Why Bitcoin still has the highest risk-reward in crypto with David Bailey

Transcript

We're kind of at the scale of Bitcoin where if Bitcoin does go up a lot, if we go to a million dollars of Bitcoin or half a million dollars of Bitcoin, we're talking about Bitcoin becoming one of the largest most important economic factors in the global financial system. You know, at a million dollars of Bitcoin, we've created basically US GD one America out of thin air. Like US GDP is 25 trillion. A million dollars of Bitcoin would be $21 trillion asset. You know, probably half the Bitcoin are owned by Americans. So imagine the economic stimulus that you're injecting into the economy as Bitcoin goes up, as you're just increasing the wealth of the hundreds of millions of people globally that own this instrument. GM, good morning. Welcome to the Milk Road Show, the daily crypto show where the Fed's money printer has more miles than your

college roommates's Honda Civic. I'm your host, Jay Hamilton. It's September 10th, Wednesday. Today we're joined by David Bailey, CEO of Nakamoto, a NASDAQ listed Bitcoin treasury company. CEO of BTC Inc. which runs Bitcoin Magazine and the Bitcoin Conference. Their mission is to grow Bitcoin's ecosystem by backing public companies that hold Bitcoin on their balance sheet and help to further the adoption of Bitcoin within retail, corporate treasuries, and the sovereign adoption movement. Today we're going to talk about how Bitcoin treasury companies are set to explode in the future and how it'll happen in the right

way versus the wrong way. Is there potential risk from these treasury companies and where is the upside because really so many companies should have Bitcoin on their balance sheet and there's a great case to be made for that. We're also going to talk about why David thinks the US government could buy Bitcoin this year. And finally, how institutional capital is flooding into Bitcoin at record speeds with deals doubling and tripling in size overnight. Before we jump in, do me a quick favor. Wherever you're listening, give us a like, a subscribe, a review. It really helps the show and helps make sure that we can bring more people into crypto and into investing in a safe way so that they stay and don't get wrecked and rage quit. Today's episode is brought to you

by Figure Markets. Grow your cash like a bank. No lockups, just real returns. It's also brought to you by Ken, the distribution protocol, changing the growth game. With that, David, welcome to the Milk Road Show. Hey Jay, thank you for having me. Pleasure to have you, my man. I can't believe it's the first time we're having you. Hopefully, it's the first of many. Uh let's let's start. How you feeling? It's uh September 10th. Bitcoin sitting around uh I think we're at like 113 114,000. Yeah, 114 I think right before we we jumped on. So, uh, do we just do we bump up a h of 114? It looks like we might have. Okay.

So, yeah, I'm bullish. I mean, in general, I'm I'm extremely bullish on the price of Bitcoin and where we're at. Uh, I'm, you know, surprised we're not higher in one sense, but also, you know, I'm I'm impressed that we've eaten through some pretty significant selling. Uh, and so from that perspective, like the market is just way deeper than it's ever been. So like I I I feel like those are two counterbalancing forces, but in general the direction is is up up only and I I think you know this year things will heat up but like all all great bull markets things just accelerate as they play out. So I I still feels like uh relatively early in the cycle even though if you follow the four-year cycle trend we're actually pretty far into into this cycle. So it's uh definitely a

cycle that is you know rhymes but is not the same as as past cycles. And you know that's that's kind of a new thing. I mean I do you subscribe to the four-year cycle thesis still still though moving forward because then we would top October November which I kind of agree with you. I don't think we're going to top October November this year. Yeah. So this this this cycle my view on the four like the four-year cycle has changed. It's just like the the the makeup of the market, the market structure has changed and like the type of buyers and how they buy and you know the amount of money that they're putting into the into the market etc. It's just it's different than it's been in the past and the the buyers are much more

sophisticated. You have rebalancing. You have all these things that are designed to basically smooth out the volatility. And so, you know, I I think uh that's really what what we what we've seen happen is like the volatility has come down a lot, but we're still directionally going in the same place that the price has always gone, just in a smoother, slower fashion. So, yeah, I I think the four-year cycle, I don't think it's done. Like, I think um maybe it won't be four years anymore. Maybe it'll be a different time time interval, but like at the end of the day, like what's happening? The reason the four-year cycle is a valid concept is like the price of Bitcoin goes up so much that the inflation rate of what's coming into the market every day is just too too much to be able to sustain. And

so, you know, if you're if you're have a $10 million of Bitcoin hitting the market every day, you know, in a 100 days, that's a billion bucks. If it's a hundred million hitting the market every day in a 100 days, it's 10 billion bucks. So, there just hits a a threshold where the market can't sustain it. I'm personally of the view that like bare markets are are something that's like very beneficial to Bitcoin. It's like it's it's the cleansing mechanism that gets rid of the malinvestments. It it discovers the frauds. It reallocates the labor. It reallocates the uh capital to people who actually have products that the market wants. So, I think it'd actually be a big a big loss if we didn't have like these cleansing, you know, uh moments within the space. But like I just don't see it as being plausible that the bare market starts in

two months or that we've even gone up enough to sustain a bare market over an extended period of time. Yeah, fully agree with all those takes. It's it's nice to put a a bare market with rosecolor colored glasses like that. It it is uh it's nice to approach it and feel feel good about it in that way. The thing I think is it's so it it always comes back to me with the way you you stack your portfolio. And if you are stacking your portfolio with assets that will outlive the next bare market, then you can look at bare markets and say, "Okay, that's fine, right?" You know, no big deal. I know I'm I know Bitcoin's

going to be here decades from now and it's going to be higher even if there is another I don't know what you think in terms I think obviously I think you're going to agree that volatility has dampened so I don't think we're going to get as big of a with if we're talking about Bitcoin specifically as big of a drop as we've gotten in past past bare markets but I agree we still will have bare markets I think it comes in 2026 though at some point uh it's the debate is out on when it happens in 2026 we'll have to see let's Let's talk I do you know on the volatility side like what's happening is a lot of people are monetizing volatility and selling volatility and so like sailor selling V there's a lot of people selling V and you know when you sell V you don't change the

