Strategy Inc

Hello, everyone, and good evening. I'm CJ, head of investor relations at Strategy. I'm excited to moderate Strategy's second quarter, 2026, earnings webinar for you. We will start the call with a 60-minute presentation, starting with Andrew Kang, followed by Fong Lee, and then Michael Saylor. This will be followed by a 30-minute interactive Q&A session with four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans, and prospects may constitute forward-looking statements. Actual results may differ materially from these forward-looking statements. due to various important factors, including fluctuations in the price of Bitcoin and the risk factors discussed under the caption Risk Factors in Strategy's quarterly report on Form 10Q filed with the SEC on May 6th, 2026, and the risks described in other filings that Strategy may make with the SEC. We assume no obligation to update these forward-looking statements which speak only as of today. With that, I will turn the call over to Andrew Kang, CFO of Strategy.

Thank you, CJ, and thank you all for joining our call today. Moving on to the first slide, we now hold 843,775,000 Bitcoin, representing approximately 4% of all Bitcoin that will ever exist. Bitcoin per share is currently 203,683 sats, which remains one of the cleanest measures of how we create long-term value for shareholders. Our market cap is approximately $38 billion, and year to date, we have raised $17 billion of capital across common equity and digital credit. That capital gives us the strength to continue building our overall Bitcoin holdings, manage our capital structure, meet our dividend and interest obligations, and support the growth of our digital credit platform. On this slide, we show that we adopted Bitcoin as a treasury asset beginning in Q3 of 2020. We have accumulated more Bitcoin in every single quarter across 113 acquisitions. And today we hold, again, 843,775 Bitcoin with a Bitcoin reserve value of approximately $55 billion. Our total acquisition cost is approximately $64 billion and our average purchase price is roughly $75,000 per Bitcoin. Strategy is now the largest institutional holder of Bitcoin in the world. Our holdings are larger than the largest Bitcoin ETFs shown here. They're larger than the estimated holdings of any nation state and larger than the major DeFi custody balances. That scale matters and it reinforces Strategy's unique position in the digital assets market. We are not just participating in institutional Bitcoin adoption, we are leading it. Doing so as an operating company with access to the capital markets, a growing digital credit platform, and a long-term objective of increasing Bitcoin per share for our shareholders. Now turning to the balance sheet, Q2 reflected active execution across all of our operations and our capital structure. Digital assets ended the quarter at $49.7 billion, having acquired a net 83,901 Bitcoin during the quarter, with the total balance sheet holdings now slightly lower due to the lower price of Bitcoin as of the end of Q2. Cash and short-term investments increased to $2.4 billion as of the quarter end, and now even further to $3.75 billion current quarter to date. And now we hold over two years of dividend interest coverage and also reflect our goal of continuing to replenish the USD Reserve to support our digital credit instruments. Long-term debt declined from $8.2 billion to $6.7 billion, driven by the $1.5 billion repurchase of convertible debt, which we executed at an 8% discount in Q2. and preferred equity increased from $9 billion to $14.4 billion driven by the strong issuance of STRC during Q2. We began the quarter with just over 762,000 Bitcoin with a market value of $51.6 billion. During that quarter, we accumulated more Bitcoin, adding a net 83,901 Bitcoin, an average price of approximately $75,500. At quarter end, we held 846,000 Bitcoin, and the quarter end Bitcoin price was approximately $58,700, resulting in a Q2 unrealized fair value loss of approximately $8.3 billion. After quarter end, we have seen a recovery in the market value of our Bitcoin holdings. Quarter to date through July 27th, we did sell 2,225 Bitcoin for approximately $135 million. And with Bitcoin price increasing to approximately $65,000 per Bitcoin, we currently would reflect an estimated fair value gain of about $5.2 billion on our total holdings. and our digital assets balance sheet will have increased to approximately $54.8 billion. As of July 27th, our total reserve, which includes our BTC reserve and our US dollar cash reserve was $58.5 billion with a net reserve of approximately $36.3 billion, which nets out our out of the money convertible debt and preferred equity balances. Here, amplification calculated as our BTC reserve of approximately $58 billion divided by net reserves of $36 billion is over 1.5 times. Amplification represents our total Bitcoin as a multiple of reserves remaining after taking into account our debt and preferred claims. We have $15.4 billion of preferred equity outstanding and $6.7 billion of convertible debt outstanding. and a low net leverage of 5.4%, which reflects our debt less our cash reserves divided by our BTC reserve. At a current Bitcoin price of roughly $65,000, our approximately $55 billion of Bitcoin reserves provides an 18.5x BTC rating against our net debt of about $3 billion. In an extreme stress case, as you can see here in the middle of the slide, even with a 95% Bitcoin price decline to roughly $4,000 per Bitcoin, our converts would remain fully covered at a 1.0x BTC rating. Over time, our plan remains to equitize, repay, or refinance existing convertible debt while continuing to maintain strong collateral coverage. And as we demonstrated in Q2, we believe the market remains open to all of these options. We plan to remain patient, monitor the market conditions, and continue to focus on the overall liability management of our outstanding debt. Turning to the Q2 financial results, we reported an operating loss of $8.3 billion, a net loss of $8.6 billion, and an EPS of negative $24.45 per share. These results were driven by the quarter end non-cash fair value mark to market of our Bitcoin holdings. Our focus remains on the long-term drivers we can control, which include capital allocation, balance sheet strength, the strengthening of our digital credit instruments and increasing Bitcoin per share over the long term. And I mentioned earlier, quarter to date with Bitcoin price having increased to closer to $65,000, our current fair value mark to market of our holdings would reflect about a $5.2 billion gain. Turning to our Bitcoin KPIs, as of July 26th, Bitcoin per share was 203,683 sats compared to about 191,904 sats in July of 2025, which is an increase of about 6% year-over-year. Year-to-date BTC yield is currently 4.5% compared to about 22.8% for the full year 2025. BTC gain is approximately 30,000 Bitcoin year to date, which is about 30% of last year's full year gain. And in dollar terms, BTC dollar gain is approximately $2 billion year to date compared to about $8.9 billion for the full year 2025. Despite the significant drawdown in BTC price year over year, we continue to execute positive performance across all of our core KPIs. Since 2020, our Bitcoin per share has increased from approximately 46,000 sats to 203,000 sats, which is more than a 4x increase over that period. And in 2006, we have delivered, as I mentioned, 4.5% BTC yield year to date. As you can see here, historical annual BTC yield performance does move sort of in conjunction with Bitcoin price and Bitcoin Bear markets, like we saw in 22 and 23, BTC yield was lower than the bull market years of 24 and 25. That being said, BTC yield this year does have the potential to outperform the prior bear market if BTC price improves and through the support and strengthening of our digital credit instruments. On this slide, we show here in Q2, within Q2, Bitcoin per share increased from approximately 201,170 sats at the end of Q1 to approximately 210,824 sats at the end of Q2. Despite the lower price of Bitcoin and the overall market volatility in Q2, the quarter's BTC yield of 5% outperformed the Q1 BTC yield of 3.2%. So we are continuing to make good progress. And lastly, I will end with a quick snapshot on the most recent view from our equity analysts. We added two new covering analysts from Barclays and Siebert for a total coverage of now 16. Across the firms shown here, the average analyst Bitcoin price target, for those that have one, is approximately $98,000. The average MSTR price target is approximately $296, and all with corresponding buy ratings. While we do not endorse any third-party forecasts, it's important to note that the banks are increasing their engagement with Bitcoin, with digital capital, and with a focus on strategy's role within that market. I think the growth also reflects the deep and growing demand from investors as well for independent institutional views on Bitcoin strategy and digital credit. And it helps deepen investor understanding of our business model, our capital structure and the long term value we are pursuing for our shareholders. So with that, I thank you all for your time and I will turn it over to Fong for his remarks.

