Bitcoin and Crypto Thread

eradicator said:
The rewards for holding stable coins are quite good, I’ve seen 8%, and as high as 16% per year

I don’t think anyone holding stable. Coins is planning on holding them forever, though, probably a smart traitor, who is waiting for a good dip to buy.
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where does the yield come from??? Gemini Earn, for example - the risk is very high for such a low yield. STRC is the real "stablecoin" 8x overcollaterlized, non-rehypothecated and a 9% yield. Its more collateralized than a bank deposit - vs putting a stablecoin into a yield ponzi for a paltry 8% hoping to get out before the rugpull
 
chance vought said:
where does the yield come from??? Gemini Earn, for example - the risk is very high for such a low yield. STRC is the real "stablecoin" 8x overcollaterlized, non-rehypothecated and a 9% yield. Its more collateralized than a bank deposit - vs putting a stablecoin into a yield ponzi for a paltry 8% hoping to get out before the rugpull
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All of them are slightly different, which is why they give different rates

For example On Balanced DEX the savings rate (stable coin yield pool) is currently offering 16.5%. That yield comes from:

Interest charged on their stable coin loans,
DAO fee revenue,
On chain USA Treasury bills,
ICX inflation.

Here’s balanced dex http://balanced.network/

Coinbase is 4%
 
chance vought said:
where does the yield come from??? Gemini Earn, for example - the risk is very high for such a low yield. STRC is the real "stablecoin" 8x overcollaterlized, non-rehypothecated and a 9% yield. Its more collateralized than a bank deposit - vs putting a stablecoin into a yield ponzi for a paltry 8% hoping to get out before the rugpull
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The one glaring flaw with all the Microstrategy yield producing products is that Microstrategy does not produce any cash flow as a company so where does the yield come from?

The answer is the yield comes from issuing more securities to pay the interest on the existing securities.

This works fine under normal market conditions but if financial markets get dislocated (like 2008) they will not be able to issue securities because liquidity/demand will dry up. Then they will default on their interest payments or have to sell Bitcoin to pay the interest.
 
Australia Sucks said:
The one glaring flaw with all the Microstrategy yield producing products is that Microstrategy does not produce any cash flow as a company so where does the yield come from?

The answer is the yield comes from issuing more securities to pay the interest on the existing securities.

This works fine under normal market conditions but if financial markets get dislocated (like 2008) they will not be able to issue securities because liquidity/demand will dry up. Then they will default on their interest payments or have to sell Bitcoin to pay the interest.
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Liquidity won’t dry up, it can’t be allowed to or the entire fiat ponzi collapses.
A company worth $100 billion has no problem borrowing money, no matter what the market conditions. There is no reason to sell bitcoin, simply borrow more fiat - at an interest rate that is below the rate of monetary debasement. This is how every zombie company survives, borrow artificially low priced fiat money and buy assets. Strategy is just buying the apex asset.

I don’t recall the exact number, but I think it was one month of preferred stock issuance can pay for 80 years worth of the preferred stock dividends…as long as risk is mispriced (due to central bank manipulation), Strategy will continue to be profitable.
 
GoodShepherd said:
Bitcoin mentioned
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he's not wrong - at this part of the fiat story, it is true that investing is more financially rewarding than solving human needs for others.

How long will this be true? As long as governments are able to print money out of nothing without destroying trust in fiat currencies.

Once humanity is on sound money, solving problems for other people will be the easiest way to earn bitcoin, not investing.

It won't require 80% of people to switch to bitcoin. The "gradually, then suddenly" moment might be when 10% of people are on a bitcoin standard, maybe 20%. A large minority. That might be 10 years or 50 years from now - thats when bitcoin goes from $1M to $10M in a span of months, and increasing numbers of people will only accept bitcoin, eventually bitcoin won't have a fiat price as no one will accept fiat for bitcoin.
 
chance vought said:
A company worth $100 billion has no problem borrowing money, no matter what the market conditions.
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Are you forgetting what happened to companies like Lehman brothers, Bear Sterns, AIG, Fannie Mae and Freddie Mac during 2008? In fact the whole financial system was days away from collapse. And I can gaurantee you the next major financial crises we have that some major companies will go bankrupt.
 
chance vought said:
I don’t recall the exact number, but I think it was one month of preferred stock issuance can pay for 80 years worth of the preferred stock dividends…as long as risk is mispriced (due to central bank manipulation), Strategy will continue to be profitable.
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If the preffered stock is paying a 9% yield then every $1 of preferred stock issued gives you 11 years to pay it back (9% yield = 11 year payback period). Bot sure where you got 80 years from unless you are incorporating the returns earned from the bitcoin purchased with the borrowed funds.
 