fundamentals of what's happening to the system you just change change the the event the event curve effectively the risk curve and so like I think there's a scenario where like we've compressed V a lot and when Bitcoin has like a violent move like that that V is going like rear its head and you kind of have a a blowout event. And so like I could actually see us like having a very if too many people get crowded in any trade, unwinding that trade, you know, has uh equal or greater, you know, effect than the building up of the trade. Yeah. I don't know. It's it's it's very interesting, but I think if you just take like a step back and you just look at this general situation and what's happening, uh I think we're in a moment unlike any before in Bitcoin

where we've hit a tipping point. like we've hit a tipping point where this this asset is now a mainstream asset. And so from that perspective, it's like Bitcoin is going to infiltrate every capital pool that exists on the planet. And you know, right now it is touching such a tiny little sliver of what is out there and available. And so, yeah, I think I think like as this this this tipping point that can't be stopped continues to play out and as it, you know, siphons up the lowhanging fruit of these liquidity pools, the price of Bitcoin is going to go up a lot and like we're at we're kind of at the scale of Bitcoin where if Bitcoin does go up a lot, if we go to a million dollars of

Bitcoin or half a million dollars of Bitcoin, we're talking about Bitcoin becoming one of the largest most important economic factors in the global financial system. You know, at a million dollars of Bitcoin, we've created basically US GD one America out of thin air. Like US GDP is 25 trillion. A million dollars of Bitcoin would be $21 trillion asset. You know, probably half the Bitcoin are owned by Americans. So imagine the economic stimulus that you're injecting into the economy as Bitcoin goes up, as you're just increasing the wealth of the hundreds of millions of people globally that own this instrument. and they own it now in their pension funds and in their index funds and in all these different forms and fashions.

So, you know, we spend so much time like wondering what is like GDP growth going to come in at or is like payroll is going to be 200,000 or 100,000? Did we grow at like 5% or 4%. And it's like, dude, when we're at when we're at the size of US GDP, the daily swings in the price of Bitcoin is going to be equal to one year of GDP growth in a day. in you know like hey now like Bitcoin is more relevant to determining like global economic forces than like the Fed's interest rate you know like it's like almost like this is how Bitcoin just consumes the system so it's it's a very unique moment in time I've never in the 13 years I've been in Bitcoin I've never

felt like we've hit the tipping point um but what was what was the tipping point when you say you know because you've been in Bitcoin for so long what was the tipping two setting point like there's two catalysts that that that changed my perspective on this. One is the ETF. Um you know maybe there's there's there's three. One is the ETF which was kind of like you know the barbarians were at the gate and when they opened the ETF it was like they let they open the gate they let us in in. So it's like okay then we've infiltrated the system and they're never shutting that gate again because the dollars are it's very effective. They like the profit.

No. Yeah. That's the thing is like Wall Street, you know, maybe they don't like parts of Bitcoin, but Wall Street's like the epitome of of capitalism. And Bitcoin is the epitome of capitalism. And so, honestly, Wall Street and Bitcoin is a match made in heaven. Like, once they get a taste of what it's what Bitcoin is like they're going to it's a they're going to be in love with it. So, I mean, I think we've been watching that play out over the past two years, which has been pretty interesting. But the the ETF was a big piece of it. I mean, if you hear the stuff that Black Rockck says behind the scenes about Bitcoin, it's like, oh, like there is not a more establishment institution than Black Rockck, you know, like if Black Rockck is saying kosher, like

if you if you're saying it's not, you you have to defend like why Larry Frink's wrong and why you're right, like it's not a good good place for someone to be. So, the ETF was one and then the next was uh the election. you know, we had a kind of a front row seat to everything that happened with Trump and we we we came away from that whole experience with several kind of observations about where Bitcoin is and the nature of of, you know, populist movements, I guess. And you know, while there was a a great partnership developed between, you know, this ideological movement and and President Trump and he has like a very

keen eye for seeing potential that others don't. You know, we didn't we weren't given that. We we earned that like, you know, he would he didn't he didn't support this industry out of charity. He supported it because out of out of he's he was impressed. He was impressed by how much we were able to do despite the system being against us. He was impressed by Yeah. I mean, we just we earned our place there. And it's like, okay, you know, the reason why is because this is the most widely held asset in the world. It's the most widely held asset in the United States. Is it the most widely held asset in the world? Is that a fact?

It's it's it's less held than the US dollars still. Yeah. But outside of US dollars, I I don't think there's another asset that's more widely held that has half a billion users holding it. Yeah. Yeah. Yeah. Especially when you consider how many how difficult it is for so much of the world to hold most assets whereas Bitcoin is one of those assets anybody can hold pretty much instantly. Yeah, absolutely. And you know every other distribution vehicle that we have to spread other assets globally now Bitcoin is also on those same rails. So, it's like, you know, maybe I would have said Apple could have more share, like more holders before Bitcoin, but like now that we're included in all the same indexes that Apple's included in, we

we've kind of gained all those holders, too. So, now it's about not just how widely held is the asset, but what percentage of your portfolio is also deployed into it. So, there's there's complexity and nuance to it. But regardless, like this is this the most widely held asset outside of the US dollar globally. It's growing. If you just look at it from a zoomed out perspective, you know, on an annualized basis, we're growing high double-digit percentages per year in terms of the number of users. Think about Bitcoin if it was a religion, okay? And you were a politician, you were catering to a religious group. Like, you know, name a religion that has half a billion users that's growing at high double digit percentages year-over-year.

