Five Bitcoin bear cases examined: Sam Callahan

Transcript

Bitcoin is no longer evaluated on a standalone basis. It's now evaluated alongside equities, bonds, other commodities, other alternative assets. And so when there's like a riskoff moment, Bitcoin can trade like an equity gets sold off, but that's not really it doesn't change the fundamental reasons why you'd hold it in the first place. What's up everybody? It's LGD said here and welcome to the Milk Road Show, the daily crypto show that woke up today feeling bullish, which is a complete turnaround from how we felt going to bed on Friday night. Today is June 8th, 2026. John is off today, so instead of our usual Monday episode, we have a special treat. Today, we're going to dive into Bitcoin and how we're all thinking about it the wrong way as we freak out over the recent price action.

Sam Callahan, director of strategy and research at Orange BTC, is here to explain how Bitcoin has grown up as an asset and why the fear in the market right now is just a little too much overblown. Also, our analysts have been busy. They made over 20 trades last week. I'm not kidding. There was like 23 at the deadline on Friday. Some are buying the blood. Others are waiting to see how the dip plays out. You can see what they sold and what they bought. For just a dollar in Milk Road Pro, you get 7 days in there and you can cancel anytime. Today's episode is brought to you by Cape, the privacy first mobile carrier. Sam, welcome back to the show, man.

>> Thanks for having me on. >> Okay, so let's get into it. When there are days like uh last week where we went down like 20% or something, are you are you do you freak out or are you like this has to happen for us to go higher? How do you visualize that kind of stuff as somebody we're going to adapt? >> I mean, I'm pretty unfased by Bitcoin's short-term volatility at this point. It's it's not my first rodeo. It's pretty part for the course. Um, when you're managing a treasury of a public company that holds a lot of Bitcoin, when you're thinking about the capital structure, you know, how much leverage you have, we're always thinking about risk. And the main risk that we think about with Bitcoin is its short-term volatility. We're not so much concerned about its long-term potential, uh, its

ability to appreciate in value because it's denominated in fiat currencies that continue to be debased. And so really, we're just trying to manage our capital structure to be resilient for Bitcoin's short-term volatility. It's it's a characteristic of the asset. And this is part for the course. I mean, Bitcoin is a 4550 vol asset or a little bit over 50% off its all-time highs. This is the volatility that you should expect, but without risk, there's no reward. So, this is typically the volatility goes up and to the right over the long term.

You'll have draw downs like this, but volatility is a gift to those that have conviction in its long-term potential. >> And you guys, you guys are buying, right? This is you guys are buying at these. This is a juicy level for you. >> Yeah, it's great opportunity to lower our average cost basis to buy some Bitcoin. Stack stack the dip. We just bought another 41 Bitcoin. Uh we also bought back some of our shares that are trading at a discount. We think they're undervalued. The market's kind of undervaluing them right now. And so we generated a BTC yield of of five over 5% this quarter alone. And we'll continue to be buying uh this this uh this dip because um obviously we haven't lost conviction in Bitcoin's uh long-term

potential. >> Where does that where does your where does your um yield come from? >> Well, we just raised a first of its kind debt transaction um about a month ago. We announced it to the market with it asset management. And so that's a fiveyear it's a longdated debt instrument uh with zero cash burden um all-in cost with hedging around 11%. You know Bitcoin correcting off these levels um we look at the forward potential returns of Bitcoin from here based off the adoption trends that we see as well as Bitcoin's historical rolling 5-year KAGER and we believe that it's going to be an accretive transaction long-term for our for our shareholders. And so we use some of the proceeds primarily to

acquire more Bitcoin to increase our Bitcoin holdings. Um and then we have we have cash on the balance sheet as well that we can use to uh accumulate more Bitcoin too. So you know this is why um a public vehicle with a large Bitcoin balance sheet has access to capital that can be very favorable in terms of the terms. you know, an individual can't get a five-year loan with zero cash burden to basically accumulate Bitcoin at at those terms at that cost of financing. And so that's the benefit or the advantage of being a public company um operating company that can use its access to acquire Bitcoin.

>> Do you fancy yourself an analyst andor a content creator in this space? Well, we want you. Specifically, if you live and breathe tech equities, Milk Road could be the home for you. We're hiring for two positions right now, analyst and content creator. So, check out the careers page below. How much Bitcoin do you guys hold right now? >> We hold 3,83. >> Jeez. How much What's the average What's the average entry on that? Do you know? Uh it's a little uh it's probably it's dropped because of these recent buys, but I would have to go look. It's it's about 10 103 or 104, I believe.

