In this episode, industry experts discuss the latest developments in Bitcoin treasury strategies, Lightning Network innovations, and market outlooks amid macroeconomic uncertainties. Gain insights into hardware wallets, stablecoins, and the future of Bitcoin adoption.
Timestamp:
(00:00) – Interview with Freddie New from BHODL
(08:47) – Interview with Nick Farrow from Frost Snap
(21:27) – Interview with Tony Klausing from Stable Channels
(26:41) – Interview with André Dragosch from Bitwise
(39:35) – Interview with Sam Callahan from Oranje BTC
Links:
- https://x.com/freddienew
- https://x.com/UTXOClub
- https://x.com/tonklaus
- https://x.com/Andre_Dragosch
- https://x.com/SamCallah
Stephan Livera links:
- Follow me on X: @stephanlivera
- Subscribe to the podcast
- Subscribe to Substack
Transcript:
speaker-0 (00:00.046)
Hey guys, we’re here at the Freedom Tech Summit here in Prague. I’m here with Freddie from BHODL. Some of you may know him also from his work in Bitcoin Policy UK. Freddie, give us a quick update. What’s the latest on BeeHodl?
speaker-1 (00:11.84)
So the latest biggest piece of news is the launch of our LSP service. We announced that when we went to market and very excited that it’s now actually live. We are available on Ambos Magma, big step for us. First week we had about 24 million SATS of liquidity requests and as of last week we were looking at about 1.6 Bitcoin actually deployed into the LSP already. So that’s the addition of a a second business line to our initial routing business. So we’re very excited about that.
speaker-0 (00:40.458)
Excellent. And so for listeners, the the idea is, you know, people are setting up Lightning and there’s now this conversation around earning actual yield in the Lightning Network from obviously routing payments. And so this is an ear this is a nascent industry, isn’t it? Like as we were saying b just before, it’s like you can kind of counter them on one hand. You got block, cash app, you’ve got Zeus, yourselves, LPWD and that’s about it, right? Or there’s not that many guys who are really seriously looking at this.
speaker-1 (01:06.486)
Exactly right. Probably the best comparator for people to think of is the very, very early days of internet. in the same way as there were not very many ISPs at the beginning, there are not many LSPs at the moment. so getting in at this stage is super exciting for us if you’re at all interested in payment technology of of any kind.
speaker-0 (01:23.382)
Yeah, fascinating. And and then just kind of on the treasury company side of things, any updates there on like, you know, the yield operations?
speaker-1 (01:31.886)
Fantastic. So the as I said, we went to work we went to went to market with our first business line, which was the routing. And Rivers data shows that you know between sort of you you you can have between sort of two and nine percent yield. We’re regularly hitting about six percent on deployed capital, which is fantastic. So in the treasury context, we went out to market, we raised money, we bought Bitcoin with that, we’re not setting on a hundred and sixty six Bitcoin in our treasury. Key for us is the fact that we actually use our Bitcoin.
so we self custody, we have proof of reserves on our website and the self custody for us is absolutely key, not just for transparency, but because we’re actually using the Bitcoin to make payments, to route those payments and to really to facilitate the network.
speaker-0 (02:13.528)
Yeah. And so I guess it’s almost like y there’s two hats you can sort of wear because on one side you’ve got the lightning routing side of things and then you’ve got let’s say in TradFi fiat yield aspect. Now yes, obviously we’re in a bear market right now, so maybe it’s not as easy to raise that kind of capital. But on the fiat side of things, what are you seeing there in terms of interest in the market, this kind of thing?
speaker-1 (02:36.494)
Well you’re completely right that it’s a bear market and you and I have been in the game for long enough to know that these things always pass. the traditional media, I think we’re still in a learning phase there. So treasury companies, we’ve got to remember, are very, very new. Even strategy is is only five or five or six years into their into their treasury strategy. And we’re even newer still. We haven’t even been public for a year. In terms of actually adding to our treasury, we kept a lot of dry powder back. We
had ourselves been in the market for a long time. We thought a bear was coming and that has enabled us to be pretty flexible. We’ve got a very strong balance sheet. We’ve got a lot of cash still kept back in reserve. And that’s enabled us actually to to keep buying Bitcoin at lower price points since the crash of October last year.
speaker-0 (03:17.046)
Excellent. And so yeah, I guess that’s always the challenging aspect of like how long do you think the bear market is gonna go and how do you kind of position the business because I mean none of us knows, you know, when the bear and when the ball comes. How do you how do you position for that?
speaker-1 (03:30.478)
Conservatively in terms of looking at cash management to be honest. So I’ve been in startup work it both in Bitcoin and and outside the industry for a long time. Absolutely key for anyone working in a startup, as you’ll know, is how much runway you have and what your burn rate is. So we’ve kept our costs low, so our burn rate low, and we ensured that when we went to market we had a long enough, a long enough cash pile we thought to get us through a bear market out of the other side laughing.
speaker-0 (03:53.676)
Yeah. And I think we’re seeing a bit of criticism now from some aspects of kind of Bitcoin online. I’m I’m a bit more neutral to supportive of of treasury companies, as you know. I think some of them will succeed, some will not. But some people are sort of seeing it like, they’re sucking up you know, th you’re taking people who are buying treasury company equity instead of buying Bitcoin, they should just be buying Bitcoin and this kind of thing. How are you seeing that or how are you addressing that?
speaker-1 (04:16.93)
Well, I’d never disagree with anyone who recommends that other people buy Bitcoin. That’s why I’m in the industry and that’s why I think it’s important. The I’ve said this before, the key key differentiating factor for would be HODL was that this was a company which was really focused on something I care deeply about, which was those uncentrable payments. And being able to be a part of a company that was acquiring Bitcoin and using that in the network to ensure that those payments can continu continue to be made. And like I said before, we’re at the beginning of what I think is going to be an enormous revolution in payments.
