Is Strategy's Pivot to Selling BTC for USD a Betrayal of Bitcoin?

Transcript

So, I want to ask about something that you've said. I forget the exact phrasing. I think you said something like um about how people's concern doesn't have to do with their ability to pay back STRC or something like that. But, I think that's actually what kicked off this whole drama, right? It's like they initially had enough runway to cover the dividends for a few years, but then when they paid down some debt, suddenly that runway got short and that is what caused all the initial consternation. Isn't that how or Tell me tell me how you interpret what happened these last like 6 weeksish.

>> Yeah, so I think you know, everybody's going to look for a reason in the market. But, the fact is that you know, they spent I don't remember the exact number, but um I think it was 1.5 billion roughly on bond buybacks. Um you know, they've got 60 billion dollars or at the time had 60 billion dollars worth of Bitcoin. So, you know, this wasn't like some giant percentage of their Bitcoin stack and they could, you know, very easily service the dividends with Bitcoin assuming Bitcoin didn't drop to like, you know, $1,000 a coin or something crazy that no one actually expects to happen.

Um and so, I think really what I think you had is a situation um and I'll kind of dive in a little bit here, but a situation where STRC trades at 100 and it's never going to or at least the market believes it's never going to trade above 100. So, that actually creates a very interesting setup for a short where if you shorted at 100, your downside is capped, right? You know that strategy's going to come in and run the ATM right at 100. So, if you shorted at 100, you've got unlimited upside as a short and basically capped downside. And so, I think and you've seen this a few times where the price of stretch tanks and

then it pops back up. And that's I believe due to short sellers coming in, pushing the price down, causing people to freak out, and then covering when people freak out and decide to sell. And so I think that's really what you had here. And um I think a good piece of evidence here is that SATA you know, the other main variable rate non-convertible preferred in the market did not have nearly as violent of a reaction and for a number of days when stretch was starting to trade down, SATA was just trading right at 100. And now you could say, well, but strive has 2 years of cash set aside for dividends.

Yes, but they also have a lot less Bitcoin to back the dividends and preferred. And so they're actually in a more vulnerable balance sheet position than strategy with stretch. And yet the market was trading down for stretch. And so I think this really was just a situation of the shorts kind of latching on to an opportunity. Um and then people panicking, grabbing hold of a narrative and selling. Um And right, but strategy has responded to that.

>> I think that opportunity was created because strategy gave them an opening. Because and this is a point I I made on some show, but I'm I'm not even sure if I made it on Unchained. I might have made it on the chopping block, but the point is that um basically, you know, uh strategy for you know, ever since its inception was this Bitcoin accumulation vehicle. And as long as you kind of like believed in Bitcoin long term, since there the only thing they were doing was acquiring Bitcoin, like that that one thing made sense and it was aligned with belief in Bitcoin, right? Which is decentralization, censorship resistance, like you know, all those things. But now

this structure that a strategy has created, it shifts that away from belief in Bitcoin to now you have to have faith in the team at strategy. And you know, I also my personal take on this is that this is also a departure from the Bitcoin ethos. It's literally kind of going back to what Michael Saylor has been criticizing where you know, he has criticized the US dollar. You know, he calls it trash like a melting ice cube, you know, whatever. And the dollar is something where there's kind of like a small group of people, they're sort of in charge of

you know, how it's managed and so you have to have faith in those people. And now you know, strategy is sort of created their own version of that. And so it's it's just not really aligned with Bitcoin's philosophy anymore. Would you agree with that? >> I guess I'd be curious to hear what what components of faith you have to have in the strategy chain team that has changed. I mean, as long as they don't lose the Bitcoin like the Bitcoin's there.

>> I mean, that so this goes to the question about you were saying that you felt like the shorts were making this opportunity, whatever. But to my mind recently and it's not even just about the shorts. It's cuz the way you're framing it, it's like it's only an attack, but I feel like strategy lost the faith of investors, right? It's like people saw, oh hey, they made a series of financial decisions that just caused people to lose confidence in their ability to manage this whole structure.

