The Debt Crisis Bitcoiners Aren’t Ready For | Avik Roy

0:00 But the thing that a lot of people don't appreciate is that the Congressional Budget Office's predictions, these official government predictions, are wildly optimistic. And if you actually use more realistic assumptions of economic growth, of inflation, of our borrowing costs, things get very bad very quickly.

0:19 We don't have a lot of time. If civilization collapses, if the financial system collapses, it's not going to be fine. And it's especially not going to be fine for Bitcoiners because, yes, it's going to be fine in the sense that you have Bitcoin, you're going to be somewhat protected, but the politicians are likely to go after you precisely because you're seen as a pot of money that they can then use to solve the problem.

0:43 We have to give people the tools to have a censorship-resistant way to exchange U.S. dollars for Bitcoin. And again, maybe the various things, the bullets that I just listed out, maybe that's not the right technological solution, but it is a technological problem. Let's just get into it for, we'll, we'll fight later. Okay. Um, but you know, you were the first interview I ever did in person. Yes. And, uh, I'm, I said, true, true point of pride for me. I'm just so, uh, uh, it was cool that you, you, you did your first interview with me and, um, you know, obviously I got to know you when you were working for Peter and so happy that you've kept the franchise going. I think it's super important for Bitcoin, this franchise of what Bitcoin did.

1:24 And you've done a great job. Kudos to you. I mean, I'm a listener. I find the interviews you do very interesting and you do a great job. Thank you. I appreciate that. And we're back here in Austin. We are. I wanted to start off because at least in the show we did, we didn't really talk about where you came from. And I think you've been in Bitcoin a long time. And I don't think, especially when you came into Bitcoin, you were a very stereotypical Bitcoiner because you were in sort of the, was it biotech? Yeah, biotech TradFi. And then you ran presidential campaigns for, was it Mitt Romney? Mitt Romney. And then I was a healthcare policy advisor for Mitt. And then in the 2016 cycle, I worked for Rick Perry, who was then the governor of Texas, became the energy

2:04 secretary. And then Marco Rubio, who was a senator from Florida, became secretary of state. So a couple of, three interesting people. So how does that person who's very involved in biotech and politics become a Bitcoiner? Well, it's interesting. I mean, I would say a lot of the, there'll be a lot of common themes with other Bitcoiners, just maybe from a different seat in the ecosystem. I was a portfolio manager in 2008 during the financial crisis, and I had a friend who was going on and on about how Lehman Brothers and Bear Stearns were going to go bankrupt and been ranting to me about this for years.

2:49 And I'm just like, whatever, they're going to get bailed out. Nothing's going to happen. I guess I was half right. And so once Lehman and Baer did collapse, I started paying a lot more attention to this guy because he'd been ranting about, he was an Austrian econ type, go on about fractional reserve banking and all this stuff, gold.

3:08 He was the one who first told me about the Bitcoin white paper. And I'm like, okay, I'm listening. I'm paying attention. I'm getting it now. I understand everything you're saying, and it's all making sense to me. But I was very busy as a biotech hedge fund manager, and biotech is very intense. These stocks go, you think Bitcoin is volatile. Biotech stocks can go from like 100 to zero overnight if the clinical trial fails. So the volatility of Bitcoin was not scary to me at all.

3:34 But it was all consuming. I was very dedicated to that work and didn't have any time. In those days, it was hard to buy Bitcoin. You either had to mine it on your laptop. When are we talking here? We're talking like in the 2008 to let's call it 2013, 14 timeframe. So you've been in Bitcoin that long?

3:50 I'd followed it. I hadn't bought any yet. So basically I was following it, but I hadn't bought it because it just seemed like I didn't have the bandwidth to figure out how to do it. I'm going to code a wallet and I got to do all this stuff and I have to figure out how to mine it or I have to go to this Japanese exchange.

4:06 It was like, what? I want to figure this out. I just don't have time. I'll figure it out eventually. And then Mt. Gox blew up. and bitcoin went from a record high of 1200 to 300 and i thought well this is the moment i better i better look at it now because i better dig into it now and figure it out because this is the opportunity and i had a friend who had been a a capitol hill staffer for a florida congressman who was very into Bitcoin.

4:39 It was a friend of mine named Perianne Boring who ended up founding the Digital Chamber of Commerce. I asked her, I said, Perianne, I think I want to try to figure out how to buy some Bitcoin finally. What should I do? She's like, well, there's a startup called Coinbase. You should look at that because they can help you buy some Bitcoin in a kind of way that's very user-friendly, easy for normies.

5:02 Back then, actually, Coinbase was actually still a pain in the butt to try to use. You had to do all this KYC. It was super annoying but that where I first you know bought my first Bitcoin and bought a position And it basically took a percentage of my biotech portfolio and said look let me put it in this uncorrelated asset And over time, it took over my portfolio and became a lot bigger as a part of my portfolio.

5:28 And I had to pay more attention to it and become more versed in every little thing that was going on. but I kept quiet about it. I didn't really talk about the fact that I was into Bitcoin just for security reasons. Over time, the security got better, and I felt more comfortable about talking about it. And then more importantly, starting around 2017, when the ICO craze started to happen and the Securities and Exchange Commission started to say, hey, we want to regulate this space and Gary Gensler and all this stuff. And I started to say, you know what, maybe my policy background, all this work I did on the presidential campaigns and all the time I've spent at the White House and in Congress. Maybe I can be useful to this ecosystem. I wasn't a coder. I wasn't somebody

6:14 who could talk about the technical aspects of Bitcoin or be useful in contributing to that element of Bitcoin. But maybe this is the way I can be useful to the Bitcoin community. And so I wrote this article called Bitcoin in the U.S. Fiscal Reckoning for a quarterly policy journal in Washington called National Affairs. And I think it was the first mainstream treatment of Bitcoin, like a mainstream policy journal. And what year was this? This was 2021. Okay.

6:43 It was published in 2021. I mean, I wrote in 2020. And basically that article, I was trying to do two things. Well, three things. Thing number one was I was trying to communicate to Washington that Bitcoin was not a passing fad, that it was going to be increasingly important as the debt got bigger and worse.

7:03 I wanted to communicate to Bitcoiners that the consensus, their conventional wisdom in the Bitcoin Committee in 2020 to 21 was, we're a censorship-resistant, permissionless network. It doesn't matter whether governments pass laws or try to crack down on us. We can survive any government criticism or antagonism. Which is true. Which is true. The network can continue. But what I wanted to communicate to Bitcoiners is that while that is true, if you want Bitcoin to be maximally useful, if you want people to use it to buy their coffee and to save for student loans and all the other things we want Bitcoin to be useful for for your everyday lives, you do have to be able to plug Bitcoin into the mainstream financial system. And that is permissioned. For example, to use a simple

7:53 example today, one of the things that makes Bitcoin very hard to use for payment is that you have to pay a capital gains tax in the US every time you sell Bitcoin to buy a cup of coffee or buy a couch. And that creates a lot of friction for, especially if you've had Bitcoin that's appreciated, it creates a lot of friction for you to use Bitcoin for everyday purposes, right? So if you believe that Bitcoin should be e-cash and it should be peer-to-peer cash, then there is a government policy, a government tax law that makes that very hard. And the ideal sort of version of that would be like, well, come and get it. It's very hard to try and like necessarily see those transactions and then try and claim the tax. But I'm not saying anyone should ever not pay their tax,

8:41 but it doesn't have to be one or the other. Like as long as we always retain sort of the ideological reasons that we all love Bitcoin, it can be plugged into the financial system too. Like I think the path is the middle ground. Yeah. The way I would put it and the message I had in the article in terms of the second bucket of goals I had is that yes, Bitcoin is censorship resistant and permissionless. And that's an extremely important feature, one of the most valuable, if not the most valuable feature of Bitcoin.

9:08 But if we want Bitcoin to maximize its value and utility for the world, government policy is very important. To give a simple example, some of the things I proposed in the piece was, what if the government, actually the US government, owned some Bitcoin? What if we took 5% of the gold that we held and created a Bitcoin strategic reserve?

9:35 This is the first, as far as I know, the first formal policy proposal of let's have a Bitcoin strategic reserve. You know, and that way, like since most traditional mainstream economist types don't even believe we should own gold, they won't care. Like, let me just take some of the, I thought it was a very conservative proposal in that sense.

9:54 Just take some of the gold and put into Bitcoin and no one will be mad. Let's legalize ETFs and let's ban central bank digital currencies because that's the opposite of censorship resistance. That's a way to make every transaction censorable. And that leads to my third bucket. My third bucket in terms of goals for this article was to say, what's really important if we wanna make sure Bitcoin doesn suffer a massive crackdown that could limit and cap its utility and its value is can we make sure that Bitcoin businesses become strong enough that they can lobby the government that they can donate to political candidates?

10:37 Because once you can do that and you can swing elections, then the politicians become more afraid of you and or more wanting to be your friend. And so if we could give Bitcoin enough runway to get to that level of maturity, that there are Bitcoin-based businesses that are profitable that can then defend themselves in the U.S. political system, that will then prevent the worst-case outcomes in terms of crackdowns.

11:09 And I feel like all three of those goals, broadly speaking, we were able to achieve as a community, right? So I think Washington is clearly more aware than it was before of Bitcoin's importance and utility. I think today the conventional wisdom is very much in my favor in terms of I think Bitcoiners today very much understand that government policy can affect the value and utility of Bitcoin and are very attuned to the policy landscape.

11:38 And then that third piece of has the Bitcoin ecosystem mature to the point that it can influence elections? Clearly, it did in 2024 and 2022. We'll see about 2026. But it's clear that Democrats in particular, if you look at the old Elizabeth Warren model of let's have an anti-crypto army that's very antagonistic to Bitcoin, most Democrats have changed their rhetoric.

12:06 It's not we're against crypto. It's we're against the Trump corruption and the Trump coin and those things specifically. And now data centers. Yeah. So it's more targeted. Yeah. It's not we're against crypto completely. It's we're against the use of crypto for corrupt ends, which is a narrower focus.

12:27 And again, less controversial. Yeah, I totally agree with that. Like, I think that's fair. And I'm interested, though, because so the guy who first told you about Bitcoin, Austrian guy, where did your sort of philosophical or ideological belief in Bitcoin come from? And what did you think it was then? And has that view changed?

12:46 Yeah, great question. So I was somebody who was very concerned about the federal deficit. The reason why I kind of fell down the rabbit hole trying to fix the fiscal situation is for that reason. It's like, so why did I become Mitt Romney's health care advisor? Basically, what happened was financial crisis happens.

