BTC & ETH as Institutional Treasury Strategies | EBC11

Morning everyone. Uh pleasure to be here. Also a big thank you to the European Blockchain Convention, Victoria, Daniel, and Furella by extending this panel because initially we're only scheduled to speak for 30 minutes, but we've got so much stuff to uh dig into. So I'm glad we've got the next 50 minutes dedicated to DATs. Um, first I'd like uh you know the the panel to introduce themselves and then we're going to dive right in.

Ben, if you'd like to start.

Yeah, of course. I'm uh Ben Harvey. I'm a digital asset researcher at Q Rock. Uh Krock is a global crypto investment firm. You probably know us best for our market making capabilities, but we also deal in uh OTC and options trading.

Uh and most recently we opened a asset management division. So glad to be here. I'm Sandra Anderson. um chairman and co-founder of H100 which is currently the leading Bitcoin treasury company in the Nordics and since we listed in April we have bought,046 bitcoin and and raised around 120 million. Hello everyone.

Um, Huain Sasser. I'm chief revenue officer and head of institutional business at Borstok Dital. We provide regulated infrastructure for financial institutions uh brokers and asset managers mostly in Europe uh through brokerage exchange and custody solutions. Uh previous to Barcard I was at uh SAPO which was one of the largest if not the largest Bitcoin custodians and OTC trading desks um at the time. started at in 2013 and after that I was running Europe and Latin America for BitGo.

Good morning everybody. My name is Michael Ashby. I'm the CEO and CIO of Algo Quant. We're a large multi-manager quant fund. So basically we uh do a lot of quantitative trading uh global remmit and um been around for about six years.

So we run about half a billion dollars in in exposure and I'm excited by this conversation. Thank you.

Thanks everyone. And I'm Christopher Sedintop. I'm the founder of CRS Advisory. I help hedge funds and investment solutions to raise capital. I'm also the managing director at Acetera, a method to regulated tokenization uh trading platform.

So um topic is DATs and and I'm very honored to have here um a CEO and chairman of a publicly listed uh DAT. So, in order to dive right in, Sandra, if you could just kind of give the audience uh a breakdown of the mechanics of a DAT and how it actually works and what the objective is.

Yeah. So, we are a a Bitcoin only company. is a Bitcoin treasury company and we have one key metric which is Bitcoin per share and we use the public market and and the investors interested in Bitcoin exposure to accumulate as much Bitcoin as we can with different financial instruments which I guess we will come back into.

Fantastic. Um, look, I think, you know, it's fair to say it's been the story of the year of the year so far, Dads. Even though leveraging and deleveraging stole our limelight a little bit. Um, I'm also very happy to see Richard join the stage. Um, Richard, if you

Sorry, I thought it was 11:15. It was in my calendar at 11:15. Apologies.

Thank god you're not in the business of numbers. Um, if you could just introduce yourself, please.

Yeah. Hi. Sorry for being late, everybody. Uh, Richard Pyworth. I'm a managing partner at Seas Capital.

Um, we run uh one of the largest fund of crypto hedge funds in the world. We allocate about $600 million to crypto hedge funds. Um, I also do a lot of commentary on the Bitcoin treasury space. Um, we're looking at a project in Switzerland currently. And I sit on the board of Relay, a Bitcoin only broker in Switzerland.

And finally, I am an adviser to JAN 3, the nation state advisory firm for uh Bitcoin adoption, and we're helping them with a couple of countries in South America and Central Asia. It was actually a very timely entrance of Richard because Sand just gave us a quick overview of the structure of DATs. If you could maybe Richard just dive a little bit deeper into the mechanics of how this which is so often referred to the fly wheel flywheel that needs to be fed how it's structured and how important the convertible bond issuance and generally capital markets are to the structure.

Yeah, sure. So um I don't know how aware everybody is of the terminology around Bitcoin treasury companies but one of the key metrics is MNAV and that is the multiple that the company trades at to the NAV i.e. the amount of Bitcoin that they hold. Um, right now we're in a period where MNAVs are being absolutely crushed and the leaders of these companies are being tested as to what they're going to do in the various different situations around potentially even a discount to their NAV um trading at one times their NAV or you know hopefully back to a more um robust period where we're trading at a premium to NAV.

