Why Saylor's 'Inoculate' Comment May Be a Signal He'll Sell More Bitcoin

Transcript

Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this live stream. Before we dive into today's show show, let's hear a word from the sponsors that make the show possible. Fidelity has been investing in blockchain since 2014. They're not wondering if digital assets will shape the future. They're hiring the talent to help ensure they do. Explore opportunities today at crypto.fidelitycareers.com. Fidelity is an equal opportunity employer. This episode is brought to you by Cape, America's privacy first mobile carrier.

Same premium service you'd expect from any other carrier, but designed so your number, your location, and your data actually stay yours. Get 33% off 6 months at cape.co/chained. Today's guest is Glenn Cameron, CFA, global head of institutional at On-Ramp Bitcoin. Welcome, Glenn. Thanks so much for having me, Laura. It's nice to be with you. >> There's been a lot of chatter about Strategy and Stretch, its variable rate perpetual preferred stock, also known as STRC. After Strategy announced that the company had sold 32 Bitcoin worth $2.5 million last week, the price of Bitcoin

kept dropping until it dipped below 60K. Then today, Michael Sailor announced that MSTR had bought 1,550 Bitcoin at an average price of 65,000. So, we gave listeners a brief overview of what's happening uh in an interview with Jeff Dorman last week, but I know you also have your own takes. There's a lot of people that are criticizing Sailor and Strategy. There are others that are saying all of this is FUD. give us your overall take on what's happening and the situation that they're in.

>> Sure. So, I think it's worth uh starting by saying that I'm not predicting anything. Um really what I'm doing is I'm pointing out the risk, right? Um there's an old concept in uh you know uh in investment professional circles where they make the distinction between risk and uncertainty right where risk is you don't know the outcome but you do know the odds right so for example a roulette wheel right uh you don't know which uh number the ball's going to land but you do know the odds

Whereas uncertainty is where the outcome is driven by crowds of people and crowds never behave the same way twice. So it's entirely unpredictable, right? And that's the case with the Bitcoin price. We can look to history um to as a little bit of a guide. If we do that, um, what we see is that every Bitcoin draw down has been greater than 77%. The last one was greater than 77%.

The ones prior to that were the maximum draw downs were in the mid 80s, right? But those were less sort of it was a less mature market then. So a good benchmark is the last one where it was starting to become institutional here. I would say the max draw down could be slightly less. Um but on the other hand there's all this leverage in the market now. So it could also be just as deep as that. And we're only just more than 50% off its highs in October. Um and I'm not predicting that it's going to go further down. This may be the bottom. I'm just using all we've got which is history to

give us a guide because like I said this is uncertain rather than a a probability that we can uh sort of uh know that probability ahead of time. Now, so the the situation with the 32 bitcoin, so the the message given by sailor about that was the purpose of it was and I quote to inoculate the market. So if you think about that word inoculate, what does it really mean? Right? It means when you inoculate something, you're preparing it for a bigger event. Right? So if you read it literally, what it means is if because

he's selling to inoculate the market, he's preparing for a larger sale later. And just the fact that he sold Bitcoin, you see, he now has changed his language after many years. is I've got a list of many many quotes where he made it crystal clear that they would never sell Bitcoin. You know, he used to say things, sell your kidney, uh, you know, to prevent selling your Bitcoin and those sorts of things, right? But there's literally countless examples.

of late he's kind of changed the na language to he'll never be a net seller so he'll be a net buyer right um but the thing is how do you define that it's a bit orwellian when you kind of change he says I meant this I meant that because the issue is a net buyer over what period over the last five years over the next five years because if it's over the last five years he can sell 800,000 Bitcoin and he was still a net buyer Right? So uncertainty in markets creates volatility. Right? So it was the signal that and look there are other things going on in the world. There's Iran and whatever and it's impossible to know

what exactly is moving the price. But on in that respect that is the way I think some people do view it and obviously the crowd splits on that. Now today I think the m the the the the company is kind of feeling the heat and I think the executives and team are definitely feeling the heat. You've seen a number of interviews with them quite defensive. Um and so I think they wanted to sort of do some damage control and kind of you know show strength in the midst of all of this. But the issue here is that and again this is a contentious point

because the way um you know you tell if issuing common stock to buy uh bitcoin is accretive on a bitcoin per share basis or dilutive on a bitcoin per share basis. They use a metric called enterprise value uh mnav or uh multiple of net asset value but that actually is not the correct measure and they took the basic mnav which they used to have on their website off their website at some point I don't know when um and so now the company the last time I looked maybe an

hour ago uh the market cap so If you take all of the shares and you multiply by the share price um and you divide that by the value of the bitcoin the uh mnav is well the company's trading at about 84% of the value of its bitcoin right so if you issue common stock when it's like that that's dilutive and I calculated the number and you're getting about half the number of bitcoin per share as um um as shareholders already have. So the Bitcoin per share falls, right? So when the market recovers, each shareholder has slightly le less Bitcoin

