How Digital Credit Could Usher In A Bitcoin Future

What's going on, guys? Today, we've got a great conversation with Matt Cole. Matt is the CEO of Strive Asset Management, and in this conversation, we do a breakdown of digital credit. He explains what it is, how it works, what the risks are, and how they would respond to different situations. We also get into all the pros and cons of both strategy and Strive having these instruments in the market and how institutional investors are responding. I found this conversation fascinating. It helped me better understand digital credit. I hope it helps you as well. Here's my conversation with Matt Cole.

All right, Matt. I want to talk about digital credit. This seems to be taking the world by storm, but at the same time, it is creating massive controversy. Can you just describe what is the problem that digital credit is solving?

Yeah. Um, I've been reflecting on this a lot, and I think the problem that it's solving is actually bigger than I first imagined. So, maybe I'll start with what I thought the problem that it was solving is, and kind of what I think the problem that it's solving is now. Um, so when, when we first launched SATA, what I viewed it as was just a preferred equity security. It pays a high interest. It is backed by by Bitcoin risk. And as an issuer, I was concerned with a couple of risks on the issuer side. So, like Strive or Strategy, namely maturity risk, just that Bitcoin is such a long-duration asset. It has no cash flow, and we're trying to underwrite a perpetual bull thesis in Bitcoin. And what I wanted to do is have the longest liability I possibly could have, which is obviously a perpetual liability. Um, and then secondarily, remove negative convexity to the maximal degree to the upside. So, because we know Bitcoin over time on average goes up and to the right, and I think it's going to go to literally infinity, that I would prefer for my my liability to not convert to equity when Bitcoin's ripping higher. That that can constrain the total return as an issuer. So, I just viewed digital credit as a better source of financing, and I was happy to pay a double-digit interest rate to not have the negative convexity to the downside of maturity risk and not have negative convexity to the upside of equity conversion. And I just thought that was a a good trade for us as an issuer. And so, I wanted to be all-in on digital credit. And just coming from the fixed income world, I know how yield-starved we are. Uh, you've covered a lot, and I agree with this, the concept of the 60/40 portfolio being dead. And, you know, coming from a fixed income background and just thinking through, you know, what I, what I think that's almost like a consensus position: 60/40 is dead, or it's consensus in our circles. What is completely not consensus is what do you do with the 40? Uh, do you put it in Bitcoin? Do you put it in, you know, prediction markets? Do you put it in digital credit? Uh, what do you, what do you do with it? There's a million. Do you put it in, you know, trend-following solutions? I've seen so many different ideas, a lot of interesting ideas. Um, but I thought digital credit could make a play at that. So, that was just kind of the the simplistic idea um to start.

Where I think it's going now is something much bigger. And and this much bigger idea is that right now, fiat currencies are still the primary form of currency. The dollar is still the reserve currency of the world. As a as a Bitcoiner and a longtime Bitcoiner, I firmly believe that this debt crisis will not get better, and we're transitioning to a Bitcoin future. The hardest part about that transition is how long will it take? And no one knows the answer to that. I think Bitcoin continues to go up over the course of time. But does it take five years? I don't think so. Does it take ten years? Does it take twenty years? Does it take thirty years? Does it take fifty years? No one really knows what that transition will look like. But when you look at other other kind of emerging third-world currency uh countries that have had their currencies debased, what you'll see is in those countries, as that starts to happen more and more, the citizens look for alternative things to use as currencies and to kind of ditch the whatever the Argentinian peso or whatever the currency we're talking about. And I think that's going to happen in the US as well. And I think digital credit could be the most important asset in this transition period that kind of smooths it out, minimizes the volatility. People see where it goes, but you don't have to make as hard of a prediction of when it happens. You don't have to write out as much volatility. And what's interesting is that if that thesis plays out and digital credit is this transition asset, maybe the ultimate transition asset, I don't think it'll be the only transition asset, then it in and of itself could actually accelerate hyperbitcoinization because you actually have fresh sources of demand coming in to digital credit. So, I think it plays that role. I don't think it's a forever thing. I think if we move to a hyperbitcoinization world, then Bitcoin becomes money. But I think it could become very interesting for several decades.

Now, when we think about this digital credit, can you just explain the very simple concept of you all are taking capital from investors, you are promising them this yield in perpetuity, and then you are buying Bitcoin? How does this work, or or like, when you describe it to someone for the first time, what do you say?