There's not one. There isn't one. you know, there there is just and and so like when I was when we were watching this up close, we just we just realized like the power comes from the support of the people like Bitcoin has the support of the people because it is an open permissionless decentralized system for everyone. And when we are able to use Bitcoin as a as a coordination device, which is really what money is, is like a social coordination device. But when we're able to use it as a as a this common this common equity that we all are aligned around, we can bring any government in the world to its knees. We can bring any institution in the world to its knees. So it's kind of like the we we had hit the point in the United

States where we're setting, you know, already we're influencing the outcome of the election, but like this is just a moment in time. Next election we'll turn out in even more voters and then the election after that even more voters. And then before you know it, one two elections from now, if you don't have the backing of the Bitcoin community, you cannot win office. And then it's like, okay, well then now in that situation, like we've just taken over thei the system. Like we we, you know, we we can make the rules whatever we want them to be. So um so yeah so it just it it like we we've reached this point of credibility and and distribution that you know there's no as Sailor would describe it organized resistance that is stopping the social

coordination and we're just going to take this until literally every part of the financial system as you know it is integrated with Bitcoin. Um and there's nothing you can do to stop it. Yeah, it's a a few points I want to touch on there. One is uh I interview about 250 people a year, all leading investors from, you know, every major financial institution. And one thing that you said that everybody seems to agree with is that the US government support for I'm going to go beyond Bitcoin and say crypto is was the major tipping point that not that that hasn't been felt necessarily yet because the the impact of that tipping point is that every

other government around the world and corporation says, "Oh, okay, we got to think differently about this asset class." And and that takes time because institutions don't make move quickly. It's not like they turn around the next day and are like, "Oh yeah, if they're buying then I'm buying." But that is that you can't go back on that tipping point. Like that was the only thing that we really needed to finally ensure was yeah, governments are behind this. Okay, let's go. It's off to the races. And so that is certainly a point you agree with. The other thing that you mentioned which I find really interesting is did you know that religion has bottomed as a uh a as in terms of adoption and faith.

There's a there is a upward trend in religion right now and I've heard Raul Paul make a a connection to the bottoming of a religion is connected to a lack of trust in our governments. And as the lack of trust in our governments grow because of the way that they are managing our financial system and our our monetary policy that people are looking for other things to believe in and other things to connect to which is and religion just isn't you know a great form of community a great form of connection regardless of your beliefs but you can see how that connection sort of makes a similar connection to maybe you find your place in Bitcoin maybe you find your place in another community and you can see that I mean the the younger

generation right the are currently they're connecting in massive ways to a lot of crypto tokens I'm not going to touch right or wrong some of these are going to win and some of them are not I can say that confidently but there is certainly that effect is happening right now I I want to shift gears go ahead it's because the system is broken and it's like people need an alternative solution and they're going to they're going to keep searching for one until they find one or they're going to revolt and like that's like that's just the dynamic. And um yeah, I think um you know, one of the things that's been really interesting about the Trump stuff is like after getting involved, I had a lot of people reach out from all over the world. And

one thing that became clear to me is like like Bitcoin has infiltrated literally every institution in society around the globe. Like there's Bitcoiners in the inner circle of President Xi. There's Bitcoiners in literally every central bank, every treasury. And you know this because you talked to them, right? Like this is not anecdotal like this. You you know this. I talked to every single person that is out there. But it's like we hear from people from the Federal Reserve that are Bitcoiners that just, you know, don't say [ __ ] at work and keep their head down and go home and buy Bitcoin. I mean, we I mean from from places you would not believe. And so it's just like, wow, we've infiltrated

everything. And the number one divide that exists in in terms of Bitcoin adoption, the the the number one determinant if you are pro or anti- Bitcoin is age. And so if you're young, you you feel more comfortable with this than you do filling out pieces of paper and putting in a tube and putting in a bank or whatever. If you're old, you're super skeptical. Well, guess what? Like that's a trade you make all day long because every year every year we get better on that trade. So it's like, okay, well great. Like do you want to be aligned with the young people? Do you want to be aligned with the people that are going to be inheriting the wealth that are going to be running the institutions that are going to be the next presidents of the United States? Or do you want to be

aligned with the people that you know in 10 years time half of them are going to be out of their out of their careers? So, you know, this is like a transformation that just I don't I don't think can be stopped. Again, it's it's going to take us way beyond that $1 million threshold, but like once we get to a million bucks, like it's like that meme from um you know, I'm the captain now. It's like like we're the economy now. So yeah. Yeah. It it is it is interesting to think about the million dollar as like that next big tipping point whenever that comes. And there's many uh different price predictions for the the long term that'll say it'll come 2030 2035. I mean who who knows? I don't we

don't need to speculate on when that comes. I think we both will agree that it's it's going to come. I want to break down um three main buyers that you are you have unique insight into which is corporate treasuries uh sovereign wealth funds and central banks. Let's start with first with corporate treasuries. Uh you raised over 700 million at Nakamoto to buy Bitcoin and start a Bitcoin treasury company. Uh so you just so everybody listening understands David has fantastic insights here. Where are we at in terms of my understanding we have about a hundred Bitcoin corporate treasury companies?

Over 300 now. 300. Okay. So about 300. Um now is that a lot or is that a little? Like there's 4 million companies around the world in some ways. I a lot of people look at it and say, "Oh, that's too many and we're going to have this blow up at some point." But then I also look at it and say, "Well, there's four million companies and there's only 300 that have Bitcoin on their balance sheet." like feels like there's a lot of opportunity here. Yeah. I think part of the issue is that um first off, there's too few people that understand what's going on and too many people that are just um repeating like you know where what what where they hear other people say. And so like we've created this like information what's the

word? uh like vacuum where like we're using we're describing things wrong or or we're kind of incorrectly like uh understanding the phenomenon. You know, a company putting Bitcoin on their balance sheet is not the same thing as a company being I think what people consider Bitcoin treasury companies where you're you're uh literally the point of your company is to maximize Bitcoin per share and and try to arbitrage the difference between the Bitcoin standard and the fiat standard. So, like I think every company will own Bitcoin. I think it's the best performing asset of all time. If you don't, Getting back to the tipping point, we're we're getting close to the point on the corporate world where if you don't have Bitcoin on your balance sheet, what's your justification for

that? Like, if I'm a shareholder, you know, like I I want you to maximize value. Like, what's your case for not doing this? And you know, it's one thing to ignore it when there's career risk, you know, and you you don't want to be on the wrong side. It's another thing to ignore it when your company's getting kicked out of an index because some company that owns a lot of Bitcoin just got included to the index and you're the marginal person on the edge and you're like, "What the [ __ ] We just we just, you know, uh uh lost our position to some company buying f this happened.