backing each share. So it's kind of an illogical thing to do. The total amount of Bitcoin increases, but the number of Bitcoin per share decreases, and that's what matters to the investors in the common stock. Um, so how do you explain something that is illogical? Well, it's again a message, right? You know, we we're we're still strong and whatever. But ultimately the issue now is that Dann rating on the company, not on any of the securities, uh, said that one thing that would help their credit rating would be if they had

a cash reserve. about an 18month cash reserve. And so they basically issued securities, took in the dollars, and created 2.25 billion cash reserve. But I don't know how many days ago, but not that many days ago, they decided to use uh 1.325 billion or something like that of that money to redeem a convertible note, leaving them with about 900 million. part of the issuance to uh uh sort of very recently that allowed them to buy these 1550 Bitcoin. They took some of the cash and put another hundred million

in there, which means they've got about a billion, which is about seven months worth of cash reserve, right? And Murphy's law, this is the time when they may need the cash depending on where the Bitcoin price goes next. Because right now, if they issue more common stock, it's dilutive. if they issue more press it's trading below par that more supply will create more uh selling pressure um so the effective yield will go up again um you know the the other prefs below uh uh stretch in the capital stack so that

would be strike and stride are both trading at effective yields like four or 5% above uh you know what's on their prospectus. So essentially um investors are demanding a higher credit spread on the secondary markets. Um so I think you can objectively say that the market is pricing in more risk here um or more uncertainty if you like. So that's kind of where they find themselves today.

Yeah, it's sort of like um I think back before the preferreds when it was just really simple then that really was limited to kind of the risk as you defined it. But now that there's so much financial engineering, it leans more into that uncertainty that you talked about where it's more of a psychological game and about instilling investor confidence. and last week, you know, I mean, you could actually make multiple arguments about why the price of Bitcoin dropped, but so so so I'm I'm not even saying like that, you know, them selling the 32 ETH or ETH Bitcoin was even um

>> that would have been a scandal. I'm I'm not saying that them selling the 32 Bitcoin uh was necessarily the reason that the price of Bitcoin dropped, but if you're just reading the timeline alone, all the chatter and the back and forth and you know, all of that that speaks to that uncertainty piece that you talked about and when Jeff Dorman came on the show last week, he and I talked about how essentially now it's sort of this confidence game. So, um, I do want to hear you address though some of the people who are kind of like dismissing what's going on. So, Scott Melker tweeted, quote, "Sailor sold, um, 32 Bitcoin at 77K and then immediately

bought 1,550 Bitcoin at 65K, which, you know, on the face of it, that seems pretty smart." You know, a small sale at small sale at a higher price and then a big purchase at a lower price. Um and you know in general like if you look at the timeline there are a lot of people who just point out simply the fact that you know Bitcoin would need to either trade you know kind of in this range or even a little bit below for quite a while for the company to really get in trouble or to have a significant drop. Um and so then they kind of view all this chatter as FUD. So what's your response to um people who are you know saying that this is all just noise?

>> Okay. So the first thing is I'll I'll sort of uh repeat and I'll add something to what I said about you know whether it's logical to have bought these 1550 Bitcoin. Right? So a lot of people get upset whenever you say anything negative about strategy. Right? So even though it's mathematics and objective, they kind of don't want to accept reality, right? Um but the way I like to explain it to people is we all know that if you've got dollars in your bank account and the Fed prints a whole lot of dollars, your dollars lose value, right? Because you the purchasing power

gets diluted. So if you issue shares below the value if the market cap of the company is below the value of the bitcoin and you issue shares right you're diluting the num the you're diluting on a bitcoin per share basis so you're actually making shareholders have less bitcoin per share right so just like when the fed prints dollars it's similar to that you're essentially um taking or stealing a little bit of Bitcoin from every single shareholder. So, it's like a hidden tax, right? Because when the Bitcoin price recovers, right, you're going to have less Bitcoin backing each

share, right? So, it doesn't help to add to, you know, from the the investor's point of view, it's more of a message, more of a psychological signal that, hey, we're still here, we can still raise money, etc., right? Um then um on the issue of you know if Bitcoin trades sideways for a long time so again history you know I nobody knows what's going to happen next right anything can happen but just for a some sort of guide right in all those other cycles when Bitcoin

kind of had that max draw down of I think it went 86 84 and then the last one was 77 right it took about between 12 and 18 months for it to get about 65% off the lows but what's important to remember right so if Bitcoin were to have a similar draw down even 70% right it would be in the mid 30,000 range now if you have a 65% return from there. You don't even get it back to the Bitcoin price we're at today, right? And that so the the average draw down length is 12

months. We're only 8 months in, right? So you've got another four months of draw down and then 12 to 18 months just to get back to slightly below the Bitcoin price we're at now. Right? So that's what h history should s would suggest about how long this could take and that is exactly the situation that you just described that you know people are saying only if right well I'm not predicting anything for all I know we could get into another you know roaring bull market it seems unlikely but you know anything can happen but history sort of can provide some sort of side

and again I'm not making predictions I'm just pointing out that the risk is there right so what happens if we end up in that world right um because also there's only a number of ways that strategy can raise money so we already talked about diluting Bitcoin per share if you issue new prefs at below par you're issuing them at a higher effective yield right um so that's going to be costly. Um or you can raise the dividend but then you raise the dividend across the entire uh outstanding issue of whatever pref you do which would be stretch and that's $10.7 billion. So if

you raise it by 50 basis points, you raise the yield on 50 basis points on 10.7 billion outstanding of prefs, right? Um and then if you put heavy issuance in the market like this when it's jittery, there may not be as much demand as you had previously. So the price could sag below par. So what do you do? You raise the dividend again. And what if the Bitcoin price is still falling right on the way down? If you look, there's all these dead cat bounces in previous uh cycles. So, you know, the Bitcoin price can rally 15 20%.