Yeah. So, as as an issuer, it's really a carry trade. So, we have a cost of capital. So, for SATA, it's 13% right now. It's variable rate um, cuz the issuer, we are trying to peg it, minimize volatility around 100. So, it could go up, could go down. For Stretch's products, it's 11, 12%. And so, what we are making an investment bet on is that the average compounded annual growth rate of Bitcoin into the future will be better than that financing rate. That is what needs to be true for our common equity investors to outperform Bitcoin. Bitcoin is the hurdle rate. Uh, that has to be true. That does not have to be true for the preferred equity investor to win and to have a great asset that could pay the interest in perpetuity. The interest rate for that to be true for them is much lower. Uh, so for SATA right now, it's in the neighborhood of 6, 12% as that break-even interest rate where Strive could pay interest literally forever into the future. And and so sometimes people hear that and they say, "Oh, Strive is saying that if Bitcoin goes up 6, 12%, that everybody wins." No, everybody doesn't win. The SATA investor wins. They have a good credit. The common equity investor, how it would likely play out would be Bitcoin's going up, call it 6.5% on average, and the common equity probably largely just holds flat. It doesn't participate because all the Bitcoin returns are filtering into the preferred equity instrument. So, it's just a a structured finance instrument where you have the more senior path and you have the more junior common.

Now, when you think about this actual uh kind of return of Bitcoin going forward, what do you think that is? Is that 20%, 30%, 40% year-over-year, let's say for the next decade?

Yeah, we we have a long-term projection, call it for the next couple of decades of in the neighborhood of 30% a year. Um, right now, with Bitcoin in a bare market, when Bitcoin goes down, that compounded annual growth rate projection actually goes higher um, because to make up for kind of the bare market. And so, right now, it would be on the higher end of that range. I think this is a a time where you want to take risk. And and so this kind of gets into the theory of amplification for a Bitcoin treasury company. And and what I mean by that is that we have stated that, you know, we think somewhere, you know, call it in the neighborhood of 30 to 60, 70% is kind of for a clean balance sheet company, the range of amplification that generally makes sense um and could be managed. And and the reason that we go to 60 to 70 actually is to say that Bitcoin going down itself could actually push amplification beyond that. In a in the depths of a bare market. And so, we ourselves as an issuer would likely stop around there when Bitcoin's kind of at a current level, right around a 200-week moving average. But um, I think you really want to go and be aggressive. The concept of "be greedy when others are fearful" um, and and you really want to push it to the max exactly at this period of time. But on average, call it a 30% CAGR is what I think uh we should expect.

I don't think that that's really that crazy. Um, it tends to be right around where uh, where I think it is as well. Um, when you look at the way that you are paying out these dividends, obviously, everything was monthly. Now we see Stretch going to twice a month. You all have gone to daily. Can you talk about the pros and cons of you guys going to daily or even uh, kind of twice a month?

Yeah, it it really gets into this, call it, epiphany I've been having of how big digital credit could be. That digital credit is, you know, it's a preferred equity instrument. It's not debt. It's not a money market. It's not money. But in this transitionary period, to the extent that you can make the dividend a more continuous stream of events, then what it means is that someone that holds it doesn't need to hold it waiting for the next dividend event. They don't have to, like, right now, when it's monthly, what you'll see in the behavior of digital credit is you'll see the price of Stretch or SATA move up to par right around the dividend event, and you'll see the volume spike, which I think is the most interesting tell sometimes. You know, if you're just looking at price, you actually miss the liquidity, which I think is the most important driver of what's kind of happening behind the scenes here. And and you see a massive liquidity spike because everybody wants that dividend event, and then post-dividend event, it drops um, on average about by the price of the dividend, but some months more, some months less. And that economically makes sense. It's not anything that's crazy. But if you move to something like Strive's doing with SATA, where it will be the first, literally the first listed security in US capital markets history. So, like, real innovation here to pay a daily dividend, then that dividend event is not an event that you really want to plan around. Like, like it's just a continuous stream. You either like SATA or you don't like SATA. And if you like it, you just, you just hold it. You're not trying to time a dividend event, which should reduce and compress the volatility. And if you reduce and compress the volatility, then it can be used more likely like a money market fund or like a savings account type sort of instrument.

Now, when you think about kind of what can go wrong here, the first thing that my mind goes to is if you have to pay this in perpetuity, do you always have to pay a dividend? Could you pause the dividend? It sounds like you could lower the rate. What are some of the things that you could do to maybe mitigate risk over a very long period of time? Because in a couple of years sounds great, but what about 20, 30 years from now?