This is real. This you're not speculating. This is a real story. Micro strategy got added to the NASDAQ 100. Someone had to be taken out of the NASDAQ 100. So, so I think like this the same thing works uh with like uh capital allocators. It's like everyone wants to be in like the top quartile, but like it's actually not beneficial to be the number one guy and like you definitely don't want to be the last guy or like you know below below a certain bar. And so there's like this crowding effect where it's like you know you want to be you want uh outperformance and stability in your business. And so you want to be like in this in the sweet spot. Well, the more and more capital allocators that buy Bitcoin and then outperform you, you start getting kicked down that that performance ranking and like

eventually you're like, "Okay, well, we have to own Bitcoin, too, or otherwise we're putting ourselves at a competitive advant disadvantage." So, I think that is what's playing out on the on the corporate side. All all public companies will eventually own Bitcoin and uh it's a it's a massive opportunity. I think what pe when people think of Bitcoin treasury companies, you know, uh, from that perspective, there's not really that many meaningful Bitcoin treasury companies that have any significant amount of of capital that they've raised. The way I think about a Bitcoin treasury company is like they're effectively Bitcoin exchanges. They're they're they're bridging capital from the traditional Tradfi world into the the Bitcoin capital market. And you know the the if you ask the question like

well how many Bitcoin exchanges are needed? Well, every country has one, you know. Yeah. Some countries have United States probably has five or six that are that are big. You know, if you take this to the like in-game conclusion, you might also be able to say like, okay, well, you know, these Bitcoin treasury companies, you know, they're building a financial system on a Bitcoin standard. They're like the gold bullion houses of um the past when we had the gold standard emerge and you know those ultimately just became what we know now as as banks like that was like the the the creation of the of the financial system. And so you know if you re ask the question like how many banks does every country have?

A lot. a lot a lot you know so so I think I think the market is quite massive I I think people misunderstand how massive it is and then I think people misunderstand like you know if I would agree that the world doesn't need a hundred micro strategies doing exactly what Micro Strategy is doing in the exact same market servicing the exact same clientele I would agree with that but the capital markets are so fragmented across so many different ways like across asset classes, across investor types, across active and passive, across uh domestic international. So, like

I think there's a space for a lot of companies to do what Micro Strategy is doing conceptually, but to target other pools of capital um that Micro Micro Strategy is not speaking to, whether it's because it's not big enough for them to go after, whether it's because they don't have the bandwidth to go into this. But, I mean, you can securitize Bitcoin and package Bitcoin in a massive number of ways. You can you can package it um as debt, you can package it as equity, you can package it with commodities. I don't know if you saw um the product that launched yesterday from uh Canour, their like Bitcoin Gold product that they launched. Um no, I didn't see that. What is that?

It's like um uh it's a structured product uh fund where you get the upside of Bitcoin and the downside of gold. Huh. Okay. like like like there's a certain type of investor that that appeals to. I'm not saying it's it's everyone, but there are some people. And it's like, okay, well, that product speaks to what I need in my life in terms of my risk profile or my ideological views or my investment thesises. And so I I can buy that. So, you know, uh you can um uh you can do it with real estate, you can do it with preferreds, converts, you know, all of these different vehicles. And that's just in one market. And then there's, you know, 80 distinct capital markets. So you could repackage each of

these these uh different types of securitizations into every international market for every international currency. So it's like you know I could envision thousands and thousands of unique distinct securitized Bitcoin products trading in you know globally in all these different capital markets. Um and so you know how much room is there for that? Again, there's like, you know, not that many that are actually running the Bitcoin Treasury play. Most of them are just copying what's already been done successfully rather than kind of innovating and pioneering new things.

There's just still a massive design space in front of us. So, I I think uh uh we are in the first inning of this. You know, at the end of the day, also this goes back to the tipping point issue is like we've hit a tipping point. Investors want to buy these products. Well, guess what? Mainstream investors want to buy mainstream financial products. They want to buy it from their brokerage account that they already have. They don't want to buy Bitcoin on chain. They don't want they don't want to [ __ ] wire money to Coinbase and go set up the they want they want to hold this like they hold any other mainstream asset. And so that's completely understandable and and you know there's a lot of reasons why someone may not be able to buy Bitcoin. There's there's you know maybe that they don't have products

available in their market. Maybe there's uh they're not tax optimized products. So it doesn't make sense. Maybe yeah a pension fund that that limits the scope of what they have. Maybe they have an investment mandate from their fund that they can only buy certain types of instruments. Maybe uh they live in a in a market that Bitcoin as like holding it directly has questionable legal, you know, has legal uncertainty. Um you know, maybe they're in a country that's out. Yeah. Yeah. And so, um, you know, and then there's also like what I think a big thing that people misunderstand is just like the friction of doing stuff.

And, and you know, someone was explaining to me the other day how how much work it was for them to get money from their SIP account in the UK to buy Micro Strategy. It took them like 30 days. And they were like, you know, the you have to go to your broker, you have to fill out a form, you have to fax it to them. They have you have, you know, calling them multiple times a week to like move it along the process. People don't have time for that. And so, you know, people want one click. You know, people want easy. And so, um, you know, I I think I think we are so far away from delivering that experience to every investor as a brokerage account globally. You know, I think it's the biggest opportunity in the world right now.

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The best audience to distribute your product to your super fans. Duh. But what if you haven't found them yet? That's where Ken comes in. They help businesses scale digital distribution at a price that makes sense. Ken's verified distribution protocol identifies the best users for your product and connects you directly to them. Ready to find real meaningful users for your next big product? Join the Ken network today at milkroad.com/kjen, spelled KGN. Mhm. Mhm. Okay. Let me connect the dots there. So, there's two types of companies. There's Bitcoin treasury companies that are explicitly running a playbook using financial engineering to acquire more Bitcoin at a cost at a

lower cost base in order to increase their their balance sheet. And then there's corporations that have they're profitable for other reasons and are just putting Bitcoin in their balance sheet because they're financially savvy and they realize that it's a better investment to have an asset that is accumulating at 50% a year versus an asset that you know maybe is getting you 5% yield such as a treasury or something. So we have those two types. on the on the Bitcoin treasury company side, you're saying there's going to be uh I don't know double digits in every capital market around the world and every country around the world, which doesn't currently exist. So there's a long way to go in terms of the adoption there. Those Bitcoin treasury companies