You know, paying down doing the bond buyback when they didn't have to and then having that shorten their runway to the point where, you know, people were concerned. And like, it just goes on. So, do you see how And Strive is just a different story. They didn't have a series of, you know, I'm just going to call them missteps that caused people to lose confidence in them. >> Sure. Yeah, I mean, I think Strategy is certainly, you know, learning through all of this, right? I mean, they I believe it was in Well, it was earlier this year when Strat traded down, and they decided to implement a cash reserve in the first place. And they caught some

flak for that. Hey, what are you doing holding USD? Like, you should only be holding Bitcoin. But they're like, hey, no, the market wants this. And then it seemed, you know, the price recovered quite a bit on Strat. And so, then they, you know, thought, hey, maybe we don't need as much of this cash reserve. So, we'll go ahead and buy back some bonds. You could argue the market didn't like that. And I would say some, you know, certainly some market participants didn't like that. And so, that's why they've been addressing that. And they've gotten the the reserve back up to 18 months with the 2.5 billion. And then they've shown that they can also cover dividends with some Bitcoin, you know, a very modest amount of Bitcoin sales.

And so, I think, you know, the business is certainly growing, and they're certainly learning. And you know, you could say maybe mismanagement. You know, Strive has just kind of copied them and followed them. So, when you're the market leader, you are going to take steps, and sometimes the market responds in a way that it's tough to predict, right? I mean, from my perspective, I would prefer personally for them to hold no cash. And just use bit Bitcoin. Because to add another two and a half bit billion into Bitcoin right now, I think it would be fantastic. But the corporates of market participants have said, hey, we want some more cash. And they've been

out there talking to a lot of market participants from what I can hear. And so I >> they need the cash to pay the dividends. So. >> Well, they can I mean, last week um they raised or 2 weeks ago they raised over a billion dollars on the MSTR common. So, that would cover their dividends for um like 7 8 months. So, they don't need cash sitting there. They sold enough Bitcoin to cover more than a month's worth of dividends last week in one week. So, they don't actually need cash.

They can tap the uh ATM on the common. They can tap Bitcoin to get um you know, to raise the cash that they need. They're just selling the >> am I right in thinking that they sold the Bitcoin because they they can't tap the ATM at at this moment? >> Well, no. They they have, you know, 2 and 1/2 billion dollars now worth of cash, and the common stock is trading at a premium um to the, you know, the net asset value. You can go to the website. You can check it out. So, they could tap the common, but this is all about kind of market dynamics.

>> I think last week it was like at one. >> Um I mean, we can go we can take a look at it right now, but it's um it's about a 10% premium. So, if you go to the website, >> it's today it's up. Yeah, for sure. >> Sure. And and most of last Actually, all of last week it was up. It was like Monday of last week when they announced boom, it re-rated because the market really liked >> I meant the week the week before. >> Sure. The week before, that's right. It closed it was at um 10% premium and kind of closed down.

Um and so, this week or or last week, I guess, they didn't need to sell any Bitcoin to fund anything. But, the point was to show the market, "Hey, we can sell some Bitcoin if we need to. This is another tool and we will use it. We've got a lot of tools in their toolbox here. >> Okay, I did see that JP Morgan in a report said quote, "The possibility that strategy would be selling Bitcoins introduces two-way risk into crypto markets inducing more uncertainty and volatility for Bitcoin prices that could have been avoided if it instead issued equity to rebuild reserves for future dividend payments." So, it sort of feels like they also feel like this wasn't necessary, but what's your

response to that? >> Sure, you know, I would say them selling Bitcoin last week yeah, it certainly wasn't necessary. They have the cash. They could have topped the common um ATM or plenty. I think the point is just showing to the market, showing to the rating agencies, showing to anyone else um that has a problem with them never selling Bitcoin that like, "Look, we can actually sell some Bitcoin." And in terms of introducing a risk, I mean, they sold 200 million roughly over the course of an entire week.

Um Bitcoin trades many, many, many orders of magnitude greater than that. They could have sold that in a single clip with a 50 basis point haircut off spot. I'm sure they tea walked it, but um that number is just not like that does not move the price. And we saw that evidenced. Bitcoin last week was up and yet they were selling. So, we know JP Morgan is kind of talking out of both sides of their mouth, right? I mean, they are basically as anti-crypto as it gets. We know what Jamie Dimon has said about Brian Armstrong and about the rest of the crypto space. They are the primary blockers for the Clarity Act.