Yeah. So, um, what are the rights of the issuer? So, we could pause dividends, and we actually would have a a fiduciary obligation as a board to pause dividends if paying a dividend would put Strive into bankruptcy risk. And and so the next natural question is, well, what does the balance sheet look like? What would that scenario look like where something like that would be in the interest of the issuer of Strive? Um, where, you know, SATA is our flagship product. If we were to do something that impaired the confidence of SATA, that would permanently impair the entire strategy that we're trying to do, right? So, obviously, as an issuer, we're going to do everything we can to not do that. But it's a fair question to say, what would that look like? What does your balance sheet look like? So, Strive has no debt. Uh, we have 18 months of cash and marketable securities. So, cash and STRC and reserves of over 12 months of cash and about six months of of Stretch reserves. And and so what that means is that you start to look at risk and and say, what does downside risk look like? So, if you were to assume the 2022, 2023 bare market played out as an example, what that would mean in Bitcoin terms today would be about a $40,000 Bitcoin bottom. And for Bitcoin to not move off of the 200-week moving average to the upside until very late 2027. Um, that that's not a scenario that that is impossible to imagine. I think it's it's more bearish than or more bearish than my base case scenario. I'm pretty bullish on Bitcoin for the back half of this year, but, you know, it's it's not an insane scenario. If that scenario were to play out, Strive could literally do nothing and just use our our cash dividend reserves and not have to sell a single Bitcoin through that entire bare market. Um, and then if you were to say, well, Bitcoin has something worse than 2022, 2023, it's longer in duration. It's down longer. Well, then we still have, depending on where you think Bitcoin price is, $40,000, five to seven years of Bitcoin coverage in of itself. So, once you start dipping into the Bitcoin, so you really have to start thinking about a scenario where it's a substantially longer and worse bare market than 2022, 2023 in duration and downside before we even have to dip into our Bitcoin. And and so it becomes very hard, not impossible, but very hard to see the scenario where we have to actually pause the dividends. You basically have to underwrite Bitcoin failing for that to be true.

When an investor buys SATA, how much of the dollar that they give you goes into Bitcoin versus goes into the dollar reserve?

It's a it's a dynamic question. So, we're not just issuing SATA, we're also issuing the common equity ASST. Um, and we don't have a a mandate to preserve the dividend reserve. And so, actually looking at kind of the history of, you know, I can say a lot of different things as, you know, the CEO of the company, but, you know, don't, you know, don't trust, verify. I think the actions are actually more interesting than what I could say, right? Um, and so, when we IPOed SATA in November, we started with the 12-month dividend reserve. Bitcoin was over $100,000 a coin when we IPOed Seda. We've gone into a bare market. And so, it would be natural to say, well, I would expect that in a Bitcoin bare market, that might be when an issuer would start to use the dividend reserve. That's probably what it's for. Um, but what Strive has actually done is we've increased the dividend reserve from 12 months to 18 months. We were under no obligation to do so. Um, so, not only have we maintained it, we've increased it as SATA has been increasing in size. And the reason is is that we, we, you know, we're actually seeing kind of the opportunity for SATA to be bigger than we expected. And we want to do everything as an issuer to preserve confidence in this instrument to be able to withstand downside scenarios. And and so right now, we feel pretty that it's pretty appropriate to try to maintain an 18-month dividend reserve. I think it would be very possible, like if Bitcoin went down to $40,000, the reserve is a reserve. And if capital markets and liquidity conditions completely dried dried up, it's a reserve. It's not something that has to be maintained. It should be used if when needed. Otherwise, what's the point of even having it? Um, so I think it's possible we could dip into it. Um, it's, you know, possible with SATA issuance that we often will put 100% of the the money raised into Bitcoin. It's also possible that we might reserve, you know, an 18-month or a 12-month dividend reserve if we think that's the most appropriate action. Um, but what's been actually happening is that both the common equity ASST has been firing and SATA. And and so it's really um, a dynamic question. But what is the first principle? What is the goal? The goal is to maintain confidence and maintain SATA as a low-volatility, high-yielding instrument. And and so, what that means is that, you know, if we have to reserve cash to do so, we will um, but our goal is to stack Bitcoin.

What do you think is the single best critique of these digital credit instruments?

Um, I think the the, it depends. I I think there's two, two different sides of the best critique. Um, one is, well, why don't you just own Bitcoin? Why don't you just own amplified Bitcoin? Um, as a as a Bitcoiner, I've been very um, open that I do not own digital credit. I own Bitcoin and I own amplified Bitcoin exposure because I'm so confident in the direction that this goes. That is what I view as appropriate for me and what I think is going to maximize the returns for me and my family over time, and I can ride out the volatility. I think this, this bare market's a bare market for ants. It doesn't even faze me. Um, the reality is that that's, and there's a lot of Bitcoiners that have that mindset, but that's kind of like a sicko mindset. Most people are volatility adverse. They have different needs in their life. They need cash flows. They have a lower duration ability. And so, what I, what I saw is the problem with Bitcoin, just in kind of anecdotes across people in that I know, is that they tend to buy Bitcoin at the tops of the bull market. They don't actually have conviction. They ride off of other people's conviction and don't do the homework, and then they sell in the depths of a bare market because they weren't prepared for the volatility. And and so, I think digital credit provides the great product for them. Um, but if you have the conviction and the ability, then going out the risk spectrum further, I think is is appropriate. Um, I just think that the product market fit for that to not be true is insanely massive. Um, on on the other side, the the risk adverse side, I think people say, well, it's not debt. You don't have the the credit protections. And then they'll list like, you know, 50 different risks that are, you know, disclosed in the disclosures, which is fine. And and I think what's fair is that every individual should look at any risks of an investment and assign an expected value, a probability of those, and then make use those to make a a risk determination. Um, and so, if you think that Bitcoin is going to fail, if you think that uh, people can't be trusted, companies can't be trusted, then you will likely assign a higher expected value to those risks than maybe I would or maybe a lot of other people would. And so, if you assign a higher value, then maybe you think the risk reward of these instruments is not favorable. Um, I think that there's really one true risk to these instruments. Um, and and the reason I say that is, as an issuer, there was one key risk that we were trying to eliminate, and that key risk was maturity risk. And so, if the issuer is trying to eliminate maturity risk, then that means that the investor of SATA takes that risk, and then they get compensated for that risk with a return, right? Um, and and so, if that's the key risk, then you have to put an expected value on that, which we kind of went through a little bit already when we were talking about downside scenarios. And so, you have to put a probability that you think that that scenario plays out and then what you think that means. But I think if if you're willing to view Bitcoin as an asset that likely succeeds and you need income, then I think these are a very attractive risk-reward security.