might eventually become banks, financial institutions within those countries, Bitcoin exchanges. At the at the end of the day, like each of these companies is trying to build a Bitcoin balance sheet if you're doing the Bitcoin Treasury play. I I I prefer the term uh you know like bit bank or bitcoin bank but there's a lot of you know calling something a bank has a lot of loaded meanings. So um you know I I I think at one point in time maybe Sailor was even called Micro Strategy a Bitcoin bank and he did. Yeah, I remember that. People didn't like that. I think Yeah. Yeah. It's also there's regulatory issues with it and stuff but anyway I think it's an apt term but like what is a bank? Like a bank is is monetizing a massive balance sheet. Like that's what like if you want to build a

financial institution, you start with a massive balance sheet. And so um by building a big Bitcoin balance sheet, like you're gonna in the future like as this plays out like the arbitrage and arbitrage only lasts as long as the ARB is there, but like you know the the long-term uh vision for these is like take your balance sheet and put it to work to to u create shareholder value. Um, and so yeah, I I think it's it's it's kind of like a reinvention of of the system that we have today, but with like new new medium, new characteristics, new features that are possible for it. But like we're kind of going back to the beginning of how the old system started and we're we're we're we're redeveloping it in a new way. Mhm.

And and to me, what stands out there is the acceleration of Bitcoin, whether it be Bitcoin treasury companies in markets around the world or whether it just be a CFO saying, "My gosh, look at this company over here. Why am I not holding Bitcoin, which more and more are are starting to do?" And especially as you mentioned the age thing as their boards turn over and we have younger people on their boards, leadership This is, you know, this is it is inevitable, but it certainly what stands out to me is there is I mean it always comes back to limited supply, right? 21 million Bitcoin, let's say. I don't know if you have there's about 800,000 Bitcoin somewhere between

800,000 to a million Bitcoin that is held in in corporations, I think, is the rough range. You know, that is that is so small compared to where that's going to be in 10 years. So boom, one massive uh means of demand that is not slowing down and is only accelerating. What about uh what about sovereign wealth funds and central banks? That that's more unclear what's happening there. And feels like there's a lot of governments buying that we just don't know about to be honest. So wealth are are absolutely active right now. Um I mean we're talking to them regularly. Uh I think you know well I won't get ahead of my skis but there there's there's um a lot of uh investment interest from sovereign

wealth funds. Some of them have put pretty large sums of money. That's not a totally new phenomenon. I mean sovereign wealth funds have been active for at least the past six years um doing some high-profile stuff. But I it's really accelerated behind the scenes. and some of these sovereign wealth funds now I mean um you know there's one country that between their sovereign wealth funds and their the actual sovereigns um you know has accumulated a six figure number of bitcoins so I mean it they're it it's happening it's absolutely happening and on the central bank side it's slower much much much slower on the central bank side like I I think that there are basically the only central banks that are seriously pursuing things with Bitcoin

are those that are disenfranchised from the system. So, I mean, you know, the the the Russ the the the the people who are are um sanctioned, the people who, you know, Bitcoin is the best solution that they have. Um, you know, there's others that are are, you know, Bitcoin's a repudiation of the central banking system. It's it's very hard to get a central banker to get excited about Bitcoin because it's really just like true basic calling everything that they do a fraud. Um, so I like I I think you know where you're going to see central banks uh endorse and support it first um are places where they have a a political leadership that can just dictate to the central bank what to do. I mean even if even if the

US is was buying Bitcoin today the Federal Reserve would hate it like you know even if the Treasury was doing it. So like it's not like it's a different dynamic here as you know either. So, um, you know, and when I look at nations more broadly, you know, I think there's several different ways they're dipping their toes in. I would say probably the most mainstream thing that they're doing is monetizing their energy through Bitcoin mining. That's that's becoming a pretty widely uh validated thing to do. If you have excess energy capacity, like you should be monetizing it. So, I think there's probably 40 or 50 nation states that have Wow. 40 or 50. Wow. I didn't realize it was that high.

That's that's like a you know I'm I'm I haven't counted above. I'm guessing I mean there's a large number large large number that uh are either running large sites or are you know in the process of doing their first site and it's you know proof of concept stage but it's still hundreds of megawatts of power. You know that's that's not chum change that's big. So um but there's several there's there's at least five to 10 some you know in that range countries that have more than a gigawatt of power deployed um Bitcoin mining um which a gatt is a lot of power.

That's a lot. Yeah. Wow. What about um I I want to step back for a second. You mentioned the uh the ETF being a major tipping point earlier in the show for for our audience who are investors. What's the difference between investing in the ETF versus investing in a Bitcoin treasury company? Yeah. Well, there's there's a few. First off, you know, I think one thing that's not appreciated is like most of the world does not have access to a Bitcoin ETF. There's only a few markets that have uh access and it's way more difficult than people appreciate to get capital from one capital market to another capital market, especially as a retail investor. So, but in terms of what's the difference between them, uh,

first and foremost, a treasury company is an operating business. They're allowed to do things that an ETF is not able to do. They're allowed to take on leverage. They're allowed basically a an operating company, as long as they disclose it, can do whatever they want to do as long as it's not illegal. As long as they disclose it, they can take on leverage. They can buy businesses. They can use their own custody solution. They could self custody if they wanted to. like there's there's wide flexibility of what you can do with an operating business. It also allows you to access um different types of financial products that um you as an individual wouldn't be able to access.

Um like the corporate structure just gives you a lot of benefits. There's a lot of benefits that come with it. So, so, uh, that's really the main difference is like you're buying a business that's taking on more risk than an ETF is, and they're promising you, uh, performance for that excess risk. And, you know, in some cases, that's a wise decision. In other cases, it's not. So, it's not like, you know, just because someone's taking on more risk, it's guaranteed to pay out better than than not taking the risk at all. Yeah. It's it's essentially with with a it gives you access to yield.

