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[upbeat music] [footsteps] [dramatic music] [water splashing] [screaming] [laughs] That's right.

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Oh. It wasn't the bottom. Sailor came back for more. Colin, what's on the docket for today? Oh my gosh. Welcome back to Blockspace Live, everyone, with an incredible cold intro from friends of the show, Psyop Anime.

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Friends of the show. [laughs] Yes, as you probably guessed from that cold intro, we will be talking about the dire state of Strategy and its preferred Stretch.

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That'll actually be at the end of the show, so if you're interested, stick around in that. We'll also have some clips on it later in social media. But to kick off the show, we have news from Hive.

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Two big press releases hit today. They signed a non-binding LOI for a tenant for their Boden, Sweden data center, which they are in the process of acquiring.

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Concurrently with that, they are also issuing 100 million in convertible notes to fund their AI revamp.

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Following that, we have none other than podcaster extraordinaire and crypto degen beat reporter, Gordy Gort, on to talk about the dire state of the trenches.

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If you thought that that clip showed that it's really bad out there for the degens, it's even worse than you can imagine. After that, some good news coming out of the Galaxy Digital front.

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They are making headway for a new data center in McGregor, Texas, and have been working with the city council in a way that could set the standard for how these data center companies do grassroots interaction to make sure that no NIMBYism gets in the way of their plans.

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Following that, we have Demandpool founder, Alejandro De La Torre, on to talk about Demand mining the first Stratum V2-compatible block ever. That's right. It didn't come from Brains. It came from Demandpool.

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And then following that, we will get into the nitty-gritty of MicroStrategy, rather Strategy, and look at some of the numbers

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to paint a picture of why a lot of bears are asking some pretty tough questions about Strategy's capital stack and the future of the company with Bitcoin treading water below 60K. That's right.

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Blockspace goes live every weekday at 1:00 PM Eastern, featuring quick hits on AI, data centers, markets, some Bitcoin, and some Bitcoin mining.

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Make sure to hit subscribe on YouTube, and hit that notification bell to get the push notification to your phone. If you like the stream, it turns into a podcast.

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Anywhere podcasts are found, search Blockspace in your RSS feed on Spotify or Apple. Leave us a review. If you like what you hear, you'll love our newsletter. Newsletter.blockspacemedia.com,

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uh, drops in your inbox every single day. Uh, get some memes in your inbox and some, uh, uh, the occasional, uh, hot take. This show is brought to you by CleanSpark, NASDAQ-listed ticker CLSK.

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More on CleanSpark later on in the show. Oof, Colin, stocks are up, but the majority of my bags are down. Stretch- It-... which I don't own, down. Bitcoin- You don't?... which I do own, down.

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But Stretch was supposed to be your key to early retirement, Charlie. Yeah. You're gonna be sipping piña coladas on some nondescript Caribbean beach. Mm-hmm.

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And there's going to be a gaggle of beautiful women who wonder how you made so much money, and you say, "Baby, digital credit." Yeah. I, I wasn't, I was meant to live a comfortable life. I'm retired.

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[laughs] Uh, and instead I- Aged my entire 401[k] into a dubious would-be junk rated not in, [laughs] investment grade- Yeah... you know, preferred. Oh my gosh, look at this chart. $75

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per STRC. I heard someone say one M- one MSTR equals one STRC.

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[laughs] I mean, yeah, that was, you know, one of the funnier jokes I saw recently during all of this is, you know, if Stretch can't maintain the target $100 peg, at least Strategy seems to be doing so. Yeah.

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But lest we put the cart before the horse, we will return to this. We just had to highlight it, because honestly, in terms of Bitcoin stuff, it's the only thing that's populating our Twitter feeds right now.

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But we'll move on to our new beat in AI. Yeah, a big deal. Let's, let's start off with a big deal, some GPUs, a few million dollars. Go where it's all.

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Start off with a little, uh, something a little nicer to cover and a little more bullish for the timeline.

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This just hit this morning, and it's really two press releases that we bundled into one article here at Blockspace. Headline reads, "Hive signs LOI for Boden AI tenant, launches $100 million convertible note offering."

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So Hive has signed a non-binding, uh, letter of intent with an unnamed Swedish tech company that they say is investment grade for a 10-year lease of its 32-megawatt data center in Boden, Sweden.

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This will equate to 25 megawatts of critical IT load, 32 megawatts gross,

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and Hive said it plans to retrofit the site to handle as many as 10,000 GB300 GPUs with single rack density as high as 150 kilowatts using direct, uh, hybrid direct-to-chip liquid cooling and air cooling.

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Kind of interesting to see both of those there. I imagine there's kind of a speed to market equation going on when they're designing this.

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So as I said, Hive described the tenant as an investment-grade sovereign Swedish technology company. And Hive is actually in the process of purchasing this data center currently.

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We covered on the show a while back that they had received approval from the local Boden Council to acquire the data center site, which the council valued at $10.81 million.

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That's, uh, that's about 105 million Swedish krona. And this acquisition is still being finalized. So I think that's one thing to note just with regards to the timing on all of this. Again, the LOI is just an LOI.

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There is no deal inked yet, so we don't know how much the deal will be worth. And also, I would believe that the LOI, the LOI's fruition would be contingent on Hive closing this deal to acquire the data center.

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No indications that there will be any bumps in the road, but just that's important to caveat. One last news item with this. Hive also concurrently announced a $100 million convertible note sale with this release.

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Those notes would be due in 2031 with a 0% coupon, and there is an option to add an additional 15 million within 13 days of issuance. Yeah, so this is the second Swedish deal,

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uh, we've talked about in the past week. CoreWeave just yesterday also, uh, uh, announced a Swedish, uh, deal.

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It's interesting in that I, I wouldn't be surprised [chuckles] if these sites are, like, really similar or kind of near each other, because they're similarly sized, they're similarly, like, protected in, like, exactly what percentage of the overall deal belongs to the respective company.

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Um, and this is also on the heels of what? Uh, Iron announcing 400 megawatt-plus of po- of power, uh, runway in, uh, the Iberian Peninsula.

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And, uh, it's like, it's like everybody took a look at what was happening domestically with the power, with the megawatt crunch and competition and said, "Well, let's go find some, uh, power that fell off the back of the truck in Europe."

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So that seems to be where a lot of the, like, speed to power is, is available. Yeah, and if you're going to find abundant and cheap power in Europe, it's probably going to be in these Scandinavian countries.

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They are flush with hydro. I believe Norway and Sweden are both... I said this on the stream, believe yesterday, 99%. It's, it's at least 90-plus percent powered on hydro.

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And going back to the size of the data centers, the data centers that CoreWeave is renting capacity from is also 32 megawatts. Yeah, this reminds me- This could be-... the same data center. I don't think so. Okay, okay.

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Um, I don't think so because the provider for that data center was not Hive. Okay. That may have been old. That may have been who Hive is purchasing it from. I don't believe that's the case.

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Okay, disregard that speculation, but it is coincidental. Well, and, but- I mean, 32 megawatts... I did, I thought the same thing. Yeah. And what it reminds me of, I believe it was

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Cipher and TeraWulf when they announced their fluid stack deals. It was for the same gross megawatt figure, 168. And we had... And I believe Hut8 as well with their, with one of their deals.

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And I, I was asking, I believe, Asher or Ganout about this a while back and, or someone from one of those teams, and they basically said that figure is...

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You're see, you see that figure represented across some of these different deployments because of the density of the deployments. And so, I mean, I would imagine it's probably similar here in Sweden.

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I mean, these data centers are much smaller, but perhaps there is a standard that has emerged where 32 megawatts is considered, you know- Yeah. It could be-... maybe what they're zoned to build, right?

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It's the maximum, but it's also just, uh, aligns, I think, with the density that you need to be running, uh, these high-performance computing- Yeah... apparatuses. So.

