John Arnold is a colleague of mine at Ten31, we are five man team focused on investing in and supporting the best bitcoin businesses globally. This is our second quarterly update where we cover current market dynamics and our outlook.
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EPISODE: 173
BLOCK: 909206
PRICE: 858 sats per dollar
(00:00:01) Bloomberg Intro
(00:02:10) Happy Bitcoin Friday
(00:04:08) Gold vs. Bitcoin
(00:09:14) Institutional Bitcoin Adoption
(00:15:37) Potential Gold Revaluation and Implications
(00:24:32) Strategy's Bitcoin Strategy
(00:43:12) Strategy's Preferred Equities
(01:05:04) Bitcoin in 401(k)s and Market Dynamics
(01:10:16) Fannie Mae IPO and Economic Impact
(01:15:16) Federal Reserve Chair and Economic Policy
(01:22:24) Bitcoin Market Cycles and Predictions
Video: https://primal.net/e/nevent1qqs0afzqdu46khzv4j8yz0r6m3yxs0l4sdhr4crsrx6a9l57wgh72yqx08pf8
more info on the show: https://citadeldispatch.com
learn more about me: https://odell.xyz
[00:00:02]
Unknown:
On some of the other big news, from today, a lot has certainly happened on this Friday, but one of those is what's going on in the gold market right now. You have the Trump administration ruling that gold bars will be subject to tariffs, as well, these reciprocal tariffs. So imports of gold will be tariffed, and that's really sending shock waves through the gold ecosystem. Gold and Bitcoin are also often compared to one enough of their Bitcoin called digital gold, for example. I wonder if you think this has any ripple effects, positive or negative, for Bitcoin.
[00:00:34] Michael Saylor:
It it does. Bitcoin is digital gold that's going to accelerate the migration of capital from physical gold to digital gold. You know, Bitcoin lives in cyberspace. No tariffs in cyberspace. The big appeal of Bitcoin is it's not physical. It doesn't have weight. You can settle anywhere with anybody in a few minutes. And so gold has always been too heavy, too slow, you know, and you can't really ship it across an ocean. And if you do, now you're getting tariffs. So I really think it just reminds everybody why the digital version of gold is better than the than actual physical gold. And and I think it's gonna catalyze a new wave of institutional adoption of Bitcoin. Alright. Crypto is stateless. It's hard to tariff. Michael, have to leave it there. Really enjoyed speaking with you, though. That is strategy executive chairman, Michael Saylor.
[00:02:11] ODELL:
Happy Bitcoin Friday, freaks. It's your host, Odell, here for another Citadel Dispatch, the interactive live show focused on actual Bitcoin and FreedomTech discussion. As always, the show is brought to you ad free and sponsor free, purely supported by viewers like you with Bitcoin donations. The easiest way to support the show is by going to primal.net/citadel, where all videos are posted after the livestream ends. The two largest zaps over there was from runner die freak Mav twenty one with 10,000 sats. He said great rip. And Tresen with 10,000 sats. They were tied, so they both get a shout out. Thank you for your support. The other way you can support the app is through podcasting two point o apps like Fountain Podcasts, which you can search in your favorite app store.
Highest zap over there was from Trevor Agora with 20,000 SaaS. He said, off grid mesh networking in Bitcoin. This is how it should be done. Thank you, Odell, for staying true to the principles of Bitcoin and taking it to its highest level. Thank you, Trevor, for your support. It keeps me going. If stats are tight, if Bitcoin is tight, it is the hardest money in the world. A great way to support the show is to share it with your friends and family. Ciel Dispatch is available in all your favorite podcast apps by just searching Cielo Dispatch. All relevant links are at dispatch.com.
I see we have average Gary in our Nostril live chat. He zapped 5,000 sats. He says way easier to zap in the stream, and I I just love the the the live chat dynamic is a key part of of dispatch that makes it unique. I saw someone complaining on Noster the other day that they did a podcast, and it was never released. Well, one of the beautiful things about live shows is you know that they are all unedited and unfiltered. Anyway, with all that said, I have returned guest here, my colleague at 10:31, our resident quant, John Arnold, here for a we're gonna do ten thirty one quarterly updates, market updates. How's it going, John?
[00:04:25] John Arnold:
Doing well. Great to be here on the the Leading, Gold podcast.
[00:04:29] ODELL:
The Leading Gold the Leading Gold podcast on the Internet. Yes. Pivoting to gold. That, that intro clip was Michael Sailor talking about the gold tariffs that were announced today. It's gonna be our first topic. I, I always did say that probably, like, the worst case scenario of dedicating, you know, the last 12 of my life to Bitcoin would be if we were directionally correct, but the world moves back to a gold standard and Bitcoin just gets left behind.
[00:05:04] John Arnold:
Yeah. It's it's something I don't, I don't enjoy thinking about. Fortunately, I think it's a sub 5% chance that that happens. We may well move back to some sort of gold standard, but I don't think that world, is one where, Bitcoin price is only six digits. I think it's seven plus digits in, in that world.
[00:05:24] ODELL:
Yeah. I mean, I think the most likely scenario is that they both coexist and thrive. Right? Yeah.
[00:05:32] John Arnold:
And it I mean, it's that's the that's the easiest transition state, I think, you can imagine for global central banks, global federal treasuries, to leg into some kind of Bitcoin exposure and position and, like, whatever that whatever that means, whatever that looks like, to to have Bitcoin be the the digital gold analog that everyone can kinda wrap their heads around until the the boomers fully age out of those institutions.
[00:06:01] ODELL:
I mean, we get closer we we get closer every day to them aging out. I mean, so what are your thoughts? Let's start with the these gold tariffs that were announced. What are your thoughts there? I mean, Saylor boldly said that Bitcoin cannot be tariffed. It's better than gold.
[00:06:15] John Arnold:
Yeah. I mean, I think a couple of things. First of all, we need to be careful what we wish for with, with Bitcoin not being subject to tariffs. I think he is technically correct, but we, we have a president and administration that seems interested in finding ways to tariff everything even if, some of those tariffs literally don't make any sense. So we, we need to avoid inviting, American only Bitcoin, into, into the chat, if we can. But, the other the other piece that I'll just before we talk about the substance of that, it it blows my mind how we're still it's 2025.
We know everything we know about Bitcoin and every other digital asset, air quotes. Right? And we you know, this this Bloomberg anchor and I don't wanna, rag on her too much because I actually think she's one of the better ones out there. But, you know, she spends five minutes talking to Saylor about, about Bitcoin as digital gold. She knows she's talking to, you know, one of the most noteworthy Bitcoin maximalist that there is out there publicly. I mean, some would say he's maybe still a fiat maxi, but in any case, one of the the biggest Bitcoin devotees. Right? He's the most famous Bitcoiner, period. Famous Bitcoiner. Right? Except for maybe Trump depending on how you you look at, Trump's Bitcoin allegiance. But she wraps up the clip. She says, thanks, Marco, for coming on. Crypto is stateless. Right? Like, there's this this, like, reflex that people in mainstream media and academia and financial institutions still can't avoid just pivoting back into calling when they're in a a fully Bitcoin oriented discussion.
All they wanna do is lump that into broader crypto. And it's like you see it with, like, it's not as bad now with some of the language models, but as recently as a few months ago, I'm sure people listening have you know, if you've tried to play with any of them, had have conversations about any Bitcoin related topics, you have to it's amazing the work you would have to do to to prompt the LLM not to talk about crypto or digital assets, right, or web three or DeFi. Like, to to you have to, you know, construct, like, an essay linked prompt to tell it that you don't you're not interested in any of those topics and you wanna talk about Bitcoin exclusively. So we still all that is to say, we we still got our edge, still got a long way to go to, stamp out the,
[00:08:37] ODELL:
the noise and make sure only the the signal is what they'll discuss. But I mean, it remains one of, like, the the single best filtering mechanisms when you're talking to someone for the first time on where they actually stand and what they understand and what they don't if they use crypto instead of Bitcoin. I mean, we see it in our investor calls all the time. We see it when we're screening companies, in terms of of potential deals to make. But I would say that I mean, if if you've been watching Saylor, there was a a a deliberate change that happened as it became obvious that Trump was gonna win, and he started saying crypto, himself. And I think it was because he realized the stable coin lobby. He wanted to make sure he was, like, on point with the stable coin lobby, and he brought them into the fold and started saying crypto a lot. Yes. He's a very smart one. Pretty good about always just saying Bitcoin, Bitcoin, Bitcoin.
[00:09:31] John Arnold:
Yeah. He does, he he what what's that phrase that he'll use? Like, the the crypto economy. Like, I think he brings up a lot. So, yeah, he he has pivoted slightly to He's expanded the tent, I think, you're you're exactly right, for, for for stable coins, and for for USD dominance, extending that globally.
[00:09:50] ODELL:
But yeah. So Yeah. Go on. I was gonna say, on the front of, on on being careful what we wish for, like, the government can governments can very clearly tax the shit out of Bitcoin. They are doing it in various various ways already. Tires are just another form of tax. I mean, we obviously have cap gains tax that, adds a significant mental burden, let alone financial burden on using Bitcoin as a medium exchange for transactions. And then, I mean, on the tariff side, like, you could tariff miners. You can tariff different hardware. You can tariff all different sorts of things.
[00:10:29] John Arnold:
So they can come up with new schemes. You could do I mean, think think about I mean, like, you know, I mean, only American KYC mining pools have certain, like, privileges and, like, you know, are not subject to some sort of, like, OFAC, censorship, right, or attempt at that. Right? It wouldn't actually affect the network in any meaningful way, and, Bitcoin will go where it's treated best. But, yeah, like, as Americans, I would I would rather that we not have to, like, fight through, illogical, you know, tariffs on Bitcoin, whatever that would ultimately mean in practice.
[00:11:00] ODELL:
So, yeah, let's let's avoid that. But Back to gold. This is a gold podcast. So This Right. Exactly. Your thoughts on on this this recent move? Because you were a little bit ahead of it. I mean, you shared a piece from the Fed maybe yesterday or two days ago right before this announcement was made.
[00:11:17] John Arnold:
Yeah. It was a couple days back. I think I retweeted it. I know I put it in our 10:31 chat. I mean, I got it from, you know, the the gold goat himself, Luke Groman. So it's it's mostly just me passing on, Luke's alpha. But, yeah, a a few days ago, interestingly, the Fed posted on its website, I think this is, like, August 1, just like an overview, like, a an innocuous, like, inconspicuous overview of historical periods where central banks or federal treasuries have revalued asset holdings primarily gold. So if they've had gold on the books at, historical valuations, you know, what what how has it worked and what what has happened when they've marked those those holdings to market, and what are the mechanisms behind that and what are the downstream impacts.
It was it's very like I I, you know, I haven't, like, gone into it deeply. It's fairly, like, wonkish like thing that was buried on their website. But that's exact like, it's interesting, like, because if we were going to, if if the fed slash treasury, like, you kinda have to plus, ultimately, congress would probably be involved. But, like, if some nexus of, like, federal agencies were going to revalue gold, which for those who if you're listening and you don't know what we're talking about, The US currently holds some large amount of gold theoretically. We never got the audit at Fort Knox, but, like, let's let's assume that we hold the gold that we think we hold, marked on the books at the historical price of $42 an ounce.
That's never moved from an accounting perspective, and there's theoretically this, like, latent opportunity to, through just, the accounting trickery, basically, to to revalue that, to acknowledge its its market price of, call it, like, $4,500 an ounce now, and through kind of a a note that would be issued from treasury to Fed, basically create close to a trillion dollars of new, newly created money in in the TGA, the treasury general account that they could use to do, you know, whatever. It's like a a new treasury slush fund, basically. That option has been floated before historically at different times. I think gold bugs have talked about it for a long time, has never been, obviously, exercised.
And earlier this year, Bessent was kinda asked about this in a Bloomberg interview. Treasury secretary Scott Bessent was asked about it, and he said, well, we're we're I'm not thinking about that right now. And in politics, it's important to never believe anything until it's officially denied. So, that that, pricked my ears up a little bit. And then, yeah, like, fast forward to this week, you see this memo posted, this wonky, like, policy memo with no fanfare. Like, it's not, you know, something that they were, like, promoting on on Twitter. No one was on CNBC talking about it. Just kinda buried in the archives, but slowly, like, trickles around, matriculates through different, like, you know, academic and financial spheres. And that to me is like that's interesting because it's exactly how you would start to do, like, the predictive programming on something like this. I feel like, you know, you wouldn't you would you would drip little, like, suggestions, over time pointing to something like this happening.
Did they specifically mention Bitcoin in that? No. No. No. No. I I I'm 90% sure that one It was just about repricing the gold. It was just repricing gold. Yeah. I'd have to go back and look, but I don't think it had anything to do, explicitly with Bitcoin. But it's it's interesting because, like, they've, you know Besson has said they're not gonna do it. I I think maybe Powell was asked about it as well, like, conceptually earlier this year and kinda just blew it off and said, like, that's not even ultimately their their call. And, I mean, he's right. It would have to, you know, at least theoretically be an act of congress. I mean, we've increasingly you know, we're, looks like we're kinda merging all three branches of government into one for better or worse. So maybe maybe we could get around that in some way. But, I just I, you know, found it interesting to share it with you guys, kinda retweeted on Twitter, just because, again, like, that's a it's a subtle, like, shift in the talk track if now we're, you know, apropos of nothing acknowledging and talking about, like, the the ways that this has happened in the past and, like, the pros and cons of it and, you know, the mechanisms behind it and everything for them to just kinda, like, do the subliminal messaging of, like, hey. Here it is, and then let it trickle out throw out slowly. So, I mean, I That was the guess,
[00:15:42] ODELL:
like, the over like, the the the high level thought here is that you tariff Swiss gold refined refinery, refinement, which would drive up the price of gold, which would create some kind of gold type of shortage situation where people would would speculate and the price would increase, and then you reprice at the higher price. And then all of a sudden, you have, quote, unquote, so much more money than you had to begin with.
[00:16:11] John Arnold:
Yeah. So to be clear, also that memo didn't outline, like, anything about, you know, tariffing international local supply. It was it was all but just about, like, what would happen if theoretically, not even proposing The US should do it, but just here's how this might work. We're combining two pieces here. Yeah. Exactly. So, like, you could do this today. You could have done that yesterday, right, before any of these, like, Swiss gold tariffs were announced and get, you know, the trillion dollar benefit. I think the way that they might be combined, and this is, like, entirely speculative and a lot of it's, like, you know, schizo Bitcoin Twitter, gold bug Twitter, like, you know, rabbit hole stuff. But theoretically Nice. You could you could engender a short squeeze on the gold supply by making it really hard for so I guess as context, the Swiss bars, that are refined that are now subject to the tariffs are, I think, like, primarily what is accepted. Like, I think they're like a what are they? Like a kilogram?
There's some exact, like, weight that With the standardized bar. The standardized bar is what's accepted to settle gold contracts at, the New York Comex. And so the I think the idea would be if you make it very difficult for those contracts to settle, for some amount of time, right, if you and this probably be like this is this could be tied up in courts in in, you know, different trade organizations will lobby you in different ways, whatever. But, like, if over the next, like, six to twelve months, you introduce kind of a shock to the system, that makes it harder for physical gold to move around to settle contracts, Do you potentially set off, like, a a short squeeze of of outstanding contracts? And does that even create a
[00:17:55] ODELL:
I mean, if it's extended for a significant period of time, I think it's, like, floated out, like, 30% or something. Then the to to be able to get physical to settle, you would need, like, a 30% price increase. Yeah. Right.
[00:18:08] John Arnold:
And it might it might there might be reflexivity to it as well. Right? Depending on I have no idea, like, the, you know, the outstanding, like, positioning is for among all these guys. But, if it if it becomes prohibitively expensive for some, like, period that is indefinite and no one knows, like, when it's gonna, when it might settle out again, whether either, like, the tariffs themselves get, overturned or just, like, supply finds its, you know, finds its new equilibrium. And you don't know how long that's gonna last and you have some short position, like, the you theoretically, like, the price move could be, like, arbitrarily higher than, you know, the just that, like, 40% level. So, basically, the idea is, like, could you engender, like, a a short squeeze, some extended squeeze that pushes that adds a lot of price momentum to gold, and you squeeze the the most juice that you can out of this move if you were gonna do it. Because it's kinda like you only really get to play this play this card once, and I think some of the theorizing has been that I mean, I guess, technically, every time you you could always keep, like, marking it up to market and kinda creating new, creating new dollars that way, but you're not gonna get, like, some huge, like, you know, juice out of it most likely every time, just because the deltas aren't gonna be as big. So if you're gonna play this card, like, you want the max, like, juice you can get out of it. So maybe, like, that the the Swiss tariff thing, combines with the idea of a gold revaluation to, you know, add meaningfully to the TGA, and expand liquidity in kind of a a free way that isn't exactly QE. Like, it's effectively like QE where they're just buying their Fed is is essentially buying gold instead of buying bonds in some sense.
It's part but it's a lot more politically palatable. It's a lot more, like, logical also, I would say, just to say, well, this is, you know, this is the gold we've had for however centuries or however long it is or since we confiscated it from the French, whatever the case may be. And we've had it for so long, and so it only makes sense to market to market. But in any case
[00:20:08] ODELL:
I mean so first of all, I mean, I think it's a perfect example of how how inferior gold can be, specifically in terms of gold markets are are very centralized and very vulnerable to this type of action compared to Bitcoin that's trading twenty four seven, three sixty five around the world, highly liquid markets. It's very easy to settle. Right? Any person can settle it, you know, at home with a gold card, or like a software wallet on their phone. Yeah. I, but can you do you have a good answer for me? I feel like no one's given me a good answer for the rationale for marking our gold at, like, $40 an ounce to begin with. Like, it just seems so dumb. Like, imagine you're running a business, and you're, like, holding this you're holding a a huge amount of some asset, and you're pricing it off of, like, sixty year old prices. And I don't understand the positive of doing that. Like, why not just mark it up always?
[00:21:05] John Arnold:
I so I don't have a great answer. The ones that I've heard that I think are the most compelling are if from '71 onward when when the Nixon shock happened, we basically said, you know, the dollar is is untethered to gold and, you know, stop asking for your gold back. Like, you're you're not getting it. We're not in any way acknowledging, like, the link between the dollar and gold. And to allow it to be marked at what the market deems is in some sense, like an acknowledgment that, you know, the USD a, that, like, we, you know, we we did the Nixon shock, and we we we rugged the entire world. Right? Like, it's politically sensitive.
There are some suggestions that perhaps there are claims on the existing gold stock, among, like, European trading partners and others that, you know, from whom gold was confiscated potentially that, if you were to mark that to market, you're opening up the can of worms of your trading partners, you know, wanting demanding gold back or access to, gold that you have. So are you, like, opening up, you know, the potential for having to repatriate that or having to have whatever conversation that suits from that? I think, to me, the most, like, strategically, interesting response would be and this isn't original to me. I can't remember who said it. But, I I alluded to it earlier that it's this is a this is a card you only really get to play once.
And so I think you wanna just get them absolute max juice out of it. And I don't know that, like, for the last fifty years up until very recently, like, we didn't we didn't need to do this. Right? Like, we had the, you know, fiat reserve currency of the world. We had the money printer. We had the petrodollar. We had the the ability and, carte blanche to just, print treasuries, to to fund the government kind of at and and American society, at will with basically no consequences, at for a time. You know, we're seeing, I think, now the the long running buildup of those consequences kinda, come home to roost. But, like, for the for if in, like, the eighties, nineties, February, like, what what is really the upside of doing it? Right? Like, you you have no It's just, like, good accounting.
[00:23:27] ODELL:
Yeah. But, like, I mean, I don't know. Like, it just responsible responsible accounting. Yeah. Because It kinda reminds me of, like, the so, like, we had we had the sale or earnings earnings call, last week, and, like, all the analysts were saying that they were gonna have a 12¢ loss, but this was the first quarter where they could mark to market their Bitcoin holdings. And so it was really, like, a $40 earnings per share when you included Bitcoin earnings, and the stock dumped on it. And it was because even though that's how it the accounting used to happen, like, anyone with a brain knew how much Bitcoin they said they had and could do the math themselves.
So it was it was priced into the market. And it's kind of the same situation here. Like, if the gold actually exists, like, no one's doing the multiplication at at $40 an ounce. Right? It's like we're all doing the accounting separately.
[00:24:23] John Arnold:
So it's it's kind of retarded. Makes no sense. Well, if if there's one thing that the federal government is known for, it's logical and reasonable accounting and fiscal policies, so that's a piece of it. But, but I think the the delta is the key. Right? Like, if it's 42 and the market goes to is to is pricing gold at 500 or a thousand or 2,000, like, the higher that goes, like, the bigger that, you know, Trump card is, like, no pun intended, that you can pull out of your pocket when you need to. And if again, like, in the eighties, nineties, 2 thousands, like, we just fundamentally didn't need to to do to to pursue the policies that the federal government wanted to.
