Michael Saylor: Bitcoin at Beginning of Next Bull Run, Clarity Act "Bill of Restrictions"

Welcome to Market Overtime. I'm Sam Bartis. Michael Sailor is back for his third appearance in the past year as Bitcoin attempts to recover from a volatile stretch and strategy continues to reshape its approach to digital assets and capital markets. We will revisit some of his previous predictions, the latest developments that strategy and what could drive the next phase of Bitcoin adoption. Michael, welcome back. Thanks so much. >> Yeah, thanks for having me. >> Bitcoin had a good summer. Is the crypto winter over? >> You know, it bounced off the 200E moving average and so normally that's the baseline and when it it dips slightly below it, you know, that's sort of the end of the bare market. Uh we've rallied about $20,000 beyond that. So yeah, I we think we're at the beginning of the next bull run now. >> And it's been great for you obviously uh with Bitcoin gaining about what 40% over Q3. I mean, you're back to 20 billion of a gain uh during that time. Uh what does that bring your Bitcoin holdings to and the value and how sustainable is that? >> We've got about 845,000 Bitcoin or so and uh they're worth about, you know, on any given day 70 to 72 billion. And then we've also got about $5 billion of cash. So the company's running with uh total reserve assets of $75 billion or more generally. >> Mhm. Okay. And just as far as how sustainable that is, I mean, you know, while we have got this recovery in motion, I mean, we're still what 30% below the record high. I mean, do you see a mismatch right now between the regulatory um and kind of institutional tailwinds that you and I have discussed and the performance still right now >> of Bitcoin? >> Yeah. >> Um I think that Bitcoin's had a couple of headwinds. Restrictive foreign policy, restrictive monetary policy, restrictive trade policy, and there was the AI bubble that slurped a trillion dollars of capital. So that's what Bitcoin's been working against. But all of a lot of those things are normalized and they're starting to be priced into the market. And so now we're looking at some fundamental tailwinds that are kicking in. Digital credit is coming to life. Companies like Strive that are the number two digital credit issuer. They've raised more than a billion dollars of capital in the past few weeks. And uh bank credit is another tailwind uh that's kicking in right now. A lot of banks are custoing Bitcoin and beginning to create credit on top of it. And then we're getting very positive guidance from the regulators out of Treasury, the CFTC, and the SEC. That's very good for the digital asset space. And uh the tokenized economy is starting to kick in. And uh our securities are the most tokenized securities in the world right now. So everybody wants to move securities 24/7, 365 at the speed of light. and their favorite thing to move 24/7 is anything cryptoreated because if there's news on Saturday morning, Bitcoin's moving and everything linked to Bitcoin is also moving and it's tradable. >> Okay. Uh which is obviously why you're proposing some of these daily dividends as well. Uh you've got a potential vote coming up at the end of the month. Um what would that mean then for products like Stretch for instance? You know, we we have a lot of uh preferred stocks that paid quarterly, and we found that uh they would draw down the day after the dividend was paid. They paid $2.50, so they might fall $2.50. So, that meant that they didn't trade a lot for 80% of the time and then they trade the wrong way. And uh our STRC was trading twice was paying twice a month dividends. What we've realized is that you can smooth the volatility, increase the liquidity if you pay daily. So, we're really excited about this. Uh we've got a shareholder vote coming up and if that vote goes as we expect then all of our credit instruments will go to dividends every calendar day. Those will be the first securities in the world that pay dividends every calendar day. It's never been done before, but we're doing it for two reasons. One, we think it's the right thing for the trady markets. I mean, even in traditional finance, you can see that if you have 365 dividend events a year, then you're not likely to see the same volatility around each one. And we know practically speaking, people like the idea of being paid every day. And then we're also doing it for the digital markets, the DeFi markets, because you know what's your incentive to buy something on a Saturday morning and sell it on a Sunday afternoon if there is no record period taking place on the weekend or on a holiday. So our our securities are already the most tokenized securities in the US markets. STRC is a screaming home run. Everybody's tokenizing it, but we want to be ready for the 247 365 tokenized digital future. And that means if we pay dividends every