Gailus

[Gailus @gailus888]

@coinbureau So he is admitting that eventually we can hack bitcoin protocol ?

[Gailus @gailus888]

@SimonDixonTwitt All he had to do is follow the 4-year cycle. That simple

[Thomas Braziel @Bkclaims]

I like Nic and generally agree with a lot of his work, but I think he's using the wrong framework here. This isn't a CCC bond. It's a distressed special situations security.

I've spent the better part of two decades in distressed credit and roughly the last 12 years buying distressed crypto. I've competed with or worked alongside many of the largest distressed investors. When I ask myself who the marginal buyer of STRC is today, it isn't a traditional high-yield fund.

It's an opportunistic credit fund. Those funds don't wake up looking for 15% returns. They generally need 30%+ IRRs before they commit capital to something this uncertain.

Today you can buy:

• Government refund claims targeting 10-15% IRRs.

• Distressed crypto claims with recoveries denominated in dollars and often substantial collateral protection for 20-25%+ IRRs.

STRC is riskier than both. You're subordinated. There are essentially no meaningful lender protections. The dividend is non-cumulative. The collateral is one volatile asset. There is negative convexity.

And unlike a traditional distressed loan, you don't control the collateral or have meaningful enforcement rights. This isn't lending against Bitcoin.

It's taking directional Bitcoin exposure through a structurally weak preferred security.

There's an important distinction people miss.

Common shareholders have a fiduciary relationship with management. Creditors don't. Management's job is to obtain the cheapest possible financing for shareholders - not to create an attractive security for creditors.

To Strategy's credit, they did exactly that. They issued extraordinarily issuer-friendly paper because the market let them. Good for them!

But once that paper leaves the hands of income-oriented crypto investors, who is the next buyer? That's the question. I think it's an opportunistic distressed investor. And that buyer isn't showing up for a 15-20% required return. They're looking for something closer to a 30%+ IRR.

At an 11.5% coupon, that implies a price of roughly $38.33 (11.5 ÷ 30%), versus about $76.67 for a 15% yield and $57.50 for a 20% yield. Maybe 30% isn't exactly the right number. Maybe it's 35%. Maybe it's 40%. But I think anchoring this off CCC spreads misses who the actual marginal buyer is.

[Gailus @gailus888]

@BTCoptioneer They have to find $580mio every year to pay for the dividend …. A lot of BTC selling to do or MSTR dilution

[Gailus @gailus888]

@GrainofSaltSF @JoeCarlasare @Strategy Please Michael raise more MSTR. It will be good for my puts

[Gailus @gailus888]

@FinanceLancelot @dash_darkhorse *at some point

[Gailus @gailus888]

@FinanceLancelot @dash_darkhorse STRC is perpetual so he pays the rate the board decides each month at their discretion. At sole point it makes so sense to increase it. This thing goes to zero soon.

[Gailus @gailus888]

@ActuallyClimber Well STRC will trade much lower near zero I think and MSTR $15.- at some point. So for me no flippening but pain

[Gailus @gailus888]

It seems we are getting there …

$MSTR bitcoin:native

[Gailus @gailus888]

$BTC

Cycle 1: Mt Gox hack (2011)
Cycle 2: Mt Gox bankruptcy (2014)
Cycle 3: FTX+Celcius+3AC (2022)
Cycle 4: ??? (2026)

My guess: Bitcoin treasury companies such as $MSTR

[Gailus @gailus888]

@Megatron_ron Bibi reminded Trump he still has the Epstein files ...

[Gailus @gailus888]

@mc_khristina This is 5 to 10 days prior to earnings

[Gailus @gailus888]

@MarkYu7out @unusual_whales You mean what was accomplished by Iran ;-)

[Gailus @gailus888]

@benjamincowen It is baffling to me that there are people who watch the World Cup.

[Gailus @gailus888]

@GabGrowth CAONIMAS

[Gailus @gailus888]

@REALMizkif @RobinhoodApp You are subscribing to an IPO via Robinhood .... this is a joke, right?

[Gailus @gailus888]

There is one “small” thing that make the $SPCX IPO different than other IPOs…. In 15 days QQQ and many passive funds around the world are going to buy a lot of shares ….

[Gailus @gailus888]

@hillery_dan You guys are still around?

[Gailus @gailus888]

@unusual_whales Yes of course and now it is called the Strait of America ….

[Gailus @gailus888]

@benjamincowen I won't touch BTC for now. I am patiently waiting October and then I will start DCA unless we get a flush crash before.

[Gailus @gailus888]

@ActuallyClimber @comic 😂