Thank you, Andrew. Thank you, everyone, for joining us this evening. I'm going to provide an update on our capital market strategy and our capital markets programs. And before I go into some of those details, I do also want to recap Q2 2026. We acknowledge that it was an up and down quarter for Bitcoin. And our common equity and our preferred have gone down in that period of time. But if I look at the key metrics that we look at for performance and health of the business, things are generally speaking positive. Our Bitcoin holdings over the course of the quarter. Increased 11% from 762,099 Bitcoin to 846,000 Bitcoin. We reduced our debt outstanding from $8.2 billion to $6.7 billion. And on a net debt basis, we reduced it even more. This was down 18%. Our U.S. dollar reserve is up from $2.1 billion to $2.4 billion at the end of Q2. And as Andrew noted, we're now at $3.75 billion. That's a 12% increase quarter over quarter. And our Bitcoin per share, potentially our most important of our metrics, went from 201,170 satoshis to 210,824 satoshis, so a 5% increase. So many of these metrics show health in the overall business. How are we able to do that? Three months ago in our earnings call, we said that we were adding engines to the strategy playbook, if you will. We went from one-way capital issuance, buying Bitcoin through active issuance of MSTR, of our preferreds and our convertibles, to what we call active capital. active capital management. We're able to sell MSTR to buy Bitcoin, U.S. dollars, debt, prefs. We're able to sell our prefs to buy Bitcoin, U.S. dollars, debt, MSTR. And we're also able to sell our Bitcoin to buy U.S. dollars, buy debt, buy prefs, buy MSTR. And we're able to use those U.S. dollars to pay off dividends and to strengthen our balance sheet. Thank you. We bought 174,895 Bitcoin year-to-date 2026. We sold 3,620 Bitcoin during that same period of time. We bought 48x more Bitcoin than we sold, and we increased our Bitcoin 25% since the beginning of 2026 until now. When it comes to digital credit and stretch, we issued $7.52 billion of digital credit. We repurchased year-to-date $25 million. We issued 300x more digital credit than we repurchased, and we increased stretch's notional 250% since the beginning of the year. So I think we are carrying through Thank you. Another way to think about a robust access to the capital markets is to look at what we've done year to date 2026. So through seven months in 2026, we've now issued $17 billion of capital. As you can see here, that's approaching what we did in 2025, primarily used to buy Bitcoin. And you'll also see the percentage of capital that we issued that was digital credit, specifically primarily stretch, was 44% of the total capital we issued versus 28% last year. If you look at this same information on a quarter-to-quarter basis, Q2, we issued more capital than we did in Q1 of last year, Q1 of this year, and also we issued more capital in Q2 2026 than we did, or we raised more capital in 2026 than we did in any quarter of last year. So $8.4 billion total, of which $5.5 billion is digital credit. Q3, 2026, right? So this is the month of July of this year. We've issued about $1.3 billion of common equity. And of course, we want to see preferred equity added to that stack too. And so I'll talk a little bit more about why that's important. We've talked about the flywheel in the past. Our overall objective is to double Bitcoin per share in seven years through digital credit. And why is this important? We want digital credit to work because we're able to sell digital credit to buy Bitcoin. That generates amplification to the company. That would increase our Bitcoin per share for the company, especially as Bitcoin increases. And it allows the company ultimately to do what we have been doing and what we intend to do, which is to outperform Bitcoin. What are the inputs that can help us flex these levers? Decreasing our cost of credit. And we'll talk about that in a little bit. Higher digital credit sales. This is selling more stretch and a higher MNAV through accretion of our equity, our common equity, MSTR. So let me talk about the digital credit capital framework and how do we get this flywheel working even better than it has in the past. I'll start with our corporate objective. It's for stretch to trade at $99 to $100 over time. We recognize that that has not occurred over the course of the last month. Stretch is now trading at about $89.50. Our goal is to get this back to $99 to $100 because that helps our digital credit engine work and it helps us increase Bitcoin per share and ultimately accrue value to our common shareholders. So about a month ago, we issued five pillars that are gonna strengthen stretch and strengthen digital credit. The first major pillar is the US dollar reserve. We recognize the importance of the US dollar reserve to our digital credit shareholders, We decreased that over time in the month of June, and we realized that it's important to keep it strong. And so we've increased it now to $3.75 billion, which is about 2.1 years worth of dividend coverage, dividend and interest coverage. And we're going to keep one year a minimum. And I'll talk a little bit more about that in a minute. Bitcoin monetization, selling Bitcoin for three purposes. One, to fund U.S. dollar reserves. Two, to fund dividends and interest expenses. And three, to support our repurchase programs. And those are our third and our fourth pillar. The ability to repurchase digital credit up to a billion dollars. We've repurchased $25 million so far a year today. And to repurchase MSTR up to a billion dollars. And the fifth and last pillar is to manage our stretch dividend in a way that it's thoughtful and supports the price of stretch while also reducing our dividend burden. And we can review that one. The good news is we've built now an all-time high U.S. dollar reserve. So we started at the beginning of the year in January at $2.25 billion. We drew that down to pay down $1.5 billion notional of our 2029 converts. Thank you. And two, that on a duration basis, which is how many years of dividend interest expense coverage we have, our high in January is 2.7 years. Our low end of May was 0.5 years. We're now back to 2.1 years. And our target is to be somewhere between two and three years. I talked about our Bitcoin monetization program. Our intent is to sell Bitcoin for three reasons when we think it's appropriate for the company. One, fund the US dollar reserve up to $1.25 billion. That would take our US dollar reserve up to $5 billion if we were to do that fully using Bitcoin, which would take us up close to three years. Two, fund dividend interest payments of $1.76 billion currently, annually. And we've used Bitcoin sales to fund some dividend payments in the last month or so. And three is to fund up to $2 billion in our repurchase programs. So let's talk a little bit more about Bitcoin monetization and Bitcoin sales. This is a subject of much discussion during the month of May and June. So I thought I would provide some more clarity on to why we did it and what we believe the result to Bitcoin was when we did this. First, our first Bitcoin sale in the week ending May 31st was 32 Bitcoin. That was 0.004% of all of our Bitcoin holdings. And why did we do it? We did it to inoculate the market and test our processes. The average cost basis of that Bitcoin is $125,464. which came to a $4 million total cost basis with a proceeds of $2 million and the average sale price of $77,135. We took about a $1 million realized loss in that, and that gives us a potential tax asset, assuming a 29% corporate tax rate of about $400,000. Our second Bitcoin sale was about a month later. In the week ending July 5th, we sold 3,588 Bitcoin, about 0.4% of our Bitcoin holdings. So about 100x more than what we sold the month before. Why did we do that? We did that to fund our prep dividends that were due June 30th of 2026. Average cost basis of that Bitcoin $116,000, which came to $418 million. The sale price was $60,000. And so our proceeds are $216 million, which we used again to fund our dividends on our preferreds at the end of June. And we took a realized loss of $203 million, which allowed us to potentially book a tax loss of $59 million. If you see here, we have 843,000 Bitcoin. And you can see the size of the bars of our Bitcoin sales are almost not noticeable compared to our total Bitcoin holdings. Of course, then the question is, sorry, and so the next topic I'll get into is what is our overall potential tax benefit? We showed this slide last quarter. Of all of our Bitcoin, we have about $18.5 billion in unrealized losses, which equals a potential benefit of $5.4 billion on our taxes. So selling high cost basis Bitcoin at a low price gives us the potential to take tax losses that can then offset future capital gains. So did our Bitcoin sales have an effect on Bitcoin price? We have two data points, so I don't think we can make a definitive statement, but I thought it'd be useful to look at these two data points in a little bit more detail. Our 32 Bitcoin sale was about $2 million that week. And what happened after we sold the $2 million of Bitcoin? Well, in the week that we sold the $2 million, Bitcoin price went down 4%. The week after we announced the $2 million sale, Bitcoin went down 11%. And as a reminder, that was 0.001% of the liquidity of Bitcoin that week. So we were 0.001% of the Bitcoin trading volume when we made those sales. One month later, we sold about 100x more Bitcoin. The week that we sold 100x more Bitcoin, Bitcoin price went up 6%. The week after we announced it, Bitcoin price went down 1%. And we were 0.104% of the liquidity of Bitcoin in the week we sold. Did we have an impact on the price? Based on the liquidity, I would think not. Based on sentiment, perhaps. We'll continue to study this, but we thought it would be useful to share a couple of the data points. Another way to look at this, the bigger question we sometimes ask is, is strategy propping up Bitcoin price with our purchases? Is strategy moving down Bitcoin price with our sales? Does Bitcoin need strategy? And I think we've said many times strategy needs Bitcoin. So how would I look at this? As an example, average Bitcoin liquidity has been about $26 billion of trading on a daily basis. If we look at the week where we bought the most Bitcoin in the history of the company, our average daily purchase was $363 million. That's the max, right? In that particular week, we were 1.42% of the trading volume of Bitcoin. If you look at the last 12 months, we would average about $56 million of Bitcoin purchases a day, which sounds like a lot. It is a lot. But as a percentage of the $26 billion of daily liquidity, we were 0.22% of the trading volume of Bitcoin. Bitcoin is extremely liquid. We are a large purchaser. But looking at these numbers, I would say we were not a material purchaser. What about when we sell? The most we've sold so far is $19 million a day. And in that particular week, that would mean that we were 0.08% of the trading volume of Bitcoin. And that's a pretty small number. And if we were to sell to satisfy our $1.7 billion of dividend obligations, that would average to about $5 million a day. And that would be 0.02% of Bitcoin liquidity. All right. So my takeaway from this is we are a heavy participant in the Bitcoin market when we buy, but still not a material amount of the overall Bitcoin market. And we are a very, very small participant in the Bitcoin market when we sell. Back to the other pillars. So repurchasing up to $2 billion of our securities. All right, so this is 1 billion of our digital securities. We have a REACH purchase program now authorized. $13 billion is our market cap right now of our digital credit. A billion dollars has been authorized. We've said we'll prioritize Stretch right now. When would we buy Stretch? When it's trading at a discount to par. how much of a discount that's subject to management discretion. Why might we buy it? We might buy it to reduce our annual dividend, or we might buy it to strengthen the quality of digital credit, and we might buy it to capture net BPS accretion. On MSTRs, about $38 billion in market cap. We have an authorization to buy back up to $1 billion. We have not used it yet. Why might we buy it or when might we buy it? We might buy it when it's trading at a discount to net Bitcoin per share, which we have not seen that occur on a sustained basis yet this year. Why might we do it? Because we think it would create long term value by capturing that BPS accretion. How would we do this? We could buy in the open market. We could buy via block trades, tenders, exchange offers. And what's the timeframe that we might do this? We have no obligation, no expiration. We can modify, suspend, or terminate this program at any point in time. So how do we get stretch back to par? That is the focus of the company. That's the focus of the leadership and the management team. To climb stretch back to $99 to $100, we can adjust the U.S. dollar reserve. You've seen us actively do that. We can maintain the stretch rate. We're not planning on decreasing the stretch rate to bring it back to par. And we found that increasing the stretch rate is not really an effective way to bring it back to par. So our current plan is to keep the rate right at 12%. And of course, we can buy back stretch, which we've seen us start to do when we get back to par. We've learned a lot. We learned a lot about how stretch trades. We learned a lot about the types of people buying stretch. We learned a lot about the overall characteristics of digital credit leverage, what layer two players do on top of it. So what would we do? We could manage the ATM issuance, right? We could not issue necessarily as much as we have in the past. We could adjust the stretch rate, in this case down, right? If we see billions of dollars of demand for stretch and we don't want to grow digital credit too quickly, we could adjust the rate down from 12% to 11% to 10% or whatever we see fit. We can manage the BTC reserve, meaning we could decide how much of our stretch proceeds we put into Bitcoin. Historically, we put it all into Bitcoin, but we don't necessarily need to do that. We could put some of it into increasing the U.S. dollar reserve. And of course, we can manage our overall capital structure. We can manage our convertible bonds. We can manage what else is in that capital structure. And then we can manage some of the policies, including the one that I've discussed. The stretch rate is adjusted by observing multiple signals, right? We have a 12% annualized dividend rate right now. And when we return to par, we'll look at things like trading levels, market yields, the Bitcoin market, the U.S. dollar reserve coverage, and the capital structure to determine what the right rate is. And I want to reiterate our capital markets principles that we've shared in the past, and there are six of them. One, we're going to continue to create long-term value for MSTR. That's the most important of our principles. And we're going to do that primarily by increasing Bitcoin per share. How do we increase Bitcoin per share? We're going to do that by growing demand for stretch, getting it back to par, and observe the trading characteristics and learning from that. We're going to responsibly reduce the convertible market debt based on market conditions. We did that in Q2, right? And we would consider doing that on a go-forward basis. We'll monitor stretch demand and credit risk to determine the size of the U.S. dollar reserve. I think we've learned from Q2 that keeping a robust two to three year U.S. dollar reserve makes sense. And our minimum will be one year. We'll adjust the amplification based on market conditions. The price of Bitcoin is a big factor to the amplification. And we'll sell Bitcoin when it's advantageous to the company, which we've started to do. And you can expect that we may do that on a go forward basis, too. So with that, I'll pass it over to Michael Saylor.