>> Okay. Okay. So, you guys are buying higher uh and obviously estimating that that we will return to that. Um great. I mean, that's that's that's a that's a godly amount of Bitcoin. Sam, you know, I I think one of the reasons we wanted to have you back on, especially in these times, um is when you came back on in March, and I think we're around the same price levels. uh you know e you are so fantastic at kind of framing Bitcoin for us and and reassuring us not to freak out. Um hard not to freak out in times like this man especially when people have been we've been waiting a long time you know for Bitcoin to kind of reach these heights and and um you know last all-time high I think disappointed a lot of people but it sound I'm just repeating kind of narratives that that

we see across the timeline. I feel like the way that you see Bitcoin, especially in these last couple years, uh it kind of speaks to how maybe we're all misfring Bitcoin Bitcoin. We're not really thinking about it the wrong way. Maybe you can explain that a little bit more of that to us. >> Well, I think you know, one of one important factor when you purchase Bitcoin uh is to think of it as a long duration asset. You know, it has short-term volatility, but the reasons to own it are more related to the credibility of fiat currencies, the monetary policy there, the unsustainable nature of the fiscal picture, the highly indebted governments that are likely going to turn to currency debasement, financial repression, um capital controls, you know, that's kind of what

you're buying Bitcoin for, to to hold an asset that eliminates those risks and protects you against them >> uh for the long term. >> And so you shouldn't really, you know, you could think of it as a savings technology. And Bitcoin shouldn't be um you know, you shouldn't think about it from quarter to quarter. This isn't a trade uh to get rich. It's a it's a savings technology to get wealthy slowly. Um now in the short term, Bitcoin can trade like other risk-on assets like equities. And I think what we were talking about before the call was that Bitcoin's correlation to equities has actually risen over the last 5 years or so. And I think that's actually a function of Bitcoin winning.

And what do I mean by that is is Bitcoin as it's been adopted by institutions as the regulatory barriers have fallen as products like the ETFs launched and allowed these institutions to get exposure to Bitcoin through like a a compliant vehicle that fits into their brokerage accounts easily. You know, we know that these institutions prefer to get exposure to Bitcoin through the ETFs. And so as these products emerged and it made it easier to get access to Bitcoin, you know, the investor base changed. Now around 20% of Bitcoin's total circulating supply is held by institutions.

>> Uh whereas before it was all individuals basically >> and it was a very isolated market. There wasn't a lot of overlap between tradi. Nowadays once that transition happened you know it has shared owners which have shared flows which has shared uh hedging strategies and trading strategies rebalancing portfolios. Bitcoin is no longer evaluated on a standalone basis. It's now evaluated alongside equities, bonds, other commodities, other alternative assets. And so when there's like a riskoff moment, Bitcoin can trade like an equity gets sold off, but that's not really it doesn't change the fundamental reasons why you'd hold it in

the first place. >> And so it's really important to know like understand that is that Bitcoin can trade risk off, but why you should own it is actually or risk on, sorry, but why you should own it is actually for all the safe haven characteristics >> um that I mentioned. It's not an equity fundamentally. It's not an equity. It's not a claim on future cash flows or it's not driven by uh profit margins or earnings growth or multiple or valuation multiples. It's driven by its monetary properties and its network effect. You know, its scarcity um the openness of monetary systems in the world today. If there's more capital controls, demand

for Bitcoin should rise. We we see that it with the developments in the straighta horm. So, um, it's just important that people kind of understand what they own and why they own it so that they can have conviction to hold through Bitcoin short-term volatility and just understand that although it can trade like a a tech stock, I mean, it has to be said it's not a tech stock, right? It's a decentralized store store of value um, that has a different value proposition. That was a narrative for like three days at one point that all cryptos were SAS were SAS uh SAS assets when during the the the brief death of SAS uh of winter 2026.

