Michael Saylor: Bitcoin has dropped by half, and my digital credit is making money

Editor | Wu Says Blockchain

During the roundtable discussion "Bitcoin for Corporations" on June 12, 2026, Michael Saylor engaged in a dialogue about the Bitcoin bear market, digital credit, corporate treasury strategies, and mNAV valuation. Saylor stated that Bitcoin remains a "digital capital" with no counterparty risk, but most global funds cannot withstand its approximately 40% annual volatility. Therefore, there is a need for digital credit and digital currency products supported by Bitcoin that maintain low volatility relative to fiat currencies and generate returns. He believes that these products are not meant to replace Bitcoin but to compete with money market funds, traditional credit, stablecoins, and other crypto yield assets, bringing funds that could not directly allocate to Bitcoin into its underlying network. The two sides also discussed whether equity financing constitutes dilution, whether preferred stock should be viewed as debt or hybrid capital, and why one cannot rely solely on a single mNAV metric to assess Bitcoin treasury companies.

The audio transcription was completed by GPT and may contain errors; please refer to the original podcast.

In this bear market, Bitcoin has fallen 50%. How can digital credit maintain positive returns?

Michael Saylor: Clearly, on October 6, Bitcoin was priced at about $125,000, and now it is roughly half of that, so the decline has reached 51%.

During the same period, the total return of STRC was approximately positive 3% to 4%, and SATA's total return was also positive. People may ask, why is there a need for digital credit? The reason is that when the underlying asset falls by 50%, can you really invest your family's or company's funds without losing principal and safely weather this downturn? You need credit products to do that.

From the data, Bitcoin has fallen by 50%, but digital credit products can still maintain prices near par and may even generate some positive returns. As for equity, the stocks of the companies I hold have fallen by 75%, further amplifying the volatility of the underlying assets. Another time point I studied was May 14. On that day, the market suddenly dropped significantly. On May 14, Bitcoin was priced at about $82,000 and then fell by about $21,000.

Bitcoin fell by about 25%, our common stock fell by about 40%, but digital credit products only fell by about 3%, and the final total return may still be around positive 2%. Therefore, I believe we have proven through digital credit that we can successfully strip away about 90% of Bitcoin's volatility. Our goal, of course, is to strip away 95% of the volatility, but for now, we can say we have stripped away about 90%.

In the past 12 months, Bitcoin's annualized volatility has been about 40%. Calculating on a rolling 30-day basis, its volatility once dropped to 30%, then to 28%. At that time, we even felt that this performance was somewhat unreal. Later, volatility soared again. Now, whether calculated on a rolling 30-day basis or over the past year, Bitcoin's annualized volatility is around 40%.

Therefore, Bitcoin has proven to be a capital with high volatility and a form of digital capital. Another important trend regarding Bitcoin is that its market dominance continues to rise. If you observe Bitcoin's market capitalization share in the entire crypto asset market, excluding stablecoins like Tether and Circle, Bitcoin's market share once dropped to about 41% during the peak of FTX.

Since then, Bitcoin's market dominance has slowly risen from about 40% and is currently around 68% to 69%. In other words, Bitcoin is now close to occupying 70% of the total market capitalization of the entire crypto market. Meanwhile, if you continue to pay attention to the market, you will find that confidence in Ethereum has significantly declined. Other parts of the crypto market are fiercely competing, with Ethereum, Solana, and BNB Chain competing against each other. For a long time, Sui was considered the next Solana, but that narrative later collapsed. Now the market is starting to favor Hyperliquid.

In the Layer 2 space, there is also competition among networks like Arbitrum and Base. All this competition is continuously stripping away the monetary premium that these crypto tokens originally had. I believe that even those who believe in these tokens now realize that they are not currencies and will not have a monetary premium in the long term. Whether they can survive ultimately depends on their actual utility, and all projects are in very tough competition.

So I believe that the past 12 months have been very favorable for consolidating Bitcoin's position as the dominant digital currency network. The market has established Bitcoin's positioning as digital capital. I believe we have also proven that digital credit is a viable concept. Currently, the market has lost its sanity. This is often the case when the bear market enters its later stages, approaching the bottom, and the market is filled with various noise and emotions.

But if you look past this noise and take a longer-term perspective, and today everyone present is from companies participating in Bitcoin for Corporations, then I would tell you this: If you already have billions of dollars and just want to preserve wealth, you should buy digital capital or digital credit. This is the way to preserve funds.

If you want to invest funds, you can allocate a combination of digital capital, digital equity, and digital credit, or use leverage to create digital yields, or adopt other similar strategies. This is what investors do. If you currently do not have much capital but want to create billions of dollars in wealth, and you only have three people who just started a company, then the smartest approach is to create some form of digital currency, digital yield, or digital income product based on digital credit.

I believe this is the next important topic worth discussing. There are at least 10,000 such opportunities, each potentially worth a billion dollars. You can create a digital product, a new digital asset, a digital fund, or a digital service. All of these are built on emerging market opportunities. Digital credit is certainly not the only source of energy and opportunity, but for now, it is undoubtedly the most obvious and easiest direction to scale quickly.

Why do digital currencies need to be pegged to fiat currencies and generate returns?