Thank you, Fong. I want to spend a moment talking about our credit products and our business model. So let's start with digital capital. We use Bitcoin as digital capital and we just upgraded our website and we're making available a whole set of metrics for Bitcoin investors to track Bitcoin as the investment. So what you'll see here is on our website, we're now tracking the real-time Bitcoin price and the market cap. But we've also added the 200-week moving average. We view that as being something akin to the basis in Bitcoin or the book value with Bitcoin. And a lot of Bitcoin movements are anchored to it one way or the other. You'll see that we're actually calculating the premium to the 200-week moving average in real time on our website. And we've also added a pretty neat metric time above. And what you'll see on our website is that Bitcoin right now, it's trading at a very slight premium to the 200 week moving average. And for about 91% of the history of the network, it is traded at a higher premium than that. And so I'd encourage anyone to go check out this website. It's pretty useful. We've got other metrics like Bitcoin dominance and hash rate, the fear and greed index. You can also see the net ETF flows. They were as high as minus $5 billion or so about a month ago. Now they're coming in. And so this is for people that really want to gauge the status of our capital base, BTC. Now, let's go to the next slide. And what you see here is that we're in a phase of weakness. We're sitting now resting right around the 200-week moving average. If you're a capital investor, I'd say you have to take a four-year time horizon. So the right price signal to look at is the 200-week moving average. And You see, it's a pretty up and to the right message and signal, but you can see the periods of exuberance around late 2021. There was a massive premium. Then you could see in the crypto winter, we fell to a slight discount. And then you can see we traded back to a premium. Right now we're sitting right on that moving average. Now, if we ask the question, you know, what are the headwinds holding back Bitcoin? We really think there are five. There's an AI capital expansion, a trillion dollars or more of capital that are flowing into the data center build out, the AI center build out, you know, with the SpaceX, the Google, the Meta. the anthropic, the open AI. And then of course, you're probably familiar with all of the Bitcoin miners and they're building out their data centers for AI and they're extremely capital intensive. That's created a capital suction in the equity capital markets and also an attraction in the private credit markets where massive amounts of credit capital has been flowing. So that's a headwind. We think at some point we'll get through the biggest phase of that build out and we'll settle into an equilibrium and that headwind will become neutral, you know, attacking wind or it'll subside. We also see trade tensions have been weighing on Bitcoin, all the foreign tariff wars and trade wars and uncertainty. The Gulf War disruption is a macro headwind. And it revs up and subsides and things escalate. The Fed policy has tilted to becoming more restrictive over the past nine months. And we could see even as of yesterday, there were rumors that the Fed might raise rates and three of the Fed directors or governors actually voted to raise rates. So that restrictive monetary policy from the Federal Reserve has been a headwind. And then delays in regulatory clarity. The clarity bill has not moved as quickly as people have expected. And there's substantial uncertainty about when that will be resolved. So those are the headwinds that we face right now. We also think any one of them could become a tailwind or a catalyst. And we think generally Bitcoin has done pretty well in the face of those headwinds. And as we get good news in any of those areas, I think that'll be very positive for the entire Bitcoin market. You can see that sentiment is near a cycle low. And this is the fear greed index. And we track this on our website now and you can click through and you can see it. So that sentiment reflects itself in a number of ways in our equity price and our credit prices and in the Bitcoin price. But there are many, many positive factors in the Bitcoin ecosystem right now in the industry that I'd like to highlight. One of them is the BTC dominance has been consistently growing since the 2021 low. It's expanded about 20%. And now if you look at Bitcoin's market cap as a percentage of all the market caps of the crypto tokens, not including stable coins, Bitcoin is a bit more than two thirds. And we think this is an incredibly bullish sign. So when I refer to the fact that Bitcoin has won the race to be the dominant digital capital network and the dominant digital monetary network in the world, I think this metric is one of the key signals that shows that it's won. There really is no serious discussion. And that's incredibly clarifying insight, because if Bitcoin is the digital capital network for the next decade, it's more likely than not that it's the capital network for the next hundred years. And we are building our credit structures and our equity structures on top of it. So this is the biggest uncertainty taken off the table over the past four years. underappreciated by many people, but perhaps it's more important than any other, you know, week by week, month by month, year by year development in the entire digital asset space. We keep track of banking adoption in this space. And I've noted that the real drivers of Bitcoin price are going to be the formation of credit networks, either digital credit or banking credit. And of course, the banks have the ability to create incredible amounts of credit. So if the banks create credit on top of real estate, real estate values increase dramatically. And as banks create credit on top of digital capital, on top of Bitcoin, then the value of Bitcoin will increase. By our own Bitcoin Banking Adoption Index, which we just rolled out, and it looks at the top 25 leading global banks, you can see that we've advanced from 9% to 14% to 24% to 32%. And so we think this is just incredibly bullish. We will keep track of this adoption index each quarter. And on our quarterly calls, we'll report back to you as to how things are developing. Another great development this quarter is the formation of the Bitcoin Security Consortium. We worked in conjunction with all of the major Bitcoin investing and custody and trading institutions in the United States in order to form this consortium. And this is in response to a lot of investor requests, a very broad-based sentiment across institutional investors that they have clarity about how the Bitcoin network will address future security concerns. The most well-known one that's been talked about the most over the past six months has been quantum computer risk. And lots of investors wonder, how would the network react to a quantum threat? Should it materialize? And we have joined forces with all of these other institutions to make sure we stay coordinated on that. There are a lot of people doing really good work in the space. The point of the consortium is to support any work that is pro-Bitcoin security related. We all want Bitcoin to be a secure network for the next hundred years. And so I personally have had a lot of enthusiasm for supporting security related work with regard to Bitcoin. I supported security efforts starting about 2020 with my own personal funds. And so this is really the natural evolution of institutional investment and the security of Bitcoin. The intent of the consortium is not really to drive the protocol or protocol changes, but really just to fund investments committed to security and stability of the protocol. And each of the various institutions involved is going to make their own decisions. However, Institutional investors would like a common voice and they would like a coordinated response. And so it will be helpful for the entire institutional community and for banking adoption, investor adoption, and to get positive regulatory adoption and nation state adoption of Bitcoin. for us to be able to coordinate and to communicate the work that's going on and then make sure that we're ready for any security threat that may develop in the future. So a few words on digital credit. Stretch, STRC is our flagship digital credit product and we're laser focused on Stretch. Our goal with Stretch is we want to increase the liquidity We want to decrease the volatility and we want to build an ecosystem of market participants. We want people that are willing to trade it. We want people that are willing to short it. We want people that are willing to go long and hold it forever. I'm not terribly bothered by the fact that someone might buy it at $88 and sell it at $95. We would love for that to happen. We'd love for another group of people that buy it at 95 and hold it till it goes to 98 and other investors that will buy it whenever it falls below 99 and write it back to 100. And if they don't want to hold it at 100, that's okay. They'll be creating liquidity for other buyers at 100. And that stabilizes STRC. So we welcome derivatives traders, long traders, short traders, anyone that has any particular view. It's fine. You know, if someone wanted to sell a billion dollars of STRC short. they would be paying the 12% dividend. And so they would be paying $120 million a year in order to create a billion dollars of liquidity to the benefit of our digital credit. So again, we don't really worry about it. We would like to return to par with the broadest, most diverse ecosystem of market participants that we can possibly develop. And so That means sometimes instead of doing things immediately, like we could return STRC to par very quickly using our own capital, but that would exclude many of these other ecosystem participants and we would be getting ahead of our equity investors, our credit investors, Bitcoin investors and the like. So we will move progressively and deliberately with the thought that that we want the deepest, richest derivatives market, the deepest, richest credit markets, the deepest, richest equity markets, the most clarity, the most liquidity, and the broadest reach with regard to STRC we can possibly create. And that will be best for everybody involved. You can see our progress toward this here. STRC has grown from 2.8 billion in notional value to three at the end of Q4 and then to 5.3 billion at the end of Q1 and then to 10.5 billion at the end of Q2. It's growing quite rapidly and we're sort of in a hyper growth phase. If we go to the next slide. You can see why it's growing. Simply put, it's the highest effective, you know, the highest tax equivalent yield and the highest effective yield of any major class of credit in the world. And right now we see STRC is competing against private credit and bank preferreds and junk bonds. for the most part, those three categories, but we think over time it will begin to compete against investment grade credit, mortgage backed credit as well. The effective yield is 13.6% right now, but the tax equivalent yield is 21.6%. We think that digital credit is going to be the best credit, is the strongest credit because it's based upon the strongest capital asset, BTC, and because it's based upon the strongest business model. The digital treasury company business model based on digital capital has lots of advantages in creating the highest tax equivalent yield. And so simply put, we think we've created one of the world's great business models for creating one of the world's great products, the product being digital credit. Now, of course, I would think that. But the real question is, what does everybody else think in the world? Well, I think the most sophisticated, preferred stock investors in the world could reasonably be considered to be those running the BlackRock PFF fund, the Virtus InfraCap PFFA fund, and the VanEck PFXF funds. Those are the three largest preferred credit indexes that are publicly traded, and they're custodians of billions of dollars of capital. One thing that you'll note here in the past 12 weeks is that STRC is now the number one holding at all three. Right. So it's not a fluke. We used to be the number three holding. We crawled up past everybody in the market to be number two or number three in a hurry. But in the past few months, we've emerged as the number one holding. And it's not a fluke. It's universal across all three indexes. So we think this is incredibly bullish because. You know, you can develop all sorts of theories about what retail investors like and don't like. But I don't think anybody disputes that a professional money manager who's in the business of managing preferred equities and has been doing it for a long, long time is pretty good at it. And they've got a lot of skin in the game. And they're responsible to the most sophisticated institutional investors that are their investors. And you can see here on this table that we're the security of choice for all three and the number one security. And we've got a lot of momentum here, right? When other people were selling, they're actually buying STRC. And I think that's very positive. Who's digital credit for? It's for every investor class, right? We're going to continue to refine it and we're going to offer it to retail investors, to institutional credit investors, to corporate treasuries, to hybrid hedge funds and equity investors, and to digital money and crypto native investors. And we think that all five of these groups are just incredible growth opportunities for us. If we look at a snapshot over the past three months or so, you can see that 78% of STRC was held by retail and 22% by institutional March 17th. But as of the 1st of July, the institutional holdings had grown from 1.1 billion to 3.1 billion, so tripled. And they're now 29% of STRC outstanding. On the other hand, retail investments had not quite doubled. They were still very strong, but now they're 71%. So we think that the trend toward more institutional adoption is great for the stability of STRC. You can see on the right side of the slide, that the average retail account grew from $44,000 to $48,000 over that period, and the average institutional holding went from $1.7 million to $3.5 million over that period. These are very, very bullish metrics, and they speak to the seasoning and the maturation of the asset. When we came public with STRC, it took us about 70 trading days to reach par. And some people forget this, but when we did the IPO, we IPO'd at 90. It took us 70 days to get to par. And if we trace the period since STRC fell below our trading range of 99 to 100 and where we are today, it's been 40 trading days. So if we were to trace forward 70 trading days from when STRC fell out of our trading range, that would put us around September 8th. So we're keeping track of that date and we're keeping track of our progress. We will focus upon returning STRC to health. And we think that if we did it in 70 days after the IPO, then it's reasonable to target 70 days after it fell off our trading range from May 28th. We have the means to return STRC to par. Right now, you can see the market cap is $9.2 billion, and the notional is $10.5. So there's about a $1.2 billion dislocation. We have allocated $1 billion to buy back STRC, about 2% of our BTC reserve. We still have $975 million of that program left. available to us. And so the first place we look is to use that buyback program to cure the dislocation. But I would remind everybody that the company has total reserves of $58.5 billion. I've shown the bar on the right. And what you can see is that If the $975 million doesn't cure the problem, we have ample additional capital in order to cure the dislocation. We're currently in a discovery process to figure out how much capital it will be required on our part in order to return SDRC to par.

We're certain that we will return STRC to PAR.