>> Right. >> Right. And like you know you know I think I mean if I could just go off a little bit on like >> you know I think this recent weakness is a is a confluence of events. I mean, it can be painful when Bitcoin's going down every single time, but it's especially painful when you see other sectors of the market that are railing hard, you know, and especially when you have more institutions holding Bitcoin now, they'll get pressure from their clients. You know, they can get fired if they're in one asset class that's not doing well and then you got AI stocks ripping off the roof. You know, their clients are calling them, why aren't I allocated in this? Everyone has very shortterm thinking and short time horizons when really they should be thinking long

term. But that kind of changes things where you can have this capital rotation that occurs. And I think that's why you saw you know over 4 billion of dollars worth of outflows from the ETFs because like I said we know that institutions prefer to hold the ETFs. They're rotating out of Bitcoin into these other sectors because their jobs kind of pressure them to do this. I mean they don't want to lose clients. They don't want to get fired. relative outperformance is a real uh pressure for them. And so when you look at the capital rotation that's occurred um to other AI stocks to to highly anticipated IPOs um I think that's part of it. The other part I think is is the macro picture. I think there's a ton of uncertainty right

now with the geopolitical uh tensions in the Middle East. How long is it going to continue for? Peace talks continue to, you know, break down every single week it seems, but that the straight remains closed and oil prices remain elevated. And the longer oil prices remain elevated, um, that puts pressure on sovereign yields and so bond yields continue to rise. That puts pressure on stocks, that puts pressure on risk on assets. Like people view vit Bitcoin that way. it really and and the inflationary pressures now people don't expect a rate cut right and these are all kind of like tied to liquidity bitcoin kind of benefits from more uh favorable liquidity conditions and so

all these things are connected and so you got this confluence of factors of a capital rotation uncertainty in the macro picture there's some like more chatter about theoretical risks like quantum you know people thought that when Besson said we we seized a billion dollars worth of crypto people just assumed he meant Bitcoin when really it was mostly centralized stable coins. But all of these narratives together kind of added a lot of headwinds coming in for Bitcoin at the same time. But again, you look at really you got to think long term. Nothing's changed. They're still running $2 trillion deficits, deficits of over 6% of GDP. Historically, that only happens in major wars and reception in and recessions. They're still

spending money like drunken sailors. Okay. And when you face obligations like that, when you're that highly indebted as a government, the only way to get out of that is through austerity to stop spending. That's not happening right now. It's not politically tenable. The other way is to grow your way out, which is optimistic right now, I would say. And then the other option is to debase the currency. And so these are realities that we face today that aren't being fixed. And it's why you should own Bitcoin. So, it's it's really just a function of time horizon and fundamentals. And you know, if you want to be hedging equity volatility with Bitcoin, it's not always going to be the answer for you because Bitcoin can get

tied into the same flows. But if you're hedging against currency debasement and fiscal fragility, geopolitical fragmentation, you know, those risks, then Bitcoin is uniquely designed to address those. So is that so do you think that that is what what is driving the institutional interest go dating back a few years ago to the ETF approvals and everything is that is that what like this exact case >> why institutions are piling in >> I think it's some of it I think it's increasingly uh seen that way but I think people I think institutions also just saw it as a like a high growth uh sector you know they kind of viewed it different I think incorrectly to be honest with you they view it as more

like a high tech a leveraged tech stock or something like that >> when like I said before it's not it's not a tech stock you know it's very different they saw the asymmetric upside that still exists but I think more and more people as they look out on the macro front they say okay um this is an asset that can't be debased that can't be controlled that can't be censored in a in a macro environment that has those features we might want to own say like small percentage of our portfolio to this asset because quite frankly there's not many neutral apolitical uh alternative monetary assets out there. It's basically digital gold and

gold, Bitcoin and gold. And so I think you're seeing more and more of that, but that comes with more market awareness of what Bitcoin is. You know, people have to look through the volatility and really start to understand like why you should hold it. and and institutions are early in their in their Bitcoin journeys for the most part. So I I don't think I think that's increasingly becoming a narrative like you see it from these institutions like Black Rockck, you know, they're putting out educational materials that say exactly what I'm saying. It's a hedge against currency debasement and and uh geopolitical uncertainty. Uh but I think that that narrative still catching on and you're seeing it with their u allocation recommendations. It's usually around 1

to 5% because in those you know you can have an asset that's more volatile that doesn't add so much risk to the portfolio and it still uh improves riskadjusted returns and so because it's uncorrelated because it has different drivers different fundamentals um different return profile so you know I think increasingly they'll start to view this as the macro picture continues to deteriorate on the fiscal side of Why isn't this is is this priced in? And if if not, why not yet?

>> Um I don't think No, I don't think it's priced. I think the market I think the opportunity exists because those with conviction and understand what Bitcoin is and and it's actually in many ways the least risky asset. You know, people view it still broadly today and just see risk because they they misunderstand that volatility does not equal risk. real risk or is twofold. One is underperforming the rate of monetary inflation. So you're losing in real terms. And so if your asset doesn't appreciate more than 6.7% a year, you're losing in real terms. That's permanent.