And being able to get my foot in on the ground floor in that kind of evolution was massively exciting.
speaker-0 (04:50.956)
Yeah. Now turning to the UK, give us a bit of a a sense of, you know, the regulatory, the policy landscape in the UK. How is how are things there?
speaker-1 (04:59.246)
I think since we last spoke, I’m bit more optimistic. I was pretty down the last time we chatted. the FCA came down very hard on the definition of Bitcoin, you remember. It classified it as a restricted mass market investment, which means that companies in the UK that offer Bitcoin really struggle to advertise. It’s very, very hard for them to reach new customers. A lot of them have seen their onboarding funnel absolutely drop off since those regulations came to place. But the intel I’m seeing now is that the FCA.
probably shot shot its wad too far and actually exceeded the remit. A lot a lot of the industry pushed back against that definition. What we’re seeing now is actually in response to some of the consultation work that we at B Hoddle have also done, which we’ve I’ve continued in our professional corporate capacity, they are beginning to pay attention to some of the things we’ve recommended. For example, there was a there was a suggestion floated that no credit should be allowed to to be used in order to to purchase Bitcoin.
And they’ve actually backtracked on that. You will be able to use credit cards, you will be able to use lines of credit to purchase Bitcoin. And that was we we we we lobbied very, very hard on that. B Hoddle has a seat on the the advisory board for the all-party parliamentary group for crypto and digital assets. And we continue to attend meetings to put our case and our understanding of the industry in front of MPs and Lords and hopefully we’ll continue that pressure and and move things in a more positive direction than France and we explained.
speaker-0 (06:22.528)
Yeah, and I mean I colloquially I’d sort of heard that some businesses were either exiting or l putting less focus on the UK just because of the regulatory environment. How true is that now or is that shifting?
speaker-2 (06:33.262)
Yeah.
speaker-1 (06:34.112)
unfortunately I think that’s still the case. We’ve got to remember that the UK, on its own is a comparatively small market. So you have obviously the United States, the Behemoth on one side, and you’ve got Europe where Mika, the marketing crypto crypto assets regulations are perfect.
speaker-0 (06:48.398)
Yeah. Yeah. All right. So so it when it comes to the different products that can be offered, what what where where is kind of the low hanging fruit for the UK?
speaker-1 (07:01.422)
That’s a really interesting one. I mean to be honest, simply being able to advertise your services to sell Bitcoin will be fantastic. Bitcoin backed loans currently being offered, for example, by Coin Corner. That’s that I think is a new a new piece of the market. It could be really interesting. And of course we’ve got remember borrowing taking a Bitcoin back loan when the price is low is actually healthier than when the price is high. You’re much less likely to get margin called if you take a Bitcoin back loan at sixty than at 120.
speaker-0 (07:27.532)
I guess the other one, maybe in the American context, people doing tax loss harvesting in the bear cycle and stuff like that. So is that also a thing in the UK? I think it’s
speaker-1 (07:34.982)
Possible. So the our tax year ends in April, and so it would be arguable that you’d see some selling pressure in the run-up to April in order to tax us harvest. To be honest, you mentioned low-hanging fruit. For us, the easiest one, and one that we’re we’re certainly lobbying for at B Hoddle, would be to recognise that where Bitcoin is used in payments, it’s CGT exempt. So there’s no capital gain charge. One of the biggest blockers to Bitcoin as a means of payment in the UK is that every time you send it, HMS
speaker-0 (08:02.228)
Accounting, record keeping, etcetera, yeah, which is frustrating. But look, I mean we’re we’re low right now, but I you know, I I think we’re we’re gonna grow up. So where where do you see a s a sense of optimism for Bitcoin?
speaker-1 (08:15.694)
I’m always optimistic in terms of its ability to function as a an uncensorable money. And for me, I always ask a couple of questions, you know, does the does the fight in the market, does the does does the does the worry about the price change a couple of things? Does it change the hard cap and does it change the ability of a small number of people to change the rules? If neither of those things are true then I don’t ever worry.
speaker-3 (08:37.518)
Well, yeah.
speaker-0 (08:39.01)
got we’ve got some interesting updates here from Freddie. Thank you Freddie for your
speaker-0 (08:46.338)
Hey guys, we’re back at the Freedom Tech Summit. I’m here with Nick Farrow, aka UTXO Club. He is the CEO of Frost Snap, which is an interesting Bitcoin self-custody multi-sig technology using Frost, right? And that that what they’ve got are these devices, which you can see here. And basically it allows what feels like a multi-sig experience for the user, but it’s actually single-sig on-chain, but using, you know, fancy cryptography. So give us kind of the update.
I know you’ve been working on FrostNAP for a while now, but kinda where are things right now with FrostNet?
speaker-3 (09:18.988)
Yeah. so we we started shipping devices in October last year. so we’ve got a bunch of happy people who now have their life savings outside of their home. so it’s really a a big problem that we saw in Bitcoin was you know, Bitcoiners, you know, really going all in on Bitcoin and then having their life savings, you know, stored at their house and they can spend it in two minutes. it’s not only risky like
On their for themselves and the fact that, you know, you you maybe you just make a stupid decision. Like someone says, you know, Stefan messages me Telegram and says, I need, you know, quick, you know, 10 you know, one Bitcoin for device and mining hardware or something. And you might not be thinking, and you you quickly you can spend a lot of a great amount of money very quickly. It’s not really you know a good position to be in. And the second part of that is physical attacks against Bitcoiners have been rising a lot. So
That was the problem that we saw and we’ve we’ve been addressing. and we’ve so we’ve we’ve got that out there. So super easy multi-sig, you know, no multi-sig multi-sig foot guns such as descriptor backups and such. And now we’re sort of just improving the the system overall, doing things like remote signing, remote key gen, and all the the the bells and whistles that make a really good, you know, Bitcoin wallet and and multi-signature experience.
speaker-0 (10:37.922)
Yeah. So walk us through like have you got a a companion app for Android, iPhone? Yeah. and then you plug in the device. Yes. And you can generate the key and then you have to do the kind of that initial setup. So talk us through what does it look like nowadays for the setup and the signing.
speaker-3 (10:54.446)
So you you you plug three or more devices into your phone and in they connect in a daisy chain. I can show you quickly. So they’re they’re double-ended USB-C. So you can connect them in a daisy chain. So you connect three to your phone, and then you open the FrostSnap app and you can name each device, choose your threshold, which is a trade-off between
redundancy and sort of theft resistance. So you know if you’ve got a four or five, it’s it’s you need to sign on a lot of devices. It’s very hard for someone to you know coerce you to steal your Bitcoin, they’ve gonna take you to a number of places. or if you have a lower threshold, you’ve got more redundancy, so you can lose more devices and you’ll still have access to your Bitcoin. so yeah, we support Android.
