Why Bitcoin's Lack of Yield Keeps Straining Its Treasury Companies

**Steven Ehrlich** (0:00)
Yeah, those are all really good points. And I'm trying to think about how I want to address this, because there's a few different ways to take it. I mean, for one, as you've talked about, and I've mentioned over my last few shows, it's just a really difficult environment for crypto. I think Citi had a report that came out, it must have been this week, talking about specifically pointing out how retail participation, especially in terms of the Mag Seven stocks, is at a multi-year low.
And it wasn't definitive saying they're all rolling out of stocks, but one of the points that was made is that there's a lot of other opportunities to get that very risk-laden exposure. I mean, you can do the AI stocks, you can go to the stocks that are basically the suppliers to those AI firms. They didn't discount the fact that maybe some of these retail users were moving into diversified ETFs, which they're not necessarily able to track, but it really showed how the retail enthusiasm is gone, and that's particularly important for crypto. Then just the added fear, the psychological importance of strategy, where many people saw it as almost like, I've heard it referred to as Michael Saylor as crypto-central banker in a way, or the buyer of last resort, and if that buyer suddenly becoming a seller, potentially at size, I mean, that's an order of magnitude more worrisome in the eyes of a retail investor that doesn't understand everything, than even if they're just gonna pause their purchases for a while.
I do agree with what you said. I mean, any smart business should always leave themselves and out. I mean, obviously saying like sell organs before selling your Bitcoin was some tongue in cheek, and I think most people probably assumed it as such, but you do need to have a business that can withstand different market cycles. The one question that I still come up with though, and I want to ask you about this, it just kind of goes to the core of the business model of these debts that do have like a diversified type of cap table, cap stack, and in particular ones with Bitcoin that offer prefers, it's a non-yield bearing asset. So you have to find some way to financialize the cash that you're going to pay for it. I mean, Ethereum is yield bearing, Alana is yield bearing. I mean, the native yields on those assets isn't by themselves enough to cover the dividends that these things are paying anyway. But goal, I'm sorry, maybe that was a 40 and slip. Bitcoin generates no native yield. So there's always going to be this flywheel up or down that has to be managed. Like, how do you think about that in a market like this?

**David Lawant** (2:45)
Yeah, no, that's a great point. And while there's, yeah, there's many ways I can take this. The one thing I would say, and this is just detaching a little bit from the strategy conversation, I actually put out a long paper on this about how folks have been using options to generate synthetic yield, right? So strategies like covered call selling, I wrote a very long paper on this trying to show what are the type of results were the consistency of positive yields that you are able to implement in a typical or traditional covered call selling strategy.
And this is interesting, and we have seen a bunch of market participants take advantage of these types of strategies. But in this case, yes, you are right, Bitcoin doesn't have a native yield, so it is a lot different, the strategy that a Bitcoin treasury company will implement versus what an Ethereum or Solana or Hive Treasury company. I fully agree with that. The other thing I would highlight, though, is that Bitcoin might have some advantages, right? So if you think about strategy, I mean, they have the option. They're probably the only one of the only, if not the only company that can issue preferreds, right? Because they have an active and liquid options chain that allows them, I'm sorry, converts in order to do those. They have enough market gravitas in order to issue ATM equity, and also all these preferred instruments. The thing I want to say, though, is I want to say two things here about your commentary, which was very interesting. Number one is, I think it's important to keep in mind that Saylor was DOG in this whole Bitcoin, let's say institutional Bitcoin accumulation strategy. I think sometimes these narratives, they develop much more iteratively than actually having being set in stone from day zero.
I think over time, we're all learning that maybe an institutional Bitcoin accumulation strategy can look more a lot like active management, instead of looking much more like the huddle forever, that maybe a lot of folks or maybe a lot of us will do in our PA. I think that's fine. I'm fine with the strategy evolving over time or the narrative evolving over time, and I think that is part of the process, that is part of being a pioneer in these types of strategies that have been so successful for the past many years.