Leon Wankum shows how Bitcoin and MicroStrategy are disrupting the $300T real estate market, reshaping capital allocation and store-of-value thinking.
Leon Wankum, a real estate expert turned Bitcoiner, presents a powerful argument that Bitcoin is emerging as the new “hurdle rate,” outpacing real estate as the preferred store of value in a shifting financial landscape. As the 18-year property cycle nears its end amid high interest rates and imbalanced markets, Bitcoin’s scarcity, performance, and optionality are prompting capital allocators to rethink traditional strategies. Institutions are beginning to reallocate cash flows and refinance properties into Bitcoin treasuries, while new yield-bearing Bitcoin instruments like Strike, Strife, and Stride offer compelling alternatives to bonds and property. Wankum envisions a gradual transition to a Bitcoin standard, facilitated by dual collateralization and designed to avoid economic disruption as Bitcoin steadily replaces legacy financial infrastructure.
"Bitcoin is starting to become the new hurdle rate that all other financial products have to abide to."
“No asset—not even prime real estate—can compete with Bitcoin’s long-term performance and absolute scarcity.”
"You can refinance a property and allocate to Bitcoin without selling—this is how many are making the transition."
"Strategy (MicroStrategy) has enough Bitcoin to cover preferred stock dividends for over 200 years."
"20% of our property cash flow into Bitcoin outperformed the 80% left in fiat."
“Bitcoin is digital real estate—but better. Scarce, global, and doesn’t need maintenance or tax sheltering gimmicks.”
“If it’s just 1% of the real estate market, that’s $3 trillion. And that’s enough.”
"A smooth transition, not collapse, is the optimal path forward."
This episode explores how Bitcoin is overtaking real estate as the global store of value, with Leon Wankum offering a rational, experience-based framework for understanding this shift. While institutional inertia slows adoption, capital flows are beginning to reflect Bitcoin’s growing dominance, as new financial instruments and treasury strategies emerge. Leon advocates for a thoughtful, evolutionary transition to a Bitcoin standard—one that prioritizes stability, practical integration, and long-term value creation across the global economy.
0:00 - Intro
0:50 - Real Estate
12:36 - Bitcoin for real estate investors
17:44 - Bitkey
18:39 - MSTR products and opportunity cost
30:43 - Unchained
31:13 - Cash flow alternatives
37:40 - Strategy risks
44:41 - Smooth or chaotic transition
50:58 - Is this cycle different?
56:42 - Tradfi degeneracy
1:02:00 - Leon’s Book - Digital Real Estate
(00:00) Other than real estate, there were little investments that performed better. Few were aware of the existence of Bitcoin. As people become more aware, they will likely also sell off their properties. Bitcoin as a near-perfect form of money is starting to become the new hurdle rate that all other financial products have to abide to.
(00:19) Instead of buying a regular bond issued by a nation state, you can actually buy a fixed income product issued by Strategy. This is a product that could potentially tap into the real estate market. If it's just 1%, that's 3 trillion. And that's enough. They are starting to weigh the opportunity cost of not putting money into Bitcoin.
(00:36) But very few are able to comprehend the necessity of quickly investing large part of the capital into Bitcoin. Every 18 years will have a correction on housing. We're bringing in a housing expert to talk about the real estate market and Bitcoin corporate adoption. in the crazy frenzy that's going on right now in public markets.
(01:04) Leon, welcome back to the show. Thanks for having me back. It was great seeing you even though it was briefly in Vegas last week. I caught you literally as I was running to the airport off the stage. Yeah. And uh look, I'm pull that back up because I think this is a good jumping off point. We'll start with like a personal story.
(01:24) I'm currently in the middle of a move right now, but decided to rent a house because I was looking at the prices for housing in the places I'm looking to buy and they were they were too high. Not only were they too high, we put a bid in on one house and it wound up going a million dollars over asking.
(01:44) And I think over here in the United States, this is a big topic of discussion right now, which is the real estate market feels a little toppy. Prices are still very high, very sticky. Rates are still very high. Uh, and that's one thing I'm trying to discern as somebody who would like to buy a house in the next few years, a forever house for my family, what is going on.
(02:08) And as we can see here, Red Red Fin reported earlier this week that 34% there are 34% more sellers in the market than buyers. At no other point in records dating back to 2013 have sellers outnumbered buyers this much. There are a total of $698 billion worth of homes for sale in the US, up 20.