13:05 I'm extremely concerned about the federal deficit and the debt. at the time, the countries that everyone was talking about were the pigs countries, Portugal, Italy, Greece, Spain. These are the countries that had the big deficits that the European Union was bailing out. And I'm looking at this and I'm like, the US debt to GDP ratio, our debt as a share of our economy is actually a lot worse than some of those pigs countries that everyone's complaining about. We're actually, and the long-term situation in the US is much worse. And we're just sitting here like everything's fine. It's not. I just need to ask one question on that. Because while it looked worse on paper, did the fact that the US dollar is the global hegemon, they have the

13:44 printing press to a degree that no other country really has, did that mean the calculus is different? Yeah. And that's one of the things I write about in this original article, Bitcoin and the Fiscal Reckoning, is that very fact that there are structural reasons why the US has been able to get away with having a higher debt. One of the most important that a lot of people talk about is the fact that it's the world's reserve currency, that that creates a lot of demand for treasuries, the treasury securities, which are basically the equivalent of cash if you're a bank or a government or a large institution. But it's not just that. It's not just that it's the world's reserve currency. There are financial regulations like Basel III, which basically punish banks if

14:34 they own things on their balance sheet other than government debt and specifically U.S. denominated, U.S. dollar denominated government debt. So we reward banks for holding U.S. treasuries and punish banks for holding other kinds of assets. So that's another big way in which we sort of rig the game in favor of the US.

14:55 And there's a couple of other things like that that I walked through in the article. And so those artificial mandates have insulated America from the fiscal responsibility that Greece and Italy and others were more quick to encounter. But that doesn't mean we're immune. It just means that we have more runway.

15:19 And that runway is running out. The thing that I've been saying and some analysis we've done at my think tank, the Foundation for Research on Equal Opportunity, or FreeUp our view is that we only have about 15 years before things get really really bad And that because the debt situation in America is bad enough under the official government projections that the Congressional Budget Office puts out. But the thing that a lot of people don't appreciate is that the Congressional Budget Office's predictions, these official government predictions, are wildly optimistic.

15:54 And if you actually use more realistic assumptions of economic growth, of inflation, of our borrowing costs, things get very bad very quickly. We don't have a lot of time. This show is brought to you by our lead sponsor, Ledin. I've taken out multiple Bitcoin-backed loans with Ledin, and I think they're an awesome company.

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17:40 Your Bitcoin secured like an institution's. That's BitGo. So we are absolutely going to get into that, but I kind of cut you off there. We went on a bit of a tangent because the question was like, ideologically, why were you interested in Bitcoin? And you say, obviously, initially, like the first interest came because you'd seen the debt problem.

17:57 Right. But I'm curious if you see like the freedom tech angle of Bitcoin as well and how important that is to the ongoing story. A hundred percent. So one thing that governments throughout history have done is when they're in this debt inflation cycle, where the only way out of their skyrocketing debt is to devalue their currency to try to make their debt worth less on paper.

18:30 this is what happened in weimar germany in the 1920s it's what's happened in countless examples throughout history going back to the roman empire um one of the one of the techniques the government tries to use to kind of uh stem the tide or plug the leaks in the boat is to restrict your ability to move your money out of that that government currency into another currency yeah it's coin clipping and capital controls. Right. Capital controls. So and capital controls and other other things like, for example, exit taxes. So like, for example, in the US, if you if you want to move to a different country, you still pay US taxes wherever you live. If you're a US citizen, if you try to give up your US citizens, you pay a tax on your unrealized gains. Other countries do

19:19 that, too. Norway has a big exit tax, for example, if you try to leave. So there are a lot of countries that do this and more countries are considering it as a way of saying, hey, if you're trying to leave us because you think your taxes are going to go up or because you don't want to hold your savings in our currency, we're going to create kind of financial Berlin Walls.

19:38 Yeah, you're trapped. That's one thing people don't remember about the Berlin Wall is that why did the Berlin Wall get built? The Berlin Wall got built because East Germans were fleeing to go to West Germany. And the Soviets and the East Germans said, well, we've got to stop this because our economy is going to collapse if all the industrious, middle-class East Germans leave.

19:59 So they created the Berlin Wall to prevent the East Germans from leaving. And that was a physical wall. But what a lot of countries do is they create these financial Berlin Walls where they make it very hard for you to move your savings, your currency, out of their currency because they want to prop up demand for their currency to deal with their fiscal problems.

20:21 And the Berlin Wall, this is actually quite an interesting analogy. The Berlin Wall was up for 40 years, 50 years? Yeah, it went up. I think it was 1961 when it went up and it came down in 89. So 28 years. Okay, so yeah, nearly 30 years. In this sort of modern economy we have where people are putting up these non-visible walls, is Bitcoin a way of collapsing that wall?

20:42 Yes. And that's why the self-custody, permissionless, and censorship-resistant piece of Bitcoin is incredibly important. And I wrote a paper that I think we talked about when I did that first interview with you for the Bitcoin Policy Institute and for Friot, where I talked about this, that when that fiscal crisis comes in the U.S., say in 15 years from now in 2041 or the early 2040s, maybe sooner, but let's stipulate that maybe it's in the early 2040s.

21:11 will the U.S. follow that traditional pattern, that sort of, let's call it the Argentina or Turkey financial repression pattern where they impose the capital controls and the financial Berlin Walls? How will Bitcoin, how do we make Bitcoin resilient to that possibility? And one of the big takeaways for me and one of the arguments I've been making is it's not enough for Bitcoin to be a permissionless network.

21:38 We also have to make the exchange of fiat currencies for Bitcoin permissionless. And they're not today, right? So the US government today could say to Coinbase and Kraken, pick your favorite exchange. No, we're not going to allow, we're going to temporarily suspend your ability to exchange US dollars for Bitcoin.

21:57 And then what do you do? I mean, in the old days, we had localbitcoins.com and you could go to the street corner and, you know, exchange some cash or whatever. But at scale, at the scale that Bitcoin's at now, you know, that's not going to work. Right. And not only that, like at that time, Bitcoin was worth far less.

22:16 That's what I'm saying. The increased danger in doing that kind of transaction is real. Completely. And so the argument I've been making and the pitch I've been making, I gave a talk at the Midwest Bitcoin Summit recently in Columbus on this topic, is that we actually have to, as a Bitcoin community, there's been a lot of talk about quantum computing.

22:35 I think that is an important conversation to have. We do need to think about how to make sure Bitcoin is quantum resistant. But I think the underappreciated conversation that we're not having is how do we make Bitcoin resilient in terms of the ability to exchange fiat currencies, especially the US dollar for Bitcoin?

22:54 Because right now, there are some early stage projects. There's stable channels on Lightning. There's atomic swaps. There's Thor chain where you can exchange USDT for Bitcoin. So there are a couple of things like that that people are working on. But USDT, Tether, is actually very sensible. The US government has the ability to censor a tether.

23:18 If you were to actually build a censorship-resistant stablecoin in the US, it would be illegal. The US government, there are actually laws on the books today that basically ban censorship-resistant stablecoins. So how do you solve that problem? One way I've thought about is you could have a stablecoin in a dollar-pegged non-US currency.

23:41 Why do we need a stablecoin here rather than just Bitcoin? Well, you could do it with Bitcoin. So again, stable channels on Lightning are trying to create this kind of algorithmic. It's not even that, sorry. It's like, why do we need a dollar denominated version? Why is Bitcoin not enough as money in this scenario?

23:57 So let's say the fiscal crisis comes in 2041. And people who are normies, not us, people who haven't bought enough Bitcoin, their savings, their assets are denominated in dollars. How do they convert those dollars into Bitcoin? But why does a US dollar stablecoin help them do that? Because that would also be, would that not be just as hard as trying to buy Bitcoin?

24:24 Well, however you buy Bitcoin, you're either buying it with the currency that you have, which is in the conversation we're having, US dollars, maybe it's some other currency, or you could barter. You could say, okay, here's this chair. I'm going to hand you this chair. Give me some Bitcoin. That's what happened in Weimar, Germany during the hyperinflation 100 years ago.

24:42 That's what Pierre Richard does. So there are ways, but it's very hard. So my point is, if we want to maximize, again, the ability of people to use Bitcoin in a crisis, we have to give people the tools to have a censorship-resistant way to exchange US dollars for Bitcoin. And again, maybe the various things, the bullets that I just listed out, maybe that's not the right technological solution, But it is a technological problem.

25:12 Is it with physical cash? Is it with blockchain-based US dollars? Is it something else? How do we actually give people the ability to exchange US dollars for Bitcoin without the government being able to cut off that transaction? I see what you're saying. The tricky thing about that scenario, though, is that if we are in real fiscal crisis, who's going to want the dollars?

25:35 There has to be someone on the other side of the trade. Well, that's true. The market will determine that price. But the thing that we can be confident of is that the US government will try to block that transaction because they'll want to keep you in dollars. And that's what we did in the 1930s when FDR and the Democratic Congress at that time said we gonna prohibit the individual ownership of gold personal ownership of gold We could easily see something like that again And by the way another really important point that a lot of Bitcoiners are not aware of is the, if you actually, there's a great website called bitinfocharts.com. You can go on there and say, okay, what is the distribution of Bitcoin

26:22 wealth in terms of like the wallet addresses and what percentage of wallet addresses on what amount of Bitcoin. And wallet addresses that own more than 10 BTC represent something like 98% of all the Bitcoin on earth and are 1.6% of all the wallet addresses. Yeah. And so that number is massively skewed by sort of exchanges and... It is, but it also gets skewed in the opposite direction by people who might have 10 BTC, but spread across 50 wallets. So it's skewed in both directions. But either way, if you compare that to fiat wealth distribution, it's way more concentrated. Bitcoin wealth is way more concentrated because of the OGs than fiat wealth is, U.S. dollar-based wealth or euro wealth or Japanese yen wealth. And the reason I bring that up

27:14 is that in a democracy, during a fiscal crisis, if you're a politician, whose rights are you going to be or whose interests are you going to be more oriented towards defending? The interests of the 98.6% of Americans who have no Bitcoin or a tiny little bit of Bitcoin or the 1.4% that have some Bitcoin? You're going to say, no, I'm going to side with the 99% against the 1%. Well, I mean, that's definitely true to a degree, but is it also true that they're going to try and defend their buddies on Wall Street, the richest people who are now buying Bitcoin?

27:45 I worry that they won't, right? I think they're going to look at it like in a true crisis where people are suffering and losing their wealth and barely able to afford their rent and put food on the table, politicians are going to be really responsive to that. That's what we see throughout history is that there's a huge populist impulse in those moments. And I think Bitcoiners have to be very concerned that they will be on the target list. That's what's happened. That's again, if you look at the history of hyperinflation throughout the world, the people, the Bitcoiners in this case, are the equivalent, Bitcoin or equivalent of the historical examples. They're seen as speculators.

28:26 They're the greedy speculators. The Emperor Diocletian in the Roman Empire talked about this, the greedy speculators who are taking advantage of, you know, this economic struggle that we're having. We're going to punish them. And that's what the Greeks have said, you know, during their crisis. That's what people have said, again, in Latin America. Through all these crises, the people who bet right by being early to Bitcoin are the ones who get blamed.