You know, the the world was fine to just gobble up US treasuries and, you know, allow us to have, like, a forty year kind of secular downtrend in interest rates and do forever wars and, you know, pay pay the boomers, you know, as much as they needed out of Social Security and, do do everything that we wanted to do from a domestic you have both guns and butter. Right? Have all the domestic and foreign policy that we wanted basically for for essentially free for a time. Now you're actually hitting some kind of, like, budget constraint. Right? Like, you know, foreign central banks haven't bought treasuries on net in, like, over ten years.
The Fed has not been able to sell long end treasuries from its balance sheet in, I think, about the same amount of time in any meaningful amount. Right? So there's some you're running up into some, like, constraint of demand on kind of the long dated issuance side, which is why you're seeing, an increasing move in the last, like, five years to the short end. And so I think what that's telling you is, like, okay. Now we might actually need to play the card. Like, now there actually is you're you're running to some extent into some kind of constraint, of, you know, issuing treasuries just infinitely without any, without any issue or potential problem in the system. And so now maybe you actually do wanna play the card. And if you do play the card, you probably want it to be, you know, that delta. You want it to be as wide as as possible. That would be, like, the conspiracy theory tinfoil hat type of narrative, I would think,
[00:26:22] ODELL:
of why you would do it. I mean yeah. I mean, the real conspiracy theory is they said they're gonna do a gold audit. Elon Trump said they're gonna walk through with a live stream, and they never did it. Okay. I wanna we're trying to keep this episode, these updates tight to an hour. And so now we've almost spent half of it talking about gold. Bitcoin is better than gold. Bitcoin is But much more than gold. Gold.
[00:26:48] John Arnold:
Agree with all that. The relevant thing to Bitcoin is, just well, a couple of things. A, in a world where the treasury just, like, magics, a trillion dollars of, you know, new liquidity into existence Right. Is, like, very pro risk assets, very pro Bitcoin, just by itself. Right? So that's that's one thing. Number two is we everyone is now fading the the SBR, for the last, like, few months. If if you if you go on, you know, Bitcoin Twitter and and and even Noster, like, there are a lot of, you know, actually gotcha, reply guys in the in the chat saying Many such cases. Many such cases that, everyone was a moron for thinking that Trump would follow through on the SBR.
And I think the gold revaluation concept is really interesting for the SBR because, a, first of all, when you look at the text of the executive order, I just wanna point out, like, we have a strategic Bitcoin reserve. It says it in the EO. Like, it has been established. Now whether you think it gets overturned after Trump is out of office or whatever, like, that's fine. But everyone should be aware, like, we have one now. Right? And to accumulate the the treasury and commerce departments were directed, not, authorized, but directed to find budget neutral ways to accumulate more Bitcoin. And wouldn't it be nice if they had a sudden trillion dollar slush fund that didn't have to be sourced from new borrowing, where they didn't have to cut social programs, they didn't have to cut defense spending to start accumulating Bitcoin?
Now I think, technically, the CBO would still score that as not budget neutral if they did it out if they did this gold evaluation thing. But I also know there are a lot of, like, goofy accounting tricks you can use on the back end to kinda get around that. And, also, at the end of the day, I think Trump doesn't really care what the c what some nerd at the CBO says. I think he cares about the narrative of, like, I didn't have to do any new borrowing, no new taxes, no programs were cut, and I was able to go acquire Bitcoin. So just, like, for all people fading the SBR and thinking that's not gonna happen, I think you're not bullish enough on Bitcoin to if you think that the biggest, greediest, most self interested government actors in the world, all the spooks in the world, wouldn't want to acquire Bitcoin, for their own strategic use, assuming that we're we're right about what it is, and you think they wouldn't wanna be involved in it in some, like, meaningful way, whether they announce it or not immediately.
I think you're not bullish enough on Bitcoin if you think that dirty tricks like this won't be used to, to go acquire Bitcoin, in budget neutral ways. So that's to me, that's, like, the real upshot for if this happens, what it could mean.
[00:29:22] ODELL:
I, first of all, Sawzall, just zapped us 5,555 sets. He says, end the Fed, repeal the Bank Secrecy Act. I couldn't agree more. Thank you for your support. Great advice. Great advice. I mean, so Mallers on Monday, founder of Strike ten thirty one is the largest and proudly the largest investor in Strike. He had a theory that, you know, they were supposed to release a Bitcoin audit as well. And we basically got a we got a little bit of information through a a FOIA request, a freedom of information request through the rage that showed a smaller subset of Bitcoin.
And his theory is that they haven't released the Bitcoin audit yet, and they've been pretty quiet about the SBR because they have way less Bitcoin than they realized, and they don't want that information to get out because one well, Malers, hypothesized that they were embarrassed, which is definitely probably part of it. There's a lot of egos at play. But even more importantly, you don't want the price to run away from you if you're trying to accumulate,
[00:30:27] John Arnold:
which we all know that feeling quite well. Yeah. Totally. That's the other thing too is, like, I, with the SBR stuff, I think we've said this for a while, but, like, I don't think we have no reason or the government has no reason to make clear, like, what they're doing with this until they're, like, fully sized. Right? Just because the second that there's, like, any kind of actual endorsement of Bitcoin, like, of buying more Bitcoin actively, like, I mean, who that there's your Omega candle. Right? Yeah. So you just dries up. Yeah. Absolutely. So you need to be I think you need to be fully positioned if you're if you're the government before you in any way publicly acknowledge an SBR.
Especially Yeah. Gone. Especially if you're starting from a whole, like like, knowledge is pointing out. Like, let let's say they have, like, a fourth of what they thought or half of what they thought or whatever and, like, they've gotta, you know, do that much more to get to where they wanna get to. Like, yeah, like, you definitely don't wanna tell people anything about, you know, current holdings. And this goes for every major player. Like, we have we have
[00:31:28] ODELL:
precedence for this. I mean, the government of Bhutan was quietly stacking in size for their size. And the only reason we found out was because they got doxed in the Celsius bankruptcy. Like, they didn't publicly tell people, like, yo, we're trying to get a lot of Bitcoin, because that just wouldn't make any sense. That's counterintuitive for them to do that.
[00:31:48] John Arnold:
Yep. Yeah. No doubt. So I I don't think we're gonna get, like, you know, we're not gonna get the El Salvador type mempool dot space dashboard of, like, here's, you know, the the Bitcoin that we're requiring every day, full transparency, gonna keep everyone in the loop on what we're doing with this. Right? It's it's still a different game. I mean, it'd be nice if we got that after the stacking happens. I mean Yeah.
[00:32:09] ODELL:
I love the, I'm hope I mean, I I think El Salvador doesn't get enough credit for leading the way on that. In terms of public stocks, you know, Meta Planet also probably doesn't get enough credit for that. It's great to see Jack's new venture, XXI, going that route as well. Obviously, we love the mempool project. We are the largest investor exclusive fund in in supporting mempool space. It's busy us and a few angels. And I also think it's just a it's a great poster child for a project that is that is open source. You can run it yourself.
You can run it at home, but they also have a sustainable business model. Like, profitable open source projects is is a trend to watch and something that I'm very excited about. I see SoapMiner's app does 21,000 sats. Thank you for your support, sir. There was some commentary in my announcement, post of this asking when ten thirty one was gonna invest in SoapMiner. I let everyone know that his bars are in all of our showers. Our families rely on them. He's saying so I just before we get to more big to actual Bitcoin stuff, this is all related to Bitcoin now that Bitcoin is the macro thermometer of the world. He mentions the trillion dollar coin idea. This is something that I've been, ever since I was became a Bitcoiner. So, like, over a decade, I've been fascinated by the trillion dollar coin concept.
They could just mint the trillion dollar coin and buy Bitcoin with it. Wouldn't that be budget neutral?
[00:33:49] John Arnold:
I think, again, technically, from, like, a CBO perspective, it wouldn't be. But, like, I yeah. I I I mean, at the end of the day, they're they can and will make up the numbers they need to make up in whatever fashion is, like, legally palatable and pull it and that they can sell politically to accomplish, like, the objectives that they that they have. Right? So, yes, we like the printing press. Like yeah. Jokes aside
[00:34:13] ODELL:
jokes aside, so, like, the whole idea is that, I guess, the treasury can basically just mint any coin they want, and then we just have, like, value out of thin air. But the problem is right now is what they're trying to balance is a mandibles type treasury situation where the long end of the curve is running away from them regardless of what they do. Like, people are questioning, the responsibility of the US government and whether or not we're gonna pay back our debts and what inflation rate that happens at, you know, in a ten year timeline, like a lot of inflation could happen in that period of time. So that kind of move would just absolutely destroy the treasury market.
[00:34:53] John Arnold:
Yeah. For sure. And, I mean, look. It's like it's it's a it's a relevant question for, like, the gold evaluation idea too, because you've effectively like, there's a there's, you know, trillion dollars of, like, newly created reserves out there, that will flow into into the system, and there will be, like, very likely, a price inflationary impact from that as well, like, depending on, I guess, you know, where it hits first, in the economy. But I also think, like, that's kind of baked into the cake now. Like, I just don't really think we're likely to see a debt the, like, the next decade. Like, we don't have to go into, like, Weimar hyperinflation for you know, to have, like, you know, 5% type inflation, seventies like inflation, especially given you know, we just saw the BL the head of the BLS fired last week, and we already know CBI is a basically, the most manipulated metric, you know, on the planet. So they're not past making up the numbers and putting out the data that they want to, accomplish their objectives.
So, yeah, I mean, I'm I I think either way, like, whether it's trillion dollar coin, whether it's gold revaluation, I I think they actually need essentially negative real rates now for the next, like, ten years at least, to get get your GDP back into some kind of reasonable, reasonable range. And so, like, yeah, you should probably plan for and expect, you know, something like mid single digit plus, inflation, whether that's CPI or a real metric.
[00:36:19] ODELL:
Yeah. But, I mean, the quest the yeah. But the question is if they could actually pull it off. I don't actually think that's possible.
[00:36:25] John Arnold:
Which piece do you think is not possible?
[00:36:29] ODELL:
I I mean, I don't I don't think it's possible for them to get the treasury market under control. I I think they're they're losing control of of of yields, and I think they're they're I I I think we see rates start to run on the long side regardless of what the Fed does. And the only real response we can have is to actually kinda lean into it and and, you know, let inflation run hot alongside of it. Like, how do we even handle that?
[00:36:58] John Arnold:
I think I think you underestimate how aggressive the Fed can be if it needs to. If if it if they have the guy in charge to do what they wanna do, if they have, like, the Trump sycophant, like, partisan involved and everyone's on everyone's on sides, some news about that this week that we can maybe talk about as well. I think if if Trump nominates himself as Fed sec
[00:37:17] ODELL:
Fed chair. Yeah.
[00:37:20] John Arnold:
Yeah. I wouldn't somebody somebody was saying that the other day, like, you know, there was some, like, like, boomer type who was trying to call, like, the the end of, basically, the end of the American financial system after, GFC in a way. Like, he thought that, like, that that was it. And that was the big one, and it was all going down. And he was like, well, I was wrong because I just I never imagined how much the Fed would expand their balance sheet in response to that. Like, I just had no idea that they would be so aggressive. And, this was, like, on a podcast. I remember who who were the people were that were talking, but the other guy was said to him, like, well, you should start imagining it. Right? Like, there's there's no reason. Like, it's all it's all completely made up numbers, and they have, you know, unilateral control over it. Like, the there's no reason the balance sheet can't expand by an order of magnitude to keep yields where they need to be. The the release valve is just gonna be inflation and especially, like, if you're not an asset owner, like, unfortunately, like, the the regular person just takes it on the chin. Like, the person who isn't benefiting from, you know, the financial repression, on the asset side, like, yeah, we, you know, we have a long history of doing that. And so all you really need is to make sure those people don't, like, openly revolt, or, you know, vote in, what's his name, Mondani from from New York to to run the country and completely, you know, go the other way on policy. Like, if you can keep the boat reasonably steady, like, people will kinda take I think people will take a lot on the chin. People will take a lot lying down, unfortunately.
[00:38:51] ODELL:
I think we saw that five years ago. It was also, like, it's a hidden tax. Right? I mean, that's also why the tariffs are so effective. Like, has any president ever come into office and just at least no modern president has come into office and effectively raised taxes significantly with no one batting an eye? Right.
[00:39:08] John Arnold:
Yeah.
[00:39:09] ODELL:
I, okay. Let's let's move on to the next topic. I wanna talk about, I wanna talk about current state of MSTR of strategy, specifically, their preferred equities. They finally seem to have bolted on a Bitcoin business model, and it's on this financialization side. They have four preferred equities now. The most recent one is STRC. What are your thoughts?
[00:39:38] John Arnold:
Well, first of all, I apologize to all the regular viewers and listeners of this podcast that tune in for high signal freedom content and have been subjected to half an hour of of gold and now MSTR discussion. So I'm very sorry for that. But no. Like, it's either way, like, whether you like MicroStrategy, whether you, you know, own equities or not, whether you own MSTR or not, whether you think Saylor is a spook or not, the reality is they've got over 600,000 Bitcoin on balance sheet. They're becoming one of the biggest publicly traded companies in the world. He is, as Odell said at the beginning, you know, one of, for better or worse, one of Bitcoin's biggest kinda advocates and public spokespeople. So, you know, it is relevant to kinda general market dynamics for Bitcoin,
[00:40:25] ODELL:
you know, what they what they do. You can't ignore it. You have to pay attention to it. Yeah. And and regardless of what happens in the next bear market, I I will just put out there that I think it's unlikely that he'll be a fore seller. You can absolutely guarantee that the majority of FUD will be the implication that he's gonna be a fore seller regardless of him selling or not, because we've never had a stack that large in a public facing entity. There's a reason why Satoshi disappeared, and now we have a Satoshi level stack, with with a board and earnings calls and shit.
[00:41:01] John Arnold:
Yep. No. No doubt. Yeah. I think to to so to get a couple things out out of the way because I'm gonna I probably piss off, like, every both people who, you know, hate MSTR and all the MSTR fanboys, at least for, like, you know, if they're among the the dozen people listening to this, you know, maybe piss piss on both sides. But, I disclosure, I have a very small MSTR position myself, because I couldn't help myself. So I am a a common shareholder, in a in a small way. And, also, I agree with everything Matt said cosign. I think that the the FUD around, like, Sailor's gonna blow up, and that's gonna be the catalyst for the next bear market. Like, you know, it's a it's a very, like, mid curve take, and I think you should just look at the numbers.
He, I think, is extremely unlikely to become a fore seller unless you think we're heading into, like, a multiyear extremely, extremely rough, like, 80% drawdown type bear market, which is possible, but I you know, it's certainly not my base case. All that said, none of that suggests that it's a good idea necessarily to hold the common stock over Bitcoin. Like, you very well may not outperform Bitcoin by holding MSTR. I think it's very much an open question.
[00:42:12] ODELL:
Well, I mean, I think that's the calculation that you have to be thinking. You're you're taking on additional risk. You're you're giving up custody, right, instead of self custody Bitcoin. Self custody Bitcoin is the Apex asset. Right? Yep. There's no other asset that has the properties itself. Like, self custody Bitcoin is the superpower, so you're adding on additional risk in an attempt to outperform Bitcoin. I mean, I'm most fascinated by the the preferred equity offerings. I guess I I think, like, there's a there's a small subset of people that understand Bitcoin. There's a small subset of people that understand what he's trying to do with MSTR.
There's even a smaller subset that understands both. And, I mean, even the preferred equity just, like, to set up this conversation, like, part of the reason I think he won't be a fore seller even in a long bear market is because all of a sudden he has the preferred equities that he can tap instead of instead of selling Bitcoin or selling common in, like, a death spiral type of situation.
[00:43:12] John Arnold:
Yeah. I think I think that's, that's definitely true. I mean, the the only thing that would really, like, make him a, you know, a a forced seller would be, you know, the the converts that are still on the balance sheet. And even then, like, there's so much capital, that you you have to believe truly awful, you know, truly awful and long Bitcoin bear market, you know, would be coming. And even then, he'd still have options to probably not sell Bitcoin. You might not wanna be a shareholder in that case, but Right. Two two things can be true. You know, buying MSTR comma is not a good idea, and, also, you know, Saylor's not gonna be a fore seller. All that said, I do think the the prefs have been really interesting to see play out.
I have been, I'll say, pretty bearish on the entire pref strategy for up until literally probably, like, this last week. Really? And and I still remain actually a a bear on all of the non STRC prefs, the non stretch prefs because, you know, the SDRF, STRK, STK? STRK, STRF. Yeah. And not necessarily bearish in terms of, like, how those will perform. Like, they they may be, you know, reasonably good, reasonably good rate of return. It depends, like, you know, what your benchmark is. You know, I don't I don't necessarily think that that's, like, gonna be a a horrible, you know, trade or horrible investment. No real call there. The bigger thing to me is as, from the perspective of MSTR common, his narrative with these has been, well, this is our, like, our next move into fixed income. Like, he keeps trying to frame these as, like, we're attacking the fixed income market. There's, like, a $100,000,000,000,000 of trapped capital that's in bonds, and, you know, they they can't really access Bitcoin. Well, we're giving them something that, you know, that they can buy that falls in their mandate. And I just think, like, that's it's just wrong. Like, that's just not the the prefs, STRK, STRD, and STRF, like, don't really address any meaningful amount of, like, the of fixed income buyers because, first of all, it's right in the name. It's not fixed income. Okay? Like, he he can he can at will, essentially, suspend the dividends. And I know there are different conditions on, like, which ones are cumulative and which ones are not. I I can't remember which is which are which, within that stack.
[00:45:28] ODELL:
They are seem to suspend he can suspend STRF, I think.
[00:45:33] John Arnold:
Maybe that's right.
[00:45:35] ODELL:
Although I think STRK is the one that has the call option.
[00:45:39] John Arnold:
Right? Yeah. That's right.
[00:45:41] ODELL:
So that one you can convert into Yeah. MSTR. So it has it has some upstart addition, but STRF, I believe, is cumulative, and he can't suspend them. Like, they're actually it's actually perpetual.
[00:45:53] John Arnold:
So I thought he still well, so that's the other issue, but I thought he still had an STRF, some leeway and flexibility. I have to give him a look. He probably does. But yeah. But the other piece is the fact that they're perps. Both of those things, I think, take it, like, in take, these instruments immediately out of outside the wheelhouse and the addressability of all of the vast majority of, like, institutional fixed income capital that is out there, because, like, bond math in general that these guys are underwriting on is is based on, again, fixed income payments. Like, you know, if you if if you if you suspend payments on interest, like, okay. You're in default. Like, we're taking you to court. Like, that's that becomes its its own, its own thing. So the math is based on actual, fixed payments and a and a maturity date. Right? And that you're going to get principal back specifically on, like, a defined maturity date.
And anything that doesn't fall that does not have those features is, I I think, realistically, like, very, very difficult for your average, like, bond investor at any, like, large shop to buy or even look at. And, of course, they also the other piece is, like, most of these guys need, you know, something to be rated and, from a credit rating agency. And, you know, Saylor has talked about trying to get these things rated, and maybe that'll happen, but I think that's probably a long slog because there's fair I think there's still very little appetite among, you know, your Moody's and Fish and S and P institutions to look at anything like this in a serious way. So you don't have the ratings. You don't have an instrument that really, like, looks actually like Gaband. Like, it's it's more certainly more similar than, like, common equity, but, it's, it's still, I I think, not really a a good product for the vast majority of allocators out there in bonds and fixed income. And I think you can kinda see that with, like, the level of uptake that they've had so far.
You know, they they haven't really, like, flown off the shelf in the way that you They're all still brand new. No. Oh, totally. Yeah. But, like so that's a good transition to STRC. Like, compare them to Stretch. Like, Stretch was radically oversubscribed, like, immediately. And I think that's the one that has, like, some real product market fit because so this is the one that he's, you know, essentially kind of copping to, like, a money market fund. So it's something that's intended to be kinda stable in face value, you know, within, like, a very narrow range.
You know, 98 to, like, $1.00 1, I think, is what the the target band, and, you know, pays, like, a very low It's a 100 it's supposed to be a $100. It's supposed to be yeah. You could think of it as, like, you know, like, yeah. He has a he has a band he'll defend, but, like, it's supposed to be, you know, stable value, stable principal value with a with a variable dividend that they adjust to as necessary, to kind of stay within that band. They basically increase was like They increase the interest rate if it goes down,
[00:48:46] ODELL:
because it's paid monthly. And then they then they just, like, smash the ATM and just sell a a shit ton of shares if it if it goes too far over par. Right? They can also, yeah, they can also do, like, buybacks and forced calls, I think. Yeah. Understood. That that one has forced calls in it. Yeah. And, like, one zero one or something.