Let's talk about uh Strategy and Michael Sailor selling Bitcoin. Obviously, they haven't done that in a number of years. They sold uh now infamously 32 Bitcoin. Uh, there's a lot of folks who are looking at recent price action of Bitcoin and saying Bitcoin went down a lot because Michael Sailor has given up. I think the Wall Street Journal called it a U-turn. It seems that there's a lot of speculation as to why this happened and what the implications are. What's your read?

Um, I think it was a a necessary evolution from Strategy. And so, when when we launched SATA, in our investor calls, the IPO process, we explicitly said that if we need to sell Bitcoin, we will sell Bitcoin. It wasn't off the table, and the institutional investors really appreciated that um from Strive. And then, you know, I think in, call it, 90% of instances, Strive has learned from Strategy. They've been the pioneers in the space. In a couple of instances, I think that we've done something that has proven to be valuable. And and one of them was introducing a cash reserve when we IPOed SATA, and now Stretch has a cash reserve also, which I think, you know, better reduces the risk profile. The second was, you know, being willing to sell Bitcoin. Um, you know, but Sailor had been out there very publicly with a lot of messaging, "Never sell your Bitcoin," "We will never sell your Bitcoin," all these different things. And and so, I think he just had to message that I'm willing to do this. And and that willingness to do that was always going to come with the critics saying, "Oh, this is the tip of the iceberg. First it's 32, next it's going to be 3,200." But if, but your goal should be maximizing total returns. You know, Bitcoin is your hurdle rate, but ultimately the goal is, is you want to maximize the total returns for for your common equity shareholders. And to not have selling Bitcoin on the table when it might be advantageous, I think um is not the optimal way to do that. Um, and and so selling 32, I think just, it clearly shocked the market. And I think just the fact that a 32 Bitcoin sell would shock the market, I think shows me that he had to do this to get to the point where they can operate maximizing total returns into the future. And with Bitcoin down, you know, there's potential that, you know, just from a, like a tax loss harvesting perspective, that more, you know, Bitcoin sells might make sense. But what's mo most important there is that I think he's going to be a net buyer of Bitcoin effectively every single month into the future. And so, if he did a tax loss harvest transaction and sold whatever 50,000 Bitcoin and then the next day he buys back 50,000 Bitcoin or even the next hour he buys back 50,000 Bitcoin, I think that shareholders should be should be thankful for that because it actually helps them put themselves in a better long-term position. I don't think you nor I believe that Michael Sailor has given up on Bitcoin or has changed his views on Bitcoin. Um, but do you think that there could be negative ramifications in terms of the story now is a little bit more nuanced? You know, when you just say, "Hey, we will never sell Bitcoin," I think it's kind of the smooth brain, right? Anyone can understand that. Um, the second that you start to talk about, "Hey, we are intelligent capital allocators. Sometimes we're buyers, sometimes we're sellers. It kind of depends on the market." Obviously, that doesn't mean it's not a smart decision, but the story changes a little bit. And so, how do you look at story versus maybe like what's the actual right decision as a capital allocator, whether for you or for a Sailor?

I I think the the actions ultimately will speak the loudest. And and so the story, it's kind of like how how we talked about what's the story of, you know, could you, do you have to have a dividend reserve or what have you actually done? And so, I think the the story becomes a little bit scary to some when you first see that first Bitcoin sell. But if over the course of the next year, if every single month Strategy is a net Bitcoin buyer, then I think that story and that concern quickly ages poorly. I mean, I mean, I've been on X, I'm on X. And the amount of people, big, you know, X accounts, big Bitcoin accounts that are predicting right now that this is the start of Bitcoin sells, continual Bitcoin sells for Michael Sailor, I think becomes part of the narrative and and the story for now. Um, but I think that story will quickly evolve over time. Um, and and quickly evolve over time that actually reduces the the tell risk that I think people have always been concerned about is that Strategy becomes like a forceller of a million Bitcoin, right? If you're willing to manage it on the on the fly, on the go, then then that that risk becomes substantially less, and I think ultimately the risk of Strategy failing reduces um substantially, even though I think maybe the consensus is that it's increased right now. Um, and ultimately that I think will be good for the price of Bitcoin.