If if they can if that treasury company can generate yield on the Bitcoin that they hold 10 15% is, you know, the range that a lot of them are able to do right now, great. You're going to get your Bitcoin. Now, the ETF, your Bitcoin only is about is valued at the price. Now, with the Treasury company, your Bitcoin is valued at the price plus that yield that they get, right? And as you mentioned, if they're innovative, if they can do different things with their financial engineering, then they can grow at a much faster rate, then the ETF could grow. But there's the risk. So, let's talk about the risk for a second.

H how how first let's let's talk about how how does a Bitcoin treasure company need to manage the risk of the leverage versus the volatility? Well, I think the the volatility is something that is plays to the favor of treasury companies because like treasury companies in general should have a very long time horizon. Their capital is permanent. It's not like a fund. It's not like something where there's redemptions. And so when you're able to have permanent capital, you're able to deploy with a long-term perspective, then you're able to uh absorb volatility and risk that other people can't for whatever reason or uncomfortable holding. And like that's that's your

opportunity to out outperform and do something unique in terms of like what's the right leverage. You know, Bitcoin is an extremely volatile asset. I I I don't really have an answer to like what's the right amount of leverage and um you know, I think it can be it it's dependent upon the business because it's dependent upon like does the business generate income or not? Does the does the business have another way of of paying the debt or not? Does the business have you know like um like you have you have to look comprehensively like is the business trading at a big premium to NAV and they're going to be able to take down future ATM proceeds. Okay. Well then that debt is riskier than someone who is trading at a discount to NAV has no

access to raising additional capital that's doesn't become dilutive um uh on a bitcoin per share basis and that they're going to have to carry that debt load for a while. So like there's different you have to like look at these situations differently. Um, you know, I think in general you want to keep your loan to value of the entire business at sub 30% sub sub 20%. So, um, and I think, you know, ideally you want to do what Sailor's doing where which really enables you to ratchet up the risk, uh, because he can't really be defaulted on like, uh, or he he can't, you know, he can't be marginal called, he can suspend his dividends. like he's built in a level of flexibility that's beyond what almost

any other treasury company out there is able to get from the market. So his model is amazing. It's like, you know, give me your money. I'm going to go speculate with it and like if it wins, I'm going to give you a little bit of the action and keep the rest for us and if I lose, I'm going to suspend the the dividend and you're going to have to wait until, you know, the market comes back. Like I think that goes back to your earlier point of like you want to invest into things that you have a long-term confidence in where you know it doesn't matter if it's a bare market or not like you know you're going to recover in time. Um so that's generally how I think about leverage. The more leverage you can make in the business without taking on additional units of risk the better. You

know that's there's kind of a lot of kind of data and information out there showing you kind of what that um convexity looks like etc. you know, I think um I think, you know, in terms of how these businesses like make money, it's not just taking on debt and leverage. Like I think that, you know, uh uh if you looked at a bank and you said the only reason a bank makes money is because of leverage, you you wouldn't be like totally wrong. Um but there's a lot more that goes into operating a profitable bank than than uh just leverage. And so I think like you're going to see these treasury companies really evolve and mature going forward. I think it in order to like

stay competitive, in order to continue to have access to these capital markets, you're going to have to differentiate your your business. And you know, I I think, you know, there was so much money that came into treasury companies so quickly uh that we had a glut of of of businesses clone the strategy, create the headline number that maybe like would attract investor interest. But if you read into the details of actually what they did or the terms of the the loans they took, some of this is like predatory stuff that you would you would never agreed to in a million years. And so I think the market's also learning that it has to uh get more sophisticated in terms of

assessing like which one of these companies is going to uh actually be profitable and successful and make you money versus which ones are at a risk of blowing up. Um, and there's a couple out there that we've looked at that it's like if Bitcoin went to like 90K, 80K, you know, it'd be rough. It'd be rough for some of these treasury companies. H how how big of a risk is this is this potential blow up? Not big because uh the companies that are are taking on that type of financing, they don't have very much money. So, I mean, it's like of the million bitcoins that are owned by corporates, 600 and something thousand of them are are strategies. So, like take those out. So, now we're down to

like 400,000 Bitcoin. Okay. Of that 400,000 Bitcoin, 75% of it is owned by, you know, the top 20 companies. Um, you know, a good number of those companies are still like in the process of despbacking and they actually haven't even gone live yet. So, like, you know, I think like some of these companies blowing up, you're talking about singledigit thousands of Bitcoin. Um, and there's not that many of them. So I the risk isn't there now but as this category expands which is going to expand uh um quite a bit uh like it will become a growing and increasing risk.

Um yeah yeah something to keep an eye on. Talk to us about Nakamoto. What's the opportunity for investors with Nakamoto? So Nakamoto is actually like um uh the whole story of Nakamoto is is pretty interesting, but like we've been into this treasury play for about 18 months. So uh like before Nakamoto was even an idea, we were investing into treasury companies and the first one that we backed was a company called MetPlanet um out of Japan uh through our hedge fund UTXO Management and that was like it's what really showed us the how effective the playbook is. It showed us that this is not a Michael Sailor thing. This is

like a a broader capital markets phenomenon. And since then, we've funded through UTXO like 16 or 17 treasury companies at least 11 different capital markets. Maybe that number's even gone up. Like we're we're we're closing deals all the time. And so, uh, like we've realiz and like UTXO on the back of these investments became the number one, uh, performing fund in the world over the past five years. So the the like we are extremely bullish on the strategy of taking these to new markets but it takes money, it costs capital.

And so we decided, hey, you know what we should do is we should build um we should create a treasury company that we can build a massive balance sheet and we should use that balance sheet to underwrite accelerating the the seeding and launching of these treasury companies throughout the world. And so that's what Nakamoto was. It was like how do we build a sovereign wealth fund of Bitcoin? How do we build uh uh a central bank of Bitcoin that can uh underwrite the creation of Bitcoin banks and financial institutions in every major capital market globally and build the biggest balance sheet in each of those markets so that um we're a they effectively in the future will become the biggest financial institution of that market. So that was kind of the

thesis. Um we also saw a uh common set of of needs across these treasury companies. You know the ability to custody funds, insure funds, uh prime brokerage, lending, um uh structured products, uh media compliance, etc. And so we also see an opportunity to acquire operating businesses that are Bitcoin native that generate cash flow that grows uh proportionately to the price of Bitcoin. Meaning like if I'm charging you basis points on custoing your funds if Bitcoin goes to a million bucks. Um I'm still taking the same number of basis points on your Bitcoin.