Michael Saylor: If you put on the hat of the Austrian School of Economics, 100 years ago, J.P. Morgan said, "Gold is money; everything else is credit." According to what Michael Saylor proposed about 100 weeks ago, "Bitcoin is money; everything else is credit." All other assets carry counterparty risk, while Bitcoin is a capital that carries no counterparty risk.

This is the perspective of the Austrian School of Economics, or the Bitcoin standard system, and it is how they understand and use the term "money." But if you turn to the fiat currency system and Keynesian standards, their understanding of money is: an asset that maintains zero volatility relative to fiat currency.

For example, the trillions of dollars in global monetary assets, as well as the trillions of dollars in money market funds, must maintain zero volatility relative to some fiat currency while being able to generate returns. Whether that fiat currency is the euro, the dollar, or another currency, it is the same. Bitcoin can certainly represent many different things, and I understand that.

When we describe a system of digital assets and use the term "digital capital," it is actually a term under the fiat currency system. What we mean is that digital capital is competing with precious metal capital, real estate capital, equity capital, and credit capital. "Digital capital" is just a fiat term, while Bitcoin itself is far more than digital capital.

Similarly, when we use the term "digital credit," it is also a fiat term. Digital credit is competing with mortgage-backed credit, junk bonds, private credit, sovereign credit, investment-grade corporate credit, and other assets. When we use the term "digital currency," it is also a fiat term. It refers to a digital currency supported by Bitcoin that maintains zero volatility relative to fiat currency while also generating returns.

Why call it digital currency?

Because 99.9% of global capital exists within the fiat currency system. Bitcoin's scale is about $1 trillion, while the scale of other assets is about $1,000 trillion. There may be a few gold supporters who agree with my view that gold is money, Bitcoin is also money, and everything else is credit. They might even say that money market funds are not real money. Perhaps indeed a few people think so.

But overall, the vast majority of people who hold funds and capital, that is, the people we need to attract and guide into the Bitcoin system, believe that money is a fund or asset that is denominated in dollars, euros, or yen, maintains zero volatility, and can generate some returns. Those building in this space, whether Saturn, Apex, or other institutions, are actually constructing digital yield or digital currency products. What we are doing is building digital credit on top of digital capital. The goal is very simple: we want to capture 5% to 10% of all global credit assets.

If the global credit market is $300 trillion, we hope that $15 trillion to $30 trillion flows into credit instruments supported by Bitcoin. Then, we also hope that 5%, 10%, 20%, or even 30% of funds in the global money market flow into digital currency. Ultimately, traditional views hold that the ideal money should possess three attributes: a medium of exchange, a unit of account, and a store of value.

So, how can it become a medium of exchange?

You just need to search the entire internet, and you will find that 99.9% of goods and services are priced in fiat currency. That is the reality; it is not something I decided, but the fact is that almost all prices are quoted in dollars, euros, or yen. Therefore, if you want to create "perfect money" in the eyes of those who control that $1,000 trillion capital, you must understand their needs. Their views are what truly matter because the funds are in their hands, and we need to attract this capital.

In their view, perfect money should be pegged to the dollar and maintain zero volatility. This way, I can use and exchange it without friction and without immediate tax implications, and I can convert it into currency at any time to purchase anything. It should also be priced in dollars because the dollar is the unit of account used by almost all multinational corporations' accounting systems, as it has been in the past, is now, and is likely to continue in the future.

At the same time, it also needs to generate returns that exceed the rate of currency depreciation. If its yield can exceed 7%, then in the eyes of all non-Bitcoin extremists globally, it possesses the perfect attributes of a store of value, medium of exchange, and unit of account. If you really want to sell products to these people, then their views are the most important. So when I say "digital currency," I mean an asset that is pegged to fiat currency, maintains zero volatility, and can generate returns. If you want to achieve this in an economically sound, technically reliable, and ethically principled way, then this digital currency will ultimately be supported by Bitcoin.

How does digital credit bring Bitcoin to ordinary investors?

Michael Saylor: I have a large following among Bitcoin believers and Bitcoin maximalists. But they often have a misunderstanding that by selling SATA or STRC, we are encouraging people not to buy Bitcoin or not to self-custody Bitcoin. But the fact is, I have never met a single STRC holder who thinks it can replace holding Bitcoin.

Almost all the buyers I meet are using funds originally allocated to money market funds, credit instruments, S&P 500 ETFs, or other stock assets to purchase these products. We are attracting funds that previously did not hold Bitcoin or could not enter the Bitcoin market. Even if you are a Bitcoin supporter, but you need to pay for your child's tuition in the next 12 months, you cannot put all your funds into Bitcoin. Otherwise, after Bitcoin falls by 50%, this year, only half of the children may be able to go to school, while the other half have to stay home.

Many people believe in Bitcoin, but they will not put 100% of their family's capital into it. They always need to keep some low-volatility funds. Therefore, what we are really offering is an alternative to JEPQ, PFF, or your favorite bank money market fund. Bank money market funds may only pay a 2% yield, which is the real competitor these new products face.

Take the tokens that people often debate, such as Saturn and APEX. The people buying Saturn or APEX are not those who were originally prepared to buy Bitcoin and store it in cold wallets. These buyers are mainly crypto investors from Asia, outside of China, South America, and Africa. They buy these yield-bearing tokens as a substitute for Tether.

