Michael Saylor 的 BTC 支持型 STRC 正在瞄准 300万亿美元市场

The overall fixed income market globally is estimated to be $300 trillion. For reference, overall wealth across all asset classes is estimated to be $900 trillion or $1 quadrillion. So, 30% is fixed income. On a relative basis, Bitcoin is tiny. Bitcoin itself is just $2 trillion.

1. ATM program for raising capital to buy more BTC

We would argue that all of that capital could be better served by investing in STRC. If we convert, let’s say, 1% of the $300 trillion market, that would be $3 trillion, which is more than Bitcoin’s size itself. So, maybe it’s a bit too ridiculous to say those kinds of numbers. But if we convert 0.1%, that is $300 billion. If you do 0.01%, that’s $30 billion. That would still be a 6x increase from where Stretch is today. It’s at $5 billion.

2. Which Strategy instrument is most senior?

So, 0.01% of the overall fixed income market would be a 6x increase for Stretch. All that capital will then go into Bitcoin, which will drive up the price of Bitcoin. This will further make Stretch, as well as the other credit and equity instruments, more attractive. More capital will flow into them, which will again drive up the price of Bitcoin and make Stretch look safer and less risky.

I’m DeFi Dad. Today’s show features Chaitanya Jain, who works on the Bitcoin team at Strategy. CJ, thanks for joining us. How are you doing?

I’m doing well. Thank you so much for having me. I’m really excited to record this podcast with you.

3. How does STRC enable Strategy to accumulate BTC in the bear

CJ, we’re excited, too. I want to start out with just a few highlights from Strategy. Strategy has accumulated 761,068 Bitcoin as of yesterday, when I wrote that down. That is a total of around $53 billion in Bitcoin at a price of around $70,000 per Bitcoin.

We’re going to talk a lot about Strategy today, but we’re going to talk about Stretch specifically, STRC. You’ve probably seen it on X or heard about it recently. Michael Saylor called this Strategy’s iPhone moment last year when it launched.

4. CJ’s background and role at Strategy

We’re going to give a brief overview of the Bitcoin treasury model, break down what Strategy is doing with these preferred share classes, explain what Stretch and STRC are and how they work, and then discuss the impacts of STRC on Bitcoin. Ultimately, how does all of this come on-chain into DeFi, which is more the world where we live?

CJ, why don’t we start by having you tell us a bit about your background? What pulled you into Bitcoin?

My background is that I studied mechanical engineering at university, but I worked in finance right out of high school. I was in private equity at Blackstone in India from 2019 to 2023, and I focused on leveraged buyouts across the technology and industrial sectors.

I was loving that job, going deep into value investing and financial concepts in general. In 2021, during that last bull run, when Bitcoin, crypto, stocks, and everything else were making new all-time highs and there was a bubble in the market of sorts, that’s when I discovered crypto.

I thought I should go deep into crypto and try to build a very unique profile for myself because I wanted to apply to MBA programs in the United States sometime soon. I thought it might be a cool way to differentiate my private equity background.

I had someone at work who told me to find or follow some accounts on Twitter that were crypto experts. I started doing that, and I started paying attention to the discourse on Twitter for the first time, especially in the crypto world. I started discovering podcasts about crypto versus Bitcoin, proof of work versus proof of stake, and commodity versus security.

I loved those podcasts. I found some that were focused on the value-investing or macroeconomics lens when talking about Bitcoin, and I found that very fascinating because that’s the world I came from. I went really deep into that, and I came out of it as a radicalized Bitcoin maxi. I sold all the crypto I owned and put it all into Bitcoin. I sold all the other equities I owned and put all of that into Bitcoin. I became an evangelist for Bitcoin with my family and friends.

I had very little success there, but I could never stop talking about it. I decided to come to the United States to do an MBA program and was very focused on getting a Bitcoin internship. Strategy, or MicroStrategy at the time, was a category of one. They were the only company doing what they were doing. There was no competition and no other Bitcoin treasury companies, per se.

I got really lucky. I pestered them, forced them to give me an internship, and told them I would work for free. Finally, they caved and gave me one. It worked out really well. I stayed on as an intern, completed my MBA, and I’ve now been here for another full year as a full-time employee.

I did the internship for a full year as well, so I’ve been actively working in the Bitcoin space for 2 years, but I’ve been a Bitcoiner for 5 years.

What do you actually do day to day now, CJ? What’s your role there at Strategy?

It’s a very small finance team that works on the Bitcoin side of things. It’s about 5 of us. We work very closely with the legal team, which is another 5 people, and then with the management team and people across important functions like reporting, tax, and accounting. It’s a small team of 20 people overall.

Within the finance team, I work on all things related to our Bitcoin activities, from all the work we do in the capital markets—designing these new instruments that are backed by Bitcoin, launching them through IPO processes, and working with banks, regulators, and advisors—to actually running these ATM programs and raising new capital on a daily basis to buy more Bitcoin.

Then there’s investor relations: speaking with new and existing investors, conducting these earnings calls every quarter, and being on the road a lot with Michael and Phong to meet different investors in different parts of the world, or at least in different parts of the United States as of now.

There’s also a lot of treasury management, such as actually buying the Bitcoin through exchanges and custodying it with custodians. Then there’s some work on general Bitcoin advocacy. We have a Bitcoin Innovation Hub in our office where we invite entrepreneurs to work out of and use it as a coworking space.

So, I’m working across all things related to Bitcoin. No day looks similar to the previous one. No month or quarter looks similar to the previous one, so everything is evolving very quickly. Our team is also expanding, which is nice. It’s a closely knit, tight group that’s working effectively 24/7.