day, it'll strip the vault. It'll increase the liquidity. It creates all sorts of highfrequency trading opportunities and arbitrage opportunities because you might buy the thing to capture a dividend in the US market and then you might sell it and buy something in the UAE or Singapore or Hong Kong or Europe and capture something there and then trade back into this. And those are not ideas that people thought about 20 30 years ago. But I think every market is increasingly starting to come to grips with the fact that securities are global, asset trading is global. It's not going to stop on a holiday that's only recognized in the US. >> It's not going to stop on a weekend. And uh you know, some places like the UAE, you know, Sunday's a working day, >> right? >> And see the world differently than we do. >> All right. Yeah. It's a 24-hour market. I mean, STRC, to your point, I mean, it dropped significantly over the summer. I mean, we did see it hit almost 70 bucks, right? And then it's gone back back up, recovered $100 par value here. There are lots of ways, as we know, to invest in Bitcoin. But why SDRC or why, you know, MSTR rather than say a spot ETF? >> You know, the way to think about capital allocation is if you need your money back, all of your principle back in the next four months, you probably just want to put it in a money market, >> right? because it's very stable nav. It's a safe thing. You know, next Tuesday you'll get the cash that you put in today back. If you don't need the capital for four months and maybe you want it back, you want to invest it for 4 months to four years and you'd like it to be mostly stable, you're probably a credit investor and you would buy something like STRC because even if it falls off of par, you've got the representation of the company. We will spend billions of dollars to bring it back to par. And I might not be able to get it back to par in 3 weeks or two weeks, >> but probably in four months I will get it back to par and you can expect us to use all of the billions of dollars of our capital to do it. >> On the other hand, if you don't need the money for four years or more if you're a long-term investor, you're either a capital investor or an equity investor. Um, if you're a capital investor, so you're choosing between buying the S&P index or gold or a diversified portfolio of something or Bitcoin, those are all kind of assets without a counterparty, right? And and if you don't want to trust a counterparty and just you want to buy an index on the crypto economy or an index on the greater economy, you buy SPY or you buy BTC. On the other hand, if you believe in uh Bitcoin, specifically in digital credit, and you want to own a company that creates digital credit, or you want amplified Bitcoin returns, you buy a digital equity like MSTR where you're getting 1.2 or 1.5 the Bitcoin uh performance and you can outperform Bitcoin. And also if you believe that digital credit is a great idea, you buy the institution that's creating the digital credit. And so I would say uh you know a simple way to look at it is >> you know the volatility of STRC is like below 10. It's like eight right now. It's less than the S&P vault >> and you get like a 10 to 12% dividend yield right now 12%. >> The volatility of Bitcoin it's like 38, >> right? >> And you're getting 38 ARR. So it's almost like a 40 vol 40 AR asset. On the other hand, uh the volatility of our common stock MSTR is 80. >> So you're getting double the vault. You know, we've been providing a 50 I think a 52% return over that six years. So So you can get very high returns. You're going to get on the rocket ship, >> right? The roller coaster. You're going to pull a lot of G's. So the real issue is uh do you want to get on the rocket? because that's a digital equity. Do you want to uh get on the fighter jet? That's probably Bitcoin. >> Yeah. >> Do you want to get on the passenger jet? That's probably STRC. >> And they're all just different ways to get to your destination depending upon your risk tolerance and your volatility tolerance. And of course, your time horizon makes a big difference. Do you need the money back next Tuesday? >> Sure. Okay. So, it depends on what kind of investor you are and how much GeForce you can stomach to your point, I suppose. Let's talk about your strategy. Obviously, you resumed your accumulation of Bitcoin. I mean, the pace of those purchases though, Michael, have slowed down compared to previous years. Why is that? >> Well, you know, we've added like 160,000 Bitcoin this year. So, yes, >> it's actually quite a lot of Bitcoin, right? We're the biggest buyer of Bitcoin in the world. >> But, you know, there is the law of large numbers that uh if you're starting from a billion dollar base, you only need a billion dollars of capital to double. Mhm. >> When you're starting from an $80 billion base, you need $80 billion of