Their choice may be to hold a stablecoin backed by about 80% cash and cash equivalents, or a stablecoin that is 100% reserve-backed, compliant with regulations, but pays no yield. Whether you are from Turkey, South Africa, or elsewhere, you typically face similar choices. Another option is to buy a yield-bearing token supported by Bitcoin.

So when considering these products, do not think they are competing with the underlying capital asset Bitcoin. What they are doing is expanding the entire network. The real competitive target is the approximately $999 trillion capital in the traditional financial system; or more directly, the approximately $350 billion currently in the crypto market that is seeking yield.

When you want to gain yield in the crypto market, what will you buy? You might purchase Solana, Ethereum, or a token driven by digital credit and backed by Bitcoin. Therefore, these tokens are truly competing with Solana, Ethereum, and other crypto yield-bearing assets; or stablecoins like Ethena that generate yield through crypto trading activities; or ordinary stablecoins that do not pay any yield.

Creating these products can expand the market and attract more capital into the underlying network, which is beneficial for Bitcoin. It is also creating a new investment opportunity. Suppose you are a Chinese investor, how should you allocate your funds and generate returns? Especially when you cannot withstand Bitcoin's volatility, what can you do? I have spent thousands of hours trying to promote Bitcoin to businesses and individuals, which is a very difficult task.

We once promoted Bitcoin to Microsoft, and how much support did we ultimately receive? 1%? 0.1%? Only about 0.1% of shareholders voted in favor. Convincing businesses and most individual investors to invest in an asset with an annualized volatility of 40% is extremely challenging. But on the other hand, if you can strip away that volatility and offer a product with a yield that is two to four times that of a money market fund, then almost everyone will be interested.

Therefore, if you want to expand the Bitcoin market tenfold or even a hundredfold, simply relying on preaching to people or educating them will not achieve that goal. Believe me, we have invested more in Bitcoin education than anyone else. But even if we spent $100 billion a year educating people about Bitcoin, the market growth rate may not match the growth rate brought by digital credit at present.

Ultimately, the truly suitable products will spread through word of mouth. People will actively tell their mothers, fathers, sisters, and uncles: "Go buy this product." For the vast majority of capital globally, the market is not yet ready to accept an asset with an annualized volatility of 30% or 40%. This is not a matter of insufficient education, but rather that these investors do not have enough capital to place in an account that can withstand such high volatility, nor can they use that capital to purchase a commodity-like asset.

In a bear market, does issuing stock dilute or enhance shareholder value?

Michael Saylor: It turns out that if you want to responsibly invest in a publicly traded company's stock, you need a certain level of focus. You need to read the company's disclosure documents and listen to earnings call conferences. Regarding our company, the SEC filing documents have accumulated over 100,000 pages, with thousands of pages specifically detailing the balance sheet, what we have done in the past, and what we plan to do in the future.

Therefore, if you want to evaluate our business, you must first clarify some commonly circulated misconceptions. For example, many people believe that selling equity will inevitably cause dilution, but this statement is not accurate. In fact, if you calculate the per-share assets after the transaction is completed, or calculate the per-share net asset value after deducting liabilities, the transactions we have conducted have significantly enhanced per-share value.

Whether we are exchanging equity for Bitcoin or for cash, the result is enhancement. This is the first point. Second, if the funds you use to purchase Bitcoin mainly come from equity financing, then how much paper gain or loss the Bitcoin position later generates is actually completely unimportant. About 80% of the funds we used to purchase Bitcoin came from equity financing. We almost always sell stock when the company's stock is at a premium relative to net asset value.

In 2024, we raised about $21 billion in equity capital within a few months. At that time, the issuance price was at a premium of about 200% relative to the value of the Bitcoin assets held. We raised $21 billion and then used that money to buy $21 billion worth of Bitcoin, creating about $14 billion in Bitcoin gains. Even if the price of Bitcoin later falls by 30%, it may show a paper loss of about $4 billion, but that is not important. Because the equity issued when you purchased those Bitcoins was priced at about three times the current level.

So when you exchange equity for Bitcoin, the only real question is: after adjusting for all liabilities, did you issue stock at a price above the per-share net asset value? You must take into account all liabilities on the balance sheet and then determine whether the issuance price is above the net asset value. For us, the answer is almost always affirmative. In the company's history, there may have been only a handful of days when this was not the case, but those were just isolated dates.

The second question is, if you issue equity, assuming you can sell $100 billion worth of stock at $1,000 per share, and later the stock price drops to $100 per share, and Bitcoin price also drops by 80%, do you really care about the $80 billion paper loss? In fact, compared to not having issued those stocks at all, your situation is still better. But if you bought Bitcoin through margin loans or short-term credit, the situation would be different. For example, if you borrowed a loan due next week, then the price at which you purchased Bitcoin becomes very important.

If I borrowed $1 billion from a trading platform and used that money to buy $1 billion worth of Bitcoin, and then the price of Bitcoin fell by 50%, that would become a serious problem. If you used long-term debt, the problem would be much smaller. If you used hybrid financing tools like preferred stock, the key lies in the various options the issuer has. Preferred stock never matures, and due to the issuer having multiple options, its random capital cost will be lower than the nominal capital cost.