And the other one is just permanent loss of capital. Like uh you know, you know, you you buy some memecoin and it literally gets rugpulled overnight. You you're never getting that money back. Um, and that happens throughout a lot of investments in all different types of asset classes. You know, those are the real risks. Short-term volatility, not so much. And so, when people view Bitcoin today, they just see risk. But really, what I see is an asset that has the chance to be around in 50 years, and 100 years because of all the risks they you remove by holding digital gold. uh you remove physical risk, you remove management risk, business risk, debasement risk, duration risk, the list goes on and on. When you hold Bitcoin

versus other asset classes, you start to view it through that lens. You realize that, okay, this is actually a safe haven asset, but the market doesn't view it that way. And so, I don't think that's priced in at all. And I think that's why there's asymmetric upside and opportunity for anybody who comes to that uh realization before the broader market does. >> Are you worried about the quantum risk at all, Sam? Especially somebody is who's a you know a Bitcoiner only? I don't know if you guys have a term for for people that are Bitcoin only. Uh solo solo bitcoiners. I don't know. I don't know what the term is uh when it comes to crypto. um is that is that has also been um I guess kind of part of the narrative or part of the risk in the last few months and we've seen some

documentation about it from Google some warnings and stuff. How do you how do you visualize that type of threat? >> So actually I I wrote a pretty long uh blog post on this. You can find it at orangebtc.com. That's spelled with a J in the orange. I I I think the risk is less imminent than the headline suggests and actually the work underway to already address it is more robust and diverse than people think. And um it really comes down to the fact that the hardware doesn't exist yet. And it and when you look at quantum computing when you have like environmental disruptions you have to keep it kind of perfect or else you get a a wrong outcome an interact an inaccurate outcome. And so that doesn't

exist. we no long we don't have the ability to actually have a cryptorelevant quantum computer to exist today. Now there's been some papers that pulled some of the theoretical timelines forward uh but but in in terms of actual hardware it does not exist. And so I think people also misunderstand the attack vector on Bitcoin. They think that oh quantum will literally be able to crack the underlying consensus of Bitcoin. People won't be able to trust the 21 million. That's not the case. Um, you could think of it as, you know, there's address types in Bitcoin. Think of it as like certain PO boxes. And if a quantum computer ever came to be, which is still a question mark, they would be able to basically unlock certain P.O.

boxes. Some of these older address types would be vulnerable to a quantum computer. They would be able to take those coins and, you know, theoretically sell them, do whatever. But that's only if they don't voluntarily move the PO the Bitcoin from that PO box to one that is protected from quantum. It doesn't crack the underlying network itself. Um it's just a question of coming up with solutions that allow it more easily for people to protect themselves if they're in some of those older addresses that are laying dormant for a while. And so the actual attack vector is misunderstood. It's still a theoretical tail risk uh that I think is farther away than people think. And then there's so many different avenues and solutions

that the community can go down that have different levels of severity from an entire protocol change of the underlying signature schemes or the address types like I said or just coming up with little like uh backup plans for people to to basically go into if they want to if it becomes a problem. So it's not like a major protocol change. It's more just like a couple backup plans, solutions that we could propose and debate and implement if the community decides like it's a good thing to do, if the risk is becoming more uh substantial. And so I I really think it's overblown. I think it's a misunderstanding of what the actual attack is. And um and I think the Bitcoin community is is you know,

Bitcoin itself, the network is the most resilient secure computer network in the world. It's decentralized and that that comes with some strengths. There's so many eyeballs on the code at at once that is looking for all kinds of vulnerabilities, exploits. It's why it has 99.9% uptime in its existence. And so it it takes slower to kind of move, but that's actually a strength because you don't want to push through a a an upgrade that actually causes more harm. >> And so you have all these eyeballs on the code. They're looking for things.