Now, when you look at the actual price action of Bitcoin, obviously, we have Sailor selling 32 Bitcoin. There seems to be u two narratives around Bitcoin in relationship to geopolitics and the conflict in Iran, etc. Uh, there's also a deluge of information on a daily basis in the headlines of Wall Street institutions, sovereign wealth funds, etc., all adopting, using, being become much more sympathetic to Bitcoin. It seems like all of the news is fairly positive, but the price keeps going down. And then you see the NASDAQ is going up. And so, how do you rectify maybe the news to price action, especially with the context of all of these other assets that seem to be going up and to the right while Bitcoin is not?

I remember back to previous bare markets that I've that I've lived through where I was looking at headlines and, you know, scary headlines and asking myself, has my fundamental view of Bitcoin changed? And both in, you know, in 2017, 2018 when we did the 2018 bare market, and then 2022, 2023, my foundational belief in Bitcoin and the fundamentals of Bitcoin actually increased during the bare market, and the price action did not behave. And and that wasn't surprising to me, but it was just interesting. Um, and I think right now in this bare market, I believe the same to be true. Um, I think we're at the early stages of broad institutional adoption. Uh, one of those reasons still being the Bitcoin ETFs. Um, when you look at the the growth trajectory of ETFs in general, it is a three to five-year maturity process, and we've already seen them be the most uh successful launch in financial products history, and it's only, you know, in the first couple of years. And and so track records are being developed. You know, issuers like Morgan Stanley are getting their Bitcoin ETFs out there. Different allocators in the space, they're still making them be investable in their investment policy statements. These just always structurally take time. And and so I think we've only seen the beginnings of of ETF adoption and Bitcoin adoption from those on the digital credit side. Digital credit has only existed for almost a year at this point. So, if you think about that in its track record-building process from an institutional perspective, it still has a couple of years to go. And I would argue it's building a great track record. The number one question that you would get as an issuer of digital credit last year is, "How, how will it behave in a bare market?" And what we've seen is that Bitcoin's gone down, you know, north of 50% at times. Right now, it's approximately 50% from its all-time high. And you have digital credit instruments still right around par. As we're recording this, they're just, you know, a couple points below par. But importantly, the total return for both SATA and Stretch since they've been issued is positive still because they're paying a high yield, right? So, that that yield has been more than even the prices that they've dropped right now. And and so, that correlation to Bitcoin is very low, right? Because it's had a positive return when Bitcoin goes down 50%. And so, it's proving the thesis of having substantially less volatility than Bitcoin, which I think eases the biggest institutional fear. On on the retail side, you might have, you know, you have people that obviously want it to stay at 100 every single day, and that's what we're trying to do. And I think these things will evolve to have less volatility over time. But on the institutional side, anything with a double-digit yield is just attractive. And they're prepared for substantially north of high-yield volatility. And if you just pull up a chart of the HYG high-yield ETF and you look at how volatile that thing is, and that thing has a yield to worst of 6, 12% or so, and you double that with digital credit, and if you can double that and have less volatility, then I think it's just going to be something that will be will make a lot of sense for institutions to adopt. And and but we're in the early stages of that happening. So, if that happens in a couple of years, and ETFs get a, you know, three-year track record in in a year or so, then you could see mass institutional adoption continue to scale in 2027, 2028, 2029.

Now, when you think about um, kind of the situation of this playing out, obviously, this digital credit has become attractive to somebody, right? So, somebody is out there. Is this a cash replacement in their portfolio? Is this a fixed income replacement? Like, how are people thinking about their portfolio construction, putting this in? Where is it taking capital from? And how do you see that evolving over time?

I think it's going to evolve over time in a major way. Where I think we are right now is the biggest people that I see allocating to it are allocating it more from fixed income sleeves. That that 40% what do you do with that? Putting it into digital credit. We've seen a lot of examples of real estate investors actually selling some real estate property and buying digital credit. You get more yield with less work. And real estate investors generally, they understand the problem with fiat currency debasement. They're, you know, hard asset investors. And so, we've seen a lot of examples on that. Uh, I think as SATA and digital credit generally starts to pay dividends more frequently, I think tokenization will be a further innovation on top of that. So, you're going to see a lot of tokenized securities in the future. I think there's no better security to tokenize than digital credit. And and as you tokenize digital credit, I think it will move ultimately to a place where right now, SATA will pay dividends on business days. There's no reason that in the future, dividend frequency can't continue to increase further from there. And there's also no reason in the future that you won't see banks, banking products, financialization products built on top of digital credit. And and you think about that, a lot of brokerage accounts already today offer checking type sort of features. This is not something that's new. But if you combine tokenization, you know, moving towards instantaneous dividend payments, and the ability to have financial products, debit cards, credit cards, things like that tied to the digital credit instrument, I think in that future, it'll start to be used as an alternative to currency for more people. Um, I think that'll make some people on the internet lose their minds um about the risks of that, but I think that's ultimately where it goes. And I think it, it makes sense. And I think this is kind of a, one of my core beliefs around tokenization and securitization and the fiat currency debt crisis is that as consumers look to move out of the dollar, the financial ecosystem exists for securities in general to become alternatives to dollars. And that's not just saying digital credit, but just not, you don't necessarily need to hold dollars if you have tokenized things that you have a card attached to that you could sell. And I think digital credit is probably the best version of that. Um, but I think we're still in in the early stages of that adoption cycle.