So all of those different environments create different dynamics for how to get that flywheel moving. And you know, you've got a few of these leaders of Bitcoin treasury companies that are very focused on never sell your Bitcoin. That is the you know, sort of very religious mindset that they cannot do. But actually, if your MNAV is less than one, it is very accreative to shareholders to sell Bitcoin and buy back your shares. And that will then tell the shorts or the hedge funds out there that you're not going to be taking your MNAV at a discount without arbiting them.

And they don't like being arbitrageed. They like to arbitrage everybody else. So, uh, they will quickly stop shorting your stock, which means it will then revert back to either a one or a premium to NAV. Just talking about the environment we were in when Chris last asked me this question where NAVs were in a very different place. We were looking at sort of NAVs between three four multi micro strategy and I think smarter web company which is a UK company was trading at a 550 times MNAV.

So it was and I think Sander was probably at one point you were like 25 or or 30 times MNAV.

20. Yeah.

Yeah. So you know once you're at that sort of premium MNAV, let's take four times MNAV as an example. And this is an example I've been using to just help people understand. Let's say you're a four times MNAV. So that means let's say you're 100 million of of BTC.

You're a 400 million market cap. If you issue 200 million more shares, so you increase your market cap to 600 million, use all that money to buy Bitcoin, you've actually dropped organically your MNAV to two times. And when you show the market that you can act in that aggressive way, but you can also raise capital, which by the way, H100 and Sander are exceptional at raising capital. If you can show the market that you can raise capital in that environment to accrete that that MNAV, then you get that flywheel moving. And that's when you start to see as we did as I was it in February this year, everybody starting to really kick and and show the market that if they can sustainably keep doing that, diluting and uh buying Bitcoin, then they're just adding Bitcoin per share to their shareholders.

So the the question for the moment in time where we are right now is what do you do at a one times MNAV? You don't have that discount which is really easy to arbitrage and you don't have that premium that is really easy to arbitrage and that's when convertible bonds come in because convertible bond you're essent essentially issuing stock at a premium to to the current stock price. So that's an MNAV premium and then you're essentially taking Bitcoin in um and and using that debt profile which is quite interesting. So something to explain, these companies have been using Bitcoin denominated convertible bonds and that's very interesting for a convertible bond investor because you when you're investing in a convertible bond, you're always worried about the credit. But if there is no expenditure of the fiat or the money that's being given, it's just sitting on the balance sheet, i.

e. in the case of Bitcoin, then you have basically no credit risk. you have credit risk of course if there's fraud happening at the company or they're losing money drastically but you know essentially if they can segregate those assets for you then you essentially have zero credit risk and you just have upside potential on your convertible bond. So that's a very compelling product. It works well for the investor, works well for the company in a onetime znav scenario.

Um so shall I stop there Chris?

Great. Thanks. Thanks Richard. Um, I'd like to kind of invite, you know, the the entire panel really to give you a view. Is it are these stats, are these structures, are they a blessing?

Are they a curse? Uh, Michael, how do you see this? Are they are they here to stay? Uh, what are your thoughts around it?

Um, so I think they're a necessary stepping stone for traditional finance to get involved in crypto. You know, they're they've been developed to serve a purpose, right? um a lot of investors weren't able to access crypto directly and so this has been a great way for them to do so. I think um there's a rush to launch these products and I think now what happens is that there's a um a build of products to service them. So how can they manage those assets?

How can they differentiate themselves? And I think the infrastructure layer now needs to be built to provide the DATs with the ability to have [snorts] a menu of of different products to help them uh um navigate the the future and and create a really great yield strategy.

Thanks, Michael. Join, you got anything anything you'd like to add to that? Blessing or curse, how important is the structure?

I would be very quick quick response. No, it it depends if Bitcoin goes up or it goes down. No, let's make it uh really simple. No, there there are risks attached to it. And at least we do believe that if if this structures get big enough, it could create a problem, right?

It hasn't created yet, but um it could. I'm not trying I I don't want to be negative. Of course, it all depends on risk management, but um I would say we need to be careful. And the reason why I'm saying this is because you know, you guys come from professional investment firms. You know what you're doing?

You're building purpose-built vehicles. It is not the only use case, right? We've seen and at least what we see most is publicly listed companies in different uh European countries. We are um we are um European exchange, right? We we have different exchanges.

We talk to all these different corporates that have businesses that are not actually working great and they're actually thinking of converting the entire strategies into being a Bitcoin or ETH um um vehicles. No. And treasury companies, this is a very different game, right? These these CFOs don't get uh sophisticated strategies around crypto, convertible bonds, etc. and you really need to hold their hands to make sure that things are done correctly.