[00:49:04] John Arnold:
Yeah. And there's some conditions around that, but basically, like, that's the idea. Right? But the reason I think that that's, like, a step function change relative to the others is, like I said, product market fit. The pools of capital that that's targeting are money market funds, which are basically if you've ever had a brokerage account, and you're keeping, you know, cash on the side to, like, deploy into stocks later or something, right, you could just park it in. A money market fund that is basically composed of, like, very, very, very short dated, like, government bills, and it'll pay, you know historically, up until a few years ago, it'd pay, like, basically nothing. It'd be essentially no different than a savings account, at a bank. Slightly higher yield than a savings account. Slightly higher yield than a savings account. Slightly higher yield. FDIC protection, basically. Yeah. Although you do you do have this. There is, like, SIPC protection up to some level now. But in any case so it's basically and also, like, we we we already found out, like, what would happen if any of these things broke the buck, in o eight and also what would happen if, like, you know, you had a real banking crisis. Like, the Fed would just become the FDIC and backslap everything. So to me, that's kinda, like, irrelevant now. But in any case, after when the Fed started hiking rates, money market funds actually started to pay, like, a a meaningful yield, like, you know, four to 5% kind of, like, became something like a high yield savings account.
And now there's yeah. So a lot of capital flowed out of, you know, savings accounts and into money market funds just to, like, sit there and and park it and, you know, collect the the yield in the meantime. And so now you've got, I think, it's, like, 10 to $15,000,000,000,000, something like that, of maybe that's a global number. I don't know if it's US total, but it's it's a meaningful amount of capital in broad money market funds. You've also got a, set of investors that you would think of as kinda like income investors
[00:50:48] ODELL:
that, you know Yeah. Like old boomers that, like, just do dividend stocks.
[00:50:53] John Arnold:
Yeah. The the, like, the the dividend And they have a lot of money. Yeah. No. Totally. The if you've ever been on, like, FinTwit, like, financial Twitter, I don't necessarily recommend that anyone start that habit. But, there are, like there's a whole, like, subset of, like, guy. That's like a personality type is to be, like, a dividend guy. Yeah. There's many of them. Off dividends. Yeah. Or, like, the Passive income. Yeah. Exactly. Passive income. Yeah. And so those guys aren't, like you know, they're perpetual in nature. Like, they're theoretically wanna own something, like, forever if they can and just, you know, clip the clip the coupons off it. They don't have, the same type of, like, institutional mandates around, like They have no mandates. They're, like, like, 2 to $5,000,000.
Yeah. And they just buy dividend stocks. Yeah. Sure. And, you know, there's no there's no risk waiting. There's no, like, something that needs to be rated. There's they're explicitly they don't want, you know, maturity necessarily. Like, they want redeemability and, like, relative stability. But, like, mostly, they're they're trying they're just trying to clip coupons and get income. And if they don't have to take price risk to do it, like, you know and they can get nine to 10% kinda yield relative to, you know, what it what's Coca Cola's yield right now, like, dividend yield, like, 3% maybe. Like, kind of these dividend, dividend aristocrats, if you look those up. You know, those are, like, low single digit, mid single digit maybe type type yields.
Granted, you know, they're growing over time. But either way, like, that's kinda what you're looking at. So you but either way, you've got that pool of capital. You've got money market funds. And both of those types of buyers, are you know, don't have the same, like, risk waiting questions. They don't have the same, like, rating needs. They don't have, you know, bond math constraints that they're thinking about. They're not comping it to, like, you know, a ten year treasury or something like that. They literally just wanna sit there and have, like, relatively stable value that gives them, like, indefinite income. And they've already made the decision if they've got the capital in those things versus Bitcoin or equities or bonds or something else, that basically they want, like, a cash like instrument that just pays them income. Right? And that's what this is.
And I think this is the first one, this stretch product that really caters very directly to a a particular and and very large, like, market segment that he can go sell into. And I think, you know, it's very early. It's only like, they've only done, you know, the one issuance. But the thing was, like, five or six x oversubscribed, I believe. Everyone seemed to kinda get immediately what it was. And, you know, I think this is one that they could go really do big size in,
[00:53:23] ODELL:
over over the next couple years. And if if you're not, like, an outright Bitcoin denier, like, if you compare it to other alternatives, the risk is actually way lower than what like, risk to yield like, risk to dividend rate is way, way lower with this product than any of the alternatives. Yeah. As long as you're not, like, a complete Bitcoin denier and you don't think it's just gonna go to zero and fail overnight because then, obviously, there's really no collateral. Yeah. I mean, to me, I, like, I think it's interesting because, like, high level, why do I think it's interesting? First of all, for the first three products, he actually doesn't have direct control over what that interest rate is. It's market determined. So he kinda just throws it into the market. Yep. And then over time, like, the market's gonna presumably I mean, if you're if you're bullish on Bitcoin, presumably, the market's gonna bring those rates down, and the market the market participants are gonna decide basically what interest rate he needs to pay on, on on those preferreds.
So instead of him having to, like, call up people and make deals and shit to to borrow and buy Bitcoin, it's just like this outs these outstanding products that that that they exist, and the market can determine what his borrow rate is effectively. Because when he's when he's doing ATMs on them, when he's selling new shares of them, that's effectively his borrow rate. And it's kind of like this beautiful free market ish kind of solution to that problem. STRC is a little bit different because he set it up so they do have more direct control on what that rate is. Hypothetically, it probably should be the lowest rate of all of them because it's it's paid out monthly.
He did he did block himself a little bit. Like, they can't lower the dividend rate, the the effective interest rate. They can't lower it's like a it's a certain amount they can lower it every month or something. Yeah. I think it's 25 bps or maybe 50 bps. So you can't just, like, dramatically decrease it on you. But, like, high level if you think about a high level as a Bitcoin bull, right, what is he doing? He's instead of selling the common, instead of selling MSTR to buy Bitcoin, he's selling the preferreds that are paying a yearly dividend rate.
That yearly dividend rate, most of them came out around 10%. Right? So 10% annual. Every year, he has to pay 10% on it. Those rates will probably go down unless treasury yields go up significantly. Like, they'll probably be kind of anchored to treasury yields, but they should go down from 10. But the idea is that if Bitcoin outperforms that rate of return, then instead of selling common today to pay for the borrowing, you sell common to pay for the dividends in a year Yeah. And Bitcoin has outperformed them, and that should be accretive to the common shareholders. Right? The Bitcoin per share for the common shareholders should go up. Like, that's the high level thought process. Right? And that seems compelling to me. Yeah. Yeah. And I think that that's exactly right. I mean,
[00:56:39] John Arnold:
from a common shareholder perspective, the problem that I think you still run into is and I'm just I'm still kinda working through this in my head. But as long as there is a drag on your BPS, your Bitcoin per share from issuance of the dividend, even if it's very deferred and you would it's like a drag that you would, like, absolutely accept, as it relates to, like, the time value of money, like, only having to take the hit over, you know, a very long period as Bitcoin rips. You're pushing it out. Yeah. You're pushing it out. I think there are a lot of scenarios where if you don't also have, like, a rising MNAV, a rising multiple on the stock, or at the very least a consistently, like, you know, 1.5 to two x. I don't have all the math in front of me, but, I I think you would probably, in a lot of scenarios, still be better just holding Bitcoin in in the same case. Right? So I think to really get leverage on it as a shareholder, like, you need to believe that that multiple is gonna hold and probably go up. And I think there's maybe a reasonable case for that if Saylor is starting to, you know, if if he's starting to distance himself from the pack even more so and establish a a durable, repeatable flywheel of, issuing these things to, like, aggressively and quickly, you know, acquire Bitcoin in size and effectively then defer the, the cost of that over a very, very long period to the common shareholders.
If you believe that he can keep doing that in maybe an accelerating fashion, then, like, arguably, like, there's reason for the, you know, the MNAV to actually start to rise and be somewhat, you know, durable. I don't know where it should shake out. But I think we talked about this last time. But the replacement cost of, like, building another MSTR, the reserve that he has, especially if you think he can kind of accelerate that flywheel of, further Bitcoin acquisition. Like, it's not clear to me that that should just be that that should necessarily trend to, like, one times nav. And so,
[00:58:47] ODELL:
I think the real question is the real question is is how he can monetize that advantage, if if he can effectively monetize that advantage. And I think, like, the preferred shares are basically his first example of trying to monetize that advantage.
[00:59:04] John Arnold:
Yeah. I mean, it's kind of like it's not really this yet, but it's like it's a little like, bank note issuance during, like, the free banking era. Yeah. You know Private banking. Private private banking. Like, there's I'm I'm giving you something that has, like, some face value that I'm I'm you know, should hold. It should be pegged to this, like, value of, you know, a $100.100 on the dollar, and, also, it's it's paying you something to hold it. Right? Like, some interest rate effectively, in this case, like, a, you know, dividend yield. And the market will decide, like, if I can defend that peg, essentially.
And, you know, if if the market is, like, not confident at all that I can, then, you know, incremental issue on incremental issuance, I have to pay, like, much higher rates, right, to to be able to to issue again. But the collateral base here is so strong, that I think it's very likely at least until he, you know, balloons this thing to some insane size that he very, very likely will always be able to defend this peg, you know, at at reasonable sizes. So, yeah, like, that's kinda what it reminds me of. He's talked about, you know, becoming a Bitcoin bank, over time. You you made that comment last year that everyone, you know, flipped out about, flipped out in a positive way. And this is the first, like, this is the first product that I think he's issued that kind of does, like, look something like, you know, pre pre fed, pre 1913 kind of, you know, private banking, type product. So that that's like I see this one as, for for all those reasons, as kind of an interesting, like, step function change in the strategy, and and maybe he's actually now kind of unlocked the the first way to, to durably monetize, in a differentiated way the the asset base that they have. I still don't know if you would not just be better holding Bitcoin. It probably depends on the MNAV that you enter at. Like, you know, if you buy it at, you know, four x or whatever, like, probably you're gonna perform. You buy it at, like, 1.5, like, you know, probably have a much better shot at kind of benefiting from the leverage of it.
But, yeah, that's gonna be the eternal question here is, like, why should I not just hold Bitcoin?
[01:01:13] ODELL:
Yeah. I mean, the the proper way of thinking about it is you're taking additional risk. It needs to outperform Bitcoin. So if it's not, then it's clearly not worth taking that additional risk of holding self custody Bitcoin. And I think he I mean, he's definitely aware of that. I think a lot of market participants aren't yet. I think there's a lot of market participants that probably don't even hold self custody Bitcoin. I think there's a lot more retail involved than people give it credit for. You know? Like, the the argument has always been it's trapped institutional money. They can't buy Bitcoin directly. I think there's a lot of retail that only owns MSTR, and maybe other derivative, you know, Bitcoin stock plays, and don't hold self custody Bitcoin and aren't actually thinking about whether or not it's outperforming Bitcoin yet. But I think as the market matures, that is clearly gonna be, what what what buyers are thinking. Is if I buy this, is it gonna outperform Bitcoin or not? And it's not just for MSTR. That's the crazy thing. Over the next decade, every single financial decision, every single capital allocation decision is gonna be increasingly measured against Bitcoin. And if you can't outperform Bitcoin, you're better off just holding Bitcoin.
If if if an investment into your own business can outperform Bitcoin, then you're better off holding Bitcoin than trying to grow your business, etcetera, etcetera.
[01:02:41] John Arnold:
Yeah. I mean, I was gonna connect this back to to 10:31 in that way. Like, it's a conversation we have with all of our founders and and portcos every day. It's a conversation that we have internally with potential new investments, like the the hurdle rates of Bitcoin. You know, we've written extensively about this. Like, we, we comp ourselves to Bitcoin to the opportunity cost of just holding Bitcoin instead of, you know, investing in a company. So, yeah, I mean, as as this as knowledge of this distributes, Bitcoin can't help but become kind of your your reserve asset and unit of account, and it so it dramatically changes the, the the ROI calculations you have to make.
And I really quick, I'll just say for, like, the the traditional finance people, all all two of them listening, there's an interesting connection to be made with I recommend everybody who's listening, go read the book The Outsiders by William Thorndike. It's a great book about kind of, CEOs over the last, like, fifty years, and public companies that have just done things very differently, and generated, like, inarguably fantastic returns relative to, like, you know, the S and P, for their shareholders as a result. And, Odell, you said something about, like, you know, making an investment in your business, growing your business might actually not be, like, the the right thing to do relative to just holding Bitcoin or distributing to shareholders, distributing excess capital to shareholders so they can hold Bitcoin, like, whatever.
That connects, like, very directly to the return calculation a lot of these CEOs were making. Like, when you're a CEO, your instinct is like, I wanna empire build. Like, I wanna get bigger and bigger and bigger. I need to go buy more businesses. I need to go open more factories or whatever. But very often, like, the highest ROIC thing you can do for your shareholders is, like, buy back stock or, you know, pay dividends or spin off, like, some segment that's underperforming or whatever. Right? And so I think, like, good CEOs, like, really strong, like, 10 x CEOs have already been making this calculation for, you know, decades, and Bitcoin just, I think, slots really nicely into that, like, capital allocation framework of what I'm trying to do is give my shareholders the best possible return.
And in this case, like, now I have to I have to include, like, either holding Bitcoin or distributing to them so they can buy Bitcoin into that calculation. And so I think, like, the best executives in the country, in the world over the next ten years, like, will start to think about this in a on a much more forward basis. And I know we have several, CEOs in the portfolio who are already, like, doing that very directly. So that's definitely a theme that, is gonna be key next decade.
[01:05:04] ODELL:
Okay. Well, we'll reevaluate we'll touch back on all this stuff in three months on our next quarterly update. By the way, Freaks, in the live chat, if you have any questions for us, feel free to drop them there. We've already passed our one hour internal deadline. We have a couple more topics on the list that I like to get through. So let's try and wrap them a little bit on the quicker side.
[01:05:27] John Arnold:
That's that's tough for me as you know, but I'll try. Not do a half an hour on each topic.
[01:05:34] ODELL:
Let's talk about the this should be a relatively quick one. Let's talk about the Bitcoin and $4.00 1 k's announcement that happened two days ago or three days ago. Yeah. What are your thoughts there?
[01:05:45] John Arnold:
I mean, it's still a little I think the EO is, like, somewhat light on how you, like, what, Actually do it. How how you actually do it and how it gets administered. But, yeah. Like, I, you know, I don't know there's a lot to say other than it's, yet another kind of bullish update on, like, unlocking capital to to come in and own Bitcoin. It's still, like, remarkably, you know, difficult to to do. Like, I for example, like, I have, like, a a legacy, like, Vanguard self directed IRA that I need to just, like, move to move to unchained. But, like, it's, you know, maybe not big enough to kinda justify the the cost, but in any case, like, you still with Vanguard, the biggest kind of asset manager, in The United States, you can't even buy iBit. Right? Like, they they haven't you you can you can run, like, very insane. You can have, you know, crazy MSTR option strategies, in in Vanguard, by the way. Don't ask me how I know. But, you you can't, you can't just buy straight ibid. So the point is, like, we're still very, very far from, like there is legitimate trapped capital in a lot of these accounts that, like, you know, is gonna be slow to move to, like, say, an unchained IRA or something like that.
And, you know, having the the ability for some of that to, quickly and easily get into Bitcoin is, I think, like, very obviously just, like, a bullish tailwind for for Bitcoin. So, yeah, we'll we'll we'll stay tuned for updates on how it actually works and how it gets administered and, you know, where what the custody looks like and what it even means to, like, hold, you know, Bitcoin in in one of these vehicles. But, yeah, it look like it's of a piece with everything that we've been seeing this year in terms of, like, regulatory policy. Just like one more positive domino to fall. The one other thing I'll add is just notably, the EO includes it's not just it's Bitcoin slash crypto, but also, like, investments in, like, private equity vehicles. And if you've been paying attention at all, you've probably you might have been seeing over the last, like, six months, six, twelve months, like, there's been a lot of talk among private equity executives about democratizing access, quote, unquote, to Dump on retail? To their funds. Yes. To to dump on retail, like, from their funds that are having, you know, notorious issues making distributions and can't find exits for their their portcos.
Now we need to make sure that retail has the ability to participate in that and give them some exit liquidity. So, yeah, just interesting, to see Bitcoin bundled in with that. And, if you're if you're thinking about one of those private equity investments in in an IRA, just, you know, consider maybe just owning Bitcoin instead.
[01:08:18] ODELL:
Yeah. I mean, I'm most super torn on that because I'm a free market personal responsibility guy, and I think, like, the accredited investor stuff is, like, all very paternalistic. Like, people should have the right to get wrecked. But you're right. Like, almost every time you hear a scheme about democratizing access or, like, you know, like, crowdfunding equity and stuff, it's almost always just, like, to scam retail. Yeah. Like, this is the unfortunate reality of the situation. I guess my hope high level is that there's gonna be a transition where access is, quote, unquote, democratized, and a lot of these laws are pulled back in terms of, like, paternalistic accredited investor laws type of situation.
And a lot of people will get wrecked, which is why those laws exist in the first place. And then, hopefully, some of them will learn and be a little bit more deliberate about their capital allocation. And the fact that Bitcoin exists is like they actually have, like, a highly liquid, very compelling alternative to doing that in the first place. So maybe that reduces the effect, but it is one of those things. You know? In free markets, people there's no training wheels. There's no bumpers on the pool on the on the bowling, and people will get wrecked.
Okay. Fannie Mae IPO memo.
[01:09:35] John Arnold:
Yeah. I mean, so that yeah. That hit this, this morning, I believe. It kinda goes back to it it's interesting that you would get, like, the Swiss gold tariff, the gold revaluation memo, and this, you know, potential for Fannie Mae and Freddie Mac to be IPO ed. As quick background, they've been in conservatorship by the government, since o eight, since the financial crisis. These were the government sponsored entities that basically backstopped,
[01:10:01] ODELL:
and continue to backstop all all mortgages in in The United States. Soon as you get a home mortgage, you get one of those thirty year fixed rate mortgages that no bank would ever give you Yeah. If they were actually being logical. It just immediately gets bought by Fannie and Freddie Yeah. Exactly. Behind the scenes. Like, literally, like, a day afterwards, it just gets packaged up and sold to them. And that's the only reason Americans have thirty year fixed rate mortgages in a highly inflationary environment.
[01:10:26] John Arnold:
Yeah. Absolutely. It's something you definitely don't appreciate until you start kinda going through the process and you realize how, how rigged the the housing market is, in in favor theoretically of, quote, unquote, the common man, although we, we see how it's getting increasingly out of reach for, I think it's mostly a lot of this stuff. Yeah. I mean, it's mostly, like, a middle income welfare. It's probably one of the single largest welfare programs we have in The States. Yeah. But it's funny because, like, this this program's like this. I mean, it's obviously the Fed's expansion of its balance sheet is, like, you know, the underlying driver and enabler of it all. But, like, it's yet another example of, like, a government entity or a government program that theoretically, like, exists to, you know, maybe start with noble intentions of of making, making homeownership more affordable, but also has the impact of subsidizing, ownership of homes maybe by entities that, shouldn't
[01:11:21] ODELL:
necessarily be buying them all up and make them student loan phenomenon on steroids. Right? It's like it drives the prices of everything up. And radically increasing demand. In the system already, you're far. Yes. And then there's no way to unwind it without chaos. Like, if they unwound it, the housing market would collapse. And then, you know, I don't know what the exact number is, but a large portion of Americans, the majority of their savings and net worth is locked up in their home value. So you'd literally just be destroying that.
You have you have it's like Americans pitted against Americans, and you're just it's it's not it's not a good situation to be in. I don't know how do you unwind that.
[01:12:03] John Arnold:
Yeah. I mean, either. I don't think they have any intention to in the near term. And I think they I think they wanna go the other direction and, you know, there's because right now, like, the household savings base is or at least, like, the, I guess, I should say, household leverage is, like, dramatically lower than it was, right before the financial crisis. Like, there's there's actually a lot of, like, untapped home equity that, could be unlocked, by, you know, adding new HELOCs to people's balance sheets, right, home equity loans, credit. And I think one of the things have gone up so much? Yeah. Yeah. Prices have gone up. People refied at, you know, low rates. Low rates. Yeah.
And yeah. So and you've had, you know I think I think there was also, like, a lot of scarring, after, like, the GFC. You had a lot of people blown out of their homes.