That’s really cool. I wasn’t sure how big the team was, but it sounds pretty tight and probably a good thing for you. It is growing, so maybe you’ll have to take a little bit less of the load.

5. What Strategy actually does with Bitcoin

I want to get the elevator pitch for Strategy. If you’re describing it to somebody, how do you like to break it down for somebody who’s new to it or somebody who understands finance?

Strategy is a Bitcoin treasury company. What we do is take Bitcoin, the raw commodity, which we view as digital capital—something that’s appreciating 20% to 30% per year for the foreseeable future because of its characteristics—and securitize it.

We create different financial products or financial instruments that have different forms of risk-reward exposure to the underlying Bitcoin. If you’re a Bitcoin maxi and you want to take some risk and outperform Bitcoin, we create MSTR, the common stock for you, which provides leveraged or amplified exposure to Bitcoin and has the potential to outperform Bitcoin over a long time frame.

If you’re skeptical about Bitcoin but think it’s a legitimate asset class, trust Strategy as an issuer, don’t want to take the risk of Bitcoin’s volatility, and can’t hold it for 5 years, but still want to extract some juice from it, we create these credit instruments like Stretch, or STRC.

What we’re doing is serving the different classes of investors that exist and giving them different forms of exposure to Bitcoin.

And we do it by bridging the crypto world and the TradFi world and the traditional capital markets. So, that's the role of Strategy in this world of Bitcoin and traditional capital markets.

6. Why Strategy chose to offer perpetual preferred equity

Appreciate it. I want to dive into some of these preferred products that you alluded to. We don't need to talk about all of them, but at a high level, I want people to understand what's happening here under the hood because, as far as I'm concerned, it's pretty novel. Strategy has been a trailblazer in utilizing these different share classes as their own equity products. But there's Strike, there's Strife, there's Stride, there's Stretch, which we're going to talk more about today. At a high level, break down what you're actually doing with these. And what even are they? I don't even know how familiar people are with the fact that there are different share classes outside of common stock, which is MSTR.

Yeah, so I think that's the best place to start. What are they? They are perpetual preferred equity instruments. Preferred equity means a hybrid between common equity and debt. It has characteristics of both; it's a hybrid between the two.

The word “preferred” means it has a liquidation preference to common equity, which means that in the event of something like a bankruptcy or liquidation of assets, it has a priority in the waterfall. It receives a payout before the common equity receives a payout. So, debt is the most senior, then it's preferred equity, and then it's common equity.

Debt is the least risky for the investor because it's the most senior in the capital structure, but it also gets the least return. Common equity is the most junior; it's the riskiest from the lens of an investor, but it also gets the most return. Preferred equity is in the middle.

The reason we chose preferred equity is because we started with debt in the beginning. We were issuing different forms of debt to build leverage on our balance sheet and try to outperform Bitcoin by borrowing at a certain rate, buying Bitcoin, and, if Bitcoin appreciates more than the cost of borrowing, the common equity, MSTR, benefits. We were doing that, and that was working very well.

We did different kinds of debt. We took a margin loan, we did senior secured debt, and we did a lot of convertible debt. But all debt instruments typically have a maturity, and they mature in 5 years or 10 years. You need to find the cash to repay them, or you need to refinance them, take another loan, take another debt instrument, or take new money from new investors and give it back to the old investors. That introduces a risk that we didn't want to undertake.

We were trying to move away from that risk and discover a more intelligent form of leverage on our balance sheet. Then we thought, let's go from the debt class to the preferred equity class. Let's find the right kind of preferred equity, which is perpetual in nature, where there is no maturity, because even preferred equity can, in theory, have maturities.

We said we'll take perpetual preferred equity, where, once we take the money from the investors, all that we're obligated to do is give them dividends that are either fixed or variable, with different features and characteristics. That is the return they get, but we don't need to repay the entire principal amount to them.

It reduces the risk for us as an issuer or as a company, so we don't have to, in 3 years, 5 years, or 10 years, when Bitcoin is having a bear market or a big downfall in price, go and find cash in a distressed scenario to repay them. It gives us more flexibility and more robustness in terms of what the capital structure looks like. That's the reason we chose perpetual preferred equity, and we have these different classes that we created within perpetual preferred equity.

Strike was the first, as you mentioned. It was the most similar to what we were doing with convertible bonds. To get those investors interested in this new class, we created Strike. Then we did something else with Strife and something else with Stride. We kept changing the characteristics and the features, and we kept warming up this engine in the preferred equity market and showing investors that we are a credible issuer.

Eventually, we realized that the ultimate preferred equity product to create would be Stretch. We can dive into why we think that and how we got there, but that's the overall journey that we took, and that's what preferred equity is in this capital structure.

Chaitanya, is the Stretch offering more senior to the other instruments that you offer, these other Strategy offerings? I've always wondered: if I'm in Stretch, am I in the most senior offering?

The most senior preferred equity offering is Strife, STRF. That's the one that gives you a fixed 10% dividend, but the price is not stable, and the price does move around. It also has a few more governance rights and protections.

If Strategy was to not pay a dividend, there would be a penalty rate, and the dividend would step up. If Strategy suspends the dividends for a few quarters, then the holders of STRF can elect a board member to our board. So, it's the most senior instrument, and it's targeted toward more sophisticated institutional investors that want that seniority and those protections.