(02:29) 3% from a year ago in the highest dollar amount ever. So, it seems like there's a ton of people who have rode the real estate market and they're being a bit stingy on pricing and we're waiting for a correction. Is that your take on this? Yeah, we definitely need to wait for price equilibrium to build because since 2008 really since we had low interest rates um prices were skyrocketing and now with a different interest rate environment.
(02:57) Um what I personally also feel is that people are not willing to sell their houses for a price that they believe is not what they could get because they still have the prices in mind that they were able to receive 2 three years ago and the buyers are not willing to pay prices that people want because interest rates are higher meaning the cost of capital and the cost of borrowing went up.
(03:21) So I think this is a healthy um and a healthy um development. We need a price equilibrium. We need um demand and supply prices to match. It's going to take a long time. I think it's also it also depends on interest rates. If Powell is going to um lower interest rates, which I don't think he will, even though that's something that the president would like him to do, but I don't think he will because it would cause inflation to go up again, especially in in goods and services and groceries.
(03:51) And um judging by that, I think interest rates will stay above 3% at least for the foreseeable future. Meaning I believe that real estate prices will come down a little bit till we meet that equilibrium. But something that's important to to remember which makes it a little bit odd that because as a Bitcoiner when you look at housing, I think you constantly think now it's going to crash, now it's going to crash.
(04:15) But the reason it's not really going to crash is as soon as new money is being introduced into your economy or as soon as interest rates are lowered that money is being funneled into real estate and also the existing system that is depending on real estate as collateral has an interest in propping prices up.
(04:34) So this can go on for another 10 or 20 years I think. I mean there could be there's definitely a correction that we can see right now and I personally wouldn't get into uh real estate development at this point if you'll ask me from the perspective what's the better investment of course that is Bitcoin but I just want to make a point that this can go can go on for longer than we think because housing is limited not as limited as Bitcoin but there's something called the 18-year property cycle and it says that every 18 years, we'll
(05:08) have a correction in housing. And the reason for that is if the money supply is expanded and that money goes into land, it's not going out of land because land is limited. It's similar to Bitcoin. But what happens is that after around 14 15 years, prices start to come down and then they find a new price equilibrium which is higher than when the cycle started.
(05:33) And we are at the end of this 18-year property cycle. and I had suggest that prices will fall until 2026 and then in 2026 if interest rates are lowered I think prices can find price equilibrium and then possibly move up in nominal value of course if you start now accounting for real estate and bitcoin it's a whole different story I know talked from the lens of a fiat um based system yeah that note on pal and the fed is interesting that it It's very obvious Trump's wanted him to lower rates since before he even got elected.
(06:09) But I was reading an article yesterday that made a lot of sense to me, which is he's not going to lower rates for multiple reasons. One of which you mentioned, which is it would it would reignite inflation, which nobody wants to see right now. And then number two, profit margins are going up because the productivity uh increases due to AI.
(06:32) I mean, and we're still at the early stages of that, um, where you have many of the big big tech, the MAG 7 beginning to lay off people because they're creating all these efficiencies via AI. So, we're able to increase productivity and profit margins and so there's no reason to to lower rates from that perspective, which agreed.
(06:58) Yeah, absolutely true. Yeah, which is uh you know it'll be it's crazy the confluence of events that are happening right now whether it's real estate market looking a little toppy at least temporarily the interest rate environment the progression of AI and the adoption uh by many large companies and small companies alike and then you have Bitcoin sitting over here sitting over $2 trillion establishing itself as a $2 trillion asset and it still seems a bit fringe where um where we are certainly as Bitcoiners, individuals who get Bitcoin
(07:38) and have decided that it is the best performing asset and that's where we'd like our wealth to sit, but it seems like it's getting more popular but is still on the fringe and as it pertains to real estate market. Do you think people are honestly beginning to weigh the opportunity cost of allocating toward real estate or Bitcoin? I think it's starting.
(08:00) People are starting also to understand what opportunity cost means because in the field system there was little reason to pay attention to that especially in the real estate market because if you for example bought a property that was overvalued you got a cheap loan let's say you got a loan at a percent or two you just waited another 5 years and the property then rose in value and due to the cheap money that you used to to leverage into the property the bad deal that it was at the art over let's say 5 years became a good deal simply because of monetary
(08:33) debasement. So there was little opportunity cost when you were in real estate because other than real estate there were little investments that performed better even though um maybe real estate wasn't the best performing asset. Bitcoin of course was since 2009 but few were aware of the existence of Bitcoin and now people are aware of Bitcoin.