And then you get the regulator into the game, right? Like go and sit down with a local regulator and tell them that instead of doing this uh pieces of a car, I'm making it up. You're going to change your entire strategy to be a a big and treasury company, right? So there risks involved there.

Yeah. Yeah, look, I think um I don't know the latest numbers, and maybe Ben, you can help me out there, but I I I read there's over 130 Bitcoin Treasury companies out there. There's got to be some kind of um you know, I don't want to say bad actors, but maybe not as experienced actors among the pack. What What are the risks? Maybe if you could double down on that.

Yeah, definitely. So, I there's over 130 uh Bitcoin treasuries now. Um the supply of Bitcoin within Bitcoin treasuries is up to about 3.6%. So these things are an assumed amount to the Bitcoin supply which is why we discussed the sustainability of them so much.

I think it comes down to can they cover off any interest payments on their debt and any dividend payments on their preferred stock convertible debt. Um really it depends how much they're pushing that Bitcoin per share growth strategy. Right? if they're doing super risky stuff with their Bitcoin to then generate a yield. Say they're putting it into I mean maybe it's not even financial securitization of Bitcoin.

Maybe they're actually deploying it into strategies uh lending out to different people um trying to generate a yield and then suddenly that Bitcoin disappears on the back end they have a problem. Uh, also if they just issue way too much bitcoin, start trading under a par and then they actually can't sell down any of the bitcoin because they then can't cover off the debt. They have a serious sustainability issue. So yeah, there's a problem there. But I think most of these companies are structured in a way that they can cover off their debt, they can cover off their interest payments and actually they'll be okay.

Thanks Ben. Yes, Sandra. Please go. So now I think when it comes to risk in this industry you have to look at it in a way that this is an asset play and that asset the company balance sheet has sometimes also has a liability and when you structure convertibles you can do it with 0% interest rates and you can do it with 10% interest rate that's a completely different risk for the company. So as an investor you have to look at that what's the risk for the company to have to deliver back the loan.

If the loan is structured as Bitcoin denominated you basically have zero risk. That's a way where the investor can get exposure to the share, but it's more structured like an option because the investor gives me 100 Bitcoin and I can only convert that investor if I outperform with 30%. If I don't do that, I have to deliver back the Bitcoin. But you as an investor have to understand what bitcoin do the company really own and what bitcoin do the investor own. So, for example, our depth, we have $35 million fiat denominated depth where you as an investor has to look into that and see, okay, what's the risk that my 5-year convertible bond will not convert in 5 years when it's 0% coupon.

If you're a Bitcoin believer, that's also relatively low risk. But if you structure it where more of the industry are going now, the investor are willing to give you Bitcoin denominated bonds and that works as an option for the company and sometimes they're even willing to pay a couple of percent to have that option in that period. So the risk always have to be looked at as you have one side which is asset and another one is liability and that's very similar to any other commodity business out there. If I could just jump in there as well, I think it's really important to distinguish between the risk for Bitcoin treasury companies in terms of will they blow up and then the risk for investors. So we've seen Bitcoin treasury companies have really in the last 3 months underperform Bitcoin and that's a proponent of the MNAB collapse, right?

MNABs on average for Bitcoin have collapsed from 1.9 down to I think 1.2 1.3 in the last 3 months. Um the problem for investing there is that when you buy in on day one at an MNAB of call it 1.

9 three months ago you're buying $190 or yeahund $100 worth of Bitcoin for $190. And what you need to look at is the Bitcoin per share growth metric. And there's this really interesting metric called days covered which essent essentially how much is the Bitcoin per share growth and how many days would it take for you to reach par on your investment. Right? So, we've seen investors get really really hurt where they buy in at a high MNAV, they get crushed and suddenly they're underwater uh before we've even seen Bitcoin accumulating come into the uh into the picture.

Great. Thanks, Ben. Um we we've touched upon it a little bit. Um how do you differentiate one DAT from another? And I think it really comes down to because we're predominantly talking about Bitcoin here and and I know there's a lot of Bitcoin maxis in the room and on the stage and we'll talk about other assets in a minute.

Uh Bitcoin you can't stake. So how do you generate additional yield? Um so I'd like to talk a little bit around the competition amongst these. Um how do you maximize yield and uh yeah how do you differentiate stuff from the pack? Michael, maybe that's one for you to jump in.

Uh generating yield on Bitcoin.