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Flagging this, it could be like a GB300, like, optimal cluster configuration. Could be a permitting thing. Who knows? Um, also before we go to Gwort, I think you also... We've got Hive issuing a $100 million note.

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Also some raise here. I'll let you take that as well. Oh, yeah. No, we... I, I covered that. It was quick though. Okay. [laughs] 'Cause there's not much there. There's still- Yeah... you know, that note is, uh...

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They're, they're issuing it. They haven't closed on it yet.

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So we'll definitely revert to this story once this, uh, assuming this deal closes and there's an actual, um, firm figure to report on, and also when the note is finalized.

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Hoping to have Hive President Aydin Kilic on the show either tomorrow or sometime next week to talk about this more in detail. So stay tuned for that if y'all are interested. All right.

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We have Gwort, Gordy Gort, waiting in the wings backstage. We'll bring him on very shortly after a word from our sponsor, CleanSpark. [gentle music] We are CleanSpark,

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America's Bitcoin miner, a publicly traded company with the largest operating hash rate, powered entirely by self-operated infrastructure across four states. This is our proof of work.

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We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com.

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[upbeat music] If Bitcoin's actually the best money, and it's the thing that people should accumulate, and it's the best risk-adjusted asset, I lose zero sleep about whether or not that's gonna happen.

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I, I just ask the question of when. It's literally matrix math that you're running on large pieces of data. The Bitcoin miners can absorb that energy.

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And, and in many ways, this feels like a second bite at the apple to build a new internet. All right. We've got friend of the show, Gwort, in the wings.

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We are gonna bring him on up here. Welcome to the show, Gwort. Hey, guys. Can you hear me okay? Yeah, you sound great. I have my mic and everything prepared for this. Yeah. Nice.

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Heck yeah, it's, uh, it's, it's, uh, it's like a live version of the Gworc show. So, uh, we've got you here to help us have some difficult questions [laughs] about the state of crypto.

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Uh, we need a friend of the show on. Uh, and it seems to me, Gworc, right now, like, that... I, it seems like all of crypto Twitter just started rebelling against Saylor in the past few weeks.

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I don't know if I just wasn't paying attention before this, but I'm j- I've got some tweets pulled up just from the timeline.

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Are y- is, are you getting the sense that the people are projecting onto Saylor, like, the cause of this current pullback? Yeah, I mean, this is not...

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Uh, so from the crypto Twitter side, yeah, I think this is something that also has been more of a recent revelation in the sense that there were maybe a few people who were following this a year ago, like when, when Stretch

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came out and there was, like, a few people sort of mentioning that this looked or resembled somewhat of like a, a algorithmic stable coin.

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And obviously as of late, um, really, like, the past few months and especially the past few weeks, I would say, it's been more apparent. So I think that people are, like, quickly trying to learn what's going on.

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Um, yeah, I, I don't know. It, it's very hard to gauge, like, whether or not all of this is a result of the, just taking the financial engineering of it too far. Uh,

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I will say, like, there's also a reasonable case to be made that we're just in the depths of the bear and that Saylor will get out of this. I don't know. I don't have strong opinions.

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I'm very much fence-straddling this one. Um, if it goes to zero, I'll be like, yeah, I mean, obviously it was gonna go to zero. Uh, um, Stretch specifically.

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Um, but if it rebounds, I'll be like, yeah, I mean, he w- wiggles his way out of everything, right? So I don't have strong opinions. I've been following...

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It's not like s- I'm not such an expert on the mechanisms now at this point, 'cause he has so many of these different, you know, things out there.

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Um, but y- it does seem like as of late, yes, there's a lot of people turning on Saylor specifically and, and thinking that he is sort of the bane of crypto's existence. Yeah, I'm looking at this.

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We got a rare Light Crypto tweet, uh, [laughs] which says, "Can we please tear Saylor's heart out and eat it?" Um, with a lot of, like, uh, [laughs] support from folks in the space. Like, this is pretty notable. Uh,

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uh, you know, I see someone like Light talk about it, and I don't know, Light seems like a really smart person. It's rare that they've spoken for a while.

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Um, we also see, I believe, [laughs] this account, alawat, also saying, "Yes, I have abandoned Michael Saylor despite supporting him in the past.

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Yes, Michael Saylor has abandoned his users despite supporting him in the past. Um, the idea of sitting around watching the MNAV and concocting purity tests is gross."

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Obviously, it's kind of a shit post, but, like, um, it see- you know, to me, crypto Twitter was already in the depths of the bear market. Uh, is this...

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I, I'll, I'll throw this, the kind of the same question back to you. Is this them just looking for a pariah, do you think? Uh, what are your, what's your take on this? Also, I'll kind of frame it differently. Okay.

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Like, why are the degens specifically coming out of the woodwork now and criticizing him? Have they just run out of things to talk about and this is just the hot topic?

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I think that- It's just kind of funny to see- Yeah... 'cause Saylor is the ultimate degen, so they're kind of eating their own here. Well, I think that's, there, there's a portion of that, yes.

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Like, he's the next, you know, main character, but he's been the main character for quite some time. Um, I think that it's not... So I, I think that o- o- one

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reasonable argument is that the original idea behind Strategy was, you know, they were going to issue shares and buy Bitcoin, and, and now he's really added, like, DeFi-level complexity to this.

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Um, m- maybe even, you know, because it touches the traditional financial system and because there's actually a lot more liquidity at stake here, uh, maybe even worse.

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And I also think that people aren't really paying attention to altcoins, and if they're paying attention to crypto at all, it's likely Bitcoin. And so that is, like, th- that's the conversions of a few factors.

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Again, this is not, like... I think Udi is somebody who we all know. He's been following this for quite some time and has had some... I think he was quite... I mean, Udi has some absurd takes obviously.

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This is something that he was quite early to, and I think he recognized that Stretch was going to enable the bid for that for, you know, six months there.

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And so I think he's been following this, and I think he's quite concerned. So I don't know. Again, like, I don't, I w- wouldn't...

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Yeah, I, I don't have strong, like, beliefs one way or another, but it, it is kind of sketch right, [laughs] right now. Yeah.

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Udi just tweeted, "The only way for Saylor to show strength is to liquidate billions' worth of Bitcoin without dying. Anything else is, uh, weak, sheepish."

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[laughs] Uh, and, uh, he advocates for selling Bitcoin, which to be fair, like, the other takes I've seen from, I would say, other smart people, Udi notwithstanding, but, like, maybe a Nick Carter or a Matt Walsh, have been like, "He's gotta sell some Bitcoin."

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He, he, like, floated this. He inoculated the market the other week, if you saw that. Um, do you- He might sell some. I mean, M- Matt's...

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We'll pull up Matt's tweet towards the end of the show here when we kind of go into the numbers.

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The idea is basically he may need to sell as much as, like, 111,000 Bitcoin to just cover the puts on the con- the converts. And th- this, I think, kind of demonstrates the bind that Saylor finds himself in. So

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Stretch is trading way below par. Strategy is getting absolutely nuked right now. Apparently, he can still sell some Strategy into the market. Like, they raised, I believe, 300 million recently through their ATM.

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But if Saylor sells a meaningful amount of Bitcoin with Strategy's price so low, then he spits in the face of the MNAV narrative, because the MNAV is going to tank. Um, and so-

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I don't understand how you get out of this unless Bitcoin rebounds. And this to me seems like the most significant stress test the entire ecosystem for Strategy has ever seen. Yeah.

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Gort, what happens when- That's a great thought... Saylor stops buying? Gort, you there? Yeah, yeah. I didn't have any good... I didn't have a good response. Oh. [laughs] I, I, I think...

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Okay, so like this is the last thing I'll say on this. I do think the market probably slightly over indexes on Saylor being the only bid.