Like my fees have gone up proportionately. So, we're looking for businesses that can basically service this global portfolio of treasury companies and um over time can can scale the cash flow of Nakamoto as well, which we think gives us like a lot of optionality for whatever the market holds in the future. So, that's the what we're building. Um, you know, we've made two investments now from Nakamoto that we've announced uh one last night uh into MetaPlanet. So we we doubled down on Metaplan in a big way and the it's only one day of trading data so far but we're up pretty considerably. So it's like okay sweet like non-dilutive shareholder value and we did another one in in uh Amsterdam which will be the first uh Netherlands listed treasury company which the Netherlands is a huge

market. Um so we're already active on the investing side. We haven't closed any uh M&A deals yet but we have announced that we have an option to acquire uh BTC Inc. which is, you know, Bitcoin Magazine, the Bitcoin conference, and UTXO, um, once it completes its PCAOB audit at the end of the year. So, um, you know, we intend to have like one of the few treasury companies that's actually generating pretty significant, um, cash flow. And yeah, like I said, I think that cash flow gives you a lot of optionality.

Like there's going to be a period of time where a lot of these treasury companies will trade at a discount to NAV. Um, that's okay. Micro Strategy traded at a discount to NAV. If you're generating income, that's going to give you the optionality of like buying your shares back at a discount to NAB, which is accretive to shareholders on a bitcoin per share basis. Um, so you know, I think that those are all very useful useful tools to have and I and like at at to to also pick up on one other thread that I think is important to to to touch like this MNAV premium or discount, you know, uh, uh, concept at the end of the day like boil it down in like the simplest terms is like the MNAV is just a a proxy for showing

growth. So if you know you have a certain amount of bitcoins today and you're growing the number of bitcoins that you have tomorrow then I will pay more than the amount of bitcoin you have today because it's going to be worth more tomorrow. So um and if likewise like if you're losing bitcoin if you're burning money like and you have 100 bitcoins today I'd pay less than 100 bitcoins because like by you know by the time I realize this investment you're going to have 95. So that's really like in its simplest form what the premium represents. And if you can't sustain growth, then you're not going to trade at a premium. So like that's really that's the crux of of of the matter. So um like so from that perspective, I think it's going to end

up being very important that these companies generate cash flow and income because that ensures that they're going to have kind of growth of the balance sheet no matter what the market conditions are. Um and and I think that those that are able to sustain their business operations and thrive in a bare market is going to create a lot of opportunity for market efficiency for these firms. Like we're already looking at public companies right now that have Bitcoin on their balance sheet and are trading at a discount and saying what would it take for us to acquire this business, restructure it, uh you know uh uh take the Bitcoin, sell off sell off the the pieces and you know and how accreative can that be?

Very accreative. So it's like the the the the the apex treasury companies will you know uh absorb um and reallocate the resources of the the ones that are not destined to make it. So again it gets back to like not all treasury companies are the same. Like you know you want to back the one that's going to be eating the other company at preferential terms not the one getting eaten and being like so sorry your you know uh consolatory check. So, um, yeah, it it feels to me like there is an opportunity if there is not a Bitcoin treasury company in a certain capital market and you can be a part of the

first one. That feels like an obvious opportunity. No, I mean I mean MetPlanet started as a $15 million company. Like even with the down market that we're in right now, Metad Planet's down a lot from the top. They're sitting at like a three and a half four billion dollar market cap right now. So, you know, in a year they they've 200x the value of the company. We're like, oh no, it's it's it's bare market winter for treasury companies. It's like, okay, if your time horizon is 45 days. So, the um and like we've done, like I said, we've gone into all these different markets. Every one of them has hit. We have we haven't had one that hasn't that hasn't been successful. the the one we did in the UK was is called Smarter

Web. Um was the most successful IPO in the history of the UK capital markets going back like 600 years. We we we invested at a $3 million um uh three million. That's it. Okay. And you know, it's down significantly from its peak. I think it peaked at probably a billion half dollar market cap. Um but right now it's worth like a couple hundred million dollars, you know, a few hundred million dollars. We made that investment in like February, March. So, you know, the the Yes. like being the first in a market, it's like, you know, there was a time where it's like when you were the first Bitcoin exchange that entered into a market, like, yeah, you're going to

clean up. And so, I I I think uh uh what what are the markets that don't have a Bitcoin treasury company yet that are like lead what are like the leading markets that are like missing one? Oh, I mean, uh, ones I'm really excited about. So Germany Poland Turkey Saudi Abu Dhabi, the any of the GCC countries. Um, um Malaysia Singapore, we just did one in Korea, but it hasn't like we just got announced like a week ago. Um, Russia, uh Mexico.

I feel like I should stop you. You're just going to keep going. It's a long list, isn't it? It's a long list. It's a India. I mean, there's there's two in India. Both very very tiny. So, like, um, we're still so early. We are South Africa. South Africa is one of the biggest capital markets on the planet. Like, I mean, like, there's so much money in all these markets. like like if you are the first one if you can execute and you're the first one you are a billion-dollar company. H how how quickly are are we going to get these treasury companies in these markets that you just mentioned? I don't mean specifically but like generally like what's the what's the timeline for adoption here?