[01:12:52] ODELL:
And so I think that Less variable rate mortgages. Less variable mortgages.
[01:12:56] John Arnold:
There's been a lot more conservatism in the last ten years, I think among a lot of, you know, home buyers, maybe maybe not in the last, like, few years. But, like, you know, over fifteen years, there's been a a decent buildup of home equity, broadly, and I think they want to I think they wanna tap that now, and I think they want people to go out and, like, take out a HELOC and, you know, spend Lever up. Lever up. Yeah. They wanna relever. So,
[01:13:21] ODELL:
yeah, I think they're gonna to save the country.
[01:13:23] John Arnold:
Exactly. As as always. But the but the again, the inter the really interesting piece from Bitcoin's perspective other than just, like, yeah, people, like if they incentivize, you know, making some new mortgage program or or new HELOC program where you get, like, super cheap financing for tapping into your home equity to go do x y z, like, yeah, that's like a pro liquidity, probably pro risk asset type environment, also pro inflationary. But the more interesting piece on the Bitcoin side, I think, directly is, like, of a of a piece with the Swiss gold tariff stuff, the gold revaluation memo. This is, like, potentially, you know, they're talking about in the Wall Street Journal article that, you know, mentions that this is gonna happen. You know, the government's looking to raise, like, $30,000,000,000 in the IPO, and I think only sell it by only by selling, like, 15% of the equity, in Fannie Mae and and Freddie Mac. And so there's a lot of there's another source of potential, like, you know, late neutral. Blatant budget neutral value that, you know, could maybe go into certain programs.
And I don't think, you know, even if they do all this, like, I don't think by any stretch of the imagination that it's all gonna just flow into Bitcoin. But, you know, a 10,000,000,000 or 20,000,000,000 or a humble, you know, $50,000,000,000, Bitcoin purchase, for the for the SBR, you know, would would would be pretty meaningful, even just from the optics perspective once it's, you know, announced.
[01:14:39] ODELL:
Gets wind to even something significantly smaller than that, it could be a catalyst.
[01:14:44] John Arnold:
Yeah. For sure. So, yeah, just interesting that all of these, like, headlines are hitting kinda this week, about potentially opening up, new new budget avenues for, you know, the government. Now I will say the Fannie Mae thing has been I think they're they're, like, people who have been sitting in that trade for, like, fifteen years, like, waiting for, like, any day now it's gonna happen. They're finally gonna take it out of conservatorship. So it could very easily still fall apart, but I think they're very incentivized to to make it happen They're motivated. This time. Yeah.
[01:15:16] ODELL:
Okay. Good thoughts. Last topic. Fed chair Powell, is he gonna stay with us?
[01:15:23] John Arnold:
Are we not gonna do thoughts on Are we not gonna do cycle top scenarios?
[01:15:27] ODELL:
Okay. We can talk cycle top. You wanna talk cycle top first or after? Well, okay. Let's let's close with that. Let's talk let's talk Fed Chair, and then and then we'll do cycle top, and we'll wrap. We'll save the spicy price predictions for you. Cycle, cycle top. Yeah. Exactly. Fed chair drama. Is Powell gonna stay to the end when his the end of his term is 2026. Right? Yeah. It's May.
[01:15:49] John Arnold:
I think he definitely stays because I think, Trump has very, you know, has pretty much already neutered him, and he has, like, the ability to not just buy, like, yelling at him on Twitter every day or on on sorry. On truth social or whatever it is. Or in person? Or in person. Yeah. Slapping him on on the back and telling him to lower rates. By the way, like, it was it you gotta you gotta, like, Trump has given us just so many iconic moments and so many iconic photos. And the photo of him towering over Powell, like, you know, a head taller than him in, like, they're both wearing hard hats, you know, like the the basement of the new Fed Building. You know? And it's just like it's it's gold, and I think it just says it all in terms of, like, you know, he's he's got the upper hand, I think, in terms of the narrative. Right? Unless you're like, you know, a a mainstream, you know, economist at, at Harvard, MIT, or, you know, the the halls of Goldman Sachs. Like, I think it's pretty clear that, you know, it's like the, you know, the which which Batman movie is it? The one that has Bane, the you know, where he's like he's got his, like, financier lawyer, like, handler who's trying to tell him what to do, and he's like, you know, I'm the one who's in charge here. And Bain just, like, puts his hand on his shoulder and says, do you feel in charge? Yeah. It's a similar thing here. Right? Like, at the end of the day, like, the government's gonna do what it needs to to get funded.
One of the Fed mandates is to, like, maintain moderate long term interest rates. And so, like, there's even already a statutory case for, like, the Fed to basically do what the government, like, needs it to do. I'm not saying this is, like, a good system or desirable system, but, like, you know, we shouldn't be surprised if, like, we go back to a world where the fed is just kinda subordinated to, the the needs of of the state, which kinda commissions it and and keeps it alive. So, yeah, I think, like, we're heading toward, you know, the writings on the wall. We're heading toward a kind of a a Trump sycophan, a Trump yes a Trump yes man, running the Fed, gonna be subjugated to what the treasury wants and what the treasury needs.
And I think Powell stays. You know, maybe he resigns just because he's he, you know, is is tired of being, you know, being in that position, but, there's really no need for him for Trump to remove him at this point. Now that Trump just had you know, he installed this week, you know, one of his kinda, yes men, I guess, you'd call him the head of the council of economic advisors, Stephen Myron, who was kinda principally responsible for architecting the whole kind of Trump, trade tariff, like, capital reorienting strategy. He wrote a white paper on it last year. Well, now he sits at the vacated chair, the just vacated chair of the Fed. So he's got a he's got a seat at the table until Powell leaves. And, you know, Trump's kind of signaling that, Chris Waller, who's a much more kinda dovish Fed governor who ex who has dissented, I think, the last couple times from the the from Powell's rate decision.
You know, he's kind of being tapped as, like, the likely heir apparent, and so he can kind of Last guy you were talking about, he actually tweeted Bitcoin fixes this twice, I believe. Oh, that's the, yeah, that's the other thing that we shouldn't forget that Myron has, has commented positively on Bitcoin in the past. And, also, in that white paper where he talks about reordering, like, the global global trade flows, he explicitly mentions, you know, gold and he doesn't say Bitcoin. He says and cryptocurrencies, but, you know, kinda know what that means. Gold and cryptocurrencies are likely to, you know, benefit from the the regime that he kinda wants to put in place. So, yeah, I mean, I I just feel like all the all the writing's kinda on the wall here, and it it may take longer than Trump wants to get to turn the ship, like, exactly where where he wants it to go. But, I'd I'd be really surprised at this point if, you know, we don't have a a much more accommodative Fed over the next, like, six to twelve months. Even with Powell in. I think even with Powell in. Yeah. Be and and whether, like I don't know what rate decisions they ultimately make. Like, maybe he still drags his feet. But, I guess I should say a a much more accommodative, like, Fed relationship because Trump's gonna have his shadow Fed chair, whoever that is, whether he ultimately wants to nominate Myron or he wants to nominate Chris Waller.
He's got his guys on the inside now that he can explicitly point to and, like, you know, the market's gonna listen to them ultimately. Like, they're gonna take their forward guidance from what those guys are saying the closer we get to Powell kind of being off the scene. And, you know, Besson has already talked about, you know, wanting to do exactly this. Like, he's talked about it last year, this kind of playbook. And so, you know, whether the Fed funds rate moves down materially in the next, like, few months, like, no idea. Maybe they still drag their feet. But, yeah, the the the talk track is is only going kind of in one direction.
[01:20:21] ODELL:
I mean, I will say that I'm, been fascinated with prediction markets for years now. And first of all, it's a huge miss that the most popular prediction market in the world doesn't support Bitcoin. Hopefully, we'll have a liquid Bitcoin, not liquid Bitcoin, but a a liquid market that uses Bitcoin, that competes with PolyMarketer. But PolyMarketer right now has a 25 bps decrease in December at the most likely 76%. No change at 18%. If you combine the 50 bps decrease, which is at 6%, that's 82% chance of a decrease is what at least the Polymarket degens are pricing it in at right now.
Okay. Well, we'll reevaluate that again in three months. Okay. Last topic, super cycle, cycle top, bear markets, timeline, thoughts.
[01:21:25] John Arnold:
Yeah. I mean, we talk about it a lot internally. Everyone, you know, talks about it constantly on on Nostra and Twitter. You know, what's what's that? Everyone everyone's got their own, like, artisanal way to cut up the cycle to show that this is either somehow, like, the best cycle or the worst cycle in history depending on how you wanna look at it. But, yeah, I think there's, like, I recommend people read, the only, like, on chain analysts, the only, like, relatively near term kind of, like, price analyst that I think is worth listening to is, is Checkmate, James Check. He he usually makes the, the podcast round, so you very likely heard of him. But if not, I think his newsletter is worth subscribing to if you're interested at all in seeing the data that he pulls. He he put out an interesting piece this week, which which is basically arguing we're about to find out if this time is different or not.
And and if so, in what way? You know, we're kinda coming up on based on prior cycle timing, you know, only based on, you know, two cycles. We're kinda coming right into the period where you would expect to see basically what we have. Like, what's what's it gonna be. Right? How how how much are we gonna rip? We're entering that positive seasonality from a cycle perspective. So, like, where's the top? When is the the, you know, parabolic ascent gonna start? Or, like, is it gonna start? And, you know, in the next yeah. I think he argues, like, ninety days where, you know, we'll probably have a pretty good idea of, you know or I think maybe even before that, like, sixty days of what what's gonna happen, in that regard. And, like, I have no idea. He has no idea. He argues it a bunch of different ways. I think it's, like, worth reading through.
The one thing that I think is, like, worth thinking about with with this issue is, like, I saw someone say I can't remember who it was, but, like, someone suggested, like, there is a huge amount of, like, cycle PTSD that people have, And everyone's so focused on, like, you know, we've got a we've got a moon by, like, October or, like, everything's dead and Bitcoin's going to zero. Right? Like, if if we don't have, like, some crazy parabolic move in the next, like, few months, then, you know, the the whole the whole game's up, and we should all just go home. And I just think, like, I won't say this time is I mean, every time is different.
So I guess to some extent this time is different, but, like, the dynamics that we have, like, at our back right now, with the ETFs, with everything we talk about this, on this podcast with liquidity dynamics, with gold revaluation, with how much, you know, Trump wants to pump assets, with the need to, like, run it hot in the economy, Trump having, you know, his yes men installed at the Fed. The the the market depth that we're seeing with, you know, that we haven't even talked about the 80,000 Bitcoin, whale dump a couple weeks ago, which in previous cycles would have just utterly wrecked, you know, momentum and sentiment for, you know, months, with nation state interest that I think, like, you just you can't tell me that's not only increasing, like, month after month, year after year. Bitcoin and $4.00 1 k's, like, MSTR being able to, you know, do what they're doing.
I mean, I I look at all that, and I'm like, I I have no idea if and when things are gonna really pop off. But I do feel like the cycles are, like, irrelevant now in the sense that, like, it kinda doesn't matter what happens in the next few months. Like, if we get past the next few months and we don't have a parabolic move, it's really hard for me to believe that, like, well, that we we therefore like, once we get to the end of this, like, cycle period, we must have a 50% dump or 70% dump coming because that's just what always happens. It doesn't make sense. It doesn't prove anything. Yeah. Like, I I just I don't see how we can have a 50 to 70% dump without a parabolic move first. So for anyone who's sitting there kinda wondering, like, or anyone who's sitting there wringing their hands and thinking, you know, if we get to December and we're not above, like, you know, one fifty or something, like, if that's it, game over, you know, we must therefore thereafter have, like, a seasonal dump of 50% or 70%. Like, I just think it makes no sense with the tailwinds behind Bitcoin and without, like, a a a prior, massive parabolic move up. Like, you just you don't get the dump without the pump. Right?
And so I think we do need to move past, like, our time based PTSD about, like, what needs to happen and by when for, like, a cycle to, to be, like, worthwhile or for Bitcoin to be, you know, progressing in the right way from, like, a price perspective. You know, all the KPIs are there. Like, I mean, there are things that need to change. Like, yeah, you could argue different things need to be, you know, improved about mining decentralization, but, you know, hash rates going one way. Like, institutional adoption is going one way. Individual interest is going one way. The mainstreaming of this is going one way. Like, some laws I would still like to see changed, and, you know, precedents that, I would like to see set particularly around, like, money transmission laws,
[01:26:20] ODELL:
which we we didn't get into. Custody at all. Self custody. Yeah. The samurai case, the tornado cache case, open source software.
[01:26:29] John Arnold:
Yeah. Totally. So not everything's perfect. I'm not saying in any way that, like, everything's fixed and perfect and, you know, they're not issues. It's not. From a pure price perspective, though, from, like, a cycle top perspective, like, I increasingly just think, like, all of these charts, like, mapping this cycle to the last or the the last couple are just, like, completely irrelevant,
[01:26:50] ODELL:
with with everything that we're seeing now. I mean, look, I think every cycle is different. They're they've never been exactly the same. They kind of rhyme, right, more than than be identical. I will say in 2017, like, this idea that bear markets are over is not a new idea. Like, in 2017, I was conservative mentally, and then we hit, like, $18,000. You know, it was, like, a run up from sub 1,000 to $18,000. As soon as, like, we hit, like, the 16 to 18,000 range, I was, like, hyper Bitcoinizations upon us. And then we had the winter, and we went all the way down to $3,500. I think we're in a very strong position right now market wise.
I'm cautious about making specific price predictions, but I think we're in a very strong position right now. I'm curious. And and and and but I I I think the idea on two sides, the idea an extreme bull run is not possible, and the idea that a bear market is not possible is exactly why we will probably have both. And, like, first, that's what always happens. It's like that's what happens. You know? The market has to get overleveraged and overexcited and overgreedy on the upside. And then at some point, there will likely, in my opinion, be some kind of blow off top, and then we will have a bear market that should probably be in, like, the, you know, 60 to 80% range. Maybe Maybe it doesn't go all the way down to 80%, but, like, not from this level. Like, first, you have first, you have the exuberant bull where people overleverage themselves and then say that there's never gonna be another bear market, And that's exactly what causes it, and people forget how quick sentiment shifts.
Once again, like, I don't even think you have to have sale or be a fore seller or people be fore seller. It's the panic of the concept of it and people trying to front run that happening in the first place that leads to a lot of these things. You mentioned the 80,000 Bitcoin sale, and, I mean, I think that's a testament to where we are currently in this, quote, unquote, market cycle. Because, like, on chain analysts saw that Bitcoin move to Galaxy before the sales actually happened. Not only historically would the market have had trouble absorbing the 80,000 Bitcoin actually, like, in the market, But the panic that would happen just for the idea that the 80,000 Bitcoin was gonna be sold would become a self fulfilling prophecy on that side, and it didn't. Right? Like, the market mostly absorbed it well. We're sitting at nearly all time highs right now. We're sitting at a $117,000 per coin.
[01:29:50] John Arnold:
Yeah. No. Exactly. Like, I to be clear, like, I definitely think, you know, bear market I'm not saying bear markets are over. I'm not saying, you know, we can definitely have a 50%, 80% drawdown again. But as you said, I just it's not gonna happen. Like, if we're right about Bitcoin, what it is, it's not gonna happen from this level. Right? The two options are either, I think, we bore ourselves to a million dollars and we have, like, some sort of, like, you know, very controlled, like, 20 to 40% CAGR type move up to, you know, a million dollars, like, five to seven years from now. And we're all, like we all kinda hate it, but, you know, we're just sitting there, like, compounding wealth, like, over time in, like, kind of a, you know, boomer fashion, just outrunning the boomers. It's either that, or we're, at some point, going to have an insane bull run followed by, like, an insane bull, or, insane bull off top and then a bear market.
But the thing that people seem to be worried about, which is, like, if x price isn't reached by, like, December, we're gonna you know, that's it. The cycle's over, and we have to come back in four years or whatever and just wait for it again, is I think just completely off. But that's where all of sentiment seems to be right now.
[01:31:03] ODELL:
Yeah. I mean, it's fascinating. But, yeah, I agree. I mean, I feel like we kinda said almost I don't like making specific predictions. I made one satirically last cycle that I'm not gonna repeat, and people still give me shit for it. So I will tell you that I will be irrationally exuberant around wherever the top is going to be because that seems to have always been the case since they got into Bitcoin. So if you're just following along on civil dispatch and rabbit hole recap, as the, exuberance increases, we're probably closer to the top.
John, this has been fantastic. Guys, we will be doing these quarterly. It'll be like a mix of market updates plus ten thirty one updates. I just like the idea in general. I have a lot of things going on in the space and just trying to be as transparent as possible with you guys and give you a front row seat. This time, it seems like there wasn't that many questions about ten thirty one specifically. But if you wanna learn more about ten thirty one, you can go to 1031.xyz. John, final thoughts.
[01:32:15] John Arnold:
I'm sure I was debating if I wanted to, throw out a price call to be spicy, but, I'll I'll It is with a price call. Just a It is with a price call. So what's the test alright. So okay. I'll I'll throw it out there. The funniest timeline would be, and therefore the most likely, would be that we get to, I don't know when this will happen. I'm not gonna, like, make a a timing prediction, but, like, that this cycle ends in, like, you know, we have a few, like, major moves and we get to, like, you know, high four hundreds, let's say. Right? And Okay. Everyone's wondering if we if we can kind of break above to, like, the psychological 500 level or, like, halfway to a million. And then one day, we rip through it. Right? And we we don't just, like, you know, go to five zero one and then come back down. We go to, like, five fifty. And then everyone's like, next stop, a million dollars. And then that's when we dump back to, like, $1.75. I think Yeah. I can see that. Yeah. Whenever I I feel like that's how the cycle ends is everyone convinces themselves that, like, a million dollars is in is in sight. We're closer to a million than we are to, like closer to a million than we are to zero. We're, like, over halfway there, and it's just, like, you know, turn on the turn on the jets, turn on turbo.
And when you start seeing million dollar price calls with high conviction, that's when you know. Like, I don't take any off the table. That's not really how I how I, operate. I know it's not how you do Odell, but, like, that's a good time to not take out a Bitcoin backed loan. Oh, no. I've never taken anything off the table. Yeah.
[01:33:40] ODELL:
I've I've I've successfully bought every top. Yes. Yeah. And I will say I will say if if we rip through 500, I'm gonna try to remember this conversation because I'm a 100% gonna be, like, in the back of my head, hyper Bitcoinization's upon us. Yeah. We're in a super cycle. So I don't think you're too far off on on that front at least. And then what is an 80% drawdown from there?
[01:34:05] John Arnold:
80% drawdown from there is a 100, which would be like yeah. I mean, I could see it. I said one seventy five, hopefully, but, yeah, if if we if we go up like that and then dump really hard, like, probably you should assume there's a 100 k retest incoming at some point. Okay.
[01:34:25] ODELL:
Do you and then also, like, what is the timeline there? I'm, like, kinda thinking we got, like, twelve to eighteen months of this bull right now is how I'm thinking about it.
[01:34:37] John Arnold:
Yeah. I'd be like I'd say I'd be surprised if we got anything like that this year. Like, I do think this, you know, this is a 26 type thing. And I think just because, like, that's outside of normal cycle timing, like, doesn't really mean anything to me. Just, like, look at everything that's going on, and I think there are some liquidity dynamics that'll actually be more bullish next year. So, like, this is this feels like a, you know,
[01:35:03] ODELL:
midway next year type thing. Yeah. Powell's out Powell's out in May. The fall is midterms. Like, you have, like, a massive exuberance in the fall enter entering, like, January ish. Like, I mean, that's at least my mental model, but I'm just gonna stay on Bull and Stacks. That's about it. That's that's the best final thought that we can offer. Do you have any other final thoughts for the audience besides just your d gen price call that you drew in there?
[01:35:30] John Arnold:
Yeah. Like Odell said, very proud of everything we're doing at ten thirty one, and encourage everybody to if you're not familiar with us, check out 1031.xyz. I think we'll continue to, be the leading, the leading fund in the space, the leading Bitcoin investor, and continue to just try to be as as creative as possible in investing in, the best Bitcoin companies and Bitcoin opportunities.
[01:35:57] ODELL:
Love it. I agree. Freaks, give me your feedback. Let me know if you enjoyed this rip. You can do that on on nostr, primal.net/citadel, or in fountain or other podcasting two point o apps. You can leave a comment there. It is appreciated. I want this these shows to be as helpful as possible for you. I have Alex Gleeson joining us next week. I like the idea of, like, these core group of return guests and mix in new voices. I hope you all enjoyed the the Ham Radio conversation we had earlier this week. I know I did. There's been a lot of excitement around it. Liberty Farmer reached out to me, said a lot of people are are reaching out to him getting interested in ham and hamsters specifically, which is this ham noster project. But freaks, as always, all the links are at silldispatch.com.