capital to double. So, uh, our company is growing rapidly. We think we can grow 20 30% a year from here, which is very respectable. But, you know, companies like Strive, which is also a digital credit company in the Bitcoin space, they started from a billion dollar base and they were able to grow 100% in a matter of a couple of quarters. So, you know, it's like, do you want the smaller super fast growing vehicle or do you want the monster company that's going to grind up 20 or 30% from an $80 billion number and both of those are very legitimate investment ideas. >> But I guess back to your accumulation and I understand your point um when you did soul sell I mean which was obviously what the markets perceived to be a sort of change in tune from the never sell kind of mantra. you did have a big impact on the market u particularly over the summer. I mean people saw Michael Sailor selling and I'm just wondering what you think of your kind of outsized influence right now on the market. I mean how do you condition these markets right now if this has very much and you and I discussed this in May become now part of the strategy. You know, we're a very important part of we're almost like the central bank of the crypto economy. A very important player, the best capitalized company in the entire digital asset space. >> But the com our company has really evolved in many dimensions over the past four months. If you roll the clock back 6 months, people didn't think we would ever buy our common stock. They thought we'd only sell it. They didn't think we'd ever sell Bitcoin. They thought we would only buy it, right? >> They didn't think we'd ever buy our credit back. they thought we would only sell it. And uh it's very important for us to evolve to a company that can can swap any asset to any asset going long and short on any given day. So today we have a billion dollar buyback program to buy back our common so we could sell or buy MSTR on any given day. We have a multi-billion dollar program to buy back our credit so we can buy or sell any of our credit instruments on any given day. We've already uh put in place a billion dollar plus BTC monetization program and we've shown the market that we can raise large uh sums of capital by selling BTC. So we will generally be a net buyer of BTC because our capital is expanding but we also are able to sell it in order to fund our dividends and back our credit when we need to. >> Right? >> So think of a company that is uh buying and selling in the credit markets. the equity markets and the and the Bitcoin capital markets on any given day. And sometimes the credit market sentiment is negative and the capital market sentiment is positive. And sometimes we swap the other direction. So if we were unable uh or unwilling uh to say sell Bitcoin, we couldn't support the credit. The credit would be weaker and the credit spreads would blow out and be much more expensive and that would undermine liquidity and support for the credit. If we were unwilling to buy the credit, that would also undermine liquid liquidity and support for the credit. And if we're unwilling to buy our common stock back, that undermine support of the common. So the thing to keep in mind about the company is we've got $75 billion of capital, but if we paid off all of our liabilities at face value, we still have $55 billion of net equity. >> Okay? And so the company's got a huge amount of capital that we can use to support Bitcoin, right? >> Support MSTR and support STRC. And we've just shown the market we're willing to use it. And I think that that's one of the reasons why Bitcoin's rallied. That's one of the reasons why our equity rallied and that's one of the reasons why STRC has rallied. If you look at all three charts over the past three months, >> they're all up. >> Yeah. And so the market had a had a very uh narrow view of what we're able to do and they thought our options were limited six months ago. And that's not good right >> for the market. Now the market knows that we'll do the rational thing, the right thing for Bitcoin, the right thing for the credit, the right thing for the equity whenever we need to. And we have billions of dollars of firepower to do it. We are the 800 pound gorilla in the space. like we're going to sell STRC above 100, we're going to buy it below 100. And we have so much capital, we could buy it all. Right? >> And so anybody that's trading against us, you know, is probably making a mistake and now the market understands that. That's one of the reasons why liquidity is is growing. That's one of the reasons why volatility in the instruments are falling. And so that that is a it's a right of passage for the company. >> It wasn't it wasn't pleasant. is a bit painful, right? But I'm glad we went through it. >> So, it's kind of like teething problems for the market, conditioning the markets for how you're using