28:50 Do you think we also need to repeal KYC and AML laws? And the reason I ask that is like, that's obviously one of the other tools that they have in their toolkit. When, if something like this happens, where they can go to a Coinbase, not only they can then demand, you know, who are your customers? Where do they live? What are their addresses? And that's where the 6102 attack can become very serious.

29:11 But even to add to that, especially in a world of AI where we see these things getting hacked all the time, happened to Revolut recently, they had a lot of customer data leaked, including home addresses. That puts people in danger. Like, do you think that those laws, the KYC AML laws, are actually more detrimental than they are beneficial?

29:27 Because if you're a criminal, getting fake information off the dark web is trivial. Like, they still can get around those rules and really affects normal people who are trying to be sort of law-abiding citizens. So I'd say that the appetite in Washington for getting rid of KYC AML laws is near zero. Because the way Washington looks at it, and the way particularly the national security and law enforcement apparatuses look at it, is we have to be able to surveil money laundering, terrorist financing, criminal activity.

30:03 And if you take away KYC AML, you take away the number one tool we have to do that. Now, that's a qualitative argument. What I would argue is that there's a balance. There's a degree to which you can have KYC AML. You can't eliminate it for the reasons I just described, but could you better tailor it so that there isn't this kind of dragnet where every single human being who interacts with the banking system is presumed guilty before proving innocence?

30:38 That's the system we have today. And the other thing we do that's really dumb in the U.S. is the laws and rules that we use in terms of people setting up bank accounts are different from the rules that the rest of the world uses. And so that makes it really hard for Americans to kind of use the broader banking system because banks around the world don't want to work with American clients because there's an extra compliance hassle.

31:09 So if we simply said let use a standard that the rest of the world uses that Europe uses that Japan uses that Singapore uses and just have a common standard so the information can go both directions That would actually smooth out the process a lot and create a lot, reduce the regulatory and disclosure burden that you have. So there are things like that that we can do. We can limit and reduce the amount of information we require of people. But unfortunately, as much as I would prefer a world in which these things were completely minimized.

31:43 I can tell you, you know, this came up in the Clarity and Genius Act discussions in Washington. It's a non-starter out there. But even if it's a non-starter politically, do you think it would be the right move? Because I don't know when KYC AML laws really came in, but when the economy was largely a cash-based economy, much harder to try and implement those rules.

32:04 And as everything went digital, much easier. And I don't know what the point was, but it seems like law enforcement has been handed off to financial companies instead of like, why aren't law enforcement just handling this in the traditional way? Yeah, you're right. I mean, there has been some outsourcing to financial companies. And that is one of the interesting things that the government, not just the US government, but governments around the world do as a way of saying, hey, you know, we're going to put these mandates on the banks to enforce our laws rather than just enforce them ourselves.

32:32 That's a technique that governments have used to minimize the degree to which they get blamed or criticized for creating onerous laws. And that's something we definitely have become very good at here in the U.S. So, again, there are, I could write a whole white paper on how we could optimize these rules in a way that would not eliminate KYC AML, but minimize the footprint.

33:00 and again, reduce the number of innocent people that were dragging through these processes every day. One example that I would give as a country that does things the right way is Estonia. So Estonia has a really amazing model. We've written some stuff on this at FreeUp, where their entire basically government infrastructure is on what you might call a precursor to the blockchain.

33:25 They built this when they became independent of the Soviet Union in the early 1990s. and so your identity has, you have like a combination of letters and numbers that's your digital ID, like a driver's license or something like that and there's a pin code attached to it, like a 2FA type code and you can go on the government website and you can vote electronically, you can set up bank accounts electronically, you can change your address, change your last name, all these things can be your health insurance, your bank accounts, And because all this stuff is, the spine of this is they know who you are, your identity is something you can identify cryptographically, or you can prove cryptographically.

34:12 You don't have to go through all these other steps because the fact that you can, the government knows you are you when you interact with a bank. And the bank knows that too, means that whatever data they need to pull in to say, okay, is this person a Estonian citizen? Have they paid their taxes or whatever?

34:28 like they can all put all that together instantly and it's all done and it's so it's very seamless they can find out the information they need to find without making you go through all the all the hassle um so that that's a system that at least reduces the surveillance burden and is also secure one of the things that estonia did was they built all this on the blockchains precisely so that the russians couldn't basically hack their system because they're constantly being attacked by Russians, cyber hacked by Russian cyber hackers.

34:59 And so they built their whole system to be resilient to cyber hacks from Russia. So there's a lot to learn from Estonia. The challenge is in the US, we have an incumbent system that's very hard to fix, one that's already been built. As Bitcoiners, we spend a lot of time thinking about taking control of our money.

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35:52 That's expatmoney.com slash WBD for your free report Recent hardware wallet vulnerabilities have definitely made me rethink my entire security setup As I'm sure it has for a lot of Bitcoiners And the uncomfortable truth is that no single security product can promise there'll never be a problem Which is exactly why the design matters BitKey is a self-custody hardware wallet that uses three keys created in three separate environments There's one on your phone, one on the BitKey hardware itself And one on a secure BitKey server Two of those three keys are required to sign any transaction So a problem isolated to just one key is never enough to move your Bitcoin So if you are rethinking your setup right now as I sure a lot of people are you should really think about the BitKey The hardware looks great The app and the user

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37:16 reach the people you intend it for. And US-based customers can also add Bitcoin insurance backed by Lloyds of London. Whether you're a self-custody expert or want multi-institutional support, your Bitcoin estate plan should not be an afterthought. Bitcoin is only generational wealth if it can be passed down.

37:31 So make sure your family can access tomorrow what you've built today. AnchorWatch is your custody, your way. So visit anchorwatch.com to get started. That's anchorwatch.com. Yeah, so I know I'm being an ideologue here, But one of the things that I hate, I'm in my 30s and this could be just me being more aware of the world.

37:50 But it feels like in the, you know, 15 years, whatever, I've been an adult. I feel the encroachment of the state. I feel like I'm getting more and more involved in my life and I just want to be left alone. Yeah. Well, so I agree with you and I share your philosophy. And what I'm trying to explain is that in a Democratic or Republican form of government, small r, small d, there's simply not the majority, the voting majority is not interested in establishing the kind of system you're describing.

38:28 And so the best way to achieve the outcome that you want, which is how can I live my life in a way in which governments don't have the ability to surveil me or restrict my choices? How do I live that way? And the answer to that is to have the right of exit. The most important right and the most important freedom is the freedom to leave.

38:53 because if you have the freedom to leave, if you have the freedom to leave a country, if you have the freedom to move your capital from dollars to Bitcoin, then it's very hard for the government to repress you. So to take the dollar to Bitcoin example, let's say my dream comes true and some genius out there who's listening to this podcast builds the permissionless, censorship-resistant technology for exchanging dollars or stable coins for Bitcoin and vice versa.

39:21 then if the u.s government in 2041 says hey we want to we want to impose capital controls we want to impose financial repression we don't want people to exchange their dollars for bitcoin they won't be able to stop it and because they won't be able to stop the exit from dollars to bitcoin they'll have to figure out a different way of solving the problem so if if you can't prevent people from exiting, then what can you do? You actually have to solve the original problem, which is the budget deficit. I'll give you another example, corporate tax rates. So in 2017, the US had the highest corporate tax rate in the developed world. It was like 35%.

40:04 The rest of the world, I think the average in the industrialized world was something like 25% at the time. And so Congress said, this is dumb. We're seeing a lot of US companies leave, merge into foreign acquirers because they want to get out of the U.S. tax system, so they're paying the Irish tax rate or the Swiss tax rate or what have you. And so the U.S. Congress said, okay, how do we fix this? Well, one way to fix it would be to say, we're not going to allow U.S. corporations to leave. That would be the eliminate the right to exit. But they didn't do that. What they did instead was say, let's lower the U.S. corporate tax rate so it's competitive with the rest of the world. So they brought the U.S. corporate tax rate down to 21% so that companies would have an

40:48 incentive to stay in the U.S. instead of leaving. So this is the point I'm trying to make. One way for the government to solve the problem is to say, no, you can't leave, and we're just going to keep raising your taxes and taking your money. And the only way we can take your money is to prevent you from leaving. So we have to stop you from leaving first, then we raise your taxes. The other way to say, well, we can't stop you from leaving. The right of exit is preserved. And because the right of exit is preserved, we've got to make our economy more competitive. So then map that onto the deficit. If we can't prevent people from exchanging dollars for Bitcoin and leaving the system, if that is something that we can't stop, then the only way for the US to win in the end

41:32 is to solve the problem of the deficit and the debt. This is exactly it. And that makes total sense to me. These governments should be working like businesses and competing for your business as a citizen. And it feels like across most of the world, certainly the Western world, where you look at the UK, Europe, like Australia, all these people are trying to impose exit taxes and do unrealized capital gains, and they're driving business out of their countries instead of competing for the business.

41:56 And there are places like, you know, the Dubais, the Singapals of the world, Hong Kong, that are trying to play the game of competing for business. And I don't know why these, what you'd consider like Western democracies, aren't playing the game. Instead, they're just trying to trap people and disincentivize them from leaving rather than incentivize them to stay.

42:13 It's a clear and obvious signal. Anytime a country creates or erects a financial Berlin Wall. It makes me want to leave more. The signal that they're sending is we don't want to compete. Yeah. We want to force you to stay and actually tax you more or devalue your currency more. And the countries and jurisdictions that say, no, you can leave anytime you want.

42:36 what the signal they're telling you is we're not afraid of you leaving because we think you're going to want to live here. We think you're going to want to stay here and we're not afraid of competition from other countries. And there comes a time where someone's going to make or lots of people are going to make a decision of I can pay 50% exit tax or whatever.

42:53 I still think I've got more prosperity elsewhere. People will make that decision and they're going to lose the wealthiest people in these nations. I mean, that's happened. So if you look at Norway where they have this giant wealth tax and you have all these entrepreneurs who've been very successful in Norway and if you have a startup and you have equity in your startup, that's not cash. You can't sell the equity in your startup, but the Norwegian government says, no, you have to basically sell your shares to pay this tax on your wealth. These guys are like, you know what? I can't afford to live here anymore. I got to leave. Then Norway said, no, we're going to have this exit tax that makes it impossible for you to leave. Then how did the Norwegian entrepreneurs respond? They said,

43:32 well, I'm going to start my next business in Switzerland. I'm not going to start it in Norway. Yeah, it's crazy. It's so anti-competitive. Okay, so let's get onto the debt stuff because this is what we were, when we were talking to Hong Kong, this is what I really want to get into with you because there's a lot of talk around, obviously, everyone knows the US debt is a problem.