Taking STRC as an example, when SOFR decreases, we can choose to lower the dividend; when credit spreads change, we can also choose to adjust the dividend; if necessary, we also have the option to defer dividend payments. These options have significant value for the issuer. In simple terms, if you are currently paying a nominal dividend rate of 11.5%, then from the perspective of the next 20 years, the real capital cost may only be around 8.5%. Moreover, since the principal never matures, you will never face a forced liquidation event. This is a form of capital that can persist.

Therefore, we can summarize all of this into a very simple judgment: if you believe that Bitcoin's annual appreciation will exceed 8.5%, then after deducting capital costs, all Bitcoin appreciation can be viewed as net income. If you believe that Bitcoin will not appreciate at all each year, we still have about 35 years before we exhaust our funds. But according to our calculations, as long as Bitcoin appreciates by 3.2% each year, we can pay dividends indefinitely without needing to sell any common stock.

So how long does it take for Bitcoin to achieve an annual appreciation of 3%? What is the duration here? About 30 years.

Therefore, from a 30-year time span, credit investments and equity investments correspond to two different judgments. Credit investors are betting that over the next 30 years, Bitcoin's average annual appreciation can reach or exceed 3%. If it cannot, the company's credit quality will deteriorate. This is the core judgment of digital credit investment.

As long as Bitcoin appreciates by 3% each year, the company can actually pay dividends indefinitely. Equity investors are betting that Bitcoin's return can exceed the company's capital cost. Most people actually cannot accurately calculate our capital cost and do not truly understand it, but this number may be around 8% to 9%.

To simplify, let's set it at 10%. If Bitcoin appreciates by 10% each year, then the company's equity return will exceed Bitcoin itself because the leverage we use is always enhancing. If Bitcoin only rises by 4% each year, then in the long run, the company's equity performance may slightly lag behind Bitcoin. Of course, we also have public market liquidity and a lot of options available for use.

Therefore, when Bitcoin's average annual appreciation is between 3% and 10%, the company's equity performance may lag behind Bitcoin. If Bitcoin falls by 10% each year, then digital credit products will ultimately turn into distressed debt. Therefore, if you are a credit investor and believe that Bitcoin will fall by 10% each year, then do not buy these credit products.

If you are an equity investor but do not believe that Bitcoin's annual appreciation will exceed 10%, then you should not buy the company's common stock. As for the various situations in between, the company is responsible for managing them. But many people in analysis will say, "Only when the company issues stock above a certain price can it achieve positive Bitcoin yield."

The fact is, in dollar terms, the threshold that needs to be crossed to achieve enhancement is actually lower. The difficulty for Bitcoin treasury companies lies in the fact that you must always calculate according to both the dollar standard and the Bitcoin standard, and you must assess both assets and liabilities simultaneously.

Many people view preferred stock as a liability. But preferred stock only becomes a liability when the company enters liquidation, and we cannot simply enter liquidation because of preferred stock. A company may only be forced into liquidation when its debts are due and it is unable to repay. So if a company has zero debt, like yours; or like us, only a very small amount of debt, then the company will not enter liquidation.

Since the company will not enter liquidation, preferred stock should not be viewed as a liability that forces the company to repay principal. It is actually a form of equity capital and can be viewed as a capital asset of the company. What many people find difficult to understand is that if you first assume that the company has entered liquidation, then of course you can view digital credit as a liability and draw very pessimistic conclusions.

But digital credit itself cannot force a company into liquidation. Only the existence of due debt can lead to a liquidation event for the issuer. This means that when you operate such a company, you actually have a lot of options and can control when and how to finance. Many pessimistic narratives begin by assuming, "Bitcoin price falls by 80%, never recovers, and then the company is forced into liquidation. In this case, the company will certainly have problems."

But for any business in the world, as long as you first assume that all its assets permanently depreciate by 80%, and the company is forced into liquidation, then no company seems to avoid distress. If you think more seriously about this issue, you will start to ask: How does a company actually reach the point of liquidation? What will the world look like at that time? The structures of these companies actually have strong anti-fragility. As the company's stock price falls, its amplification effect relative to the underlying assets actually increases, making equity more attractive. Digital credit also has a certain self-repairing ability, and prices often return to near par.

When the price of Bitcoin plummets, the market demand for digital credit will also decrease. This will reduce the new credit supply, thus improving the future credit status and forward-looking credit metrics of existing credit products. Equity also has a similar mechanism. As asset prices fall, we will gradually attract more demand for digital credit and common stock, and this new demand will ultimately form a stabilizing force, pushing related asset prices back up.

On-site question: Why doesn't Strategy concentrate on buying when prices fall? Is Satoshi's wallet the wallet with the most Bitcoin?

Michael Saylor: First, to answer the second question. Satoshi seems to have multiple wallets, holding a total of slightly over 1 million Bitcoins. Therefore, I believe Satoshi should be the largest holder of Bitcoin. As for the first question, we actually have multiple ATM issuance plans.

Our perpetual instruments STRD, STRF, and STRK all have ATM issuance plans; common stock MSTR has an ATM issuance plan; and digital credit instruments STRC also have an ATM issuance plan. All these plans will adjust dynamically and run programmatically based on a set of parameters. Decisions depend on the conditions of the equity capital market, credit market, and Bitcoin market, as well as our judgment on which assets to buy, sell, or exchange.

