This article comes from:David Lin

Translation｜Odaily Planet Daily (@OdailyChina); Translator｜Azuma (@azuma_eth)

Editor's Note: During the earnings call last Monday, Strategy mentioned for the first time "prepared to sell Bitcoin if necessary to pay dividends," which immediately sparked intense market discussions about its "abandonment of faith."

In response, Strategy's Executive Chairman Michael Saylor recently provided an in-depth analysis of the underlying logic behind this decision while participating in David Lin's podcast, emphasizing that he only said "will sell," which does not represent "net selling." Saylor also mentioned that Strategy is leveraging Bitcoin's extreme appreciation as "digital capital" to achieve arbitrage by issuing digital credit instruments (such as STRC), thus ensuring a continuous net growth in holdings. Below is the full content of the podcast (with edits) translated by Odaily Planet Daily.

Podcast Interview

David Lin (Host A): I am very honored to co-host this exciting interview with Strategy's Executive Chairman Michael Saylor, alongside Bonnie Chang. Let's start with the recent announcement from Strategy and the updates Michael Saylor posted on social media. Bonnie, let's get started.

Bonnie Chang (Host B): Last week you announced something that shocked everyone.

Michael Saylor: Uh, what you may be referring to is our statement during the earnings call - we are prepared to sell Bitcoin if necessary to pay STRC dividends.

Bonnie Chang: I believe that was a well-considered decision; what was the thinking behind it?

Michael Saylor: The most important point is that we want the market to understand that Bitcoin capital gains can be used to fund credit dividends. When we sell $1 million of STRC credit products, we will immediately buy $1 million of Bitcoin. We expect Bitcoin to appreciate about 30% per year; in fact, its appreciation is close to 40% annually. We can strip the initial 11% from these capital gains to be paid as dividends.

The market has been perplexed about what we would use to pay dividends. For most of history, we have been paying dividends through the sale of common stock (MSTR equity). MSTR's equity is a derivative of Bitcoin and usually trades at a premium compared to Bitcoin. Therefore, what we were selling was Bitcoin derivatives, but some were concerned that we might not be able to sell the equity in the future.

This led to some bearish sentiments, saying we had to sell the equity; others claimed the company would never sell its Bitcoin. These discussions escalated to — "Well, if they don't plan to sell Bitcoin, then Bitcoin must be worthless, and they will never sell it. If they can't sell it, then we can't count Bitcoin as an asset on the balance sheet."

If you own something worth $65 billion and people want to value it at zero, that's not good, right? We don't want credit rating agencies to think our company's assets are zero. We want them to perceive that we have $65 billion in assets. Additionally, there are some "haters" online constantly complaining that this is a Ponzi scheme because we fund preferred stock dividends through the sale of equities.

What we want to do is reinforce such a business model — selling credit to invest in Bitcoin; over time, the appreciation of this investment exceeds the accumulation speed of dividends; then we realize capital gains and pay out dividends.

We believe the best way to clarify this is to make it clear that "the company never has to sell common stock"; we simply need to sell greatly appreciated Bitcoin to pay dividends, which honestly is using capital gains to fund credit dividends.

I think of it like a real estate development company that raises money by issuing credit instruments to buy land at $10,000 an acre, develop it to achieve a value of $100,000 an acre, and then realize that capital appreciation. You can sell the land for $100,000 an acre, lease it fully developed, or refinance it. No one would question a real estate development company that conducts capital investment through credit income, and what we are doing with Bitcoin is the same; we want to ensure the market understands this.

I was famous for saying, "Never sell your Bitcoin," which is why the internet exploded when they heard we were going to sell; but if I put it more precisely, I should say, "Never be a net seller of Bitcoin"; the phrase "never be a net seller" just doesn't sound as catchy or easy to communicate.

I believe during these periods, even if we sell 1 Bitcoin, we will buy 10 to 20 more. So what you're talking about is a situation where "buying 10, selling 1, net buying 9." Once people understand this, it should no longer be controversial, but currently, it is still a hot topic.

Bonnie Chang: Can you explain how you achieve selling 1 Bitcoin while buying 10?

Michael Saylor: Sure. Strategy's primary Bitcoin accumulation engine is STRC. We sold $3.2 billion of STRC in April, so we purchased $3.2 billion of Bitcoin. The dividends are around $80 million to $90 million. Therefore, in that month where we raised $3 billion, we only needed to allocate $80 million or $90 million to pay dividends — essentially, buying 30 Bitcoins while selling 1.