(08:58) It's a topic that's being publicly discussed. I think the strategic Bitcoin reserve also had a positive effect generally speaking on um the importance that people large institutions, capital allocators, but also households place to Bitcoin. And from personal conversations, judging by what I hear from people working in the real estate industry in particular, they are starting to weigh the opportunity cost of not putting money into Bitcoin.
(09:27) But very few are able to comprehend the necessity of quickly investing large part of the capital ways into Bitcoin. So, a good friend of mine who is a real estate broker who I've done deals with in the past and they've done significant deals in Europe. They started now to build a Bitcoin treasury and that's the first real estate developer that I personally know in Europe that wasn't into Bitcoin, let's say, a year ago and now they are into Bitcoin.
(10:00) They're starting to build a Bitcoin treasury, but they're doing it very slowly. So, they're tapping into Bitcoin slowly and um to really tap into Bitcoin with significance. I think that's still rare, but we do see also from the credit side products like Battery Finance. And I see there's other products popping up that do make it easier for owners of real estate and people that own significant um amounts of real estate to tap into Bitcoin without needing to sell their real estate because it is true that selling real estate and putting that
(10:36) money into Bitcoin is the better savings or investment options. But it's not that easy because think about it a property is actually a capital structure. If we if you take it to the abstract level, real estate has been priced away from its utility value. Now it's being treated as a store of value. Meaning that large institutions that develop and hold real estate, they treat it not as a good that's used for utility, but as a capital structure.
(11:03) And within that capital structure, you have different parties with different interest. On the credit side, you have banks that lend money. And then on the on the on the borrowing side, you have different partners that either provided capital or knowledge in developing a house. And these different parties have different um preferences.
(11:25) And from personal experience, I know it's very difficult to juggle these different preferences. So I think that's important for the real estate sector to start to understand Bitcoin as the new hurdle rate and the opportunity cost of not participating in Bitcoin that we have products on the credit side that make it easy to refinance existing structures and then over time as people become more aware of how great Bitcoin is performing they will likely also sell off their properties and that should create more sell pressure on on real estate. But the
(11:57) fact that Bitcoin is a superior store of value to real estate is a little bit shadowed by the fact that it's easier to obtain credit to leverage into property developments than it is to obtain credit to buy Bitcoin. But once we reach the point where we have products on the credit side that do allow to also receive credit to buy Bitcoin, I think that will help real estate um professionals and people in the real estate industry to consciously be aware of the necessity to include Bitcoin more aggressively in their capital structure.
(12:36) No, I think you highlight a couple of really important things here. I was talking to some people at this intersection of real estate credit and Bitcoin and there's some interesting anecdotes out there where you'll have a real estate developer that'll typically raise a fund and they have LPs behind them and the developers really into Bitcoin but the LPs aren't on board.
(12:59) So they the developer desperately wants to get some Bitcoin exposure. And so they're creating unique structures where they themselves will will get Bitcoin exposure, but they'll keep their LPs only exposed to the real estate because they don't want to deal with the Bitcoin. And so you're beginning to see these different dynamics at play.
(13:16) And I'm interested if you're willing to share just for some actionable advice for anybody in real estate who may be interested in dipping their toes in Bitcoin. Your friend or the colleague that you spoke to that is beginning to allocate the Bitcoin. How are they doing that? Yeah, I'm going through the same problem.
(13:36) So also myself, I'm I'm at at the development side. Um so we are actively doing the development and on the credit side we have banks of course that work with us and then we have capital partners and our capital partners are not as bullish on Bitcoin as I am for example. So I had to find ways to stack Bitcoin both in the company and also on the private side that is in line with what the LPs expect from us as the people that receive the money and do the development.