As I'm looking online at various uh news coverage of this, I think that people are still wrapping their head around this idea of Bitcoin-backed credit. Are there other Bitcoin-backed type of instruments or assets that you all are looking at, or do you think that it is less of a let's diversify from an asset standpoint and let's focus on just the Bitcoin-backed credit?

I think the opportunity set for Bitcoin-backed credit, digital credit, um, whatever you want to call all the all these different things built on top of Bitcoin is close to infinite. And it's part of the reason why Strategy has done this in a major way. We do this. A lot of other players in the ecosystem do this is that Strive in and of itself will not be able to offer all of these products. We have SATA. I think it's, you know, it's there's a possibility that maybe one more product comes, but there's also a possibility that it doesn't come because the demand for SATA is just so high. But we can't be everything to everyone, and we just can't utilize our balance sheet to provide a million different products. That would create too complex of a risk structure within Strive. But other players that have Bitcoin on their balance sheet, I think will make plays into this uh Bitcoin-backed credit ecosystem and will provide real products that will have real demand and a differentiated risk-return profile than SATA. And and I could think of a bunch of different examples of this. Um, the international example is just so easy and so obvious, but I think there's also a lot of examples in American capital markets. But the international example is SATA but paid in the pound. Seda but paid in the yen. Seda but paid in the euro. Like, if if this truly is the best bridge between the current fiat-based system and the Bitcoin future, then different people are going to want to have different types of exposures to that risk profile. And it just makes sense that there should be multiple products out there. Um, and so I think SATA gets really big. But also, I think if if that is true and if digital credit were to speed up hyperbitcoinization, then you could start to see that really making banks mad. Think about Jamie Dimon, how he's losing his um mind about stablecoins paying interest, and the fight between Jamie Dimon and Brian Armstrong, and it makes sense. If if stablecoins paid interest, then you might see a run on the banks, and so that creates a systemic risk for the banks. And I think that for the US capital markets, it would be best if banks are the Blockbuster of today, that that transition happens orderly, and it doesn't happen in, you know, an overnight fashion. That that would not be something that anyone, you know, wants. But I think the problem is not the banks, the problem is the money, the problem is the dollar. And and ultimately, I think that you can't constrain through regulation where this will ultimately go. Um, and and I think that digital credit will play that. And so, as an issuer, if you see that as a risk, you see, you know, in the future Jamie Dimon screaming at Strive or screaming at Michael Sailor, um, then, you know, you want a few different things. One, you want to educate everybody. You want to educate DC. But two, you also want like a diversified ecosystem of issuers. You don't want there to be, you know, one head to attack. You want there to be a lot of different products out there providing different risk-return that actually increases the chance of success. Which is just kind of a unique thing to this ecosystem and to Bitcoin, and why I, you know, firmly believe that, you know, this, this is like a, it's like a friendly type of competition in this ecosystem than like a cutthroat, because we grow the pie together. And and anyways, I just think that's a a interesting nuance that even Strategy right now, they're getting a little bit of heat online because of their support for Strive because their, you know, stock is down or whatever. But what I think is interesting, and what I think is true, is I think Michael Sailor and Fong Lee are preparing themselves to run the largest corporation in the world. And and they see this from a longer-term perspective, which is why they want to see growth and success across the ecosystem with Stride, but also with, you know, several other players as well.

Now, this is part of the uh uncomfortable conversation, I think, of the industry. I know you pretty well, I know Michael pretty well. I think both of you are highly competitive. You also are both very polite. I think of you both as gentlemen. And so, there is this uh somewhat, you know, uh friendly competition, I think, that you describe. Um, at the same time, if there was an outsider who didn't understand some of the interpersonal dynamics here and the belief that you guys are actually benefiting from having each other, I think people would say, "Hey, wait a second. You know, they're going to go to twice a month dividend, you go to daily. They come out with 11, 12% you know, interest, you go to 13%. That seems pretty competitive. What are the downsides maybe to having two? Right? Because I, I do believe that there's actually a benefit to more players, grows the pie, it kind of normalizes this in the eyes of institutional investors. They see that it's a repeatable, scalable type of strategy. But there's got to be downsides. And so, do you think that Strive is taking away some of the capital flows to the Stretch product, or or vice versa?