Our "breakeven rate" is about 2.3%. This means that if the credit debt we issue equals 2.3% of our Bitcoin holdings, even if we sell Bitcoin to pay dividends, we will always be net buyers of Bitcoin. Another point is that if Bitcoin appreciates by 2.3% per year, we can pay dividends forever and continue to create value without having to sell any common stock.

In the first four months of this year, we have already sold about $5 billion of STRC; at this rate, the issuance for this year will be 15% to 20%. As long as the company is growing, the Bitcoin it buys will exceed what it sells. I expect that every month and every quarter in the future, we will be net buyers of Bitcoin.

Bonnie Chang: I have one more question. Many investors almost religiously follow the advice to "never sell Bitcoin." Do you think they should still adhere to this advice?

Michael Saylor: Yes, I believe you should be a "net accumulator" of Bitcoin. When I say "never sell your Bitcoin," I mean if you're going to spend it on something, make sure to replenish it as you spend.

There are many cryptocurrency or Bitcoin believers who say they want to buy things using Bitcoin; I would say, then make up for the consumption gap. Don’t become a net seller of Bitcoin because Bitcoin is capital. At the end of each year, your Bitcoin should be greater than at the beginning.

For example, if Google invests $1 billion to build a data center and earns $10 billion, they effectively net $9 billion. This doesn’t cause a collapse in the dollar market, right? No one would shout, “Google sold dollars to buy a data center.” The dollar would be fine, and this wouldn't undermine Google's business model. They invested $1 billion in their business, which is normal and rational. Sometimes you spend money to make more money.

So if you spend 1 Bitcoin to earn 10 Bitcoins, I think it's beneficial for Bitcoin and for the company... When the liquidity in the equity capital market is less than that in the Bitcoin market, we want to take advantage of this market.

Whenever a company restricts its options by saying "we will never do something," whatever that may be, the end result will always be regret. For example, if we say "we will never repurchase our own stock, only sell stock," then the bears will wildly sell our stock, driving it down to $1. When the stock price is at a huge discount to net asset value (NAV), if we can repurchase, those shorts will have a loss. By taking advantage of their irrationality, we can make a lot of money.

So what we really meant during the earnings call is — we will exchange STRC for MSTR, we will exchange BTC for MSTR, and we will use BTC or MSTR to pay dividends; we will do anything that is in the best interest of the company. But over time, we expect to be net accumulators of Bitcoin. This will not change the way we trade assets daily. Whether we sell credit debt, equity, or Bitcoin capital will depend on market conditions and pricing errors.

Another point we mentioned yesterday is that we are ready to repurchase our bonds. Currently, our corporate bonds are trading at a low price and are undervalued, so repurchasing them makes sense, whereas selling them does not. We will not sell undervalued assets; we will buy undervalued assets and then arbitrage any opaque efficiencies. If the market knows we will do this, the market will give all these assets a fair valuation. This benefits all investors in these tools because fundamentally, this is our fiduciary duty.

David Lin: One of your biggest critics, Peter Schiff, wrote this morning: "Yesterday, Saylor admitted that MSTR (MicroStrategy) would sell Bitcoin when necessary to pay STRC dividends. I think this commitment is to prolong the so-called Ponzi scheme. But I guess when that moment comes, he will choose to suspend dividends and let STRC collapse rather than let Bitcoin collapse." What is your response to this?

Michael Saylor: Peter believes Bitcoin is a Ponzi scheme. Peter actually doesn't like anything in this space. Bitcoin is "digital capital," and we buy this capital through the sale of equity and credit instruments, thus creating a digital finance company. I believe Bitcoin will last because it represents global economic wealth that exists in a tokenized form with complete property rights.

On top of this, we built a credit tool STRC, which simply strips volatility, reduces risk, and extracts or "distills" yield from digital capital. If you don't acknowledge Bitcoin as legitimate, you will never acknowledge any derivatives above it as legitimate. However, for those who believe Bitcoin can store economic wealth in tokenized form, what we are doing is very straightforward.

