Digital Credit Harnessing Superior Yield through Bitcoin

Thank you. I'm delighted to be here. And the topic of my discussion is digital transformation of the capital markets today. Bitcoin is digital capital. It's digital gold.

And if once you understand it's digital gold, you realize that all the credit in the world is going to be rebuilt on digital gold. Uh who thinks it's digital gold? The entire cabinet of the United States, the president of the United States, the vice president, all the financial regulators, all the non-financial regulators, the banks believe it's digital gold. Nearly every major bank in the US is starting to extend credit on Bitcoin or Bitcoin derivatives. Uh even even people that were skeptical.

JP Morgan, Bank of America, Wells Fargo, BNY Melon, PNC Bank, Charles Schwab. This is coming. Our company has capitalized on digital capital. We are the biggest holder of Bitcoin in the world. We have acquired nearly 50 billion dollars of Bitcoin.

about 3.1% of all the Bitcoin there's ever going to be. Uh we typically are acquiring in the range of 500 million to a billion dollars a week and uh we've added $60 billion of equity in the past 14 months. Uh you wouldn't have heard of us 5 years ago. We're now the fifth largest treasury in the S&P universe.

Uh we're going to be the second largest in 12 to 24 months. will probably be the largest treasury in four to eight years at the rate we're accumulating capital. What would you do with capital? Well, you create credit. We've created the world's first digital credit vehicle.

And our product is digital credit. We're generating $800 million of dividends that are tax deferred dividends to the recipient. We're paying about 10% dividend rates. We fund those dividends by either selling equity, selling the Bitcoin commodity, or selling the Bitcoin derivatives into the public markets. If you give your three-year-old a million dollars worth of real estate in the middle of town, that's capital.

They have to wait 30 years to get rich. There are no cash flows. You could also give them $10,000 a month forever. That's credit. Many people want credit.

The world is built on capital. It runs on credit. Capital is all the granite underlying New York City. Credit is the buildings that generate the rents over the granite. Capital is Bitcoin.

It's very volatile. 45 V 45 ARR. Most people don't want a roller coaster of volatility on the way to getting rich. Most of them want a bank account that pays them 10% forever without the roller coaster. What our company does is we convert Bitcoin into the currency of your choice like dollars.

We strip the risk by overcolateralizing at five or 10 to one. We strip the volatility by managing the dividends and managing liquidity and putting in place dollar buffers. We distill a yield like 8% or 10%. We compress the duration. Instead of waiting for 120 months to get rich, we start giving you immediate gratification.

You get money this month and every month. And so we have a number of different digital credit instruments. [clears throat] We created a a convertible preferred stock that trades in the public market called STRK. And STRK gives you a perpetual dividend yield combined with a conversion right to the equity. You have your cake, you eat it too.

The call option on the equity is forever. The dividend is forever. You can hold it forever. It's a long duration asset. We created a senior instrument.

Think of it as investment grade Bitcoin 30-year bond. It pays 10% at par. It trades above par. It has a lot of investor protections and and and penalty provisions. If we don't pay it, you get about a 9% effective yield on that instrument.

It gets paid forever. Why are we paying you forever? Because we want to make the investment in Bitcoin forever. We stripped the investor protection and the cumulative rights off that same instrument and we created a junior instrument called STRD. It pays a 12.

5% cash dividend quarterly. It's tax deferred. It's a rock dividend. If you trust the company, you buy Stride. If you if you semi trust the company, you buy Strife.

If you don't want to trust anybody, you buy Bitcoin. And if you like what I'm talking about, if you think digital credit's a good idea, you buy the common equity because we're like the central bank of Bitcoin. And we've sold 8 billion of this equity in this year. If you're a European investor, you can get a 10% dividend at par forever in euros with a hundred euro basis. That's called stream.

Stretch is the most interesting thing we've done. It's like a one-mon Bitcoin treasury bill. Think of it as a one-mon duration instrument. What do you do with treasury bills? You build money markets with them.

Stretch is a product you could use to build a perfect money market, a digital money market, or in this case, it pays you a monthly dividend. We adjust the dividend rate and to keep it stable at par. The idea is to target it at 100. What's the difference between capital and credit? If you bought a $100 worth of stretch on August 1, you would have it would have climbed toward par.

you would have made $9 and collected about $4 in dividends. If you bought a $100 of Bitcoin the same day, it would have lost about $23. The Bitcoin is the better investment, by the way, if your time horizon is four years or longer. I think Bitcoin's going up 30% a year for the next 20 years. My equity investors think it.

We're willing to give you the first 10% of that 30% and we take the rest because over a decade it means that we capture 80 to 90% of the economics and then we will overcolateralize it with cash and a five to one or 10 to1 collateral basis. But if you don't believe what I believe, you should take the credit because the credit's a guarantee with all the risk stripp or most of the risk stripped off. These credit instruments are a hundred times as liquid as the average preferred stock. This is the most successful preferred stock launched in the century. No one's ever done this because no one ever had a use of proceeds like Bitcoin.

You don't care about this, but if you live in New York City and you own these credit instruments, you don't pay New York City tax. You don't pay state tax. You don't pay federal tax. It's a zero upfront tax distribution until we've returned the capital to you. It's a profound breakthrough.

Um the equity has value because we're accreating more Bitcoin per share. We sell the credit to buy the Bitcoin. You get like a you can get a 20 25% Bitcoin yield this year. Over time, if we sell 10% credit, we capture a 10% yield. Your Bitcoin per share doubles every seven years.

If you're trying to outperform Bitcoin, you would buy the equity. And when you compare this to the credit market, this chart kind of makes the point. The bank wants to pay you nothing. The money markets 4%. When the Fed changes hands, the money markets will pay three and perhaps 2%.

Corporate debt is 5%, junk bonds are six. Private credit is seven. It's all taxable to the normal investor. We pay 10% or more. It's tax deferred.

If you're a taxable investor, it's like 17% tax equivalent. If you're a New York City dweller, it's like a bank account that pays you 22%. The big idea is digital credit built on digital capital. If the capital's appreciating and if we can create this instantaneous and it's transparent and homogeneous and if we're not afraid to invest the money for a hundred years, we can actually pay you for a hundred years. We can pay perpetually because we have a perpetual use of proceeds.

Everything I've described to you would work fine in an S&P portfolio, except the Investment Company Act of 1940 makes it impossible for a public company to capitalize on securities. You need commodities. Bitcoin is that commodity. So digital credit, it's a new asset class. It's better than conventional credit or mortgage credit or consumer credit.

If you're a credit investor, you should look at it. We're going to take this everywhere in the world. What's the perfect product? The perfect product is a bank account that pays you 5% more than the money market rate and the currency of your choice. How do you create it?

You use digital capital. You put a layer of digital credit and then you you provide it through a fund or a bank with a little cash buffer in order to strip the last volatility. And with that, I want to thank you for your time today. Appreciate it.

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