43:51 And the way that they deal with that debt is the thing that's kind of up to question. It's whether they essentially make everyone in the US poorer by inflating the currency and trying to inflate their way out of the debt. There's a lot of talk of whether AI I can help grow out of the debt. But I think you see this even more differently, where you think this is a much bigger problem than people realize. It's huge. And we talked about this a little earlier. So at FreeUp, I reverse engineered this official government projection, this Congressional Budget Office model for what the future debt and deficit will look like. And if you read a newspaper, if you open most white papers, most research reports that you read,

44:27 most of them rely on this official government projection to say, hey, in 10 years, The debt to GDP ratio will be this instead of that. And it's all built on this official government projection. The problem is the official government projection is wrong. And it's not just wrong because it's hard to predict the future. It's wrong in very specific ways. It's wrong because it's wildly optimistic about what the economic growth of the U.S. will be, what the borrowing costs of the U.S. will be, and what inflation will look like in the future.

44:58 And so once I reverse engineered their model, I asked the model, I said, okay, if real GDP growth, inflation-adjusted GDP growth in America, economic growth, is 3.0% a year instead of 3.6% a year, how does the debt look in the future? And it goes like this. Excuse me. It shoots up. What seems like a very small change.

45:23 What streams like a very small change, 0.6% per year, because of the power of compounding, it massively increases the debt. Why? Because the big spending bucket, you know, the big spending line items, like Medicare, Medicaid, Social Security, the big healthcare programs for the elderly and the poor, and Social Security, the pension program for the elderly, these programs are on autopilot.

45:48 they grow based on inflation. So if inflation is 5%, then Social Security payments go up by that much more. If inflation is 5%, then Medicare payments go up by that much more versus 2% or 3% inflation. On the other hand, if your economic growth is slower, the tax revenue that you collect to pay for all those benefits is lower. So the tax revenue grows more slowly if your economic growth is slow, but because the inflation keeps trucking along, the spending on the government programs keeps increasing. That's what creates the... So the deficit gets larger if economic growth is slower than you expect and inflation is higher than you expect. And of course, borrowing costs also contribute to this because right now, interest on the federal debt is about a trillion

46:39 dollars a year. So if the interest rates go up, as they have been this summer, we're recording this in the late summer of 2026 as interest rates go up the borrowing cost for the US government goes up and that also a spiral So you can try to inflate your way out of that but it really hard because if the Federal Reserve starts doing what it has been doing in crises in the past and print more dollars to try to lend more money to the U.S. government and inflation gets worse, it doesn't really solve the problem. And so we're stuck in between a rock and a hard place right now, and we don't have a lot of great options.

47:17 Is this summer? We're in October. I know it's raining in Austin. You're right. I guess it's technically fall now. I've lost track of time. You're right. So when you look at these debt numbers, what's the important one? Is it the, so 40 trillion is obviously headline number right now. Is it that or is it the debt to GDP that is the important metric here?

47:37 I would say that the real, the most important metric is what you think it's going to look like in 10 or 15 years, right? The debt today is bad, $40 trillion, and as a share of the economy, that's a lot. It's basically an almost historical record. The only time the debt-to-GDP ratio has been this high was during World War II, and then it rapidly went down as the war wound down.

48:00 So we're not fighting World War II right now, and so this is a real problem. But the bigger problem is the future. So one thing you'll hear people say, people who are more optimistic than I am, they'll say, look at Japan. Japan has a debt to GDP ratio of 200%. So their debt to GDP ratio is the worst in the industrialized world.

48:24 And they're trucking along. That's the argument of the optimists. Now, that's true that they're trucking along, but their economy is stagnant. And there's a lot of unhappiness. And has been for a very long time. Yeah, I mean, it's been like a lost generation or two now at this point. Their economy isn't basically stagnant since the 1990s.

48:40 It's not a great situation. Yes, there's beautiful whiskey and beautiful sushi in Japan, but there are a lot of things that are wrong with the Japanese situation. Terrible age demographic. No one wants to have kids. It's nihilism. It's like loss of hope in the future. Completely. And importantly, their debt to GDP ratio, while it's increasing a little bit, it's relatively stable in this kind of low 200% percentage.

49:05 That's not the circumstance that we find ourselves in the U.S. because of Medicare, Social Security and Medicaid. These programs are growing so rapidly, and they grow on autopilot. So it's with most countries in the world that have, say, public health care systems. So take, I don't know, the UK. The UK Parliament passes a law, you know, passes a budget each year that basically says, here's how much we're going to spend on the National Health Service.

49:35 And then the, you know, England and Wales and Scotland have to sort of decide, okay, here's the budget we have for the NHS. What are we going to pay? How are we going to spend the money that we've been allocated? That's not how it works in the US. The way it works in the US is if you're on Medicare, you're 70 years old, you go to the hospital, the hospital charges whatever it wants to charge you for a knee replacement, and then it sends the bill and the government pays it.

49:59 And those bills just go up and up and up every year. So they don't know what they're going to be. Right. So you can project it up to a point, but it basically works in this autopilot way where the Congress has no control over the spending. So the problem in the U.S. is that let's say our debt-to-GDP ratio gets to 200%. I think it'll get there sooner than the government predicts.

50:21 It won't stay at 200%. It'll go to 250. It'll go to 300. It'll go to 350. And over time, international banks, international governments will be less willing to lend us the money we need to finance our debt. And if there's less interest in supplying us with those funds, interest rates in the US will skyrocket unless the Fed prints more and more money.

50:47 So the peculiar structure of the US debt is way worse than what you see in the old pigs countries or in Japan or some of these other places we look at as places where the debt to GDP ratio is also bad or the deficits are also really bad. It's the future. It's that 10 to 15 year outlook. That's really the thing that I worry the most. So this is the real flywheel. It's the debt crisis flywheel. And you say numbers like 200 and 300 percent. They sound really extreme. How quickly do you think the U.S. can get there? So if you again, if you look at these official government projections right now, the debt's 40 trillion. If you use the 10 year window, which is what the Congressional Budget Office uses. I'll make the math very simple. So if you have $2 trillion in

51:34 debt for the next 10 years, that's $20 trillion. So that alone increases your debt-to-GDP ratio by 50%. So let's say that the debt-to-GDP ratio in 10 years' time is, let's say it's 175% of GDP if you include the compound interest and all the other stuff. So that's what the official government projections are, I believe. I can't remember the exact debt-to-GDP ratio that they're projecting but it in that range it sort of like 175 of GDP or something like that It could easily be 250 And again what matters is that slope of that curve The more it goes up and the more the bond market looking at that and saying you know what this looks really bad. I don't see anybody in Congress or in the White House trying to fix this.

52:17 I'm out. I'm going to allocate less of my balance sheet to investing in treasury securities. I'm going to put more in gold or Bitcoin. And all this is already happening. This is already happening. So for example, gold has run up a lot over the last couple of years. And the reason why gold has run up relative to the dollar is because central banks have been buying a lot of gold. So central banks in general are not buying Bitcoin because they're more conservative. They're buying gold.

52:43 And this year, for the first time since I believe the 1990s, central banks held more gold than they held treasuries. For most of the 21st century, the largest holding of any central bank was U.S. treasury securities, bills, bonds, and notes. That's no longer true. Now gold is the number one and treasuries are number two.

53:05 So that gives you a sense of the shift. And you could say these are kind of like tectonic plates. they move very gradually, but over time, they're quite noticeable. And so this does become exponential in the fact that if people are over this period, people becoming less interested in US government debt, buying less of it, the Fed has to step in. Do we end in hyperinflation here?

53:25 It could get very bad. I mean, hyperinflation, people have different definitions of what hyperinflation is. Is it 50% a year? Is it 1000% a year? What is exact hyperinflation? I don't know, but I do worry that it could get very bad. Another possible outcome, so hyperinflation is one element of it, or high inflation, let's call it, is one element of it.

53:49 Another element of it is bank failures. Some of your listeners remember a few years ago when Silicon Valley Bank or SVB failed, and SVB failed because they mismanaged their balance sheet. interest rates were going up, and that meant the value of some of their treasury holdings were going down. And because they were using fractional reserve banking, they basically became insolvent in a very short period of time. Now, imagine something like that, but times a thousand, meaning like if there is a real loss of confidence in the US fiscal situation, and therefore a loss confidence or loss of interest in people holding Treasury securities and therefore the prices of those Treasury bonds and other Treasury securities goes down. That means that the value of the balance

54:43 sheets of the banks and other entities that hold those Treasuries will also go down. And so if their liabilities are high but their holdings, their assets decrease, they could quickly become insolvent in a similar way that SVB went broke. So imagine if that happens to a Barclays or a Goldman Sachs or Morgan Stanley, that's a big problem.

55:11 And does that though not then lead to the high inflation? Because the Fed is not going to allow that to happen. They can't allow that to happen. That's a good point. So the Fed will probably try to print money to prop up the banks. But But we're talking about a very large sum. So the amount of money you'd have to print would be in the trillions.

55:35 So right now, the supply of U.S. dollars in circulation, if you use M2, which is a common measure of the supply of money in circulation, the quantity of money in circulation, the U.S. dollars, it's about $21, $22 trillion, something like that. Don't shoot me if that's not exactly right, but it's in that range.

55:50 and so imagine that you print another 10 trillion dollars or 15 trillion dollars to to stave off you know all these banking collapses that's a lot that's a lot of money it's a very lot of money um and i i think one one of the things that i i try to emphasize in my writings and my conversations guys like you is bitcoiners when they hear this kind of talk from a guy like me they're kind of like okay this is cool i'm in bitcoin i'm gonna be fine i don't think this is And what I'm trying to really warn people about is be careful what you wish for, because if civilization collapses, if the financial system collapses, it's not going to be fine. And it's especially not going to be fine for Bitcoiners because, yes, it's going to be fine in the sense

56:35 you have Bitcoin, you're going to be somewhat protected, but the politicians are likely to go after you precisely because you're seen as a pot of money that they can then use to solve the problem. And even without that, Bitcoiners will be positioned well for this, but I don't want to be the rich Bitcoiner in Mad Max world. I completely agree. So this is why I think it's so important that we as Bitcoiners think about and do everything we can to think about how do we, first of all, stave off that crisis? How do we help the government stave off that crisis? That's why I worked so hard on healthcare reform for all those years But also can we make sure that as many Americans as many people around the world as possible have a stake in Bitcoin success whether it through self custody or through things like what we do at Strive by giving people the ability to have a stake in Bitcoin and their regular brokerage accounts or what have you

57:31 And if you had to put a probability on this, because I mean, this is apocalyptic, essentially. I know it's kind of a depressing conversation. I try not to be depressing, but this is why we have to be solution oriented. What are the solutions? But yeah, it's a downer. And it's really like, I don't want to go too far.