Possibly in the short term, vice versa. Uh, you're a big believer in capitalism, obviously. So am I. And >> Just just a little bit. >> Just just a little bit. I think I think I think you're a fan. And and as we know, the great thing about capitalism is that that competition pushes innovation and it pushes people to be the best versions of themselves. It pushes companies to be the best versions of themselves, which ultimately grows the pie to be substantially larger. If if you were to go to a system where there's one issuer, how it would likely play out would be lackadaisical innovation, you don't need to do it. There's no competition. Um, and so you could just sit and provide an inferior product, and it would be the only product. And I think that would be how it would play. And and so you think about some of the things that Strive has innovated on. Um, providing a cash reserve that might seem like a silly innovation. It's like, well, it's not, is it really even an innovation? But I think it improved the products. Strategy then followed. They saw how the market reacted to that. The willingness to sell Bitcoin. Um, the frequency of dividend payments to really push that. Um, Strategy had made some, you know, initial statements that NASDAQ rules only allowed you to pay this amount of of dollars. Actually, we thought that was true, too. It wasn't like when they'd said that, we were like, "Oh, like they're wrong." We actually were pushing every angle to see if that wasn't the case. And that is, you know, the great thing about capitalism is that we found a way within the system to get NASDAQ and DTCC to say yes, right, which is now open source. Strategy in the future can can copy that. They can innovate on this. And and that innovation from different minds, I think makes these products substantially better and grows the pie. And in the meantime, you know, it's like we might, you know, do something that's really cool, we stack a bunch of Bitcoin. They do something that's really cool. I mean, their their scale is just so much massive to us, right? Like, I mean, even when we stack a lot of Bitcoin, for them, it's like, you know, effectively nothing. Um, and but um, you know, for us, it's it's meaningful. And ultimately, I think that provides a a better system. I think in in the in the short term, that can cause that can cause flows to go more one direction than the other. But ultimately, as a as a Bitcoin balance sheet company, the most important thing is making Bitcoin win. If Bitcoin wins, every company that has a substantial balance sheet of Bitcoin, they win. And and and so if bit, and if Bitcoin doesn't win, then we all lose. And and and so I think that innovation, making these products better, driving demand ultimately benefits the most important thing, which is our balance sheets.

Now, when you think about Strategy, they obviously own a lot of Bitcoin. It's something like 840,000 or more Bitcoin. Um, you all have also gotten into double-digit thousands of Bitcoin. Is there too much Bitcoin that can be held by public corporations?

Um, if it was 100% of the Bitcoin, sure. But when you think about money, whether you're talking about dollars or whether you're talking about gold, the majority of of those types of commodities, dollars, currencies, are typically held by institutions anyways. Um, so I think that's just the natural arc of these types of things. What I think is great about Bitcoin is that it always preserves that ability to opt out and have your your freedom money in self in self-ste self-custody. And that's something that we fundamentally believe everybody should do. Um, but what's interesting about Bitcoin because it's so scarce is the amount of Bitcoin that you need to hold in self-custody to kind of have have that insurance is not very much. So, one of the the stats that I that I like to talk about is in 2017, we gave basically everyone in our family, my wife and I, 0.05 Bitcoin on a ledger and it had a note attached to it. And what that note said was, "With 0.05 Bitcoin, even if 100% of the Bitcoin was held in America, you will have more Bitcoin than the average American can hold." So, if you're concerned about the system falling apart and needing this opt-out, literally that amount of Bitcoin should be enough to make it. And and and so, if that's enough to make it, then ultimately I think what will happen is that, you know, for most people, it will be held in institutional wrappers, whether that's ETFs or Bitcoin treasury companies um, and when you think about Sailor's stack, he probably gets to a million Bitcoin, I think, probably this year. Uh, and if that were to happen, you know, he holds approximately 5% of the supply. And when I think about any distributed ownership structure, 5% is not a controlling position. It's a large position. It's the, I think in SEC land, if you own 5% of a stock, it's like when you start to have to disclose that you have a stock. It's not a controlling position. It's just like the the minimal of like a material position in in their eyes. And so, I don't think it's anything to the level of concerning. And even if he doubled it, it would be very large, but I don't think it would be something that overtakes or takes down the network. It's always interesting to me, like a corporation technically, you know, Michael Sailor, you, you don't own 100% of the corporation, right? They're they're shareholders that have a claim on the assets, on the cash flows. Um, and uh, you know, it's a little weird because they're kind of pulled together in this name, Strategy or in Strive. Um, but I do think also at the same time, uh, you control to some degree, you know, the company, right, in the sense of you're making decisions as the steward for those shareholders. And so, I guess the other part of this is, can there be too many digital credit instruments? Like, is there a point where you say, okay, you know, two is better than one, three would be better than two, but 25 of them would be a net negative and there would be too much fractured energy, capital, you know, me, mental focus?