that capital because just for an example, if people are sort of confused by all this, I mean, you've been prioritizing spending money to buy back SDRC stock, right? I mean, for instance, in the first week of October, uh you bought just 334 Bitcoin, 28.7 million, but spent 176.3 million buying back >> your own preferred stock, which is about six times more. Um so you know as far as the strategies cash and where it's going as the strategy I should say why is that a better use of capital? Yeah, because the company is a digital credit producer. Our product is the digital credit, >> right? >> So what what we're doing is we're converting capital Bitcoin 40 V 40 ARR into five V or in this case 8V credit that pays you a 12% dividend. There's a pool of investors that want to buy that credit. They do not, you know, do you want to hold a volatile asset for a decade with no cash flow? Not if you've got rent, not if you got a mortgage. So the the pool of credit investors is different. We're creating that credit. And so if the credit doesn't work, then the company is just a holding company for Bitcoin. >> So, you know, it's kind of like saying if I had a bank and you could put money in the bank, but you could never withdraw your money. You know, how valuable is that banking stock? M >> you know so what we're doing is we're creating a very valuable product digital credit. If the credit works we can sell billions of dollars of the credit. When we sell a billion dollars of digital credit all we have to do is see Bitcoin beat the hurdle rate for us. The hurdle rate is about 10 and a half%. So we sell a billion dollars of credit. Bitcoin appreciates 10% a year. The company made a billion dollars >> of net income equivalent. >> Okay. We're never paying the money back. So imagine a world where we sell $10 billion of credit a year and Bitcoin appreciates at 10.5% a year. That's like a company that generates 10 billion of net income. Now imagine that growing 20% or 30% a year. What is that company worth? It might be worth 10 or 20 times that net income number. That is the premium to the net asset value. So, this is another long- winded way of saying the equity is valuable if the company can create the credit. The credit is valuable if it returns to par. If the company doesn't return the credit to par, we can't sell any more of it. And that's like a bank that takes your deposits but never returns them. You know, no one's going to do business with the bank. And uh on the other hand, what is it worth to create a company that could sell $20 billion of credit growing at 30% a year forever, right? I mean, the company could become a trillion dollar company, right? >> So, the future of MSTR is based upon converting capital, Bitcoin into credit, digital credit, so that you have a digital equity. The equity will outperform Bitcoin if the credit is good. And so the credit's the product, the equity is the byproduct. It's a better use of our capital to buy back the credit because uh because if the credit works, the companies could trade it should trade at a premium. It's a NAV. If we let the credit go away, we're just a holding company and the company should trade plus or minus X around net asset value. And so that's why we defend the credit. >> What about what's going to happen with the Clarity Act? Because you and I have discussed how you believe this has been a tailwind, but then now you've sort of suggested that the Clarity Act stalling is perhaps one of the best things to have happened to the industry. So why the change in tune? >> You know, if you're a capitalist, if you want to create a great economy or a great nation, what you want is a bill of rights, not a bill of restrictions. Right? The founding fathers said we had rights. And and the Bill of Rights isn't very long, by the way. You can read it. It's on a it fits on a couple of pages. >> The Clarity Act was 630 pages. And it was a bill of restrictions. It was 630 pages of which probably 620 pages were restrictions. And there were a couple of rights in there, but they were hard to fish out. And normally what happens when you go to Washington and you ask for a bill to support your industry is is they're very good at worrying about everything that might go wrong. So they load it up with hundreds and hundreds of restrictions in order to protect in you know the 20th century economy and and existing uh assets and existing players. What they don't do is focus so much on the bill of rights. So when clarity stalled, there was a whole set of guidance rules that provided rights to the industry. They came out of the SEC, the rights to tokenize. They came out of the CFTC, the rights to list and trade digital derivatives, the rights to offer prediction markets. They came out of Treasury, the rights to issue digital currency. Right? We create trillions of dollars of value by doing things with the rights. um the