Yeah. So I think um I was saying earlier this is still very early. We've seen the issuance of a number of DATs of the last sort of 6 to9 months. There's obviously some earlier uh uh folks to this um initiative but we're still at the beginning of be able to provide DATs with products and industry. You're seeing some of the uh incumbent institutional platforms like Galaxy, Balconex, um etc.

um acquire companies to help service them. Um but it's also dependent on jurisdiction. So in the US you have the 40 rule. The 40ac rule means basically that DAPs cannot invest as LPs and funds. So they either have to run the capital internally and hire teams.

Hiring investment teams is very expensive and it's hard to find good teams or they have to find other ways to run capital. And Europe's, you know, a a mix of different regs. uh the UK, etc. And so I think what you're going to see over the next uh couple years is industry really developed to help provide um a robust um you know uh selection of different tools so the DATs can start to utilize those. And I think as investors analyzing different dats, you're going to want to look at the operating team, their experience, their risk management, compliance, and then how they're actually trying to differentiate themselves.

What yield are they going after? Are they going after staking? Are they going after profit generating businesses that help them buy and accumulate Bitcoin cheaply,

[snorts]

etc., etc. And so I think we'll end up with different buckets in thematics within that space.

Thanks, Michael. Let me just quickly add there. I think um regulatory limitations will make a huge difference for the time being. Okay. There are companies in different regions which are not allowed to do this and that um including uh giving yield in different ways etc.

So and unless they play in the with the same in the same playing field with the same rules and frameworks it's going to also be difficult to compare them right because if they have different um certain limitations in different areas um in which they can give yield to the client for example how can you compare them no it's not apples to apples so I think for now that is or at least that's what we see it's kind of um affecting most that comparison Chris, can I uh just add something? I I think that

there are a few companies that do this very well, and we kind of touched on it um with with what Ben said that there are many companies coming into this space that are going to be opportunists. And I think Yoken mentioned it as well, like if a CFO is desperate, they're like, well, let's just do a Bitcoin treasury company. Our business is failing. Like that's obviously not the sort of people that you want to be running a Bitcoin treasury company,

but happens.

But it of course it happens. I mean like yeah, we've got 130 companies out there right now that are doing this. I would say that there are four clear leaders in terms of strategy and what they're doing. Obviously Micro Strategy is one. What are they doing differently?

What are they doing exceptionally? They are addressing all the various different capital pools that are available in the fiat monetary system that are desperate for some sort of relative performance to Bitcoin. I'll explain what I mean by that. If you're an equity portfolio manager trying to outperform the S&P, if you don't buy Nvidia, Tesla, Amazon, Apple, even at ridiculous valuations, you're going to struggle to outperform. And if you do underperform, then you know you're everyone's going to be saying, "Why didn't I just buy an ETF on the S&P?"

So, it's very very difficult to outperform when you're looking at things on a valuation basis. So, you need Bitcoin in your portfolio. So, you can't buy a Bitcoin ETF, but you could buy a business intelligence group that is running on a Bitcoin treasury standard and financial engineering to increase the amount of Bitcoin on the balance sheet. So it it fills a certain capital pool for equity managers. What sailor's done with strategy very well is address the fixed income market which is struggling because on a real rate basis everybody in the fixed income market is losing money right at 4% base rate in the US dollar against inflation where real inflation is probably somewhere between 8 and 10%.

Like you're losing money guaranteed. So to have a fixed income product that is looking at the kagger of Bitcoin at 35 to 25% over a 5year period and saying okay we're happy to pay 10% to borrow money to buy that Bitcoin then you're suddenly providing something in the fixed income markets that allows that investor to allocate capital and the same in the vault markets and everything. So it it really is what Sailor's doing is addressing all those different capital pools and he's understanding that certain investors can only stay in one particular lane in the capital markets, right? And that's the sort of the ARB that he's making. Then you move on to someone like Metaplanet that has used derivatives extremely well.

They underwrite puts on Bitcoin to essentially get yield. They're always buying Bitcoin anyway, so they can just be selling puts in the future to generate more yield because they know they're bringing cash in constantly to buy more Bitcoin. So that's paying for the Bitcoin that they might end up getting through the put selling program and and essentially using derivatization to benefit again their shareholders. Then you've got someone like Sander who is extremely innovative in terms of what he's doing on capital raising and I think extremely differentiated and I would probably say that it would be worthwhile you just giving a couple of minutes on what you're doing on capital raising not to take the panel control of the panel here Chris

that's all right

but and then and then Capital B the the French group that are doing these Bitcoin denominated uh convertible bonds and using these types of products to just innovate again into the financial markets to bring more Bitcoin onto the balance sheet. So I I look at those four companies as companies that are doing stuff that's really different. And obviously you're going to have some late comers that are going to look at each of those things and go, "Okay, we're going to do every single one of these." And then you're obviously going to get a continual upgrade as more and more companies come into the space. But of course, some of these companies are doing some of the same things as well.