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Like, if, if we take a step back and, and, you know, still believe in the, the, I don't know, first principles of Bitcoin, I think that in the long run, this is most certainly the worst stress test, if you will, for Strategy.

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We'll see how they come out the other side, but I mean, Bitcoin will get through this.

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Um, I don't know if that means it goes to 25K or whatever, where like that, that, that appears to be the number where people are saying that he could be hunted, whatever that means in this context, because it's certainly not like a per position.

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But you know, I do think that the, the powers that be like see a, see a liquidation point, I'm doing this in a, I'm doing this with quotation marks here, like what- whatever that means in practice.

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Yeah, I mean, he could get wrecked. I don't know. It, it'll be interesting to observe. I'm not gonna be exposed to any of it, and I'll just ride down Bitcoin's spot and, you know, if we die, we die.

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Like, I don't know, [laughs] you know what I mean? [laughs] It is what it is. Okay. I'll stop... We'll... I'll stop asking you about, uh, Saylor [laughs]- I actually... Sorry, Charlie, I have one question- Okay.

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[laughs]... 'cause I just want Gort's take on how schizo this is or isn't. This is coming from Travis Kling of IKIGAI. I don't know if you saw this. Oh, man. He's founder of IKIGAI.

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But you, you just said, you said, "Hunted" there, Gort, and it made me think of this tweet.

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He says, quote, "It makes intuitive sense to me that there would be a group of sophisticated, deep-pocketed Bitcoin bulls that are currently trying to figure out how to collapse Strategy's cap structure by any means necessary so as to force a puke of the Bitcoin currently held.

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Call it the Sorosification, quote, unquote, of Strategy." Basically, the idea, you know, the powers that be are trying to tank Bitcoin's price so that they can... Oop. Thank you, Charlie.

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Trying to tank Bitcoin's price so that they can shake Saylor out entirely, set new lows before we rip. How, how, how, how paranoid and schizo is that, or how, ooh, that might be a peek behind the curtain in your view?

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I mean, I know the market dynamics at that level. Like, I'm not slinging around billions of Bitcoin a day, or like billions of dollars of Bitcoin, right?

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So when people say that there's like this, you know, cabal or even just sophistc- sophisticated traders would, would try to hunt...

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Again, by the way, like, we're talking this word hunt, like it's, it's very much not like a perp dex where your, you know, levels are exposed or whatever.

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Like, he has all of this financial engineering, and there's numbers at which Bitcoin could, could hit where, you know, it starts to mess with the M NAV, and it has positive or negative downward reflexivity.

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So I don't know what this looks like in practice. It does seem a slightly conspiratorial, because from my angle, nobody's really paying attention to this shit anyways. Like, I, I still think we're largely siloed off.

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I mean, I can tell you that like BlackRock's not sitting there with like iBit like, "How can we," you know, "how can we take out Saylor before we, you know, onboard the next billion users?" I think it's...

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So I don't know. But if there are numbers that are, you know, clearly bad, I don't know, maybe we hit them.

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But again, uh, I don't, I don't have much in- insight into like the, the people who are, [laughs] the, the Illuminati here. Okay.

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So maybe just, uh, so I'm, I'm curious about like the, the profile and, of, of the like, the crypto traders who dominated the timeline five years ago.

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Um, and it's like all of my chats, my, the, my casual degen and trading chats, like they've all turned into stock chats. Everybody's moved to the stock market. Um, like are you seeing this in your experience?

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It, it's like, it's as if everybody found the siren song of TradFi and is like g- is gambling on AI stocks right now. Um, I'm kind of curious, 'cause like Crypto Twitter is silent.

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Have they just all moved to their alt like stock accounts lately? I mean, it does appear that way. I...

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So I think from the professional side, like from the people that I talked to that were like real traders, not, not just a degenerates, but like maybe worked at a shop or something, a lot of the volatility has been stripped out, and like that's where the money is made, right?

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Like there's like sort of... In, in fact, you could make some argument that Stretch and Saylor and I- like obviously iBit contributed to this, right?

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Um, stripping this just like, you know, up and down in these markets, and that's where, that's where a lot of professionals do well, right? And so when there, when that doesn't exist, um, in size, right?

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We're not talking about like $10 million meme, meme coins right now. We're talking about like actual size. I think it obviously makes sense that you'd, you would pivot elsewhere.

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From a more ideological or a more like actual, um, you know, how the, how the industry is structured point of view,

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I think that there was obviously a lot of demand to use crypto stuff when you could gamble on meme coins, you could gamble on DeFi tokens, you could gamble on governance tokens, and m- most of that is just put to the wayside.

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And even the last bull market was not particularly appealing for those, quote, unquote, "real projects," right? Like meme coins are really what did it.

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Most of these alt L1s, DeFi tokens that people expected to rip in conjunction with Bitcoin ripping didn't really rip, right? And like a lot of these did not make all-time highs or barely made all-time highs.

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That is, you know, clearly people, uh... Like I think there's just... That, that marinates, and after a while, like people lose interest, right?

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So when there's not the ability to make really asymmetric gains, like you're gonna see people go elsewhere. So yeah, I've obviously seen a lot of people go into stocks and stuff.

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I don't know how much of an edge they have there. Like I'm not, it's not immediately clear to me that meme coin trading, you know, translates into semiconductor trading.

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But with that said, um, it does seem like it's a very- Red guys doing okay it looks like. Right. That's what I was gonna say. Exactly, right. Like, so, um, I add that, yeah, so maybe I take that back.

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I was of the opinion that like this skill set is not going to translate, and then the stock market and like the whole AI trade has ripped And it's very, very similar to the, like, narratives within crypto.

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So I guess perhaps it has, and if you're a relatively intelligent person, I suppose you could have done well there. I didn't really gamble much in stocks. Um, I don't think that's where my edge is.

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[laughs] So, but yeah, I think that, that it does appear that there's very little interest in, like, on-chain coins.

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I mean, to, to be candid, Gord, you know, you're saying that the strategy ported well to equities, and it makes total sense to me that that's where the volatility and the upside is right now.

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So, like, the entirety of the crypto ecosystem that's not still twiddling their thumbs or, or waiting around has, has gone into that if they think they can make money.

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But I mean, is part of the reason why that strategy ported so well is, like, everyone's a genius in a bear market?

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I, I mean, I, I look at stocks that I've never even freaking heard of, and they're doing, they're up like 100%. Yeah. Every- everyone's a genius in a bull market, you mean. Yeah. You mis- Uh, did I say bear market?

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Excuse me. Yeah. Yeah, everyone's a genius in a bull market. Yeah, I think that's what it is. I mean, I do think people were, I mean, there, I definitely saw some people who seemed like they

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understood the various bottlenecks or [laughs] whatever you want to call them right along the, the AI sup- supply chain and were yeeting into that and doing well.

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But yeah, I, I, I don't have, like, much edge there, so that's not really my domain. Okay. Well, then let's take a, a, I think your domain is, like, broader crypto. You spent a long time, you've been a good,

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uh, like, Ethereum bellwether even though you're, like, a Bitcoin guy. And we haven't covered really anything about Bitcoin on this show in crypto, and here we have

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Vitalik's recent post on the EF, the Ethereum Foundation, decreasing its budget by 40%. Um, I believe it's, like, about 20% of the EF contributors or folks on salary have left, and basically there's an exodus.

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And, um, I know Ethereum is not the EF or whatever, but it absolutely is the hegemon. Vitalik himself is, like, the face of the network. What's going on here, Gord?

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I know Ethereum's been on, like, the downturn relative to Bitcoin. Vibes are lower relative to Bitcoin somehow. What is going on with Vitalik and the EF?

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I think this has been a very long, like, gradual, uh, exodus, by the way. I mean, there was this whole shakeup with, um, Aya, who is actually now out, and then Tomasz.