Uh you think it's the bottom and then it falls again, right? And in that environment, you can end up in a situation where, you know, the uh the the the the stretch price keeps sagging below par and they keep having to raise the dividend to try and draw it back to par, right? And if Bitcoin gets down into sort of the mid40s or 40,000 or whatever, right, you can end up having to raise the dividend to sort of high double digits like 17 18%. Right? Now, you got to wonder about the wisdom of that because now over the long term, Bitcoin's got to because if you lower the dividend yield, right, the price is

going to sag again. So, it sort of becomes a permanent thing, right? Uh semi-permanent. It's not entirely permanent. Some people make the argument that if the base rate lowers so like uh uh the secured overnight uh financing rate sofa, right, that um because that's the right benchmark here because that's the base rate in the stretch prospectus, right? So if you lower that, the yield should come down. But the thing is think about the environment where sofa is lowing. It's usually when the economy is weak, right? That means people have less money. So they have less money to put into stretch. So the the credit spread above sofa can actually widen, right?

And uh so eventually at some point they'll decide the yield's too high. So what is their next option? Well, they can either sell Bitcoin, right? But the problem is if they start selling Bitcoin then you send especially if it's strategy doing it and if they're doing it in larger quantities the market can get spooked and the Bitcoin price can fall even lower into the 30s right the other option you have is you suspend the dividend right because these are not credit instruments they preferred equity right and every month the board makes a decision about whether to pay the dividend or not in the case of stretch the dividend is cumulative right so it

essentially just it's like a bar tab it just adds up and gets added but um you know so and then that increases the uh sort of layer of the preferred that is owed so that starts to eat into the bitcoin that belongs to the common stock above I mean below sorry, below because the uh the stretch ranks ahead of uh the common, right? But also if you if you suspend the dividend, you also automatically have to suspend the dividend on the preferreds below it. So strike and

stride, right? And on stride, the dividends are not cumulative, right? So if you miss a dividend payment, it's gone, right? Um and so you know so my response to people that say oh it's fine there is no risk da da da da is look at what happened to investment grade pref shares or AT1s in the GFC right and that might sound hyperbolic but we're talking about the most volatile major asset in the world right so that is a fair comparison an investment grade bank uh pref shares

utility pref shares and whatever in the GFC when they suspended dividends traded down into the 20s and 30s okay so 20 cents on the dollar 30 cents on the dollar right now the issue is that at the same time all of those uh cumulative dividends are stacking up right now what do we know about retail investors because it's important to realize that about 83% of the investors in Stretch are retail investors. I have electricians, plumbers, nurses, truck drivers messaging me all the time because they're worried trying to figure out what is going on here and what's the

truth? because the only investment advice they've had is from podcasters or from the messaging from the company who's actually selling the securities, right? And what do we know about retail investors? They buy the top and they sell the bottom, right? And so you'll have a whole lot of vulture funds, right? Buying at 20 or 30 cents in the dollar, right? And look in an extreme situation if the bitcoin falls below the value of the convertible debt plus the prefs right um you could end up in a situation where you know retail's not getting any

income. They could not get any income for 6 months, 12 months, 18 months. That's the whole reason they bought this thing. They see the price dropping. they're selling, you know, they because they're just like, I just want out, you know, I can't live like this anymore. That's how retail investors behave. Um, I think it would damage the brand massively. I think they would battle to raise capital after that. Um, and also another thing is that the thing to look at about the convertible debt is not the maturity date, right? It's when they become putable. They've got put options where the holders can put the uh convertible back to the company and and and they

need to get paid out in cash and there's a couple of those in the first half of 2028 adding up to three and a half billion. Now if you map out you know the time over which I said it would uh take if Bitcoin kept falling in a max draw down similar to past cycles and then to recover to kind of the Bitcoin price where we are today that would take you into the first half of 2028 right and so those convertibles would be way below their strike price I think one's got a strike price on Micro Strategy shares in the mid 400 00s 457 or something like that and the other one's about 628 and

these are the 0% convertibles so they don't cost anything uh to the company right um and the idea was kind of like a call option on the Bitcoin price because if the micro strategy shares above the strike you can convert them at the strike price and keep the profit above that but the issue is if the if those um if uh micro strategy below trading below the strike price which in the scenario I'm painting not a prediction again uh there would be that they would demand their cash back right and so that would add another three and a half billion right and they've already got

uh today they've got to come up with about 1.7 billion in cash every year it's about 145 million a month that's a lot of cash to in a soft market to be able to pay all the dividends, right? So you if you get another three and a half billion uh uh bill that you have to pay, right? Um you know, and everybody's been through that and then you need to start uh issuing more securities to be able to come up with the cash to give back to the convertibles. You can see how this could end up in something quite messy.