That is the goal, right? So there's no question about whether or not success is returning it to PAR. It is returning it to PAR. The big question mark is, How extensive will the buyback be and how rapid will the buyback take place? And then what will be the exact open market execution strategy of the buyback? We are calibrating day by day and sometimes multiple times a day as we learn from the market. And of course, we have a lot of market signal every minute of the day, every day of the week. We also are getting signal back each week as we put out a new announcement about our status. We think this is one of those things where we wanna do it not too slow, but not too fast. And we want to allow other investors, our credit investors, our equity investors, and the Bitcoin community to participate with us, but especially we want our other credit investors to join us on this journey. We can go to the next slide. We updated our credit tab on our website, and I would encourage anyone to go check out that tab. One thing you'll see is the BTC ratings of all our credit instruments, and you can see that the senior bond has got 122x over collateralization. You can see that STRF is now 12.9 BTC rated. So the BTC ratings of the instruments are improving as we build the U.S. dollar reserve. We think this is obviously good for credit investors. You can calculate the BTC fair credit spread based upon your assumptions about forward volatility and forward Bitcoin ARR. And we've added a new metric, the BTC floor rate. And the floor rate is the rate the Bitcoin would have to fall on an annualized basis in order for these credit instruments to be collateralized one for one at the end of their duration. And so how do you get to a BTC rating of one for STRF? Bitcoin would have to fall 21% a year, more than 21.6% a year forever in order for STRF to be under collateralized at the end of its duration. So this gives you a sense of how fragile or robust any given credit instrument is. And you can see, for example, with the senior bonds, Bitcoin has to almost go to zero in a hurry in order for those bonds to be under collateralized. But you can see even with STRD, the floor rate is 10.8%. And The floor rate across all of these things, all of our credit instruments is 11.8%, and we're starting to publish that on our website. We think that that's pretty useful for our credit investor. We can go to the next. I've got our credit model here, and it's a little bit more detailed, and I guess I'll just make a few points. If you're a skeptic, and if you think that Bitcoin's going up 0% a year forever, it's basically not going to perform. then the BTC credit spread that the model would spit out for STRF is 86 basis points. So STRF would still be investment grade, even if your view of Bitcoin was it's not going to perform forever. The other instruments, STRC-E and K, they start to look somewhere in the intermediate level as high yield, and STRD kind of falls into distressed debt levels. But having said all that, all of those publicly traded credit instruments have a spread premium over that theoretical BTC credit spread. Because the market is pricing them much weaker than that. So even if you're a skeptic, they've all got very, very large 474 basis point to 670 basis point spread premiums. Now, what does it take for all those credit instruments to be investment grade? Let's go to the next slide. The BTC investment grade rate is a little bit more than 12%. So you can see at 12.5%, all of the credit instruments publicly trading, S, T, R, F, C, E, K, and D, They all have credit spreads, theoretical credit spreads, less than 150 basis points. And so, you know, if you think the Bitcoin is going to perform like the S&P index, or I mean, gold's been about 12% for the past six years, the S&P has been a bit more than that. But if you have an optimistic view toward Bitcoin as it's a legitimate capital asset, you can see that the credit spreads all look investment grade. The spread premiums are anywhere from 550 basis points to 1,048 basis points. If you're... If you're a long duration credit investor and you don't need your money back for four years or more, and you just want to make a long duration credit bet and you believe in the company, then you buy STRD and you could pay 1048 basis points, you know, of a spread premium and effective yield in the 16% range. Um, The company's not going to suspend its dividends because we're going to protect the digital credit business. If we were to suspend the dividend, then that would destroy the credibility of the company and digital credit. It would be devastating for the asset class. So if you believe the company's business plan and if you believe in digital credit, you can see that STRD is a high effective yield and a massive spread premium. If you semi-trust the company and you just want a lot of investor protections, but you're a long-term credit investor and you don't need your money for four years, STRF is showing a BTC rating north of 12 right now. So what you can see is it's senior, the senior billion dollars in the credit stack out of 15 billion. It's got penalties, dividend penalties. It's got dividend stoppers, right? And on the other hand, you're collecting an effective yield of 10.5% and you're getting a... extraordinary spread premium, and the company doesn't have any discretion to lower that dividend. So if you're a professional credit investor and you don't need your money in four years or longer, then if you trust the company, you buy STRD. If you semi-trust the company, you buy STRF. But on the other hand, if you're a short-duration credit investor and you're going to want the money back in the next year or three months or six months, well, then you just don't want the volatility. You don't want to wait. And that's what STRC was built for. It was built for the shorter duration credit investor. I guess we would say at this point, If you think you need the money back in less than three months, you're probably a money market investor. If you need the money back in 90 days, you're probably a money market investor. You're going to put your money in a money market. But if you could wait three, if you wait four months to four years. Anywhere in that duration, then you're a short duration credit investor, like a stretch investor. And if you don't need the money for more than four years, you're a credit investor. You know, you might want to look at some of the other preferreds. And of course, if you don't need the money for more than four years and you're a capital investor, you should buy Bitcoin. And if you don't need the money in less than four years and you're an equity capital markets investor and you want to amplify Bitcoin, you buy MSTR. But I think these models illustrate this pretty effectively. And that takes me to my next point. We think digital credit is the best kind of credit. We think that we're uniquely positioned to create digital credit. And the best form of digital credit, the one that's in the greatest demand, is going to be stretch, STRC. It's going to have the greatest liquidity. It's going to have the largest AUM. It's the shortest duration. And in all of our discussions with credit investors, plus our view of the market, we've seen that what the market wants is they want the shortest duration, lowest volatility, highest liquidity, most stable, highest AUM, most broadly distributed credit. And STRC is already the most liquid and largest preferred stock in the world. So we expect to keep laser focus on it. We're going to do everything we can to make it the most appealing credit in the entire digital credit space. And we think that if we do that, it'll be incredibly compelling credit for people that might otherwise invest in private credit or junk credit or corporate credit. A few words about our equity. We now publish the hurdle rate, the breakeven rate, and the floor rate on our website. The hurdle rate represents our blended current cost of credit. And so if Bitcoin outperforms the hurdle rate, then in our view, our BTC gain, when we sell $10 billion of credit and we book a BTC gain of X billions of dollars, let's say it is 10 billion, then if Bitcoin outperforms the hurdle rate, we're never paying back the credit, which means that the $10 billion is $10 billion of net income. So the company becomes incredibly profitable on a Bitcoin, a BTC gain basis when Bitcoin is outperforming the hurdle rate. And you could think of this as... Four simple zones. If you think Bitcoin is going to outperform the hurdle rate and you're an equity investor, then our equity will capture the positive spread over the credit. We're borrowing money at the hurdle rate. You know, we're investing it at something that might be 15 or 20%. some premium to it. And so it's an incredibly good business. We capture the spread and then we can cover the cost of the credit with the capital appreciation. And so the equity will thrive. But of course, the credit will also thrive because we're making a wise investment. So in that zone, equity and credit both thrive. If you expect Bitcoin to appreciate between the breakeven and the hurdle rate, the equity might underperform. It may not. We have a lot of tools at our disposal. We may actually benefit from the float and the volatility, and we can do a lot of things that may be good for the equity. But it's a bit harder for us. We have to work at that. So there's uncertainty around the equity. The dividends are still covered because we're substantially north of the breakeven. As long as Bitcoin's at the breakeven rate, we can pay the dividends indefinitely and we can do it without even selling a share of equity or without any other capital or recapitalization. So you're in a pretty safe zone, a very healthy zone for the for the credit and for the equity, we're in an operating zone. We have to think hard about how. We can still perform, but it's harder than when we're substantially above the hurdle rate. Now, if Bitcoin underperforms the break-even rate, that's challenging for the equity. The equity will probably underperform. And for the credit, we have to do things over the long term. Like, you know, we've got at 0%, we've got like 33 years. That's the duration of the company. So it's not like we don't have time, but sometime in 33 years, we're going to have to do something if Bitcoin performs 0% a year. So we start thinking about what we might do if Bitcoin falls below the breakeven rate, below the floor rate. That's when we start to think that's a challenge for the equity. The equity is definitely going to underperform, but the credit is going to be impaired. And so that means we have to think about restructuring the credit. We refinance debt. We roll it forward. We would have to become creative. But you can see here just how bad things have to get before you get in that zone. So the beauty of a Bitcoin treasury company is there's transparency every 15 seconds to this. And you can create all of your own models, statistical models to figure out what you think is likely. You can plug in your own assumptions and then you can figure out whether or not your long equity, short the equity, long the credit, short the credit if you want to hedge these things. There are so many different ways to be long, short, straddle, or take risk off the table. And we welcome it and we encourage it. That's one of the reasons why our derivatives markets are so healthy and why the equity has so much liquidity. But what I would say to anybody is check out the website, look at these rates and come to your own opinion about what you think Bitcoin is going to do. Now, the history is Bitcoin has been appreciating 33 percent a year for the past six years. And if you go to our website, you'll find we've got the 10 year rate as well. So you're not without resources here. Where are we right now? The markets right now are pricing fear. It's a very muted market, very skeptical market. Bitcoin's trading at a very slight premium to its 200-week moving average. As you can see, our credit is paying an 870 basis point premium today. above the BTC credit spread you would predict, if you plugged in Bitcoin appreciating 12.5% a year and staying as volatile as it is right now, then the credit would be fairly valued at 870 basis points less than it currently pays. And so you can see credit markets are fairly skeptical. The capital markets are fairly skeptical. They've traded with a premium north of where we are, 90% of the history of Bitcoin. And the equity markets are fairly skeptical. MSTR is trading at a 5.5% premium to our net assets. And you can see this illustrated a bit more on the next slide. The MSTR price implies a near zero value for the digital credit business. In essence, if you look at the market cap of the company compared to our net reserves, if we were to pay off all of our liabilities at face value, we still have $36.3 billion of net reserves. And the market cap is $2 billion in excess of that. So the real issue is... What is the operating business worth? And so our view is, if we can sell $5 billion of digital credit a year, and if Bitcoin outperforms the hurdle rate, then that looks like $5 billion of net income to us, and the business ought to be valued at some multiple of that, depending upon robustness and growth. If we can sell $10 billion of digital credit a year, then you could imagine the business being at some point, we show the market, we can do it. We show the market, we can grow from there. You could put a 10 P to E on that. And so what you can see is our view is the digital credit business is dramatically undervalued. It should be worth something substantially more than $2 billion. The market is pretty much skeptical that there is a operating business there. As the market begins to realize that we have a digital credit franchise, then I think that they'll put a bigger P2E on that. And as we show that we can stabilize STRC and we can grow it in a stable, steady fashion, then I think that we'll see those multiples expand and the value of the digital credit business will expand as well. And I think that's very bullish for the equity. MSTR is built to outperform Bitcoin over the long term. And one way to see that is looking at these statistics. If you're a short duration investor, if you're just trading on a daily basis or weekly or monthly basis or even quarterly basis, it's pretty much a coin flip whether MSTR will outperform BTC. But as your duration stretches to one year, you get a substantial advantage. When you go to two years, it's 64% likely. When you get to three years, it's 87% likely. And in 495 windows of four years or longer, MSTR has outperformed Bitcoin 100% of the time. So if you're a four-year investor, you've got a long time horizon. You can see that as the time horizon extends, the laws of statistics start to work in our favor and we begin to outperform. And you can see it reflected here in the last six years from August 10th of 2020 to today. Bitcoin's up 32%. MSTR is up 42%. The MAG7 is up 23%. The S&P is up 14%. Gold's up 12%. Real estate's up 8%. Money markets give you 3% and bonds are a minus 4% loser. So our strategy is fairly straightforward. The stats seem to be telling a very clear story. We believe that we can continue to outperform Bitcoin and the engine for doing it is the digital credit engine. Why do we believe in the franchise? Let's look at these four factors, right? We're sitting on an incredible capital stack. We have $55 billion of Bitcoin, 3.75 billion of US dollars, and we're a well-known seasoned issuer. That gives us a big capital advantage. We also have a technology advantage. We've been in the business for a long time, 35 years, but also we invented a lot of these credit instruments. We've been trading them in the markets. We've learned a lot about how they trade. And we think that understanding how digital credit works and how digital equity works is a big tech advantage for A third pillar of our franchise is the brand. We have millions and millions of followers. They know who we are. We're well known everywhere in the world, in every major capital market. This is a big advantage. And then finally, there's the network effect. Millions and millions of investors, tens of thousands of institutions, deep pools of liquidity. We've got the highest ratio of open interest to market cap in the S&P universe. We've got a very deep, I think one of the most liquid stocks. in that S&P 500 universe. So deep equity liquidity, deep derivatives liquidity. We've got the most liquid preferred stock. So deep credit liquidity. Lots of people trading these things. Lots of people making a market in them. All of the hedge funds. And We pride ourselves on creating lots and lots of trading pairs. So there are a lot of ways that people can be long, short, hedged, straddled in equity or credit or derivatives. And that's a very, very large financial advantage and a large brand advantage for MSTR. And we think that we will be able to grow that. So simply put, what is the goal of the company? What's our ambition? We want to be the world's largest company. That's our ambition. Well, largest in what terms? Not the most employees, not the most products. We want to be the largest in terms of market cap, the most valuable company in the world. And what's our plan to do it? It's very simple. Own the most capital. BTC is capital. We're going to own the most. Our strategy is own the most capital. Who else would say they want to own capital? Berkshire Hathaway in the 20th century. I don't think they're as ambitious right now as they used to be, since most of their capital is sitting in T-bills or sovereign credit. But in essence, Berkshire Hathaway had a strategy to hold a bunch of capital. We have a strategy to hold a bunch of capital. Most other successful companies don't have that strategy. The second prong, after we own the most capital, we're going to issue the strongest credit. If we have the world's best capital, the best performing capital asset, BTC, we should be able to create the strongest credit, STRC. We think for every dollar of capital, we can sell 10 to 20 cents of credit per year. And so the more capital, the more credit, the more credit, the more liquidity, the more stability, the stronger the brand, the lower the volatility, etc. And then by issuing the strongest credit, we think we'll create the best equity, MSTR. And and that just becomes a virtuous cycle. You know, acquire capital, issue credit, trade equity, rinse and repeat. And, you know, we have done that. We've gone from a six hundred million dollar enterprise value six years ago. to 60 billion, so by a factor of 100. And we think we're just getting started. Now we're getting the engine tuned and the credit turbine is beginning to spin up again. I will end by thanking everybody for your support, reiterate our principles that haven't changed. And with that, we'll be happy to answer questions from the panel.