Single biggest way you can support the show is sharing with your friends and family. We're available on every podcast app. Just search Siddle dispatch. Press that big subscribe button. I love you all. Thank you, John. Stay humble sex sets.
On some of the other big news, from today, a lot has certainly happened on this Friday, but one of those is what's going on in the gold market right now. You have the Trump administration ruling that gold bars will be subject to tariffs, as well, these reciprocal tariffs. So imports of gold will be tariffed, and that's really sending shock waves through the gold ecosystem. Gold and Bitcoin are also often compared to one enough of their Bitcoin called digital gold, for example. I wonder if you think this has any ripple effects, positive or negative, for Bitcoin.
[00:00:34] Michael Saylor:
It it does. Bitcoin is digital gold that's going to accelerate the migration of capital from physical gold to digital gold. You know, Bitcoin lives in cyberspace. No tariffs in cyberspace. The big appeal of Bitcoin is it's not physical. It doesn't have weight. You can settle anywhere with anybody in a few minutes. And so gold has always been too heavy, too slow, you know, and you can't really ship it across an ocean. And if you do, now you're getting tariffs. So I really think it just reminds everybody why the digital version of gold is better than the than actual physical gold. And and I think it's gonna catalyze a new wave of institutional adoption of Bitcoin. Alright. Crypto is stateless. It's hard to tariff. Michael, have to leave it there. Really enjoyed speaking with you, though. That is strategy executive chairman, Michael Saylor.
[00:02:11] ODELL:
Happy Bitcoin Friday, freaks. It's your host, Odell, here for another Citadel Dispatch, the interactive live show focused on actual Bitcoin and FreedomTech discussion. As always, the show is brought to you ad free and sponsor free, purely supported by viewers like you with Bitcoin donations. The easiest way to support the show is by going to primal.net/citadel, where all videos are posted after the livestream ends. The two largest zaps over there was from runner die freak Mav twenty one with 10,000 sats. He said great rip. And Tresen with 10,000 sats. They were tied, so they both get a shout out. Thank you for your support. The other way you can support the app is through podcasting two point o apps like Fountain Podcasts, which you can search in your favorite app store.
Highest zap over there was from Trevor Agora with 20,000 SaaS. He said, off grid mesh networking in Bitcoin. This is how it should be done. Thank you, Odell, for staying true to the principles of Bitcoin and taking it to its highest level. Thank you, Trevor, for your support. It keeps me going. If stats are tight, if Bitcoin is tight, it is the hardest money in the world. A great way to support the show is to share it with your friends and family. Ciel Dispatch is available in all your favorite podcast apps by just searching Cielo Dispatch. All relevant links are at dispatch.com.
I see we have average Gary in our Nostril live chat. He zapped 5,000 sats. He says way easier to zap in the stream, and I I just love the the the live chat dynamic is a key part of of dispatch that makes it unique. I saw someone complaining on Noster the other day that they did a podcast, and it was never released. Well, one of the beautiful things about live shows is you know that they are all unedited and unfiltered. Anyway, with all that said, I have returned guest here, my colleague at 10:31, our resident quant, John Arnold, here for a we're gonna do ten thirty one quarterly updates, market updates. How's it going, John?
[00:04:25] John Arnold:
Doing well. Great to be here on the the Leading, Gold podcast.
[00:04:29] ODELL:
The Leading Gold the Leading Gold podcast on the Internet. Yes. Pivoting to gold. That, that intro clip was Michael Sailor talking about the gold tariffs that were announced today. It's gonna be our first topic. I, I always did say that probably, like, the worst case scenario of dedicating, you know, the last 12 of my life to Bitcoin would be if we were directionally correct, but the world moves back to a gold standard and Bitcoin just gets left behind.
[00:05:04] John Arnold:
Yeah. It's it's something I don't, I don't enjoy thinking about. Fortunately, I think it's a sub 5% chance that that happens. We may well move back to some sort of gold standard, but I don't think that world, is one where, Bitcoin price is only six digits. I think it's seven plus digits in, in that world.
[00:05:24] ODELL:
Yeah. I mean, I think the most likely scenario is that they both coexist and thrive. Right? Yeah.
[00:05:32] John Arnold:
And it I mean, it's that's the that's the easiest transition state, I think, you can imagine for global central banks, global federal treasuries, to leg into some kind of Bitcoin exposure and position and, like, whatever that whatever that means, whatever that looks like, to to have Bitcoin be the the digital gold analog that everyone can kinda wrap their heads around until the the boomers fully age out of those institutions.
[00:06:01] ODELL:
I mean, we get closer we we get closer every day to them aging out. I mean, so what are your thoughts? Let's start with the these gold tariffs that were announced. What are your thoughts there? I mean, Saylor boldly said that Bitcoin cannot be tariffed. It's better than gold.
[00:06:15] John Arnold:
Yeah. I mean, I think a couple of things. First of all, we need to be careful what we wish for with, with Bitcoin not being subject to tariffs. I think he is technically correct, but we, we have a president and administration that seems interested in finding ways to tariff everything even if, some of those tariffs literally don't make any sense. So we, we need to avoid inviting, American only Bitcoin, into, into the chat, if we can. But, the other the other piece that I'll just before we talk about the substance of that, it it blows my mind how we're still it's 2025.
We know everything we know about Bitcoin and every other digital asset, air quotes. Right? And we you know, this this Bloomberg anchor and I don't wanna, rag on her too much because I actually think she's one of the better ones out there. But, you know, she spends five minutes talking to Saylor about, about Bitcoin as digital gold. She knows she's talking to, you know, one of the most noteworthy Bitcoin maximalist that there is out there publicly. I mean, some would say he's maybe still a fiat maxi, but in any case, one of the the biggest Bitcoin devotees. Right? He's the most famous Bitcoiner, period. Famous Bitcoiner. Right? Except for maybe Trump depending on how you you look at, Trump's Bitcoin allegiance. But she wraps up the clip. She says, thanks, Marco, for coming on. Crypto is stateless. Right? Like, there's this this, like, reflex that people in mainstream media and academia and financial institutions still can't avoid just pivoting back into calling when they're in a a fully Bitcoin oriented discussion.
All they wanna do is lump that into broader crypto. And it's like you see it with, like, it's not as bad now with some of the language models, but as recently as a few months ago, I'm sure people listening have you know, if you've tried to play with any of them, had have conversations about any Bitcoin related topics, you have to it's amazing the work you would have to do to to prompt the LLM not to talk about crypto or digital assets, right, or web three or DeFi. Like, to to you have to, you know, construct, like, an essay linked prompt to tell it that you don't you're not interested in any of those topics and you wanna talk about Bitcoin exclusively. So we still all that is to say, we we still got our edge, still got a long way to go to, stamp out the,
[00:08:37] ODELL:
the noise and make sure only the the signal is what they'll discuss. But I mean, it remains one of, like, the the single best filtering mechanisms when you're talking to someone for the first time on where they actually stand and what they understand and what they don't if they use crypto instead of Bitcoin. I mean, we see it in our investor calls all the time. We see it when we're screening companies, in terms of of potential deals to make. But I would say that I mean, if if you've been watching Saylor, there was a a a deliberate change that happened as it became obvious that Trump was gonna win, and he started saying crypto, himself. And I think it was because he realized the stable coin lobby. He wanted to make sure he was, like, on point with the stable coin lobby, and he brought them into the fold and started saying crypto a lot. Yes. He's a very smart one. Pretty good about always just saying Bitcoin, Bitcoin, Bitcoin.
[00:09:31] John Arnold:
Yeah. He does, he he what what's that phrase that he'll use? Like, the the crypto economy. Like, I think he brings up a lot. So, yeah, he he has pivoted slightly to He's expanded the tent, I think, you're you're exactly right, for, for for stable coins, and for for USD dominance, extending that globally.
[00:09:50] ODELL:
But yeah. So Yeah. Go on. I was gonna say, on the front of, on on being careful what we wish for, like, the government can governments can very clearly tax the shit out of Bitcoin. They are doing it in various various ways already. Tires are just another form of tax. I mean, we obviously have cap gains tax that, adds a significant mental burden, let alone financial burden on using Bitcoin as a medium exchange for transactions. And then, I mean, on the tariff side, like, you could tariff miners. You can tariff different hardware. You can tariff all different sorts of things.
[00:10:29] John Arnold:
So they can come up with new schemes. You could do I mean, think think about I mean, like, you know, I mean, only American KYC mining pools have certain, like, privileges and, like, you know, are not subject to some sort of, like, OFAC, censorship, right, or attempt at that. Right? It wouldn't actually affect the network in any meaningful way, and, Bitcoin will go where it's treated best. But, yeah, like, as Americans, I would I would rather that we not have to, like, fight through, illogical, you know, tariffs on Bitcoin, whatever that would ultimately mean in practice.
[00:11:00] ODELL:
So, yeah, let's let's avoid that. But Back to gold. This is a gold podcast. So This Right. Exactly. Your thoughts on on this this recent move? Because you were a little bit ahead of it. I mean, you shared a piece from the Fed maybe yesterday or two days ago right before this announcement was made.
[00:11:17] John Arnold:
Yeah. It was a couple days back. I think I retweeted it. I know I put it in our 10:31 chat. I mean, I got it from, you know, the the gold goat himself, Luke Groman. So it's it's mostly just me passing on, Luke's alpha. But, yeah, a a few days ago, interestingly, the Fed posted on its website, I think this is, like, August 1, just like an overview, like, a an innocuous, like, inconspicuous overview of historical periods where central banks or federal treasuries have revalued asset holdings primarily gold. So if they've had gold on the books at, historical valuations, you know, what what how has it worked and what what has happened when they've marked those those holdings to market, and what are the mechanisms behind that and what are the downstream impacts.
It was it's very like I I, you know, I haven't, like, gone into it deeply. It's fairly, like, wonkish like thing that was buried on their website. But that's exact like, it's interesting, like, because if we were going to, if if the fed slash treasury, like, you kinda have to plus, ultimately, congress would probably be involved. But, like, if some nexus of, like, federal agencies were going to revalue gold, which for those who if you're listening and you don't know what we're talking about, The US currently holds some large amount of gold theoretically. We never got the audit at Fort Knox, but, like, let's let's assume that we hold the gold that we think we hold, marked on the books at the historical price of $42 an ounce.
That's never moved from an accounting perspective, and there's theoretically this, like, latent opportunity to, through just, the accounting trickery, basically, to to revalue that, to acknowledge its its market price of, call it, like, $4,500 an ounce now, and through kind of a a note that would be issued from treasury to Fed, basically create close to a trillion dollars of new, newly created money in in the TGA, the treasury general account that they could use to do, you know, whatever. It's like a a new treasury slush fund, basically. That option has been floated before historically at different times. I think gold bugs have talked about it for a long time, has never been, obviously, exercised.
And earlier this year, Bessent was kinda asked about this in a Bloomberg interview. Treasury secretary Scott Bessent was asked about it, and he said, well, we're we're I'm not thinking about that right now. And in politics, it's important to never believe anything until it's officially denied. So, that that, pricked my ears up a little bit. And then, yeah, like, fast forward to this week, you see this memo posted, this wonky, like, policy memo with no fanfare. Like, it's not, you know, something that they were, like, promoting on on Twitter. No one was on CNBC talking about it. Just kinda buried in the archives, but slowly, like, trickles around, matriculates through different, like, you know, academic and financial spheres. And that to me is like that's interesting because it's exactly how you would start to do, like, the predictive programming on something like this. I feel like, you know, you wouldn't you would you would drip little, like, suggestions, over time pointing to something like this happening.
Did they specifically mention Bitcoin in that? No. No. No. No. I I I'm 90% sure that one It was just about repricing the gold. It was just repricing gold. Yeah. I'd have to go back and look, but I don't think it had anything to do, explicitly with Bitcoin. But it's it's interesting because, like, they've, you know Besson has said they're not gonna do it. I I think maybe Powell was asked about it as well, like, conceptually earlier this year and kinda just blew it off and said, like, that's not even ultimately their their call. And, I mean, he's right. It would have to, you know, at least theoretically be an act of congress. I mean, we've increasingly you know, we're, looks like we're kinda merging all three branches of government into one for better or worse. So maybe maybe we could get around that in some way. But, I just I, you know, found it interesting to share it with you guys, kinda retweeted on Twitter, just because, again, like, that's a it's a subtle, like, shift in the talk track if now we're, you know, apropos of nothing acknowledging and talking about, like, the the ways that this has happened in the past and, like, the pros and cons of it and, you know, the mechanisms behind it and everything for them to just kinda, like, do the subliminal messaging of, like, hey. Here it is, and then let it trickle out throw out slowly. So, I mean, I That was the guess,
[00:15:42] ODELL:
like, the over like, the the the high level thought here is that you tariff Swiss gold refined refinery, refinement, which would drive up the price of gold, which would create some kind of gold type of shortage situation where people would would speculate and the price would increase, and then you reprice at the higher price. And then all of a sudden, you have, quote, unquote, so much more money than you had to begin with.
[00:16:11] John Arnold:
Yeah. So to be clear, also that memo didn't outline, like, anything about, you know, tariffing international local supply. It was it was all but just about, like, what would happen if theoretically, not even proposing The US should do it, but just here's how this might work. We're combining two pieces here. Yeah. Exactly. So, like, you could do this today. You could have done that yesterday, right, before any of these, like, Swiss gold tariffs were announced and get, you know, the trillion dollar benefit. I think the way that they might be combined, and this is, like, entirely speculative and a lot of it's, like, you know, schizo Bitcoin Twitter, gold bug Twitter, like, you know, rabbit hole stuff. But theoretically Nice. You could you could engender a short squeeze on the gold supply by making it really hard for so I guess as context, the Swiss bars, that are refined that are now subject to the tariffs are, I think, like, primarily what is accepted. Like, I think they're like a what are they? Like a kilogram?
There's some exact, like, weight that With the standardized bar. The standardized bar is what's accepted to settle gold contracts at, the New York Comex. And so the I think the idea would be if you make it very difficult for those contracts to settle, for some amount of time, right, if you and this probably be like this is this could be tied up in courts in in, you know, different trade organizations will lobby you in different ways, whatever. But, like, if over the next, like, six to twelve months, you introduce kind of a shock to the system, that makes it harder for physical gold to move around to settle contracts, Do you potentially set off, like, a a short squeeze of of outstanding contracts? And does that even create a
[00:17:55] ODELL:
I mean, if it's extended for a significant period of time, I think it's, like, floated out, like, 30% or something. Then the to to be able to get physical to settle, you would need, like, a 30% price increase. Yeah. Right.
[00:18:08] John Arnold:
And it might it might there might be reflexivity to it as well. Right? Depending on I have no idea, like, the, you know, the outstanding, like, positioning is for among all these guys. But, if it if it becomes prohibitively expensive for some, like, period that is indefinite and no one knows, like, when it's gonna, when it might settle out again, whether either, like, the tariffs themselves get, overturned or just, like, supply finds its, you know, finds its new equilibrium. And you don't know how long that's gonna last and you have some short position, like, the you theoretically, like, the price move could be, like, arbitrarily higher than, you know, the just that, like, 40% level. So, basically, the idea is, like, could you engender, like, a a short squeeze, some extended squeeze that pushes that adds a lot of price momentum to gold, and you squeeze the the most juice that you can out of this move if you were gonna do it. Because it's kinda like you only really get to play this play this card once, and I think some of the theorizing has been that I mean, I guess, technically, every time you you could always keep, like, marking it up to market and kinda creating new, creating new dollars that way, but you're not gonna get, like, some huge, like, you know, juice out of it most likely every time, just because the deltas aren't gonna be as big. So if you're gonna play this card, like, you want the max, like, juice you can get out of it. So maybe, like, that the the Swiss tariff thing, combines with the idea of a gold revaluation to, you know, add meaningfully to the TGA, and expand liquidity in kind of a a free way that isn't exactly QE. Like, it's effectively like QE where they're just buying their Fed is is essentially buying gold instead of buying bonds in some sense.
It's part but it's a lot more politically palatable. It's a lot more, like, logical also, I would say, just to say, well, this is, you know, this is the gold we've had for however centuries or however long it is or since we confiscated it from the French, whatever the case may be. And we've had it for so long, and so it only makes sense to market to market. But in any case
[00:20:08] ODELL:
I mean so first of all, I mean, I think it's a perfect example of how how inferior gold can be, specifically in terms of gold markets are are very centralized and very vulnerable to this type of action compared to Bitcoin that's trading twenty four seven, three sixty five around the world, highly liquid markets. It's very easy to settle. Right? Any person can settle it, you know, at home with a gold card, or like a software wallet on their phone. Yeah. I, but can you do you have a good answer for me? I feel like no one's given me a good answer for the rationale for marking our gold at, like, $40 an ounce to begin with. Like, it just seems so dumb. Like, imagine you're running a business, and you're, like, holding this you're holding a a huge amount of some asset, and you're pricing it off of, like, sixty year old prices. And I don't understand the positive of doing that. Like, why not just mark it up always?
[00:21:05] John Arnold:
I so I don't have a great answer. The ones that I've heard that I think are the most compelling are if from '71 onward when when the Nixon shock happened, we basically said, you know, the dollar is is untethered to gold and, you know, stop asking for your gold back. Like, you're you're not getting it. We're not in any way acknowledging, like, the link between the dollar and gold. And to allow it to be marked at what the market deems is in some sense, like an acknowledgment that, you know, the USD a, that, like, we, you know, we we did the Nixon shock, and we we we rugged the entire world. Right? Like, it's politically sensitive.
There are some suggestions that perhaps there are claims on the existing gold stock, among, like, European trading partners and others that, you know, from whom gold was confiscated potentially that, if you were to mark that to market, you're opening up the can of worms of your trading partners, you know, wanting demanding gold back or access to, gold that you have. So are you, like, opening up, you know, the potential for having to repatriate that or having to have whatever conversation that suits from that? I think, to me, the most, like, strategically, interesting response would be and this isn't original to me. I can't remember who said it. But, I I alluded to it earlier that it's this is a this is a card you only really get to play once.
And so I think you wanna just get them absolute max juice out of it. And I don't know that, like, for the last fifty years up until very recently, like, we didn't we didn't need to do this. Right? Like, we had the, you know, fiat reserve currency of the world. We had the money printer. We had the petrodollar. We had the the ability and, carte blanche to just, print treasuries, to to fund the government kind of at and and American society, at will with basically no consequences, at for a time. You know, we're seeing, I think, now the the long running buildup of those consequences kinda, come home to roost. But, like, for the for if in, like, the eighties, nineties, February, like, what what is really the upside of doing it? Right? Like, you you have no It's just, like, good accounting.
[00:23:27] ODELL:
Yeah. But, like, I mean, I don't know. Like, it just responsible responsible accounting. Yeah. Because It kinda reminds me of, like, the so, like, we had we had the sale or earnings earnings call, last week, and, like, all the analysts were saying that they were gonna have a 12¢ loss, but this was the first quarter where they could mark to market their Bitcoin holdings. And so it was really, like, a $40 earnings per share when you included Bitcoin earnings, and the stock dumped on it. And it was because even though that's how it the accounting used to happen, like, anyone with a brain knew how much Bitcoin they said they had and could do the math themselves.
So it was it was priced into the market. And it's kind of the same situation here. Like, if the gold actually exists, like, no one's doing the multiplication at at $40 an ounce. Right? It's like we're all doing the accounting separately.
[00:24:23] John Arnold:
So it's it's kind of retarded. Makes no sense. Well, if if there's one thing that the federal government is known for, it's logical and reasonable accounting and fiscal policies, so that's a piece of it. But, but I think the the delta is the key. Right? Like, if it's 42 and the market goes to is to is pricing gold at 500 or a thousand or 2,000, like, the higher that goes, like, the bigger that, you know, Trump card is, like, no pun intended, that you can pull out of your pocket when you need to. And if again, like, in the eighties, nineties, 2 thousands, like, we just fundamentally didn't need to to do to to pursue the policies that the federal government wanted to.
You know, the the world was fine to just gobble up US treasuries and, you know, allow us to have, like, a forty year kind of secular downtrend in interest rates and do forever wars and, you know, pay pay the boomers, you know, as much as they needed out of Social Security and, do do everything that we wanted to do from a domestic you have both guns and butter. Right? Have all the domestic and foreign policy that we wanted basically for for essentially free for a time. Now you're actually hitting some kind of, like, budget constraint. Right? Like, you know, foreign central banks haven't bought treasuries on net in, like, over ten years.