Mac OS, Windows and Linux. iPhone is in the works in the background. We’re gonna see what we can do there. And yeah, so that that’s that’s pretty much the the s the basis.
speaker-0 (11:59.662)
Stop it. And give people an idea how much do the devices cost and what’s the normal
speaker-3 (12:04.194)
So at the moment they’re 200,000 SATS per device, but you can find disco discount codes are pretty widely available. Gotcha. we actually have a a flat pricing structure at the moment, so there’s no discounts on you know, if you if you get three or five, the pr the cost per device is the same. And one reason for this is we actually want to learn from users what multi sigs like configurations they actually you know suits them. And that’s really useful information for us if
If people are buying four devices pretty often, that’s like actually you might not expect that so often. Usually it’s, you know, three or five or seven. but actually it’s surprisingly
speaker-0 (12:43.544)
Backups for redundancy. Like maybe they’re gonna do a two or three setup but they want one as like a backup.
speaker-3 (12:47.704)
Yeah, exactly. So that that information’s really, really interesting for us.
speaker-0 (12:51.468)
Okay, and then tell us a little bit about the signing component. Like let’s say, you know, let’s say I’m in Dubai and you’re in Melbourne. can we sign together or how does that work? We
speaker-3 (13:01.39)
We have this remote signing feature on a developer branch, so it should be ready in the next, I would say. Yes, and we we do I think last time we spoke actually I mentioned that we were hoping to do a lot of this communication over Noster. and and my colleague Lloyd has been been implementing this over Noster, and one of the really nice features of this is it’s not dependent on Frostnap as a company. So everything’s open source, you can
speaker-0 (13:07.712)
Okay, it’s it’s coming, okay.
speaker-3 (13:28.14)
You know, plug and play different relays to do that communication over. and and you know, it’s it’s very sovereign.
speaker-0 (13:34.754)
Gotcha. And so in terms of the users, who who does this make sense for? Like as an example, it could be you’re a high net worth hodler, it could be you’re a family office, it could be you’re a business who doesn’t want to have all the keys in one location. now just give us a sense. So for now we don’t have remote signing, but currently does that mean you have to kind of go around and get your signatures? Yeah, so as an example, you have two of three, maybe you have one at home, one in a
You know, and a vault and one and another. So you’ve got to do like a get one signature and then go to the next and then broadcast it. Yes. And the cross snap app is managing all this. Yes.
speaker-3 (14:12.522)
Exactly, yes. So the FrostNAP app manages sort of the the c collection of these partial signatures and then combines them into a a a complete signature that you can then broadcast your transaction.
speaker-0 (14:24.078)
And those partial signatures in it’s not technically a PSP T. No, no, sorry. Yes. Correct.
speaker-3 (14:33.666)
Correct. regarding the the the users of Frostnap, yeah, predominantly at the start it has been, you know, are pretty hardcore Bitcoiners who want to secure their Bitcoin in a way that yeah it is inconvenient by design. You you don’t want to be able to spend, you know, your life savings in five minutes. Maybe you should have to go and visit multiple places and eventually maybe contact remote people and
And you can s we want to get to a point where there’s policies on that. but another really interesting one that I think is actually very underexplored in Bitcoin, especially in Bitcoin Multi-Seag, is the really multiplayer Bitcoin and and especially for families. So, you know, having I have a key and you know my girlfriend is a key, and then we can, you know, have sort of like a joint account together and and sort of build wealth together, build our Bitcoin savings together. And I think that that’s something that
I think has been quite under addressed in Bitcoin. and I think it you know it’s it’s very important for for finance globally.
speaker-0 (15:35.784)
Gotcha. Now I guess some of the different trade-offs of like let’s say if you were to just just do multi-seed today, not frost non-frost style, you can maybe you can do different device types. and it’s kind of just different trade-offs because yeah, and now yes, you would pay more on fees and you have to think about things in a different way. Yeah, you have to make sure you’ve got your descriptor backup. So then in the frost case, how does the
speaker-3 (15:54.84)
Script a backup.
speaker-0 (16:02.508)
I guess what’s the equivalent of the descriptor backup? Is that like a a cloud backup or what are you doing there?
speaker-3 (16:06.978)
So so because frost the the group, the wallet has just has a s like a single master public key, unlike script multi-sig where you have like multiple public keys or multiple extended public keys, because we have like a single public key that can be restored by any threshold of devices. So if you visit two devices, two if you’ve got a two of three and you visit two devices, you learn that that that public key again.
And it’s just it’s the same as like a single signature wallet descriptor. like most wallets, if you’ve just got twelve words, you plug in the twelve words and you have if you’ve got the right script type, it will just use the the standard, you know, descriptor path. so we have that that that’s how we can not have to make, you know, these backups of each individual device’s metadata. so it’s not crucial for recovery.
speaker-0 (16:57.578)
I see. And then as an example, I know this is another benefit in the frost system where you can do a key rotation without having to go and change over every every device. You can literally just spend and like kind of hot swap into a new setup. Can you just talk us through a bit about what like how that works?
speaker-3 (17:15.982)
Yeah. so this isn’t something that we’ve implemented yet. It’s been on the roadmap for quite some time. So what it would look like is say you’ve lost there’s a few different variants of it, but if say I’ve lost one device, I could go and visit my my other two devices with with a third new device and and re-reenroll that third one to replace the one that I’ve lost. And you can also
speaker-0 (17:20.765)
I mean so it’s like a theoretical possibility any
speaker-3 (17:46.04)
You can rotate those those shares to make them incompatible with the one that’s lost or
speaker-0 (17:51.39)
Kind of invalidate the old setup and move into the to migrate into a new setup. And I guess this is a bit theoretical for now. Yeah. Yeah.
speaker-3 (17:57.502)
I mean all the all the research is there. The the the important thing that we want to get right is the nice user experience for that. and and one of the things is we would like it to be in as few rounds of of travel as possible. Yeah, so like exactly. So it’d be like if it’d be pretty annoying if you had to like go around your devices like three times or something. because you you know, the idea is you never really want to bring them into one place. Is that that’s sort of your
speaker-0 (18:11.744)
Like reducing the interactivity.
speaker-3 (18:24.738)
That would be your most vulnerable moment is, you know, your your life savings in one place again. so yeah, all the research is there, we just haven’t implemented yet. We’re sort of doing other things for
speaker-0 (18:33.688)
Interesting, yeah. Okay. so what do you think most Bitcoin hodlers don’t understand about Frost and FrostSnap? Like what’s kind of a common misconception?
speaker-3 (18:43.478)
Ooh, that’s a good one. a pretty big one is that people who are getting interested in multi-sig, they really want to do multi-vendor, multi-sig for very good reasons. You know, they want to not have any single point of failure on one hardware company or or one service. with Frost, you can actually get pretty much all the benefits of multi-vendor, multi-sig with without needing a the multiple vendor.