(14:06) So there's there's risk in giving us the capital and the money. So I want them to feel comfortable of course. So what we did was once we started to sell properties um and we sold this is 3 years ago but I've been doing this for for 5 years now. So I'm going to share some stuff also from 3 years ago. So 3 years ago, we sold a property that we held together with LPS and then we very simply and kindly explained to the LP that the profits that we made, we do not want to reinvest that into another property with the LP. We are going to put that into
(14:38) Bitcoin. So they went forward, they invested into another property. We invested into Bitcoin. Now after three years they saw that the property that they invested in actually fell in nominal value and the the bitcoin that we purchased I think went from 35,000 or 40,000 to whatever the price is today so around 100k and uh the interesting thing is that this was a tax-free event because in Germany the way that bitcoin is treated if you hold it for longer than 12 months there's no capital gains so we know We had a a better deal going
(15:15) into digital real estate and this helped our LPs to understand the significance of Bitcoin as the new benchmark and of Bitcoin as a digital and scars absolutely scar store value that's superior to to real estate in that perspective. And now step number two is some of the properties that we own with our LPS for the past let's say 8 to nine years there's significant cash flow significant free cash flow and we are in charge of managing the cash flow because we are also managing the property.
(15:47) So we are doing like a 360°ree deal where we find property we secure financing from a bank. We get in a capital partner that puts in the money that we need as equity. We execute the property development and then we manage the property and the property management side we are responsible for managing the cash flow that comes in and as long everything is paid for and there are enough maintenance reserves and we pay the debt off our LPS are happy and they don't ask many questions.
(16:17) So what we did is we took some of the cash flow around 20% of it we put it into Bitcoin in the depths of the bare market. So of course these are favorable time frames that I'm referring to now. But if you have a long enough time frame, let's say 5 years minimum or 10 years, the numbers will look similar.
(16:37) So 20% of the cash flow that we put into Bitcoin is now worth more than the 80% that we did not put into Bitcoin. And the 80% we did not put into Bitcoin actually lost around four to 6% purchasing power year on year. So by by by gradually tapping into Bitcoin and doing it in a way where we don't erode the trust with our LPs and our capital partners specifically the banks that lend us the money to develop we are helping them to sort of build a consciousness for what Bitcoin is.
(17:04) And at the beginning I was a little bit stressed about it and I wanted to tap into Bitcoin more aggressively and I saw other people for example like Michael Sailor doing it so fast. But I think it's also important to remember um everybody's in a different situation. So if you are the founder of a company and you hold more than 50% of the voting rights and the board is on your side if you're publicly listed you can do whatever you want.
(17:29) But if you are a smaller company or if you're a public listed company with a board that's not on board with Bitcoin, I think it's important to consciously help everyone understand what Bitcoin is. Not missing the opportunity, but doing it in a way where you can align incentives. Sup freaks, this rip of TFTC was brought to you by our good friends at BitKey.
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(18:40) Yeah, incentive alignment is extremely important. And I and I you're not the only one who senses that urgency looking at what Michael Sailor Strategy are doing, what other Bitcoin treasury companies are beginning to do in public markets. You look at that and you say, "Oh my gosh, I'm falling behind.
(19:01) " But I do think in the long run being very patient, very methodical, and somewhat risk averse, and how you get in this is going to be the best play. Um, and there anybody out there who feels the FOMO, don't worry. Leon and I have been in Bitcoin for a while and we feel it too. But I think having been in for 12 years, just falling back to the age-old adage of stay humble, stacks, and just stay in your lane, blinders on, just work on your personal accumulation strategy, your business accumulation strategy is wise.
(19:35) Don't get over your skis. Don't get crazy overextended because it is a volatile market at times and it's important to just have a plan, stick with it. And as you described, it seems to be working pretty well for what you're doing. I think so. It is. And um also there is there's a there's something in having Bitcoin in self custody.
(19:57) So if you're a publicly listed company, you can stack quicker, but the Bitcoin are not held in self-custody. Uh I'm not taking any anything away from that strategy and I'm happy to discuss um how public companies are tapping into into Bitcoin um later. But there's also something in owning a private company and owning Bitcoin and self custody.
(20:17) So there's something to that that I really like. Uh also when it comes to privacy of course or privacy in general. So there's there's space for both. There's space for individuals and households stacking. There's place for smaller cap companies and privately held companies to stack and then there's a place for publicly listed companies in the way that they approach Bitcoin.