Wonderful. I think you teach Sander up there. So over to you.

Yeah.

First of all, thank you for including me in that uh list with those fantastic companies. But from from day one, what we have done is to work with investors to truly understand how they want exposure to Bitcoin. Um and you can look at it from many many different angles. Where we started was family offices. Family offices, they can manage up to a billion and they only have five people.

So what they do they outsource their investments because the whole point of a family office is to protect the wealth of the wealth owner. So when you speak with them you can then understand how they want to invest and they don't want to open an account on exchange to buy Bitcoin directly because it just adds more people and that's not their business. And on the other side, you can structure downside protection through depth. But I think what Richard are um hinting to is how I look at um collateral itself. When a company accumulate the best collateral in the world, it's sound money.

You have the option to attract other types of investors that are interested in get exposure to the balance sheet of the company itself. And the moment you can get access to cheap capital with your balance sheet, that's when you are in the game of truly capital architecture and you can give exposure to the whole investor universe that have different types of way of looking into how do I get exposure to Bitcoin. For example, if you package Bitcoin into a bond and Bitcoin historically do what Bitcoin do, the coverage of that bond increases over time and you have a huge industry that are willing to buy that depth of your balance sheet at a premium because that's how they get access to cheap capital. That's the way I see a future potential where Bitcoin treasury companies can actually get access to fractionalized reserve not by itself but through partners that wants and accept that pristine collateral for their balance sheet. And we try to have that angle on everything we do.

And we talk to investors all the time in private to understand what's your ideal allocation to Bitcoin and what type of exposure do you want and investors have all different preferences because a lot of the money manager out there they just don't want to do a mistake. If they do a mistake, they lose their job. So, you have to tailor the product so they don't lose their job, but they still want exposure to Bitcoin because historical performance of the Bitcoin shows that that you should have some allocation to Bitcoin or in my opinion, you're doing something wrong.

Thank you, Sandra. And I'd kind of like to just double down on that because, you know, we have the opportunity to speak with someone who who's actually running a a DAT right now. Could you maybe give the audience just a two-minute insight into how the company is structured? You know, how big the team is and kind of give them a flavor of of your day-to-day. Um, do you have a capital markets expert, a convertible bond trader in your team?

Is is it a whole group of people? Like what does it look like? So on the Bitcoin side, uh we are um three people that manage around 100 million today and we we started racing in in May this year and I sorry so these companies are relatively lean. My I'm currently work as the executive chairman and my CEO has a background as an M&A lawyer. So we do a lot of this work of course in council with the local lawyers to structure this product but we do it with the investor and then we have a head of Bitcoin treasury strategy that do the external communication and a CFO.

So these teams are very very lean but you have to do it in a way where you work with investors on a daily basis. 80% of the time of my work is sitting down with investor not to sell them anything but to understand how they want exposure and that is also true for corporate because when corporates are now thinking about should I put Bitcoin on my balance sheet then they need to hire someone else to figure that out or should they be able to structure a convertible bond with H100 where we can do that for them in a relatively familiar way where they don't need to add to the organization in terms of knowledge and expertise. So to answer your question, it's extremely lean teams. Um we are only doing Bitcoin. So it's all about understanding how investors want allocation to this asset class which are I would say increasing very very rapidly.

Fascinating stuff. um kind of a nice segue into maybe the other side of the uh of the equation. Who's actually buying these structures? And and Mike, I'd like to pass the microphone back to you. You know, you you travel the world extensively.

What what what do you hear there uh in various jurisdictions who are ultimately buying DATs uh for various purposes whether it's uh you know treasury expansion, diversifying portfolios, what do you see, what do you hear?

Sure. Thanks Chris. So um I got spent the last month in Asia between China, Hong Kong and Singapore and there's a lot of interest from uh Asian investors and DATs. I think um you know if you look at venture capital crypto venture capital tends to have a a shorter maturity. It's like four years plus two and traditional venture is 8 plus two.