57:46 It's the end of capitalism. It's the end of the Western world. Like this is a really apocalyptic scenario you're sort of laying out here. And I want to know, like, if we take that sort of worst case scenario, what probability are you at with it? Boy, it's so hard to assign probabilities. I would say the range, let's put it this way.

58:01 The range of outcomes might be the best case scenario is Japan and the worst case scenario is Mad Max. And for your younger listeners who probably don't know what Mad Max is, It's an old set of movies starring Mel Gibson about like a post-nuclear world. They'll know. There's new ones. Have you not watched Mad Max Fury Road?

58:20 Oh, I guess that just came out a couple years ago. You're right. Okay. So maybe youngins know what Mad Max is. Anyway, so that's the range of outcomes. And certainly my hope is that we can get more to the positive end. And part of how we could do that, for example, is a structured bankruptcy. So imagine we have a situation where the US starts to go broke, the bond market starts to fail, and the end result is the US has to say, you know what? We are broke. We can't pay off all these liabilities. Let's do a restructuring where we write off, we do a partial default on treasuries, which again would be very bad for banks because a lot of banking collapses could happen because of that. But that structured default is accompanied by a restructuring of

59:14 Medicare and Social Security and Medicaid. This is basically what happened with the big three automakers in 2008. So when GM and Chrysler, General Motors and Chrysler, went bankrupt in 2008, the government stepped in, bailed them out in terms of their pension obligations and some other things, but then said, we're going to, going forward, you've got to restructure those pension obligations so that they're sustainable in the future. And that's what they did. So now GM and Chrysler are on much more sustainable footing. They still have to compete in the global market for cars, but at least they don't have these crazy pension obligations that basically bankrupt them.

59:51 And that's how you can do that at the government level too. You can say, okay, but the bond markets are willing to say, you see this in the Argentinas of the world, bond markets are willing to accept a haircut on their bond investments, a partial default, if they believe that you've done a restructuring such that going forward, you're going to be in a more sustainable situation.

1:00:12 So to me, that's probably where we end up if we want to turn this around. Ray Dalio has written a number of books about some of the historical examples of this that people can look at. But is that a scenario where everyone loses? Like the banks maybe lose the most, but the people that have been paying into their pensions, all that sort of stuff, they're also going to lose in this scenario.

1:00:29 It's not a good outcome. And what we should have done is what Congressman Paul Ryan tried to do many years ago, saying, hey, let's let's bend the cost curve. Let's modify these programs for young people so that 20, 30 years down the road, they'll be sustainable. And Paul Ryan got really attacked for that. And and here we are.

1:00:48 So it's it's unfortunate. But now we're at a point where the hour is late and time is short. I know you said it's hard to put probability on it. I think I have a way of figuring figuring out your real probability. Have you looked into an exit plan, a bug out plan in case this does happen? You mean like the, you know, the create the bunker and get the canned food, that kind of.

1:01:09 Yeah. Or find a jurisdiction that you think will be safe. Are you moving to Latin America or New Zealand? You know, it's. I look at everything, I think both, you know, for both from a corporate standpoint, from an individual standpoint, I think you have to look around the world and say, how do you how do you navigate this world?

1:01:28 I think less so for me personally and much more for my kids. I think about my kids and I say, my kids are young. And so if I'm right that we have 15 years left before the U.S. really has a huge collapse, then that's my children's entire adult lives. And so how do I make sure that they have opportunities to thrive and succeed and are not completely dependent on the U.S. fixing the U.S.'s problems, which I certainly am doing everything I can to help fix.

1:02:00 But I think about it from their landscape and making sure that I'm following what else is going around the world so that they have opportunities to take advantage of other places, to get a job somewhere else, to get educated somewhere else, or have the ability to live somewhere else if they can, if they have to.

1:02:18 We've got the perfect soundtrack for this. It's raining, we've got thunder and lightning. This couldn't be more perfect. So the thing that I want to get from you here then is there'll be people listening to this show that are hardcore Bitcoiners like I've heard similar thesis before, like they feel prepared because they have Bitcoin. There's probably also going to be people that might like you for the work you do at Strive, maybe just newer to this world. Like why is Bitcoin the answer here? Well, I'd say I would- Actually, sorry to add to that, explicitly self-custody Bitcoin. Yeah, sure. So, well, I was just going to say that I think there are two... You can break down Bitcoin's value, I think, into two big categories. The first big

1:03:04 category of why Bitcoin is useful is that it's a great store of value. I mean, in other words, because the supply is fixed and because it's impervious to government-driven inflation, It's a way of protecting your savings from this monetary devaluation that Bitcoiners know a lot about that we've been talking about during this podcast.

1:03:30 The second piece is the censorship-resistant, permissionless, self-custody piece of it, meaning it's very hard for governments to confiscate Bitcoin that you hold in self-custody. You have the ability to move it around, unlike gold, which is a great hard asset. if I want to move my gold from the US to Canada or Switzerland or Argentina or wherever, you got to take it in a truck and drive it across a border or what have you. That's really hard to do.

1:03:58 The customs and border officials can stop you, whereas Bitcoin, it's a lot easier to move. It's much more portable than gold. So the fact that it's both more portable than gold and more censorship resistant than gold is incredibly important. So those are two things that are important. Now, there are lots of investments that can increase in value over time at a comparable rate as Bitcoin.

1:04:23 So, for example, if you owned NVIDIA stock in the early days or if you bought Google at the IPO, you'd probably be just as wealthy as if you bought Bitcoin at a certain point in time. So there are lots of ways to make money or to have your investments grow in value outside of holding Bitcoin. So Bitcoin is useful as a store of value.

1:04:42 it's not the only theoretical possibility for increasing your returns over time. I think what makes it attractive is that it can increase in value in all sorts of different economic environments, unlike some of those more conventional companies. But all that to say that while Bitcoin is a great investment and a great store of value, what makes Bitcoin unique is the combination of being a great store of value and being something that is more resistant to government confiscation, more censorship resistant.

1:05:15 The ability of you and I to exchange value in Bitcoin without the government being able to block that transaction is incredibly important. And so the combination of the two, it's like what we were saying before about the right to exit. But you've got to have the permissionless piece is important. And what I would say is it's not necessary for everybody to use Bitcoin in a permissionless way.

1:05:38 What I would argue is that there are approaches of interfacing Bitcoin in the traditional financial system, which is what Strive works on, that are very important and very valuable. Bitcoin ETFs are ways for a lot of people to get access to Bitcoin as a kind of a gateway drug to maybe having it self-custody.

1:05:58 or maybe because they've already got a 401k, they got to put it in something, might as well put it in a Bitcoin ETF. Now you can put 401ks in raw Bitcoin too, or spot Bitcoin. But the point is, there's a utility in having permissioned forms of securities or instruments that also allow you to take advantage of Bitcoin's investment properties.

1:06:21 You get exposure without owning Bitcoin. Right, so the exposure of Bitcoin, but having that right to exit, having that freedom to exit, that's what the self-custody piece provides. And that's an essential feature to Bitcoin that we always have to preserve. And that's why the cold card hack and some of the things that are going on with Rob Hamilton's red team, it's so important for us to make sure that self-custody continues to be robust. That's why I think it's really important for us to take seriously the quantum computing threat, the potential for AI to theoretically, you know, hack hard wallets and things like that.

1:06:58 Those are all things we've got to really be very vigilant about so that self-custody remains a very important, valuable part of the Bitcoin use case. Yeah, it's definitely naive to think everyone's going to do it. We just need to make sure everyone can do it if they need to. Exactly right. Everyone has to be able to do it so that if and when this crisis happens, more people can use self-custody and operate with self-custody.

1:07:24 Damn. This is a, that's quite bleak. Let's change tack. Cause I- Yeah, please. I wanna talk to you about Strive. Cause we've had these conversations in private a lot. And you know everyone knows that I like I don have the hugest like I don care that much about treasury companies I think my opinion has changed a lot as the sort of market has changed So if you went back to last summer paper Bitcoin summer, every person in the world is doing a Bitcoin treasury company.

1:07:51 There's a new announcement every week. That's when I was really skeptical of this idea. And more so because of the sort of question of the incentives between investors and shareholders. Like, I feel like a lot of that has been washed out. I think there's companies that have promised to do something, they've not done it, they've wound down.

1:08:07 And the market there has matured for sure. And I think people's experience of that market that we've been through has changed people's perception of these treasury companies. But why do you still think they're very important? For me personally, I think it's been an incredible blessing to be involved in Strive.

1:08:26 I think we have an amazing team. Really just it's been a great joy. It's so much fun on a personal level. We talked about my personal journey earlier. It's taken me a long time to find the right opportunity to have my full-time job be a Bitcoin-based job and to be paid in a form of... A lot of my compensation is in stock, and the stock is, of course, pegged to Bitcoin in a sense.

1:08:53 So to be able to, in that way, be paid in Bitcoin is really exciting. And to be able to build what I think is going to be a great company is super fun. so on, just on a personal level. Closing the loop on our earlier conversation about my Bitcoin journey, it's just been an incredible joy and privilege to be able to participate in this great company. I think that you're describing something that I think intuitively was a very healthy instinct, a healthy reaction that a lot of Bitcoiners had in the summer of 2025, where all of a sudden there was this explosion of people saying, hey, look at MetaPlanet.

1:09:34 They're a rocket ship. Now, it's not just strategy they can do. Strategy was sitting there since 2021 doing this all by itself. And Michael Saylor kept saying, why isn't anybody else doing this? And it took a fair amount of time for more companies to say, hey, we should be trying to do this too. And there was this big explosion during the peak of the 2025 bull market. And I can completely understand why it felt to a lot of people like this feels like a bubble like every every week there was some new announcement about a new bitcoin treasury company it's like what's going on here and i think that there was among the people who are founding these companies even there was a degree to which uh not all companies were created equal um it's it felt perhaps like

1:10:24 that building a Bitcoin treasury company was easy. If you just said, I'm setting up a Bitcoin treasury company, I'm converting this old business to a Bitcoin company, it didn't really matter if you had a lot of experience and sophistication and knowledge about how corporate finance worked. You could just start one of these things, issue some debt, buy some Bitcoin, and everything would be fine. And right around that time, really about a year ago, I mean, in October of 2025, the market turned, Bitcoin went down, and a lot of these companies had a hard time because they borrowed a lot of money. And they borrowed a lot of money that they had to pay back precisely at a time when the value of their balance sheets was going down. So they basically

1:11:09 got margin called and struggled to stay afloat. And that was a big problem. And one of the things that we did that was novel and unique at the time, and I think still novel and unique, is we decided we weren't going to have any debt at all. So I remember early on when I was first getting recruited to Strive in the spring of 2025, Matt Cole, the CEO, and I would have these conversations.

