turns out that the most efficient, the most scalable is today on the balance sheet side and of course companies over time will develop new P&L opportunities as well or as Jack Mallers said, if you can have since the very beginning a very big cash flowing business, that's of course a great element as well. Just that in capital markets you have a broad range of opportunities and that digital credit is also a form of operation and that operation in capital markets results to be the one that has created the best performing companies in Bitcoin since the launch of their respective strategies.
Thanks Alexandra. Eve, welcome. As you can tell, we're talking about this transition from a defensive capital strategy to an offensive capital strategy.
So first of all, I would like to remind you that whenever there is a disruptive innovation, there is always anger against it and it's systematic, it's a sociological fact. And this anger has many engines. And in my mind, the most important engine is ignorance. Okay. And you know, people don't understand. Those people who don't understand why we own Bitcoin are simply people that did not listen to us. Because we are not absolutely sure to be right, but there is a certain probability that we are right and therefore you should allocate. And I really believe that the way you framed the question about defensive and offensive, we don't need to be defensive anymore. We should answer them the way Satoshi used to answer them. If you don't understand, we don't have time for you guys. What we should focus on, what your question inspired me, is a different question. Now we have to question them. Why don't you own any? Why do you own none? And we should leave no answer unanswered. If it's a question, I only own securities, we have dealt with this problem as a market setup. If it's about risk, we are generating a full range of products in order to adapt to the specificities of each of our clients. So in fact, we should not try to convince them about Bitcoin anymore. You know, if still I wanted to convince somebody about Bitcoin, I will generate only one chart. I go to Fred and I ask US public debt. The US public debt is increasing by a trillion every 67 days. If you don't look at the US public debt, but at the G7 public debt, it's 40 billion. It's 40 days for every additional trillion. Inflation has nothing to do with increase of value of things. Everything has a decrease in value. From an apple to a glass to a table to this microphone, the value of everything is decreasing because it's more and more easy to produce and still the price is going up. How come? It's because of increased abundance of money. Okay? And the only monetary aggregate that matters is M4, which no central bank in the world is publishing with the exception of the UK. Everybody's hiding M4. The difference between M3 and M4 is public debt because public debt is like liquidity. Thanks to the repo market, you can exchange any holdings you have in public debt into liquidity and liquidity is going like that. So this is the only answer we have to give them about Bitcoin. And now we have to provide them with engineering in order for their specificities to be answered. And this is why I like your question. We should not be defensive anymore. It's finished. We have explained it. Now we have to move on and to exactly make sure that the precise product we are offering them is exactly adapted to the needs.
It's a great segue actually because each of you in all of your roles must have heard so many reasons against Bitcoin, why it shouldn't be adopted. I think we've knocked over a lot of those over the years, but some must be remaining. In your minds, what are the remaining biggest barriers to adoption? I mean, we're not all going to be Bitcoin treasury companies, and I don't think we should want to be, but there's certainly scope for more ownership of Bitcoin. What do you see as the reasons not to? What are you hearing are the reasons not to? And why are those barriers not already knocked over? Ben, do you want to start?
Sure. You know, I think volatility still scares people, right? They still equate volatility to risk. And that's a very difficult mindset for people in the market to get out of. And the reason is, if you're going to allocate to an asset for the long term, Bitcoin, in my opinion, is the longest duration asset out there. It's the most resilient one that man's ever created and I think it's the best asset that everybody should own. That being said, there's still fear in people's daily lives and corporations' daily lives because the expenses don't stop. You still have cash flow needs. And the problem that you face with an asset like Bitcoin is they see the volatility but the risk they assign to it is that they might need that capital at the exact worst time. And I think that is enough to scare a lot of people away from it. They don't understand that having a fixed supply is going to have volatility as a feature. It's not Bitcoin that's volatile. The same number of Bitcoin are out there. It's got the same value. One Bitcoin equals one Bitcoin. I heard someone say something the other day that I really liked, which is Bitcoin doesn't have a price. It has an exchange rate. And I think that's an interesting way to think about it. But when you think about individuals in their lives and corporations allocating to it on their balance sheet, they're trying to balance the desire to own an asset that maybe they understand the properties and how it's going to perform over time with the fact that they still have short-term needs that they need to manage. And when they get pushed to be all in on one thing right away, I think that turns a lot of people off. I think people need to discover and adopt Bitcoin at the pace that they're ready for. Now, the pace is accelerating. We've seen that. What he was just talking about with the debt, that's a runaway train. We've all identified that. It's why Bitcoin's at the core of our personal lives. It's why Bitcoin's at the core of our businesses. It's because we see that problem continuing to accelerate. And so, I think for a lot of people, you need to make it okay for them to just step in. Take an allocation. It doesn't need to be everything to start. You're going to see the benefits over time, but you have to learn to accept the volatility and understand that volatility is not the same thing as risk. It's a feature of Bitcoin. It's not a bug in Bitcoin. And as long as we have volatility globally in the markets and the debt figures and all of those things, that volatility is going to continue. But as I think we all believe, there's going to be a breaking point where everybody on Earth is going to wish they owned more Bitcoin, including all of us who are all in already. 100%.