So, you know, them saying it introduced some big risk like I take that with a grain of salt. >> All right. Well, so to go back to my question about the Bitcoin ethos I have one other issue, which I'm curious for your take on. You know, in the beginning strategy was all about Bitcoin, and it was all about accumulating Bitcoin, you know, sell your kidney before you sell a Bitcoin. And now it feels like the company has to put US dollars above Bitcoin. It needs US dollars to pay the dividends, you know, as we just discussed they're selling Bitcoins at a loss um to do that. They're raising more via the ATM, and when they do that, that dilutes the Bitcoin per share of MSTR holders.

And so this kind of feels like a change in the direction or philosophy from Michael Saylor and from strategy. What is your response to that? >> Yeah, I'd say it's um, you know, I'd say it's a little bit of a tweak, right? I mean, strategy last year, right around this time actually, I think it was July 5th, uh it might have been a little bit later in the year though, when they IPO'd stretch, and it was the largest IPO of 2025 of any kind. Now, 2025 wasn't a big year for IPOs, but the fact that a preferred stock was the number one IPO for an entire year in the entire world is pretty incredible. And stretch now is by far the highest volume, most

liquid, most widely held preferred stock of any preferred stock ever in history, and in fact, probably all combined, like all the other preferred stocks out there issued by banks and some other industrial companies and so on. And so they are completely rewriting the script when it comes to just financing general, right? They're taking a pretty big step here with uh the issuance of stretch. And so it would make sense for them to need to a little, you know, tweak their capital management strategy a little bit going in.

And you know, you can't really fault them for not fully predicting the future, right? I mean, when they launched stretch yeah, in hindsight, they should have come out and said, "Hey, we've got this dividend or or this cash strategy. We're going to hold this amount of cash and whatever." All the things that they've done, they should have started out paying daily dividends, right? All these things. But um you know, they're building a business, right? And they're If you look at stretch as a product, just like you might look at a SpaceX rocket as a product, there's going to be some um some learning and some growing along the way. And so, I would argue that, you know, holding a little bit of USD

relative relative or versus prior just holding all Bitcoin is some learning and some tweaks to the product that make the product better, make it easier to sell, make more people want to buy it. Um and any company should be doing that with their products. Any company that launches a product on day one and doesn't change anything about it is irresponsible. And so, I think I like seeing them make these tweaks. And sure, you could argue the business is a little bit complex >> tweak. Like, we can uh we can debate that because I to me it feels more like changing direction, like a flip-flop. Right? If like Bitcoin is first and then now it's like, well, they

have to put the dollar first. >> Well, they you know, they still have um north of 50 billion dollars worth of Bitcoin. Um so, less than 5% or about 5% of their balance sheet is in cash. You could argue, "Well, they sold, you know, the 3,500 Bitcoin this week." But they still have about 850,000 Bitcoin. So, you know, anything less than 10%, you know, 5%, this is less than 1%. I don't know, like 50 basis points worth uh less than 50 basis points worth of sales like it feels like a tweak to me. Um yeah, if they went and sold half their

Bitcoin stock or 20% of their Bitcoin stock, and they raised $10 billion worth of cash, you could start to say, "Well, that starts to look like a fundamental change of business." But, you know, holding um fairly minor amount of cash on a you know, relative basis, single 5% or selling 50 basis points of their Bitcoin stock feels like a tweak to me. Um yeah, you could argue it's a flip, but, you know, I just putting the numbers into perspective, this is like pretty small on a relative basis. And this is relative to Bitcoin at a price level that's been depressed. If we're talking 120k Bitcoin again, obviously, you know, now less than 2 and 1/2% of

their balance sheet is in cash. So, pretty in my view, pretty um relatively small numbers. >> You just caught a piece of Unchained. I'm host Laura Shin, and the full conversation is in the description below. We go live every Monday and Thursday. Subscribe [music] so you never miss it. Fidelity has been researching and investing in blockchain since 2014, long before it was a headline. And they're hiring crypto and DeFi professionals to join their team and discover what's next in finance. Fidelity is looking for people with fresh perspectives from different backgrounds, whether it's tech, UX, or product design. Whether you're crypto savvy or crypto curious, as long as you have the passion to make a real impact at a company striving to make finance accessible to all. Explore

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