STRC adopts an over-collateralization model where for every $5 of Bitcoin, $1 of credit debt is sold, which has a clear yield. There are many who believe Bitcoin is a legitimate asset; they just can't stand its volatility. They don’t want to invest the money for their children’s tuition that’s due in 12 weeks into Bitcoin. Therefore, for them, digital credit makes a lot of sense because the principal is protected, and it is more stable. Moreover, they can earn 3 to 4 times the yield of money market returns through STRC, which is precisely what makes Bitcoin superior to other capital assets, allowing us to pay these high dividend yields.

David Lin: This is a theory I would like to ask you about, and then I will hand it back to Bonnie. Some traders have noticed that whenever STRC issues dividends, the ex-dividend price lingers below par for a while (possibly a day or two). Once it hits par, that’s the time for Strategy to buy Bitcoin. So, they begin to "front-run" by buying Bitcoin before STRC reaches par, betting that you and Strategy will buy Bitcoin at par. Can you comment on this?

Michael Saylor: What happens close to the dividend date is that the demand for STRC is enormous since there will be about $0.90 in dividends after the record date. Therefore, there are billions and hundreds of billions of dollars of STRC trading before the record date, and the price may drop 60 or 70 cents the day after the record date, then gradually return to par over the next week or two.

So that is normal. Those people are arbitrageurs, and their thinking is that they just need to have their funds occupy for about 12 days each year to capture about 42% of annualized yield. They have their calculations. This is good for us too because it creates liquidity and participation, and this will continue.

As for the second idea, can you "front-run" in the Bitcoin market? The Bitcoin derivatives market has $50 billion in trading volume daily. So, I don't believe anyone has enough capital to shake that market.

My view is that Bitcoin is a bit like "the square of tech capital," and the factors driving the Bitcoin market are trade wars, hot wars, diplomatic policies, national situations, and the Iran situation in the Strait of Hormuz, followed by currency wars – for instance, whether we expect SOFR to drop to 200 basis points or whether the yield curve is being distorted. As you can see, we are currently in a fairly tightening monetary environment, so these macro factors are the main drivers of Bitcoin.

I can tell you a fact: we once bought $100 million of Bitcoin in an hour, and it did not move the price; we bought $200 million of Bitcoin in an hour, and it also did not move the price; we bought $200 or $300 million in an hour and then stopped, and the price actually increased.

So, no one has enough power to drive Bitcoin's price movements… well, if you plan to inject $30 billion into the market in an afternoon, maybe you can. But I have spent a lot of money, and we have bought more Bitcoin than anyone I know; we may have acquired Bitcoin worth $62 billion. I believe this is a global market with its own dynamics.

So, those statements about our ability to influence the price are actually elevating us, but I don't believe that.

Bonnie Chang: Why do you buy so much Bitcoin and yet say the price stays still?

Michael Saylor: Because the market is extremely liquid. Assume I want to buy $1 billion today; even then, that is only 1/50 of a $50 billion trading volume.

If you were to ask those traders, they would say the spot market’s daily trading volume is sometimes $20 billion, and the derivatives market sometimes reaches $80 billion. In such a liquid market, what does $100 million represent? That’s what makes it special. Over the weekend, if you want to establish a $1 billion position with 20x leverage, you can completely do it in the Bitcoin market; if you want to obtain $1 billion in credit within an hour, you can also do it in the Bitcoin market.

I do believe that macro factors are driving Bitcoin, and sometimes Bitcoin has its own vitality. Micro factors are also driving it; I mean industry factors, such as the formation of digital credit, the formation of bank credit, and investors’ sentiments towards Bitcoin as an asset, all of which are driving the market. But I think Bitcoin is more powerful than all of us, and that’s why we have confidence in it — because no single participant can sustain or obstruct it.

David Lin: If the Strait of Hormuz remains closed in the foreseeable future, several forces will intertwine. First, some say inflationary pressures will persist; second, the Federal Reserve may ultimately need to cut interest rates as they are trapped by high inflation. So what will happen to liquidity? If the Fed remains trapped, what will happen to Bitcoin?

Michael Saylor: I think when you face a tightening monetary policy, high tensions in global trade, and high geopolitical tensions due to diplomatic policies or wars (whether in Ukraine or Iran), all these are somewhat constraining factors and present headwinds. I think when these factors reverse, they will become tailwinds.