The Fed has not been able to sell long end treasuries from its balance sheet in, I think, about the same amount of time in any meaningful amount. Right? So there's some you're running up into some, like, constraint of demand on kind of the long dated issuance side, which is why you're seeing, an increasing move in the last, like, five years to the short end. And so I think what that's telling you is, like, okay. Now we might actually need to play the card. Like, now there actually is you're you're running to some extent into some kind of constraint, of, you know, issuing treasuries just infinitely without any, without any issue or potential problem in the system. And so now maybe you actually do wanna play the card. And if you do play the card, you probably want it to be, you know, that delta. You want it to be as wide as as possible. That would be, like, the conspiracy theory tinfoil hat type of narrative, I would think,
[00:26:22] ODELL:
of why you would do it. I mean yeah. I mean, the real conspiracy theory is they said they're gonna do a gold audit. Elon Trump said they're gonna walk through with a live stream, and they never did it. Okay. I wanna we're trying to keep this episode, these updates tight to an hour. And so now we've almost spent half of it talking about gold. Bitcoin is better than gold. Bitcoin is But much more than gold. Gold.
[00:26:48] John Arnold:
Agree with all that. The relevant thing to Bitcoin is, just well, a couple of things. A, in a world where the treasury just, like, magics, a trillion dollars of, you know, new liquidity into existence Right. Is, like, very pro risk assets, very pro Bitcoin, just by itself. Right? So that's that's one thing. Number two is we everyone is now fading the the SBR, for the last, like, few months. If if you if you go on, you know, Bitcoin Twitter and and and even Noster, like, there are a lot of, you know, actually gotcha, reply guys in the in the chat saying Many such cases. Many such cases that, everyone was a moron for thinking that Trump would follow through on the SBR.
And I think the gold revaluation concept is really interesting for the SBR because, a, first of all, when you look at the text of the executive order, I just wanna point out, like, we have a strategic Bitcoin reserve. It says it in the EO. Like, it has been established. Now whether you think it gets overturned after Trump is out of office or whatever, like, that's fine. But everyone should be aware, like, we have one now. Right? And to accumulate the the treasury and commerce departments were directed, not, authorized, but directed to find budget neutral ways to accumulate more Bitcoin. And wouldn't it be nice if they had a sudden trillion dollar slush fund that didn't have to be sourced from new borrowing, where they didn't have to cut social programs, they didn't have to cut defense spending to start accumulating Bitcoin?
Now I think, technically, the CBO would still score that as not budget neutral if they did it out if they did this gold evaluation thing. But I also know there are a lot of, like, goofy accounting tricks you can use on the back end to kinda get around that. And, also, at the end of the day, I think Trump doesn't really care what the c what some nerd at the CBO says. I think he cares about the narrative of, like, I didn't have to do any new borrowing, no new taxes, no programs were cut, and I was able to go acquire Bitcoin. So just, like, for all people fading the SBR and thinking that's not gonna happen, I think you're not bullish enough on Bitcoin to if you think that the biggest, greediest, most self interested government actors in the world, all the spooks in the world, wouldn't want to acquire Bitcoin, for their own strategic use, assuming that we're we're right about what it is, and you think they wouldn't wanna be involved in it in some, like, meaningful way, whether they announce it or not immediately.
I think you're not bullish enough on Bitcoin if you think that dirty tricks like this won't be used to, to go acquire Bitcoin, in budget neutral ways. So that's to me, that's, like, the real upshot for if this happens, what it could mean.
[00:29:22] ODELL:
I, first of all, Sawzall, just zapped us 5,555 sets. He says, end the Fed, repeal the Bank Secrecy Act. I couldn't agree more. Thank you for your support. Great advice. Great advice. I mean, so Mallers on Monday, founder of Strike ten thirty one is the largest and proudly the largest investor in Strike. He had a theory that, you know, they were supposed to release a Bitcoin audit as well. And we basically got a we got a little bit of information through a a FOIA request, a freedom of information request through the rage that showed a smaller subset of Bitcoin.
And his theory is that they haven't released the Bitcoin audit yet, and they've been pretty quiet about the SBR because they have way less Bitcoin than they realized, and they don't want that information to get out because one well, Malers, hypothesized that they were embarrassed, which is definitely probably part of it. There's a lot of egos at play. But even more importantly, you don't want the price to run away from you if you're trying to accumulate,
[00:30:27] John Arnold:
which we all know that feeling quite well. Yeah. Totally. That's the other thing too is, like, I, with the SBR stuff, I think we've said this for a while, but, like, I don't think we have no reason or the government has no reason to make clear, like, what they're doing with this until they're, like, fully sized. Right? Just because the second that there's, like, any kind of actual endorsement of Bitcoin, like, of buying more Bitcoin actively, like, I mean, who that there's your Omega candle. Right? Yeah. So you just dries up. Yeah. Absolutely. So you need to be I think you need to be fully positioned if you're if you're the government before you in any way publicly acknowledge an SBR.
Especially Yeah. Gone. Especially if you're starting from a whole, like like, knowledge is pointing out. Like, let let's say they have, like, a fourth of what they thought or half of what they thought or whatever and, like, they've gotta, you know, do that much more to get to where they wanna get to. Like, yeah, like, you definitely don't wanna tell people anything about, you know, current holdings. And this goes for every major player. Like, we have we have
[00:31:28] ODELL:
precedence for this. I mean, the government of Bhutan was quietly stacking in size for their size. And the only reason we found out was because they got doxed in the Celsius bankruptcy. Like, they didn't publicly tell people, like, yo, we're trying to get a lot of Bitcoin, because that just wouldn't make any sense. That's counterintuitive for them to do that.
[00:31:48] John Arnold:
Yep. Yeah. No doubt. So I I don't think we're gonna get, like, you know, we're not gonna get the El Salvador type mempool dot space dashboard of, like, here's, you know, the the Bitcoin that we're requiring every day, full transparency, gonna keep everyone in the loop on what we're doing with this. Right? It's it's still a different game. I mean, it'd be nice if we got that after the stacking happens. I mean Yeah.
[00:32:09] ODELL:
I love the, I'm hope I mean, I I think El Salvador doesn't get enough credit for leading the way on that. In terms of public stocks, you know, Meta Planet also probably doesn't get enough credit for that. It's great to see Jack's new venture, XXI, going that route as well. Obviously, we love the mempool project. We are the largest investor exclusive fund in in supporting mempool space. It's busy us and a few angels. And I also think it's just a it's a great poster child for a project that is that is open source. You can run it yourself.
You can run it at home, but they also have a sustainable business model. Like, profitable open source projects is is a trend to watch and something that I'm very excited about. I see SoapMiner's app does 21,000 sats. Thank you for your support, sir. There was some commentary in my announcement, post of this asking when ten thirty one was gonna invest in SoapMiner. I let everyone know that his bars are in all of our showers. Our families rely on them. He's saying so I just before we get to more big to actual Bitcoin stuff, this is all related to Bitcoin now that Bitcoin is the macro thermometer of the world. He mentions the trillion dollar coin idea. This is something that I've been, ever since I was became a Bitcoiner. So, like, over a decade, I've been fascinated by the trillion dollar coin concept.
They could just mint the trillion dollar coin and buy Bitcoin with it. Wouldn't that be budget neutral?
[00:33:49] John Arnold:
I think, again, technically, from, like, a CBO perspective, it wouldn't be. But, like, I yeah. I I I mean, at the end of the day, they're they can and will make up the numbers they need to make up in whatever fashion is, like, legally palatable and pull it and that they can sell politically to accomplish, like, the objectives that they that they have. Right? So, yes, we like the printing press. Like yeah. Jokes aside
[00:34:13] ODELL:
jokes aside, so, like, the whole idea is that, I guess, the treasury can basically just mint any coin they want, and then we just have, like, value out of thin air. But the problem is right now is what they're trying to balance is a mandibles type treasury situation where the long end of the curve is running away from them regardless of what they do. Like, people are questioning, the responsibility of the US government and whether or not we're gonna pay back our debts and what inflation rate that happens at, you know, in a ten year timeline, like a lot of inflation could happen in that period of time. So that kind of move would just absolutely destroy the treasury market.
[00:34:53] John Arnold:
Yeah. For sure. And, I mean, look. It's like it's it's a it's a relevant question for, like, the gold evaluation idea too, because you've effectively like, there's a there's, you know, trillion dollars of, like, newly created reserves out there, that will flow into into the system, and there will be, like, very likely, a price inflationary impact from that as well, like, depending on, I guess, you know, where it hits first, in the economy. But I also think, like, that's kind of baked into the cake now. Like, I just don't really think we're likely to see a debt the, like, the next decade. Like, we don't have to go into, like, Weimar hyperinflation for you know, to have, like, you know, 5% type inflation, seventies like inflation, especially given you know, we just saw the BL the head of the BLS fired last week, and we already know CBI is a basically, the most manipulated metric, you know, on the planet. So they're not past making up the numbers and putting out the data that they want to, accomplish their objectives.
So, yeah, I mean, I'm I I think either way, like, whether it's trillion dollar coin, whether it's gold revaluation, I I think they actually need essentially negative real rates now for the next, like, ten years at least, to get get your GDP back into some kind of reasonable, reasonable range. And so, like, yeah, you should probably plan for and expect, you know, something like mid single digit plus, inflation, whether that's CPI or a real metric.
[00:36:19] ODELL:
Yeah. But, I mean, the quest the yeah. But the question is if they could actually pull it off. I don't actually think that's possible.
[00:36:25] John Arnold:
Which piece do you think is not possible?
[00:36:29] ODELL:
I I mean, I don't I don't think it's possible for them to get the treasury market under control. I I think they're they're losing control of of of yields, and I think they're they're I I I think we see rates start to run on the long side regardless of what the Fed does. And the only real response we can have is to actually kinda lean into it and and, you know, let inflation run hot alongside of it. Like, how do we even handle that?
[00:36:58] John Arnold:
I think I think you underestimate how aggressive the Fed can be if it needs to. If if it if they have the guy in charge to do what they wanna do, if they have, like, the Trump sycophant, like, partisan involved and everyone's on everyone's on sides, some news about that this week that we can maybe talk about as well. I think if if Trump nominates himself as Fed sec
[00:37:17] ODELL:
Fed chair. Yeah.
[00:37:20] John Arnold:
Yeah. I wouldn't somebody somebody was saying that the other day, like, you know, there was some, like, like, boomer type who was trying to call, like, the the end of, basically, the end of the American financial system after, GFC in a way. Like, he thought that, like, that that was it. And that was the big one, and it was all going down. And he was like, well, I was wrong because I just I never imagined how much the Fed would expand their balance sheet in response to that. Like, I just had no idea that they would be so aggressive. And, this was, like, on a podcast. I remember who who were the people were that were talking, but the other guy was said to him, like, well, you should start imagining it. Right? Like, there's there's no reason. Like, it's all it's all completely made up numbers, and they have, you know, unilateral control over it. Like, the there's no reason the balance sheet can't expand by an order of magnitude to keep yields where they need to be. The the release valve is just gonna be inflation and especially, like, if you're not an asset owner, like, unfortunately, like, the the regular person just takes it on the chin. Like, the person who isn't benefiting from, you know, the financial repression, on the asset side, like, yeah, we, you know, we have a long history of doing that. And so all you really need is to make sure those people don't, like, openly revolt, or, you know, vote in, what's his name, Mondani from from New York to to run the country and completely, you know, go the other way on policy. Like, if you can keep the boat reasonably steady, like, people will kinda take I think people will take a lot on the chin. People will take a lot lying down, unfortunately.
[00:38:51] ODELL:
I think we saw that five years ago. It was also, like, it's a hidden tax. Right? I mean, that's also why the tariffs are so effective. Like, has any president ever come into office and just at least no modern president has come into office and effectively raised taxes significantly with no one batting an eye? Right.
[00:39:08] John Arnold:
Yeah.
[00:39:09] ODELL:
I, okay. Let's let's move on to the next topic. I wanna talk about, I wanna talk about current state of MSTR of strategy, specifically, their preferred equities. They finally seem to have bolted on a Bitcoin business model, and it's on this financialization side. They have four preferred equities now. The most recent one is STRC. What are your thoughts?
[00:39:38] John Arnold:
Well, first of all, I apologize to all the regular viewers and listeners of this podcast that tune in for high signal freedom content and have been subjected to half an hour of of gold and now MSTR discussion. So I'm very sorry for that. But no. Like, it's either way, like, whether you like MicroStrategy, whether you, you know, own equities or not, whether you own MSTR or not, whether you think Saylor is a spook or not, the reality is they've got over 600,000 Bitcoin on balance sheet. They're becoming one of the biggest publicly traded companies in the world. He is, as Odell said at the beginning, you know, one of, for better or worse, one of Bitcoin's biggest kinda advocates and public spokespeople. So, you know, it is relevant to kinda general market dynamics for Bitcoin,
[00:40:25] ODELL:
you know, what they what they do. You can't ignore it. You have to pay attention to it. Yeah. And and regardless of what happens in the next bear market, I I will just put out there that I think it's unlikely that he'll be a fore seller. You can absolutely guarantee that the majority of FUD will be the implication that he's gonna be a fore seller regardless of him selling or not, because we've never had a stack that large in a public facing entity. There's a reason why Satoshi disappeared, and now we have a Satoshi level stack, with with a board and earnings calls and shit.
[00:41:01] John Arnold:
Yep. No. No doubt. Yeah. I think to to so to get a couple things out out of the way because I'm gonna I probably piss off, like, every both people who, you know, hate MSTR and all the MSTR fanboys, at least for, like, you know, if they're among the the dozen people listening to this, you know, maybe piss piss on both sides. But, I disclosure, I have a very small MSTR position myself, because I couldn't help myself. So I am a a common shareholder, in a in a small way. And, also, I agree with everything Matt said cosign. I think that the the FUD around, like, Sailor's gonna blow up, and that's gonna be the catalyst for the next bear market. Like, you know, it's a it's a very, like, mid curve take, and I think you should just look at the numbers.
He, I think, is extremely unlikely to become a fore seller unless you think we're heading into, like, a multiyear extremely, extremely rough, like, 80% drawdown type bear market, which is possible, but I you know, it's certainly not my base case. All that said, none of that suggests that it's a good idea necessarily to hold the common stock over Bitcoin. Like, you very well may not outperform Bitcoin by holding MSTR. I think it's very much an open question.
[00:42:12] ODELL:
Well, I mean, I think that's the calculation that you have to be thinking. You're you're taking on additional risk. You're you're giving up custody, right, instead of self custody Bitcoin. Self custody Bitcoin is the Apex asset. Right? Yep. There's no other asset that has the properties itself. Like, self custody Bitcoin is the superpower, so you're adding on additional risk in an attempt to outperform Bitcoin. I mean, I'm most fascinated by the the preferred equity offerings. I guess I I think, like, there's a there's a small subset of people that understand Bitcoin. There's a small subset of people that understand what he's trying to do with MSTR.
There's even a smaller subset that understands both. And, I mean, even the preferred equity just, like, to set up this conversation, like, part of the reason I think he won't be a fore seller even in a long bear market is because all of a sudden he has the preferred equities that he can tap instead of instead of selling Bitcoin or selling common in, like, a death spiral type of situation.
[00:43:12] John Arnold:
Yeah. I think I think that's, that's definitely true. I mean, the the only thing that would really, like, make him a, you know, a a forced seller would be, you know, the the converts that are still on the balance sheet. And even then, like, there's so much capital, that you you have to believe truly awful, you know, truly awful and long Bitcoin bear market, you know, would be coming. And even then, he'd still have options to probably not sell Bitcoin. You might not wanna be a shareholder in that case, but Right. Two two things can be true. You know, buying MSTR comma is not a good idea, and, also, you know, Saylor's not gonna be a fore seller. All that said, I do think the the prefs have been really interesting to see play out.
I have been, I'll say, pretty bearish on the entire pref strategy for up until literally probably, like, this last week. Really? And and I still remain actually a a bear on all of the non STRC prefs, the non stretch prefs because, you know, the SDRF, STRK, STK? STRK, STRF. Yeah. And not necessarily bearish in terms of, like, how those will perform. Like, they they may be, you know, reasonably good, reasonably good rate of return. It depends, like, you know, what your benchmark is. You know, I don't I don't necessarily think that that's, like, gonna be a a horrible, you know, trade or horrible investment. No real call there. The bigger thing to me is as, from the perspective of MSTR common, his narrative with these has been, well, this is our, like, our next move into fixed income. Like, he keeps trying to frame these as, like, we're attacking the fixed income market. There's, like, a $100,000,000,000,000 of trapped capital that's in bonds, and, you know, they they can't really access Bitcoin. Well, we're giving them something that, you know, that they can buy that falls in their mandate. And I just think, like, that's it's just wrong. Like, that's just not the the prefs, STRK, STRD, and STRF, like, don't really address any meaningful amount of, like, the of fixed income buyers because, first of all, it's right in the name. It's not fixed income. Okay? Like, he he can he can at will, essentially, suspend the dividends. And I know there are different conditions on, like, which ones are cumulative and which ones are not. I I can't remember which is which are which, within that stack.
[00:45:28] ODELL:
They are seem to suspend he can suspend STRF, I think.
[00:45:33] John Arnold:
Maybe that's right.
[00:45:35] ODELL:
Although I think STRK is the one that has the call option.
[00:45:39] John Arnold:
Right? Yeah. That's right.
[00:45:41] ODELL:
So that one you can convert into Yeah. MSTR. So it has it has some upstart addition, but STRF, I believe, is cumulative, and he can't suspend them. Like, they're actually it's actually perpetual.
[00:45:53] John Arnold:
So I thought he still well, so that's the other issue, but I thought he still had an STRF, some leeway and flexibility. I have to give him a look. He probably does. But yeah. But the other piece is the fact that they're perps. Both of those things, I think, take it, like, in take, these instruments immediately out of outside the wheelhouse and the addressability of all of the vast majority of, like, institutional fixed income capital that is out there, because, like, bond math in general that these guys are underwriting on is is based on, again, fixed income payments. Like, you know, if you if if you if you suspend payments on interest, like, okay. You're in default. Like, we're taking you to court. Like, that's that becomes its its own, its own thing. So the math is based on actual, fixed payments and a and a maturity date. Right? And that you're going to get principal back specifically on, like, a defined maturity date.
And anything that doesn't fall that does not have those features is, I I think, realistically, like, very, very difficult for your average, like, bond investor at any, like, large shop to buy or even look at. And, of course, they also the other piece is, like, most of these guys need, you know, something to be rated and, from a credit rating agency. And, you know, Saylor has talked about trying to get these things rated, and maybe that'll happen, but I think that's probably a long slog because there's fair I think there's still very little appetite among, you know, your Moody's and Fish and S and P institutions to look at anything like this in a serious way. So you don't have the ratings. You don't have an instrument that really, like, looks actually like Gaband. Like, it's it's more certainly more similar than, like, common equity, but, it's, it's still, I I think, not really a a good product for the vast majority of allocators out there in bonds and fixed income. And I think you can kinda see that with, like, the level of uptake that they've had so far.
You know, they they haven't really, like, flown off the shelf in the way that you They're all still brand new. No. Oh, totally. Yeah. But, like so that's a good transition to STRC. Like, compare them to Stretch. Like, Stretch was radically oversubscribed, like, immediately. And I think that's the one that has, like, some real product market fit because so this is the one that he's, you know, essentially kind of copping to, like, a money market fund. So it's something that's intended to be kinda stable in face value, you know, within, like, a very narrow range.
You know, 98 to, like, $1.00 1, I think, is what the the target band, and, you know, pays, like, a very low It's a 100 it's supposed to be a $100. It's supposed to be yeah. You could think of it as, like, you know, like, yeah. He has a he has a band he'll defend, but, like, it's supposed to be, you know, stable value, stable principal value with a with a variable dividend that they adjust to as necessary, to kind of stay within that band. They basically increase was like They increase the interest rate if it goes down,
[00:48:46] ODELL:
because it's paid monthly. And then they then they just, like, smash the ATM and just sell a a shit ton of shares if it if it goes too far over par. Right? They can also, yeah, they can also do, like, buybacks and forced calls, I think. Yeah. Understood. That that one has forced calls in it. Yeah. And, like, one zero one or something.