We actually do this by including the phone or the laptop in all the sensitive stages of the device’s like operations. So when you’re creating the multi-sig key, the phone actually contributes randomness verifiably in a way that even if all the devices were evil, you would still not be able to have a a private key that has been contrived to to be known to an attacker.
And and we also do that during signing as well, preventing attacks like Dark Skippy.
speaker-0 (19:41.526)
Yeah. Okay. now I guess the other thing is obviously this is a relatively new hardware wallet. You’ve been working on this for a little while, but people sort of want to see it battle tested for a while or as a as an other as another example, sometimes these devices fail, right? Like if it’s new hardware wallet just came on the scene, sometimes you get this device failure kind of issue. So how do you handle the device failure case? Is it just a matter of having the quorum, let’s say two or three or three of five, such that if one of your devices fails, you can, you know. And then also do you do like
Health checks every six months or that kind of idea.
speaker-3 (20:12.494)
Yeah, great questions. so eventually we would love to get away from having seed word backups for each device. It’s like a pretty annoying UX thing, having to write down words. You know, it’s not too bad. Anyone can learn how to do it, but to start out with, we we do have seed word backups. This one I I don’t think is a real wallet, so you can you can check that out. so we have a frost backup cards.
And so if if I, you know, broke a device or I lost a device, you can use this backup card and restore that device’s key just just from the backup alone.
speaker-0 (20:46.766)
Gotcha. Yeah, so I mean it’s interesting, it’s it’s new technology, it’s really like advanced stuff. let’s leave it there. Where can people find you online?
speaker-3 (20:54.434)
Yeah, I’d I’d just say we’ve we’ve been going for a few years now, Stefan. We’ve been we’ve been working on this since about twenty twenty two we started working on the frost implementation and we it is it is at a point where it’s really robust. So I would encourage you people to check it out and and you know if you if you’re interested in battle testing it, please do. we’ve got a bunch of a lot of users now. you can find us at frostsnap.com or frostnaptech on x. and yeah, that’s the best place to find us.
speaker-0 (21:24.098)
Thanks.
speaker-3 (21:24.202)
So thanks very much. Always good to see you, Stefan. Thank you.
speaker-0 (21:29.442)
Hey guys, we’re here with Tony Clossing. We’re here at the Freedom Tech Summit. Tony grave a great talk about stable channels. So tell us just give us a quick update on the stable channels wallet that you’re building.
speaker-1 (21:41.358)
Sure. So stable channels is a concept to take the evident success of stable coins that we’ve seen in the crypto ecosystem, but try to take the aspect of bringing dollar-based stability to Bitcoin-only solutions. And this is what Stable Channels does, it lets users have a self-custodial lightning wallet on their iOS or Android device, deposit Bitcoin in.
And then choose to peg a portion of that Bitcoin balance to a dollar amount. And the way we handle that is by matching that user up with a service provider who is willing to provision that stability to the user and then take the extra volatility on the user’s behalf.
speaker-0 (22:22.796)
Interesting. And so I guess it at the start, you are gonna be that service provider and then later maybe other people could also be the the stability provider. As you said, you have a stability provider and a stability correct receiver. And just I guess for listeners, you might be used to the idea of having let’s say stable coins or you may have heard of let’s say stable sats, but this is a Bitcoin form of this and I I guess
speaker-4 (22:29.772)
Stable.
speaker-0 (22:47.352)
Just so people get a sense of what the product could look like, it can look like basically a Bitcoin wallet that people may be used to today, but the idea is actually you have a slider. So can you explain a bit of how that slider would work and what the experience would look like? Sure.
speaker-1 (22:59.726)
Sure. So the user would deposit Bitcoin into their Lightning wallet, which runs on their phone. And then at the top of the application, they’ll have essentially two balances and a slider bar where you can move it back and forth with your finger. So you can customize your BTC versus USD price exposure. So for example, in a bear market, some users might want to be more allocated towards Bitcoin, maybe like
you know, 80% allocated to Bitcoin to 20% dollar exposure. And then as the price rises, maybe the user wants to take some profit per se, and maybe wants to be more like you know 50% dollars, 50% Bitcoin, and it’s an easy way for users to fine-tune their Bitcoin price exposure in an easy, easy-to-use application.
speaker-0 (23:51.254)
I see. And as you were mentioning, technologically you are using the LDK stack from Spiral and you said you have LDK and mentioned this concept of LDK server, which would be on the server side. So can just talk a little bit about the stack there?
speaker-1 (24:04.43)
Sure, so the staple channels wallet architecturally uses the same technological design as the Phoenix wallet, which I think is one of the best self-custodial lightning wallets out there. And the Phoenix wallet connects the end users who are on their device with an LSP or a Lightning service provider. And so in the staple channels case, we’re running that Lightning service provider and also provisioning the stability on behalf of the users.
