Transcription
Good morning everyone. My name is Adam Livingston and I am the Bitcoin wizard, and boy do I have a fun one for you today.
I've had this idea that's been rattling around in my noggin, and it is potentially the most bullish Bitcoin bullish strategy short fiat idea ever conceived. And that would be stretchbacked stable coins as a self-funding attack vector on the fiat system.
I need you guys to imagine a yield-bearing stable coin that lives on Stretch, which is Strategies' par-pegged 10.5% dividend machine. And then you could stack DeFi leverage on top, because right now compound pools let you borrow USDC at roughly 1.06% today. Now, obviously, there are some liquidity limitations there, but I'm just saying this presentation can possibly blow your mind if you are willing to accept the spread between leverage and the payout that Stretch gives you, and how a stable coin that is backed by Stretch could possibly change everything.
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So, right now, there are no stretchbacked stable coins. This is Bitcoin Wizard fanfiction. So, this is not financial advice. This is financial entertainment. That said, if somebody were to build something like this, my heavens, this could change absolutely everything.
So obviously, the number one thing that's been bumping around in my noggin is that Stretch has an absolutely lethal collateral profile because of number one, there is price stability. Remember, the PEG strategies finance nerds babysit this share price like a helicopter parent. They nudge the dividends and the share count so it paces between $99 and $101. So you could call it a cash equivalent, but I call it a hand grenade with a pin duct-taped in place. If T-bills wobble a basis point, bankers panic, but Stretch barely flinches.
Now, on top of the price stability mechanic, we also have a very rich coupon. As of now, 10.5% paid monthly, which significantly outperforms traditional fixed income products. If you're paying a little bit of attention, Stretch has already rendered savings accounts totally irrelevant. This is like savings accounts on steroids, then mailing you the needles each month so you never cycle off.
And on top of the price stability and the incredibly rich coupon, we look at the deep coverage. Everybody knows that Strategies is currently sitting on over 100 years of dividend payments for all of their perpetual preferred. That's correct. Over a century of dividend payments. And on top of that, they're already admitting that they're willing to sell high cost basis Bitcoin to pay dividends. And remember, that's after $26.9 billion of MSTR equity issuance this year. I'm pretty sure they have no issue raising money to pay dividends. And in fact, if you just ignore the fact how they can get the money, they already have the money because remember, risk is mispriced. If you've been paying any attention to this channel over the past few months, you should know that by now.
And on top of that, Stretch is obviously in a regulated wrapper because it has the SEC stamp. Quite obviously, Stretch is not some Bahamas registered mystery meat. So, I'm just saying if there is a Stretch stable coin, you can wrap one share into one STRUSD token, and then you would stay inside legacy compliance while enjoying DeFi liquidity. It would be like sneaking a flask of single malt through TSA because the label says holy water.
So, what am I trying to say? I'm saying that Stretch, in my humble opinion, is incredibly stable. Obviously, stable enough for cowards, in fact, and juicy enough still for degenerates, and legal enough for your compliance officer to sleep at night. And this cocktail is why this wizard thinks the fiat system should start writing its own obituary.
So, now it's time to talk about the carry trade mechanics here. We're going to talk about the money printer that your banker swears doesn't exist. The key inputs obviously, the Stretch coupon, 10.5%. Every 30 days, Strategies wires you money big enough to make a MUN bond cry.
Now, I did some research to see the cheapest borrow that you can get in USDC. Right now, according to my research, that is 1.06% inside Compound. That is cheaper than your grandma's HELOC by quite a lot. Now obviously, like I said, there are liquidity limitations with this borrowing. That said, there are borrowing rates that are still taking advantage massively of the spread between a 2% to 3% and a 10.5% from Stretch. So, I don't want to see the comments, "Adam, you can't get 9 figures of borrow for 1%." Yeah, I know. I've already said that twice now. Calm down.
And let's use a 75% practical loan to value once STRUSD gets the green light from whoever wants to be the stable coin issuer of this potential product. And this would mean that the protocol happily lets you pledge $3 of collateral and borrow two. Now, the Compound policy is already pretty much rubber stamping the framework. All that you would need is the stable coin oracle, a DAO vote, and the ritual sacrifice of one clueless TradFi economist.
Now, we have to talk about the leverage impact, the rocket fuel. The spread between 10.5% and 1.06% is 9.4 percentage points. That difference is so wide that you could march a parade of bankrupt regional banks through it.
Now, if you loop this four to five times, you recycle the borrow, you buy more Stretch, and then you rinse and repeat. You clear 40% to 50% cash on cash every single year while sipping iced coffee. And then 8 to 10 loops, well, you are printing high double-digit returns. At that point, the line between savvy investor and friendly neighborhood bond vigilante blurs very nicely. At this point, the only things that can stop you are a liquidation bot and your own sense of shame. And I know that you left the shame back in 2022 with yield farming and Zoom happy hours.
So, put differently, if you combine a Stretch stable coin and low-interest DeFi lending, we have found a very legal way to mint a lot of yield, give Michael Saylor more money to buy more Bitcoin to make your investment more safe, and then you can both laugh at the fiat overlords who are wondering why nobody wants their 5% treasury scraps.