Number two is Stretch, and our intention is to keep Stretch as the second-most-senior one. Strife will always be for the sophisticated institutional investor that wants the fixed 10% and those governance rights. Stretch is the second one, which is stable in price and appeals to a very different kind of audience.

Senior to the preferred equity are the convertible debt instruments, and our intention is to phase them out. They're from the previous era of leverage. Once they're completely phased out, Strife will be number one in the overall structure, and Stretch will be number two.

7. How AI helped design Strategy instruments

I appreciate that, and it's cool that you're going to phase out that old era of Strategy. I wasn't fully aware of that. I want to ask you something that I don't know if this is just a rumor or if it's actually true, but hopefully you can clear the air for me.

I saw somewhere on X, on Twitter, that some of these products were created by using AI and prompting—trying to figure out, “Hey, this is a wild financial model.” Is that true? Did you actually use AI to create or incept any of these?

Yeah, that's true, and Michael likes to say that very often. I think what happened is Michael personally loves brainstorming with AI. The beauty of AI, especially in the work we do, is that there are so many nuances of the capital markets and securities law that are impossible for one individual to know. You need a team of lawyers and a team of bankers even to brainstorm and ideate.

With AI, the AI can know all the constraints and boundary conditions of what's allowed and not allowed. Once you have an idea or a concept in your mind, you can really go back and forth with AI, tweak certain things, and come up with new, creative ideas that have never been done before but are not illegal, are not breaking any rules, and are not breaking any important conditions.

You can then take that idea to your lawyers and bankers and the finance team. The team can go deeper into it, and once everyone agrees that it can happen and it makes sense, you actually run the whole IPO process and launch it.

It is true, and Michael says it's Bitcoin, digital capital, and AI, digital intelligence, that have enabled the whole ecosystem at Strategy to evolve. I would say it's true. Fifty or 60% of all the creativity that you see behind these instruments is a combination of Michael and AI, and the rest is the team going deeper into it, executing it, and implementing it.

8. What is STRC? Stable price, 11.5% yield, monthly dividends

That makes total sense. Obviously, I think you're using it for much more sophisticated strategy and planning, but we're using AI tools every day ourselves. One of the best use cases for us has been brainstorming and thinking about what we're doing right and what we're doing wrong. We'll even try to figure out what our little podcast is doing in terms of income—not quite on the order of what you guys are doing there at Strategy.

We keep referring to Stretch. Stretch is what prompted us to reach out in the first place. We felt like our DeFi-native audience would love learning about this. It's very nerdy. We feel like we recognize a common interest in creating new financial offerings here. What is Stretch, and what problem does it solve?

Stretch is just another iteration of our digital credit instruments, or these credit instruments that we are creating that are backed by Bitcoin. What's most unique about Stretch is that it's designed to have a stable price at $100. It still gives you an 11.5% yield.

That yield is in the form of cash dividends that are paid monthly. The monthly cash dividends add up to 11.5% over the course of a year. These cash dividends are all tax-deferred. You don't pay either ordinary income tax or capital gains tax when you receive the dividend as an investor.

Instead, you get to reduce your cost basis in the investment and defer the taxes until you sell it or your cost basis hits zero. It's a traditional preferred equity instrument, so it's listed on Nasdaq. That means you can buy or sell it from any brokerage account that you typically would use, like Robinhood, Schwab, or Cash App.

Yep, that's Stretch in a nutshell. What we do is back it with 4 to 5 times more Bitcoin on our balance sheet. We also hold 2 to 3 years of dividends in the form of cash reserves on our balance sheet to give more confidence and conviction to investors in Stretch that we will continue to make those dividend payments of 11.5% over the course of a year, broken into monthly installments, perpetually. There is no end date; it's a perpetual instrument.

We have 5 times more Bitcoin on our balance sheet to back it. So, even if Bitcoin has a big drawdown, we still have more Bitcoin assets on our balance sheet relative to the amount of Stretch that we're issuing or have already issued into the market. The big breakthrough here is that many credit instruments, or most credit instruments, that have a high yield and give you good returns typically have a lot of volatility and are very sensitive to changes in interest rates.

When the Fed cuts interest rates, the price of your bond will go up. If the Fed increases interest rates, the price of your bond will go down, so you need to understand that risk. You need to understand the credit risk of the company. If the perception of the company's risk changes, then the price of the instrument also changes.

It's very difficult for average retail investors to understand and value traditional fixed-income or credit instruments. That's something we realized as we issued different tranches of these preferred equity products. We realized the most unique one would be something that could have a stable price.

The way we achieve the stable price is by using the dividend rate—the 11.5%—as a lever, which we can increase or decrease at the end of each month. If the price is going down, we increase the dividend rate and bring back demand. If the price is going up above $100, we can reduce the dividend rate by up to 0.25% each month.

There are restrictions on how much we can reduce it by: either 0.25% or, if there are any cuts in the Fed rate, by that amount. We can bring the price back to $100 because demand might decrease, or we can create new shares and sell new shares through our ATM programs into the market at $100. So, that's Stretch in a nutshell.

9. Where does STRC yield actually come from?

Chaitanya, it's funny because I wrote a pretty big article about this, and there are still things crystallizing even more in my head as you're explaining it. One thing I wanted to talk through, though, is where this yield comes from. You mentioned the $2.5 billion cash reserve buffer, but there are other ways to fuel that yield, correct? Can you get into a little bit more depth on the other levers where Strategy can raise yield for Stretch?