And as you mentioned, Lightning Development Kit has recently come out with a new piece of software called LDK Server, which makes it easier to run LSPs, gives more more data rich APIs for those who want to run their own LSPs. And we plan to implement that and release it as an umbrella application as well.
speaker-0 (24:57.566)
Yeah, so I think it’s really fascinating because I mean as you were mentioning in your talk, and I mean this is uncontroversial, there’s massive, massive product market fit for stable coins. I think last you mentioned in your talk, I think it’s about a quarter of a trillion dollars worth of, let’s say, market cap or demand for the big stable coins, right? USDT, USDC, and and many others. This is a new form or a new way to do this kind of thing using Bitcoin and using the Lightning Network and potentially opening this up to
more users who might not have otherwise been using Bitcoin on chain. Because I guess the point, so people understand as well, is that you have this wallet and you can close it, you can close out your position on chain, right?
speaker-1 (25:38.252)
It’s a self-custodial wallet. So the user has custody of their Bitcoin at all times. And the way we maintain the stability is by frequently updating the user so that they maintain stability at a given price. And as you mentioned, you know, crypto enabled stability is an enormous use case. And I think that as Bitcoiners, we can be more creative about how to bring that stability use case to more Bitcoin only Rails.
speaker-2 (26:03.294)
Okay.
speaker-0 (26:03.532)
Yeah, so I think it’s a fascinating project and I think more people should take a look at it. And I know you’ve been building on this for like what, a a couple of years now. give us give the audience an idea where to find it and what what to expect here.
speaker-1 (26:16.738)
Yeah, check out stablechannels dot com where you can get in touch with us. And stay tuned for the version one point release of stable channels, which will have some of the latest capabilities, lightning payments in and out, splicing in and out, and of course the ability to manage your Bitcoin exposure between US USD and Bitcoin. Thank you.
speaker-0 (26:35.278)
That’s right. Thank you, Tony.
speaker-5 (26:38.254)
your presence.
speaker-0 (26:38.702)
Hi guys, we’re here at the corporate day as part of BTC Prague. I’m here with Andre Dragosh from Bitwise, head of research for Europe, isn’t it? Exactly. Gotcha. So yeah, give us kind of where we are. I mean obviously right now everyone’s feeling down, it’s a bear market, but I know you’ve been doing some research. what can you share?
speaker-5 (26:57.569)
All right.
speaker-2 (26:58.188)
So I think everyone’s waiting to buy the dip, right? Waiting for the cycle bottom. I think mm so as far as my personal opinion is concerned, I think we’re not quite there yet. Yeah. Right. so what I’m looking at what I’m looking at is bottom probability model. Yeah.
speaker-0 (27:11.743)
Yeah, go keep going, keep going. Go on.
speaker-2 (27:17.694)
and it contains more than twenty indicators, valuation indicators, also on-chain indicators like percentage supply and profit, entities and profits and so on, but also things like the VRB ratio and so on. Yeah. it has started ticking up, right? That’s the good news.
speaker-0 (27:36.832)
So is that like a momentum or a MVR so sorry, refresh us on VR V again?
speaker-2 (27:41.346)
So MVRV is like market value to realize value. Right. Right. It’s one of the key valuation metrics, on-chain valuation metrics. But I I mean it’s just one of many metrics in that model. The model tries to classify bottom cycle cycle bottoms based on previous cycle bottoms. Gotcha. So it learns based on the past data.
speaker-0 (28:03.168)
And as you said, realize value. So this is like tracking the coin when that UTXO last moved, as a ratio, right? Of the
speaker-4 (28:08.022)
Okay.
speaker-2 (28:11.256)
Market value to realize value. So in realized value in that context is like the cost basis, the average cost basis of all coins. Exactly. And so but yeah, the interesting part is that probability has increased. Yeah. But I think we’re not quite there yet.
speaker-0 (28:17.332)
Gotcha. Yeah.
speaker-0 (28:26.33)
Right. So we’re not like the the bottom. I don’t know. So basically you would say we’re kind of we’re in the zone, but we’re not like the bot so for you, we haven’t so sixty K was not the bottom for you, you think?
speaker-2 (28:37.206)
I I I think there’s more downside left. I used to think that we actually saw the bott bottom during because sentiment was bombed out, was as bearish as during FTX and so on. Right? Valuation indicators back then were already in the lowest ten percent percentile, right? Yeah. And we’re back in this kind of zone. Yeah. but that being said, I think because of correction risk in the stock market and so on, and there are various reasons for this,
speaker-0 (28:42.486)
Right, the February sixty K.
speaker-2 (29:06.998)
I think we might see more downside. The question is where’s like the potential bottom. I mean many people they look at the two hundred week moving average, right? Sixty one sixty one K, right? With with
speaker-0 (29:15.96)
Right.
Which is about where we are now, right? Yeah.
speaker-2 (29:23.192)
But like even during previous cycle bottoms, what right we we’ve reached these levels, right? Yeah. Not not for for l for a long time, but I think there’s definitely potential for more downside, yeah, below the two hundred week moving average. And that I think many people tend to look at realized price, right? The the average realized price around fifty six K. And I think the ultimate level is probably around forty eight K, where the long term hold their realized prices.
speaker-0 (29:50.784)
So you think that could that’s a potential bottom like the bottom?
speaker-2 (29:53.678)
If we s if we saw more downside inequities, which I think is quite likely, because there’s some there are some signs of hurting going on in especially in semiconductor stocks.
speaker-0 (30:03.448)
Gotcha. So as I’m reading you then you’re saying it’s like there’s a chance we go down further to like fifty K ish, but that would be like the bottom.
speaker-2 (30:10.094)
I I that being said, I think a lot of bad news has already been priced in, right? Even if you compare what Bitcoin’s price in terms of global growth, yeah. Right. Even if we had a recession, yeah, right, which is rather unlikely. But of course if you have stock market crash then you probably get a recession. But if even if we had a recession, I think that’s already b been priced into big and you can show this in a quantitative way as well. And so I think downside at these levels is rather
speaker-0 (30:32.174)
Gotcha.
speaker-0 (30:38.774)
Is relatively low, yeah. And of course if you’re kind of looking one or two years out, you know, getting some now is generally gonna be a good idea. now let’s talk a bit about the treasury companies aspect of it, ’cause we’re here at the corporate day. Any of you is any of your analysis looking at the treasury companies and obviously many of them are down from a high. what what are you thinking on those?
speaker-2 (30:58.246)
I think the elephant in the room is obviously stretch, right? It’s trading below par. I mean it is somewhat connected to the fact that yields have started going higher because of sovereign bond risks, right? Because of the rise in inflation, because of energy prices and so on. Straight off the moose essentially. Yeah. But also sovereign debt risk in Japan and so on. And so I think the relatively high dividend yield of of stretch.
