Analysis of Bitcoin Investment Risks

Well, I described it as a Ponzi scheme, and that's pretty much what it is.

But strategy is in a lot of trouble right now as an entity.

And I've been saying for a long time that I do expect the company to ultimately go bankrupt.

And that's pretty much what's going to happen.

What happens if the company can't pay that?

Well, by law, you can't pay a dividend on a preferred stock that would create an insolvency

event for the issuer.

The board has to approve the dividend.

So you understand it's literally impossible, it is literally impossible to create an insolvency

or to bankrupt an issuer of a preferred stock.

So people worry, but whereas if you basically borrowed a million dollars from an exchange,

they wipe you out in one minute.

You're gone.

But in this particular case, in 27 years, after a parade of 947 horribles, right?

If the company couldn't pay the dividend without being insolvent, it would suspend the dividend

for 12 weeks.

You know, it's like, okay, so what is the risk?

It's an equity risk.

It's not a credit risk in the sense of there's no credit instrument that comes due that unwinds

the capital structure.

The risk primarily is, you know, if you do this and you buy Bitcoin and Bitcoin doesn't

go up forever.

Then what happens? Well, the equity investors aren't going to make a lot of money on that trade, right?

If you're paying SOFR plus a credit spread or 10% and Bitcoin goes up 0%,

the equity investors and the company didn't make money on that trade.

But that's all. It just wasn't profitable to the equity.

And if you're wrong for 50 years, well, then there might be a risk to the preferred equity.

But you see, we've taken something that would be a risk in the next 50 minutes or 50 hours or 50 days,

and we've turned it into a 50-year risk for the credit investor.

It's like, we literally have 50 years of dividends, right?

Like, how do you create this? Well, you're over-collateralized by a factor of 10, 20, 30.

So a lot of times people think they don't really understand the math that well.

If Bitcoin goes up 2%, we've got a $50 billion equity tower.

That means we're making a billion a year. That's the dividends.

So the break-even point for us is 2%.

So if you don't think Bitcoin's going up 2%, you probably shouldn't be an equity investor in a Bitcoin company, right?

So there's no equity investor that thinks Bitcoin isn't going up 2%, right?

But if it goes up 2%, we can pay the dividends forever.

And create shareholder value.