Thank you, Michael. We'll now start the live Q&A session. I'd like to welcome all our Q&A guests and invite them to turn on their video. We look forward to your questions. We'll go one at a time. I'll call out your names and you can direct your questions to the management team. For the first question, we have Mark Palmer. Please go ahead.

Yes, thank you. Good evening. Earlier in the call, Fong noted that management has learned a great deal about the investors in Stretch and how they think. And one thing that we've seen is that the size of Strategies USD Reserve is important to retail investors in particular. and more important than the amount of obligations ahead of stretch in the company's capital structure, such as the convertible bonds. With that said, would you consider borrowing against Strategies Bitcoin Holdings, specifically with a bank with a Fortress balance sheet as your counterparty, And use the borrowed funds to increase the USD reserve to a size that would put to rest any concerns about dividend coverage and presumably drive the price of stretch back up to par, at which point the company could resume buying Bitcoin.

Bong, do you want to take that question initially?

Yeah, I can start. I think the feedback is that something between two to three years from our institutional investors is that level that we need to get the Bitcoin reserve to. We're at 2.1 years, which continue to grow. We're doing it primarily through issuing equity at a premium to net asset value. We have considered and talked to many counterparties about borrowing against our Bitcoin. And I would say that the market is not as big and not priced as well as you would think it would be at the size we want. So it's not something we've considered doing. The other thing we have to consider is the counterparty risk, the terms, etc. So it's not something we've really looked too hard into. I think we have better ways to build up the U.S. dollar reserve.

You know, so I think the short of it is it's not on the table right now. The company has the option right in the future if we ever needed to to to use Bitcoin. But we think that right now it's it would be more complicated than it's worth. And and we have more straightforward ways to build the USD reserve up that will work. will create fewer questions or counterparty risks or uncertainties. And so our goal, I think, is we would like to eschew debt.

We would like the existing amount of debt to be the maximum we have.

We would like it to be progressively whittled down in a responsible way over time. And we would like to avoid any kind of appearance of a margin debt or mark-to-market loan on the balance sheet just because it tends to be an attack surface and an attack narrative for short sellers. And we don't want to create anything that creates those uncertainties if we don't need to. And I don't think we're going to need to.

Thanks, Mark. Next, I'd like to invite Matt Hogan.

Great. Thanks for having me, Michael, Andrew, Fong. Thanks for a great call and a good execution on a difficult quarter. I have a two-part question. So watching the business evolve, you've periodically added new tools to the toolkit. First, equity issuance, then convertibles, then preferreds, then perpetual preferreds. The first part is, are we at the end of that series of innovations or are there more instruments coming down the road? And then the second is a variant of that through the BTC monetization program. you have effectively found a way to sell volatility and sell the volatility of investor sentiment at the securities layer. Wondering if you've considered or there are reasons why you wouldn't also consider selling volatility at the derivatives layer as another tool in the toolkit to navigate always changing market environments.

I'll start with that and then you guys can chime in if you like. Right now we have... six bonds and five other credit instruments. So we have 11 credit instruments. We could issue six more tomorrow. We could do one a week, every week, and we could blow out to 18 or 24 or 36 or 48 credit instruments. We could go, but we're actually, it's not hard to issue a credit instrument when you have 55 or 60 billion of unencumbered capital. We're going the opposite direction. We're laser focused on consolidation. So, you know, I rather like the business model of like the Stribes. If you look at Strive, they've got one equity, ASST. They've got one credit instrument, SATA. And that's it. And it's just a question of how big will the market cap of the equity get and how big will the market AUM or the market cap of the credit get. And, you know, I think you probably should expect that we won't have more. We'll probably have less. So I think our 11 credit instruments will be whittled down. You know, our explicit plan is to whittle them down over time. I'm certain that we'll keep STRC. STRC is the flagship. All the focus is STRC. We think that the other prefs that publicly traded are option value if they were fairly valued. Right now, they're not fairly valued. They're way under value. So like my message is, you know, like, If you get this, you ought to go buy STRF or you ought to buy STRD. They're incredibly compelling institutional opportunities for a long-term credit investor. They're so good that I won't sell it to you. That's how good they are. The bonds, we don't see a strategic opportunity. We think that we had to do the five. If I could do it again, Matt, I would just do, I would do no bonds. I would just sell STRC. I would go directly to, you know, to go, you know, don't stop anywhere else. Just go to the winner if I could do it again. And I tell people generally, like if you're sitting on $5 billion of capital and you're a Bitcoin treasury company, Don't sell convertible bonds. Don't sell long duration credit. Don't sell convertible. Don't sell a product like Strike or Stride or Strife or Stream. Just create something which is short duration credit like STRC or SATA. Because we know there's 50x to 100x the demand. So if there is 100x the demand, we don't really need to create any new credit instrument to grow. And in fact, That, you know, it's like, like I say, just because you can do a thing, you shouldn't, doesn't mean you should do a thing. I actually think this is one of those examples where, you know, Don't just do something, stand there, right? Like the more you do, the worse it is because every new credit instrument robs liquidity from the one that really matters. So we're interested in combining liquidity or building liquidity. So it's more likely that we would offer you a swap to swap into STRC and pull liquidity than we would ever bifurcate it. And it is true. I can imagine 100 cool things to do. I can imagine digital money in yen or Swiss francs or pounds or euros. I can imagine a 10-vol credit instrument in euros, pounds, or francs. I can imagine a zero-vol money instrument in those things. We're just not going to do it. That's what I would say for everybody else, every one of our partners. They're great ideas. You should do it. But for us, they would be a distraction and they would dilute our focus and they would they would dilute liquidity. It's like rather than even if I could issue, for example, stretch in euros, I would rather issue stretch in dollars and have someone else create stretch in euros and buy the currency hedge fund. and get paid 200 basis points and they make a lot of money off that business than for us to do it. So we feel like we've got kerosene. We're not going to design the jet airplanes, the trains, the planes. Everybody else can build every refined version of it that they want. So I don't think it's constructive for us to be over inventing product right now. You know, it's kind of demonstrative when you think of Apple. You know, they're still making all the money off the iPhone. And it's like, I'm not against magical revolutionary product, but let me put it as a hurdle as this. If you came up with an idea where the demand was $100 billion or the market opportunities between $100 billion and $1 trillion, you might get my attention and we would talk about it. But if you gave me a $10 billion idea, I would say that's a distraction. And the only ideas I can think of that are $100 billion ideas are things built on top of STRC by someone else. And I hope someone else does build a $100 billion thing on top of STRC. Good for them. I hope they make billions and billions a year off of it. And everybody lives happily ever after. But I'm reasonably sure that... We're more likely to commit a foul by innovate, by creating other things rather than by focusing on the one thing and making the one thing, because the one thing is short duration, low volatility, high liquidity. stable credit. And that's a trillion dollar opportunity for us. And if that's all we do, that's all I do in the rest of my life, then that will have been greater than I could have ever hoped for. So that's what I think of with regard to that. Now, the second part of your question, oh, selling volatility. You know, we could go and we could we could sell volatility. We could sell tranche. You know, we could sell out of the money. We could sell out of the money call options on Bitcoin. We could sell volatility against the commodity or the capital asset BTC. We could also sell volatility against the equity. We could actually sell warrants on MSTR. And it's not lost upon us, right, that we could sell a warrant on an MSTR. By the way, when we sell convertible bonds, we were selling a bond with a warrant. So I could go and sell a $200 strike on MSTR, or I could tie it into a convertible bond. But as you know, we don't want to sell bonds because bonds are senior to stretch. So that's a non-starter. Now, If I were to sell the warrant, I'm selling volatility, but I'm stripping volatility. I'm clipping it off of the common stock. And so the point really is we are selling volatility right now, Matt. And the way we're selling volatility right now is we're selling MSTR. And so when we sell MSTR, MSTR has a 90 vol or 80 vol. And the reason people want to buy it from us is because it's got vol. So if I turned around and I sold a billion dollars of volatility on top of MSTR, I changed the convexity of the instrument and I strip the volatility from the equity and I transfer it to the other security. So this is kind of like I can sell five credit instruments senior to STRC, but they undermine my best idea, STRC. And I could sell five warrants. I could sell a warrant at $150, $200, $250, $300, $350, $400. But I'm stripping the vol and the value off of the underlying instruments. Security. And what I'm doing is fragmenting all the liquidity and I'm creating complexity. And this is something that, you know, a professional options trader at Susquehanna or Millennium or Citadel or Soros, they could do all day long. And my view is they're better than us. And so there's two there's two there's two thoughts. One is I don't want to steal an opportunity from a credit investor or an equity investor or a derivative investor. I don't want to steal it from them. I want to leave it for them. I want them to say, oh, these goofball guys, they could sell the volatility, but they don't. So I can like, yeah, it's like you can. That's why people that we never met. I've never had a meeting with the derivatives traders that create the options market and our stock, and yet they just spend this stuff up for us. That's the reason they do it, because that's what they do. So I don't want to steal their opportunity, and I don't want to make their job harder. I want them to have complete transparency and line of sight for five years, for as long as possible, so they can create all these things. But the second thing is, There's a general principle that we're a publicly traded company. We should do things that we are uniquely able to do that they can't do. So a guy with $100 million in a Bloomberg cannot create STRC and they can't strip the, they can't do what we're doing. They can't issue it, right? And they can't improve it. And they also can't create MSTR. So we're creating securities. We can create publicly traded liquid securities globally and they can't do that. But what they can do is they can enter on all those trades.

So all of those other trades, whether it's like strip the ball, convert the currency, change the duration, you know, butterfly between one year and three year, amplify it up, damp it down, structure it. They can do it. They should do it. I welcome them to come do it. And our representation to them, our promises, we won't compete with you. And we won't change the convexity. How would you feel if they put out a press release saying, I just sold... BTC call options at $75,000 a coin against $50 billion of Bitcoin. How do you think about the equity then? You're like, well, he just stole the upside on equity, you see? And so the equity, the call option guy, it's like, wait a minute, I just...

created that market, and they just distorted the market in derivatives, and they're mucking with it. And now you've got all this issue of derivatives guidance.

And so we're not trying to make the company more complicated. We're trying to make the company simpler. And it's such a good idea. My view is, yeah, it is a good idea, so I leave it for someone else to do. And it's not that we're not selling the ball. We're selling the ball, right? We sold billions and billions of dollars of equity. And it's like, to a certain extent, the people that bought it from us were buying it for the volatility and for the upside. And when we started selling them all, we're stripping their upside away from them. And ultimately, there'll be a price base. So I think it's one of those things where... It's easy to do. I could raise a billion dollars in two days by selling the warrant. I could raise a billion dollars in two days by selling the commercial bond. I could raise a billion dollars in two days selling a junk bond.