These strategies are not just adjusted weekly or daily, but will truly adjust minute by minute. You will find that we believe we have other financing options. For example, the company can issue bonds. Currently, we have six bonds that are not yet repaid, but we have not continued to issue new bonds, and we will eventually repay all these bonds.

In other words, we have basically closed the debt financing part of the business because we believe this approach currently has neither strategic value nor obvious advantages. You will also notice that according to our submitted 8-K documents, we have not sold any STRD, STRF, or STRK.

The reason is that we believe these securities are currently undervalued. If issued now, the company's capital cost would be too high, and it would lock in the corresponding dividend cost in perpetuity. So I would tell you this: If you are optimistic about Bitcoin and this company, then you should consider buying these securities because I will not sell them at present.

I am unwilling to sell because for the company, they are a cost-prohibitive financing method; but from an investor's perspective, they are currently undervalued. Therefore, what we are doing is actively managing these financing tools.

If the price of STRF rises to $200 per share, reducing the cost of this perpetual capital to 5%, then we may start issuing again. When making such decisions, we will consider factors such as SOFR, the forward yield curve, the credit market, and so on.

For STRC, we will not issue at a price below par by even one cent, but as long as the price is above par by one cent, we are willing to issue in large quantities. Because one of the main functions of STRC is to strip away Bitcoin's volatility. We are managing and supporting this tool in this way.

Depending on the state of the credit market at the time and the position of the company, we will dynamically switch capital allocation between Bitcoin or dollars. We will buy debt, hold dollars, and purchase Bitcoin. We have been doing many different operations, and all strategies will adjust dynamically.

These decisions depend on the forward yield curve, premiums in the derivatives market, the capital market, the stock market, and various credit market conditions. Each market is different, and we will continuously evaluate. The overall principle is that we want to take actions that are beneficial to common stock shareholders, which means actions that can enhance equity value.

We also want to take actions that are beneficial to credit status and can support digital credit products, especially STRC. To support STRC, we have already taken more than ten measures. At the same time, we also want to take actions that are beneficial to Bitcoin.

Sometimes, there may be some conflicts between these three interests, and we must weigh between common stock, digital credit, and Bitcoin. This is basically our business: continuously and cautiously thinking about these factors and finding a balance between different goals. Let me add one more thing, and then we will move to the next question. If you believe that Bitcoin's average annual appreciation is about 10%, which is close to our capital cost, then when we report "Bitcoin yield," this yield can be likened to net profit.

So far this year, we have achieved about $5 billion in Bitcoin yield, and at the current pace, it may reach around $10 billion for the year. Last year, it was slightly below $10 billion. But when we report $5 billion in Bitcoin yield, you must assume that this yield has value, and you must first assume that Bitcoin will not drop to zero tomorrow.

If you believe that Bitcoin will fall by 10% each year in the future, then this Bitcoin yield is not that attractive because you will calculate its value at a 10% discount rate. If you believe that Bitcoin will not appreciate at all in the future, then our purchase of Bitcoin through issuing STRC may just add a burden. I understand this.

But if you believe that Bitcoin will rise by 10% each year, then assuming I issued $1 billion in STRC and used that money to buy $1 billion in Bitcoin, I actually never need to repay the principal, and the Bitcoin I bought can cover the dividend cost with a 10% annual compound appreciation.

In fact, even if Bitcoin only rises by 8% each year and our capital cost is 10%, most of the Bitcoin yield may still be considered net profit. If you believe that Bitcoin will rise by 30% each year, then when we report $5 billion in Bitcoin yield, its actual value may be equivalent to $15 billion: of which $5 billion is realized yield, and there may be another $10 billion in future value.

So this business indeed has strong profitability. But the reason it is so controversial is that your judgment on the company's equity inevitably depends on your judgment of Bitcoin's future price. Similarly, your judgment on digital credit products must also be combined with your expectations for Bitcoin's future performance and its volatility.

If you have a negative view of Bitcoin, you could completely conclude that the company's credit products are in distress and that common stock is very poor. But if you are optimistic about Bitcoin, you may also believe that our performance will significantly exceed Bitcoin and achieve returns of around 50% each year. Our performance over the past five years has roughly been like this. In this case, you would also think that these credit products have investment-grade credit quality.

There is a huge divergence in market participants' views on Bitcoin, and many people, before expressing their opinions, do not even clearly state their basic assumptions about Bitcoin's future price. This is why there is so much controversy and repeated debate surrounding this issue.

On-site question: How does the definition of mNAV affect enhancement and dilution judgments?

Michael Saylor: Our definition of mNAV is: first calculate the company's equity market value, then add the net debt and the nominal value of preferred stock, thus deriving the mNAV from the enterprise value perspective. This number will be published on our website.

But any lawyer will tell you that the value of a publicly traded company's securities cannot be based solely on a single metric disclosed on a website. If you look at the 8-K, 10-Q, and 10-K documents we publish, you will see a lot of risk warnings that clearly state that this metric does not measure the company's liquidity and does not fully reflect the company's overall financial condition. Investors still need to consider all of the company's assets and liabilities comprehensively to form a judgment.