But regardless, Bitcoin will grind up because the organic supply from miners is only about $10 billion to $12 billion a year, equating to only 450 Bitcoins a day. Do the math yourself and you’ll understand. Then, whenever we raise another $10 billion in capital, we buy the entire year’s supply. So, if a bank creates $10 billion in credit, that’s “one axle turn”; if we sell $10 billion of STRC digital credit, that’s “the second axle turn”; when $10 billion flows into IBIT (BlackRock's Bitcoin spot ETF), that’s “the third axle turn.”

So, capital flows, digital credit, digital capital packaging tools, and bank credit are all pushing the fundamentals of the market, and all of these are positive. Regardless of macro factors, you will see continued adoption. The effect of macro winds is merely that when we should have climbed 30%, the tailwind will propel us up to 50%, whereas headwinds will dampen our speed to some extent.

David Lin: Has your logic about Bitcoin changed?

Michael Saylor: It has not changed. But I would say it is now very clear that Bitcoin is "digital capital," and over the past 12 months, one thing has become very clear — one of Bitcoin's killer applications is digital credit.

A lot of people are wondering, what is the killer application for an asset class worth $15 trillion and trading hundreds of billions daily? The answer is as collateral for credit. Since digital capital is the best-performing capital asset (which it indeed is), outperforming the S&P 500 by two to three times, it naturally follows that we can create the best-performing credit assets on top of this capital asset.

What we have seen in the past year is that STRC is the most liquid credit instrument; it is also the largest preferred stock in the entire market, with the highest Sharpe ratio. We have successfully created a tool with a Sharpe ratio of 3 and a dividend yield of 11% to 12%.

The highest Sharpe ratio among stocks is Nvidia, around 1.7; the S&P 500 is about 0.9… none exceed 1. Even the best hedge funds' Sharpe ratios cannot exceed 2.2.

Thus, digital credit actually possesses better risk-adjusted returns than all other financial strategies in public capital markets and all publicly traded instruments. I could not have told you this 12 months ago. But now the logic makes sense — if Bitcoin is the best-performing capital, then convertible bonds backed by Bitcoin will become the best-performing convertible bonds, and credit tools like STRC will become the best-performing preferred stocks.

By the way, do you know how much of the preferred stock market we have accounted for this year?

Bonnie Chang: I guess over 70%?

Michael Saylor: This year, 60% of preferred stocks in the United States have been issued by us. Last year and this year, we are the largest credit issuer in the United States. We have revitalized the preferred stock market, and STRC has experienced explosive growth.

So I think the novelty lies in the idea that "digital capital drives digital credit." As you saw in the program, digital credit is the stepping stone to digital currency. Because a large number of stable tokens (Yield coins/tokens) that are pegged to the dollar and can pay yields of 8% or 9% have emerged, Apex created one, growing from 0 to $300 million in 8 weeks; Saturn created another, growing from 0 to $110 million in 6 weeks.

An innovation boom driven by digital credit has occurred across the fields of digital assets, cryptocurrencies, and traditional finance. And Bitcoin is the cornerstone that enables digital credit, which may be the most exciting thing this year.

Bonnie Chang: Last question. Did "Have Space Suit—Will Travel" inspire you to go to MIT? Let's go back before MIT, back to this book and before Bitcoin. Say something to your younger self.

Michael Saylor: You know, when I was in first grade, my parents wanted to motivate me; they told me I would receive 10 cents for every book I read. I was addicted to comic books, and I remember comic books were 25 cents each. So the math was that I had to read two and a half "serious books" to earn one comic book, and I was highly motivated.

That summer, I read about 100 books; I would go to the library and borrow 10 at a time. Later, I discovered science fiction and found Heinlein, Clarke, and Asimov. Before third grade, I had read "The Moon is a Harsh Mistress" and "Have Space Suit—Will Travel"; by the time I was in fourth grade, I had read them all.

I would say that reading these science fiction novels drove my intellectual development. Boys in elementary school are easily influenced. I remember in "Have Space Suit—Will Travel," the protagonist is an alpha male. He repairs a spacesuit, gets picked up by a spaceship, and travels through the cosmos, saving humanity from "the wormhole monster." What is the reward for saving humanity? He receives a full scholarship to MIT. I thought to myself, if MIT is good enough for that hero who saved humanity, then it’s probably good enough for me. So no matter what happens, I’m going there.

David Lin: If Musk invites you to Mars, would you accept?

Michael Saylor: That depends on what kind of vehicle he offers to take me there.

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