They're proposing, they're they're debating, they're testing, and I think the network will come to a solution even if they have to, which is still a big question mark. Your phone carrier knows more about you than your best friend does. Where you go, who you call, when you sleep, and they're selling all of it. AT&T, Verizon, T-Mobile, they've all been caught leaking data or cashing in on it. And your VPN, your encrypted messaging app, they can't fix what's broken at the network level. That's where Cape comes in. Cape is America's privacy first mobile carrier. Same premium coverage you'd expect, built with privacy from day one. Your phone's network identifier rotates every 24 hours, so you look like a different subscriber every day. Call logs are deleted after 24 hours. You get two encrypted secondary numbers for signups

and 2FA included in your plan. Plus, SIM swap protection that puts you in control of your number, so no one, not even Cape, can hijack it. Use code milkroad at milkroad.com/cape for 33% off your first 6 months. Got it. Okay. I feel like I feel like I I didn't really anticipate this, uh, Sam, but I feel like today on the show, I'm just pelting you with bear cases. I feel like that's what the show became. I'm just like, listen, you're you're the bull. You've got all this stuff, and it's like I'm just going to throw all the narratives at you uh that are negative, and then you just you just, you know, cut them in half as they they come your way. Uh the next one I want to throw your way um is is for it was kind of a headline from a week ago that I

think is has been maybe challenging for some people to understand uh because it relates to financial instruments that are that are that seem relatively new. Um which is mic Michael Sailor selling some of his Bitcoin to fund the yield from strategy. There's a lot of different stuff at play there. We've talked about it a few times on the show. Um, and to me, you know, what I've seen, and this is, this is not my opinion, but what I've seen is that there is a an idea out there, especially when Bitcoin does these, you know, negative 15% moves in a single day that it's like, this is it. Sailor's going to get blown up, like it's another FDX coming up. Like, he's got to sell all that Bitcoin. We're literally going to go to 2K again. Um, obviously you don't you don't think that

that's the case, but I want to hear from you kind of like maybe you can give a bit of context for us in terms of that situation with Strategy having to sell some of their Bitcoin uh and and also they bought some more since um and and maybe kind of frame that for us uh and also you know dispel some of those those uh theories from crypto Twitter. >> Yeah, I mean let's see where should I start here. So, Strategy sold 32 Bitcoin and in their last earnings call, they communicated to the market that they would sell Bitcoin when they thought it was uh accreative to their shareholders to do so on a Bitcoin per share basis. Meaning if it increases the amount of Bitcoin backing each share, some kind of corporate

action like selling Bitcoin, then they would do that because sometimes it would be more advantageous to sell some Bitcoin to say retire debt or service the dividends on the preferred stocks or buy back their shares if it was trading at a discount to premium. um it it would put them on a better trajectory to accumulate more Bitcoin into the future as well as increase Bitcoin per share for their shareholders. And and so again, this goes back to time horizons. Uh strategies trying to build a a capital structure or a Bitcoin accumulation machine for the long term.

Um, and so people vastly underestimate the the resiliency of of Strategy's capital structure, the strength and size of its balance sheet, uh, the optionality of its treasury operations to withstand Bitcoin's short-term volatility. You know, they have um they have the preferred equity, but you don't have to pay it back. So, there's no liquidation price, there's no margin requirements. Um, it's just about servicing the dividend. And when you really break it down, it comes down to about $150 million worth of of monthly divid dividend obligations that they have to service. They have to come up with that money somehow. Now, they can do this through issuing MSTR when it's at a

premium, which is what they did this morning. It was trading at 1.24 MNAV over the weekend. They issued um about one almost $200 million worth of MSTR. uh they used $100 million to increase their USD reserves to a billion. They used $100 million to buy about 1,500 Bitcoin. So, it's more about being a net buyer of Bitcoin, even if you sell a little bit. Even if they had to sell Bitcoin to service that dividend, we're talking about selling, you know, a little bit over 1500 Bitcoin a month.

Well, they bought 90,000 Bitcoin over the first quarter alone, >> right? And so even if they had to use the Bitcoin, which they totally can, Bitcoin is a a liquid asset, they have 845,000 plus Bitcoin on their balance sheet as well as a billion dollars worth of cash to service these dividends. They can sell that whenever they want. If they think it's accretive for their shareholders or they want to service the dividend, as long as they're net buyers, it does not matter. I I mean they bought over 200,000 Bitcoin over the last year.

Do I care if they sell 5,000 Bitcoin, 10,000 Bitcoin? If they want to do tax loss harvesting, if they want to use the the proceeds to pay down some debt to make them more long-term uh durable in terms of their capital structure, you know, I really don't care because if they're buying 190,000 instead of 200,000, you know, they're doing they're still net buyers. um of Bitcoin. >> And so people really, I think, underestimate how longdated their debt is and how large their Bitcoin balance sheet is compared to that. You know, just to give you an idea, you know, if if they have about they have about $6.7 billion worth of debt,

like convertible debt that if their stock doesn't perform, they have to pay back. But it's not due. The earliest one is 2029, okay? And the latest one is 2032 when they would have to do anything to try to pay it back. If they if you take just the billion dollars worth of cash and subtract that out from the debt, they now have $5.7 billion worth of debt just with their Bitcoin holdings. if their Bitcoin fell like 90% from here. So, I'm talking about a Bitcoin price of like $7,000 per Bitcoin, which would be absolutely unheard of uh for a Bitcoin bare market.