Yeah. So, um I know you have a lot of thoughts on Stretch and similar products, which I definitely want to get to, but one last just quick question to go back to what you were talking about about how Sailor said that that small sale was to inoculate the market. So, so why do you think that they sold such a small amount? Like what what do you think was the point of that? >> I think it was so that he could change the narrative, right? because you know for years he's been saying I mean he said it on Bloomberg uh you know actually should get up the oh you know what I don't think I have those quotes but they're all over my ex feed if anybody wants to look right how many times he said they would never sell

Bitcoin okay and the the language was crystal clear I mean well any objective person would say he meant it when he did that right but Now something in the analysis must have thought you know at some point given the way we've structured everything in the financial engineering we may need to sell Bitcoin to actually you know pay the bills right um and so this was you know because remember when he did it I think Bitcoin was still trading in the mid70s I think it had even just touched 80 again right and he probably thought, "Oh, yeah, I'll just sell these 32

Bitcoin, right? And then I'll be able to make this point about I'm a net buyer, right?" So, he's changed the commitment, the verbal commitment. I'm not saying he ever made a legal commitment, but that's what everybody trusted, right? And so you know if you if if you do that people are going to interpret why are you do why are you selling 32 bitcoin you know people have said it's for tax loss harvesting but the issue is that's that's that can't be the case because they got no capital gains to offset right so and you can only offset a capital loss against a capital gain

Right? You could do a wash trade, but with 32 Bitcoin, I mean, it's chum change, right? So, you you wouldn't do it for that reason. So it it was purely a way to send a signal to the market and like he said inoculate them so that if they need to do it later he's kind of normalized it right >> in a bid to kind of prevent a panic if all of a sudden he sells 25,000 Bitcoin or something. >> Huh. Okay. Okay. Yeah. We'll talk more about that in a little bit. But first we're going to hear from the sponsors who make the show possible. Fidelity has been researching and investing in blockchain since 2014, long before it

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stop handing your real number to every app that asks. Go to cape.co/chained co/chained and use code unchained for 33% off your first 6 months. Back to my conversation with Glenn. So, now let's dive into the details on STRC because it sort of feels like that's kind of at the center of all of this. So, um I think you've like explained a little bit, you know, about how it's structured, um how it's changed the game for strategy, but I feel like you, you know, have a take on how you feel it's been marketed and then how you feel that investors think of it versus the

reality. So, just explain all of that. >> Yeah, sure. Okay. So, the first thing is the name digital credit, right? So if if you didn't tell me what these things were were and I heard the word credit, I would assume they're debt, right? So I had an argument with uh Matt Cole. Um well, he didn't respond. Uh but he made >> the Strive which they have a similar product.

>> Yeah, that's right. He's he's the CEO of Strive right? So anyway, um a podcaster had and it had been doing the rounds. It was like just the screenshot of the cover of a Moody's uh report and it was about the the heading of the report was hybrid equity credit, right? And they were holding this up because in there they were classifying preference shares, right? they were it's a methodology for classifying them as either equity or credits or a hybrid instrument. Right?

And so what they had done is underlined the word credits on this document and then held it out as proof that institutional investors uh categorize or define preference shares as credit. Right? So this was their justification when called out by Parker Lewis who's a very well-known uh uh name in the Bitcoin space had said these things are not credit right and um so anyway um I because it was only the front cover I went and found that document it's 22 pages long and I read the whole thing okay so in there what they do is it's a methodology for

deciding like I said is this equity is a credit or is it somewhere in between and the main thing is do you get your money back from the company so is there a maturity date on the debt right on these preference shares they're perpetual okay so that immediately classifies them as equity but they could still be a hybrid right but the issue uh is that this so these all of these instruments ments are unrated. They don't have a credit rating. The only entity that has a credit rating including strive strategy and everything is strategy and it's got a credit rating six notches below

investment grade. Okay. So, it is junk uh rated, right? And um they say in that document if we're making this determination if it's not an investment grade issuer it automatically gets uh categorized as 100% equity. Okay. So the document they were holding out as kind of evidence or uh you know whatever to say that these are credit instruments right actually classifies their instruments as 100% equity and that's quite right because

the only way you can get your money back is on the secondary market. So you're relying on the next buyer to pay you the full $100. Right? So, if somebody had, you know, we went to close to $90 over the last few days. So, if somebody wants their money back, they're going to get $90. They can't go to the company and say, "Give me my $100 back." It's not debt. The other thing is with a bond if you miss a payment, right, the the the debt holders can accelerate and and basically take measures and if you if you don't uh correct them, they can push you into bankruptcy. Here the dividend is entirely discretionary. In the

prospectus it tells you that the and they decide this every month, right? um they can suspend the dividend for any reason whatsoever. They don't even have to have a reason, right? They could just be in a bad mood and they don't have to pay the dividend, right? So that is not debt, right? So by calling it digital credit, I mean it's not against the law, but it is misleading, right? But then also what's interesting is if you actually and I'm going to get the actual uh quotes here. Let me uh see where I've got them.