1:11:37 And Michael Saylor was very open at that time, starting to be very open about the fact that he was getting frustrated with convertible debt. So he was able to raise a lot of money by issuing convertible debt during the pre-COVID era when interest rates were at zero. So he'd borrow money at 0%, buy a bunch of Bitcoin with it, and then Bitcoin rockets, and he's turned a $1 billion company into a $60 billion company.

1:12:06 So that worked out well for a time. The problem was a lot of the investors in his convertible debt were hedge funds that, as a way of balancing out their investment in his convertible debt, were shorting the stock, MSTR, to balance out their exposure to the debt. And so this got very frustrating for Michael, who was saying like, hey, we're building this great company here, and we're very over-collateralized. We're never going to go broke, so we're going to pay off this debt. But in the meantime, we have these hedge funds that are shorting our stock because they're the ones who are basically buying all our convertible debt and then balancing it out by shorting the stock.

1:12:48 So he started to get very vocal about the fact that you know we decided that converts are not the end all and be all We want to move on from this We got to find some alternative solution And that was happening exactly at the same time that this explosion of these new companies was coming online, who were still using, copying the old MicroStrategy playbook of, we're going to issue converts. We're going to raise money through debt.

1:13:13 and I remember Matt going to me in those days and being like, hey, Ovec, what do you think about not having any converts at all and just issuing preferreds because MicroStrategy was starting to move in that direction. And I was like, hmm, this is interesting. Yeah, I mean, I totally buy the argument about this hedge fund problem with people shorting the stock.

1:13:39 On the flip side, the preferreds that strategy's been rolling out aren't raising a ton of money in the market. They're just kind of like trickling along. And so we're thinking about it. And then Stretch gets announced, which is their security that tries to be pegged at $100 and really not be very volatile as an underlying security, but then has this dividend that's issued when it started, I think it was 9%, and now it's at up to 12% annualized dividend yield.

1:14:11 I remember talking to Matt and being like, wow, this is amazing. Because basically it's kind of like a competitor to a stable coin. If you own a stable coin, it's supposed to be pegged to a dollar, but there's no interest or any coupon or any yield attached to it. It's just a dollar. Tether, in the case of USDT, they keep the coupon.

1:14:30 So like they put your dollar in treasuries and that 5% yield, they keep it, which is a great business if you're Tether. maybe not so great if you're just owning the stablecoin. So what Saylor using his AI models was able to engineer was this product that has some of the properties of a stablecoin in the sense that it's low volatility, low risk.

1:14:55 It's kind of like a cash-ish instrument or like a money market mutual fund, but it has this incredibly high yield. And we're looking at this and like, this is amazing. And so we immediately started thinking about, could we learn from this? Could we do something like this? And a couple of things just kind of happened. Coincidentally, we were approached about buying similar scientific. That allowed us to immediately leapfrog to getting to about a billion dollars of scale. And that was very important because the investment bankers who have to create these preferred securities, they said to us, look, unless you're at a billion dollar market cap or so, so that this preferred instrument that you're launching can be like $100 million or $200 million,

1:15:43 it's not worth it to us. It's not worth our time to build this for you because the fees that we're going to generate from it aren't going to be worth it. So we're only going to do the work for you if you get to that scale. And so we got to that scale much sooner than we thought because of the similar acquisition. And then we were able to essentially skip to the end of the movie. So if you look at strategy, they started out issuing their common stock to raise money to buy Bitcoin.

1:16:08 Then they started issuing converts, convertible debt, to buy Bitcoin. And then they started issuing preferred equity to buy Bitcoin. And it was sort of like their 12th attempt is what got them to STRC that became, as Michael likes to say, his iPhone moment. And we were able to basically learn from all those things that strategy did and basically take the last thing they did and build off of that with no debt. And so when that bear market hit and all those other companies were getting margin called, we didn't get margin called because we had no debt. And that, I think, has really allowed us to succeed in this otherwise adverse market that we've had for much of the year.

1:16:52 So you said a few things in there. That was a long answer to your question. That was a long answer. And I'm going to go back to one of the things you said very early in that answer. Because I kind of prefaced that by saying, I don't see as many issues in it now as I did. There are still some. And one of them comes down to compensation.

1:17:09 And you said you take most of your compensation in stock. Totally fair. The thing we saw recently, the elephant in the room for treasury companies right now is the MetaPlanet thing. where I feel like the compensation that the management were getting, kind of at the expense of the common shareholder, was totally misaligned.

1:17:26 I think it was pretty messed up. They obviously rolled that back to some degree, but I think if no one had kicked up a fuss, they probably wouldn't have done. Do you still judge this as a very immature market? Yeah, you know, Matt Cole, our CEO, his Twitter handle or X handle is Cole Macro. So anyone who wants to follow his take on this topic, I encourage people to do that because he's tweeted a lot.

1:17:53 He's written a lot of long form tweets about how Strive thinks about executive compensation. And as you know, we were talking about before we started filming when I first joined Strive I first joined the board and then became full later as an employee And because when I joined board I wasn an employee I was actually the first independent director that we had at Strive under this new Bitcoin strategy.

1:18:20 And so for that reason, I was very involved in our thinking about all this stuff. And And I think for us, and especially for Matt, but for the board as well, something that was really important for us, at that time, we didn't know what other people were really doing other than microstrategy or strategy.

1:18:41 We actually hired an outside consultant, Mercer, that does a lot of executive compensation work. So we wanted to have some outside thinking as a way of kind of best practices about that. That was number one. But number two, because Bitcoin treasury companies are so new and they work in a different way, we couldn't just outsource our thinking to a company like Mercer, even though they're well-known and well-established.

1:19:05 To give an example, one thing that is very typical in a U.S. publicly traded company is the executive team will be paid in stock. And if the stock goes up a lot, you'll get paid more. If shareholders do well, you do well. Which makes sense. Which makes sense. If you're delivering massive returns to your shareholders, I think you should get rich.

1:19:30 The problem is when the stock is down so much, you're diluting shareholders and getting richer. That's a misalignment. That's one misalignment, and that's what MetaPlanet got criticized for. There's another misalignment that's specific to Bitcoin tragedy companies, which is what if over a 12-month period, say, Bitcoin goes up 80% and your stock goes up 60%. So your shareholders have done pretty well compared to the S&P 500. You've outperformed the S&P 500 probably over that period.

1:20:00 But Bitcoin needs to be a hurdle, right? But you actually underperformed Bitcoin. And you're a Bitcoin treasury company. Your balance is in Bitcoin. What's going on, right? So one thing that we really spent a lot of time thinking about was how do we make sure that we, yes, align with shareholders and reward our leadership team for outperforming the stock market, but also are aware of the fact that if Bitcoin is driving the outperformance of the stock market rather than our value add to the shareholders, how should we basically balance those two objectives? And so we created some incentives around that, around we need to not just outperform the stock market. That's one component. But another component is we

1:20:47 should be able to outperform Bitcoin too. And that's where increasing Bitcoin per share is important. So if you increase Bitcoin per share for the common shareholder, you should outperform Bitcoin. Because if for one share of stock, you had one Bitcoin, just to use very simple math, you own one Bitcoin a year ago, and now you own 1.3 Bitcoin or 1.6 Bitcoin, if Bitcoin goes up, your share value should go up even more because you own more Bitcoin per share.

1:21:15 So that's why we made Bitcoin per share improvement, or Bitcoin yield as some people call it, a key performance indicator for us. Then that leads to another downstream effect. So one problem is, okay, you can say, this is great. Okay, I'm following you, Ovik. You want to reward the company for increasing your Bitcoin per share.

1:21:39 That makes a lot of sense. I, as a shareholder, like that. Cool, we're done. We're not done. And the reason is, one way you could increase Bitcoin per share is by saddling the company with so much debt that in the short term you increase Bitcoin per share, but in the long term the company is unstable and vulnerable to a bear market margin called collapse.

1:22:03 So how do you protect against that? And so we came up with the idea of saying, if Strive fails to meet its dividend obligations or other credit obligations, no one on the executive team gets a bonus. And so that was our way of saying to the executive team, hey, we're trusting you to increase Bitcoin per share and use whatever creative techniques you want to come up with.

1:22:30 But if you do it in a way that over the long term, harm strives ability to pay the shareholders as we promised to pay them, then nobody gets a bonus. And that is a way of basically making sure that the executive team's incentives are not just aligned with shareholders in the short term, but in the long term.

1:22:51 So I bring all this up to say that we were thinking about this a year and a half ago before any of this controversy came up. We were thinking a year and a half ago about the fact that all this is going to be in our SEC filings, in our public disclosures. People are going to ask us these questions. are we confident that the way we've designed this is something that we will be proud of and that we can defend and can confidently say is aligned with shareholders and shareholders will believe us.

1:23:19 Building that trust and that credibility, we feel is incredibly important. And we feel today vindicated in taking that longer term approach. And I think the companies that didn't do that are seeing why it's valuable to do it that way. So one of the other things that I've had an issue with, and I don't even know in what way you can necessarily comment on this, but is when you have these treasury companies where at least for a period of time, I know a lot of recovered Bitcoin going up helps everything here, but their share price has essentially done nothing but go down.

1:23:49 Yet in the SEC filings, like they're still flying around on private jets. Like, and all that is at the expense of the common shareholder. That's something I have a problem with too. Well, you know, I do think it's important for, you know, like you said, there's a balance, right? You have to, you want to make sure executives are incentivized to deliver value to shareholders and you want to retain and attract high caliber people who will help deliver that outcome.

1:24:17 So you can't pay them nothing because you want to attract the best people who have alternative places they can work. At the same time, if you go overboard and you do things that are unnecessary to retain that talent, that can reduce your trust and credibility. So I think what Matt has said many times recently, and also I can tell you the conversations we had privately a year and a half ago, where we want to vacuum up, in the case of Strive, our philosophy was we want to vacuum up all the talent that we can find in this early going, where people are hardcore Bitcoiners, really believe in Bitcoin for all the reasons we talked about in the first part of this conversation, but also have that traditional finance experience so that we can be as creative and opportunistic as possible in leveraging what tools are in the toolbox to buy Bitcoin in the most attractive way.

1:25:15 And I think that we've done that. I think we've built a team that has that combination of qualities, and that's a big part of why we've succeeded. And I think to your point, there was that bubble mentality a year and a half ago where people thought, hey, everyone's going to make money. It's all going to be great. So no one's going to care about these extravagances.

1:25:34 And I think that is true in a bear market. If everyone's making money, people are maybe more give you more of a leash on some of those kinds of things. But in a bear market, when things aren't going so well, that's when a lot of these criticisms start to come out. And so one thing that we've always been very conscious of at Strive is that very fact. How do we perform? And also, can we attract the trust of shareholders in a bear market? And I think we've done that.

1:26:03 And I think, you know, one thing that happened with this, as the bear market really came in, say, in the winter of last year and the first quarter of this year, one thing that Matt talked about a lot and I think we all agree with is the bear market's an opportunity. The bear market's an opportunity because the question we got from every single investor we met with in the summer of 2025 was, OK, Bitcoin treasury companies, I get how this works in a bull market.