(20:39) Completely agree. It's a good segue into the next topic. I mean, we're mentioning opportunity cost earlier and I think opportunity cost becomes more front of mind to people when there's more options on the market for different types of exposure. We've been touching on it, alluding to it. companies like strategy bringing new structures to market where that's strike strife and now stride which they launched uh I believe late last week and um Chris Drigga Driga Chris sorry if I'm uh mispronouncing your last name I saw on your Twitter account you retweeted him
(21:18) uh yesterday uh based off of a a conversation you had on the Block Rewards podcast but I think this is an important topic to bring up as well. Bitcoin is rapidly out competing real estate as a store of value due to its superior properties. And now with products like Strike and Strife, investors need a great reason why they would allocate capital to management intensive illquid assets.
(21:41) And so I think when you look out at the ways in which you can acquire Bitcoin, like you mentioned, you can buy on an exchange, move to self-custody. Obviously the ETFs launched within the last two years with massive success and now we have these publicly traded equities with proxy Bitcoin exposure like strategy well 21 coming to market potentially later this year similar scientific you could throw Tesla and block in in that basket as well I guess but as the optionality expands and these products get more unique how how much does this
(22:16) opportunity cost rise in your mind and how should people be thinking about it? Yeah. So, first of all, I just want to state that nothing beats Bitcoin and self-custody. Just so people understand, when I talk about Strive and and and Strike and Stride, I don't talk about it because I think they're better than Bitcoin because I don't believe anything is.
(22:37) When I talk about it, what I find interesting is that they're tapping into money that is held by people who not yet are willing to hold Bitcoin in self-custody either because they don't understand Bitcoin fully yet. they have not comprehended the sign significance of the paradigm shift that Bitcoin brings or they have their hands tied because they are regulated in a certain jurisdiction or they're not legally allowed to own Bitcoin and uh and also I think it's part of a greater monetary reset where Bitcoin is becoming the new standard where every investment product
(23:12) for example fixed income has to now also compete with Bitcoin. If you look at the payouts, the distributions of of Strive and Stride and Strike, which are between 8 to 10% on par. So on the on the and strike, which is a preferred stock with a conversion option and in strike, you have the option to convert 10 strikes into one MSTR common share if MSTR hits $1,000.
(23:44) And that would be a conversion price of $100 per strike. And based on that, you get an 8% uh payout. If strike goes up in price, that yield goes down obviously percentage wise. And the strike goes down in price, that yield goes up percentage wise. And with Strife, you have a 10% yield on a $100 par. there's no option to convert into common shores but the payouts are commulative meaning if the payout is not happening they they have to be paid out at a later time so it's almost like an investment grade fixed income product based on bitcoin
(24:23) and then stride which I'm aware of since yesterday and I did watch the the clip of sailor explaining how it works it's non-commulative so it sits below um strife and strike in the capital structure and um it's almost like a junk junk rate uh fixed income product based on bitcoin.
(24:45) So now you have three fixed income products based on bitcoin. One has a convertible option which is strike and they are all yielding higher returns than the average bond. So that means that Bitcoin as a near-perfect form of money that has a compound annual growth rate of around 50% is starting to become the new hurdle rate that that all other financial products have to abide to and it's setting a standard.
(25:14) So instead of buying a regular bond issued by a nation state now as a allocator of capital, you can actually buy um a fixed income product issued by strategy and you have a higher return on that. And I as a somebody that comes from real estate and I've tweeted about this multiple times and I'll explain it again.
(25:37) I find strike extremely interesting and a light bulb moment happened for me. I was at Strategy World and I was listening to Fun Lee and he was explaining how he he has neighbors. He was telling a story about his neighbors. It's a couple that retired and they have real estate and they are not developers. They're not particularly interested in managing their properties and keep them intact, but they have to and they bought the property because they wanted cash flow after um stopping to work.
(26:06) So there's a lot of people that get into real estate, they're kind of unaware of the tax benefits. They do know about the leverage and the upside, but they are primarily there for cash flow. So if they are there for cash flow, they could buy strike because strike has a similar cash flow year on year like a property, but obviously it has less upside.
(26:28) You can't buy it on leverage. There are also no tax advantages. I'm aware of that. But let's say you also want some upside. You are not just interested in real estate because of the cash flow. You're also interested in real estate because you want some upside. Stripe also has upside because you do have the option if MSDR common stock hits $1,000, you do have the option to convert 10 strike into one S MSDR common stock.