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I for- I forget all these people's names, but in any case, there's been a lot of changes, and I think, I, I don't know, maybe you would know.

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I think the EF, their mandate initially was, like, at some point they are going to put themselves out of business, right? Like the- Yeah...

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the network should be decentralized enough, the public goods will be built to the point where they no longer need to be very active. And I suppose you could look at this as some progression of that.

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Uh, this happens, like, every two weeks though, [laughs] by the way. So I don't have much, like, there's a new, uh, Eth research, you know, this is the new thing that's going to propel the network forward.

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There's this new, like, Eth Labs thing, right? Which is a bunch of people who defected from the EF. So it's like, okay, uh, it's a lot of the, the same people joining new organizations.

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And again, this is something that, uh, I think we've witnessed now for, like, a couple years if not more.

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Like, really since last bear market, there's been this kind of like ups and downs and people are upset with the Ethereum Foundation and stuff.

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So I don't know what to make of this apart from this does seem to happen a lot. They cut, I will say they cut, like, 54 people, which was apparently 20, only 20% of the EF.

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So, like, certainly that begs the question, [laughs] what are those other people doing? What are they working on? [laughs] Yeah. Like, role, role? Like, is there... Yeah.

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It's like their, everyone's job is, like, find ways to sell Eth. I have no idea, uh, what, what goes on internally there. That's, like, I, I don't, you know, I only see what you guys see. Yeah.

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But I, I don't know there's much to read into this apart from, like, this just seems like a, an occurrence. Every two weeks there's a new, the EF is, you know, transitioning to a new mandate or whatever.

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It's, okay, like, you guys do this all the time. It doesn't seem like much changes. But maybe much, maybe there's not a whole lot that needs to change. I don't know. I mean, the, my, I, I'll say that, uh, it's felt,

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like, you're right that the EF originally was like, "We would like to put ourselves out of a job at a high level."

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And, uh, but yet I don't see anyone, um, eh, talking about Ethereum as a network saying that, "Well, we're done."

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Like, so it's like the job is j- I don't see any, like, agreement that Ethereum is done being built moving forwards. It more s- feels like it's kind of started to stall or hit some roadblocks. Um, yeah, um,

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I'm not gonna put you on the spot and ask you, like, what you think Eth does, but, like, where do you think, you know, it, we, Bitcoin has almost, like, weathered the past 10 years of crypto tokens taking the limelight.

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Um, Bitcoin remains still now 10 years later, almost 10 years to the year after the big ICO run, which, like, sucked all the win- air out of the room. Um, like, do you, [laughs]

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I, I'm putting words in your mouth, but do you think, like, Bitcoin has, uh, some time in the sun again relative to the broader market, uh, crypto market cap? What are your thoughts on this?

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Yeah, I mean, I'm still bullish Bitcoin, but again, I'm very, um, acknowledging of, like, at, like, if we die, we die.

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So this is something that I've held for long enough now that I'm understanding of the risk and I'm not allocated to a point where, I mean, I'm, you know, if, like, by traditional portfolio management standards, I'm very much over-allocated, but I'm not gonna, you know, my life's not ruined.

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So I'm willing to ride Bitcoin, you know- In, in perpetuity. Uh, not so much anything else. I think the market seems to realize this, although Bitcoin's going down as well, so it's hard to make like some, you know...

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Uh, look, look at, you know, the outperformer here, and w- Bitcoin's really separating itself. Obviously, we may believe that, but it's hard, like, you know. Bitcoin's down 20%, everything else is down 25%, right?

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It's like, [laughs] okay, it's not, uh, it's nothing that you wanna really exalt about.

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I do think, obviously, I mean, I take probably, just to finish up, like, I take probably even stronger stance with regards to crypto writ large now. I mean,

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the, the claim that, that everything's coming on chain, I just, it's... That's not obvious to me at all anymore.

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Um, in fact, I- if I had to guess, I think the next five to 10 years will be use, use cases coming off chain.

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Um, things that have shown product market fit on chain, uh, becoming increasingly centralized and integrated into traditional finance.

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Um, we see this like Calshi is very much a centralized, regulated, it is not on chain. Prediction markets showed their product market fit in crypto. Um, perps now, right?

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Like I, you know, I'll make a contentious statement. I wouldn't be surprised if Hyperliquid dropped the blockchain aspect at some point, or, like, very much narrowed the scope of what the blockchain part does.

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And it's not to say that I don't think something like Hyperliquid could win, it's just that it will win, products will win in spite of, not because of blockchains anymore.

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I don't know that tokenization has anything to do with blockchains. I'm not even especially bullish stable coins, for what it's worth. Um, I'm bullish in the interim, maybe five to 10 years. I don't...

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I- I'm constantly, you know, trying to f- reason as to why a stable coin must be on a blockchain. Um, it's not clear to me yet.

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Like, the product market fit of dollars, um, that can float and be transferred instantaneously across the world is clearly there, and again, full coins on blockchains have shown that.

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That does not necessitate a blockchain going forward, in my opinion.

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So, I mean, this is kind of like a, an overarching bearish statement, but I, yeah, like I'm, I'm really not sold that this, uh, 10 years of infrastructure we've built is going to be the infrastructure we use going forward.

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Um, and I, I would, you know, probably say that there's a, there's a reasonable chance that Bitcoin is the only use case for a blockchain specifically. Like, I think that, that is actually, uh,

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you know, it gets people very heated, it gets very contentious, but I think that's, you know, likely where we're going. So again, there's been a tremendous amount of, of PMF shown.

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There's obviously, like, a lot of markets that, that are tapped, and there's still a lot of interesting things that can be built.

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Um, I don't know that going forward it's going to be, you know, like, it's gonna necessitate a blockchain. Gord, I'm in total agreement. I, I...

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There's a lot of product market fit for things and applications, and not a lot of product f- market fit for blockchains, is what I, is kind of what I see.

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Gord, maybe a, a closing question, kind of teasing out some of your comments there further. You, you...

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Something you said that really just struck me, it's blockchains will succeed, or the- these use cases will succeed despite of, despite crypto, not because of it.

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I'm wondering if you feel like the current bear market really reflects an existential crisis that the wider crypto believers or community, if we wanna use that label, have never really confronted.

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With every bear market, there are obviously people dropping out, and there were people who were singing or, or kind of dancing on graves too early.

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But Bitcoin's success and the application of these blockchains for various financial purposes were kind of a foregone conclusion.

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I feel like that's starting to wane, especially when you look at, for Bitcoin, the primary use case for most people recently, number go up. It's going to outperform things.

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It's just not happening right now, and it's not true. Do you feel like this bear market is truly a kind of

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instilling existential dread within the wider ecosystem, and do you feel like it's different than bear markets in the past in terms of people's actual outlook on whether or not any of this will succeed? Yeah, 100%.

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Like, I, I absolutely believe that this time is different. With, with regards to what you were saying,

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the infrastructure and a lot of the proposed, you know, internet of value ideas, I don't think people are buying into the way that they once did.

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There was still something to believe in, and it's just like the, the number of use cases is obviously condensing, right? Um, it's very hard to get honest feedback or to...

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It's very hard to read between the lines with narratives. Like, almost everybody has an angle, and everybody who thinks that stable coins are the future are, you know, deeply embedded in that being the case.

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And so, like all, all of the, you know, the, the use cases that do seem like they have, y-

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I guess, you know, the, the potential to endure in some capacity, like a lot of what I see are a, a bunch of weird explanations that never really answer why it needs a blockchain in the underline, right?

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Like, a- and maybe it uses a blockchain, but it will... I mean, users, I don't think will have any idea. Um, I mean, even stuff like tokenization, like the problem is that these companies stay private longer.