has become less attractive, right? And then relative like relative sense. And so either they pause buying Bitcoin, right? Because it probably won’t trade above R the short term. Right. They just pause buying
speaker-0 (31:27.95)
Relative sense. Gotcha.
speaker-0 (31:40.374)
Or they continue the dilution on the MSDR. Or the i issuing of MSTR.
speaker-2 (31:44.256)
Exactly, either continue the on MSR or they wait for yields to come back down, right? interesting. But I think until this is this remains unresolved, I think the marginal buyer, which is MSCR, and they have been the marginal coin.
speaker-0 (31:57.496)
buyer. Right. But I I thought they were maybe obviously they’re a big buyer, but then I th I thought it was also ETFs are also a decent chunk of the volume in terms of you know buying volume.
speaker-2 (32:07.82)
So I think as far as twenty twenty six is concerned, we saw around hundred seventy thousand bitcoins being bought by both treasury companies and Bitcoin ETPs. Yeah. And ETF buying, ET ETP ETPs actually experience net outflows, right? So they were net sellers of Bitcoin, right, this year. And so much of the heavy lifting has been done essentially by treasury companies and in particular MSCR, right?
So I I I agree, like ATP flows they’re more like procyclical. Yeah. And they tend to be more correlated with with price action. Also like on chains, hot volume deltas on exchanges, right? They are like the key influence influential variable. Right. But I think in terms of buying balance it’s been all about traditional companies and MSCR essentially. Yeah.
speaker-0 (32:59.246)
I see, okay. So what are you what’s your kind of outlook for the rest of the year and into early next year?
speaker-2 (33:06.094)
So I think this will be the year of the bottom, right? Probably bottom between now and most likely October, right? I think many the that the I mean the consensus is that we bottom around October because of the Harvick pattern, right? But it’s not essentially like three hundred and sixty four days to the team. Yeah. It tends to be sometimes
speaker-0 (33:16.046)
So are you a four year cycler?
speaker-0 (33:27.672)
Black and zone, let’s say, yeah. In the next few months.
speaker-2 (33:30.424)
But I’m not actually a believer in the halving side because of various reasons, because institutional demand has has been so much bigger gun like the Harving deficit.
speaker-0 (33:39.16)
Yeah. So are you saying four year cycle but not because of the halving? Or just like cycles but not four years?
speaker-2 (33:45.687)
I think because this has become somewhat consensus that we’ll bottom around the toga, I think the market will front range this.
speaker-0 (33:52.526)
Right. So you think we actually can bottom before that? And then but also do you think it’s you know maybe less likely cases of V shape bottom, like a quick up, and more likely case is like a slow up? What do you think?
speaker-2 (34:04.994)
We’re still waiting for that catalyst, right? We’ve seen the bear, right? I think a lot of bad news already priced in. The question is what’s the positive catalyst? Then we’ll ignite the new bull.
speaker-0 (34:14.69)
Right, is it I don’t know end is it the end of the Iran War? Is it Clarity Act? Is it just kind of people learn to DCA again?
speaker-2 (34:21.422)
I think usually it’s some kind of quantitative easing. I think it’s some kind of crash coming comes in and there’s might be some market crash, so more pain in the short term, but they’ll pivot and ease monetary policy. Yeah.
speaker-0 (34:23.918)
Like does Kevin Walsh come in and lower the round?
speaker-0 (34:37.065)
Are you looking at like the AI stuff? Obviously SpaceX is a big thing and
speaker-2 (34:40.449)
Exactly. And I think the the upcoming IPOs they could be catalysts because I mean we’re talking about I open AI, Anthropic and SpaceX almost at the same time. Okay, SpaceX will be much earlier but we’re looking at around I think two, three, four trillion potentially in IPO market cap, right? And that that does suck liquidity out.
speaker-0 (35:02.744)
So you buy that idea that a lot of the attention and money has gone to those three upcoming IPOs and therefore maybe that’s less buying volume for Bitcoin. But you think once that process plays out, you think Bitcoin can come back like the volume can come back to Bitcoin.
speaker-2 (35:17.41)
Yeah, I think there might be some kind of capital rotation, right? But it is I I do think that both stocks and Bitcoin can profit in such an environment, but there’s more pain first, right? You need more pain for like one two policy to ease significantly and then
speaker-0 (35:33.538)
What about this notion of productivity gains? Like are people seeing productivity like real productivity gains from AI and is that gonna drive like a this kind of positive deflationary aspect? Or on the other hand, you’re hearing like the Uber CEO said they blew their token budget in a few months and maybe people are trying to argue there’s not enough ROI from AI. Where are you at on AI productivity?
speaker-2 (35:53.836)
I think usually a capex boost and increasing capital the the co the economists call this capital intensity. Right the more capital per capita you have, the more productive people are in general. So if you have an increase in capex per capita and capital intensity, usually it should lead to a kind of productivity increase. You don’t really see it in the data yet, right? In in terms of output per hour, right? It’s probably contributing like
fifty basis points to GDP growth right now, which is not much, right? And so I mean that could increase going forward. But I I’m actually more concerned about the CapEx spending itself. Yeah, because usually and the the amount of CapEx in terms of GDP is already close to I think eight percent, nine percent. I think it was big BCA research, they they published like a very long term kind of chart.
speaker-0 (36:36.364)
Right, that it’s overdone or too much.
speaker-2 (36:51.79)
Where they showed CapEx spending in terms of GP. Yeah. And it’s the highest by far, this cycle. It’s higher than like the car boom in the nineteen twenties, it’s higher than the railroad boom of the eighteen seventies.
speaker-0 (37:04.564)
So I guess it kind of implies that we’re expecting very big productivity growth from this thing. So if people put in all this money but don’t get exactly enough of a productivity gain.
speaker-2 (37:13.806)
I think the risk is of course that you get capital misallocation.
speaker-0 (37:17.87)
I see.
speaker-2 (37:20.386)
Yeah. Exactly, because they’re investing so much because they anticipate so much demand. If that demand doesn’t come, right then there’s some kind of capital missing.
speaker-0 (37:29.26)
And to some extent people are saying, are we in kind of like an era of VC subsidization just like the early years of Uber and some of these, you know, companies are charging you like a flat subscription instead of charging the full board, you know, token API rate? Is that like a kind of a false subsidy or false sense of productivity that people are getting from some of these AI tooling if they’re not paying the full rate?
speaker-2 (37:51.054)
Exactly. I mean you can already see that there’s some that demands there, right? You can see it in DRAM prices, they’re going up. You can see it in token expenditures, or like that their time series on token expenditures for LLMs. you can see it in things like GPU rental prices that are going up. So demand is there, it’s even accelerated. There’s been a slight deceleration token expenditures more recently. Yeah.
