Original video source: David Lin

Compiled by: Azuma, Odaily Planet Daily

Editor's Note: During last Monday's earnings call, Strategy first mentioned that it was "prepared to sell Bitcoin to pay dividends if necessary," a statement that immediately sparked heated discussions in the market about its "abandonment of faith."

In response, Strategy Executive Chairman Michael Saylor recently gave an in-depth analysis of the underlying logic behind this decision during an appearance on David Lin's podcast, emphasizing that he only said he "would sell," not that he would "net sell."

Saylor also mentioned that Strategy is leveraging Bitcoin's extremely high appreciation potential as "digital capital" by issuing digital credit instruments (such as STRC) to achieve arbitrage, thereby ensuring the continued net growth of its holdings. The following is the full transcript of the podcast (edited for brevity), compiled by Odaily.

Podcast Interview

David Lin (Host A): I'm honored to have Michael Saylor, Executive Chairman of Strategy, with me co-hosting with Bonnie Chang. We'll begin with Strategy's recent announcements and Michael Saylor's social media posts. Bonnie, let's get started.

Bonnie Chang (Host B): Last week you announced something that shocked the entire internet.

Michael Saylor: Uh, you're probably referring to what we said on the earnings call—that we're prepared to pay STRC dividends by selling Bitcoin if necessary.

Bonnie Chang: I believe it was a well-thought-out decision. What was the thinking behind it?

Michael Saylor: The most important point is that we want the market to understand that Bitcoin's capital gains can be used to fund credit dividends. When we sell $1 million worth of STRC credit products, we immediately buy $1 million worth of Bitcoin. Our expectation for Bitcoin is an annual appreciation of about 30%, and in reality, it's appreciating by close to 40% annually. We can then allocate the initial 11% of this capital gain as dividend payments.

The market has been puzzled about what we'll use to pay dividends. For most of our history, we've paid dividends by selling common stock (MSTR equity). MSTR equity is a derivative of Bitcoin and typically trades at a premium to Bitcoin. Therefore, we were selling Bitcoin derivatives back then, but some people are worried that we won't be able to sell equity in the future.

Then came some bearish comments, saying we had to sell our equity; others said the company would never sell its Bitcoin. These comments escalated to—"Okay, if they're not going to sell their Bitcoin, then Bitcoin must be worthless, they'll never sell it. If they can't sell it, then we can't include Bitcoin in our balance sheet assets."

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 has zero assets. We want them to think we have $65 billion in assets. Furthermore, there are some online "haters" constantly complaining that this is a Ponzi scheme because we fund preferred stock dividends by selling equity.

What we want to do is strengthen this business model—selling credit lines to invest in Bitcoin; over time, this investment appreciates faster than the dividends accumulate; then we realize the capital gains and pay out dividends.

We believe the best way to clarify this is to state that "the company never needs to sell common stock." We only need to sell Bitcoin, which has appreciated significantly, to pay dividends. This is essentially using capital gains to pay credit dividends.

I think it's like a real estate development company that raises funds by issuing credit instruments, buys land at $10,000 per acre, develops it to a value of $100,000 per acre, and then cashes out that capital appreciation.

You can sell the land for $100,000 per acre, rent it out after it's fully developed, or remortgage it. Nobody will question a real estate development company that invests capital through credit income, and we're doing the same thing with Bitcoin; we want to make sure the market understands that.

I was once famous for saying "Never sell your Bitcoin," which is why the internet went wild when we heard we were going to sell. But if I were to be more precise, I would say "Never become a net seller of Bitcoin," though "Never become a net seller" doesn't sound as catchy or easy to spread.

I believe that during these periods, even if we were to sell 1 Bitcoin, we would buy another 10 to 20. So, you're actually talking about a scenario of "buying 10, selling 1, and net buying 9." Once people understand this, it shouldn't be an issue anymore, but it's still a controversial topic.

Bonnie Chang: Could you explain how to sell 1 Bitcoin while simultaneously buying 10?

Michael Saylor: Sure. Strategy's primary Bitcoin accumulation engine is STRC. We sold $3.2 billion worth of STRC in April, thus buying $3.2 billion worth of Bitcoin. The dividends are approximately $80 to $90 million.