App catastrophic conditions, even if it did that, their Bitcoin holdings would still uh be able to be break even with the amount of debt that they have. >> And so, that's how large their assets are compared to their liabilities. And this is the math that people just aren't doing. When you when you hear that, hey, they're in a corner. I'm like, okay, you were hearing that all last week about how oh, they're gonna have to sell this Bitcoin. They come out and they they raise another $200 million uh to buy another $1,500 worth of Bitcoin in in some of the worst market conditions we've seen in in the last couple years. You know, they're showing that they still have access to capital markets. They were the largest equity

issuer and preferred equity issuer in in the entire market. They raised over 11 billion in the first quarter alone. And you're telling me that they can't raise $100 million of that? That's like 2% of the MSTR trading volume. And so it's just like what are we even talking about here? You know, they built the capital structure to withstand Bitcoin short-term volatility. Mhm. >> And so unless Bitcoin unless you think that Bitcoin is not going to outperform the the dividend rate which is 11 and a half% in the next say 10 years >> then this then you don't you don't think the business model is going to work but then it's just like okay you're bearish like you're bearish on Bitcoin.

>> Yeah. >> Um this is a bullish business model that expects Bitcoin to appreciate above that. Um and and and if it doesn't then you were right but at the same time you were just right about being bearish on Bitcoin which uh anybody who's running a a a Bitcoin treasury company you know is inherently bullish on Bitcoin. You know, that's why we're doing that. Why at Orange BTC we feel comfortable taking a five-year loan at a similar cost of financing because we believe that Bitcoin is going to outperform that and we're going to walk away with more Bitcoin than we started before we did that transaction and that's going to benefit our shareholders. The exact same thing's happening with Strategy. Yeah.

So all that's to say, people really underestimate their access to capital, the strength of their Bitcoin balance sheet, which is flexible and liquid that they can use at any time they want to, and the different ways they can raise capital uh with their treasury operations. And so I I think it's a complete nothing burger. >> Who does who who do they raise money from when they are issuing stock like that? Like who's who's buying that 200 million of stock? >> The the MSCR. >> Yes. Yeah. Yeah, like when you cuz you're you're saying just to go back and this is this is this is this is a lot for me to process. Uh just put that caveat out there. You said that to then they raised that money today or over the weekend or whatever it was or last week

and then they spent half of it adding to their their cash reserves and the other half buying Bitcoin. Where's that money coming from? Who are they who they're raising it? They're selling they're selling more shares of MSTR. >> They sell shares and >> they sell shares to who's who's the buyer for MSTR shares right now? >> The market. the market >> the market is just happy to buy it. >> You could say the existing shareholders. Now when you buy Bitcoin with it and the Bitcoin outperforms, that's an accreative transaction for the shareholders because what they care about is the Bitcoin exposure per share. >> And so if the strategy is turning around and buying Bitcoin with the proceeds, that's more Bitcoin per share. So they're okay with, you know, being diluted in a traditional sense but not

in a Bitcoin sense >> because it's being issued at a at a premium to their enterprise value. >> Uh it was around 1.24. Now it's a little bit different when they raise cash with it because that is more dilutive. Uh that's that's dilutive for the for the common shareholders when they did $100 million. But it's a little bit nuanced because there's second and third order effects here where if they increase the USD reserve, it will improve the creditworthiness of the stretch preferred products. Meaning uh you know people feel more comfortable allocating to stretch because if there's more uh dollars in the reserve to service the

dividend, they feel more comfortable in the safety there. And so it could drive more demand for Stretch if there's more dollars backing it. And that could allow strategy to accumulate even more Bitcoin in a non-dilutive way, which trickles down into the MSTR shareholders. So that transaction on its face when they do the $und00 million to improve their USD reserve which is they've only done this twice that is dilutive upfront but the idea is that it puts them in a better position because it improves the creditworthiness of their preferreds where they'll actually be able to accumulate more Bitcoin on a Bitcoin per share basis into the future for the MSTR shareholders. Right. And so um you know