Where? Oh, here we go. Okay. So, Michael Sailor in a Bloomberg interview on the 29th of September, 2025, and I quote, "Everybody in the world would love to have a high yield bank account that yielded 10% or more. They'd love to have a money market that gave them double or triple their normal money market. Okay, so he's saying these things are equivalent. Then in February 2026 when designing Stretch, our goal was to create a high yield bank account style product. Okay. Uh again in February 2026, our goal is to provide you with a

bank account that pays 10%. Instead of your bank that pays you four or three or two or zero, that's what stretches, right? Um he Okay, this is a crazy one. In an AI generated spinal tap ad also in February 2026, he said, "We created a bank account that pays 17 to 20% by combining digital capital with a digital credit instrument with a digital treasury company that issues securities to pay the dividend." Okay? And he's adding on the tax-free nature to get to the 17 or 20%. Right? But what people

don't realize is this. The reason why it's taxfree is because it's classified by the IRS as return of capital. So your basis is dropping every time you get a different until it hits zero. So that when you sell the security, all of that is capital gains, right? So it's it's tax deferred, not tax-free, right? Um I can give you examples of Strive. So CEO uh M Cole on March 11th, 2026 um in a press release said instead of holding idle cash earning low yields in money market funds, allocate a portion of those reserves to instruments like

SDRC that provide strong yield dynamics while maintaining uh stable price behavior. And then he said SDRC and SATA are extremely creditworthy instruments. That was on the Bitcoin Treasury's account. Then Strive CRO Jeff Walton said SDRC is a high quality credit instrument. Clear advantages over traditional fixed income. Right. Um and so these things are actually unrated. Okay. Uh uh they're issued by an unrated company in the case of SATA

or an a company with a credit rating uh six notches below investment grade. They're junior. They're perpetual preferreds. They have no maturity. You have no right to redeem. You cannot demand your $100 back. You can only sell on the market. Both have traded below 100 multiple times. The dividends are discretionary. Holders have no claim on the Bitcoin. It is not ringfinched or pledged to them. The coverage and overcolateralized figures are marketing ratios, not leans on the Bitcoin. Okay?

Uh and both are issued by companies with negative operating income. Compare that to a money market fund, okay? That'll have only investment grade paper, much of it treasuries, okay? And the government can print dollars to pay you back, right? Um it'll have like double A or AAA rated. Uh it's the systemically large banks that are issuing that paper, right? Um and it's diversified across hundred hundreds of instruments, right?

So if in the unlikely event something was to happen to one of them, it would be like 0.00002% of the fund, right? Um and a bank account is FDIC insured up to a limit. Um, and so therefore, and also, yes, FDIC can run out of money, but again, we know they would bail out the FDIC because they're not going to let contagion run through the banking system. Um, these are daily f fluctuating unsecured junior equity on the most volatile major asset in the world. And that is how they are talking

about it, right? And then you got plumbers electricians nurses truck drivers thinking this is awesome. Finally, what I've been looking for an 11 and a half% interest rate bank account or money market fund. >> So that is problem that I have. >> Yeah. I think what's interesting is um you showed how basically the company kind of has all the power even though they've um marketed in this way that gives people confidence that they'll always be paid this dividend. But I think um like you know so so I did see some other tweets like for instance Ryan Watkins of Secrecy Capital tweeted it amazes me how many people actually think

Sailor is at risk of getting liquidated. The point of the preferred is so MSTR can get the benefits of debt without the obligations to pay it back. So it like shows that the structure is beneficial to them. But I think the other piece of it, which is maybe what you're pointing out, is that if they were to exercise that power, then it reduces the confidence in those instruments and creates a little bit of a spiral on its own as well. is that >> well I mean so think about it right so when when everything when we were in a raging bull market after the ETFs got issued and everything right people were paying two and a half times the value of

the Bitcoin for shares right so 150% premium is what they were paying for the shares right now that's kind of illogical why would you pay 150% % above the value of something. Well, it's because you believe the next guy is also going to be willing to do that, right? So, it's essentially a belief that oh the, you know, we're always going to have this premium. So, and if you issue shares above the value of the Bitcoin, you increase the Bitcoin per share. So, as long as everybody who behind you keeps doing that, then you'll make up the premium that you've paid, right? But as soon as that belief goes

away, which it has done now, now you're trading at 84% of the value of the Bitcoin. Right? So you can imagine people who bought in say at the peak like in November 2024, they had this kind of blowoff top, right? I mean those chair shares and please if I get this wrong, forgive me, I'm going from memory, but it was sort of 550 or something like that. Okay. the the stock stocks trading at 120 and those people were paying like three and a half times or three times the value of the Bitcoin.