Sure. The conceptual way of thinking about where the yield comes from is Bitcoin's performance. Our base case is that Bitcoin will appreciate 30% per year on average for the next 10 or 20 years. We feel comfortable giving the investor in Stretch the first 11.5% return, and we get to keep the upside above 11.5%. By “we,” I mean the MSTR investors, because if Bitcoin is appreciating 30%, then 19% or 18.5% is, in effect, the spread that the MSTR investors get to capture.

If Bitcoin is not appreciating at 20% or 30%, if it's only appreciating between 0% and 10% for the foreseeable future, for 10 or 20 years, then this is perhaps not an excellent strategy. Investing in MSTR, the common stock, might not lead to great outperformance relative to Bitcoin because you're not capturing an incremental spread anymore. Instead, you're giving up returns and allowing STRC to get the 11.5% payout.

That's the big idea here. We've taken our treasury asset, Bitcoin, and structured an instrument, STRC, which strips out the first 11.5% return from it and also strips out the volatility and the risk from it. STRC becomes something that's super stable, has very low volatility, and offers an 11.5% return.

MSTR takes in and absorbs all that excess risk and all the excess volatility, but also gets to outperform Bitcoin. So, if Bitcoin is going up 30%, MSTR could, in theory, go up 40% or 50% because it's capturing the spread. That's the way the business model works.

The dividend buffer—the 2 to 3 years of cash, the $2.25 billion of cash that we have on our balance sheet—is something that we park for a rainy day. If the Bitcoin price has crashed a lot and we're no longer actively raising more capital, actively buying more Bitcoin, and reserving small amounts of the capital we raised to fund the dividends, then we can dip into that buffer, the USD reserve.

The yield itself does not come from the USD reserve. The USD reserve, or the cash on our balance sheet, is just something we're parking for a rainy day when we're no longer able to actively raise more capital to buy more Bitcoin and fund the dividends.

Chaitanya, could you describe the ATM mechanic—the at-the-market offering—break it down for people, and then describe the optimal conditions Strategy would look for to do this with STRC?

Sure. An ATM offering stands for an at-the-market offering, which means you can literally create new shares and sell them into the market at the market price. This is very different from the traditional way most companies raise capital, whether they're private or public. They find a group of banks to run a process for them over 3 weeks or 3 months to put together a group of institutional investors. They build a book, and then they allocate new shares to them. The company gets the capital, and this takes 3 weeks or 3 months.

It's a very slow, inefficient process, which still makes a lot of sense for many companies. But the beauty of an at-the-market program is that, on a given day, you can take advantage of the market conditions, instantaneously create new shares, and sell them into the market at the market price. You're not waiting for 3 weeks, and you're not giving a discount to the investors who are buying them. You're just doing it at the market price immediately.

We've been doing this with MSTR for over 3 years now, and everyone is very familiar with the way it works for MSTR. Every Monday morning at 8:00 a.m., we announce how much Bitcoin we've bought and how many new shares we've issued over the past week. There's a very strong, regular cadence there with MSTR.

Now we launched STRC and all the other preferreds. They all have ATM programs as well, which means we don't need to wait 3 weeks or 3 months to raise new capital through these credit instruments. We can just go into the market and sell at the market price.

What becomes important, as you were alluding to in your question, is at what market price we would be willing sellers of STRC, or Stretch. We very clearly communicated to the market that our intention is to keep the price of STRC very close to $100, in that narrow band of plus or minus $1, or plus or minus 10 cents.

We will not be active sellers of STRC below $100. If STRC is trading at $99.99, you can be reasonably confident that Strategy itself is not creating new shares of STRC and selling them into the market. But if it's trading at $100, $100.01, or $100.02, you can become more and more confident that we're stepping into the market, creating new shares, selling them, raising capital, and instantaneously going on the other side and buying Bitcoin.

There are a lot of people who love tracking this on a real-time basis. They track where STRC is trading at a given minute or hour, how many shares have been traded above $100, and they try to guess how many of those were new shares created by Strategy, hence how much new capital we raised, and hence how much more Bitcoin we bought. Sometimes they're close, and sometimes they're not very close, but that's the way we structured this ATM program for STRC.

Chaitanya, I know that when the price of Bitcoin was going up, we as Bitcoin holders definitely appreciated how this mechanism ultimately led to Strategy accumulating more Bitcoin. I mean, it's a lot of buying pressure, ultimately. What I'm wondering is, how has this mechanism been working as the price of Bitcoin and all of crypto has fallen about 50% or so since October?

Can you give us some real-life examples of what's been going on behind the scenes in terms of being able to borrow more money to buy more Bitcoin? We all know you really make your money buying in the bear market, and we see Michael Saylor talking about this on Twitter and in interviews and so forth.

We understand that it's very important that you are able to buy and accumulate Bitcoin in the bear market right now. I'm thinking again about how this mechanism, going back to STRC, works and allows you to borrow money and buy at the worst possible moment of the bear market.

Yeah, I think the new instruments, especially STRC, have really changed the game for us in terms of how much Bitcoin we can buy in a bear market. If you looked at Strategy 4 years ago in the 2020 crash, we did not have the preferred equity instruments. We did not have STRC, and we could not aggressively raise a lot of capital and take advantage of a low Bitcoin price because our primary mechanism of raising new capital was our common equity, MSTR. If the Bitcoin price is depressed, then so is MSTR’s price, so it’s not very easy to go and raise new capital.

The form of leverage we were taking was convertible debt. Because it converts into equity, it’s very closely linked to where the equity is trading at in the present moment as well, so that would also get shut off from us. That meant that, yes, the Bitcoin price is low and it’s a great time to stack more Bitcoin because you have long-term conviction, but it’s becoming difficult to find new capital to raise, and the funding source would dry up.