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The answer is not that it has to be on a blockchain, the answer is that we just need some database that allows people to tokenize this stuff earlier, right? Like, all of these things are centralized.

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They all have massive dependencies, oracles, you know, whatever it may be. When you bring real world assets on chain or whatever, like it's always gonna have layers of centralization.

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And to that end, I just think that, like, blockchains are very, very inefficient databases, and if we are in agreement that they're useful- Because they are a database? Well, we can make much more efficient databases.

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So I do- so anyways, that was, like, a little bit circumventing your question. I do think that this is e- existential, but I, I don't think you're gonna hear this.

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You're gonna h- like, everybody is still deeply attached to their bags, and even if they recognize that there's new use cases or whatever, they're going to assume that it's gonna be on their fucking blockchain, their, you know, stable coin, uh, rails.

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Like, you know, it's... You're never really going to get these, like, honest answers out of people. I, I... P- people are still deeply tied to, like, this becoming the case, right? We're in the- Yeah...

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denial phase of grieving. Re- the denial, but there's no recovery at the end. There's no it's so back. It's just, it keeps going. Denial, denial, denial.

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Also, what, well, let me, let me say one, one, one last thing about this is, like, I, I think it, to, to...

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With regards to the sentiment on, like, crypto Twitter and stuff, it's very obvious that even the, the viable, you know, the, the viable use cases, I don't see much of an investment thesis for retail anymore.

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Like, o- all- Mm. And, and it's not just to say that the incumbents are gonna capture this. Um, I do think that's part of it. Um, but it's just, like, these, these people are going to, like, Sequoia.

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They're going to traditional VCs. They're raising equity. They're, you know, creating fintech apps. They're not doing this tokenization, yield farming, like, all of this stuff.

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It's just, like, from the retail angle, which was the appeal of, of, of crypto for so long, uh, I just don't see the investment case being there. Maybe that's, like, overly bearish, right? But I, I, I don't...

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There'll still be a few going forward I'm sure, but I don't know. I, I'm not, like, really looking at this, like, from an investment angle a- at this juncture. Very similar thoughts.

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Gworf, thank you so much for coming on the show, ripping on the markets with us. I know it's down, but someday Bitcoin will go back up. Inshallah. We can believe. WAGMI. I'm t- I'm kidding.

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Uh, Gworf, thank you so much for joining the show. Appreciate your time. Yeah. Thanks for having me, guys. Yep. Thanks, Gworf. Love Gworf. Number one podcaster. Uh, that makes us two and three.

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We can fight over who's two and who's three. We have Alejandro de la Torre in the audience. We'll bring him up here in a moment, but before that, a word from our sponsor, Luxor.

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All right. We are gonna bring up Alejandro. We haven't done a mic test, so we're bringing him in hot. Hey. Let's see Alejandro. Hey. Hey. Here you go. All right. Good. Hey. Thanks for having me. Welcome. Thanks- Yo...

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for joining us, man. Yeah. And congratulations on the first SV2 compatible block. Look at that. There it is. Beautiful- Block... block. 955318. The miner needs to be updated. Uh, MempoolSpace is on it. [laughs] Yeah.

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Because this is, uh, this is a manual field that they enter here, right? Yeah, yeah, yeah. We... Yeah, yeah. So it takes a little bit of time, but there. There we are.

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So A- Alejandro, to set the stage here, can you just briefly explain to our listeners who you are, what Demand does, and what is going on here on that mempool.space URL? Sure. Sure.

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So, uh, my name's Alejandro de la Torre, uh, the CEO of Demand.

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It is the first Stratum V2, fully Stratum V2 pool, meaning miners can build their own blocks with us, can add their own transactions into their own blocks with us, and it- that's exactly what's happened today.

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Uh, we mined the very first Stratum V2 block, uh, with the help, or the hashrate I should say, of GoMining, uh, a very large operator.

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Um, and they, uh, actually are using Stratum V2 technology f- provided by us to add their own transactions into the block.

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These transactions that they're adding are from a open source payment system that they're, um, that they released just a couple weeks ago called GoBTC Pay. So- So yeah.

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Um, diving in a little bit on, into this, now I know, like, people deep in the Bitcoin world have heard about SV2, Stratum V2, for forever. Yeah.

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And there's been all these technical podcasts about it, and the protocol's been developing. Um, uh- Yeah... why has it taken so long- Mm... to get this specific block? What's the, what's the TLDR on why it took years?

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Years. Yes. Um, so that's a great question, and it's a question I get a lot. Uh, the Stratum V2 is open source. Um, everything is specified. Um, the, the development team is, is, is, um, is from around the world.

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It's open source developers. They've been working for many years on it. Um, so these things naturally, open source technology naturally takes time.

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Obviously, um, it's not, you know, it's not from a business, so there's a different, uh, let's say, um, speed to that.

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Um, but more importantly, the actually the, the, the, the, the reason, the real reason is that Stratum V2 is built, is, it's, it's, it's an improvement in everything in the Stratum protocol. It's im- it improves...

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Not only does it allow for the miner to build their own block, add their own transactions like GoMining just did with the GoBTC payment transactions, uh, with us, but it also improves in encryption.

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So- The hash rate cannot be, um, hijacked. Um, it's enc- no, no other, uh, let's say a government body or other corporation can see what's going on with your hash rate because it's encrypted.

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Um, it's written in, it's in binary, so it's much more efficient, so you see some very slight improvements on efficiency, which in the long term, and if it's a lot of hash rate, really does add up. Um, and, and it, it...

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there's a lot of other extra very technical, um, upgrades to Stratum, uh, V2, um, um, in regards to Stratum V1. So that's the reason why it's taking so long.

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As- aside from it being open source and, and, and, and, and open source, um, development is always kind of haphazard.

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There's always new, new guys coming in or ladies coming in and working on it and then leaving and what- whatever. But mo- what, more importantly is that it's, it's very... it's a f- it's a full upgrade.

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It's not just the minor block template that you can, um... It's not just that one feature. It's all the other stuff combined. So Al- Alejandro, and concurrently with Stratum V2, Ocean Pool has their own,

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uh, how should we say, maybe SV2 knockoff, if I'm being uncharitable, called Datum.

251
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And it purports to do similar things in terms of giving miners a choice over their block template, and I believe Braiins is also working on getting SV2 implemented to their mining pool, but they haven't done it yet.

252
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Correct. What are... Can you give us a, a breakdown of the differences between SV2 and Datum, and specifically the kind of flexibility they give their miners? Because on the f-

253
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on the face of it, the marketing language is miners get to choose their own transactions, build their own templates.

254
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But when you actually dig into the details, how we actually get there and how much control the miners actually have is actually quite different from what is conveyed. Correct.

255
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So, so I wouldn't even call it an SV2 knockoff because it's, like I said earlier with, uh, about how SV2 is much more of... It's a, it's, it's a beast, essentially.

256
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It's got encryption, it's got binary, it's more efficient. Um, Datum only has the, uh, uh, only it's built on...

257
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Datum is Stratum V1, number one, so it still has all the issues of Stratum V1, all the, the, you know, the inefficiencies, the spaghetti code, the non-specification of SV1, all the problems that SV1 has. The very...

258
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It's very old code too, SV1. Datum is built on top of that, so you don't... You, al- already you're working with, uh, you know, a lesser, let's say, code base with, um, in, in that sense.

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Um, Datum allows for blocks, uh, for miners to build their own block, uh, and add their own transactions, and in that case, I'm, I'm, uh, I, I think it's, I think it's amazing.

260
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I mean, the, my whole entire goal ever s- ever since started working on Stratum V2 was to help improve decentralization, and Datum helps improve decentralization, so awesome.

261
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Great for them, but Stratum V2 is just the better technology, uh, um, than, than Datum. Um, and also Datum is not well specified. It's, it's kind of, uh... It's not built by a open source team.