(26:59) And that option becomes particularly interesting if we go through a bare market because strike was sold at a price of $85, right? I think now it's trading above $100 because there's large demand for it. But now let's imagine there's a 60% draw down in in Bitcoin and strike goes down to $60. That's a possibility.
(27:20) I'm not saying it's going to happen today or tomorrow. I'm just saying this is a possibility. If that happens, the way I would look at it is the following. If I'm a real estate investor that did not 100% understand Bitcoin, I'm looking to generate upside and cash flow. I want to make a good deal.
(27:38) So now I'm looking at the possibilities in real estate with high interest rates, high cost of capital. The leverage becomes less interesting. And now I look at Strike and I can buy Strike for let's say $60 which is below the conversion conversion rate of $100 and I get um still $8 in distribution. So now I bought an instrument.
(28:05) Let's say I buy 10 strikes for $600. That cost me 40% less than if I would buy it on par, but I still get $8 cash flow. And if Michael strategy then in the next bull market goes to $1,000, I do have the option to convert strike into MSDR. I don't have to. Maybe people don't want to because you sit higher in the capital structure.
(28:31) Meaning if strategy goes bust, the holders of the preferred stocks are being paid out first and then the holders of the common stock. But let's say I do want to convert, I could. And that is for me coming from the world of real estate and applying how I was told to think about real estate a better deal than the average real estate deal because I can buy an asset 40% below uh its value so to say and I still get distribution.
(29:00) So I still have the cash flow. So there's an upside potential here. There's the cash flow element. And uh I think that um I don't know in particular but I'm assuming that Sailor is very much aware of this and Fong Lee as well because they discussed it on stage at Strategy World that this is a product that could potentially tap into the real estate market.
(29:20) And I'm not saying that 80% or 90% of the people that invest into real estate would buy this product. But it's if it's just 1% that's 3 trillion that's enough. And I think that the bond market of course will now be faced with the reality that there are products that yield the higher return cuz they are based on Bitcoin which will lead to people that invest into bonds to start considering also these products like Strife and Stride that are fixed income products based on Bitcoin.
(29:55) they will start to ask why can they yield higher returns than a nation state and then they start I think also to understand maybe Bitcoin and the Bitcoin network which is the central bank of Bitcoin as an analogy is more trustworthy than a nation state because they can yield higher returns and now if you say they tap into 1% of the bond market that's 3 trillion which is a lot that's more than the the the market cap of of Bitcoin and now let's assume there's also half a percentage of the people that would put their money into real estate now are willing to put their
(30:27) money into a strike. That's 1.5 trillion. So I don't think that the amount of people that invest into real estate and hold their capital in real estate needs to be that large to have a significant impact on the ability of MSTR to raise capital and then put that money into Bitcoin. US now has a strategic Bitcoin reserve.
(30:46) That's not clickbait. It's a policy directive. Unchained and the Bitcoin Policy Institute just dropped a new report and are hosting a live event to unpack it. It's called the strategic Bitcoin reserve era begins. We've got Congressman Nick Beich, Matthew Pines, and Joe Bernett breaking down how the first 100 days of the new administration flipped the policy script on Bitcoin.
(31:05) Go to unchained.com/tc to register and read the full report. That's unchained.comTFTC. Few questions here. One comment and a few questions. One comment being like bond investors looking at these strategy products I mean like why are they yielding higher than than nation state debt and then you look at the size of strategies Bitcoin treasury and I think in aggregate it's larger than all nation state treasuries combined and so we're in the beginning stages of them amassing enough economic or an amount of economic power that will rival nation
(31:44) states at some point down the road to Bitcoin gets when Bitcoin gets mass adoption, we're going to manifest here. Um, and then two, what are the risks in terms of so that that income that that cash flow that that really appeals to you as a real estate investor? Where can that slip up? How is that cash flow being produced for strike investors? And is there any potential for that to dry up? Sure.
(32:14) I do have to state though for me personally I don't own these products and I just own Bitcoin to be honest with you and I'm not interested in the cash flow because the year-on-year growth of Bitcoin outperforms any rate of cash flow. So I think it's important to state that so people are aware of how I look at this.
(32:29) But I do have like in my back of my mind I have the education of a real estate investor that thinks like that and then I try to evaluate how other people that are in in real estate think about that. Right? So they don't understand that the compound annual growth rate of Bitcoin beats any cash flow that you can that you can receive. And the idea of having cash flow is actually kind of also based on the idea of outperforming inflation.