What’s happened with the preferred equity instruments, with digital credit, and with STRC is that the buyer base of STRC is very different. They don’t care whether Bitcoin is at an all-time high or an all-time low, or what the near-term expectation of Bitcoin is, and they don’t necessarily even want to hold it for 10 years or 5 years. They just want something that’s going to be more or less stable and give them a high return—much higher than their bank account, money market funds, or debt funds.

It’s a very different kind of buyer base. For 5 years, I could not convince my parents to ever buy Bitcoin. They were never interested in MSTR, but now when I talk about STRC, they are super interested and they would buy some. The basic idea is that the type of investors who are buying STRC are very different, and that provides a more secular flow of capital into the ecosystem because it’s not very sensitive to where Bitcoin is trading.

That’s the reason why, in the last 2 weeks in March, or the first 2 weeks of March, we raised $1.6 billion through STRC alone and bought a lot of Bitcoin. It didn’t matter that Bitcoin was at $60,000, $70,000, or $120,000. All that mattered was that people were learning about STRC and wanted this kind of investment and this kind of value proposition.

We think that it will just keep expanding from here. It’ll be a bit sensitive to the Bitcoin price because the Bitcoin price going up means awareness of Bitcoin is going up, so awareness of STRC will also go up as a result. But it wouldn’t necessarily mean there are a lot of extra inflows or extra outflows really related to Bitcoin’s price itself. That’s the unique thing here.

When Bitcoin had its all-time high in October, STRC was still in a seasoning phase. It was the first few months, and it was issued at a slight discount to the $100. It was riding its way up. People were understanding what it was, and we were establishing the cash reserve to provide more confidence to investors.

It took a while to get here, but now that we’re here, and now that STRC has reached this inflection point in awareness and demand, I think the floodgates have opened. We’ll be raising a lot of capital through STRC alone.

Yeah, we’ll flash up this graphic. I’m looking at it right now. I think the week of March 8, there was about $377 million that poured in, and then the week of March 15, it was $1.18 billion. It’s going to be really interesting to see the next couple of weeks, too, and see if this is the beginning of a trend.

Back to your point about your parents and Bitcoin, my dad got into Bitcoin. It wasn’t quick, but he gets it. He likes it. I wrote this piece on STRC and sent it to him, and immediately it clicked with him. One of his investments is in a real estate investment trust, and he said, “This is about the same return.”

I said, “Yeah, and it’s a lot more transparent, in my opinion. Everything’s open, auditable, and happening dynamically. You can get out of your investment in real time.” I think we’ve all seen what’s happening with private credit. Redemptions aren’t immediate, and they aren’t promised, right? A lot of these big private credit funds are capping redemptions at 5% or 8% or something.

He’s immediately starting to understand it, but he’s also become a Bitcoiner. He believes in Bitcoin long-term. I think if you do believe in Bitcoin long-term, this is such a great partner product that goes with it: “Hey, get some yield and keep some long exposure to the upside of Bitcoin or MSTR, whatever you’re into.”

10. STRC could serve $300T fixed income market + the impact on BTC

I want to talk a little bit more about this broader fixed-income market that it looks like you’re attempting to penetrate and are penetrating. How big is that market? And then I would love if you could napkin-math some version of, “If we get this percentage of that market, here’s what it means for STRC, here’s what it means for MSTR, and here’s what it means for Bitcoin.”

The overall fixed-income market globally is estimated to be $300 trillion. For reference, the overall wealth across all asset classes is estimated to be $900 trillion or $1 quadrillion, so 30% is fixed income. On a relative basis, Bitcoin is tiny. Bitcoin itself is just $2 trillion.

The fixed-income market—all the bonds issued by all the countries, all the corporations, and all the real estate—is more than 100 to 150 times the size of Bitcoin itself. The problem for this market has always been that they typically want seniority in the capital structure and fixed returns, and they don’t play for a lot of equity upside.

That’s why the capital was never flowing into Bitcoin or Bitcoin-related derivatives, because that vehicle or conduit didn’t exist. There was no way to get the $300 trillion of fixed income to flow into Bitcoin in some way. That’s where Strategy and what we are doing are very unique, because we are creating a credit instrument that is extremely easy to access.

It’s listed on a major global exchange like Nasdaq, and it’s extremely liquid, so you can be confident you can get in and out in size. It’s giving you a really attractive yield of 11.5%. Our belief is that we’re targeting not just one small slice of the fixed-income market, but pretty much the whole thing.

People can say, “There are different types of fixed-income instruments, and some are this and some are that.” But people are forced to take different forms of exposure, and they’re forced to take more risk to get more return even in the fixed-income world. That’s why they buy long-duration bonds and take on slightly more risk in terms of duration to get that higher yield and higher return.

We would argue that all of that capital could be better served by just investing in STRC. If we convert, let’s say, 1% of the $300 trillion, that would be $3 trillion, which is more than Bitcoin’s size itself. Maybe it’s a bit too ridiculous to say those kinds of numbers, but if we convert 0.1%, that is $300 billion. If you do 0.01%, that’s $30 billion.

That would still be a 6x from where STRC is today. It’s at $5 billion. So, 0.01% of the overall fixed-income market would be a 6x for STRC. All that capital would then go into Bitcoin, which would drive up the price of Bitcoin, further make STRC more attractive, and make the other credit instruments and equity instruments more attractive.

More capital would flow into them, which would again drive up the price of Bitcoin and make STRC look safer and less risky. It just becomes a very reflexive flywheel. You just need to spin it up once, but once you do spin it up, it’s like a reactor that can operate endlessly for a very long life.