Within the next 24 months. Okay. It's fast. It's fast. I mean our goal is to try to be underwriting one of these every week. What a week. Yeah. I I we it's gonna take us time to get there. But the Yeah. I mean the the there's there's unlimited opportunity and then it's like okay well as soon as you do those then it's like the preferred then it's like there there's so many other products to bring to market behind the equity once the equity is launched. So it's like the equity is just like the kind of the starting point. Yeah. Yeah. You know, I also want to kind of hit on something that I think maybe would be helpful for your audience, which is like just, you know, prioritization from a perspective of an investor, like what to care about. And, you know, uh I won't I won't shill

treasury companies specifically, but you know, Bitcoin as a concept is one of the most radically disruptive concepts like of the past thousand years. And playing out in front of everyone's eyes right now is literally Bitcoin uh co-opting and cannibalizing the global financial and and monetary system. And uh that monetary system is the foundation on which the world global world order is is built upon. And so like like the world is transforming in in front of your eyes. And you know, when you're investing capital, you like you want to invest into ideas

that not only are massive, but are are happening. And so, you know, I think when people are investing into crypto or they're like, "Hey, I'm in I'm into play to earn or I'm into this or I'm into that." It's like these are tiny ideas like relative to the value of all financial institutions in the in the world. like why why are you wasting your time investing in something that's like okay you know uh marginally marginally impactful when you could be underwriting the next central bank of Japan or of Germany you know like it's just a whole other level you know you know why I I'll tell you why because I I speak to this audience all the time every day and I mean many people listening would fall

fall into this audience of finance is very difficult to understand most people do not understand finance So they don't truly understand the opportunity that you're speaking of, right? You do. You work in this every day. And two, they look at Bitcoin and they think it's too late. They think that's not going to get me the wealth that I want because everybody I mean this just comes back to a general society problem. Everyone wants immediate returns, right? So they think, well, I'm not going to wait because if I have to if I have to wait, so I'm going to go try to get a 100x because everybody over here apparently is getting 100x on YouTube or on, you know, Tik Tok. So yeah, XRP is going to 10,000 and every Tik Tocker I follow says it. Great. I'm in, you know, and

it's it's a it's it's it's unfortunate because I agree with everything you're saying. Yeah. Well, I I you know, uh first off, from the perspective of, you know, uh it's too late. It's like, you know, we're not even 1% into the story of Bitcoin. I don't even know if we're.1% into the story of Bitcoin. So, it's like, okay, it's not too late. and these treasury companies like I think one of the things that has really been powerful for them is that they've given that 100x type uh DGEN need for for you know volatility and action um that people wanted formerly from shitcoins like these are these are this is risk on top of risk these treasury companies and so

you know we've had multiple hundred xers over the past you know 6 months 12 months so I think you know From that perspective, there's always a box that you can you can compartmentalize some component of Bitcoin into where you can get that upside without, you know, building on a a foundation of of, you know, mud. Um, you know, the other what was the other issue that you highlighted? It was uh the 100x return. Exactly. It's a it's the I'm too late to to get the returns and and it's the I don't understand finance, right? So, I don't understand the scope of what you're saying that the scope of where

it's like I understand gaming or I understand, you know, whatever is closest to me, right? Yeah. So, let me let me hit on that point because I think that's one I can really identify with. We almost didn't do the metal planet investment initially because it was a public security and you know I've been in Bitcoin for 13 years like is all I know. I'm way more comfortable with tokens and you know uh kind of like this whole like let's pretend securities are are not a thing and we can kind of just live in this digital realm. It was you know scary to have to interface with regulators and go through these processes and I'm like oh man this is like beyond the scope of what we can do.

But then once we did it, it's really not that hard. Like it's actually you can learn it really quick. And in fact, all these things that we think we created or invented in crypto or like you know crypto print crypto inventions, they're really just reskinning things that were invented in traditional finance. And so people actually can understand it pretty quickly because they're like, "Oh, securitization. I don't know what that means, but wrapping I know what wrapped Bitcoin is. Know what wrapping an asset onto another chain is." you know, like so there's the the the the how we understand crypto to work is it it has direct parallels to every part of the of the legacy, you know, capital market. So I think people could learn it quickly. I think in terms of the scale of opportunity, the amount of capital that's in crypto versus the amount of

capital that's in the capital markets that's in the capital. Yeah. Yeah. Yeah. Like hundreds of trillions. Hundreds of trillions compared to four trillion, right? like, you know. Yeah. And and and and Yeah. Yeah. And in a in a liquid hundreds of trillions, not a not a, you know, versus the the the the four trillion market cap of of crypto that a lot of it's you know, not actually liquid. So, um so yeah, I think it's like uh it's something that like you can learn and that's also like where edge comes from like you want to find places where you can develop some sort of information asymmetry. And so like there's very few people that understand both the Bitcoin

crypto markets and the trapy markets to get like both of them. Like it's a it's a huge kind of like uh um chasm between the the two of them. So I would encourage people to learn. And then I'd also say like if you don't understand like the financial principles at play in the the capital markets, you also shouldn't be buying tokens because those financial those same financial tools are at play there. Uh and if you don't understand it, then it means you're the exit liquidity uh on those strategies. And so like look, tokens are securities.

you know, we might define it away from pretending they're not, but they people buy them to make money, which is what a security is. And, you know, now you can just buy real securities. You don't need to buy fake securities. Buy real securities. So, um, yeah, I don't know. I just I I I feel like a lot of people are chasing the pennies in front of them. um versus like taking a little bit of a zoomed out perspective and realizing the biggest wealth event in history is happening right now in front of your eyes. And if you're if you're if you're focused on these tokens, you're missing where the real money is to be made.

Yeah. Yeah. And and where the riskreward far outweighs the the what you're missing out on on taking that shot at a 1,00x. Just be a little bit more patient. Give it a decade and you're gonna get the same end result. David, absolute pleasure to get you on the show today. I feel like we could talk for another hour, but I'm gonna wrap it here. Really appreciate you joining us. Well, I enjoyed the conversation. Thank you for having me and and um yeah, we should do we should schedule a follow-up to see uh how correct these predictions were, you know, 12 months from now.

Let's do it. Let's do it. As as always, got to remind you guys, none of today's episode is financial advice. I'm not your financial adviser. David is not your financial adviser. If you're making investments, you should speak to a professional cuz investing is risky. Thanks for tuning in, y'all. Have a wicked awesome day. We'll see you back again tomorrow. If y'all are making swaps or trades right now, highly recommend you check out Milkroad Swap. This is a deck that we built in partnership with Cow Protocol. Why do we build it? Not to make money, just honestly. So we could have a place to do our swaps for the lowest fees that we could find. This is the fees on Ethereum, Arbitum, and BAS are only 0.15% fees. Uh this is a huge difference from uh other centralized exchanges that

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