And it's easy come, but there would be a bad hangover, and the hangover would be it would change the characteristics of the other securities, and it would fragment liquidity, and also it would undermine trust.

And the trust is like, I'm not going to do that.

And so you can take advantage of that knowledge to put in whatever trade, trade against me or trade with me.

And it's more important for us that we make the biggest possible market in the equity MSTR and in the credit STRC than that we pursue every cool idea. One more point I'll make. We could generate billions and billions of dollars of revenue by selling volatility against BTC right now. We could also generate a multi-billion dollar tax liability. And then the equity investors absorb the tax hit. And then we pass it through to the credit investors. So MSTR equity investors currently have a business model where they've got a deferred tax on capital gains. And the credit investors have a deferred tax on the credit dividend. And so we have a very tax-efficient business model. And if we start to get cute by doing all this, we create lots of complications. You're like, well, maybe they don't care about deferring tax on the credit. Well, actually, it's not just that.

It also eliminates the withholding tax for foreign investors. So you might get a 30% withholding tax.

So this has so many complications to the tax efficiency of the credit or to the tax efficiency of the company and introduces counterparty risk. And all of those are micro reasons to do it. But to tell you the truth, the real reason that we don't do it is because I want some dude with a Bloomberg to get up in the morning and lay a $500 million bet on taking advantage of what he knows about volatility or she knows. And I want them to know that they can put that trade in and we're not going to rug pull them, you know, by counter trading or trading against them. Because the most important thing, the thing that's made us successful is a very good partnership with the citadels and the millenniums and the capital and Investors of the world and capital groups and then all those credit investors and all of them, they've got their own models. And the last thing in the world they need is to have to guess how we will decide to trade in the next 12 weeks. It just breaks their models. And what will happen is they'll take their money and they'll go home. They'll cut their allocation of capital. And so instead of investing with us, they're like, well, I can't. The company's too opaque. It's a black box. And I was like, that's just not the right way to build a network. And we could do it. I could generate a billion dollars like this. But we're not playing for a billion dollars, Matt. We're playing for a trillion dollars. We want to create a trillion-dollar company and a trillion-dollar asset class, and that requires that we think very long-term strategically, and we can't do it alone. We need people with more money than us to trust us.

That's super clarifying.

Thanks, Mike. Thank you, Matt. Next, we have Ramzi Al-Assal from Kantor. Ramzi, go ahead, please. Thank you for taking my question this evening.

I think it was Andrew that mentioned the prepared remarks plans to either equitize, repay, or refinance the existing convertible debt. Can you all collectively help us think through the scenarios where you would opt to or be compelled to deploy these different approaches and also comment on the general timing of your actions when it comes to addressing the upcoming convertible debt securities? Thank you.

I can start. I would say, Ramsey, the simple answer is that we have all of those options available to us, right? And so in terms of, you know, monitoring the market, being able to understand, you know, what the right action is at the right time, I think all of the options are open. In terms of timing, I don't think there's any prescribed rush right now. I think we're continuing to be very disciplined in how we think about it. I think the activity in Q2 showed that we're able to go out and repurchase the debt, and there is an active convert market that's very active right now. But really, it's just about waiting and seeing when the right time is. Right now, our priority is to get stretched back to par, as we've said. And so I think the broader message is simply that liability management options remain open. There is no set timeline. We will be disciplined in how we think about it.

I can give you an example, Ramsey. Our next convertible debt date is September of next year. It's our... 2028 converts with a conversion price of $183. My expectation is that in September of next year, we'll be north of that conversion price. We won't get put. And then a year later, we'll equitize it because we'll be north of $183. Let's say a year from now we're not north of $183, we get a put, then our options are either to sell a mystic coin to pay it down, or we could just refinance it. The terms of convertible notes, right now we get asked every single week by a bank, are we willing to do a zero of $40? $4 billion eight-year convert. The terms are actually better now than they were when we entered into most of these converts in the last five years. So there's a lot of options, and that's the next one that comes up, and that's how we'll think about it.

Thank you, Ramzi. Next, we have Samson Moe.

Okay. Hi, thanks guys for having me on. It's great to be here with this lovely big Bitcoin group of heavyweight intellectuals. So I have a compound question, if you don't mind. It's a bit of a follow-on to Matt's question. So I understand you want to keep things simple. You don't want to be trading against the guy with the Bloomberg terminal on $500 million. But do you think there is any benefit in this sort of new shift to an active capital management strategy to do things like sell covered calls? Because there is now a price point in which Fong said is advantageous to sell Bitcoin. So you could deploy some capital in those markets just to optimize your acquisition. or possibly create like a side pocket for selling cash secure puts to buy Bitcoin cheaper at times too. Do you view that as conflicting with the current strategy of keeping it simple or is there room for optimization in there for the Bitcoin accumulation? Because that's a very, it's a hard market. Just right now,

That's not part of the plan.

We just think it would generate counterparty risk, complications, change the convexity of the equity, change the tax. characteristics of the company, change the tax characteristics, or it might create a tax complication for the credit. And our view is the single most lucrative thing we can do with a stack of Bitcoin is sell credit against it, not sell volatility against it. So anybody with a billion dollars of Bitcoin can sell $100 million or $500 million of coverage of covered calls and the like. Anybody can do that. A private citizen can do it. There's only two companies in the world right now that have shown that they can actually sell digital credit against Bitcoin, us and Strive. There's only one company in the world that can sell credit at our scale, and that's us.

I don't know why we couldn't sell. We were selling $2 billion a month of it. We could sell a billion a month of it.

Our focus is get the digital credit reactor up and running and don't do anything to confuse the matter and don't do anything to create opacity and

And, again, they're all options. Like, in the future, if I had to do it, right, if I had to do it, for some reason I would do it.

But right now we think the best business in the world is selling STRC and the most useful thing we can do.

That the path to become a trillion-dollar company, that the path to become the world's most – on Bitcoin, the path to becoming the world's most valuable company is creating the credit money on top of Bitcoin.

And everything we do that is complication to the credit that makes it confusing. It's like, you know, that undermines the credit worthiness of STRC and it distracts the management team. So it's not on the table right now. And we're just going to focus on returning Stretch to health. Did you have a second?

Related to Stretch. So just a disclaimer, I'm a big believer. I think Stretch is a brilliant product. We try to do the same structuring instruments for nation states like Stretch. But there is marketing around Stretch saying, you know, we make Bitcoin money. And in the Bitcoin space, there are people that are kind of wondering what is your view. Is Bitcoin an asset? Is it digital property? Is it digital Manhattan? Or is it money? And do you feel these instruments, like the preferreds, squeeze out people from discovering real, bare Bitcoin? And I think it'd be cathartic for people to hear what your view is on that.

That's a good point. I think the thing to keep in mind is our marketing is to the 99% of the people that don't own Bitcoin, that don't want to buy it. So when we talk about Bitcoin... And what we're going to do with it, we're selling products, credit products to people that would never ever in a million years buy the Bitcoin. They just won't buy it. Either they won't buy it because it's illegal for them to buy it. They don't buy it because it's against their mandate to buy it. They don't buy it because they don't want to hold it. They don't buy it because they literally can't, they don't have the ability to touch the button and buy it. So it's either technically impossible or it's just, you know, impossible. So we're creating a product for them. And when we create a product for them, we need to market it in a package that they can buy.

You know, I think that the issue with money is the Austrian perspective on money and the JP Morgan perspective on money is a non-sovereign store value bearer instrument is money. So gold is money. Everything else is credit.

A famous JP Morgan quote from more than 100 years ago in a congressional hearing said, I've said Bitcoin is money. Everything else is credit.

If you're an Austrian economist and if you're a Bitcoiner, then you would understand that that resonates with you and you would be 1% of the money in the world or 1% of the opinion. The rest of the world doesn't agree with us, right? The 99% of the world, they think that money is a zero vol pegged to a fiat currency. It's a money market where it's actually a stack of dollars. They think of money as the...

As the most scalable good as a media exchange unit account store of value, but in the fiat frame of reference.

And, you know, it's not hard to point for that. There's $30 trillion in money markets. And it's literally a regulated term. Like, for example, it's illegal to market your thing as a money market, right? Because it's a regulated banking term. And so the rest of the world, has defined money as an asset pegged to a fiat currency in yen, euros, dollars, francs, pounds.

That's how the rest of the world is. Okay, so people that are 100% invested in Bitcoin, that they should buy Bitcoin.

because they don't have any additional money to buy Bitcoin with, number one. And number two, they don't need to hear that, right? Like no one that's 100% invested in Bitcoin needs to hear from me that they should buy Bitcoin. They would say, I already did that. So when we're marketing, we're marketing to the people that wanted to buy equity or wanted to buy credit or wanted to be invested in something different.

So to the conventional institutional investor, we would position Bitcoin as digital capital because it's a capital asset and it competes with real estate and equity portfolios and credit portfolios.

other liquid instruments like that. So they think of it as capital asset, and then they would recognize STRC as a credit instrument.

And that might be a little bit of, you know, some people think, well, it's preferred, that's not credit. Well, the truth is it is credit. It's just not a bond. And so they would view a preferred equity as a credit instrument, and we would deliver that. Now, in the fiat frame of reference, Gold is capital. A gold-backed bond would be credit. And an instrument that was pegged to the U.S. dollar, a note, would be currency or would be money in a fiat frame of reference.

And that's the world for the last hundred years, and that's just the way it operates.

So... When we think about how you grow the business, if you're going to grow Bitcoin from a trillion to $100 trillion,

You can't just convince all the people that have invested everything in Bitcoin that they should keep investing in Bitcoin because you're going to get a trickle of cash flows. You're going to have to go find $99 trillion of other money or monetary value. And sort of by definition, it's somewhere else. It's invested in real estate. It's invested in bonds. It's invested in the equity capital markets. That's like a $1,000 trillion stack of capital, and we're $1 trillion. That makes us 10 basis points. We're 0.1%. So when you go get that money, you're either going to create a Bitcoin-backed credit instrument like SDRC,

Or you're going to create a Bitcoin-backed equity instrument like MSTR. Or you're going to create a wrapped Bitcoin-backed fund like IBIT. And all of those are channeling capital into the Bitcoin ecosystem that could not... They could not contractually. Maybe they could not legally. They could not technically. They could not ethically. They would not economically buy the underlying crypto asset. They just wouldn't. And you can get angry.

That we're actually that BlackRock is selling wrapped Bitcoin to sovereign funds or that we're selling amplified Bitcoin to an equity investor or we're selling digital credit, you know.

credit, you know, credit insurance backed by a Bitcoin or a credit investor.

But I, you know, I guarantee you there's like, there's no one that buys those instruments that sold Bitcoin to buy the instruments because they didn't want to. It's like,

All the demand is coming from people that they say, I have a pool of money and I can't put it in a 40-ball crypto asset. And so their choice is put it in a money market or put it in a diversified credit fund. So we see the expansion as digital credit will allow us to tap into the multi-hundred trillion dollar credit market.

And then if you can take that credit and create an instrument pegged to a fiat currency, if you can peg it to the yen or the Swiss franc or the euro or the pound or the dollar, and you can offer a spread higher than the risk-free rate, the conventional rate, then you will start to divert capital from the money market instruments. And, you know, we talk about digital money. What is digital money? Digital money is a Swiss franc that pays you 4% in a world where the fiat money is a Swiss franc that pays you zero or negative. Right. And, you know, we can debate some antics in the crypto community, but it's kind of irrelevant because all the money is not in the crypto community. The money is in the fiat community. So if there's a trillion dollars invested in Swiss francs that yield zero and you want a hundred billion dollars of it, you have to offer them a Swiss franc that yields 4%.

backed by a digital credit instrument backed by Bitcoin. So when we use the phrase digital money, we're creating a product to sell to the people that have the hundreds of trillions of dollars of fiat backed securities or money instruments or credit instruments.

because that's what they understand. And we use the word digital credit. We're creating a product to sell to people that have credit that is fiat based that they understand. And what is Bitcoin? Well, yeah, it is money. It's digital gold. As much as gold was metallic money, Bitcoin is crypto money or digital money. But it's also digital property.