You don’t really need to do anything. You just don’t need to screw it up. It will keep sucking in more and more capital, and all that capital will flow into Bitcoin. We’ll power up the Bitcoin network and drive up the price of Bitcoin. That’s what we are doing.

Maybe another number to compare it to, since you mentioned private credit, is private credit’s overall size. I think it’s estimated to be between $3 trillion and $4 trillion. As you said, private credit is very illiquid. You cannot exit very easily. There are gates on how much you can redeem each quarter or each month, and it’s very opaque.

You don’t even know what you’re necessarily buying or if it’s being marked fairly. If you’re invested in the credit instrument of a software company and the software company is completely disrupted by AI, will the credit instrument ever pay off in the next 3 years, 5 years, or 7 years? You don’t know.

It’s very illiquid, very opaque, and has high fees. It’s not easy to access for retail investors. Digital credit is the complete opposite. It’s extremely transparent. You know exactly what you’re buying.

You know exactly what the risk is because you know how much Bitcoin we own. And you can assess all the risk on our website as well, Strategy.com. We have a very beautiful credit model where you can input your own assumptions and see what the risk is on the instrument. It's very liquid, it's easy to buy for retail investors, and there are no fees.

So, it's competing somewhat with the private credit market to begin with and other forms of credit, but the overall addressable market is like $300 billion of capital. That will flow into Bitcoin through STRC and drive up the price of Bitcoin. All Bitcoin holders will benefit through it.

11. Difference between MSTR vs STRC investors

It's funny—as we were preparing for the podcast, we wanted to make sure that we directly asked you: Do you believe that STRC would ultimately influence the market structure of Bitcoin? Basically, will it drive the price of Bitcoin up? I think you very clearly just answered that.

The underlying assumption here is that the price of Bitcoin will go up over time. So, there's this symbiotic relationship you've got between STRC, MicroStrategy holders, and Bitcoin holders. The idea here is that, if I'm going to dumb down what's going on, STRC holders are ultimately lending dollars to buy more Bitcoin. The other players in this ecosystem want that upside, and so you're creating a relationship there that's meant to benefit everyone.

But the underlying assumption is that the price of Bitcoin has to go up over the long term. Am I right to frame it up that way?

Yep, I think you're right. If you are an investor in MSTR, the common stock, then your base case should be that Bitcoin will appreciate more than the cost of the credit. If the credit costs 11.5% and you don't believe Bitcoin is going up more than 11.5%, then maybe MSTR's not a very attractive investment.

For STRC, however, even if you believe that Bitcoin's going up 2% or 3%, then in theory, Strategy can still service this business model and service all the dividends forever. So, you don't need to have a very aggressive assumption on Bitcoin's appreciation for STRC to be a good investment for you.

You get to benefit from all the Bitcoin that's being bought by MSTR holders as well. And you get first dibs on it. So, if we have $100 of Bitcoin and $20 of STRC, and STRC costs us 10%, then in theory, we're paying $2 of dividends each year from our overall $100 of Bitcoin.

As long as $100 is appreciating 2% each year, we can keep picking up $2 and keep servicing these dividends. Our Bitcoin account might go down, but we would still have the same dollar value of Bitcoin, the same dollar value of credit, and the same dollar value of dividends. This business model can go on forever.

For MSTR, you should believe Bitcoin's going up more than the cost of credit—more than 11.5%. But for STRC, you should believe that Strategy is a trustworthy issuer, and that Bitcoin's appreciating maybe 2% or 3%. It's going to be flat some years. It's going to be down some years, but over the long term, it's not going to zero. It's going to roughly grow at least 2% to 3% a year.

12. Who is buying STRC right now?

CJ, I'm curious who's buying this right now, and whether large allocators are already jumping in or if they're still watching from the sidelines. What is the constraint to scale here? Is there a constraint you can see within Strategy? Probably not Bitcoin, because Bitcoin will absorb whatever people want to buy. Who's buying it, and what are the constraints, if any, right now?

Who's buying it is a combination of large institutional investors, hedge funds, long-only funds, and public-market investors. They are finding this to be something that's very creative, very interesting, and unique. They've never seen it before.

Michael and Phong have been on the road a lot more, doing a lot of conferences, events, and one-on-one meetings with investors. We're realizing that the hurdle there is just awareness and education. As more institutional investors learn about it, they become more and more interested, and then they start buying in size.

Another bucket is corporate treasuries. We are seeing different companies with completely different business models, unrelated to crypto or Bitcoin, that hold cash on their balance sheet. Instead of putting it all into Treasury bills earning 3%, they're now putting some of it into STRC, and they are buying at scale.

There are 4 different companies now that are doing this. I think it's going to go from 4 to 40 different companies in the span of a year. And there are a lot of retail investors. There's a lot of word-of-mouth marketing here. As you've seen on Twitter and X, the online community is just growing and becoming louder and louder.

I think it's similar to what happened with MSTR a year or 2 ago, and that will continue to spread as well. As Bitcoin's price appreciates and there's newfound interest in Bitcoin again, I think all of those will accelerate even more. It's kind of like Bitcoin is for everyone. Even digital credit, or STRC, is for everyone, and everyone's buying it.

13. Teams tokenizing STRC for DeFi

We just saw, I think yesterday or the day before, Maria Shen from Electric Capital publish a report called “501 Sources of Real-World Yield: What Gets Tokenized Next.” Her thesis is that there are lots of real yields in the world that are off-chain, so they're not DeFi-native, that could be brought on-chain.