So I do not think there is a problem with our mNAV calculation method. But mNAV is not the only metric that can be used. You can also calculate net asset value in another way: first calculate all of the company's assets, subtract the debt, and if you wish, further subtract the preferred stock to derive the per-share net asset value.

Therefore, you can calculate both per-share total assets and per-share net assets. If a company's capital structure is primarily composed of common stock and debt only accounts for a small portion, then the differences between these different calculation methods are not significant.

However, when a company's capital structure has 30%, 40%, or even 50% preferred stock, these differences begin to matter. At that point, per-share total assets may be over $100, while per-share net assets may only be $80 or $90. If you are calculating what price the company needs to issue stock at to generate a positive Bitcoin yield, then this issuance price threshold will be higher than the price needed to generate a positive dollar yield.

For example, suppose a company is worth $1 billion and issues $100 million worth of stock. Does this constitute dilution? If you exchanged $100 million worth of stock for only $10 million in cash, that is clearly dilution.

Typical dilutive transactions often occur when a company purchases intangible assets. For example, if I use $1 billion worth of stock to acquire another company, and a year later have to impair that asset because I find it is actually worth only $50 million, that means I exchanged $1 billion in stock for only $50 million in real value, resulting in a dilution of $950 million.

Such dilutive transactions often occur when acquiring companies and their goodwill because you may have overvalued the assets you purchased. For example, if I use $100 million worth of stock to buy a Picasso painting, but it is actually worth only $25 million, that could also be a dilutive transaction. But if you exchange $100 million worth of stock for $100 million in cash, cash has almost no room for significant depreciation. It is cash worth $100 million.

Therefore, the possibility of suddenly discovering this is a dilutive transaction due to goodwill impairment is almost zero. So, a company with a market value of $1 billion issuing $100 million worth of common stock does not dilute existing shareholders. It merely expands the capital structure from $1 billion to $1.1 billion. The per-share asset value remains the same. Your number of shares increased by 10%, but the company's assets also increased by 10%.

If the company originally had $1 billion in assets and a market value of $1 billion, then after issuing $100 million worth of stock and receiving $100 million in cash, this transaction merely expands the company's capital structure. This is beneficial for credit status because the company has more cash, and its ability to repay debts becomes stronger. At the same time, this usually also improves the liquidity of the stock.

So this is not dilution at all; the company has simply grown in size. What complicates the calculations is that the company has different types of liabilities. For example, a company has $10 billion in debt that is due in a year. This is not the same as a company having $10 billion in perpetual credit capital with a floating dividend rate.

You can certainly compare them in accounting, but one is a true maturity liability; the other only has liability attributes in the event of company liquidation, and in a going concern, it is actually closer to an asset.

This is why it is called a hybrid capital instrument, and it is precisely its complexity. In this case, expanding the company's capital structure, increasing cash, or increasing Bitcoin reserves is often reasonable because it can reduce credit risk and improve stock liquidity.

Lawyers will remind you that you cannot just mention a single metric because you will not see us simply writing, "What is this quarter's BTC Yield?" in quarterly documents. Quarterly documents typically contain about 95 pages of material, which fully disclose the balance sheet, all cash, net debt, and various obligations.

As an executive of a publicly traded company, under the Sarbanes-Oxley Act, I have to sign a statement almost every quarter, and this has been going on for about 30 years. You need to confirm that the company has no undisclosed off-balance-sheet liabilities. Therefore, to determine whether a company is enhancing or diluting shareholder value, you must understand all of its tangible assets, cash, and all liabilities.

But the question is, is it really appropriate to directly deduct $1 billion in preferred stock as a liability? If you are a bank, preferred stock is used to measure capital adequacy; it is equity capital. Preferred stock may carry cumulative or non-cumulative dividend payment obligations, but it is not ordinary debt on the balance sheet.

So when you ask what enhancement means, generally speaking, if a company issues stock at a price above the per-share net asset value and exchanges it for Bitcoin or tangible assets like cash, that transaction will enhance shareholder value. You can calculate the per-share net asset value: Bitcoin plus cash, minus all liabilities. Of course, you also need to first make judgments about which items should be considered liabilities.

If the company issues stock at a price below this value, then the transaction will cause dilution. So there are indeed equity exchanges that have dilutive effects. The judgment must consider the company's entire asset, liability, and per-share balance sheet situation at the time of the transaction. Therefore, you are correct. The market can certainly propose another way to calculate mNAV, and it may be more suitable for certain analytical purposes.

But I want to point out that when we first created the BTC Yield metric, digital credit had not yet been created. In the past 12 months, our business model has changed. In fact, digital credit has only been around for about 10 months. It was only three or four months ago that we truly confirmed that this model could operate.

Therefore, the business model is still evolving, and the metric system is also evolving. We have not completed all the work. By the way, I also want to commend you. Before you went public, we were unable to disclose the "per share Bitcoin" metric on our website. Lawyers previously thought that publicly disclosing this metric was too risky. But now, we have added metrics like "per share Bitcoin" and some new metrics related to digital credit, and these metrics are still evolving. I do not believe this system has been finalized.

BTC Yield can be understood, but you must make assumptions about Bitcoin's average annual return over the next 30 years. Suppose you predict that Bitcoin's average annual return over the next ten years will be 20%, then there is no problem with the BTC Yield metric. But if you ask me, "How much enhancement did this transaction generate at this moment, or when the 8-K document was released on Monday morning?"