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It's built by a, a, a business, um, and it, there's no specifications, even though they say they're gonna, they're gonna release more, more, let's say, information on it.

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It all relies on basically, um, O- Ocean, um, and Ocean can change, uh, things, and you're gonna have to follow what Ocean does.

264
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Um, so in that sense, it, it, it's a, it, you know, Stratum V2 is more on the line of Bitcoin ethos. Um, and, um, that's one thing. And then Braiins, uh, uh, another... I'm another huge fan of, right?

265
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Those guys are a great, great team. Um, they're the first mining pool, uh, slush pool, so, um, you know, m- there's, there's...

266
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The respect is there, of course, but in my opinion, it's kind of, it's kind of the, the reverse of, of Ocean, where, um, Ocean only took a, took basically took out the, the, um, miner block technology from SV2 and put it on SV1.

267
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Well, Braiins did the other way around.

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They took all the encryption, the binary, all the other cool features, but forgot or didn't add the one number, the number one feature, which is the ability for miners to build their own block.

269
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So that's why I always say we are the first fully Stratum V2 pool because we, not only do we have encryption and binary, et cetera, but we have the ability to build their own block, and Braiins doesn't allow that.

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So- And is that, is that largely just a consequence of the fact they're f- they're full pay per share now? I mean- Uh...

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it would be much more difficult for them to have to maybe deal with that if they weren't, or do you think that's kind of a cop-out? Hmm. Hmm. Uh, I think, I think in part it has to do with that, yes. Go ahead, Charlie.

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So if you think, you, Alejandro, you've been in the game for, for forever. Um, you're very well tenured in Bitcoin mining.

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You've seen, um, on the pool side, on the block construction side, many different payout models, the OGPPON S, the rise of FPPS, and, like, the Foundry story, and it seems that now in what seems, you know, the depths of another bear market, we're having a bit of a renaissance in, like, the different

274
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types of different pool structures and payout models.

275
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You have niche community pools, and a lot of it's, like, small, independent, enthusiast driven, but you're having real, a real, like, diversification- In different like pool structures and payout models,

276
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um, do you, uh, I just wanna get like your finger in the wind idea of what like the ratio...

277
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Maybe like a few years from now, like FPPA- FPPS is overwhelmingly the high- the super majority of all payout pool pa- pool models, but like we're seeing an enthusiasm for these alternate implementations.

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Do you think that these will take a larger market share of the overall block production over the next five to 10 years? In terms of payment systems? In terms of just like different block production payout models.

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You've got SV2, you got PP- FPPS, you've got PPLNS, you have... Like, I look at my, you know, the, the, the Parasite pool, which has like their kind of weird hybrid payout model.

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Like, um, there seems to be demand, to, to, to borrow the, the name- [laughs]... for different, different [laughs] types of- [laughs]... uh, pool configurations.

281
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Uh, do you think this is an increasing trend as overall share of blocks produced? Uh, yeah, yeah. I think, um, I think different payment models will continue to be created, but I...

282
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FPPS is still, um, the most sought after type of payment system, uh, specifically because it pays, it, it allows for the miners to forecast, to pay their...

283
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You know, they, uh, FPPS pays them every single day for the shares they've sent, and then they can take, take those...

284
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Even though it's, it's usually more expensive, no, it, it, not usually, it is more expensive for the miner, but at least the miner gets, you know, daily payout that they can then, you know, pay the, the, the lights, the power for their, for their, uh, equipment and for their, their team.

285
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So I don't, I don't think at the moment, um, that FPPS is going away. How- PPLNS is, is the,

286
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let's say, the s- the, it's the better model if you wanna get paid exactly what you're owed. So if you're, if, if you get the maximum, maximum amount of sats per your terahash.

287
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Um, so what I've seen is that larger entities, larger miners who have, um, the ability to, let's say, wait until the block is hit and don't necessarily need to, you know, pay the bills tomo- or you know, today, they can, they can afford to wait until the block is hit.

288
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Those guys usually choose, you know, a PPLNS, um, or if, if you're a hobbyist miner where you just, you j- you know, you're just doing it for fun or for some sats here and there, um, then, then okay, PPLNS model works perfectly fine.

289
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But I think, I think, uh, you know, uh, what, what we've been with, what we've been seeing is that midsize miners are actually looking at ways to...

290
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Uh, they, they, they, they pinpoint a percentage of their mining farm. Let's say, okay, I need to... In order for me to cover the costs of, uh, of my business, I need 50% FPPS payments.

291
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So I send 50% of my hash rate to FPPS pool. However, the other 50% is, is just profit, so I send that, that hash rate to PPLNS pool in which I will know that I'm getting the maximum amount of sats per my terahash.

292
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So I've been seeing that sort of, um, uh, strategy being played. And this changes the game for like how op- mining, mining farm operators decide who they point to.

293
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It, it more optionality, um, 'cause as far as I'm aware, I, like in all my experience, everyone just kind of mines to one pool to give them maybe like the single best deal or they kind of, they don't really optimize for the pool, and you're saying that there is now a little more dynamism in the operator, uh, select- pool selection.

294
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Y- yeah, yeah, yeah. You know, I think, um, I think, I think pools have been legacy... I call them legacy pools. Like AntPool, all these old pools who, that are just kind of... I call them like fat cats.

295
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They're just sitting around eating all day. Um, they're not, they're not, th- they're not cognizant to all the, the, the, s- the serious har- uh, serious work and development that,

296
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let's say, pool 2.0, pools 2.0 like our pool, which are changing the game significantly. Um, and this in turn, this, our like demand is, is a totally new pool, Stratum V2.

297
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It's got different ways of approaching, uh, the problems that miners have had for many years.

298
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And miners are starting to become well-educated and saying, and are s- and are, and are seeing, "Hey, wait a second, maybe I can point my hash rate to this new pool, um, and earn more on my Bitcoin and be able to build my own block, add my own transactions from my secondary business," like, like GoMining, for example, with GoBTC Pay, where they're m- they're, they have a second business that sends many Bitcoin transactions.

299
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And for them it makes a lot of sense. They add those transactions into their own block and they get those transaction fees back. So right there, the, the door is open to a whole new game for Bitcoin miners.

300
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Like, a lot of Bitcoin miners and pools are stuck in the old way of looking at things. And I know firsthand, I was a fat cat. I was, I used to run btc.com back in the day. It was number one pool.

301
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We had, you know, and Poolin back in the day, too, which was like a top three pool. So I, I, I know how it feels to be a fat cat. Um, and you just get, you just get, you know, you just get complacent.

302
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Um, and, and, um, the, I, I, I think all these legacy pools- Are going to have a rude awakening very soon. It seems like now is a, a time that's ripe for it, given that Bitcoin's- Yeah...

303
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in the depths of a bear market, and hash rate is- Right... starting to s- to stagnate. Well, Alejandro, thank you so much for joining, man. Of course. Really, really appreciate it. Yeah. Congrats again. Thanks.

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And we will be keeping an eye on- Of course... Demandpool's growth as the years- Right... trudge on. More Demandblocks. Demandblocks to the moon. Hell yeah. [laughs] Alejandro, thank you so much. Cheers. Thanks guys.

305
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Thanks guys. Bye. An OG of OGs. An OG, an OG for the OGs. Yeah. We are the- I do think...

306
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Sorry, I just have to say, just piggybacking on one of the comments there and questions, does seem to me like the PPLNS or some variant of that model will probably win out in the future just by nature of transaction fee volatility when the block subsidy drops low enough.

307
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You, you, you can't really see, unless they're very well capitalized, FPPS pools being able to stomach that volatility for their clients, hon- honestly Yeah, we gotta get, we gotta get some transaction fees though, so let's get on that.