[00:49:04] John Arnold:
Yeah. And there's some conditions around that, but basically, like, that's the idea. Right? But the reason I think that that's, like, a step function change relative to the others is, like I said, product market fit. The pools of capital that that's targeting are money market funds, which are basically if you've ever had a brokerage account, and you're keeping, you know, cash on the side to, like, deploy into stocks later or something, right, you could just park it in. A money market fund that is basically composed of, like, very, very, very short dated, like, government bills, and it'll pay, you know historically, up until a few years ago, it'd pay, like, basically nothing. It'd be essentially no different than a savings account, at a bank. Slightly higher yield than a savings account. Slightly higher yield than a savings account. Slightly higher yield. FDIC protection, basically. Yeah. Although you do you do have this. There is, like, SIPC protection up to some level now. But in any case so it's basically and also, like, we we we already found out, like, what would happen if any of these things broke the buck, in o eight and also what would happen if, like, you know, you had a real banking crisis. Like, the Fed would just become the FDIC and backslap everything. So to me, that's kinda, like, irrelevant now. But in any case, after when the Fed started hiking rates, money market funds actually started to pay, like, a a meaningful yield, like, you know, four to 5% kind of, like, became something like a high yield savings account.
And now there's yeah. So a lot of capital flowed out of, you know, savings accounts and into money market funds just to, like, sit there and and park it and, you know, collect the the yield in the meantime. And so now you've got, I think, it's, like, 10 to $15,000,000,000,000, something like that, of maybe that's a global number. I don't know if it's US total, but it's it's a meaningful amount of capital in broad money market funds. You've also got a, set of investors that you would think of as kinda like income investors
[00:50:48] ODELL:
that, you know Yeah. Like old boomers that, like, just do dividend stocks.
[00:50:53] John Arnold:
Yeah. The the, like, the the dividend And they have a lot of money. Yeah. No. Totally. The if you've ever been on, like, FinTwit, like, financial Twitter, I don't necessarily recommend that anyone start that habit. But, there are, like there's a whole, like, subset of, like, guy. That's like a personality type is to be, like, a dividend guy. Yeah. There's many of them. Off dividends. Yeah. Or, like, the Passive income. Yeah. Exactly. Passive income. Yeah. And so those guys aren't, like you know, they're perpetual in nature. Like, they're theoretically wanna own something, like, forever if they can and just, you know, clip the clip the coupons off it. They don't have, the same type of, like, institutional mandates around, like They have no mandates. They're, like, like, 2 to $5,000,000.
Yeah. And they just buy dividend stocks. Yeah. Sure. And, you know, there's no there's no risk waiting. There's no, like, something that needs to be rated. There's they're explicitly they don't want, you know, maturity necessarily. Like, they want redeemability and, like, relative stability. But, like, mostly, they're they're trying they're just trying to clip coupons and get income. And if they don't have to take price risk to do it, like, you know and they can get nine to 10% kinda yield relative to, you know, what it what's Coca Cola's yield right now, like, dividend yield, like, 3% maybe. Like, kind of these dividend, dividend aristocrats, if you look those up. You know, those are, like, low single digit, mid single digit maybe type type yields.
Granted, you know, they're growing over time. But either way, like, that's kinda what you're looking at. So you but either way, you've got that pool of capital. You've got money market funds. And both of those types of buyers, are you know, don't have the same, like, risk waiting questions. They don't have the same, like, rating needs. They don't have, you know, bond math constraints that they're thinking about. They're not comping it to, like, you know, a ten year treasury or something like that. They literally just wanna sit there and have, like, relatively stable value that gives them, like, indefinite income. And they've already made the decision if they've got the capital in those things versus Bitcoin or equities or bonds or something else, that basically they want, like, a cash like instrument that just pays them income. Right? And that's what this is.
And I think this is the first one, this stretch product that really caters very directly to a a particular and and very large, like, market segment that he can go sell into. And I think, you know, it's very early. It's only like, they've only done, you know, the one issuance. But the thing was, like, five or six x oversubscribed, I believe. Everyone seemed to kinda get immediately what it was. And, you know, I think this is one that they could go really do big size in,
[00:53:23] ODELL:
over over the next couple years. And if if you're not, like, an outright Bitcoin denier, like, if you compare it to other alternatives, the risk is actually way lower than what like, risk to yield like, risk to dividend rate is way, way lower with this product than any of the alternatives. Yeah. As long as you're not, like, a complete Bitcoin denier and you don't think it's just gonna go to zero and fail overnight because then, obviously, there's really no collateral. Yeah. I mean, to me, I, like, I think it's interesting because, like, high level, why do I think it's interesting? First of all, for the first three products, he actually doesn't have direct control over what that interest rate is. It's market determined. So he kinda just throws it into the market. Yep. And then over time, like, the market's gonna presumably I mean, if you're if you're bullish on Bitcoin, presumably, the market's gonna bring those rates down, and the market the market participants are gonna decide basically what interest rate he needs to pay on, on on those preferreds.
So instead of him having to, like, call up people and make deals and shit to to borrow and buy Bitcoin, it's just like this outs these outstanding products that that that they exist, and the market can determine what his borrow rate is effectively. Because when he's when he's doing ATMs on them, when he's selling new shares of them, that's effectively his borrow rate. And it's kind of like this beautiful free market ish kind of solution to that problem. STRC is a little bit different because he set it up so they do have more direct control on what that rate is. Hypothetically, it probably should be the lowest rate of all of them because it's it's paid out monthly.
He did he did block himself a little bit. Like, they can't lower the dividend rate, the the effective interest rate. They can't lower it's like a it's a certain amount they can lower it every month or something. Yeah. I think it's 25 bps or maybe 50 bps. So you can't just, like, dramatically decrease it on you. But, like, high level if you think about a high level as a Bitcoin bull, right, what is he doing? He's instead of selling the common, instead of selling MSTR to buy Bitcoin, he's selling the preferreds that are paying a yearly dividend rate.
That yearly dividend rate, most of them came out around 10%. Right? So 10% annual. Every year, he has to pay 10% on it. Those rates will probably go down unless treasury yields go up significantly. Like, they'll probably be kind of anchored to treasury yields, but they should go down from 10. But the idea is that if Bitcoin outperforms that rate of return, then instead of selling common today to pay for the borrowing, you sell common to pay for the dividends in a year Yeah. And Bitcoin has outperformed them, and that should be accretive to the common shareholders. Right? The Bitcoin per share for the common shareholders should go up. Like, that's the high level thought process. Right? And that seems compelling to me. Yeah. Yeah. And I think that that's exactly right. I mean,
[00:56:39] John Arnold:
from a common shareholder perspective, the problem that I think you still run into is and I'm just I'm still kinda working through this in my head. But as long as there is a drag on your BPS, your Bitcoin per share from issuance of the dividend, even if it's very deferred and you would it's like a drag that you would, like, absolutely accept, as it relates to, like, the time value of money, like, only having to take the hit over, you know, a very long period as Bitcoin rips. You're pushing it out. Yeah. You're pushing it out. I think there are a lot of scenarios where if you don't also have, like, a rising MNAV, a rising multiple on the stock, or at the very least a consistently, like, you know, 1.5 to two x. I don't have all the math in front of me, but, I I think you would probably, in a lot of scenarios, still be better just holding Bitcoin in in the same case. Right? So I think to really get leverage on it as a shareholder, like, you need to believe that that multiple is gonna hold and probably go up. And I think there's maybe a reasonable case for that if Saylor is starting to, you know, if if he's starting to distance himself from the pack even more so and establish a a durable, repeatable flywheel of, issuing these things to, like, aggressively and quickly, you know, acquire Bitcoin in size and effectively then defer the, the cost of that over a very, very long period to the common shareholders.
If you believe that he can keep doing that in maybe an accelerating fashion, then, like, arguably, like, there's reason for the, you know, the MNAV to actually start to rise and be somewhat, you know, durable. I don't know where it should shake out. But I think we talked about this last time. But the replacement cost of, like, building another MSTR, the reserve that he has, especially if you think he can kind of accelerate that flywheel of, further Bitcoin acquisition. Like, it's not clear to me that that should just be that that should necessarily trend to, like, one times nav. And so,
[00:58:47] ODELL:
I think the real question is the real question is is how he can monetize that advantage, if if he can effectively monetize that advantage. And I think, like, the preferred shares are basically his first example of trying to monetize that advantage.
[00:59:04] John Arnold:
Yeah. I mean, it's kind of like it's not really this yet, but it's like it's a little like, bank note issuance during, like, the free banking era. Yeah. You know Private banking. Private private banking. Like, there's I'm I'm giving you something that has, like, some face value that I'm I'm you know, should hold. It should be pegged to this, like, value of, you know, a $100.100 on the dollar, and, also, it's it's paying you something to hold it. Right? Like, some interest rate effectively, in this case, like, a, you know, dividend yield. And the market will decide, like, if I can defend that peg, essentially.
And, you know, if if the market is, like, not confident at all that I can, then, you know, incremental issue on incremental issuance, I have to pay, like, much higher rates, right, to to be able to to issue again. But the collateral base here is so strong, that I think it's very likely at least until he, you know, balloons this thing to some insane size that he very, very likely will always be able to defend this peg, you know, at at reasonable sizes. So, yeah, like, that's kinda what it reminds me of. He's talked about, you know, becoming a Bitcoin bank, over time. You you made that comment last year that everyone, you know, flipped out about, flipped out in a positive way. And this is the first, like, this is the first product that I think he's issued that kind of does, like, look something like, you know, pre pre fed, pre 1913 kind of, you know, private banking, type product. So that that's like I see this one as, for for all those reasons, as kind of an interesting, like, step function change in the strategy, and and maybe he's actually now kind of unlocked the the first way to, to durably monetize, in a differentiated way the the asset base that they have. I still don't know if you would not just be better holding Bitcoin. It probably depends on the MNAV that you enter at. Like, you know, if you buy it at, you know, four x or whatever, like, probably you're gonna perform. You buy it at, like, 1.5, like, you know, probably have a much better shot at kind of benefiting from the leverage of it.
But, yeah, that's gonna be the eternal question here is, like, why should I not just hold Bitcoin?
[01:01:13] ODELL:
Yeah. I mean, the the proper way of thinking about it is you're taking additional risk. It needs to outperform Bitcoin. So if it's not, then it's clearly not worth taking that additional risk of holding self custody Bitcoin. And I think he I mean, he's definitely aware of that. I think a lot of market participants aren't yet. I think there's a lot of market participants that probably don't even hold self custody Bitcoin. I think there's a lot more retail involved than people give it credit for. You know? Like, the the argument has always been it's trapped institutional money. They can't buy Bitcoin directly. I think there's a lot of retail that only owns MSTR, and maybe other derivative, you know, Bitcoin stock plays, and don't hold self custody Bitcoin and aren't actually thinking about whether or not it's outperforming Bitcoin yet. But I think as the market matures, that is clearly gonna be, what what what buyers are thinking. Is if I buy this, is it gonna outperform Bitcoin or not? And it's not just for MSTR. That's the crazy thing. Over the next decade, every single financial decision, every single capital allocation decision is gonna be increasingly measured against Bitcoin. And if you can't outperform Bitcoin, you're better off just holding Bitcoin.
If if if an investment into your own business can outperform Bitcoin, then you're better off holding Bitcoin than trying to grow your business, etcetera, etcetera.
[01:02:41] John Arnold:
Yeah. I mean, I was gonna connect this back to to 10:31 in that way. Like, it's a conversation we have with all of our founders and and portcos every day. It's a conversation that we have internally with potential new investments, like the the hurdle rates of Bitcoin. You know, we've written extensively about this. Like, we, we comp ourselves to Bitcoin to the opportunity cost of just holding Bitcoin instead of, you know, investing in a company. So, yeah, I mean, as as this as knowledge of this distributes, Bitcoin can't help but become kind of your your reserve asset and unit of account, and it so it dramatically changes the, the the ROI calculations you have to make.
And I really quick, I'll just say for, like, the the traditional finance people, all all two of them listening, there's an interesting connection to be made with I recommend everybody who's listening, go read the book The Outsiders by William Thorndike. It's a great book about kind of, CEOs over the last, like, fifty years, and public companies that have just done things very differently, and generated, like, inarguably fantastic returns relative to, like, you know, the S and P, for their shareholders as a result. And, Odell, you said something about, like, you know, making an investment in your business, growing your business might actually not be, like, the the right thing to do relative to just holding Bitcoin or distributing to shareholders, distributing excess capital to shareholders so they can hold Bitcoin, like, whatever.
That connects, like, very directly to the return calculation a lot of these CEOs were making. Like, when you're a CEO, your instinct is like, I wanna empire build. Like, I wanna get bigger and bigger and bigger. I need to go buy more businesses. I need to go open more factories or whatever. But very often, like, the highest ROIC thing you can do for your shareholders is, like, buy back stock or, you know, pay dividends or spin off, like, some segment that's underperforming or whatever. Right? And so I think, like, good CEOs, like, really strong, like, 10 x CEOs have already been making this calculation for, you know, decades, and Bitcoin just, I think, slots really nicely into that, like, capital allocation framework of what I'm trying to do is give my shareholders the best possible return.
And in this case, like, now I have to I have to include, like, either holding Bitcoin or distributing to them so they can buy Bitcoin into that calculation. And so I think, like, the best executives in the country, in the world over the next ten years, like, will start to think about this in a on a much more forward basis. And I know we have several, CEOs in the portfolio who are already, like, doing that very directly. So that's definitely a theme that, is gonna be key next decade.
[01:05:04] ODELL:
Okay. Well, we'll reevaluate we'll touch back on all this stuff in three months on our next quarterly update. By the way, Freaks, in the live chat, if you have any questions for us, feel free to drop them there. We've already passed our one hour internal deadline. We have a couple more topics on the list that I like to get through. So let's try and wrap them a little bit on the quicker side.
[01:05:27] John Arnold:
That's that's tough for me as you know, but I'll try. Not do a half an hour on each topic.
[01:05:34] ODELL:
Let's talk about the this should be a relatively quick one. Let's talk about the Bitcoin and $4.00 1 k's announcement that happened two days ago or three days ago. Yeah. What are your thoughts there?
[01:05:45] John Arnold:
I mean, it's still a little I think the EO is, like, somewhat light on how you, like, what, Actually do it. How how you actually do it and how it gets administered. But, yeah. Like, I, you know, I don't know there's a lot to say other than it's, yet another kind of bullish update on, like, unlocking capital to to come in and own Bitcoin. It's still, like, remarkably, you know, difficult to to do. Like, I for example, like, I have, like, a a legacy, like, Vanguard self directed IRA that I need to just, like, move to move to unchained. But, like, it's, you know, maybe not big enough to kinda justify the the cost, but in any case, like, you still with Vanguard, the biggest kind of asset manager, in The United States, you can't even buy iBit. Right? Like, they they haven't you you can you can run, like, very insane. You can have, you know, crazy MSTR option strategies, in in Vanguard, by the way. Don't ask me how I know. But, you you can't, you can't just buy straight ibid. So the point is, like, we're still very, very far from, like there is legitimate trapped capital in a lot of these accounts that, like, you know, is gonna be slow to move to, like, say, an unchained IRA or something like that.
And, you know, having the the ability for some of that to, quickly and easily get into Bitcoin is, I think, like, very obviously just, like, a bullish tailwind for for Bitcoin. So, yeah, we'll we'll we'll stay tuned for updates on how it actually works and how it gets administered and, you know, where what the custody looks like and what it even means to, like, hold, you know, Bitcoin in in one of these vehicles. But, yeah, it look like it's of a piece with everything that we've been seeing this year in terms of, like, regulatory policy. Just like one more positive domino to fall. The one other thing I'll add is just notably, the EO includes it's not just it's Bitcoin slash crypto, but also, like, investments in, like, private equity vehicles. And if you've been paying attention at all, you've probably you might have been seeing over the last, like, six months, six, twelve months, like, there's been a lot of talk among private equity executives about democratizing access, quote, unquote, to Dump on retail? To their funds. Yes. To to dump on retail, like, from their funds that are having, you know, notorious issues making distributions and can't find exits for their their portcos.
Now we need to make sure that retail has the ability to participate in that and give them some exit liquidity. So, yeah, just interesting, to see Bitcoin bundled in with that. And, if you're if you're thinking about one of those private equity investments in in an IRA, just, you know, consider maybe just owning Bitcoin instead.
[01:08:18] ODELL:
Yeah. I mean, I'm most super torn on that because I'm a free market personal responsibility guy, and I think, like, the accredited investor stuff is, like, all very paternalistic. Like, people should have the right to get wrecked. But you're right. Like, almost every time you hear a scheme about democratizing access or, like, you know, like, crowdfunding equity and stuff, it's almost always just, like, to scam retail. Yeah. Like, this is the unfortunate reality of the situation. I guess my hope high level is that there's gonna be a transition where access is, quote, unquote, democratized, and a lot of these laws are pulled back in terms of, like, paternalistic accredited investor laws type of situation.
And a lot of people will get wrecked, which is why those laws exist in the first place. And then, hopefully, some of them will learn and be a little bit more deliberate about their capital allocation. And the fact that Bitcoin exists is like they actually have, like, a highly liquid, very compelling alternative to doing that in the first place. So maybe that reduces the effect, but it is one of those things. You know? In free markets, people there's no training wheels. There's no bumpers on the pool on the on the bowling, and people will get wrecked.
Okay. Fannie Mae IPO memo.
[01:09:35] John Arnold:
Yeah. I mean, so that yeah. That hit this, this morning, I believe. It kinda goes back to it it's interesting that you would get, like, the Swiss gold tariff, the gold revaluation memo, and this, you know, potential for Fannie Mae and Freddie Mac to be IPO ed. As quick background, they've been in conservatorship by the government, since o eight, since the financial crisis. These were the government sponsored entities that basically backstopped,
[01:10:01] ODELL:
and continue to backstop all all mortgages in in The United States. Soon as you get a home mortgage, you get one of those thirty year fixed rate mortgages that no bank would ever give you Yeah. If they were actually being logical. It just immediately gets bought by Fannie and Freddie Yeah. Exactly. Behind the scenes. Like, literally, like, a day afterwards, it just gets packaged up and sold to them. And that's the only reason Americans have thirty year fixed rate mortgages in a highly inflationary environment.
[01:10:26] John Arnold:
Yeah. Absolutely. It's something you definitely don't appreciate until you start kinda going through the process and you realize how, how rigged the the housing market is, in in favor theoretically of, quote, unquote, the common man, although we, we see how it's getting increasingly out of reach for, I think it's mostly a lot of this stuff. Yeah. I mean, it's mostly, like, a middle income welfare. It's probably one of the single largest welfare programs we have in The States. Yeah. But it's funny because, like, this this program's like this. I mean, it's obviously the Fed's expansion of its balance sheet is, like, you know, the underlying driver and enabler of it all. But, like, it's yet another example of, like, a government entity or a government program that theoretically, like, exists to, you know, maybe start with noble intentions of of making, making homeownership more affordable, but also has the impact of subsidizing, ownership of homes maybe by entities that, shouldn't
[01:11:21] ODELL:
necessarily be buying them all up and make them student loan phenomenon on steroids. Right? It's like it drives the prices of everything up. And radically increasing demand. In the system already, you're far. Yes. And then there's no way to unwind it without chaos. Like, if they unwound it, the housing market would collapse. And then, you know, I don't know what the exact number is, but a large portion of Americans, the majority of their savings and net worth is locked up in their home value. So you'd literally just be destroying that.
You have you have it's like Americans pitted against Americans, and you're just it's it's not it's not a good situation to be in. I don't know how do you unwind that.
[01:12:03] John Arnold:
Yeah. I mean, either. I don't think they have any intention to in the near term. And I think they I think they wanna go the other direction and, you know, there's because right now, like, the household savings base is or at least, like, the, I guess, I should say, household leverage is, like, dramatically lower than it was, right before the financial crisis. Like, there's there's actually a lot of, like, untapped home equity that, could be unlocked, by, you know, adding new HELOCs to people's balance sheets, right, home equity loans, credit. And I think one of the things have gone up so much? Yeah. Yeah. Prices have gone up. People refied at, you know, low rates. Low rates. Yeah.
And yeah. So and you've had, you know I think I think there was also, like, a lot of scarring, after, like, the GFC. You had a lot of people blown out of their homes.
[01:12:52] ODELL:
And so I think that Less variable rate mortgages. Less variable mortgages.
[01:12:56] John Arnold:
There's been a lot more conservatism in the last ten years, I think among a lot of, you know, home buyers, maybe maybe not in the last, like, few years. But, like, you know, over fifteen years, there's been a a decent buildup of home equity, broadly, and I think they want to I think they wanna tap that now, and I think they want people to go out and, like, take out a HELOC and, you know, spend Lever up. Lever up. Yeah. They wanna relever. So,
[01:13:21] ODELL:
yeah, I think they're gonna to save the country.