It's also digital capital. It's also digital energy. It's also, you know, trust, digital trust. If you want to establish or authenticate digitally, how do you prove? your identity without a trusted third party. It's one thing to transfer money without a trusted third party. It's another thing to prove that you're Satoshi without a trusted third party. The answer with both of those is using a public-private key combination. I mean, that's, you know, approach this and I think public-private key cryptography is a critical thing, but even with public-private key cryptography, the most energetic, most secure global blockchain is important. I think that Bitcoin is important to understand as a trust network, a monetary network, a capital network, an information network. And what is the highest best use? I think the market has clearly spoken that the highest best use is for store of value or as a capital network. We have proven without a shadow of doubt that Bitcoin functions if you want to store your monetary energy for four years or longer.

And the way we've shown it is like, well, we're moving $50 million a day. You're selling a billion dollars a week of something. So clearly, that's a killer app. But there are other applications, medium exchange applications and authentication applications and the like. They're not nearly as valuable right now.

And it'll be whatever it'll be. But our view is we'd like Bitcoin to become 100 times bigger than it is. And that means we need 100 times more money. And it's other people that have the money.

And right now, they're invested in fiat-denominated credit equity and monetary instruments. And we need to create products that appeal to them. And we need to market them with words that they understand.

And the most important thing is get the money.

Awesome. I think people will be happy hearing us talk about Bitcoin as money for 10 minutes. Thanks.

Thank you, Samson. Next, we have Nick Cremum from Barclays.

Thanks, Vijay. And hi, team. Thanks for having me on this call and taking my questions. But first, I just wanted to ask on SDRC, you know, it's good to see the dividend coverage is, you know, over two years now, well ahead of the 12-month minimum in the USD reserve from your digital credit capital framework. I just wanted to ask if you would consider raising the minimum number of months of coverage, just say maybe 18 or 24 months, just as a mechanism to get SDRC closer to par if later this year it's kind of still trading in this high 80s range?

I think we'd consider it, Nick. I think the best thing to get us to trade to par is our commitment to a U.S. dollar reserve and increasing the actual number, not necessarily increasing the minimum. I think the other thing we can do to get the trade back to par is a steady repurchase program, which you've seen. And another thing is just Bitcoin price going up. I think those are some of the levers. Would we increase the minimum U.S. dollar reserve? Maybe at some point, but I think the year is a good spot. Really, how much we have in the U.S. dollar reserve I think matters even more.

Thank you, Nick.

Thanks, Nick.

Thank you for having me. My question is, do you have current guidance on kind of a target level of overall amplification or leverage for the company as part of the capital structure? And kind of a related question is the counter-cyclicality or pro-cyclicality of capital issuance. So, for example, when a CRC has a lot of demand, which tend to happen along with the other instruments during bull markets, There's a choice when it starts to go above R, either to issue more STRC or to potentially ratchet down the dividend. So far, the choice has been made to issue more or accumulate more Bitcoin, historically at these kind of pro-cyclical prices when they happen, as most treasury companies do. Going forward, do you have kind of just overall guidance of what you think that kind of the ideal implication structure is or like level is? And then do you plan on trying to find ways to, now that you have kind of multiple different levers to pull, to be somewhat more counter cyclical in your approach or take a view on whether Bitcoin is maybe oversold or overbought and therefore leaning in or leaning out of? Or is that not really how you view what you're offering to investors? Thank you.

I guess I can start, and Fong, you probably have some comments.

You notice on our website we added those Bitcoin metrics, and one of the metrics we added is the 200-week moving average, and then we added the premium of the 200-week moving average, and we started tracking it, and we started tracking the percentage of the time Bitcoin is above that number. And so I think traditionally we've always wanted to be long Bitcoin, but I think we underestimated the value of US dollars. And now I think we've developed an appreciation for actively managing the mixture between USD and BTC. And obviously we have more US dollars today than we've ever had in the history of the company.

And we saw that when we went 98% or 99% BTC, 1% USD, the Bitcoin investors didn't like it, the equity investors didn't like it, the credit investors didn't like it.

So it actually was counterproductive to be too BTC focused. So I think you could expect that we're going to be staring at metrics like the premium to the 200-week moving average. And I think that although in the past we've had 100% allocation to BTC, I don't think it'll be 100% in the future. I think it'll be a mix.

And to your point, if you're sitting at 100% premium to the 200-week moving average, then then, you know, the likelihood that Bitcoin is going to trade the opposite way goes up, right? And so I think that when we're sitting at premiums, we probably will, you know, be counter cyclical and more toward dollars.

And we're sitting at discounts or we're sitting, you know, at very small premiums, you know, we would be more bullish on BTC. And the reason we published that on our website is we wanted people to see the metric that we're staring at.

So, yeah, so that's the long-winded answer to your question, which is sort of, yeah, yeah, we are going to actively manage it.

And, you know, one aspect is what is the credit coverage, you know, and the other aspect is what is the mix between USD and BTC? We have 10% of our reserves in USD, regardless of credit obligation. And do we have 36 months or 24 months of dividends, right?

So they're both interesting factors to be managed.

If you want strong credit, like creating chromium steel or stainless steel, you want 20% to 30% chromium and iron and just a smudge of carbon. But is it 20% or is it 30%? That's the question of do you have 24 months or 36 months of dividends. We want to actively manage to create the strongest possible credit.

And we're trying to figure out exactly what that alloy is. But the other piece is on 55 billion of Bitcoin and 5 billion in cash.

And if we had 100 billion of Bitcoin, we ought to be sitting on $10 billion of cash, even without thinking about the credit. I think The answer to the question of how much cash is probably going to be driven by market sentiment and the market premium. I don't want to simplify it down to it's as simple as just looking at the premium to the 20-week moving average because a lot of people will come up with a few other metrics. You may have a number of your own metrics, right? And there's debate in the community about what's the best way to calculate whether Bitcoin is at the top of the cycle or at the bottom of the cycle. But I think we're going to start to look at those signals, and that will drive the allocation of cash flow. If we sell a billion dollars of credit, I don't think you'll see 100% BTC, zero USD.

as the norm, I think it will be a ratio. And what the ratio is, it'll be a function of the equity capital markets, the Bitcoin markets, the credit markets. And what are people telling us? If the credit investors... still want more cash, then we'll probably lean toward dollars because the credit market's wanted, regardless of where BTC is. But if the credit is strong and there's no issue there and it's stable, then it will be a function of where is Bitcoin in the cycle and what are the forward yield curves or the forward vol curves look like.

And that will vary.

Fong, do you have anything to add on the subject or any thoughts?

Yeah. I think we're at the one-year birthday of Stretch, which is a brand-new asset class digital credit. And let our left-brained Bitcoin bull say that everything we can issue, we just pour into Bitcoin. And I think we've learned that holding U.S. dollars makes a lot more sense. We also have learned a lot more about our investor base, the retail versus institutional base, the leverage they take on what is important to them. And so we've talked to a lot of them to figure this out. I think reducing the rate when we see a strong Bitcoin price, a strong premium to the 200-week moving average makes sense. So I think that's something we consider doing too. So, yes, I think we agree with all your points, Lynn, that we need to look at the cyclicality. We need to look at the demand. We'll be a lot more thoughtful and methodical this time around about growing the digital credit base. I'm excited to see stretch get back to our, so we can exercise guidance.

It's worth noting that with credit, we've noted that the market would probably rather pay us a lower dividend rate. with more currency backing it than a higher dividend rate with more Bitcoin backing it.

And so there's this circularity there, which is if we... You don't want to carry dollars because they underperform BTC, but you do want to carry dollars because otherwise you have to overpay to issue the credit.

And so to find the sweet spot of how do you create strong credit that has a dividend that's somewhat better than junk bonds, that's compelling enough to hide demand, but is lower. We could see people don't want the thing paying 14% if they don't feel secure. But on the other hand, a lot of our credit investors told us, I'd be happy to be paying you 9% if I just didn't have any anxiety. So, you know, finding our way to the right balance is all consistent with a dynamic equilibrium because if you find the right credit point, then that lowers the cost of capital, that lowers the hurdle rate, which is better for the equity. So the equity benefits, if we issue the most efficient credit and the credit benefits, and we know for sure that it's this balance of dollars and BTC. And we know that we have been underweighted dollars before. Now we're in this discovery and we're talking to our investors every week. Every day we're talking to them, but every week there's a new announcement. So every single time we make an adjustment in the capital structure, we watch to see how the credit settles. Then we go and we talk to our investors to see how they feel about it. And of course, we have other moving parts, like the Bitcoin price is a massive moving part of it. If it falls $20,000 or rises 30%, but also SOFR and, you know, the federal, you know, the monetary policy of the Fed is the second moving part, and then the private credit markets and the equity capital markets. So I think it's a moving target, but what we've learned over the past 12 weeks is we need to actively manage those ratios, and we need to be humble and maybe... And this is a hard thing for a lot of people to understand. Maybe the best way to buy the most Bitcoin is not to buy the most Bitcoin. Like if it was an 80-20 split or a 90-10 split, we'll actually get more Bitcoin in the long term because it's all about sustainable growth. And, of course, it's very difficult to explain this on X because people want you. They don't like nuance of I'm going to, you know, I'm going to sell one and buy 10. They want to hear that you're going to sell none and buy 11 and do it with money you conjured from a genie, you know, under the desk.

We don't quite have that.

Thanks, that's a great segue to my question. Over the years, investors have come to associate strategy with a number of principles that at one point seemed absolute, but later proved more flexible in practice. Bitcoin monetization, obviously one example. Today, management has been clear that it does not intend to issue stretch below par. My question is, under what circumstances would you investors distinguish between principles that are foundational to the model and those that are contingent on market conditions?

I think we learned that the market wants – they don't want volatility in their credit.

They want loss of liquidity, low volatility, short duration, stability. They want to buy it around par. They want to sell it around par.

They want to collect the dividend. That's what they want. And that's what they expect us to give them.

And if we do that, then they make a decision in 10 seconds. I'm just going to buy a million dollars or I'm going to sell a million dollars. If we allow it to flex plus or minus a dollar...

That order becomes a three-day process. Like I placed the limit order. We've allowed it to flex 40 cents in the past. People put in limit orders and they wait from, they put in the order on Wednesday and they're waiting on Friday and the order isn't filled. And what would have been a five-second decision became a three-day decision. But if you let it flex plus or minus $5, we have an example like STRF.

STRF is objectively a better credit instrument. It's 12x over collateralized. It's got super dividend stoppers.

It's got non-payment penalties. And if you're a credit investor, in theory, it's 10x better. And yet it trades with 1 20th or 1 30th the liquidity. And I scratch my head. I'm like, why is it nobody wants this thing? And so... Whenever people say, why don't you just let STRC float up $2 or float down $2, or after STRD, and it's got 1 30th or 1 50th of liquidity. And so the answer to the question is, we're never gone.

If it trades, if you offered me $10 billion to sell you the instrument at $99.99, and take one penny off, I wouldn't give you the penny, Lance.

I would not give you a, I would not knock off a penny if you put $10 billion in front of my face, because it's a matter of principle and credibility. If we can't create it such that the trades depart, we can't sell it apart, we're not going to sell it at all. Our back off, our backup is harm, right? And if we can't, like, we're not going to sell Stripe.