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Where'd the ordinals go? [laughs] Okay. Everything, ev- they're dead in the water with every other Bitcoin narrative- Yeah. They're dead... over the last year. [laughs] Oh my God, we gotta figure that out.

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Okay, we're gonna, uh, we are gonna- we have a couple more topics. We're gonna talk about the Galaxy deal. We've held back for the end, Galaxy news site, some not just rumors, confirmation.

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312
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313
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314
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Go to lagos.finance to learn more. All right, let's get some good news in here, Charlie. Yeah, this is some fun news. This is something. This is, uh, this is Galaxy. So

316
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Galaxy's got a new site in Texas, specifically McGregor, s- uh, McGregor, near McGregor City Council, or in, in McGregor, Texas.

317
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Um, this was scooped by none other than Rittenhouse Research, I believe was one of the first to, like, really break this news about- Well, the local news story is the one saying it was approved, though. Okay, okay.

318
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Local news, but McGregor, but, uh, Rittenhouse found this. But basically, the future of, uh, Next,um, data center alpha is gonna be in local news stories. So shout out to Channel 10 KWTX [laughs] in McGregor. KWTX.

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KWTX reporting from McGregor City. Yeah. Okay, so here's the deal. Um, the industrial park in McGregor is set to expand after city council approved plans for a new data center.

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The company building the facility is Galaxy, which has entered into a contract with the city of McGregor for the project they are calling Project Merlin. The plan calls- Ooh...

321
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for several buildings on 500 acres northeast of the SpaceX facility in town, so linking or a, a arm's length from Elon.

322
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Um, Drew Luna, a Galaxy representative, said at the Galax- at the council meeting, "Any infrastructure upgrades that we need for our power, it's on us. We pay that. It comes out of our pocket."

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Galaxy described the investment as a $400 million capital investment, 30 jobs, 30-plus jobs, average salary of 60K plus, which for te- uh, rural Texas, pretty good. Closed loop cooling, recirculated water, minimal water,

324
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um, and again, on the water issue, uh, as, uh, the Galaxy rep said, our residential usage is not gonna be affected by this. $3,000- 3,000 gallons a day.

325
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If the facility uses more than 3,000 gallons a day, then maybe some restaurants in town would also have to shut down, because that's about how much a restaurant uses.

326
01:00:02.130 --> 01:00:13.590
So- Galaxy hitting on all of the concerns here, which is one of the reasons why we flagged this story. I'm gonna get Rittenhouse's tweet up here. Yeah. Um, not that Rittenhouse.

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This is Rittenhouse Research coming from X. And as Charlie just noted, they're talking about investing in infrastructure.

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They're not the city, nor the utility is going to front the infrastructure revamps that they need to deliver the power to the site.

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They're also quelling or quenching, I should say, concerns over water use, explaining exactly how the system works. And as Rittenhouse points out here, one of the...

330
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He has a slide from their pre- from the presentation to the McGregor City Council, provides a quote here from Rittenhouse.

331
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Quote, "It provides an in-depth look at how Galaxy articulated the benefits they'll bring to McGregor and dispelled some of the prevailing false narratives around data centers."

332
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And interestingly, they've, so they've been in negotiation for this for over six months, and have been addressing these concerns before, uh, before the council.

333
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And to vet Galaxy, the council actually toured one of their data centers in Afton, Texas, I believe that's the Helios Center, and spoke with members of the local community.

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A McGregor City Council member concluded the presentation with the following quote, "Thank you guys for working with our city leadership to make sure that all of our concerns, because you know they're-" To make sure that all of our concerns, because we know they're the concerns of our citizens too, were met and put into this agreement, I think y'all would be a good partner for us to work with."

335
01:01:34.062 --> 01:01:45.322
As Rittenhouse points out here, one of the increasing bottlenecks is not even just power, nor resources, nor land, it's NIMBYism. We've covered here the moratoriums in various places.

336
01:01:45.402 --> 01:01:53.482
Charlie, you've been good about talking about them in your home state of Oklahoma. If you don't get these localities on your side, you are not going to be building.

337
01:01:53.502 --> 01:02:15.802
We just covered Iron having one of their plans tabled for now for r- uh, f- uh, tabled in Oklahoma, and this to me is really setting a new standard for how these companies can do community outreach to address these concerns and make sure they are properly addressed and don't spiral into, you know, the realm of hysteria.

338
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Because it's fair enough to have these s- to have skepticism of these things.

339
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Very few people understand what these data centers even are, and they're going on Facebook and they're seeing some boomerfied meme about how you're not going to have, you know, water rights and that the local river is going to dry up.

340
01:02:34.222 --> 01:02:43.182
So hat- hats off to the Galaxy team for really kind of taking the initiative here and saying, "Here's what we're gonna do. Here's what we've already done.

341
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Come see our data center, and we'll show you how we actually do things so you don't have to worry." It really is the tale of two data center builders, um, where Galaxy... Again, we're not unbiased.

342
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We helped Galaxy produce a documentary about their pri- their, their, their, their site, uh, down in Texas, and with a community-focused angle. They built a pool.

343
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And so this is kind of, uh, learning from that and building this site with a, uh, a huge priority on engaging the community first. And it looks like it's paying dividends, because while, um,

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everybody else is encountering snags in the roadmap that were not anticipated six months ago, Galaxy's able to, uh, move forward with this, not with just approval, but with, uh, in some cases, explicit endorsement.

345
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So that's the part one of the Galaxy news we have. The other one is Jane Street. Jane Street, now a beneficial owner of Galaxy, a passive stake at 5.1%.

346
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I don't wanna make too much of this because it's, this is not akin to, you know, like something like situational awareness or a large fund taking an active stake in Galaxy.

347
01:04:02.092 --> 01:04:14.582
But what it does show is that there is enough investor interest for Jane Street to up its stake in Galaxy. Jane Street is a quantitative trading firm and market maker. They now own 5.1% of Galaxy.

348
01:04:16.002 --> 01:04:26.222
People are slinging Galaxy shares, really starting to seem like one of the, you know... Their, their name is up there in terms of the Bitcoin miners turned NeoCloud.

349
01:04:26.342 --> 01:04:31.112
Obviously, they have a lot of other crypto businesses, lending desks. They have a bunch of things going on.

350
01:04:31.122 --> 01:04:45.002
But it seems like right now the momentum is on their side with the data center segment of their business specifically. Yeah. So, uh, that's pretty significant. Uh, fun to see Galaxy.

351
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We like to have the Galaxy analysts and Galaxy research team on the show. So, um, always fun to see them get some attention from the big boys over at Jane Street.

352
01:04:56.562 --> 01:05:06.582
Colin, I think we move to our last story where we g- i- in which we gang up and we, uh, we kick the dead horse. In which we punch up or maybe down- Yeah... considering where the stocks are.

353
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And there are a lot of ways that we can take this. I think first and foremost, Charlie, yeah, let's get the Matt Walsh tweet up here. Yeah.

354
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So- Matt Walsh of Castle Island Ventures, he and Nick Carter both have, like, I would say, you know, tweets on this, which are both pretty interesting. Yeah.

355
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He gives a really good breakdown of Strategy's debt obligations, specifically through the converts. Now,

356
01:05:32.942 --> 01:05:44.022
when we had Jesse Meyer on yesterday, the head of Bitcoin strategy at the Smarter Web Company, he was giving the bull thesis for why we should see Stretch Gap back up and why this is probably fine.

357
01:05:44.582 --> 01:05:53.832
So we're gonna give the bear thesis today. And one of the bear theses specifically that I think's starting to rear its head is that Strategy could be in trouble with these convertible notes.

358
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And the reason for that is a lot of the convertible notes, you could hand wave the obligations when Strategy was at $300 or even $200, but it's at... What is it now? It's at 100? Jamie, pull up the stock chart.