Then you should calculate the per-share net asset value and calculate the per-share satoshis attributable to common shareholders after deducting all liabilities. However, there is still an important premise here: debt liabilities are easy to deduct because they have a definite dollar amount and a clear maturity date; but how to value hybrid credit instruments like STRC still has a lot of room for discussion.

Some critics will say that STRC is not credit. But it clearly belongs to credit instruments. You can ask AI: Do dividend-paying preferred stocks belong to credit? It will tell you that preferred stocks are credit instruments, and financial instruments that pay dividends also belong to credit. It is credit, but not debt.

I also want to point out that our debt usually contains options that are favorable to creditors. For example, investors who purchase convertible bonds can choose to sell the bonds back to us if the bonds are priced below par on the agreed repurchase date. This is an option belonging to the investor, which is a potential obligation for the company.

But the options contained in preferred credit instruments like STRC mainly belong to the issuer, which is the opposite situation. In traditional debt, the options held by creditors may constitute a burden for the company; while in preferred stock credit instruments, the options held by the issuer are actually an asset for the company.

Therefore, I do not believe there is a simple metric that can explain all situations. What I can tell you is that the entire set of digital metrics for Bitcoin treasury companies is still evolving in the market. What you do will affect us, and what we do will also affect you. All participants are influencing and learning from each other.

This is a constantly moving target, and these business models have not even been around for 12 months. Suppose I say the company created $5 billion in Bitcoin yield; the premise of this statement is that you believe Bitcoin will appreciate by 10% each year in the future. If you are an equity investor, you must make several assumptions: Can Bitcoin maintain an annual appreciation of 10% over the next ten years? Can the business model of issuing digital credit operate stably for ten years? Can Bitcoin's volatility remain relatively stable over ten years?

If the answers to these three questions are affirmative, then you might be willing to give the company a 10x price-to-earnings ratio. But if you are not confident in these questions, you might only be willing to give a 2x price-to-earnings ratio. Therefore, there is a huge modeling space in the market regarding how to value these equity and credit instruments. Investors can derive completely different valuation conclusions based on more complex assumptions.

I believe the company's obligation is to disclose all information as completely as possible. In fact, we have almost disclosed all information that can be made public. But some critics will say, "I did not listen to the earnings call or read the company's documents." The problem is that you must read these materials. If a person does not have the patience to read a single page of documents, they probably will not read 100 pages either.

My advice to everyone is: if your attention span is not long enough, hand the documents over to AI and let AI read, analyze, and break them down for you. This way, you can at least form a viewpoint based on information rather than randomly expressing conclusions just to post something on Twitter and get some clicks.

Host: I know you have a brief follow-up, but let me add one point. My first job at the California Public Employees' Retirement System (CalPERS) was to create risk and analysis reports for four different portfolio managers. They managed relatively similar fixed-income portfolios, but each had very different requirements for calculations and perspectives.

So I believe the answer is that there is no single metric that can fully tell all situations, and we should not expect such a metric to exist. If you can succeed, and if we can do this well, then we should provide what we believe to be the most reasonable analytical perspective while disclosing all relevant data, allowing investors to easily build their analytical frameworks and measure risks and returns in their preferred ways.

Ultimately, the market's evaluation of us should depend on whether we outperform Bitcoin in the long run, rather than whether a single transaction is enhancing or dilutive. Because I believe that for almost every transaction, this question will always be a matter of debate.

Question from the audience: I have held Bitcoin since I was 18. I sincerely support everyone who hopes for Bitcoin's success. My brief follow-up is mainly to further understand the definition you mentioned. For example, Google. I believe Google has been inspired by your financing methods. They seem to have raised hundreds of billions of dollars. Leaving aside preferred stock, just looking at the portion of Google that issues common stock through ATM, regardless of Google's own statements or investors' and shareholders' understanding, they describe this as a dilutive transaction because the company exchanged common stock for cash.

Do you think this definition of dilution should not apply to Strategy or other Bitcoin treasury companies?

What kind of equity financing constitutes a truly dilutive transaction?

Michael Saylor: Let me clarify one point. If you issue $1 billion worth of stock to invest in semiconductors or purchase NVIDIA chips with a lifespan of only four years, then this transaction is likely to cause dilution unless you can prove that the cash flow generated by the related business is sufficient to offset this dilution. It is important to note that if a company with a market value of $4 trillion issues $1 trillion worth of stock and exchanges it for $1 trillion in cash, by definition, this does not constitute dilution. What it does is simply expand the capital structure, and at the moment the transaction is completed, it does not dilute per-share value.

The real reason that could lead to dilution is that the company invests this cash in money market instruments with an after-tax yield of only 2% or 3%, while the capital return of the original business may reach 12%. So whenever you issue stock and exchange equity for another asset, if that asset's capital return is higher than the company's existing business, this transaction will enhance shareholder value.

If its capital return is the same as the existing business, the transaction is neutral, and the company simply has a larger capital structure. If the business you purchase underperforms compared to the existing business, the transaction will cause dilution. For example, if you originally had a monopoly business with an 80% gross margin and a 40% annual growth rate, but you acquired a business with only a 10% profit margin and an annual growth rate of only 5% at the same valuation multiple as your own.