We're not selling Stripe. We're not selling Stripe. We're not selling Stream. And we're not selling Stretch right now.

And that's okay. At some point, Stretch will return to par. And the only question is, how much money or time will we have to exert to get it to par? But I guess I would say it's not worth doing if we can't do it right. Come back to kerosene. The reason Standard Oil was successful was because it was standard and it didn't blow up any engine and it didn't burn you to death. It didn't start a fire. It used to be that people created oils and they were impure. If you ever put bad diesel or bad oil in your fuel tank of a boat or a plane, it destroys the engine. So the impurities render the product useless. So here's my analogy to you, which is if it's a little bit bad, I can either say, okay, well, here's some kerosene.

You should test it in your own factory or in your own chem lab before you put it in the engine because it might blow up. And I put the disclaimer on it.

Or I could just not sell it to you. And my point really is if you can't create the stuff so it's pure, like it's got to be pure and it's got to be what the market wants or just sell nothing at all. And if we can't create pure short duration credit at par, we'd rather just sell nothing at all until we get it right.

Because the demand is, in my opinion, it's 100x more for short duration credit, 100x more. And maybe the ultimate market is 100x bigger. And so it's like we're just playing to win here. And it would be very easy to, it's like, oh, I could let it float between, I could sell it at 98 or 97 some days or 99. What would happen would be the market would shrink by a factor of 100. And you would basically turn people from – it's like what if your bank took a 1% commission every time you deposited money or they didn't and it was random and it came and it went and you weren't quite sure? Or what if the trading fee, it changed from five basis points to 5% randomly from week to week?

It's like, yeah, it's like I put my hand on the light switch and sometimes I get a shock and sometimes I don't get a shock. And it's like, you don't want to touch the switch. And so that's how we feel about this thing. It's like, you would be so angry at me, you know, if it's like... You bought it at 100, you sold it at 100, but you could have sold it at 105. Or you bought it at 100, but then you could have bought it at 98. It's like that kind of thing. It just destroys the product. And we've discovered, we've inadvertently tripped over what we think is the magic product, the greatest product in the world. The marketplace wants us to strip the volatility off it. They want it to trade at par. They want it to be liquid. That's our job. If we punt, if we abrogate on our responsibility, it's just like someone shipping you a beer and saying, well, here's the six-pack. One of them is spoiled, but the other five are good. Just check before you drink. It's not acceptable, right? It's the failure, right, to create it. We're creating a failed, flawed product, and we're lowering our standards and telling ourselves it's okay. It's not okay. It needs to trade at par. We won't sell it below par, right? If we have to spend an extra billion dollars to get it to par, it's an extra billion. If it took an extra $2 billion... An extra 2 billion. If it took an extra 4 billion, spend 4 billion. It's like, how much is it worth spending to make the airplane that flies across the Atlantic without crashing on the way? It's like, just make the thing work.

And that's what we've discovered. We've got a thing. Everybody wants it. We need to make it work. I can't guarantee you exactly how many dollars it takes for me to get it to work or how many days it takes me to get it to work. This is what the market wants.

And this is what we can create. And this is the thing that will make the company worth hundreds of billions and then trillions of dollars. That there's nothing else worth considering. Everything else is a distraction, a waste of time. We just need this thing to work as designed.

Thank you, Lance. Last but not the least, James Ransratton. Thank you for having me on, guys. I love seeing the 200-week moving average on the dashboard. It would be great to see also on-chain metrics as a complementary, like realized price and true market mean. I think it gives a much greater indicator of support levels. I've got a couple of two-pronged questions. Looking back over the cycle, this is your guys' second cycle, what assumption about the capital markets proved you guys wrong or the least certain that you expected? And then as capital markets start to move on chain, do you think this can create new opportunities for strategy changes? whether through tokenized securities, which would obviously reach a broader global investor base, or even issue a strategy standpoint in the future. Is there something that you guys think about?

I can cover the first one. Maybe Mike, you'll cover the second one. In our first bear cycle in 2022, as some might recall, We had secure debt that had covenants on it that were quite restricted to the company. And we had a Bitcoin-backed loan that had a margin requirement on it. And our biggest lesson learned from 2020 was don't do either of those. And so here we sit in 2026, and we're fully convertible. And so that was a big lesson from 2022 when I think we upgraded our capital structure as a result and liquid US dollars to, uh. fund our dividend and to overfund our dividend so people have confidence in their preferred dividends. And I think we thought that Bitcoin would be important, but what Mike mentioned earlier is that people who are holding these prefers don't look at Bitcoin the way they look at U.S. dollars. So that was a major lesson learned. And we did a lot of things in May, June that I think looking back at that, we can execute things better. So we went a lot into the next bear market.

Yeah, I would add, I think in the capital markets, sometimes the equity capital markets correlate with Bitcoin and they trade in lockstep. But sometimes the correlation is broken. like with the AI bubble forming equity capital markets diverged from the digital capital market. And so they will converge and diverge and generally things that are good for risk assets are good for all of us, but sometimes they'll get a boost from the demand for AI.

And then sometimes we'll get a boost as a very pro Bitcoin dynamics evolve. So I think as a company, we've realized that we're straddling the equity markets.

When the equity capital markets are rallying, that's generally good for our equity, but it's not necessarily good for our capital asset, BTC. And so we're also straddling the credit markets. And sometimes there are things that are credit positive or credit negative, the way the yield curve moves and so forth. And sentiment in private credit or other sorts of corporate credit, they have their own dynamic. And then There's the digital capital markets, and that's Bitcoin, and it has its own dynamic and drivers. And what we need to do is just be in a position to exploit and arbitrage the various opportunities. And when one market is mispriced, you know, we're buying the cheap ones, selling the well-valued one, and then occasionally we just have to put the engine in reverse and go the opposite direction. And I think that two, three years ago, we had a much simpler business model.

And now we realize sometimes you sell credit, sometimes you buy credit, sometimes you sell capital, sometimes you buy capital, sometimes you sell equity, sometimes you buy equity.

And the more nimble you are with regard to that, then the more shareholder value you can create.

With regard to the issue of tokenization,

I think the killer security to tokenize, people have been tokenizing money market funds, and they're yielding 3.5%, and they put them in looping protocols, and everybody wants yield, and yield drives the entire DeFi economy. But if you can plug a 10% yielding instrument into a tokenized asset instead of a 3% yielding instrument, there's so much more energy that you can do a lot more with it.

So ultimately, I think that...

The real interesting killer application is going to be looping digital credit, either stepping it up 2x, 3x, 4x, or stepping it down, stripping the ball. And if you tokenize STRC and then you step it down and transform it, there's a market for 4% yielding Yen as a yield coin, or 5% yielding euros, or 4% yielding Swiss franc, or 6% yielding dollars. And the way you're going to get to that is you can't create that with money markets. You can't take a 1% yielding yen money market and step it up to 3% with any... with any kind of economic responsibility or rationale. It's crazy. But you can take a 10% yielding or 12% yielding digital credit instrument and you can transform it into any currency, stabilize it, step it down, provide liquidity, give it daily liquidity or hourly liquidity and you can stream a yield and strip the ball off it. So I actually think that the more tokenized securities we see and the more money flows into that, the better that's going to be for digital credit. And I think that, you know, what does the world want? The world wants 200, well, probably the world wants a trillion dollars worth of stable coin to pay 6%. And what the world has right now is $250 billion of stable coin that yields nothing. And then they jump through hoops trying to make the stable coin that yields nothing yield something. And so how you can actually create a trillion dollars of stable tokens that yield something that's more than SOFR, you're going to do with digital credit. So I think that that's really the killer thing.

With regard to all the other tokenized securities, the killer idea of tokenization is creating a free market in custody and credit.

If I have a million dollars of Apple stock, can I actually transfer it to a custodian that will pay me 4% yield on it? Because right now I don't get yield on it. And if I have a million dollars of Apple stock and my bank will give me a 40% advance ratio and charge me 8%, will someone give me an 80% advance ratio and charge me 4%? So in theory, you could see those markets form. In practice, I don't see them happening in the U.S. right now. And there's still a lot of obscurity. There's a lack of clarity about what kind of tokenized use cases will be allowed for securities. But one thing is clear. Stablecoins are going to be crippled in their ability to generate yield.

So the path to generating yield and fixed income is going to be through tokenized securities, not through tokenized currency or the like. And I think we're really well positioned for that.

And I think ultimately, the one thing that they're really good at at DeFi is they're really good at looping something 2x, 3x, 4x, or they're good at tranching risk and stripping it down to zero vol.

So that's financial engineering tokenized.

And the one thing you want to engineer is if I give you a 10% dividend yielding asset in dollars, then in DeFi and theory, you can create any currency, any monetary instrument pegged to any currency, and you can step it up and step it down with transparency.

And so I really see something I guess TRC is like for the digital asset economy. And that's really an opportunity for us should that economy become material. To be clear right now, it's only 1.1% of the money is in DeFi.

So 99.9% of the money is TradFi. And so we don't need it.

And the truth is 100x more money is solving this problem in the credit markets and the equity capital markets. But I do think that... DeFi and digital assets and tokenization is interesting because the people involved are more progressive, more innovative. They move much faster. They're much more creative. They'll take risk. They're not so crippled with tradition and custom and incumbency that they fear to do something

which is an obvious thing to do and so all of the really cool innovative products will probably come out of the digital asset space first and then it becomes a regulatory struggle and a political struggle to see whether you can get approval to sell a compliant version of that thing in the capital market where you're operating and And we don't have any time to go into that. That's a podcast in and of itself. But that's what I think. Thank you.

And just so I have a quick question as well. On the 26th of June, one stretch traded down to $70. Is there any insight you had on that? Is that forced liquidations from the DeFi? Or was it something else?

Tell me, I didn't hear the first part of your question because you cut out on the 26th of June.

On the 26th of June when the stretch traded down to, I think, $70. Is there any insight you can give on that day? Was it forced liquidation?

You know... What I think happened is that there are a number of broker dealers, unnamed, and we can't even identify them all, that were actually creating credit, 3x or 4x credit,

against strc under very favorable terms so they were giving very high like like a 70 advanced ratio or an 80 advanced ratio against strc based upon its its previous trading dynamic and then when it traded when it traded down and the ball spiked

I think that those entities change, they dial back their credit lines from an 80% advance ratio to a 20% advance ratio. In essence, the equivalent of a margin call or a liquidation event.

But see, to call it a margin call would be misleading. It's not like someone got over levered and margin called. It was a second order thing. The credit lines creating the leverage got withdrawn.

And one of the lessons we learned is it's important for us to offer the instruments in such a stable way so that the second order and third order credit lines backing the investor that took on the trade don't get pulled away from the investor. And that was kind of an unexpected thing. that we learned. It wasn't DeFi, by the way.

The simplistic notion would be, oh, yeah, some retail guys overborrowed or some DeFi degenerates, like took on too much leverage. That's not what happened. Some TradFi organizations said, well, we'll give an 80% advance rate show

when it's trading with a vol of less than 10, and then when the vol spiked to 20, they changed the advance ratio, and it created this second order and third order rippling effect, where you then had someone sell or liquidate, and that created a downdraft in the price, which created another liquidation.

So it was a second-order, third-order reflexive contraction in credit in a system we believed that caused it to trade into the 70s. And that created – when it got into the 70s, that created – anxiety for first order investors that reacted to it. So it's kind of like an amplified reflexivity through a lot of different parts of the market all working at the same time on a novel asset.

Thank you, James. Thank you.

I'll turn the call over to Fong for any closing remarks.

Thanks to the analyst, both on the Bitcoin side and the banking side for joining us. Thank you everyone for joining us for earnings call and looking forward to seeing you all again in three months.