So, in this month when we raised 3 billion, we only need to set aside 80 million or 90 million to pay dividends—essentially, you're buying 30 bitcoins while selling 1.

Our break-even point is approximately 2.3%. This means that if our issued credit debt equals 2.3% of our Bitcoin holdings, we will always be a net buyer of Bitcoin, even if we sell Bitcoin to pay dividends. Another point is that if Bitcoin appreciates by 2.3% annually, we can pay dividends indefinitely and continuously create value without selling any common stock.

In the first four months of this year, we have already sold approximately $5 billion worth of STRC, and at this rate, the issuance rate for the year will reach 15% to 20%. As long as the company is growing, it will buy more Bitcoin than it sells. I expect that every month and every quarter in the future, we will be a net buyer of Bitcoin.

Bonnie Chang: I have another question. Many investors almost religiously believe in "never selling Bitcoin." Do you think they should still follow this advice?

Michael Saylor: Yes, I think 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 you replenish it as you spend it.

Many cryptocurrency or Bitcoin enthusiasts say they want to buy things with Bitcoin, and I would say, then fill the gap left by consumption. Don't be a net seller of Bitcoin, because Bitcoin is capital. At the end of each year, you should have more Bitcoin than you started with.

For example, if Google invests $1 billion in building data centers and earns $10 billion, they would net $9 billion. This wouldn't cause the dollar market to collapse, right? Nobody would exclaim, "Google sold its dollars to buy data centers!"

The dollar will be fine, and this won't shake Google's business model. They spent $1 billion investing in the 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 good for Bitcoin and good for the company... When the equity capital market is less liquid than the Bitcoin market, we hope to take advantage of that market.

Whenever a company deprives itself of its options, such as by saying "we will never do something," whatever that may be, the end result is always regret. For example, if we say we "will never, ever buy back our own stock, we will only sell it," then short sellers will frantically sell our stock, driving the price down to $1. When the stock price is trading at a huge discount to net asset value (NAV), those short sellers will lose money if we can buy back the shares. By exploiting their irrationality, we can make a lot of money.

So what we were really saying on the earnings call was—we'll swap STRC for MSTR, we'll swap BTC for MSTR, and we'll use BTC or MSTR to pay dividends; we'll do whatever is in the best interests of the company. However, over time, we expect to become a net accumulator of Bitcoin. This won't change how we trade assets on a daily basis. Whether we sell corporate bonds, equity, or Bitcoin capital will depend on market conditions and pricing errors.

Another thing we mentioned yesterday was that we are prepared to buy back our bonds. Currently, our corporate bonds are trading cheaply and are undervalued, so buying them back makes sense, while selling them doesn't. We don't sell undervalued assets; we buy undervalued assets and then arbitrage any opaque efficiencies. If the market knew we would do this, it would give all these assets a fair valuation. This benefits investors in all these instruments, and ultimately, it's our fiduciary duty.

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

Michael Saylor: Peter thinks Bitcoin is a Ponzi scheme. Peter doesn't actually like anything in this space. Bitcoin is "digital capital," and we create a digital finance company by buying this capital through the sale of equity and credit instruments. I think Bitcoin will continue because it represents global economic wealth in tokenized form with full property rights.

We've built a credit instrument called SRC on top of this, which simply strips away volatility, reduces risk, and extracts or "distills" yield from digital capital. You'll never accept any derivatives built on top of Bitcoin as legitimate if you don't acknowledge its legitimacy, but for those who believe Bitcoin can store economic wealth in tokenized form, what we're doing is very straightforward.

STRC employs an over-collateralized model, selling $1 of credit bonds for every $5 of Bitcoin, with each $1 of credit bond having a defined yield. Many people believe Bitcoin is a legitimate asset but are simply unable to tolerate its volatility. They don't want to invest money meant for their children's tuition in Bitcoin, as they need to pay in 12 weeks. Therefore, digital credit makes significant sense for them because the principal is protected and more stable. Furthermore, they can obtain 3 to 4 times the yield of the money market through STRC, which is precisely Bitcoin's superior characteristic compared to other capital assets, allowing us to pay such high dividend yields.