1:26:29 When Bitcoin is flying and you're buying Bitcoin and your balance sheet's going up, I understand that. I can see why that would work. But what happens when Bitcoin's going down? How are you going to navigate that? And we felt we had a strategy. And this is the thing that Matt would say in our internal meetings.

1:26:50 I don't think he would mind me sharing this. Is that the bear market's an opportunity. that if we're right, that we've built a company that can outperform Bitcoin in both bear markets and bull markets, then this is the opportunity to show that. If we can outperform Bitcoin in this bear market, then the next time there's a bull market, and some investor who's never looked at this before says, oh, well, it's a bull market now. It's easy for you guys to make money. How do you do in a bear market? We can show that investor the performance that we had in late 2025 and early 2026.

1:27:21 And I mean, that's the same for any Bitcoiner in the sense that your job is to get as much Bitcoin as you possibly can, essentially. And if that's your job as a Bitcoiner, like if you're adding value, you're bringing in money like the bear market is the time where you can actually make a meaningful difference to your stack.

1:27:34 And I've seen you guys, you've been buying a lot of Bitcoin in the last few weeks. With the preferred, obviously, that's where the income is coming from right now for you guys, generally. You said you've skipped to the end of the movie with that. Is that the final scene? Have we reached the sort of end game of what these treasury companies look like?

1:27:53 Is the preferred the secret sauce or is the more to come, do you think? Well, I think there's a lot. I mean, we're still in the early innings of this entire space for sure. Both in the context of Strive and what we're thinking about and how we build on what we have and also the broader universe of companies.

1:28:11 You know, we were talking before we started filming about some of the operating model companies like Orange Juice that say, hey, let's buy a bunch of traditional businesses and then convert their profits to Bitcoin. So that's one approach that some people are using. We big believers in the strategy we have of making this preferred instrument really work I think that it still a new instrument It crazy to think that we actually launched it I believe in November of 2025 So it less than a year old as we record this interview. And one thing that a lot of institutions say or do is they wait until you've had a three-year tracker. If you're a preferred instrument, you're issuing dividends, what they want to know is, are you going to pay them? Do you have a consistent record

1:28:58 of paying it over one year? Do you have a consistent record of paying it over three years without missing a beat? And especially now that we are the first security in history to have daily dividends, now strategy is trying to follow us with that. But being the first security in history to have daily dividends, to be able to say we paid a daily dividend every day without fail, if we're able to do that for three years, that's pretty impressive. And I think you'll see a lot growth from that. And then think about all the different things you can do with that kind of a product once it's proven to be credible and reliable and trustworthy over a longer period of time. You know all the things that people are

1:29:36 trying to do with stablecoins today. But think about doing a lot of those things with an SEC-regulated NASDAQ-listed product that has a 13% percent dividend yield. There's a lot you can do in terms of consumer financial products, whether it's, you know, these are things that other companies can do. You know, already you're seeing people use, for example, create tokenized securities based on this. There's Orange BTC, which is a Brazilian Bitcoin treasury company. They created an ETF that has Stretch and Seda in it.

1:30:10 Strive actually announced, Strive Asset Management announced that they're also developing an ETF, a digital credit ETF. So there's a number of different people who are building different products on top of this model. But what we look at it as the most important thing we can do is make Seda as good of a product as it possibly can be. And if we do that, a lot of opportunities will and may emerge to build on top of that. So I think the first words of this podcast, I said to you we can fight about that later and honestly I'm losing the will to fight about this thing and not not for any reason other than I'm just I see them as such different industries in a way now like I was at the Bitcoin treasury conference on Monday in New York and I was asked

1:30:57 through a panel by Rizzo and it was you know asking some of these questions and I asked the first question to the panel panel were great this is not a indictment of them but I was just like I actually don't care. Like, I just don't have a huge interest in Bitcoin treasury companies. And you look around the room there and I'm not saying they're not Bitcoiners, but they're not the Bitcoiners I'm used to. Like there's a different sort of person in those rooms.

1:31:21 And I almost, it's a different subculture of Bitcoin. Yeah. They're wearing suit jackets and some of them are in ties. Totally. And it's not that I think there's anything wrong with that. It's just, it's not your vibe. Yeah. It's not my vibe. It's not where my interest lies. and honestly like i'm stealing eric's line who sits sat in the back here but like these companies buy bitcoin that's cool like i'm happy for them to exist i think we've been through a lot in that sort of treasury bear market where kind of some of the wheat is separated from the chaff like i think it's very clear that the thing you need to seriously look at before investing any of these companies is the management team um but honestly i'm kind of just over the fight i just think

1:31:57 i'm sure you'll do well i think it's a cool idea i think you you're doing well as a company i'm just losing the interest in it a little bit. What would you say at this point? You said, you said you didn't want to fight about it. So that implies you still have some concerns. What would you say your concerns are? I think the things that I mentioned then, there's a lot of the sort of marketing buzzwords that I also don't like. I think that's less important. I think it is important to a degree, like someone like Michael Saylor, who huge in Bitcoin, has a massive following, very important person who sort of directs narrative and controls what people are saying not not overtly controls but but controls what people are saying saying things like this

1:32:35 makes bitcoin money i've got a problem with that i don't like that um i think some of the terms you know when you talk about bitcoin amplification and talk and all like what do they mean you know amplification is that just leverage like are we are we being confusing in the marketing of these things that that's probably where some of my concerns still lie definitely the sort of trade off between the shareholder and management teams but like i say if you pick the right management team, you can probably alleviate a lot of those concerns. These are things that I don't love, but you're buying Bitcoin. That's cool. Yeah. I would say, first of all, I agree with you that all of us are on the same team. We are big believers in Bitcoin. We're creating a gateway

1:33:13 for a lot of normies who are too intimidated by self-custody. And given the cold card hack, they have reasonable reasons to be intimidated by self-custody. Again, I'm a big believer in self-custody, I self-custody. Self-custody is good. It's important for all the reasons we talked about. But you want to have ways for people to be able to get access to Bitcoin exposure without needing to self as a gateway drug to maybe self at some point And brokerage accounts and regulated bank accounts and other things do have other utilities like you can you can borrow against you know ETFs and and and securities that you hold in a brokerage account at a lower cost than you can say Bitcoin that's held at a, with strike or something like that, where the interest

1:34:01 rates are much higher. For example, if you want to borrow against your spot, Bitcoin. So there are a lot of, a lot of, there's a lot of value to having, giving people access to Bitcoin exposure in their normal, traditional finance accounts. And that part makes sense to me. I just, you know, when you see the breakdowns of like institutional versus retail investors in these products, I know strategy came out a while ago saying it was roughly 80-20.

1:34:25 I asked Matt this question when I had him on the podcast. He said, it's hard to know the exact numbers, but he doesn't think it's maybe quite as high as that in the sort of skewed in the retail side. But one of the other things that I've had somewhat of an issue with is people saying these products, you know, STRC or SATA, they help people who can't stomach the volatility of Bitcoin.

1:34:46 And like the thing that I really agree with Parker on, who's been critical of these things is like volatility can be solved by position sizing. And I don't think that's necessarily a reason not to own actual Bitcoin. Let me, I can answer that. And let me, I'll go back to something else you talked about, which is the terminology. And one of the things you mentioned that Parker has also I mentioned as an annoyance at some of the terms that are being used, you know, that Parker thinks, and maybe you think as well, are denigrating Bitcoin in some way that are out there. And look, I can tell you from our standpoint at Strive, you know, this is a completely new field that we're all creating here, the digital credit field or whatever you want to call it, Bitcoin treasury

1:35:29 company field. And we're trying our best to make sure that we're precise in the terms we use, but also precise in the terms we're not using. Meaning, in our case, we don't have any debt, so it's not technically leveraged. But it is a form of credit because we are providing this dividend. You have the liability. And you're trusting us to provide this dividend. So it is a credit product. Not all credit is debt. That may be a very finicky way to explain it, but but it's technically true.

1:36:01 And same with leverage and amplification. It's amplification because it's not leverage, it's not debt, but it's not completely different from leverage in the sense that we're issuing these referred equity instruments. We're using that money to buy Bitcoin. There is this dividend obligation that we're creating with that.

1:36:23 And for this all to work, Bitcoin has to appreciate relative to the dollar. So it's hard to come up with the terms. And I certainly am very personally open to, you know, if there's better terms out there that someone comes up with, I think we would all, you know, be delighted to come up with some better term.

1:36:44 I think we understand that we're part of an ecosystem. And, you know, obviously strategy came first and they defined a lot of the terms for the sector. and if we want to be understood, we have to be aware of the fact in communications, communications 101 is you can come up with any term you want, but if the investor, if the market, if the consumer and the institutions don't understand what you're talking about, it doesn't matter.

1:37:07 So you have to try your best to meet people where they are and use the language that they're used to. And I think we're all learning as we go along on that. And so are there ways to improve and strengthen the language? I'm sure there are, and I hope we get there. yeah what what would you say to the argument that sort of position sizing can help with the volatility because if you like you're offering 13 on sata yeah and and the reason you're willing to offer that is because you think bitcoin is going to go up more than 13 and let's forget the sort of trap pools of capital the institution investors that have a mandate of what they can invest in for like a normal person who might be looking at using one of these products again i

1:37:45 understand like people want the income or whatever it might be but if if you're betting like this entire preferred that bitcoin is going to go up more than 13 why not just buy bitcoin well you should buy bitcoin and you should hold bitcoin in self-custody as we've been saying but leaving aside the self-custody piece because remember we talked about what are bitcoin's two great qualities one is the investment profile of bitcoin as something that is a is a hard asset that can increase in value in a high deficit, high debt, fiat devaluing environment. That's one element of Bitcoin. The other is the ability of Bitcoin to help you with the freedom to exit because of self-custody and censorship resistance. So now we're talking about the portfolio investment side

1:38:31 of Bitcoin. And your question is, why not just own Bitcoin as opposed to having these instruments like Strives and Strategies. So think about it this way. Like if I have a portfolio in a brokerage account, what do I want? As someone who believes in Bitcoin what do I want How do I want that portfolio to perform Well I want two things I want to maximize the ability of my portfolio to do well when Bitcoin is doing well I want to have an amplified or maxed out bet on Bitcoin's success. But I also might need some cash on hand to pay my rent, to pay my groceries, to pay my taxes, to pay my mortgage.

1:39:25 And position sizing like what you're describing doesn't solve that problem. So you could say, oh, well, only put a 5% allocation in Bitcoin and that way your 95% of your money is in cash or boring stocks. And therefore, if you need to pay a big tax bill or you need to pay for a house or whatever, you could do that.