What about you, Jack? Is it all about volatility? Are there other barriers worth mentioning?
I reject the premise that Bitcoin is struggling to get adopted, to be quite honest. I mean, it's how old is it? 17 years old, 16 years old, depending on how you count. It's done a pretty good job. It's the top 10 asset in the world. Fastest growing ETF, corporate balance sheet adoption. It's a global... in the middle of conflict in the Middle East right now, it's being used to broker commodity trade at war. I don't know. It's doing pretty good. And my mental model is pretty straightforward. Bitcoin is some combination of technology plus fiat liquidity. Technology is the fact that it is disruptive technology. It's solved a previously impossible computer science problem that gives it monetary properties that nothing else has. Like censorship resistance, like I can put money in my brain and cross a border. One of my favorite quotes of my own is with gold I got to put it up my butt if I want to get through the TSA. And so technology has utility value. And that's where you see Bitcoin adopted in a lot of the third world when people are living under oppression or authoritarian regimes. And volatility? If Putin took my bank account, put a gun to my head, I don't give a damn about volatility. I need money. So that's the technology piece. Now, the fiat liquidity piece, I also think it's fairly straightforward. Bitcoin is priced on future expectations of fiat and you see it go through these adoption waves when they printed a lot of money after COVID. Bitcoin went on a tear. There's more fiat currency units competing for a scarce amount of goods. So yes, eggs went up, housing went up, gold went up, but Bitcoin went up the most because Bitcoin you couldn't make any more of it. You can make marginally more eggs, marginally more housing. Oh, someone has a penthouse. Well, I'll pay them even more to build a floor on top of his penthouse. No, I got the penthouse, but there's no more Bitcoin to be made. And then when they hike rates, fiat liquidity contracts and so does Bitcoin. And so right now, I think the Bitcoin price is just telling us there's not enough filthy fiat in the financial system to sustain everything that's... to sustain the levels of debt, the eagerness to go to war, and the amount of build that artificial intelligence is requiring. There's not enough fiat. And so I think Bitcoin's doing its thing. It's telling the world the truth. It's the only functioning smoke alarm of liquidity left in the world. If you want to know if the world is in a good place or not when it comes to liquidity, just look at the Bitcoin price. Don't listen to any of these stupid analysts. They don't know what they're talking about. And so, I think there's not enough liquidity to support all these IPOs, support all this war that people wanted to go on, support all this deficit spending and all this debt. And they're going to have to print a bunch of money and Bitcoin will tell us exactly when they do and how much they did. And so I stay humble and stack sats. But to say that, oh man, I'm checking my clock and Bitcoin's taking too long... I'm on Bitcoin's time. Bitcoin's not on my time. I think as humans we all lust to be a part of something bigger than ourselves and last longer than ourselves. The most natural expression of that is family. Find a partner. Fall in love. Have a kid. That's creating something that will last longer than you, which is extending your bloodline and being a part of something that's numerically bigger than just yourself. That's family. I think Bitcoin is another expression of that. Bitcoin's going to... there's going to be a block mined long after I'm gone. Who am I to say Bitcoin's taking too long? So I just disagree with the premise that, oh man, what are you guys doing taking so long? It's fine. And one more point related... I think people say, oh, people early to Bitcoin just got lucky. That's not true. First of all, there's no luck in markets. And I take my father for example, who's my hero. My dad got us all into Bitcoin, my whole family, in early 2013. And he started the first meetup in Chicago. He was posting on the Bitcoin talk forums. He helped get Andreas Antonopoulos's career off the ground. There were human beings that had to give this idea time, energy, and effort in order for all of us to be here in the first place. And the Mt. Gox hack and the crash from $1,200 down to $200 at the time before regulatory clarity, before crypto president, before MicroStrategy, before IBIT, before any of that stuff. And you get rewarded for showing up and eating that volatility to the face like a man.
So if you like... and that's what my father explained to me is like you could cry if you want but let me know when you're done crying so we can get to work. And if you don't want to show up and take the risk and stay humble, stack sats, produce more profit for the world than you consume from the world, then show up later. I can't promise you're going to. So I think the world is reallocating capital. This is a new wealth distribution. And I think wealth is being distributed to those that earn it, those that produce profit, produce businesses, have a low time preference, take care of themselves, optimize for the right things. So I let it play its course.