So they lost all the premium, right? And then the Bitcoin price dropped. So they're like off 80%. Right? Um, you know, people always cherrypick from like literally the moment they started the Bitcoin Treasury S and say, "Look, what about all the people who bought, you know, since then, right? They're all underwater and confidence has been knocked and these securities require confidence in the whole thing to be sold at a premium." And that's what this whole flywheel is about, right? when that confidence gets lost, the flywheel goes in the other direction, right? Um, now I agree, they're very unlikely to get

liquidated, right? I mean, the Bitcoin price would have to trade to about $9,000 a coin, right? So, I mean, that's that's extreme. that would be like the probably the biggest draw down or except maybe in the very early years when it was like, you know, $100 or $10 a bitcoin or whatever and it was, you know, a play thing. Um, so I don't think that that's the issue. My problem is that if you get into a situation where you have to suspend the dividend and you're selling a whole lot of Bitcoin, first of all, you're going to drive the Bitcoin price lower, but not only that, so you could get into the mid20s, you

know, in an extreme situation, but the other thing is what's going to happen to the price of all the preferred, right? and are retail holders going to understand what's going on when they're not getting the income that they were expecting to get and the price has fallen from 100, you know, if it's analogist to the GFC, which I don't say it is, but it kind of makes it's some kind of guide and benchmark. If the thing that you bought at $100 and you thought it was a bank account or a money market fund which trades apar, right, and it falls to 20 or $30, how are all of the people who have been kind of sold on this stuff by the types of statements

I'm mentioning and the hyperbolic podcast is, you know, saying, you know, it's just basically the most excellent thing, you know, why would you have a bank account? Why would you have a money market fund? And then all of these people who don't really understand the risk go and put their money in the situation where they're getting no income and the thing they've lost 60 or 70% on the par value. What are they going to do? Right? So those are the people I care about. I'm not talking about uh strategy going actually bankrupt. Right? um uh you know but also if if the type of scenario that I'm pointing out strategy is never going to

be the same because remember they need confidence to sell these shares at a premium. So then after that there's going to be a lot less confidence in that. I mean the the crowd will be split for sure but you know if it's split 50/50 well then they got 50% less demand for their securities right and every time they issue more preferred they increase the the the the cash obligation they've got >> yeah I did also want to ask about SATA which you you know mentioned because obviously um it's very similar to STRC there are, you know, some uh different kind of particularities like one being

that it pays a daily dividend as opposed to monthly, but how do you view um SATA, which you know is by Strive? Like how do you view that in comparison to STRC? Does it have all the same problems or are the problems different or or do you think it's superior or what's your take on that one? >> Okay, so overall I think it's the same instrument with a different coat of paint, right? um it you know they actually openly say they modeled it after SDRC right but there are some differences um that are worth talking about right um so first of all it pays 13% although the effective yield is higher than that um

and they're moving to daily dividends uh from the 16th of June also we didn't mention with uh s with straight They're moving to bimonthly dividends. The a vote just passed about that. Now, why are they doing that, right? It's because what was happening is every month divid dividend arbitrage funds would buy the stock for a few days, the new issuance, right? Collect the whole dividend for the month and then sell. And that selling pressure was calling creating kind of a saw tooth in the price of Bitcoin. and then they were battling to get it back up to par, right? So if they issue the dividends

more regularly, it's kind of smooths that saw tooth out, right? Um although in the case of bimonthly, I don't know if it's actually going to fix the problem. might improve it a little, but ultimately if they just if the hedge funds just use a little bit more leverage right? um they can get the same juice out of it uh even on the bimonthly basis and then that selling pressure afterwards especially in a soft market like now can drive the price down because when they issue stretch they thinking oh these are long-term holders buying these so they just and they issue kind of you know but the problem is these guys are only

buying it for a few days and then they're selling it on the secondary market after it goes xdev Right. Um, so they're trying to smooth that out. Um, they're also perpetual, so there's no way to get your money back from the company. You got to take the market price. Um, again, the dividend is uh discretionary. At its core, it's the same as stretch. Same thing as well is every time it uh drops below, sags below par uh if it does it kind of for long enough. I in the case of uh stretch they use a volume weighted average price over the month and if it's below 95 the volume weighted

average price they they recommend raising by 50 basis points. If it's between 95 and 99 they recommend raising by 25. Okay. and stretch started at 9% and they've raised it to protect the to defend par all the way to 11 and a half already now it's trading at an effective yield of 12 right so if the VWAP this month comes out below 95 they're going to have to raise it to 12 right um and then um with uh Sarta or SATA they've they launched it at 12 and then they've raised it

again to defend power. So the stability is kind of manufactured, right? And it's costly because when they raise the dividend, it applies to all of the press outstanding, right? Um and once you've lifted it, it's difficult to drop it down, especially if the market perceives more risk because they want that credit spread. Um so the bill really only goes up one way. Um, Shrive I haven't checked the latest filing. Um, I think it's I think they've got um so they've got a what's interesting about this is a big flaw in Sarta. Okay.