[sighs] Dats um have given investors the ability to seed a new product. So to participate in the launch and feel involved um typically there's a a lock up period that you know is a a tiered structure. So they have a you know a 6 month 10 month 12 month lock but I think a lot of investors have enjoyed the idea of being part of a tribe and part of these these launches. And so you're seeing um activity on the Bitcoin DATs, on the Salana Dats. You have some large uh private equity and venture firms backing these well-known brands and I generally think there's been a good amount of hype that they've created to enable folks to get uh excited.

I think to you know some of the folks in the panel are experts. I'm by no means experts on DAT. I run an asset management business. But what I do see is that um the the delta or the difference between the operating teams is quite large. I think we're a panel here is some of the better folks.

But I think um from an investor point of view making sure that the operators are are experienced and have a plan I think is key.

Thanks Michael. Yoken you're sitting right you know in in uh the center of corporate Europe. What do you what do you see who who's buying that? What's what is Berser Stoodgard witnessing in in terms of flow in these products?

I mean, we're not experts on on that side of the business on on on the buy side, but um going back again to what I was saying before between, you know, sophisticated strategies and the less sophisticated strategies, um we're also seeing quite a bunch of retail um um appetite. No, when when these companies come out, they do a few press releases here here and there, and you can see the stock price going up, we've seen it between five and 50% the same day, right? Which is and that's when you get the C the CFO clapping with their ears, right? And and and calling you like, hey, can we buy more tomorrow? No.

Um so again we're we're not experts on the on the buy side but it is a very interesting dynamic to see how the retail underlying you know uh investors that really are excited for whatever reason. Okay I'm not getting into why they would do that or not but um the reality is that it happens. Okay, I don't want to compare it of course with you know an alcoin or mecoin here and there but the behavior is quite similar right and then maybe they drop it a month after or something like that. So again I mean here we have folks in the panel that are much uh you know experts on on on on the flow uh but it is a very interesting dynamic to see when when these things happen especially when these companies are already listed right so uh again so you can have like newly created um uh vehicles that are only that only have this strategy or already created vehicles that are already listed that are changing strate.

Thank you,

Chris.

I I would just add that there are some pretty big investors that are participating in this space as well.

I mean, obviously, Yokim mentions retail. This is a big retail trade. People get very excited about it on Twitter and and these sorts of venues, but it's very important to note that there is an institutional shift and focus happening. One of the largest allocators in the world is one of the largest shareholders. I think the largest shareholder of MetaPlanet is Capital Group and uh they're a very very large shareholder of Met Micro Strategy as well.

So to my point about equity portfolio managers trying to find ways to outperform and not actually just throw up their hands and say I'm buying Bitcoin, right? They're buying a Bitcoin treasury company. And so we're seeing that in groups like Capital Group, Nordia, which is, you know, the Norwegian um sovereign wealth and you've got the Swiss National Bank actually is a large shareholder of of Micro Strategy as well. So you are seeing a shift into this space by some very credible allocators. I'd add one point on the the the question that Chris asked Sander is, you know, obviously within the team, not necessarily you don't have financial engineers, but actually some of the investors that are very close to Sander and teams like Capital B and and even Meta Planet are extremely sophisticated um hedge funded um venture capital firms or family offices um structured in in some sort of form of asset manager and they are helping with designing some of these product products for the teams to help them become the most optimized financial engineering vehicles uh out there.

Fantastic. Um we we we mentioned earlier there's over 130 companies. Um Richard highlighted four that do things exceptionally well. Is this market ripe for consolidations as within the space? And there's already been some headlines last Friday.

just love to get your thoughts as to how you see um the the the lay of the land develop uh over the course of the near future. Who'd like to go first?

Yeah, Sandra.

So, I I think M&A and consolidation have to happen for multiple reasons. First of all, it's a very small industry. So, very like the whole industry knows each other. So, it's a very efficient communication line to each company. And I think especially in harder times, you think about how you're going to structure yourself for um for the future.

And now you see a few that really really struggle. They can't raise ca raise capital and they have a burn rate. So they have to think about what should I do to not lose my bitcoin in in our industry. And there you have like clear M&A target for those that has the ability to raise capital and consolidate and grow. So I think that's going to happen.