1:39:42 But that's not optimal. What's optimal is the other way around. Let me have 70% of my brokerage account in something like Strives Common Stock, ASST, which is going to go up even more than Bitcoin in a bull market and ideally outperform in a bear market as well. I'm skeptical on that one. Well, we have.

1:40:01 We have outperformed Bitcoin in the recent bear market. And then because the Bitcoin per share goes up, right? So over time, the value per share goes up even when Bitcoin is in a bear market. That's what we've shown over the year to date. So what timeframe are you picking for that? You going from Jan 1st to now?

1:40:19 You can slice it a lot of different ways. And if you want to go on our website and compare all sorts of different time periods, you can. But if you look at year to date, if you look at the beginning of the bear market, I can't remember the exact numbers on our most recent, one of our most more recent podcasts that we did, the hurdle rate podcast.

1:40:38 Matt went through some of these performance numbers and showed that, yes, Strive's common stock has outperformed in the bear markets, outperformed Bitcoin. And it's outperforming as things from the bottom to where we are now. So from like 55 or 58 or wherever we bottomed out to the low 80s where we are now, ASST, our common stock has massively outperformed Bitcoin. So we've outperformed Bitcoin in adverse conditions and we've outperformed Bitcoin in favorable conditions. So in a brokerage account, that's great. But I also need to have some money that I can pull out of my brokerage account to finance big purchases, or again, my tax bill or other things. And I can't have that money, I can't have that in a volatile instrument that will go down.

1:41:22 Because let's say I have a $10,000 tax bill, and I've got $10,000 in Bitcoin to pay that tax bill, but then the Bitcoin goes down 30%. Now I only have $7,000 to pay my tax bill, but I needed 10. So I need a certain amount of money and a certain allocation in my portfolio for something where I'm very confident that the downside risk is really, really contained.

1:41:46 And so you can do it the way Parker or you were describing as well. I could just position size and have just a small exposure to Bitcoin. But if you're a real Bitcoin bull, you don't want to have a small position in Bitcoin. You want to have a giant position in Bitcoin, but you still need to have some money on the side for those near-term expenses.

1:42:04 So in investment, you know, in investor lingo, that's called the barbell strategy. Have a really high volatile instrument over here for your long-term savings that you don't need to touch, and have a really low volatility instrument over here that you can use for your more near-term needs. So, you know, I got asked at a Bitcoin conference this summer, you know, how would you explain what you're trying to do in one sentence to an institutional investor?

1:42:32 I said, I thought about it for a minute. I said, well, what we're doing in one sentence, we're doing a carry trade plus structured finance. So what do I mean by that? The carry trade of the old fashioned carry trade was before there was Bitcoin was you borrow in a currency that's really cheap, that has a low interest rate.

1:42:53 And then you invest in a currency where you think you're going to get bigger returns. So in the old days, when I was a young pup on Wall Street, people would borrow in Japanese yen where the interest rate was zero percent and then put that money in U.S. tech stocks where they're going to get a huge return.

1:43:07 and that's how they kind of outperform the market. And our version of that is we issue preferred equity in USD. So we sell our stock to get USD that we then use to buy Bitcoin. So we're selling USD and we're buying Bitcoin. So that's our version of the carry trade. So that's part one. Then part two is the structured finance part.

1:43:30 So instead of just holding Bitcoin and being like a Bitcoin ETF, we're splitting the Bitcoin into two pieces. Piece one is this more amplified common equity called ASST or common stock. And then part two is the low volatility instrument, SATA, where it stays very close to $100 a share, but you get this 13% dividend yield.

1:43:53 So our view is that by splitting Bitcoin into these two pieces, we make it more useful to people. We actually allow people to have more exposure to Bitcoin's investment properties, but also give them the ability to have some cash-like holdings on hand for those near-term expenses. Do you, I mean, that does make sense.

1:44:15 And like, Strive is not one of the companies that I sort of worry about in this space at all. Do you think you'll continue to outperform in bear markets going forward? Obviously, you can never, you know, guarantee anything in life. You have to, you hope that you're going to continue to outperform in a bear market.

1:44:29 You never know. A lot of it depends on how Seda performs. So the beauty of having this structure that we have is if the demand for SATA continues to be robust as it has been, because one of the things we do is we only raise money from SATA if it's trading at $100 or above. If it's below $100, we wait for it to get to $100 before raising money from it so that it can stay as close to par as possible.

1:44:59 So if the demand is robust, then we can raise money from it and use it to buy Bitcoin. And that is how we outperform in a bear market. Now, if SEDA is trading well below par, and there have been periods of time over the last couple of months where it was trading below par, parts of the summer it was below par for, I want to say six or eight weeks or something like that, we couldn't use it to raise money because we promised the market that we wouldn't. And we wanted, again, we wanted to get up to 100. So market conditions really matter. If somehow SEDA was trading below low-par and we had a bear market, then it would be harder for us to increase the Bitcoin per share.

1:45:41 But if SEDA is performing really well and staying near 100 or at 100 or above, then it's a really powerful engine as we've shown in more recent weeks. Yeah. One of the things I want to be really clear about here is that no part of me is saying companies shouldn't do this at all. And I just think investors need to be very aware of what they're doing. I think a lot of that sort of the stuff that needed to fall out the wayside has done.

1:46:03 I think a lot of the grift in the industry has gone. Maybe like- It's much healthier now. Yeah. I'm not saying all of it, but, um, the sort of gold rush for Bitcoin treasury companies seems to have gone for now. And like, we seem to be left with the more robust companies, which is, which is great. And I think it awesome that you guys are buying a ton of Bitcoin I think uh the people you opening Bitcoin up to is definitely interesting I think this is probably how institutional demand for Bitcoin starts I do hope that there institutional demand for real Bitcoin too though Yeah. I mean, I like to think we are the institutional demand for Bitcoin, right? We're buying a lot of Bitcoin. But I mean, real Bitcoin, like as in institutions outside of

1:46:38 buying preferred equity are buying actual Bitcoin. You mean like other corporations buying spot Bitcoin. Yeah. And look, I think, you know, I alluded to the fact that, you know, there's the one strategy is should we run operating companies or should a treasury company run operating companies that use their profits to buy Bitcoin? Completely believe in that and people should do that. I think that the more companies that use their profits and put Bitcoin on their balance sheet, like Tesla has, like SpaceX has, like the mining companies obviously do, that's great and more companies should do that and if you go to like bitcoin treasuries.net which tracks all this stuff a lot of the companies on there aren't bitcoin treasury companies the way

1:47:17 strive is they're just operating companies that happen to hold a lot of bitcoin and that's great and more companies should do that i think when you when you are a bitcoin treasury company um i think your mission i think we we think of our mission as how do we max out on the strategy right so let's say you're running a laundromat business you have a bunch of laundromats let's say you know we're in austin we're recording this in austin let's say you own 30 laundromats around austin classic operating business warren buffett style thing you're you're growing at five percent a year in in u.s dollar terms and you're taking your your your profits and you're stacking sats with that a very honorable and respectable thing to do and more again more companies in that position

1:48:06 should do that. But if you're a true Bitcoin bull and you think Bitcoin's going up 20% a year, then even that noble, hardworking laundromat operator who's growing at 5% a year, that business is actually shrinking in Bitcoin terms. So it's great that they're stacking sats with their savings and their profits but you still over the long term if you believe in the Bitcoin bull case or the dollar bear case that still not the optimal financial position to be in Now we need laundromats so it good that laundromats are doing this and trying to strengthen their position. But from a Strive standpoint, as a pure balance sheet company, we look at it and say, okay, what's the optimal way to maximize shareholder returns? And the optimal way to maximize shareholder returns

1:48:54 is not to grow at 5% USD terms a year for 10 years. It's to take that 10 years of profits and buy Bitcoin today. Because if you think Bitcoin is going to be a million dollars in 10 years, if you're waiting 10 years to buy the Bitcoin, you're not going to be able to buy a lot of Bitcoin. You want to take that 10 years of money and buy the Bitcoin now so that your Bitcoin can appreciate.

1:49:17 And that's why we have the strategy that we have. So everyone needs to sell their business today and buy Bitcoin. obviously we need we need restaurants we need cafes we need laundromats and and i root for all those people who are doing those great businesses to succeed because i certainly benefit from them um but hopefully there's room for us too i'm only messing with you i do think last thing i do think that uh we need we need better names in the space of what a treasury company is yeah because what you are to you know spacex tesla you know all these other companies even like the treasury companies that are Bitcoin pure plays but are trying to do the operational model they're different things

1:49:56 we need a differentiator between the naming yeah I think that's I agree with you and I think Matt would agree with you too we've started calling ourselves a digital credit company for that reason because as you said not all Bitcoin treasury companies are digital credit companies only two right now or three if you count SmarterWeb's new product are issuing digital credit And if you look at some of our peers, some have said things like, well, we might issue a preferred security, but we're also going to mine Bitcoin and we're going to run operating businesses and we're going to do all these different things.

1:50:33 But preferred securities are going to be one of the five or 10 or 20 things we do. And, you know, I certainly root for those companies to succeed. But I think in business focus is so important And I think our philosophy is try to do the one thing you doing really well And if you do then you going to have the best product and investors will gravitate to the best product. So I think our thought is be a digital credit company and try to be the best digital credit company we can be. Yeah. I love talking to you, Vic. I think people misconstrue my take on this. Again, I want to just reiterate. It's not that I don't think these should exist. I think it's cool. I think you're doing a really good job, like strategy doing an impressive, very impressive job.

1:51:15 Incredible. It's just not like, it's not the thing for me. And maybe you'll outperform me, all the owners, all the people that own Strive and strategy, maybe they'll outperform me. It's just not the thing I'm super interested in, but I have no problem with it existing. Well, I appreciate that. I know Danny, you've had some of your conversations with, with people in the space have, uh, have been more contentious than this conversation. And, and, uh, I always, uh, uh, I know that you're always, you know, coming from a good place and asking the right questions. And that's why I've always encouraged you to ask me the hard questions.

1:51:42 And I think I would conclude by saying, you know, we are, I think we are trying to do the right thing. Having said that, you know, it is incredibly important for self-custody and the Bitcoin network to continue to be as robust and successful and resilient as possible. Because if and when hard times come for the world, for the United States, Bitcoin and the ability of people to exit the US dollar system for Bitcoin needs to be as resilient as possible. And I think at Strive, that's something we think about too. We want Strive to be resilient to that situation as well.

1:52:24 And that's something I'm spending a lot of time thinking about. Yeah. And I think who better to question Bitcoin treasury companies than Bitcoin is. I think we should be holding each other to account and making sure this stuff's good. But love talking to you, man. Thanks, man. It's always a pleasure. And, you know, I'm so glad you're here in Austin.

1:52:39 I wish we had better weather for you, but I hope we have better weather for you tomorrow. Thank you, man. Appreciate that. Thank you.