It, there, there definitely probably is a level there, but it's going to be such a high level that it's not even a concern of mine. Um, frankly, I would love to see that happen. You think about financial services, how many, how many banks are there? How many insurance companies are there? And if you were to ask the average American, even for the largest banks, what's the difference between JP

Morgan and Bank of America? I don't think the average person could give you any answer. They would just say they're they're two really large banks. Um, and and so even just like two of the same thing, I think, is is a good thing. and and arguably when you have, you know, too little, you have a couple major banks, well, what's happened in the banking industry, you have systemic risk tied to single institutions. And I don't think that's a a good thing for for the ecosystem. Um, and so having 20, 30, 50, 100 different issuers, I think, would be a great thing. it it starts to actually look more like a capitalist society where there isn't single points of failure where you know you think about why the US government if JP Morgan ever failed you 100% know they're going to bail them out but in a true capitalist society you wouldn't want that to be true but part of the reason the banks got so big was because of regulation they made it very hard to compete with the banks post GFC and you got these emergence of these mega banks I think it would be healthier for Bitcoin uh for that not to be true. I think it would ultimately be healthier for Strive for that not to be true. Um for Strategy for that not to be true. Um you think about like if if Strategy held all the Bitcoin um in several different ways that would increase risk even to Strategy shareholders. Um it kind of creates a single point of failure for the US government to potentially go after and so a a thriving ecosystem is better. Um, the last thing I'll say on this is that just even you look at ETFs, if you wanted a digital credit ETF, that you need probably at least 30 issuers of digital credit to have a diversified compliant 1940 act product. And so when you only have two, you're you're kind of in this land where it might be really good for Strive or for strategy on individual basis, but for the ecosystem, it's not great. And then you come back to well our ecosystem is built on a foundation of a Bitcoin balance sheet and so a thriving Bitcoin ecosystem it is going to be the best thing for our balance sheet over the long term.

>> When you talk to your team internally how do you describe what the opportunity is in front of you guys?

>> Um it was this evolution that that we talked about. So the first version being the best form of form of financing for us. We thought it was a superior form of financing that reduced risk and allowed us to take on a higher level of amplification while controlling risk. And now it's really taking this this kind of what I would call stewardship position of if we believe and we do believe that digital credit will play this transitory role between today's fiat, you know, world and tomorrow's Bitcoin future. That's a really big role to play as as a as a firm and we need to be excellent stewards of that through SATA through helping evolve the growth of digital credit through you know working even with you know strategy in an unofficial capacity going out there and telling the world and and trying to be the most transparent companies that have ever existed. I mean, you can go to our website and the risk of SATA and the risk of ASST, it refreshes every 15 seconds. Um, outside of the Bitcoin ecosystem, I'm not sure of another ecosystem where you can refresh the risk of a security every 15 seconds. The institutional world lives in the private credit land where you get a mark every 3 months. And and in the meantime, it's complete opakeness. And and so ultimately, it's it's being transparent. It's being out there. It's, you know, openly discussing kind of the risk and the opportunity set and then actively working to improve these products and, you know, actually making the things we say true, which I think that any great entrepreneur and investor can do through through actions. That's just been true historically is that the true innovators in the world, you know, the people that we all look up to like an Elon Musk, they go out there and they say crazy things, they actually believe these crazy things. Like I think a lot of people think they're just, you know, BSing people and and they're grifters or whatever. But what I found in the the, you know, innovator ecosystem, and I would put you in this category, too, and and I don't say that just because I'm on this podcast because I actually believe it. You say crazy things, but I know you believe them. And then you go out there and you take risk, you try to make those things happen. That's what we're trying to do as well. And you know, ultimately in these things, there's there's risk. there's risk that the innovator doesn't succeed. Um, but ultimately I think that's what makes our capitalist society great is that you put capital in the hands of people that have major visions and then they go out there and they try to make it happen. Um, and that's what we're trying to do here.

>> You know, it's always funny sometimes you say things and you know it's going to be uh or it's going to sound crazy. It's going to be received as crazy. Other times you say things that seem like common sense and then everyone else thinks that they're crazy and so you you sometimes get surprised uh by uh by the reaction. U Matt, thank you for taking the time to do this. I I I find it fascinating the entire digital credit space. I think that both Michael Sailor, you both of your companies, your teams uh have really been pioneers here and continue to push this forward and it feels like something that people may not quite understand yet, but is very rapidly becoming normalized and obviously entering into the portfolios of very smart capital allocators. Where can we send people to find out more about Strive or or find uh you online to be able to follow along?

>> The best place is just following us both on X, so myself at Colemro and Strive atstrive and then our websitestrive.com. Uh you can refresh that risk every 15 seconds and see what SATA looks like.

>> Amazing. All right. Well, thank you for doing this. We'll do again future.

>> Awesome. X