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Australia Sucks said:
Are you forgetting what happened to companies like Lehman brothers, Bear Sterns, AIG, Fannie Mae and Freddie Mac during 2008? In fact the whole financial system was days away from collapse. And I can gaurantee you the next major financial crises we have that some major companies will go bankrupt.
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There are not many companies which lasted more than 100years in the US stock market. I think its just one or two actually.


BIS warns of mounting disconnect between debt and stock markets​

 
IMG_6838.jpeg

For context:

This refers to the story of James Howells, who lost a hard drive with 8,000 Bitcoins (worth ~£600M as of 2025) in a Newport, Wales landfill in 2013. His ex-partner, Hafina Morgan, accidentally threw it out during a clear-out. Howells has fought legally to search the site but lost in court; he's now exploring other recovery options like tokenizing his claim. The article screenshot is from Daily Mail, Nov 2024, where she shares her side.
 
Australia Sucks said:
If the preffered stock is paying a 9% yield then every $1 of preferred stock issued gives you 11 years to pay it back (9% yield = 11 year payback period). Bot sure where you got 80 years from unless you are incorporating the returns earned from the bitcoin purchased with the borrowed funds.
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Yes...you need to factor in bitcoin appreciation.
 
Australia Sucks said:
Are you forgetting what happened to companies like Lehman brothers, Bear Sterns, AIG, Fannie Mae and Freddie Mac during 2008? In fact the whole financial system was days away from collapse. And I can gaurantee you the next major financial crises we have that some major companies will go bankrupt.
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No.
Bear Stearns: $1 in assets for $33 in liabilities
Lehman: $1 assets for $31 liabilities
AIG credit insurance division $1 assets/$50 liabilities
Strategy: $9 in assets for every $1 liability
Bank of America: $0.14 for every $1 liability
Wells Fargo: $0.36 for every $1
 
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Assets only matter in terms of meeting debt obligations if they produce cash flows or if they can be quickly and easily liquidated for cash. Saylor is on the record stating he will never sell MSTR's Bitcoin holdings (and indeed, if he ever did sell then the entire premise of a BTC holding company immediately collapses, and the price of BTC along with it). That being the case, @Australia Sucks is correct to point out that MSTR has no way of sustaining its preferred dividend payments without issuing further preferred or common shares. This is the literal definition of a Ponzi scheme: paying off current investors with cash received from new investors.

Saylor is clever, however, and has given himself an MSTR an out: the dividends on all of their preferred stock are not guaranteed, and preferred shareholders enjoy none of the legal privileges that bondholders enjoy in terms of being prioritized in bankruptcy. Preferred shares are basically Saylor saying, "Hey, give me $100 and I'll pay you $10 per year. Just trust me bro."

MSTR is going to be forced to continually dilute its common stock to both acquire more BTC and pay its preferred dividends. The realization of this fact (which is long overdue) is why MSTR shares have been in steady decline for months now. Earlier this year, Saylor and the MSTR board were somehow able to convince shareholders to approve a measure allowing for the common stock to expand from a cap of 330m shares to 10.33 billion shares. They intend to dilute their stock by a factor of 30, if necessary, to buy as much Bitcoin as possible, while continuing to meet their dividend and debt obligations.

The funny thing is that this entire scam is perfectly legal. The glaring question is why in the world ANYONE would be dumb enough to buy MSTR common stock, when Saylor and Co. are transparently screwing their shareholders for every penny they can and doing so in broad daylight. The scam is eventually going to collapse in spectacular fashion, the company will implode, and what happens to its Bitcoin stash at that point is anyone's guess.
 
scorpion said:
MSTR is going to be forced to continually dilute its common stock to both acquire more BTC and pay its preferred dividends. The realization of this fact (which is long overdue) is why MSTR shares have been in steady decline for months now. Earlier this year, Saylor and the MSTR board were somehow able to convince shareholders to approve a measure allowing for the common stock to expand from a cap of 330m shares to 10.33 billion shares. They intend to dilute their stock by a factor of 30, if necessary, to buy as much Bitcoin as possible, while continuing to meet their dividend and debt obligations.
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To be fair there is a conceptually sound argument to be made why long term MSTR should trade at a premium to its net asset value. The reasoning is that it gives locked in pools of capital access to Bitcoin who cannot buy Bitcoin any other way other than a stock market listed treasury company.