restrictions just the economy. So I think at the you know at the end of the day the industry is going to be much better with enlightened rules coming out of the regulators that allow us to create trillions of dollars of digital assets and digital wealth. >> Um and that will now go on till 2029. Right? And and the best uh the best for the industry is you create magical products for 100 million people that are worth trillions of dollars that make them all happy and rich and delight them and then it doesn't matter who gets elected in 2029 because you're going to pry their magic products from their cold dead fingers. >> Okay. So in that case then if the Clarity Act sort of had been kicked down the road as far as that can is concerned um what is likely to be the big driver moving forward? I mean, obviously, we've got to get over a few speed humps with the macro at the end of the year, but is that going to be the big driver? Because it was interesting looking at Bitcoin and the performance earlier this year. It didn't seem to be too heavily influenced by the macro. I mean, you'd see stocks selling off one day, Bitcoin rallying, but then of course, we've had hotter inflation prints coming through, sticky prices, and all of a sudden, Bitcoin seems to have reacted a lot more to what we're hearing on the economic side. And I'm wondering if that's going to be driven more by macro now moving forward. you know the I mean the final boss uh that generally drives all assets is monetary policy. Okay. So as the as the market tilts toward more restrictive monetary policy that's a headwind. If we see some loosening of the monetary policy that'll drive all risk assets and and uh Bitcoin tends to react like risk squared right now. So that's a big driver. There's about a billion dollars of organic Bitcoin available each month from the miners for sale. So if you look at the fundamental drivers in the industry every time we create a billion dollars of digital credit that buys up all the Bitcoin >> for the month and so digital credit is a driver. Bank credit on bit Bitcoin is a big driver. So as large banks, as Schwab creates credit on Bitcoin, as City or JP Morgan or Morgan Stanley creates credit on Bitcoin or Bitcoin derivative like IBIT, um that drives the industry forward because that buys up all the organic supply. And then as uh more and more securities tokenize, generally uh the big winners in the tokenized economy are digital credit and digital assets. and they're all geared and cross-correlated to Bitcoin. So as you see more and more capital flow into digital assets and and digital securities that'll be a driver. So I think the industry fundamentals are you know are the formation of digital credit, Bitcoin credit and digital you know securities. The macro drivers will be our foreign policy, our trade policy and our monetary policy. >> Yeah. which is all sort of up in the air at the moment and the Q4 calendar is looking pretty dense at this point obviously with the Fed. I mean it's likely to hike into year end. I mean as you mentioned we've got um other things like the election and obviously Treasury refunding updates as well. Um then do you have a year-end target or is that becoming harder to forecast because of all these kind of overlapping crossurrens? >> Well, as I said I think I feel like we're at the beginning of a bull run. So we should be higher toward the toward the year sometime in the next 12 months. I would think we'll go through 100,000 and then we'll >> in the next 5 months. >> In the next 12 months. >> 12 months. Okay. >> I can't I can't be sure it happens by the end of the year, but I feel like we're definitely moving back into the six figures at this point. >> Okay. How long does the bull market last? >> Four years. >> Okay. You're right. And then I'm just wondering, you know, we've got this kind of added uncertainty now for this competition for capital. I'm just wondering, you know, how you're looking at AI compute giving Bitcoin a bit of a run for its money right now and basically the rest of the market. >> Well, I think first of all, there are going to be some screaming winners in AI where they're going to be trillions and trillions of dollars of wealth created by the companies that create the self-driving cars, the robots that do all the work, the bots that provide us with 10,000 lawyers at our fingertips, right? That's explosive. It's just unclear, you know, which of the big tech companies are going to be the screaming winner because there's a a free-for-all to be there. >> However, there's also a lot of traditional businesses that are based upon labor and talent. They're all getting degraded, dematerialized, demonetized. And so, there's a lot of equity investors that have to figure out where they're going to go. So, people are running toward the winner. They're running away from the companies getting automated out. One