Is they've got this cash reserve but about a third of it sort of bizarrely is in stretch. Right. So the the reserve is made up of an instrument that is sort of exactly correlated like when you're going to need the cash reserve. You don't want to be holding something in the reserve also going to be doing quill. >> Yeah. It's not diversified at all. >> But then the rest is cash, right? And so they've got a longer cash. I think they've got about I think it's about 17 months or something like that worth of dividends, right? Uh but again, where

do they get that cash from? they get it from issuing press and then you know instead of buying Bitcoin with the money they just take the cash and put it in their reserve right um so that's you know that's expensive um and then um the other important thing about Sarta but remember it's a much smaller instrument we're talking about I don't know how much they've got outstanding but it's like you 1% 2% of the value of stretch. Um they're debtree. Okay. But remember on the press these aren't debt, right? So um they

don't they can't really go into bankruptcy because they don't own owe anybody any money. But it doesn't mean that you know it can't get very expensive to do new issuance to pay the uh dividends on the old insurance or you got to start dipping into that cash reserve right and then it's kind of like a ticking clock like does everything look rosy again or does it take 24 months right um >> yeah there's about2 billion dollars in strive >> okay yeah so versus is it two billion okay no Is that strive or sata because there's as which >> sata? Okay. So it's about 20% the size

of uh uh stretch >> or oh no no sorry stripes overall aoom. Oh okay. >> Oh yeah. So so I think the uh look I actually created a fact sheet for myself to be accurate. >> Let me get it up here. >> Sorry. Yeah I'm trying to look at this quickly. >> That's okay. I don't want to say anything false. Um, actually, I think I've got on my phone here. Let me just have a look. See?

>> Well, while you're looking at that, um, I I did want to ask you also about Bitmines's plans to create. So did you see the AM or >> if not well let's just >> yeah because of time why don't we just talk quickly about the Bitmine >> thing because so Tom Le's Bitine immersion which is an ETH debt filed to create its own vehicle that will resemble Stretch. It's going to be called BMNP and it will offer a fixed cumulative dividend rate of 9.5% annually on a per share amount of $100.

And obviously it's it's so similar. Um, you know, I have heard people talk about how Ether is different from Bitcoin because it's already yield bearing. So I don't know if you feel that changes the calculus or if you're looking at this feeling like this is such a similar product, they're going to have the same issues. So, here's what's interesting about the 9.5. Let me get it up in front of me. Okay. Is uh they're actually issuing at $80. So, the the par value on paper is 100, but they're issuing at 80, which is a 20% discount. Okay. So, um the effective yield is a lot higher than 9 and a half%. Okay. Um, it's kind of 12%.

Right. Um, same same rapper, perpetual, unsecured, unrated, can't get your money back, can dividend discretionary, uh, the whole bit. Okay, but here's where the the Okay, so first of all, the uh, Ethereum yield. Okay. So the the the staking yield at the moment is about 3%. Okay. So if you take 12, you minus three, you you you're still paying nine.

The the you know the the staking yields not covering the cost of the prefs, right? Not nearly. Um and then also um so so you got the same rapper, right? But Ethereum doesn't have the same monetary properties as Bitcoin, right? Uh it's like you've bolted this perpetual instrument to this one asset. Um and that asset I mean okay so David Hoffman I think his name no not David Hoff is David Hoffman.

Uh >> you mean from bankless who sold all his Bitcoin? I mean Ether. >> Yeah. Yeah. I mean this guy has basically studied ETH and Ethereum inside out right and he came to the conclusion that value is not going to acrude there my analogy to sort of simplify what he was saying there is it's like thinking oh you know all the shares on the S&P 500 are uh worth a lot right I should buy I should invest in the order matching book right But it Ethereum is just kind of the infrastructure that allows for all the trading and the stable coins and all

that kind of stuff, but the value doesn't acrue to the to to ETH, right? It's >> I mean, I think I I personally think they could redo the tokconomics so that it would, but you're right. I now I don't at this moment I don't think it does acrew there, but anyway. >> Yeah. Well, and the other thing is right that that's the difference between Bitcoin and Ethereum, right? Bitcoin's protocol, right? Uh, you know, there's only ever been softworks, right? So, it's backwards compatible. So, the core rules of Bitcoin have never changed, right? Whereas Ethereum, they change the rules all the time. I mean, they move from proof of uh stake, I mean, proof of

uh work to proof of stake. they've changed the tokconomics uh a million times and whatever. So that creates uncertainty because you don't know what the future holds. So I mean that's just like the dollar, right? Uh so it doesn't have the same monetary properties. So you an asset that's a weaker monetary asset in the same sort of flawed wrapper, right? So, I think it's sort of doubly kind of risky and a weird kind of thing.

I'm kind of um surprised that um uh what's his surname? Lee. >> Tom Lee. >> Yeah, Tom Lee. Um you know, because he's a very smart investor, right? Uh it's a very odd uh kind of thing. I think he got bought into the whole thing of, you know, uh, the Ethereum virtual machine and becoming like the next NASDAQ and whatever. Um, and I just don't really see that happening. I mean, uh, but, you know, and and also they they've lost an absolute fortune, you know.