David Lin: This is a theory I'd like to ask you about, which I'll pass on to Bonnie later. Some traders have noticed that whenever STRC pays dividends, the ex-dividend price stays below par for a period of time (maybe a day or two). Once it reaches par, that's when Strategy goes to buy Bitcoin. So, they start "front-running" 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 demand for STRC is extremely high because there is a dividend of about 90 cents after that record date. As a result, there are billions or even tens of billions of dollars worth of STRC trading before the record date, and the day after the record date, its trading price drops by 60 or 70 cents, and then gradually recovers to parity over the next week or two.

So that's normal. Those people are arbitrageurs; their idea is that by tying up their funds for about 12 days a year, they can capture roughly a 42% annualized return. They have their own calculation logic. That's fine, and it's good for us too, because it creates liquidity and participation, and this situation will continue.

As for the second point, can you "get ahead" in the Bitcoin market? The Bitcoin derivatives market has a daily trading volume of $50 billion. Therefore, I don't think anyone has enough capital to shake up that market.

My view is that Bitcoin is somewhat like "the square of tech capital." The factors driving the Bitcoin market are trade wars, hot wars, foreign policy, national situations, and the situation in the Strait of Hormuz with Iran, followed by currency wars—for example, whether we expect SOFR to fall to 200 basis points, or whether the yield curve is being distorted.

As you can see, we are currently in a rather tight monetary environment, so these macroeconomic factors are the main drivers of Bitcoin.

I can tell you a fact: we once bought $100 million worth of Bitcoin in an hour, and the price didn't fluctuate; we once bought $200 million worth of Bitcoin in an hour, and the price didn't fluctuate; we once bought $200 million or $300 million in an hour and then stopped, and the price actually went up.

So, nobody has enough power to drive Bitcoin's price performance... well, if you were planning to throw $30 billion into the market in one afternoon, maybe. But I've spent a lot of money; we've bought more Bitcoin than anyone I know—we've probably already purchased $62 billion worth. I believe this is a global market with its own dynamics.

So those claims that we can influence prices are actually overestimating us, but I don't think so.

Bonnie Chang: Why do you say the price hasn't changed at all, even though you've bought so much Bitcoin?

Michael Saylor: Because market liquidity is extremely abundant. Let's say I want to buy $1 billion today, even that's only 1/50th of the $50 billion trading volume.

If you ask the traders, they'll tell you that daily trading volume in the spot market sometimes reaches $20 billion, and in the derivatives market, it can reach as high as $80 billion. In such a highly liquid market, what is $100 million? That's what makes it special. On weekends, if you want to have a $1 billion position with 20x leverage, you can absolutely do it in the Bitcoin market; if you want to get $1 billion in credit within an hour, you can also do it in the Bitcoin market.

I do believe that macro factors drive Bitcoin, and sometimes Bitcoin has its own inherent resilience. Micro factors also drive it; I'm referring to industry factors such as the formation of digital credit, the formation of bank lending, and investor sentiment towards Bitcoin assets—all of these drive the market. But I believe Bitcoin is stronger than all of us combined, and that's precisely why we have confidence in it—because no single player can support or hinder it.

David Lin: If the Strait of Hormuz remains closed for the foreseeable future, several forces will intertwine. First, some argue that inflationary pressures will persist; second, the Federal Reserve may eventually need to cut interest rates because they are bogged down by high inflation. So, what will ultimately happen to liquidity? And what will happen to Bitcoin if the Fed remains trapped?

Michael Saylor: I think when you're facing tight monetary policy, high tensions in global trade, and high geopolitical tensions due to foreign policy or war, all of these are, to some extent, constraining factors; they are headwinds. I think when these factors reverse, they become tailwinds.

However, Bitcoin will eventually grind up slowly because the organic supply from miners is only about $10 billion to $12 billion per year, which translates to only 450 Bitcoins per day. You can do the math yourself to see why.

