Let’s Talk About Stretch, Baby
…all the good things and the bad things that may be
Before we dive into this letter, we want to set the stage for how we approach this topic. Strategy is, for many people, quite divisive. Sometimes it feels like the Core-versus-Knots discussion (these are different Bitcoin node clients). One camp is pro–Bitcoin treasury companies, and the other camp calls it Ponzi-adjacent garbage that deserves to trade at a big discount to its net asset value.
It feels to us that these camps have developed over time because the topic is mostly framed as: “Strategy ($MSTR) is a vehicle to outperform Bitcoin.” That’s a fair framing, because the current playbook they’re using is to “amplify” the common stock ($MSTR) with ~30% leverage. Strategy refers to it as amplification because they’re using equity instead of debt, so technically it’s not leverage, but in practice, it behaves like it.
For some people, this framing implies that holding $MSTR is better than holding real Bitcoin, which causes a lot of Bitcoiners to go into defense mode. That’s typically a good thing. We deal with more scammers in a week than most people endure in their entire lifetime. Bitcoiners can’t let their guard down, because there will always be someone aiming for their Bitcoin—whether with good intentions or bad.
Another thing that didn’t help is that some Bitcoiners were selling their Bitcoin to buy $MSTR, which isn’t new money flowing in. Bitcoin adoption and Bitcoin’s price increase when new money flows into the protocol, not when the same money comes in through a different instrument. The same is true for IBIT and other ETF providers.
But there is a big irony here. Michael Saylor is one of the biggest Bitcoin bulls on the planet. Bitcoin is probably his favorite topic to think about and talk about. He gets invited on Bitcoin podcasts and to Bitcoin conferences to talk about Bitcoin. But Strategy’s target audience isn’t Bitcoiners. Bitcoiners are probably the one audience they aren’t targeting. Saylor famously keeps reminding people not to sell their Bitcoin, and that also applies to not converting your Bitcoin into $MSTR shares. Strategy is targeting everyone else, people who don’t own Bitcoin themselves, for whatever reason.
For this letter, we want to use the framing: “Strategy is a vehicle to turn fiat into Bitcoin.”
This framing doesn’t suggest that holding $MSTR is better than Bitcoin, and therefore doesn’t imply that a Bitcoiner should swap their Bitcoin for shares in a company. Let’s simply look at what Strategy is doing and what the impact will be on Bitcoin adoption.
The cracks in the foundations of money are becoming harder to ignore. Persistent deficits, rising debt, and central bank behavior are quietly reshaping how investors think about preservation and risk.
On January 28 at 1PM CST, James Lavish joins Unchained for a live conversation on currency debasement, why traditional portfolio assumptions are being tested, and how gold and bitcoin fit into a changing monetary landscape.
The discussion will cover:
Why debasement is structural, not cyclical
How inflation and financial repression challenge familiar portfolios
Why gold tends to move first—and bitcoin often moves further
Wednesday, January 28 at 1PM CST — online, free to attend. Register now and get early access to the report:
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Perpetual Preferred Equity
For readers who are just dialing in on this topic, here’s a short summary of what Strategy is trying to accomplish. After adopting a Bitcoin treasury strategy in August 2020 and making its first purchase with cash, the company has been transitioning into a vehicle that issues credit and buys Bitcoin with the proceeds. From 2021 through 2024, they raised billions of dollars by issuing convertible debt, senior debt, and Bitcoin-backed loans. In 2022, they learned the hard way that Bitcoin is volatile, which can lead to forced selling if you use leverage with a maturity date and/or a liquidation price. Their convertible debt has dates on which lenders can demand their money back, and the Bitcoin-backed loan at Silvergate had a liquidation level.