>> Yeah. I mean the other thing is like the timing of their filing coming the same week that I thought that was funny. I was just like okay clearly this was in the works before all these troubles happened. Um, okay. So, last question. You know, we So, when Jeff Dorman came on the show last week, he basically said that he felt that it was a mistake for Strategy to have only sold two and a half million worth of Bitcoin and that if he had been them, he would have just sold two billion right away, give the company enough cash runway to, you know, be able to pay down the dividends for a, you know, a good long period and just kind of create more confidence in the

market. kind of get it done and over with, rip the band-aid off kind of strategy. Um, but anyway, but I was wondering like, you know, if you were either advising strategy or if you yourself were Michael Sailor, like what would you do? And you know, why don't we just put some context around this? Like first of all, as you mentioned, um typically bare markets last longer. Like you know, the likelihood that Bitcoin just moons from here is probably on the lower side, especially when you add in just all these IPOs like SpaceX, Anthropic, Open AAI that are coming. So, so it kind of just feels like at this moment, um crypto is either going to trade a little bit more sideways or or even further

down. Um yeah. >> So if you were advising them or in charge, what would you do? >> Well, if I was advising them, I would have told them not to redeem that pre because the commitment to the investors in Stretch was that the 2.25 billion was there as a reserve, right? But actually it's not ringing fence or there's no legal commitment to keep that reserve. And they went and spent it on redeeming this thing. And you know what they redeemed? it had a 0% interest rate on it, right? And the first time it's was putable, I think, was in late 2027, right? So, I think they just kind of it was almost like a, you know, like a

hedge fund would behave like where they had a view on where Bitcoin was going to go and we were kind of like in a midcycle dip, right? And then we were going to rip and they thought, okay, let's get rid of this. There was also chatter that um you know they did it to improve their credit rating because they'd be getting rid of some debt but I think it will actually have the opposite impact with stand and pose and moodies because now they don't have the cash reserve right and um so but finding themsel so that's all you know with the benefit of hindsight but I would genuinely have given them that advice so in the situation they're in now right what do they do right well if they hadn't said anything you know They

hadn't done the 32 bitcoin dip, right? It's kind of speculative to know what was what had happened, but if it had come out of the uh blue that they had sold $2 billion worth of uh bitcoin, right? I mean, it's anybody's guess what would have happened to the bitcoin price. Yes. Then, but one benefit is then they could have replenished the cash reserve, but they kind of created the problem in the first place themselves. So, it would have been a bit of a weird thing to do.

It's like like why do you use the cash you've got to uh redeem a convertible note that you only got to worry about in 2027 that you're paying 0% on um and use all your cash and then dump a whole lot of Bitcoin in the market like cause a panic just to replenish it. It's kind of illogical to me. I don't understand it. >> Yeah. Yeah. Given what we talked about with the confidence game, that would be seen at least by some as another misstep, which you know would not be helpful. But but going forward, assuming that it trades, you know, just kind of more in this either in the same range or lower, like do you have a view on what

they should do or or what you would do if if you were them? >> It's very difficult, you know. I mean ultimately it depends if I look at it from the company's perspective or the investor's perspective because you know sure there are a lot of people that don't understand that if they issuing common stock at below the value of the bitcoin that it's diluting the bitcoin per share so they probably would get some buyers you know so if I'm looking from the company's perspective that's a great way you know just issue common equity and uh taking the money and uh you know pay dividends with it or add it to the cash reserve or whatever but I'm

doing that at the cost of the investors right the press kind of add to the problem it's like you know you're not emptying the bucket you're drilling a hole in the bucket right so you're kind of like making the problem worse every time you issue press if you sell Bitcoin well look at the reaction you just got right so it's kind of like you know you can't unb bake an already baked cake. You're in this situation now. You've got no good options really. Well, at least if somebody know knows what they're looking at, you've got no good options.

But there are a lot of people out there that don't really understand this stuff or even when you point it out, they kind of want to deny it. You know, it's uh they call it confirmation bias where essentially what you do is the only information you'll look at are things that confirm what you already believe. And it's a very known investor behavior trait in retail investors is they don't want to hear anybody saying what the risks are or you know what the problems are, why something doesn't make sense.

They'll just you know tell you look I don't want to hear it. I mean, they use pretty colorful language when they do, but uh uh yeah, so it's a difficult situation. I don't think there is an easy fix here. Um what uh Jeff Dorman said, yeah, in a way it kind of makes sense, but on the other hand, who knows where the Bitcoin price would have gone. Uh you know, there's just so many unknowns that we we can't say definitely that would have been the right thing to do.

>> Yeah. Yeah. Okay. Well, Glenn, it has been such a pleasure talking to you. Thank you so much for coming on Unchained. >> Thank you so much for having me, Laura. I really enjoyed it. >> Thanks everyone for joining us for that conversation with Glenn Cameron of Onramp Bitcoin. We're going to head straight into Bits and Bips now where Austin, Rahm, and Chris are going to break down when Bitcoin lost the 200E moving average, Claude cracking the Zcash exploit, and the AI capital rotation into SpaceX and anthropic IPOs. So, stick around. and we'll be right back. Nothing you hear on Unchained is investment advice. This show is forformational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit

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