thing that's clear is if you make a lot of money and we will have we'll have a lot more goods and services created by the robots and we'll have a lot more capital created by the tech, you know, winners. >> What are you going to buy? And the issue and the thing you're going to buy is something the robots can't make more of. So, the scarce desirable assets that the wealthy are going to buy are going to be acres on Palm Beach, you know, the Hampton's home. They're going to buy trophy art. They're going to buy private equity and public equity that they deem to be scarce, but it'll be the AI specific stuff. >> They're going to buy Bitcoin because robots can't make more Bitcoin. You know, even if every human being is a million times smarter than Einstein, they're not going to make more Bitcoin. So, I I would invest in something that the robots can't make more of. And that's that's a real long-term driver for scarce, desirable digital capital. >> How confident can we be that Bitcoin is going to be a part of that? I mean, you know, when you think about how investors are being lured to sort of other markets right now, prediction markets, hard assets, to your point, >> well, if you look at capital, right, you've either got metallic capital, you've got gold, silver, people play with that. The robots aren't going to trade gold and silver a million times a second on a Saturday morning. >> So, that was a good 20th century idea and a a trady idea. You've got the S&P index which is full of winners and then a lot of losers, right? 95% of the companies are are losers and then the small percentage with that that catch the AI, you know, product or service magic carpet, they're the winners, but that that kind of trades sideways. Uh Bitcoin is uh is the the index on the digital economy of the future. So when you're buying Bitcoin, you're kind of buying, you know, 121 millionth of all the digital capital in the world forever, right? It's a way to uh to make an investment without expressing uh expressing uh sentiment toward a given company, right? You don't want to take issuer risk. You don't want to take company risk. >> I don't know which of the 100,000 companies will win or lose, but I know that I want to own my fair share of them. So, Bitcoin, you know, it's it's going to always outperform the S&P. It's going to be more volatile than the S&P. >> It's going to be more useful, right? You cannot trade gold on the weekend. You cannot trade S&P with in a global fashion. So, Bitcoin is that pure digital, pure global capital asset, and that's really its advantage over the next decade. >> One more question, Michael. We've seen a lot of tinkering around on the long end of the yield curve particularly over the summer and we did see or more recently I should say and we did see Bitcoin sort of rallying as a result of you know talk about the debasement trade once again. I'm wondering how you are thinking about uh this is a long-term investment theme around the debt in this country. I mean you know is what we're seeing as far as that 30-year yield and what the government is trying to do right now is is that bullish or bearish for crypto? you know, in the near term when uh the long end of the yield curve or when when the entire yield curve is moving up over the last 12 months, everything's moved up say a 100 basis points or so, that's bearish in the near term. Okay? >> But over the over the midterm and the long term, it's very bullish because what'll happen is the financial regulators, the Treasury, the Fed, they're going to come into the market and they're going to start to buy in order. They're going to lower the front end of the yield curve. they're going to have to buy to keep the the far end of the yield curve from blowing out. They're going to expand the money supply. You know, there's that's what we've always done and that's what we will do in this case. There's no way that uh the powers that be are going to allow the 30-year rate to go to 10%. >> Right? >> So, when uh when the bid disappears on the far end the yield curve, you'll actually see the money supply expand. And the big beneficiary of the money supply expanding is normally scarce desirable assets. Gold will benefit. The S&P index and risk assets will benefit. Bitcoin will benefit SCK scared, right? And and when people start to see the money supply expanding, I think you'll see a a major rally in something that nobody can print any more of. >> Michael, always a pleasure. Thank you so much for joining us today. >> Really appreciate your time. Michael Sailor, founder and executive chairman of Strategy. Thank you so much for joining us again and sharing your perspective with us on Bitcoin and the future of digital finance. Remember to watch new episodes of Market Overtime on our YouTube channel and watch market news 24/7 here on schwabnetwork.com. I'm Sam Bardis. Thanks so much for joining us.