Thanks, Jack. Alexandra, you must hold some investor days, meetings with investors, and some of those people must be showing up much later than Jack and Jack's dad, right? What are they saying? And I want their view as well because they're also capital allocators and they have a relevant role in capital markets more broadly. I'm just keen to hear what they're thinking when they're talking with you about allocating to Bitcoin.
Sure. I think the main hurdle that I see in terms of institutional investors and in terms of how institutional investors actually approach the topic is that, well first of all, there is much more institutional investors here today that want to invest in a form of Bitcoin exposure than there was two, three, four years ago and even last year from last year. So as Eve said, there will be a type of new financial product that will be able to meet the different needs of those investors. But the biggest one that I see is even if the manager of the fund is sometimes convinced that Bitcoin is the best store of value, sometimes the fund manager has reporting requirements that impose that on a one month basis they don't produce minus 30% or minus 20 or 50%. And so of course you will have different types of funds and hedge funds and pension funds and many more types of institutional investors. But as Jack said, it takes humans to go into the capital markets to create new types of products and to educate the institutional landscape as Eve said to not let any question unanswered and to provide for the options for the products that actually can scale. And I think the success of Strategy and of Strive in the digital credit space and the levels of adoption that we are seeing across the board and from our observation, the number of investors that literally now have the ability to enter into the Bitcoin ecosystem with a digital credit product has been multiplied by five to 10x. Because those types of products, yes, you can say they still have volatility, they still have risk. The point is it is a transparent product that you can analyze. You can make your own analysis of the balance sheet is available in real time and the structure is very clear and you can definitely as an institutional investor approach that product within your investment mandates and that can fit where Bitcoin didn't or that can complement or that can be the subject of a new fund for a new subset of investors that are investors of the fund. And when you think about it, it's the same question about... I had this morning about... is there a need for different types of Bitcoin companies, Bitcoin treasury companies? Well, yes, because you have a full range of investors with different risk return profiles, different geographies, different mandates and it takes humans to go out there, create companies, create products and be able to provide different types of exposure. And the level of asymmetric information that I see right now is you can see the growth of all of the Bitcoin financial industry developing, all of the products being created from the banks launching the retail products from the Vanguards and the Schwabs and everybody doing the distribution of those types of access for Bitcoin and the funds that are being created all across the space in Bitcoin backed equity, in Bitcoin backed credit, and then you see trenches and you see tokenization and distribution all across this place. And at the same time you see the price that's not following this. And some investors ask, what is happening? Well, we are working on the long-term. We are building the financial infrastructure for the growth of the overall ecosystem and that will then have the price adjust towards that. But you don't have to wait for the price to build things and actually if you zoom out enough, the price is up quite a lot.
Absolutely. I sometimes feel that people who haven't allocated to Bitcoin yet to do so now would be an admission that they were wrong in the past and there is an ego at play. Maybe that is a barrier in itself. Eve, what do you think about that? What do you think about barriers more broadly?
So you said that Bitcoin is not risky. I think it's really wrong. I think most investors have liabilities and the risk is the risk of not matching the liabilities. They have the liabilities expressed in dollars, in euro, etc. You have to adapt to their framework and you have to build with the most precious and most fantastic invention in finance which is Bitcoin. We have to build a product which is adapted to their needs and saying Bitcoin answers everything is wrong. Even Hal Finney said Bitcoin will not scale in 2010, in December 2010 he said Bitcoin will not scale. I think there is something that I don't like too much in treasury companies, it is the name. I think we should call them reserve institutes. In fact, most of you are and I am a shareholder in all of your companies. You are building companies which have assets and liabilities. On the asset side, Alexandra is doing the most boring job in the world. It's like a central bank of the old time. Nothing is more boring than owning a cave full of gold bars. And this was it on their assets. It's not like the asset of a bank. It's the asset of a reserve institute. So you hold the reserve and then you need to be inventive on the liability side in order to adapt to the precise needs of each of the categories of your clients. Some clients will need yield in dollar. Some clients will need yield in euro, in yen. Some clients, myself, what I'm looking for is convexity. So you can give me convexity and I will help you increase your reserves. And this is our job because the rest has been done by Satoshi. So it's not about Bitcoin. Our job is not about Bitcoin. We will never help Bitcoin. The same way that we cannot harm Bitcoin, we cannot help Bitcoin. Bitcoin is what it is. It's like gold. You cannot help gold. You cannot improve gold. Okay. What you are going to do is make sure that this fantastic resource will help solve the problem of others.
Oh, was that a segue? Was that a new question that you...