So, now it's time to talk about the kill chain from loop to dollar pressure. Wall Street right now is a herd of lactose-intolerant cows. The moments that they smell a 9% net yield, they are going to stampede out of 5% T-bills faster than you can say duration risk. Every single dollar that flees the Treasury auction forces Uncle Sam to sweeten the coupon, which means higher taxes, bigger deficits, and another congressional hearing where nobody understands compound interest.
Now for the fun part, we got to talk about the Bitcoin bid. Every single new billion of Stretch issuance hands Strategies roughly 9,400 fresh Bitcoins at $106,000 per coin. Michael Saylor is Kirby from Nintendo, inhaling sats until the blockchain coughs. The more Bitcoin he vacuums up, the stronger the collateral gets, the broader the investor grin, and the bigger the next issuance cycle.
And then you start to see dollar displacement in the Eurodollar markets. The offshore banks settle trillions with IOUs that whisper, "Trust me, bro." And then all of a sudden, they can swap those for the Stretch stable coin, which is a yield-bearing token with Bitcoin muscle behind it. And the Fed's invisible leash on global liquidity becomes a decorative scarf, which would mean that Jerome Powell would still control the domestic plumbing in the United States, but the ocean currents would shift away from his water pump.
And then we would see reflexive feedback. Higher Bitcoin price boosts the Stretch asset coverage. A beefier balance sheet then justifies the 10.5% coupon, and then that fat coupon would drag in more capital, which buys more Bitcoin, which boosts the price again. So it's pretty easy to see why a Stretch stable coin would bring in a positive feedback loop that does for fiat what a black hole does for starlight.
If you put this all together, you have a four-step death spiral for the US dollar. You starve it of yield. You pump Bitcoin. And then you reroute settlements. And then you let reflexivity finish the job. Enjoy the show and bring popcorn denominated in the Stretch stable coin.
Now, let's talk about some leverage scenarios, okay? Some risk versus return. I'm going to keep this zoomed in so you can look at the table first, but we're going to look at the 2x leverage, the training wheels. So $200 grand collateral, $100 grand debt. Now that would be a 99% return on investment for any given year. And when you guys look at all these different leverage scenarios, remember there is a price drop buffer when it comes to your leverage.
Now, I'm not advocating for anything. Remember, this is not financial advice. This is financial entertainment. But Strategies already has 640,000 Bitcoin. They have over 100 years of dividend payments. If you trust Stretch to trade within that $99 to $101 range, doesn't the leverage seem a lot more safe to you? I'm not saying that it should. I'm just saying in my humble, not financial advice opinion, that it seems very safe. And I'm the most risk-averse investor in existence. I hate leverage, but I would love it on something like Stretch. In fact, I would really love it if I can get DeFi leverage to take advantage of that Stretch coupon.
So, let's just look at the 10x leverage scenario. Okay, that would mean that I have $1 million in gross Stretch. Okay, $900,000 of it comes from the debt, which would mean that I put in $100,000 to get an $8,700 monthly coupon. That's correct. A $100,000 investment with 10x leverage would get me $8,700 in a monthly paycheck. And my interest payment would be $795. So, I would net just under eight grand every single month, which would mean a 95% return on investment every single year. And that would mean that I'm still safe on less Stretch drops to $90, which is $9 under what it's designed to trade at. I'm just saying this is when my mind starts to get blown a little bit at the potential of using leverage against the fiat system.
I love the idea of a speculative attack. Okay? All I'm saying is that if you understand that risk is mispriced and Bitcoin is the least risky asset, and Strategies has the most of that least risky asset, and it's second-rated in seniority behind Strife. I guess technically the convertible debt is the highest, but you know that's going to be equitized. I love this idea of digital credit backed by digital capital on fully digital rails. And right now, the normal version of Stretch only has two of the three because the rails are still in traditional finance. I'm just saying, according to my math, if you get 2x leverage, you would have to have Stretch go down to $50 to be liquidated. And I don't see that happening at all. But, you know, that's just my humble opinion, fellas.
So, I'm just saying maybe if one day these things are built, it is an option, not advice, an option. You could choose the tier that matches your risk appetite. I'm just saying hypothetically, if Stretch stays in that band, pays the coupon in perpetuity, why wouldn't I leverage and just get more Stretch exposure? I just think that every single turn of this flywheel sucks the yield out of fiat and shovels Bitcoin into Saylor's corporate vault, and I might be acting accordingly.
So imagine as this thing scales, okay, it would create multiple pressure points on traditional dollar infrastructure, quite obviously, which would just erode the Federal Reserve's control over global liquidity. Imagine there's a board central banker staring at a 5% Treasury bill like it's cold oatmeal, and then someone hands them a Stretch USD stable coin paying 9+%. They would imagine all of the sovereign wealth funds and the FX reserves. They would do what any rational mammal would do when offered steak instead of gruel. They would lunge.