Then, every time we raise another $10 billion in capital, we buy up the entire year's supply. So, if a bank creates $10 billion in credit, that's "one turn of the axle"; if we sell $10 billion in STRC digital credit, that's "a second turn of the axle"; and when $10 billion flows into IBIT (BlackRock's Bitcoin spot ETF), that's "a third turn of the axle".

Therefore, capital flows, digital credit, digital capital packaging instruments, and bank lending—all of these are driving market fundamentals, and all of them are positive. Regardless of macroeconomic factors, you will see continued adoption. The role of macroeconomic winds is simply that when we should be climbing 30%, tailwinds will propel us to 50%, while headwinds will slow us down to some extent.

David Lin: Has your logic regarding Bitcoin changed?

Michael Saylor: Nothing has changed. But I would say that it is now very clear that Bitcoin is "digital capital," and one thing has become very clear in the last 12 months— one of Bitcoin's killer applications is digital credit.

Many people are wondering what the killer application is for an asset class worth $1.5 trillion with daily trading volumes of tens of billions of dollars. The answer is that it's as collateral for credit. Since digital capital is the best-performing capital asset, outperforming the S&P 500 by two to three times, it's logical that we can create the best-performing credit assets on top of this capital asset.

What we've seen over the past year is that STRC is the most liquid credit instrument, the most liquid preferred stock in the entire market, and also the largest preferred stock in the market. It has the highest Sharpe ratio. We have successfully created an instrument with a Sharpe ratio of 3 and a payout ratio of 11% to 12%.

The highest Sharpe ratio among stocks is Nvidia, at about 1.7; the S&P 500 is about 0.9... none of them can exceed 1, and even the top hedge funds you can find cannot exceed 2.2 in Sharpe ratio.

Therefore, digital credit actually offers better risk-adjusted returns than any other financial strategy and publicly traded instrument in the public capital market. I couldn't have told you this 12 months ago. But now the logic makes sense— if Bitcoin is the best-performing capital, then Bitcoin-backed convertible bonds will be the best-performing convertible bonds, and credit instruments like STRCs will be the best-performing preferred stocks.

By the way, do you know what percentage of the preferred stock market we accounted for this year?

Bonnie Chang: I'd guess over 70%?

Michael Saylor: We issued 60% of all preferred stock in the U.S. this year. Last year and this year, we were the largest credit issuer in the nation. We revitalized the preferred stock market, and STRC experienced explosive growth.

Therefore, I think the novelty lies in the concept of "digital capital driving digital credit." As you saw in the program, digital credit is a stepping stone to digital currency. Because now there are a large number of stablecoins (yield coins/tokens) pegged to the US dollar that pay 8% or 9% yields. Apex created one and grew from $0 to $300 million in 8 weeks; Saturn created another and grew from $0 to $110 million in 6 weeks.

A massive innovation boom driven by digital credit has emerged in the fields of digital assets, cryptocurrencies, and traditional finance. Bitcoin, as the cornerstone that makes digital credit possible, is perhaps the most exciting development of the year.

Bonnie Chang: One last question. Was it *Have Space Suit—Will Travel* that inspired you to go to MIT? Let's go back to MIT, back to that book, and back to Bitcoin. Say something to your younger self.

Michael Saylor: You know, when I was in first grade, my parents wanted to motivate me, so they told me they'd give me 10 cents for every book I read. I was addicted to comics at the time, and I remember comic books costing 25 cents each. So the calculation was that I had to read two and a half "serious" books to get one comic book, which really motivated me.

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, Clark and Asimov. I read The Moon is a Harsh Mistress and Travel in a Space Suit before third grade, and by third or fourth grade I had read them all.

I would say that reading these science fiction novels propelled my intellectual development. Elementary school boys are very susceptible to influence. I remember in *Walking in a Spacesuit*, the protagonist was an alpha male. He repaired a spacesuit, was picked up by a spaceship, traveled through space, and saved humanity from "bug-eyed monsters."

What was the reward for saving humanity? He received a full scholarship to MIT. I thought to myself, if MIT was good enough for that hero who saved humanity, it would probably be good enough for me too. So, even if the world collapsed, I would go there.

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

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