But like the overall trend still positive and I think that as long as this doesn’t really turn decisively to the downside, I think that will that trend will definitely continue.
speaker-0 (38:27.564)
Okay, so I guess s summing up we spoke about a lot of things, but I guess loosely speaking you think there could be more pain to come, but we’re kind of already in a bottom zone and we’re waiting to see what that next catalyst is for the next leg up. any other kind of closing thoughts or what people can look out for?
speaker-5 (38:43.288)
Biggest.
speaker-2 (38:44.224)
Yeah, I think Bitcoin’s potential is still there. I mean w the straight of moves situation is actually one of the biggest catalysts ever on a global scale. Yeah. Right. Bitcoin being used as a global cross border payment medium, right? And so I mean the potential is still there, right? We we do have some question marks like quantum res that still remain unresolved.
speaker-4 (38:45.752)
Okay.
speaker-2 (39:11.146)
Right. And maybe the competition with gold, the renewed competition with gold on a global scale. Yeah. But I think in terms of value, it’s definitely there, right, already. So I think it’s it’s a very interesting interesting play right now.
speaker-4 (39:26.499)
Yeah, yeah
speaker-0 (39:27.04)
Excellent. All right, well that’s Andre Dragosh from Bitwise. Thanks for joining me, Andre. Thank you. Hi guys, we’re here. We’re back at Bitcoin Corporate Day, part of BTC Project 2026. I’m here with my friend Sam Callahan. Sam is at Orange, which is a Bitcoin treasure company in Brazil, well known for also for his research and writing in the space. Yeah, give us a sense of where things are at and I guess yeah, any updates on Orange as well. Obviously I’m an advisor as well for Orange, so I’ll just disclose that I’m an investor there as well.
speaker-5 (39:31.746)
Cheers!
speaker-4 (39:56.51)
things are going well at Orange. we are buying the dip. We just did a first of its kind debt transaction with Itu Itau Asset Management, which is the largest financial institution in Latin America, bringing them into the Bitcoin fold. So it’s the first time they’ve done a Bitcoin backed loan. five year maturity with the proceeds primarily used to buy more Bitcoin. And so they were they bought
The whole thing on the other side of it. So we’re bringing in a large financial institution into the Bitcoin market. We’re using the proceeds to buy Bitcoin over fifty percent off its all-time highs. So this is this is when you wanna take on leverage in the cycle. Yeah. so our leverage ratio is still pretty low. depending on the price, it’s around twelve to thirteen percent. Gotcha. Yeah. So pretty low leverage ratio. And that’s you just gotta be careful with how you position the leverage to your overall balance sheet. Our Bitcoin balance sheets
speaker-0 (40:37.688)
So what is the leverage ratio roughly?
Ciao.
speaker-4 (40:49.954)
Large, well it’s about thirty almost thirty nine now. and so we’re creeping up. and so we we’re buying this dip and this is what we’re supposed to do as a public company with access to capital. not many people individually can get a five year maturity loan with zero cash burden.
speaker-0 (40:51.544)
Thirty seven hundred ish.
Thirty nine.
speaker-0 (41:12.638)
So what is the like the interest rate on this and all?
speaker-4 (41:15.406)
All in with the FX hedge, you’re looking at like 11%. And now we can choose to do dynamic FX hedging to remove all the FX risk from that. But given where interest rates are in Brazil, they’re historically very high compared to the US, and then the BRL has been really strengthening against the dollar over the last five years. The interest is in BRL. Yeah, so like we can choose to take a position in the BRL may weaken against the dollar.
speaker-0 (41:35.838)
And learned in B R L.
speaker-4 (41:45.608)
over the next five years and our cost of capital will actually come down over time. Interesting. But we can also just hedge it all out and our all in costs are eleven. Yeah. Around eleven percent. And so we’re betting that Bitcoin’s gonna outperform that over the next five years. Yeah. And so that’s a bet we’re willing to make because you look at historically bitcoins performed how Bitcoin’s performed after fifty percent corrections from all time high, four or five year returns and
speaker-2 (42:03.598)
Yeah.
speaker-4 (42:11.106)
Where we are in the cycle, the adoption trends we’re seeing, you know, our view is that Bitcoin could outperform that cost of capital and then it’ll be accreted for a shareholders. So we’re we’re cooking over at Orange. We’re we’re just doing what we were meant to do, which is increase Bitcoin per share for our shareholders.
speaker-0 (42:25.794)
Yeah, and I think it really just comes down to obviously there are different elements, there are different caveats we have to make. Obviously, custody, dilution, execution are risks, but fundamentally it comes down to do you believe Bitcoin KAGA is gonna be, you know, greater or much greater than the cost of the capital, right? Like if you believe Bitcoin is gonna do thirty percent per year on average for the next ten years, but the cost of capital is, you know, a fraction of that, then I I think maybe that’s
A point where it’s maybe not so well understood or it’s kinda it’s difficult to grasp. Do you mind explaining a bit of how you you you see that?
speaker-4 (43:00.854)
I mean that’s pretty much when you break down so when people criticize strategy for instance, like hey, how are you gonna how you gonna fund these dividends of eleven and a half percent? Really when it boils down to it, it’s just a fundamental disagreement of what Bitcoin’s cagger can be over the next five to ten years or into the future. So it’s funny. Now there’s reasons to believe that it it can
can perform twenty-five, thirty percent a year. And I think when people say like, hey, it’s c it could do twenty-five percent over the next ten years, people are like, No, that’s crazy ’cause they think about returns on, you know, the NASDAQ or the S P five hundred. Twenty-five percent a year, that’s those are crazy returns. Now we know that Bitcoin’s done more of that historically, but even looking into the future at twenty five percent, you’re looking at a Bitcoin price by twenty thirty one around like two hundred forty, two hundred and fifty thousand, you know, to me I’m like that’s
I pretty reasonable to do that. And if you go out to 2036, you’re looking at a Bitcoin price around seven hundred fifty thousand. Might be a little bit different based on Bitcoin’s price right now, but around there, that’s doable to me by 2036. And that’s 25% Kagger. If you’re if you’re issuing a security that pays a fixed dividend of eleven and a half percent, you’re using the proceeds to buy an asset that appreciates at twenty-five, the business is in that spread. That’s where the business model goes. And all the residual return.