This made me think of the STRC yield, because technically it is off-chain because of the way that you buy it in traditional legacy markets. We know that DeFi is hungry for yield. What are you seeing in terms of interest from DeFi-native protocols?

I know one that was top of mind for us is Pendle. We were wondering if there's any talk of bringing some sort of STRC offering on-chain through a DeFi protocol like Pendle. What can you share?

I think we are already seeing a lot of interesting activity there. We've seen different groups of crypto entrepreneurs come in, buy STRC, and then issue different kinds of crypto tokens against it. They are then getting integrated into DeFi protocols and platforms.

It's not our intention as the company, Strategy, to go and create native on-chain products that are built on a particular chain. Instead, we just want to keep growing STRC, and we want to encourage and invite other entrepreneurs to build on top of STRC.

A couple of groups—or maybe there are 3 groups. There's a 4th one that's about to launch soon doing this in the crypto space today. One is Buck. I don't know if you're familiar with them, but they have created something they like to call a savings coin. It's a crypto token called Buck that's backed by STRC.

Then there are 2 more groups. One is called Saturn, and one is called Apex. They're building something similar to the Athena crypto business model, which I guess you might understand better than I do. They're building basically 2 different tokens backed by STRC: one is more of a stablecoin product, and one is a levered, amplified STRC-exposure product.

It's literally what we do with Bitcoin. We take Bitcoin and create different securities. Now people are taking STRC and creating different tokens backed by it, with different risk-reward profiles for exposure to STRC. We're seeing those tokens get integrated into DeFi protocols like Pendle.

I think what's happening is they're taking one of the tokens they're backing with STRC and putting that into Pendle. Then they're further splitting the token into something that's the yield-bearing part and something that's the principal portion of it. All of this financial engineering and integration will keep continuing, and it will only accelerate from here.

For the longest time, we saw that the Bitcoin world was very siloed away from a lot of the crypto stuff, in my opinion, because even my interest led me down that path. But now, with the introduction of these Bitcoin-backed credit instruments, I think they will start proliferating through the DeFi world very quickly.

14. Would Strategy ever sell BTC?

The 11.5% yield offered by STRC is very attractive compared to the yield you get on most DeFi platforms, with a very different kind of risk on the other side. You're not necessarily lending to someone who only wants to borrow it to short the instrument, and you're not trying to generate yield by doing some long-spot, short-futures, or long-futures, short-spot trade like a carry trade.

You're just taking a very different form of bet, which never existed before and is only possible because we created this instrument. So, I think that's only going to continue from here.

Actually, I write a weekly column called Yield of the Week. Funny enough, this week I talked about Superstate, which I think is attempting to bring this on-chain. I talked about APXY, and I talked about Saturn. The team behind Saturn actually introduced us to Hugh and CJ.

So, yeah, we're definitely tracking their progress closely, but we're also tracking others who are innovating in the space, too. It's going to be interesting to watch play out. I'm really keen to see.

15. What are the real risks for STRC?

Right now, basically only people who have access to the Nasdaq can partake in STRC. That's my understanding, anyway, but this will actually open STRC to a global audience of DeFi. That's going to be cool to see.

I also want to get to some of the risks. What do you perceive as the current risks for STRC in its current form? And maybe, is there anything people are misunderstanding?

Yeah, I think the risk for STRC from the perspective of an investor would be that if you think Strategy and the management team of Strategy will take stupid decisions and undermine the credit quality of STRC, then that would jeopardize the future dividend stream that you should be eligible for and might make STRC start trading very differently and not trade in that target range of $99 to $100.

The mitigant over there, or what you need to believe over there, is that Michael Saylor and Phong Le are trustworthy individuals who are going to have the best interests in mind—not just for MSTR common stock investors, but also for the investors across all the preferred equity instruments. When they have stated that they want to phase out the convertible debt and not prime these instruments with more senior instruments, then you should have high confidence that they will do it. They have operated with high integrity for the last 5–6 years, so you don't expect them to go rogue and start making stupid decisions.

You should also know that there's a lot of focus and concentration on making STRC work well. That's the reason we don't do 10–20 different things that we could, in theory, do with Bitcoin or around Bitcoin, and we don't try to experiment too much, because we found something that we believe is going to be a big success. We're just going to focus and concentrate our efforts there.

The company will do everything we can to make STRC trade in that target price band. That might mean issuing more MSTR common stock to buy more Bitcoin and improve the equity buffer. That might mean issuing more MSTR, raising more cash, and keeping more years of dividends in the form of cash on our balance sheet. It might mean phasing out the convertible debt sooner or increasing the dividend rate of STRC further. We will do all of these things, because making STRC trade well and trade in the price band is the number one priority.

If that happens, then we can raise a lot more capital by keeping the trust and faith of individuals. That benefits MSTR common stock because it keeps all the upside above that 11.5%. That's the way I would describe the risk.

The other risk, obviously, is if Bitcoin has some random black swan event and just goes to zero, which I don't think is ever going to happen, and I think you would agree as well. Bitcoin is past that stage of a random technical bug emerging and randomly crashing to zero. That technical risk does not exist, and if it's not going to zero, our belief is that it's going up forever. It's going to $1 million, then $10 million, and then $20 million per coin.

You have to trust that Bitcoin is a legitimate asset class that's not going to zero, and then you have to trust Strategy and the management team to be good custodians of capital and execute the strategy well. If those 2 things work out, then STRC will be a terrific instrument for most people.