We already saw Strive and and um Semilar. I think it's going to be way more examples of that. uh but most importantly I think it's consolidation of management and the leading management teams that reach critical scale to issue new and innovative um financial products like for example Michael Sailor is doing. He has an completely different toolbox than I have but I also have a unique opportunity by being smaller because I can produce a higher Bitcoin yield relatively to my Bitcoin stack. Something I would add there is that hopefully that happens when when these companies are struggling because let's don't forget and I guess most of the people in this room uh would agree we're still trying to earn that reputation in the industry and we start having this you know big uh newspaper articles coming in and saying very simple messages no which could be I don't know uh these guys effed it up in three months doing this this and that and it's all about Bitcoin then we're back uh in in 2017 no so hopefully hopefully this consolidation happens not everyone can win I mean it is how finance works right and has been working since uh u years and years um so it's more like a wish than anything else that that this consolidation happens right

can I ask you as a question to the experts so If a company's trading a discount mnav, do they have to pay uh one flat mnav to acquire it? Otherwise is like isn't it better just to close it up and sell? It really depends um because you some have also like um a weird governance structure for example that do not deserve one times mnav when it goes below because for example if the management are incentivized by bitcoin yield they produce in that quarter then you might even like pay part of the bitcoin stack back to the management team which the investor will never do so they will vote for a sale before that happened. Um, on the other side, I think you will see activist funds coming in and trying to scoop up and try to do dividends for for some of the some of the Bitcoin companies. But you can also like have structures where I believe you can at least do MNAV arbitrage between the companies and that everyone will win in that transaction.

Thank you.

So just on the consolidation piece, um, in the last few weeks my thinking had changed on this. Uh, I think I was talking to you about this yesterday, Sandra. So, I initially thought of these Bitcoin or any asset that says access vehicles, right? And we've touched on this before, but now I'm increasingly coming around to the idea that they might actually be actively managed funds, right? And if they are actively managed funds where they're competing on generating bitcoin per share as this yield component, actually maybe we don't see consolidation in future.

Maybe we see competition between different asset managers who generate yield in different ways. Um and I think actually maybe that's kind of a thesis is that going forward we see a lot more of these things pop up. Some of them take more risk they fermentation a lot of them will blow up but actually we'll end up with five or six different assets uh that all competing on different strategies.

Interesting. on on this panel, we're we're allotting um or we're allocating time according to the market cap of the asset. And as we only got a few minutes left, I think it's only fair we spend a little bit of time talking about ETH and maybe altcoins. Um over the summer, I think you know the the the DATs were scooping up an enormous amount of ETH. Um I think there's been a statistic and Ben, you'll know this better than I, but uh ETFs and ETH and DATs own close to four maybe over 4% of of ETH.

um how do you see that develop over time? Are we going down the market cap list? Uh and then uh after that I'd like to discuss the risks a little bit. Any thoughts?

Yeah, so I think first thing to add as you said um 3.9% of ETH is in DAT. That's more than the supply of Bitcoin in DAT. So ETH has really been um adopted by that DAT model kind of pioneered by not pioneer by but led by Tom Lee. Um, I think on Friday when we saw this massive liquidation crash, uh, Tom's Bitcoin, uh, sorry, ETH accumulated 750 million worth of ETH.

So, they're pouncing at every opportunity. Uh, I think it's interesting what's going on with ETH and actually increasingly Soul recently with Ford Industries and Salana Company. Um, it's a very similar model. Obviously, the asset is slightly different for Soul and ETH is more of a tech play versus Bitcoin store value. Um but these that's asset agnostic and actually when you push out into an ETH and a soul you maybe have more options to generate that token per share growth right so you have staking uh it just is a you know on Salana 8% yield uh on ETH four 5% yield um but you also have the the DeFi ecosystem that they can deploy assets into right and they can do things like credit arbitrage borrowing quite cheap from Chadfy pumping it into the DeFi ecosystem and earning 12% 18% sometimes in Salano DeFi ecosystem.

So it it really does become increasingly interesting over there.

Thanks Ben. Um any other thoughts on that topic because otherwise we slowly got to wrap it up

from what we see and again we talk to more traditional corporates. It's um Bitcoin first maybe it's second and let's see how it goes for the for the time being, right? let's prove the strategy and let's not be like too aggressive. ETH would be aggressive enough. Uh but again, it's very different to the sophisticated strategies that um that other companies are are doing, right?

We talked more to the more very traditional corporates that um are either looking to change the entire strategy or just allocate some into the treasuries.

I was going to say for the smaller tokens um I I would say two things. First look at the float. So how much of the tokens actually trading? So you saw BMBBcoin um it did very well because most of it is locked. And so when there's new buying demand that incremental new buy demand made the token rip.