that's it's a little bit more nuance on that specific part of the transaction. Now if most of the you know they've kind of shifted away from as much MSTR issuance to more stretch or preferred issuance um because it is uh you know not dilutive at all to raise the preferreds to acquire the Bitcoin. And who's buying those? Well, it's people that want price stability. You know, one of the problems that we're running into right now, I said it before, Bitcoin is a longduration asset. And so, but people live in the real world have shortterm cash needs. Um, you know, I have to pay bills. I I have a a cost coming up next month. Even if I'm a Bitcoin, you know,

bull who just loves saving in Bitcoin, I can't afford to have it drop 20% in a month for my short-term cash bucket. >> You know, that's not how the world works. And so I need some place to park it. Now, Stretch would be an example um of of a product that allows you to collect like 11 a.5%. It has liquidity. I can trade in and out of it, but it's going to have much more price stability than just spot Bitcoin. And so it's a it's a solution for people that hey I want Bitcoin backed or Bitcoin supported securities but I want a little bit less volatility than like spot bitcoin because I need to use this over the next

30 days or 60 days whatever it is. And that's why stretch is so popular. That's one why they've been raising they've been able to raise $10 billion because people want that high yield liquid price stability product that's supported by Bitcoin and then strategies like okay I I I will pay this dividend. I agree to do this because I believe in Bitcoin's long-term price appreciation is going to be in the 20s or the 30%s over the next 10 10 years. And so I'm happy to give you this product that pays out 11 and a half percent a month. I will turn around and buy Bitcoin with the proceeds and the business model is in that spread in

the expected Bitcoin appreciation rate versus the dividend. So if I think it's going up 30% a year, I have to pay 11 a.5%. The business is in that spread. And now obviously Bitcoin can trade can perform at 20% a year over the next 10 years, 25%. That's when you get into projections about what you just think as a company. Um, but that's why there's so many buyers of of the stretch and why they're able to raise so much money. And so you ask where the money comes from. It's really just providing a financial product that uh fits a need in the marketplace which is a high yield liquid uh bitcoin supported um short duration asset that removes the price volatility.

>> If bitcoin started to go back up aggressively and signs pointed to like going back to all-time highs and beyond, would money leave stretch to go back into MSTR >> potentially. But I think, you know, I think they're different investor cohorts. You know, there there's people that, like I said, they have short-term needs or people just are a little bit more riskaverse to to the volatility. They don't they they are okay with 11.5% a year and they they prioritize price stability. And so it could be like a retiree for instance would be an example of somebody who wants a little bit more stability.

They're not young anymore. They don't want to see their nest egg fluctuate so much in dollar value. And so they're they'll always be interested in a stretch uh like product >> um or a SATA for instance. You know these these they would always kind of fit that need in their in their portfolio. Now, if somebody wants more growth and wants more up the Bitcoin upside, uh they could either hold spot bitcoin um if they especially if they want to remove the counterparty risk and the censorship risk, you know, nothing beats holding spot bitcoin and self-custody, but you're taking on that 4550 V then or you can hold the ETF if it fits into your brokerage or

retirement accounts. Or if you want even more volatility, if you want not just exposure to Bitcoin, but strategies ability to accumulate more Bitcoin over time, then you would own MSTR. So if you if you like, hey, I have a really bullish view on Bitcoin. I don't care about the volatility at all. I want the most amplified exposure to Bitcoin I could possibly get. then it would be owning the common equity of of a Bitcoin treasury company whether that's you know for orange BTC it's OBTC3 we have an ADR o r uh NJ um and and so like if they wanted exposure to a more amplified exposure to Bitcoin that's when you would own that

more volatility than Bitcoin itself so it's just kind of fitting investors where they are based on their risk tolerance based on what kind of volatility they want what kind of exposure they want, giving them a plethora of options that fit their needs. Um, and that's why they call it like we're using the capital markets to bridge Bitcoin to meet investors where they are instead of being scared away from Bitcoin completely because they don't want the volatility. Now, they can access these different products that are still supported by Bitcoin, uh, but offer different kind of levels of volatility.