And MSTR is the biggest and most liquid of the treasury companies. If you are the manager of a stock mutual fund your mandate most likely will not allow you to buy Bitcoin directly or even to buy IBIT or other Bitcoin ETFs. So if you want exposure to Bitcoin you have to buy a treasury company (and MSTR is the largest and most liquid making it the obvious choice). This is why it presents a long term arbitrage opportunity but the risk is still high because its reliant on continued access to capital markets and if it stops paying interest on its preferred the market will lose confidence in its strategy and the NAV premium will dissipate meaning the concept is no longer viable.

The same concept holds true for other MSTR related products (preferred shares, convertible preferred shares, etc) they are basically arbitraging the legal structure and the fact that certain institutional managed funds can only buy a list of prescribed assets included in their mandate.

As for the 10.33 billion shares I don't think they actually plan to get to that number of shares. They just put it at an arbitrarily high limit that is effectively infinite so they don't have to keep going back to the market every time to get approval to change the share count. I would be surprised if they even get to 2 billion share let alone 10 billion plus shares.
 
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Australia Sucks said:
To be fair there is a conceptually sound argument to be made why long term MSTR should trade at a premium to its net asset value. The reasoning is that it gives locked in pools of capital access to Bitcoin who cannot buy Bitcoin any other way other than a stock market listed treasury company.

And MSTR is the biggest and most liquid of the treasury companies. If you are the manager of a stock mutual fund your mandate most likely will not allow you to buy Bitcoin directly or even to buy IBIT or other Bitcoin ETFs. So if you want exposure to Bitcoin you have to buy a treasury company (and MSTR is the largest and most liquid making it the obvious choice). This is why it presents a long term arbitrage opportunity but the risk is still high because its reliant on continued access to capital markets and if it stops paying interest on its preferred the market will lose confidence in its strategy and the NAV premium will dissipate meaning the concept is no longer viable.

The same concept holds true for other MSTR related products (preferred shares, convertible preferred shares, etc) they are basically arbitraging the legal structure and the fact that certain institutional managed funds can only buy a list of prescribed assets included in their mandate.
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The argument that MSTR and other Bitcoin treasuries warrant a NAV premium is inherently self-defeating if you simultaneously argue for the continued growth and "inevitability" of Bitcoin. Because if Bitcoin does indeed continue its march through the financial system, the current restrictions against its ownership will inevitably be lifted. Already you can buy Bitcoin ETFs. There's no logical reason that a Bitcoin treasury company - literally a company that has no other purpose than buying and holding Bitcoin - should trade at a premium to its Bitcoin holdings. Indeed, it should actually trade at a slight to moderate discount.
Australia Sucks said:
As for the 10.33 billion shares I don't think they actually plan to get to that number of shares. They just put it at an arbitrarily high limit that is effectively infinite so they don't have to keep going back to the market every time to get approval to change the share count. I would be surprised if they even get to 2 billion share let alone 10 billion plus shares.
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There is nothing stopping them, and they have all the incentive in the world to issue every single share they can to keep the party going. They have dividend payments to meet in perpetuity, and new share issuance is their only source of revenue. The alternative is selling some of their Bitcoin stash, which blows up their entire "business model" as such.
 
Yes, when fiat dies, there will be no purpose to a bitcoin treasury company - it will have to evolve into something else - like Berkshire.

Strategy is not just buying bitcoin and selling common shares. The preferred stock is a replacement for bonds and other capital assets that uses bitcoin’s volatility (and fiat appreciation) and sells it in a form that the market wants.

Trad Fi doesn’t like bitcoin because it is volatile. Strategy shareholders will happily take that volatility and sell it to preferred stock investors who would rather have lower returns in exchange for less volatility.

About 3 years ago, my wife’s friend, a part time yoga instructor, wanted advice on what to do with the money she had saved from her yoga gig ($40k). I told her she should buy bitcoin - and I made her an offer. I told her to buy 2 bitcoin, and in 2 years, if bitcoin is less than what you bought it for, I will pay you exactly what you paid for it. If it is worth more, I get 10% of the capital gain. You have ZERO risk, and 90% of the upside appreciation of bitcoin. She said she would think about it. We talked a few months later, and she decided to go to a CFP and bought index funds. Today, the bitcoin she would have had is about $240,000. The point of this story is I was doing something very similar to Strategy - I was willing to take bitcoin’s volatility in exchange for some of the upside, because I knew where it was going, and didn’t have any more money of my own.

Bitcoin does have cash flows…about 50% per year over the last 5 years, The dividends aren’t paid in bitcoin; they are paid in fiat.

Most of the market is afraid of bitcoin and its volatility, Strategy shareholders are not.
 
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