Why Is Bitcoin Digital Credit So Important? | Matt Cole

**SPEAKER_1** (0:00)
So you're saying with Hilton Honors, I can use points for a free night stay anywhere? Anywhere.
What about fancy places like the Canopy in Paris? Yeah, Hilton Honors, baby. Or relaxing sanctuaries like the Conrad and Tulum?

**Matt Cole** (0:13)
Hilton Honors, baby.

**SPEAKER_1** (0:15)
What about the five-star Waldorf Astoria in the Maldives? Are you gonna do this for all 9,000 properties?

**SPEAKER_3** (0:22)
When you want points that can take you anywhere, anytime, it matters where you stay. Hilton for the stay.

**Matt Cole** (0:28)
As a Bitcoiner and a long-time Bitcoiner, I firmly believe that this debt crisis will not get better and we're transitioning to a Bitcoin future. And I think digital credit could be the most important asset in this transition period.

**Anthony Pompliano** (0:42)
What's going on, guys? Today we got a great conversation with Matt Cole. Matt is the CEO of Strive Asset Management. And in this conversation, we do a breakdown of digital credit. He explains what it is, how it works, what the risks are, and how they would respond to different situations. We also get into all of the pros and cons of both strategy and Strive having these instruments in the market and how institutional investors are responding. I found this conversation fascinating. It helped me better understand digital credit. I hope it helps you as well. Here's my conversation with Matt Cole. All right, Matt, I want to talk about digital credit. This seems to be taking the world by storm, but at the same time, it is creating massive controversy. Can you just describe what is the problem that digital credit is solving?

**Matt Cole** (1:20)
Yeah, I've been reflecting on this a lot.
I think the problem that it's solving is actually bigger than I first imagined. Maybe I'll start with what I thought the problem that it was solving is, and what I think the problem that it's solving is now.
When we first launched SATA, what I viewed it as was just a preferred equity security. It pays a high interest. It is backed by Bitcoin risk.
As an issuer, I was concerned with a couple of risks on the issuer side. Like strive or strategy, namely maturity risk, just that Bitcoin is such a long duration asset, it has no cash flow, and we're trying to underwrite a perpetual bull thesis in Bitcoin. What I wanted to do is have the longest liability I possibly could have, which is obviously a perpetual liability. Then secondarily, remove negative convexity to the maximal degree to the upside. Because we know Bitcoin over time on average goes up and to the right, and I think it's going to go to literally infinity, that I would prefer for my liability to not convert to equity when Bitcoin is ripping higher. That can constrain the total return as an issuer. I just viewed digital credit as a better source of financing, and I was happy to pay a double-digit interest rate to not have the negative convexity to the downside of maturity risk and not have negative convexity to the upside of equity conversion. I just thought that was a good trade for us as an issuer, and so I wanted to be all-in on digital credit. Just coming from the fixed-income world, I know how yield-starved we are. You've covered a lot, and I agree with this, the concept of the 60-40 portfolio being dead.
Coming from a fixed-income background and just thinking through, I think that's almost like a consensus position. 60-40 is dead, or it's consensus in our circles. What is completely not consensus is, what do you do with the 40?
Do you put it in Bitcoin? Do you put it in prediction markets? Do you put it in digital credit? What do you do with it? There's a million, do you put it in trend-following solutions? I've seen so many different ideas, a lot of interesting ideas, but I thought digital credit could make a play at that. So that was just kind of the simplistic idea to start. Where I think it's going now is something much bigger.
And this much bigger idea is that right now, fiat currencies are still the primary form of currency. The dollar is still the reserve currency of the world. As a Bitcoiner and a long time Bitcoiner, I firmly believe that this debt crisis will not get better and we're transitioning to a Bitcoin future. The hardest part about that transition is how long will it take? And no one knows the answer to that. I think Bitcoin continues to go up over the course of time. But does it take five years? I don't think so. Does it take 10 years? Does it take 20 years? Does it take 30 years? Does it take 50 years? No one really knows what that transition will look like. But when you look at other kind of emerging third world currencies, countries that have had their currencies debased, what you'll see is in those countries, as that starts to happen, more and more the citizens look for alternative things to use as currencies and to kind of ditch the whatever, the Argentinian peso or whatever the currency we're talking about. And I think that's going to happen in the US as well. And I think digital credit could be the most important asset in this transition period that kind of smooths it out, minimizes the volatility. People see where it goes, but you don't have to make as hard of a prediction of when it happens. You don't have to write out as much volatility. And what's interesting is that if that thesis plays out and digital credit is this transition asset, and it will be the ultimate transition asset, I don't think it will be the only transition asset, then it in and of itself could actually accelerate hyper Bitcoinization because you actually have fresh sources of demand coming in to digital credit. So I think it plays that role. I don't think it's a forever thing. I think if we move to a hyper Bitcoinization world, then Bitcoin becomes money, but I think it could become very interesting for several decades.