>> Okay, this is a good master class in strategy, man. This has been really helpful. They come with different risks too. That's why it's important to understand like Bitcoin I talked about before Bitcoin >> strips the risks. When you hold a financial product, you're changing the risk from the protocol level >> to a management team and an issuer and their ability to secure the Bitcoin that underlies these products. So you're you're trusting a third party. There's always risk there. Um, and then the issuer managing the Bitcoin and the treasury operations with discipline and execution in a way that's going to continue to accrete value to the shareholders. And so that's important to understand is that you're shifting the

risk profile from just spot bitcoin where you don't have any kind of car party risk, but you're adding some risks when you go to these different securities. But then again, then you could improve the reward as well. So that's, you know, with any kind of risk comes potential reward. Um, but it's just important for investors to understand these these differences. >> I think that's a good way to even just kind of frame the different products um from strategy is is just levels of risk, right? It's just like what do you want? How much exposure do you want to Bitcoin? What what and also even kind of what I was asking about stretch. It's like what is your time horizon in terms of your level of risk? What do you think is going to happen? And and that you know they have a few different things

available for that as well, right? So that's another way to maybe to maybe frame it at least for me as a as a as a retailer. Um my last question for you Sam I I I I I we do have to wrap up. >> Sure. >> So it's a more fun speculative question. Uh is you mentioned that you know we're seeing some ETF outflows perhaps as some of the institutional investors um or those the ETF people look you know maybe try and go and play the AI market for a bit here. What does it take for those that capital to rotate back into Bitcoin?

>> Well, you know, rotations like this happen all the time. I I would say there's a bit of a exuberance right now in that part of the sector and that the multiples are getting to a point where they're kind of like priced for perfection. Uh, so I mean the the best way to do this is right now I'd say Bitcoin is pretty I wouldn't say hated but it's considered boring. It's considered not as exciting as some of these other sectors. It's obviously underperformed some of them >> and that's usually the time to rotate back especially. But I think if you see some real weakness in the more favored sectors today um which typically happens when things move up in parabas you know

that alone will kind of get people forced to think about okay where where is capital been leaving and maybe where is there more opportunity now you know in terms of what's next for Bitcoin. I mean it's totally possible that we see more downside from here if the broader stock market comes under pressure if the macro uncertainty uh you know goes down a bad path um than everybody hopes in terms of the breaking down of peace talks and things like that. Oil prices spiking, yield spiking, you know these are scenarios where correlations would go to one and Bitcoin could kind of get wrapped up in that temporarily. So that's always on my mind, you know, as a possibility being

prepared for all outcomes. Having said that, you know, 60K sentiment is pretty poor right now. Um, like I said, the fundamentals are still uh as good as I've ever seen them in terms of adoption trends, as well as the uh the real problems that Bitcoin addresses aren't being solved or even, you know, addressed at any meaningful length in terms of the fiscal situation. um which is kind of everything uh when it comes down to it. So you know for instance just give me I'll give you one stat that I kind of thought about the 10 year is trading at like four a little over four and a half% right now.

The CBO projects it to be around 4.1% over the next 10 years. So it's about 40 bips above that baseline projection from the CBO. you know, when it's even 40 bips above like it is today, it adds $1.5 trillion in interest expense to the debt over the next 10 years. And it even sits this for even one year, it adds $200 billion in interest expense in 2036. And so the projection is that 90% of government spending is going to come from interest expense and entitlement programs. and we're not doing anything to address the entitlement programs that are set to go

insolvent in 2031 to 2032. And so you look at these the big picture here, the fiscal problem is the entitlement programs and these yields and the interest expense given how large the debt is. So this is why the increased probabilities of going to currency basement it's not going down, it's going up. >> All right. So, you know, yes, Bitcoin's 50% off its all-time high. It's typically if I saw any kind of changes in the fiscal picture or the risks of currency debasement falling or Bitcoin security coming into question or anything like that that's actually like

a real threat. I could understand it more, but I can't. It's actually the fundamentals are strengthening. So, when you have this dislocation of short-term price action and strengthening fundamentals, you know, you know, not financial advice, but just do the do your own work and come to your own conclusions of whether you think this is a good long-term entry or not. >> Well said, man. A little bit scary, but well said. U Sam Callahan, thank you for coming on the show, man. Good to see you again. Uh, and I feel like we'll see you again soon this year. Hopefully, >> I hope not at the exact same level as where we did this like 3, four months ago.

But you never know if it needs to happen for it. >> If it's got to happen, it's got to happen, you know. Um, appreciate you, man. Thanks for coming on. >> Thanks. Thanks for having me. Appreciate it. Want insights on what's moving crypto markets and how we're trading each event? Subscribe to our channel and join the Milkro Daily and Pro Newsletters and start investing like the top 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.