[01:13:23] John Arnold:
Exactly. As as always. But the but the again, the inter the really interesting piece from Bitcoin's perspective other than just, like, yeah, people, like if they incentivize, you know, making some new mortgage program or or new HELOC program where you get, like, super cheap financing for tapping into your home equity to go do x y z, like, yeah, that's like a pro liquidity, probably pro risk asset type environment, also pro inflationary. But the more interesting piece on the Bitcoin side, I think, directly is, like, of a of a piece with the Swiss gold tariff stuff, the gold revaluation memo. This is, like, potentially, you know, they're talking about in the Wall Street Journal article that, you know, mentions that this is gonna happen. You know, the government's looking to raise, like, $30,000,000,000 in the IPO, and I think only sell it by only by selling, like, 15% of the equity, in Fannie Mae and and Freddie Mac. And so there's a lot of there's another source of potential, like, you know, late neutral. Blatant budget neutral value that, you know, could maybe go into certain programs.
And I don't think, you know, even if they do all this, like, I don't think by any stretch of the imagination that it's all gonna just flow into Bitcoin. But, you know, a 10,000,000,000 or 20,000,000,000 or a humble, you know, $50,000,000,000, Bitcoin purchase, for the for the SBR, you know, would would would be pretty meaningful, even just from the optics perspective once it's, you know, announced.
[01:14:39] ODELL:
Gets wind to even something significantly smaller than that, it could be a catalyst.
[01:14:44] John Arnold:
Yeah. For sure. So, yeah, just interesting that all of these, like, headlines are hitting kinda this week, about potentially opening up, new new budget avenues for, you know, the government. Now I will say the Fannie Mae thing has been I think they're they're, like, people who have been sitting in that trade for, like, fifteen years, like, waiting for, like, any day now it's gonna happen. They're finally gonna take it out of conservatorship. So it could very easily still fall apart, but I think they're very incentivized to to make it happen They're motivated. This time. Yeah.
[01:15:16] ODELL:
Okay. Good thoughts. Last topic. Fed chair Powell, is he gonna stay with us?
[01:15:23] John Arnold:
Are we not gonna do thoughts on Are we not gonna do cycle top scenarios?
[01:15:27] ODELL:
Okay. We can talk cycle top. You wanna talk cycle top first or after? Well, okay. Let's let's close with that. Let's talk let's talk Fed Chair, and then and then we'll do cycle top, and we'll wrap. We'll save the spicy price predictions for you. Cycle, cycle top. Yeah. Exactly. Fed chair drama. Is Powell gonna stay to the end when his the end of his term is 2026. Right? Yeah. It's May.
[01:15:49] John Arnold:
I think he definitely stays because I think, Trump has very, you know, has pretty much already neutered him, and he has, like, the ability to not just buy, like, yelling at him on Twitter every day or on on sorry. On truth social or whatever it is. Or in person? Or in person. Yeah. Slapping him on on the back and telling him to lower rates. By the way, like, it was it you gotta you gotta, like, Trump has given us just so many iconic moments and so many iconic photos. And the photo of him towering over Powell, like, you know, a head taller than him in, like, they're both wearing hard hats, you know, like the the basement of the new Fed Building. You know? And it's just like it's it's gold, and I think it just says it all in terms of, like, you know, he's he's got the upper hand, I think, in terms of the narrative. Right? Unless you're like, you know, a a mainstream, you know, economist at, at Harvard, MIT, or, you know, the the halls of Goldman Sachs. Like, I think it's pretty clear that, you know, it's like the, you know, the which which Batman movie is it? The one that has Bane, the you know, where he's like he's got his, like, financier lawyer, like, handler who's trying to tell him what to do, and he's like, you know, I'm the one who's in charge here. And Bain just, like, puts his hand on his shoulder and says, do you feel in charge? Yeah. It's a similar thing here. Right? Like, at the end of the day, like, the government's gonna do what it needs to to get funded.
One of the Fed mandates is to, like, maintain moderate long term interest rates. And so, like, there's even already a statutory case for, like, the Fed to basically do what the government, like, needs it to do. I'm not saying this is, like, a good system or desirable system, but, like, you know, we shouldn't be surprised if, like, we go back to a world where the fed is just kinda subordinated to, the the needs of of the state, which kinda commissions it and and keeps it alive. So, yeah, I think, like, we're heading toward, you know, the writings on the wall. We're heading toward a kind of a a Trump sycophan, a Trump yes a Trump yes man, running the Fed, gonna be subjugated to what the treasury wants and what the treasury needs.
And I think Powell stays. You know, maybe he resigns just because he's he, you know, is is tired of being, you know, being in that position, but, there's really no need for him for Trump to remove him at this point. Now that Trump just had you know, he installed this week, you know, one of his kinda, yes men, I guess, you'd call him the head of the council of economic advisors, Stephen Myron, who was kinda principally responsible for architecting the whole kind of Trump, trade tariff, like, capital reorienting strategy. He wrote a white paper on it last year. Well, now he sits at the vacated chair, the just vacated chair of the Fed. So he's got a he's got a seat at the table until Powell leaves. And, you know, Trump's kind of signaling that, Chris Waller, who's a much more kinda dovish Fed governor who ex who has dissented, I think, the last couple times from the the from Powell's rate decision.
You know, he's kind of being tapped as, like, the likely heir apparent, and so he can kind of Last guy you were talking about, he actually tweeted Bitcoin fixes this twice, I believe. Oh, that's the, yeah, that's the other thing that we shouldn't forget that Myron has, has commented positively on Bitcoin in the past. And, also, in that white paper where he talks about reordering, like, the global global trade flows, he explicitly mentions, you know, gold and he doesn't say Bitcoin. He says and cryptocurrencies, but, you know, kinda know what that means. Gold and cryptocurrencies are likely to, you know, benefit from the the regime that he kinda wants to put in place. So, yeah, I mean, I I just feel like all the all the writing's kinda on the wall here, and it it may take longer than Trump wants to get to turn the ship, like, exactly where where he wants it to go. But, I'd I'd be really surprised at this point if, you know, we don't have a a much more accommodative Fed over the next, like, six to twelve months. Even with Powell in. I think even with Powell in. Yeah. Be and and whether, like I don't know what rate decisions they ultimately make. Like, maybe he still drags his feet. But, I guess I should say a a much more accommodative, like, Fed relationship because Trump's gonna have his shadow Fed chair, whoever that is, whether he ultimately wants to nominate Myron or he wants to nominate Chris Waller.
He's got his guys on the inside now that he can explicitly point to and, like, you know, the market's gonna listen to them ultimately. Like, they're gonna take their forward guidance from what those guys are saying the closer we get to Powell kind of being off the scene. And, you know, Besson has already talked about, you know, wanting to do exactly this. Like, he's talked about it last year, this kind of playbook. And so, you know, whether the Fed funds rate moves down materially in the next, like, few months, like, no idea. Maybe they still drag their feet. But, yeah, the the the talk track is is only going kind of in one direction.
[01:20:21] ODELL:
I mean, I will say that I'm, been fascinated with prediction markets for years now. And first of all, it's a huge miss that the most popular prediction market in the world doesn't support Bitcoin. Hopefully, we'll have a liquid Bitcoin, not liquid Bitcoin, but a a liquid market that uses Bitcoin, that competes with PolyMarketer. But PolyMarketer right now has a 25 bps decrease in December at the most likely 76%. No change at 18%. If you combine the 50 bps decrease, which is at 6%, that's 82% chance of a decrease is what at least the Polymarket degens are pricing it in at right now.
Okay. Well, we'll reevaluate that again in three months. Okay. Last topic, super cycle, cycle top, bear markets, timeline, thoughts.
[01:21:25] John Arnold:
Yeah. I mean, we talk about it a lot internally. Everyone, you know, talks about it constantly on on Nostra and Twitter. You know, what's what's that? Everyone everyone's got their own, like, artisanal way to cut up the cycle to show that this is either somehow, like, the best cycle or the worst cycle in history depending on how you wanna look at it. But, yeah, I think there's, like, I recommend people read, the only, like, on chain analysts, the only, like, relatively near term kind of, like, price analyst that I think is worth listening to is, is Checkmate, James Check. He he usually makes the, the podcast round, so you very likely heard of him. But if not, I think his newsletter is worth subscribing to if you're interested at all in seeing the data that he pulls. He he put out an interesting piece this week, which which is basically arguing we're about to find out if this time is different or not.
And and if so, in what way? You know, we're kinda coming up on based on prior cycle timing, you know, only based on, you know, two cycles. We're kinda coming right into the period where you would expect to see basically what we have. Like, what's what's it gonna be. Right? How how how much are we gonna rip? We're entering that positive seasonality from a cycle perspective. So, like, where's the top? When is the the, you know, parabolic ascent gonna start? Or, like, is it gonna start? And, you know, in the next yeah. I think he argues, like, ninety days where, you know, we'll probably have a pretty good idea of, you know or I think maybe even before that, like, sixty days of what what's gonna happen, in that regard. And, like, I have no idea. He has no idea. He argues it a bunch of different ways. I think it's, like, worth reading through.
The one thing that I think is, like, worth thinking about with with this issue is, like, I saw someone say I can't remember who it was, but, like, someone suggested, like, there is a huge amount of, like, cycle PTSD that people have, And everyone's so focused on, like, you know, we've got a we've got a moon by, like, October or, like, everything's dead and Bitcoin's going to zero. Right? Like, if if we don't have, like, some crazy parabolic move in the next, like, few months, then, you know, the the whole the whole game's up, and we should all just go home. And I just think, like, I won't say this time is I mean, every time is different.
So I guess to some extent this time is different, but, like, the dynamics that we have, like, at our back right now, with the ETFs, with everything we talk about this, on this podcast with liquidity dynamics, with gold revaluation, with how much, you know, Trump wants to pump assets, with the need to, like, run it hot in the economy, Trump having, you know, his yes men installed at the Fed. The the the market depth that we're seeing with, you know, that we haven't even talked about the 80,000 Bitcoin, whale dump a couple weeks ago, which in previous cycles would have just utterly wrecked, you know, momentum and sentiment for, you know, months, with nation state interest that I think, like, you just you can't tell me that's not only increasing, like, month after month, year after year. Bitcoin and $4.00 1 k's, like, MSTR being able to, you know, do what they're doing.
I mean, I I look at all that, and I'm like, I I have no idea if and when things are gonna really pop off. But I do feel like the cycles are, like, irrelevant now in the sense that, like, it kinda doesn't matter what happens in the next few months. Like, if we get past the next few months and we don't have a parabolic move, it's really hard for me to believe that, like, well, that we we therefore like, once we get to the end of this, like, cycle period, we must have a 50% dump or 70% dump coming because that's just what always happens. It doesn't make sense. It doesn't prove anything. Yeah. Like, I I just I don't see how we can have a 50 to 70% dump without a parabolic move first. So for anyone who's sitting there kinda wondering, like, or anyone who's sitting there wringing their hands and thinking, you know, if we get to December and we're not above, like, you know, one fifty or something, like, if that's it, game over, you know, we must therefore thereafter have, like, a seasonal dump of 50% or 70%. Like, I just think it makes no sense with the tailwinds behind Bitcoin and without, like, a a a prior, massive parabolic move up. Like, you just you don't get the dump without the pump. Right?
And so I think we do need to move past, like, our time based PTSD about, like, what needs to happen and by when for, like, a cycle to, to be, like, worthwhile or for Bitcoin to be, you know, progressing in the right way from, like, a price perspective. You know, all the KPIs are there. Like, I mean, there are things that need to change. Like, yeah, you could argue different things need to be, you know, improved about mining decentralization, but, you know, hash rates going one way. Like, institutional adoption is going one way. Individual interest is going one way. The mainstreaming of this is going one way. Like, some laws I would still like to see changed, and, you know, precedents that, I would like to see set particularly around, like, money transmission laws,
[01:26:20] ODELL:
which we we didn't get into. Custody at all. Self custody. Yeah. The samurai case, the tornado cache case, open source software.
[01:26:29] John Arnold:
Yeah. Totally. So not everything's perfect. I'm not saying in any way that, like, everything's fixed and perfect and, you know, they're not issues. It's not. From a pure price perspective, though, from, like, a cycle top perspective, like, I increasingly just think, like, all of these charts, like, mapping this cycle to the last or the the last couple are just, like, completely irrelevant,
[01:26:50] ODELL:
with with everything that we're seeing now. I mean, look, I think every cycle is different. They're they've never been exactly the same. They kind of rhyme, right, more than than be identical. I will say in 2017, like, this idea that bear markets are over is not a new idea. Like, in 2017, I was conservative mentally, and then we hit, like, $18,000. You know, it was, like, a run up from sub 1,000 to $18,000. As soon as, like, we hit, like, the 16 to 18,000 range, I was, like, hyper Bitcoinizations upon us. And then we had the winter, and we went all the way down to $3,500. I think we're in a very strong position right now market wise.
I'm cautious about making specific price predictions, but I think we're in a very strong position right now. I'm curious. And and and and but I I I think the idea on two sides, the idea an extreme bull run is not possible, and the idea that a bear market is not possible is exactly why we will probably have both. And, like, first, that's what always happens. It's like that's what happens. You know? The market has to get overleveraged and overexcited and overgreedy on the upside. And then at some point, there will likely, in my opinion, be some kind of blow off top, and then we will have a bear market that should probably be in, like, the, you know, 60 to 80% range. Maybe Maybe it doesn't go all the way down to 80%, but, like, not from this level. Like, first, you have first, you have the exuberant bull where people overleverage themselves and then say that there's never gonna be another bear market, And that's exactly what causes it, and people forget how quick sentiment shifts.
Once again, like, I don't even think you have to have sale or be a fore seller or people be fore seller. It's the panic of the concept of it and people trying to front run that happening in the first place that leads to a lot of these things. You mentioned the 80,000 Bitcoin sale, and, I mean, I think that's a testament to where we are currently in this, quote, unquote, market cycle. Because, like, on chain analysts saw that Bitcoin move to Galaxy before the sales actually happened. Not only historically would the market have had trouble absorbing the 80,000 Bitcoin actually, like, in the market, But the panic that would happen just for the idea that the 80,000 Bitcoin was gonna be sold would become a self fulfilling prophecy on that side, and it didn't. Right? Like, the market mostly absorbed it well. We're sitting at nearly all time highs right now. We're sitting at a $117,000 per coin.
[01:29:50] John Arnold:
Yeah. No. Exactly. Like, I to be clear, like, I definitely think, you know, bear market I'm not saying bear markets are over. I'm not saying, you know, we can definitely have a 50%, 80% drawdown again. But as you said, I just it's not gonna happen. Like, if we're right about Bitcoin, what it is, it's not gonna happen from this level. Right? The two options are either, I think, we bore ourselves to a million dollars and we have, like, some sort of, like, you know, very controlled, like, 20 to 40% CAGR type move up to, you know, a million dollars, like, five to seven years from now. And we're all, like we all kinda hate it, but, you know, we're just sitting there, like, compounding wealth, like, over time in, like, kind of a, you know, boomer fashion, just outrunning the boomers. It's either that, or we're, at some point, going to have an insane bull run followed by, like, an insane bull, or, insane bull off top and then a bear market.
But the thing that people seem to be worried about, which is, like, if x price isn't reached by, like, December, we're gonna you know, that's it. The cycle's over, and we have to come back in four years or whatever and just wait for it again, is I think just completely off. But that's where all of sentiment seems to be right now.
[01:31:03] ODELL:
Yeah. I mean, it's fascinating. But, yeah, I agree. I mean, I feel like we kinda said almost I don't like making specific predictions. I made one satirically last cycle that I'm not gonna repeat, and people still give me shit for it. So I will tell you that I will be irrationally exuberant around wherever the top is going to be because that seems to have always been the case since they got into Bitcoin. So if you're just following along on civil dispatch and rabbit hole recap, as the, exuberance increases, we're probably closer to the top.
John, this has been fantastic. Guys, we will be doing these quarterly. It'll be like a mix of market updates plus ten thirty one updates. I just like the idea in general. I have a lot of things going on in the space and just trying to be as transparent as possible with you guys and give you a front row seat. This time, it seems like there wasn't that many questions about ten thirty one specifically. But if you wanna learn more about ten thirty one, you can go to 1031.xyz. John, final thoughts.
[01:32:15] John Arnold:
I'm sure I was debating if I wanted to, throw out a price call to be spicy, but, I'll I'll It is with a price call. Just a It is with a price call. So what's the test alright. So okay. I'll I'll throw it out there. The funniest timeline would be, and therefore the most likely, would be that we get to, I don't know when this will happen. I'm not gonna, like, make a a timing prediction, but, like, that this cycle ends in, like, you know, we have a few, like, major moves and we get to, like, you know, high four hundreds, let's say. Right? And Okay. Everyone's wondering if we if we can kind of break above to, like, the psychological 500 level or, like, halfway to a million. And then one day, we rip through it. Right? And we we don't just, like, you know, go to five zero one and then come back down. We go to, like, five fifty. And then everyone's like, next stop, a million dollars. And then that's when we dump back to, like, $1.75. I think Yeah. I can see that. Yeah. Whenever I I feel like that's how the cycle ends is everyone convinces themselves that, like, a million dollars is in is in sight. We're closer to a million than we are to, like closer to a million than we are to zero. We're, like, over halfway there, and it's just, like, you know, turn on the turn on the jets, turn on turbo.
And when you start seeing million dollar price calls with high conviction, that's when you know. Like, I don't take any off the table. That's not really how I how I, operate. I know it's not how you do Odell, but, like, that's a good time to not take out a Bitcoin backed loan. Oh, no. I've never taken anything off the table. Yeah.
[01:33:40] ODELL:
I've I've I've successfully bought every top. Yes. Yeah. And I will say I will say if if we rip through 500, I'm gonna try to remember this conversation because I'm a 100% gonna be, like, in the back of my head, hyper Bitcoinization's upon us. Yeah. We're in a super cycle. So I don't think you're too far off on on that front at least. And then what is an 80% drawdown from there?
[01:34:05] John Arnold:
80% drawdown from there is a 100, which would be like yeah. I mean, I could see it. I said one seventy five, hopefully, but, yeah, if if we if we go up like that and then dump really hard, like, probably you should assume there's a 100 k retest incoming at some point. Okay.
[01:34:25] ODELL:
Do you and then also, like, what is the timeline there? I'm, like, kinda thinking we got, like, twelve to eighteen months of this bull right now is how I'm thinking about it.
[01:34:37] John Arnold:
Yeah. I'd be like I'd say I'd be surprised if we got anything like that this year. Like, I do think this, you know, this is a 26 type thing. And I think just because, like, that's outside of normal cycle timing, like, doesn't really mean anything to me. Just, like, look at everything that's going on, and I think there are some liquidity dynamics that'll actually be more bullish next year. So, like, this is this feels like a, you know,
[01:35:03] ODELL:
midway next year type thing. Yeah. Powell's out Powell's out in May. The fall is midterms. Like, you have, like, a massive exuberance in the fall enter entering, like, January ish. Like, I mean, that's at least my mental model, but I'm just gonna stay on Bull and Stacks. That's about it. That's that's the best final thought that we can offer. Do you have any other final thoughts for the audience besides just your d gen price call that you drew in there?
[01:35:30] John Arnold:
Yeah. Like Odell said, very proud of everything we're doing at ten thirty one, and encourage everybody to if you're not familiar with us, check out 1031.xyz. I think we'll continue to, be the leading, the leading fund in the space, the leading Bitcoin investor, and continue to just try to be as as creative as possible in investing in, the best Bitcoin companies and Bitcoin opportunities.
[01:35:57] ODELL:
Love it. I agree. Freaks, give me your feedback. Let me know if you enjoyed this rip. You can do that on on nostr, primal.net/citadel, or in fountain or other podcasting two point o apps. You can leave a comment there. It is appreciated. I want this these shows to be as helpful as possible for you. I have Alex Gleeson joining us next week. I like the idea of, like, these core group of return guests and mix in new voices. I hope you all enjoyed the the Ham Radio conversation we had earlier this week. I know I did. There's been a lot of excitement around it. Liberty Farmer reached out to me, said a lot of people are are reaching out to him getting interested in ham and hamsters specifically, which is this ham noster project. But freaks, as always, all the links are at silldispatch.com.
Single biggest way you can support the show is sharing with your friends and family. We're available on every podcast app. Just search Siddle dispatch. Press that big subscribe button. I love you all. Thank you, John. Stay humble sex sets.
Bloomberg Intro
Happy Bitcoin Friday
Gold vs. Bitcoin
Institutional Bitcoin Adoption
Potential Gold Revaluation and Implications
Strategy's Bitcoin Strategy
Strategy's Preferred Equities
Bitcoin in 401(k)s and Market Dynamics
Fannie Mae IPO and Economic Impact
Federal Reserve Chair and Economic Policy
Bitcoin Market Cycles and Predictions