(32:53) like in the personal conversations that I have with people that are really interested in cash flow there's two people now one it's people which also applies to me I guess um when we do talk about cash flow once you stop working um you need to have some cash flow right and it's and then real estate becomes interesting in that regard but but generally speaking from an investment uh standpoint people that want cash flow often think in fiat terms and they want to outperform the rate of monetary infl inflation.
(33:22) You don't need to do that with Bitcoin. So, you don't necessarily need cash flow on Bitcoin. But people want cash flow, right? And how is the cash flow being paid? How are the distributions on Strive, Strike, and Strider are being met? They're being met through the issuance of equity. So, um I actually I was looking into it yesterday and I made some notes notes on that.
(33:46) So if you think about it that um strategy has enough Bitcoin holdings to cover the dividends on the preferred for over 200 years. So at the at the moment it's around 250 million on yearby year but it's going to grow because there's a plan to issue 21 billion in fixed income and then it will be obviously significantly more but at that point of time the Bitcoin stack will also be worth significantly more.
(34:15) So assuming it would take strategy another cycle in order to really fill I think that will be very fast but let's say in the next cycle the next four years strategy is able to fill demand for 21 billion in fixed income by that time their bitcoin treasury will be worth now it's 60 billion it will be worth maybe two 300 billion and then they won't have 200 years in BTC holdings to cover the divments of the preferred maybe it's 10, 20, 30, 40, 50 years, but they are still significantly in a good position to to issue to issue
(34:52) stock to pay the the uh distribution and payouts. And also, and that's important to mention, strategy is a company with a business line that is working. So the the credit rating of strategy uh is also tied to its ability to generate cash flow to its mainland of business which is business intelligence and AI services.
(35:17) So I think it's important because if you come as a Bitcoin treasury company um and Meta Planet works a little bit different and I still believe that they have a good strategy. The same goes for for Strive A SST for example who only focus on Bitcoin. But if you are a zombie company because Strategy uh was kind of a zombie company actually.
(35:41) If you are a zombie company that only buys Bitcoin and you don't think about having a major business line or you don't think about creating demand for your stock even in a downturn, I think you have you you might run into problems paying out those distributions. And I think that in this bull market, even though I'm very much interested in the different offerings, especially of strategy and also the way that MetaPlanet is is is raising capital, there's a high potential that this bull market, the treasury companies will create a sort of a bubble. And I
(36:18) believe that is because leverage, generally speaking, always needs to be liquidated at some point. And over the past two bull markets, the leverage took place on exchanges. So we had in the last bull market, there's a number of exchanges that went bust um all these different yield uh strategies that were offered on on exchanges.
(36:41) And now we have the leverage in the equity market. But just because the leverage now happens on let's say the institutional level in entrepre does not mean there's no risk in it. And the risk is specifically centered around the fact that the payouts and the distributions that are offered by Bitcoin treasury companies are met by issuing stock and strategy has such a large customer base and such a large Bitcoin base that even if Bitcoin now drops 60% they can easily fill the distribution.
(37:16) But companies and zombie companies that are just starting with a Bitcoin treasury model, they have a very low Bitcoin treasury and they maybe they have no line of business. If they go in very very hard, if they overlever, they might not be able to pay the distribution and that could create a a cascade of selling pressure and that could then lead into the next bare market potentially.
(37:40) And is that only the case if they issue strike like preferred stock offerings with a cash flow kicker? I do uh I would say uh the to the comment I just made I would say yes but I would think it's very important that they have a cash flow kicker because if you think about it the only reason for somebody from Trevi for example Alians an insurer from Germany that's very conservative the only reason for them to buy convertibles or preferred stock offerings of strategy is because they believe that whatever whatever strategy
(38:19) has to offer in that case the payout is higher than what they can get somewhere else in the market right and that's tied also to Bitcoin's performance but if if you're a Bitcoin treasury company and you say oh I offer a convertible bond without the option to convert at the premium or I offer a preferred stock that yields less than the bond of a nation state nobody will buy it so you need to offer a distribution that is higher than whatever nation state offers for people to get interested in that preferred stock offering.