I think you see that as we move down the uh the cap table for new tokens. The other thing I would I would watch closely is is this new incremental dollar buying or is this actual venture companies just using the new DAT as an equity event to dump their tokens and there's a big difference between the two.

Super interesting. Uh on that note, I'd like to give you all a minute each um give the audience, you know, your view on what's going to happen with that. So over the next next 12 months, starting with you, Michael, at the top.

So I think we're still uh in a very healthy place. I think the US regulation has been a continues to be a tailwind. I think um this whole space is institutionalizing. [sighs] There's um really positive things to come. You know, macro is definitely uh causing us to have uh some opportunity to re-enter.

But I think generally uh everybody is um you know, really interested in the space. Things are being built and it's a really positive environment.

Okay. Um from our perspective I would say um besides the strategies um which we don't get that much into is um hopefully this ecosystem grows but hopefully also we do it the right way in our in our perspective the right way is regulatory compliance making sure that when you access the market you access it well making sure you custody it the right way uh accounting etc etc all the boring stuff that's where we are present And that's um how we make a living to be honest. It's necessary right and hopefully in all this process while people are learning no one screws up more than um normal I would say know that that is kind of our wish but uh at the same time of course um from Boris to Gardido we will we we are supporting these corporates and we would love that um ecosystem to grow of course.

Thank you Sandre. I think we will see huge institutional inflow when we now have these compressed levels because either if you buy in the market or through a convertible right now you get the price more or less at the spot bitcoin price and you get all the future yield in bitcoin for free which is that model has worked before we have seen early sign of it strategy has done it for many years metanet proved that model again and now we see more and more companies. So the model is established. So what you now get at this current MNAV is more or less Bitcoin exposure with all the future yield for free. And that's attractive for a lot of institutional investors that see that that as um risk um call it like risk-f free yield or whatever you want to call it which is very very interesting for larger allocators that only have the mandate or prefer to invest in the public market which is a regulated market.

And if we up, we don't have the same flexibility because this is a regulated market that have worked for many many years. And I think that's a very healthy sign for this industry that we now have moved more into a regulatory regulated market that will help institutions adapt and understand the asset class of Bitcoin, but also potentially crypto

yield for free. That sounds great. Um Ben, any any thoughts on the outlook?

Yeah, look, I think uh the important thing to note here is that these do a net positive for the industry, right? If we think about the crypto pie and the amount of capital that's in digital assets, that's a mechanism to bring capital from traditional finance into that crypto pie and grow it. So that's generally a net positive. I think if I look forward over the next 12 months, I expect to see competition amongst those fund managers as they'll frame them on token per share growth. For that reason, I think we'll probably see even more D that spin up doing even more experimental things.

Maybe some negative headlines, but the, you know, the big boys won't be uh too much. And, um, I think second order effects there could even be, you know, kind of fund index models popping up around DAPs. Uh, as well as if we look at ETH and Soul, the second order effects being DeFi plays, right? We've already seen Camino run up when Salani said that he was going to deploy capital into Salani DeFi. I think everyone should be looking at that as well.

Thanks, Ben. Richard, you got the final word.

Yeah, I think [clears throat] I'd like to just say sort of set the scene for where this is actually going for people to understand the big big picture. A few hundred years ago, a few businessmen got together, started a company and and raised capital and started buying gold on their balance sheet. Today, that company still exists. It's called the Bank of England. Okay, this is where we're going with pristine collateral.

Bitcoin is the new gold and it is really important to differentiate where we are going with this. This is currently at this phase a little release valve in the fiat system unwinding the fiat Ponzi. All that money that's been pumped into equity valuations that are ridiculous. All those that money that's been pumped into the bond market is absolutely nonsense. You would not ever buy this bonds with your own money.

You're guaranteed to lose money. That is the Ponzi that is being unwound at the moment and this is helping that happen. We're on the way to that picture of obviously everything being built on the pristine collateral of Bitcoin. I would remind everything everybody that these Salana Dats and the ETH DATs these are just venture capital guys playing the same fiat games. Okay, Salana is locked up in most of these DATs.

It's locked up until December 2027 trading at massive discounts and they're giving it to you on one times MNAV to get their liquidity. Okay, don't fall into the trap. focus on Bitcoin. That's where it's about.

What a wonderful way to end the panel. Thank you very much. [applause]