359
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It's at 86.96. It's at $87 per share. It's down 7.7% today. So it has been absolutely puking. Year to date, it's down 45%. In one year- Yeah...

360
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it's down 78%. So the stock is really starting to suffer. And when Strategy is in a bull market, these converts make Michael Saylor look like a genius because his stock is way above the convert price.

361
01:06:40.682 --> 01:06:49.461
But with everything, it's always been contingent on Bitcoin's price trajectory. With Bitcoin crashing, Strategy and its m- various preferreds are also suffering.

362
01:06:50.022 --> 01:07:01.782
But going back to these converts specifically, Strategy has $6.7 billion in notional value of these things outstanding, and the puts for some of these are coming up pretty quickly.

363
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Now, the put is different from the convert, uh, fro- from the date where the convert can be exercised. The put is an option within these convertible notes where the note holder can say, "I want out of this.

364
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You have to pay me back the value of the note that's outstanding."

365
01:07:20.242 --> 01:07:38.718
The convert date is when the note holder can say, "Okay, I would either like this in the actual shares that this note can convert to or some combination of shares and cash And as Matt here points out, I'm gonna share my tab here, Charlie, and get, uh, Matt's thread that breaks this down here.

366
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The put schedule is the following. I, I f- I did my best to fact-check this. I didn't have an- that much time before we went live, but I, as far as I could tell, this is mostly correct.

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One billion, uh, coming September 2027, the ex- the exercise price for the convert is $183 per share. $2 billion March 2028, $433 per share. 1.5 billion June 2028, $672 per share.

368
01:08:06.318 --> 01:08:22.318
300 million, uh, September 2028, $150 per share. 604 million September 2028, $233 per share. 800 million June 2029, $204 per share. The important thing is Strategy is below all of those convert prices currently.

369
01:08:23.078 --> 01:08:36.378
So the one that is most imminent is September 2027. We're obviously still a year out, but if Strategy is below 183 at the po- at that point when that put can be exercised, the note holder's gonna want cash back.

370
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And the, the most dangerous of the, of all of these is the March 2028 and June 2028, where $433 and $672 is the strike price for converting the shares or converting the debt into shares.

371
01:08:51.778 --> 01:09:08.078
Currently, Strategy is below all of these, and if it had to pay them back, it would need to sell, as Matt points out here, roughly 111,000 Bitcoin for all of these and 74,000 Bitcoin for the first three puts.

372
01:09:08.538 --> 01:09:21.738
Again, this is $6.7 billion outstanding in how much they owe on these converts. Strategy has a $1.4 billion cash reserve, but that is basically for the preferreds at this point.

373
01:09:22.048 --> 01:09:28.678
There's $1.7 billion in annual preferred dividends as of its most recent issuance of Stretch.

374
01:09:31.058 --> 01:09:41.298
Th- th- you know, wh- when you really sp- when you really put these numbers to paper, it starts to look really freaking bad for Strategy, man.

375
01:09:41.917 --> 01:09:55.518
W- saving Bitcoin ripping, it could get incredibly dicey for the company here in the n- over the next year. But who knows? Maybe Saylor pulls a, a rabbit out of his hat. Maybe the market saves him as it has in the past.

376
01:09:56.718 --> 01:10:11.738
Yeah. All these go away if Bitcoin goes up. Um, all the problems go away if Bitcoin increases your, your assets under management. Huge, you get a lot more leeway. Um, also, I don't know what I don't know.

377
01:10:11.838 --> 01:10:28.438
Like, the tr- Tradfi is very, uh, slippery and wily, and if you have all these different levers you can pull, maybe there's things you could do to stave these off or change the node or, you know, change the bath.

378
01:10:28.498 --> 01:10:45.238
But, uh, those of us who have unfortunately over-indexed on open networks are a little b- you know, uh, still kinda flummoxed by the inscrutable bureaucracy and levers that exist in the Tradfi financial system.

379
01:10:45.618 --> 01:10:56.418
Well, yeah. But Saylor survived before, remember? He was supposed to die in 2020. He has. I think the big difference now, the preferreds really change the nature of the company. Yeah.

380
01:10:56.518 --> 01:11:05.518
'Cause now any cash flow that you do have from issuing new equity has to go into those preferreds if you're not buying Bitcoin with it.

381
01:11:05.958 --> 01:11:21.428
Now, obviously, what, what most Strategy bulls will say, and this is fair enough, they've got 847,363 Bitcoin on their balance sheet. That's an insane amount of Bitcoin, right? You know, and, but...

382
01:11:21.478 --> 01:11:31.098
And the, the funny thing is, though, they bought it, the average price is 75,651. Ooh. So if you're ever feeling bad about your cost basis, let me tell y'all, it could be a lot worse.

383
01:11:31.658 --> 01:11:38.138
But, you know, they have, like, 50 billion roughly in Bitcoin, so they can al- always sell that.

384
01:11:38.158 --> 01:11:50.898
But, but this does create a potential doom loop scenario where, I mean, if they have to shed about an eighth of the Bitcoin that they hold just to settle this debt, then what does that do to the share price of Strategy?

385
01:11:50.978 --> 01:12:01.648
What does that do to its MNAV, which is kinda the whole raison d'être of it being valuable at all? You create a scenario in which the stock becomes very unattractive to people,

386
01:12:02.998 --> 01:12:14.898
and then you still don't solve for the fact that you also have $1.7 billion in preferred obligations. And the preferred stock right now is suffering, so can you really sell more of that into the open market?

387
01:12:15.538 --> 01:12:26.458
And also, your stock price is down 70% over the last year. Can you s- continue selling that into the open market? And now most of your bonds are underwater. Can you issue new ones?

388
01:12:27.018 --> 01:12:35.498
Because if pe- if you're looking at the fact that most of these are, you know, trading at a discount now from where they were issued, I would assume. I obviously don't have a view into that.

389
01:12:35.538 --> 01:12:43.938
I don't have a Bloomberg terminal. But, uh, can, can Saylor continue to pull these levers? Uh, it kinda TBD.

390
01:12:44.478 --> 01:12:58.438
And there's a, there's another tweet from Nick Carter up where he basically says the real rate for Stretch in terms of if you were an investor and you were gonna be comfortable investing in it, should probably be closer to, like, 15 or 20% rather than the 11.5 it is currently.

391
01:12:59.338 --> 01:13:07.378
Uh, so i- if Saylor really wants to try to restore this peg, does he have to go even further out into the curve for the yield for that?

392
01:13:08.728 --> 01:13:17.928
There are just so many questions floating around right now, and it's obviously everyone dunk on Saylor Day because all of his stocks are just performing so poorly.

393
01:13:17.958 --> 01:13:32.038
But we really are seeing the first, I would say, legitimate crisis for this company, unlike the last bear market where they sold some Bitcoin in 2022 and, but they weren't that stressed because these converts were way out into the future.

394
01:13:32.918 --> 01:13:40.858
The bill is gonna be due here pretty soon, and something needs to reverse course for the math to make sense. Yeah, that's right.

395
01:13:41.058 --> 01:13:49.998
Um, a lot of people think that s- Strategy and Stretch are going down because Saylor's, uh, been using poor AI tweets, and maybe that has something to do with it.

396
01:13:50.168 --> 01:14:02.918
May- I, I like to say Saylor might be the only person who needs to pivot out of AI right now. So, uh, on that note, Saylor, please save us. Bitcoin, uh, still under 60K.

397
01:14:03.278 --> 01:14:12.758
Uh, we can't be here too long or else, uh, we, uh, you know, everybody gets liquidated and bored. Thank you so much for listening to Blockspace Live.

398
01:14:13.038 --> 01:14:23.158
We do this every weekday, 1:00 PM Eastern, featuring quick hits on AI, data centers, Bitcoin mining, emerging tech assets, and markets.

399
01:14:24.118 --> 01:14:41.538
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