So, Chaitanya, one other thing. When we're talking about all of this—for example, STRC being backed and overcollateralized by Bitcoin—is there any scenario where the Strategy team would actually sell Bitcoin?

One thing I saw on X was people talking about this: “Hey, it's great that it's collateral, but what are even the conditions where a guy like Michael Saylor, who wants to take this to his grave, will actually part with some of his precious little Bitcoins?”

Yep. The way to think about the business model is that our ongoing obligations each year are the dividends, and we need to complete those dividend payments each year. We will always prioritize raising new capital through MSTR common stock and paying the dividends.

If MSTR common stock is not trading well and it's at 1× NAV or below 1× NAV, where it starts becoming very dilutive to issue more MSTR common stock to raise capital to pay the dividends, then we would, in theory, dip into our USD reserve—the cash that we have put aside for these needs. You would expect that the overall price sentiment in Bitcoin and MSTR will recover in 1–2 years. That's been the usual length of a Bitcoin bear market.

There would not really be any issue for us, because before we deplete the cash reserve, Bitcoin would already be back to a good price, sentiment would be back, and MSTR would trade well. If that also doesn't happen and there's a very long drawdown and MSTR is trading below 1×, then, in theory, we would first opt to sell Bitcoin derivatives.

We could sell different kinds of futures and options backed by Bitcoin, generate some income, raise some cash, forego some upside on Bitcoin, and use that cash to service the dividends. If we can't even do that, then perhaps we would step into the market and sell very tiny slices of Bitcoin.

We would sell the highest-cost-basis Bitcoin that we have first, because we would want no large capital gains. You preferably want capital losses so that we don't compromise on the tax-deferred return-of-capital treatment of the dividends. We would just sell those small slices and fulfill the dividends.

Again, you would expect that in time—in 2 years, 3 years, or 5 years—Bitcoin would recover. Then you would restart the cycle of raising more and more capital again. So, yes, in practice, we're just continuously going to raise more capital, keep buying more Bitcoin, and never sell the Bitcoin.

In theory, in these extreme downside scenarios, we obviously would not let the company go bankrupt or suspend the dividends. We would instead choose to sell high-cost-basis Bitcoin in small tranches and keep fulfilling the dividends.

16. Why STRC is Strategy’s “iPhone moment”

Before we close out, Chaitanya, what updates or milestones would you recommend we pay close attention to in terms of Strategy? Is there anything coming up in the next 12 months to watch closely?

Basically, tell us what Saylor's cooking up with AI. He's talking to his AI somewhere right now, and he's devising the next great master plan of financial engineering. Give us a clue or a hint.

I think we actually have the whole suite of products right now. You might not see us coming into the market with another iteration of a credit instrument that's even better and greater. That's why he frames STRC as the iPhone moment: This is the iPhone. We just have to go out and grow awareness, market the iPhone, and build the distribution channels.

That's what you can pay attention to. There'll be more and more awareness-building around STRC. We'll do unique and creative things, and there'll be a lot of distribution-building around STRC. We won't even do a lot of it ourselves. There'll be other entrepreneurs who find it very attractive and do things in the crypto world and in the TradFi world.

You'll see perhaps ETF issuers come in and create new ETFs backed by Bitcoin. You'll see people create private funds, public funds, and crypto tokens backed by Bitcoin. I think it'll give birth to a whole new class of entrepreneurs who like Bitcoin and like crypto but are struggling to find the right idea to work on.

Now they will take STRC as their base product and issue different kinds of financial instruments backed by STRC, which either enhance the yield of STRC and give you better performance or strip down the volatility of STRC all the way to zero. They could make a stablecoin-like product that's perfectly stable, doesn't move at all in price, is pegged at $1 or $100, and still passes through a high yield of 8% or 9%.

That's what Michael calls digital money: something that's perfectly stable and still passes through a yield. That would have maybe 1,000 times more demand than STRC itself.

I think the big catalysts coming are the launches of more and more of these instruments, like Saturn and Ibex. We're going to see that proliferate not just in the crypto world but also in the TradFi world. We'll see big banks, big institutions, and big custodians of capital also take STRC and do interesting things with it.

Unfortunately, there's no big IPO coming, but I think STRC is going to be big. It's already reached $5 billion. It's doubled in size since the IPO 7 months ago. I think it'll probably double to triple from here in very short order.

In 3 months, 6 months, or 12 months, we will have bought a tremendous amount of Bitcoin through STRC issuance alone. That would be great for the ecosystem overall.

I've always thought of the Strategy offerings as being totally separate from DeFi-native offerings. What's so interesting here—and this has really only been over the last 12 months—is the growth in demand for RWAs, or real-world assets, on-chain, whether it's trading oil, gold, or silver on-chain with perps. That has ultimately led to, I think, greater demand for real-world yields.

And then, funny enough, that real-world yield here with Stretch is underpinned by Bitcoin. Really cool to see how something like Stretch is going to benefit from this Saturn offering, along with other teams that are working to tokenize access to it and bring it on-chain.

17. Closing

As of this recording, I think there’s roughly $300 in stablecoins across all different chains. It’s wild to think about what that capital could be used for, what percentage of it could ultimately want some sort of tokenized Stretch offering, and how that’s going to continue to grow.

We really appreciate your time. You were such a wonderful guest, and I appreciate all the detail you’ve walked through here. CJ, again, thank you for your time. We’d love to have you back in the future, and I want to give you the final word before you go.

Thank you so much for having me. It’s been a great conversation, and I hope we can record another iteration of this sometime in the near future.