Every single basis point that would flee into the Stretch USD stable coin would leave the Treasury's weekly auction, which would just nudge the coupon costs upward and give deposit hawks very fresh migraines. Think of the collateral substitution to repo desks. They live on high-grade collateral. Everybody knows that if you show them Stretch with that level of asset coverage and tied to a $99 to $101 trading band, they would grin, slap a Treasury-sized haircut on it, and pledge away. Government bonds at this point would start looking like that dusty old VHS copy of Titanic that you have in your attic.
And then you would see the growth of the shadow dollar because now we're venturing offshore where Eurodollar IOUs pass around like bar coasters. If you would plug the Stretch stable coin into that ecosystem and give it a real yield, you would watch it balloon into a private yield-bearing shadow dollar. The Federal Reserve suddenly finds its open market operations less effective, its swap lines less critical, and its influence shrinking like a wool sweater in hot water.
And then there's the widening spread. Every time that Strategies tweaks the dividend to defend the peg, the gap between the private yield and the sovereign yield stretches wider, and that spread becomes a billboard screaming, "Ditch treasuries and earn more here." The bigger the spread, the faster the migration, the louder the coughing fits in Washington. In the end, the most powerful central bank on Earth gets outbid by a preferred share wrapped in a smart contract. And truly, I hope C-SPAN is rolling when that penny drops.
So, let me just wrap this up really quick for you. The Stretch US dollar stable coin would weaponize yield hunger all across the world, in every jurisdiction. The appetite for collateral, the offshore liquidity, and the simple greed of the common man. When all of those four shocks land together right here, the dollar is not going to explode. It's going to quietly lose blood pressure. And that is how empires fade. Not with a bang, but with a reserve manager scrolling CoinGecko during the staff meeting.
All right, my dearest little wizard goblins, before I load the metaphorical nuke into the dollar's reactor core, we need to walk the perimeter and mark the mines. Ignore these constraints and the only thing you will be detonating is your own portfolio.
We have to talk about liquidity constraints. Obviously, Stretch right now might currently trade only tens of millions of dollars daily. If you try to yolo a 9-figure loop through that pipe, you will gap the price faster than a Kardashian deletes tweets. That 1% rate USDC price is an intro price. If you fill the pool, the algorithm will probably hike you toward 3% to 5% in no time, which in my opinion, the spread still obviously survives.
Then we have to talk about the coupon risk. Obviously, you guys know in my opinion, it's not that risky, but my opinion, it's not advice. What if Coin takes a 40% swan dive and the market overreacts? The board meetings might get a little bit tense. The dividends could shave a few hundred basis points. The peg could drift below the $99 range. And the margin bots might start to smell blood a little bit. All I got to say is that if this thing ever comes to fruition, don't be an idiot and size your positions so a temporary dividend diet does not send you to instant liquidation rehab.
Regulatory compliance would also potentially be an issue. Obviously, you have to keep the ghost of Gary Gensler off of your back. Whoever would decide to start building something like this would have to plan the workflows that would satisfy auditors. And then obviously, you have the liquidation mathematics, of course.
All I'm saying is that if something like this comes to fruition and you treat these guardrails like the moat around your castle and you master them and you weaponize yield, collateral, and reflexivity against fiat, this could be potentially a winning strategy. But if you totally ignore them, you could become a cautionary tale that's quoted by risk managers who still think that Microsoft Excel is dangerous.
To sum it up, I think that stretchbacked stable coins would weld three ingredients that the fiat system never expected in the same cauldron. Rock-solid Bitcoin collateral, a share price that hugs $100 like Velcro, and USDC funding that you can borrow for the price of a bad gas station coffee. If you blend all of those things together, I think that you could get a carry trade that spits out junk bond level returns while behaving like a money market fund.
One more time, the chain reaction in plain English. Every single dollar that's chasing the 9% to 10% Stretch yield, it would desert the Treasury auctions. That would nudge Uncle Sam's coupon higher. Strategies would then scoop the dollar, issue another fresh share of Stretch, and then Michael Saylor would just buy more Bitcoin. Bitcoin would then tick up. Stretch collateral looks stronger, investors gain more confidence, and more dollars arrive. Rinse, repeat, and watch fiat liquidity leak like a sprinkler that the Fed cannot repair.
I think that we could be on the precipice of being able to treat this loop with respect, and it would work like a slow, relentless speculative attack. The dollar stays on stage, but only now it would share the spotlight with a private stable coin that pays you to hold it and buys Bitcoin on your behalf. This is the monetary transformation that is happening in real time without a single bill passing in Congress.
So, the quick final takeaway, I'm not trying to give you guys some moonshot meme. You know, I'm better than that, okay? I'm just describing a mechanism that could potentially weaponize higher yield against sovereign debt. And me personally, I would take that trade a lot because I would like to channel the flow into digital immortal scarcity. Whatever happens, I'm going to execute responsibly. I'm going to keep my buffers thick, and I'm going to enjoy the view while the old system searches for its missing lifeboats.
My name is Adam Livingston. I am the Bitcoin wizard. If you like this content, please like this video, subscribe to the channel, and share it with your friends and family because they need to hear the orange gospel as well. Have a terrific day. Do not party too hard, my dearest little goblin children. Class dismissed.
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