Suppose your company is valued at a 40x price-to-earnings ratio, but you also acquire a slow-growing, less profitable company at a 40x price-to-earnings ratio, then this is a dilutive equity transaction. Therefore, whether a transaction is enhancing or dilutive ultimately depends on the use of the funds raised. For example, if I issue stock to purchase Bitcoin, and the stock issuance price is above the company's per-share net asset value, then this transaction will always enhance shareholder value.

If I do not purchase Bitcoin but instead acquire cash assets with a return lower than Bitcoin, then the question becomes: Why would I do this? Suppose I do this to improve the company's credit quality and support the company in issuing $20 billion worth of STRC next year; then essentially, I am increasing cash to invest in the digital credit business. It is this use that may make this transaction an enhancing transaction.

I am not saying that capital raising will never cause dilution. It certainly can cause dilution. What I mean is that you must consider the use of funds. Take Oracle as an example; it has completed about 100 acquisitions. Are these transactions enhancing or dilutive? Every time Oracle acquires another software company, its CFO builds a ten-year cash flow model and then explains to investors, "We believe this transaction will enhance shareholder value because we can cut these costs, and future revenues will reach this level. Our existing business has an operating profit margin of 40% and a sales multiple of 8x; while the company we are acquiring at a 2x sales multiple currently has a profit margin of 20%, but we can raise it to 40%."

After seeing these assumptions, investors may believe these are enhancing transactions. But the company must justify each transaction separately. Successful companies will complete enhancing transactions, while Wall Street's history is filled with companies that ultimately failed due to continuously engaging in dilutive transactions.

If you use equity from a high-quality company with a monopoly position that is still growing rapidly to acquire hardware that will depreciate in four years, and the related business then collapses quickly, that will clearly cause dilution. Conversely, if you use equity to acquire another monopoly business, and its growth rate is comparable to or even exceeds that of the existing business, then this transaction will enhance shareholder value.

How should investors build a valuation model for Strategy?

Michael Saylor: I believe that any common stock investor must form a clear judgment about Bitcoin's future volatility curve and forward price curve. As long as you have a viewpoint on these two factors, you can build a company valuation model. In addition, you must understand the company's assets, liabilities, capital costs, and capital duration. You need to know whether this is a debt due in a year or a debt due in six years, along with other similar conditions.

You must first build a complete model and then input your assumptions into it. The model will ultimately tell you what the reasonable value of the company's common stock is and whether the company has credit risk and how significant that credit risk is.

Michael Saylor: If you hold $1 billion worth of stock, just like our major institutional investors, you will certainly have your own model. All stock analysts will also build models. They will input their assumptions and then judge whether credit products are currently cheap or expensive, whether common stock is currently cheap or expensive.

The best investors also engage in dynamic trading. They might say, "I like this stock when the company's mNAV is 1.2 times; when mNAV rises to 3 times, I will sell some." They trade based on valuation.

Derivative traders are the same. If you observe our stock, you will find that it almost follows Bitcoin's price movements minute by minute. Believe me, this is not something I can control. I cannot make the company's stock trade in sync with Bitcoin minute by minute.

This is because traders from institutions like Susquehanna, Citadel, or Soros run their models in Bloomberg terminals. Convertible bond traders also have corresponding models. They continuously buy, sell, and arbitrage based on the fair value they calculate. If you visit our website, you can also input assumptions about Bitcoin's future volatility and average return, and the system will calculate the reasonable credit spreads for various credit products.

So once you form your judgment, you will get the corresponding fair value range and make investment decisions based on that. You cannot rely solely on a single number to make serious investment judgments. You must have a complete, mature capital structure model and must have a clear view of the future. If you are ready to become a real trader, you must do these things. If you do not want to do this analysis, my advice is to buy digital credit products and hold them long-term, or directly buy Bitcoin and hold it long-term.

Audience question: Yes, we discussed this issue in the last roundtable. This is actually a very interesting conversation because everyone may be talking about two different mNAVs. If everyone is calculating their own metrics, then the person sitting next to me says mNAV is this number, and another person says it is another number, but we all claim we are discussing the same concept.

Michael Saylor: I believe the market has not yet reached a consensus on which metric should be adopted. Moreover, mNAV itself is not the only metric; there are many other metrics that can be used. If you read our disclosure documents, you will find that lawyers have dedicated a whole page to explain the limitations of each metric. They clearly state that to form a responsible and comprehensive judgment, one must read all of the company's financial reports and all SEC filing documents comprehensively.

They are not wrong. I just need to add a line or a clause to a security instrument, and it may cause any single metric in the world to lose its explanatory power. Therefore, investors must read the complete documents. This is also the reason we submit these documents, encourage people to read them, and strive for effective communication. Therefore, while some metrics do have reference value, I do not believe there is a single metric that can explain all situations.

These business models are still in their infancy, and they have all been around for less than a year, and each company's model is different. In contrast, the retail industry has adopted similar business models and reporting methods for about 80 years. Many industries, such as aviation, retail, and hospitality, have had their business models running stably for about 50 years.

But you cannot expect our industry to have reached that level of stability because these tools and business models have actually only been around for about 12 months, so they are naturally more dynamic.