Goes to the MSTR commons shareholders. That’s really what the bet is. the whole thing doesn’t really work if Bitcoin underperforms that over a long period of time. Now, really what strategy and Bitcoin treasury companies are doing are is just trying to manage Bitcoin’s volatility. There’s a belief that yes, we have conviction that Bitcoin will appreciate over time, that Bitcoin adoption will continue, but we have to manage the capital structure to withstand Bitcoin’s short term balance.
speaker-0 (44:48.206)
You don’t have to sell at the wrong time. That’s kind of the key thing. Exactly. Because if you’re overlevered, then you can get wrecked at the bottom or you know, these kinds of s like you can fall into a bad situation.
speaker-4 (44:57.482)
It’s important too. Like you said, there’s there’s there’s more there’s different risks compared to holding Bitcoin in self custom. Yeah. fails then you’re not gonna do well. But you remove counterparty risks, remove debasement risks, things like that.
speaker-2 (45:03.479)
Yeah.
speaker-4 (45:19.116)
But when you when you buy equity in a Bitcoin treasury company, you’re moving the risk from the protocol more to the management team and their ability to execute and secure the Bitcoin on
speaker-0 (45:28.152)
They could make management missteps. I mean we’ve seen some treasury companies that started but then end up selling their coins, right? Because maybe the structure was wrong or the management weren’t as committed to the plan or the various reasons. It could be
speaker-4 (45:39.526)
People gotta understand like the risk trade-offs between holding Bitcoin spot Bitcoin in self-custody versus owning an equity versus owning a preferred equity that’s supported by Bitcoin. You know, they’re different risk profiles with different rewards.
speaker-0 (45:52.546)
So another topic that is probably interesting because a lot of people I think people who come from like just Bitcoin and they’re maybe not as keen on treasury companies, they see it like, no, you should be financing out of operating ec income only and not out of the financing component. But I think maybe that’s part of the the d the difference in the w in the world view where, you know, maybe in their view they see it as like you should only be you know, you should primarily just be doing it out of operating income, not out of like borrowing or financing. How do you see
that difference between kind of focusing on the operating income aspect or operating income side of the house versus the financing ability to, you know, buy more Bitcoin now using financing.
speaker-4 (46:32.856)
I’ll that at Orange BTC, we’re focused on both sides. I don’t think either one’s necessarily wrong. I think i if you’re on that other side of the the the camp who thinks, it should only be operational, you should only use cash flow. I mean, do you not believe in any types of leverage or any kinds of debt whatsoever? We live in a debt based system. I mean it’s almost like you know, don’t hate the player, hate the hate the game kind of thing, because if you’re a large public company with a large balance sheet
one of the benefits that you have is better access to capital and and cheaper cost of financing. And that’s just the way the debt based system is structured. It’s really the cantalon effect in action. A large public company with a big balance sheet can get access to the money print better than an individual who’s not as wealthy. I mean, you’re way down in the spectrum.
And so I think if you’re not using all the tools available to you to acquire more Bitcoin, especially at this stage in Bitcoin’s adoption cycle, if you’re not utilizing debt to turn around that’s denominated in fiat that continues to be devalued, turn around and buy Bitcoin appreciating, I don’t think you’re using all the tools available on behalf of your shareholders. So I think I think companies gonna take different approaches.
But I see nothing wrong with borrowing in fiat to turn around and buy and appreciate an asset. That’s that’s been going on, not just in Bitcoin Treasury companies, that’s that’s just been going on in the markets for a very, very long time.
speaker-0 (47:59.278)
Yeah, I mean in one sense different generations have used different things, like generations older than us that might have used property as their way of levering on something. And maybe Bitcoin is an opportunity for, you know, newer entrants now to actually generate some wealth. so I guess closing thoughts, any kind of outlook going forward, you know, for the rest of this year or into next year?
speaker-4 (48:21.006)
Look, I think right now Bitcoin is there’s been a lot of headwinds. it’s been a lot of FUD, to be honest with you. I think there’s a lot of the conversations that I have, you hear a lot about theoretical tailwrites like the quantum FUD. you there’s a lot of macro uncertainty. So I think that’s actually a big part of what’s going on here in terms of the weakness with Bitcoin. I think there’s concerns over the Strait of Hormuz lasting longer than the market expects.
That causing inflationary pressures, oil prices staying high, which causes pressures on sovereign yields, which causes pressure on risk on assets like stocks in Bitcoin. I think Bitcoin could be sniffing out some kind of stock market correction. And in that case, we could see Bitcoin even going a little bit further down from here before it the liquidity is injected. But you know, I have to say that right now the sentiment’s pretty poor.
It seems to be carving out a bottom around the 60k. it’s it’s difficult to pick absolute bottoms, you know, when Bitcoin’s down at these levels and sentiments at these prices, it’s typically a good long-term entry. Then really when you think about long-term entries, you gotta think about fundamentals. And I always focus on the fiscal picture because that is the main driver of economic conditions and inflation. So you look at, hey, are they still spending? Yes, they’re still running two trillion dollar deficits.
that’s GDP’s still above the deficit’s about six percent. And so that’s not gonna change. And so the reasons to hold something that is resistant against the basement hasn’t changed. So don’t focus on the price, focus on the fundamentals, zoom out and for the reasons why you hold Bitcoin has not changed. So that’s kind of what I’ve always think about and I think that’s what
Anybody who’s a long term investor or holder of Bitcoin should focus on instead of just looking at the price fluctuations because this is what Bitcoin does.
speaker-0 (50:16.366)
Yeah, that’s Sam Callahan from Orange. We check put the links in the show notes, of course. Sam, thanks for joining Thank you. Thank you. Appreciate it.
speaker-4 (50:23.438)
Yeah.
speaker-3 (50:24.152)
Yeah, that’s