Anchorage’s David Lawant Explains Why Bitcoin's Options Market Isn't Panicking: Bits + Bips

**Steven Ehrlich** (0:00)
But the Bitcoin volatility term structure has been inverted for quite a long time now, for like six to eight months, meaning investors are more concerned about the short term than they are concerned about the long term. It is as if the market is living in this perpetual state of near-term awareness or near-term anxiety, which probably is something that is familiar to anyone who has been following the market for a while, right?
Hi, everyone. Welcome to another episode of Bits and Bips the Interview. We've got a lot to talk about today, but as always, before we begin, just a little bit of quick housekeeping. One, nothing that you see or hear on this program is investment or financial advice. Full disclosures, please see unchaincrypto.com/bits and bips. And second, let's take a brief moment to hear from one of our sponsors.

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**Steven Ehrlich** (1:34)
All right, welcome back. So I'm here with David Lawant, head of research at Anchorage. Welcome, David. Hey, Steven, thanks for having me. Excited for the conversation. Yeah, as am I. Actually have been meaning to do this for a while, and I'm glad we have a really important topic to talk about today, one that you've recently written about. And we're sitting down right now on Wednesday afternoon, and the market is kind of on edge. I mean, Bitcoin has been bouncing around 60,000. It's been below, I think, as of this recording, it's right about at 60,000 again, more than 50% off of its highs from November 2024 And there's a lot of concern about what's going to happen with strategy, with its, I guess, most commonly known form of preferred equity stretch, which has been sinking. And as opposed to the market, I guess, being calmed by this sort of new financial strategy released by strategy, no pun intended, earlier this week, to sort of rebuild its coffers, have longer runway to pay off its dividends, put together a plan to potentially sell more Bitcoin, initiate a buyback program, et cetera.
It seems to have had in some ways the opposite effect because institutionalized Bitcoin selling, something Michael Saylor had said for a long time, never ever to do. He famously, I think, once professed to sell your kidney before you sell your Bitcoin. And a lot of analysts, myself, I'm sure yourself, and plenty of others that we follow on Twitter, have been doing the math and wondering how the strategy could get this flywheel back going, where it seems like you have to pick and choose between their common stockholders and then prefers. With that long preamble, I want to get your thoughts on that right away, because it is the topic of the day.
Yeah. No, awesome. Again, a long overdue, very excited for the conversation here. There's definitely no lack of things for us to discuss.
I think, where can we start here? I think the first point perhaps to highlight is that we probably, and this is sometimes hard to do, especially in the takeoff, the market price section. But I think it's also important to keep in mind that there's other factors also driving the Bitcoin price.
There's a lot going on in broader risk assets. There's a whole theme of AI, sucking a lot of capital out of the room, AI and AI-adjacent themes and maybe other things like robotics and defense. We're seeing a fair amount of outflow coming from the Bitcoin ETFs. So I think it's also important to realize that the 8K that MSTR put out earlier this week on Monday before the market opened, it is happening during a time when Bitcoin has been trading pretty much under stress. But what I would say is, yeah, I'd love to hear a view and make this a conversation, but I was actually pleasantly surprised with the announcement that a strategy made. I actually tweeted this and I used to work in traditional equity sell-side research positions in the past. I used to go over a broad range of companies. And it's not always easy to address short-term market concerns and give your company more long-term flexibility at the same time with one statement and one release and coming out this quickly. So I do think that I actually really commend the MSTR team for the job that they put. If I had to ask, I mean, I've obviously been talking to a bunch of market participants and I would say that probably ahead of this 8K release, most folks were expecting something similar to the 8K that we saw last week. So the 8K that a lot of folks would expect and had expected to see from MSTR would be maybe they're tapping the ATM, raising a few hundred million dollars, maybe a couple of hundred million dollars, topping up their fiat reserves, maybe buying a little bit of their Bitcoin, and maybe doing some announcement around the other preferreds that are trading deep out of long to bar. But what they did, I think, was something much more comprehensive, obviously. So they touched their, they tapped their ATM facility to a much bigger extent than I think most people would have expected. I think they raised something like 1.15 billion dollars. Pretty much all of that went to strengthen the fiat reserve, which I think now stands at something like 16 months of dividends as well. Of course, they came with this comprehensive framework. I don't know if we want to dig too much into it and describe what it's out there. They also increased the stretch dividend from 11.5 to 12 dollars on an annualized basis. So I think the announcement was quite comprehensive. I do think also that the announcement came during a time when the Bitcoin price has been a little bit understressed. So, but all things said, I don't know. I was pleasantly surprised with the announcement. And I think it's also important to highlight that I think before the announcement was out or probably on Friday, I think stretch was trading at something like 75 dollars or so.