(38:57) Yeah. Crazy times. It's really uh it's really exciting time to be in Bitcoin, but also unnerving in a in a certain sense cuz because the magnitude the order of magnitude of of flows coming into these products is is all inspiring. Um, and that's why when you consider something like 21 backed by Tether, Bitfinex, uh, and SoftBank, maybe that's a formidable competitor.
(39:26) Who knows how integrated Tether's operating business will be with with 21. Obviously, that's cash flowing pretty heavily. Um, yeah. And in terms of the other question I wanted to ask in terms of like real estate developers looking at the return profile and the risk profile of these of these offerings and allocating to it. Do you get the sense that they would literally sell some of the real estate assets to get exposure to this or would they incorporate it in um in sort of like a a a multi not a multistrap but like um last night we were at the Bitcoin meetup
(40:07) here in Philadelphia and somebody was saying like an easy ETF to launch would be basically an S&P index ETF with a 2% Bitcoin allocation just the juice returns. Would do you imagine a similar strategy arising in real estate where you have these real estate development funds um with their typical real estate cash flows and return profiles with just like a 5% allocation to these preferred stock offerings or convertible notes to to get a a kicker on the returns that I just had a conversation with someone that actually sent me a business plan for
(40:43) that. So the the idea was you could lend against your uh property, you invest it into um into strike which gives you upside option and you have a payout a div a distribution. Um so I think that um there's different approaches for it but judging by the conversations I have on a day-by-day basis the people that are like hardcore bitcoiners by now they have sold their properties or they sell their properties.
(41:10) So over the past 2 or 3 years, I've met many Bitcoiners that own properties because they saved in real estate and they had a fiat job, let's say, and they stack BTC as well. But over the past 10, 20 years, they build a real estate portfolio. These individuals usually sell off their properties quickly and make the switch into Bitcoin because they are um only responsible for themselves, so to say, and there are investors that invested their own money.
(41:38) Now talking about larger in institutions and larger companies where you have different LPS and different partners I see that people number one they use the cash flow from the rental properties to buy Bitcoin to protect the cash flow from inflation. So I think Bitcoin is the best store of value for real estate.
(41:58) And something I also see is and that's something I came to realize if you look at high netw worth individuals when they make new investments usually they don't sell they borrow against the existing asset base that they have and then they make that investment and with real estate that works particularly well.
(42:16) So I have seen a number of individuals, a number of companies that refinanced the properties that they own instead of selling it and then they took that money and allocated it to Bitcoin. And now the question is if you understand Bitcoin but you are not somebody that's in real estate development because you bring the capital.
(42:38) Let's say you bring the knowledge, right? So you bring the knowledge as a developer, somebody else brings the capital, you build the property and for the work you receive 50% equity in the property. Right? So that would be us for example. For these individuals, I see that they are starting to incorporate Bitcoin in capital raising.
(42:58) So I've been working on it myself. It's pretty difficult and due to regulation and banks not willing to take the risk. But we are working on a deal right now where for the next development we are taking on additional uh cash, additional capital, additional money. Sorry, we're raising more money and we're buying Bitcoin with that money.
(43:19) And that's something I believe is like a very smart thing to do. You add Satoshi's and not just fiat in your capital raising. So you can build a Bitcoin treasury from the beginning and then it it takes away the stress. It takes away the reliance on interest rates and on the central planner. It gives a bit more freedom in the way you construct your properties.
(43:37) And I also see people that now are offering new um real estate investment uh products where they also publicly say that they take the money, put it into uh the cash flow, excuse me, and put it into into into Bitcoin to juice up the returns. So there's different practical ways of of merging Bitcoin and real estate.
(43:57) And if you want to stay in real estate because you're a good developer and you have fun, I highly suggest to start now chatting with the institutions that you work with and suggest to also raise some sets, not just fiat for your next capital raise to build that Bitcoin treasury because a Bitcoin treasury by itself might be a business model if you're publicly listed because you can leverage the ability to to issue stock to raise money and dilute your shareholders which in this fact is not add because you increase the BTC per
(44:28) share. So being a public listed company, having a BTC treasury actually becomes a business model. But if you're a private company, you can still hold the Bitcoin treasury. It won't be the main line of your business, but it will support you in whatever you do. Completely agree. I mean, that's something we've done at 1031 since we launched is hold some of the money we raise in our funds in Bitcoin as reserves.
(44:53) And that's that's benefited us massively over the life cycle of our funds. And highly recommend, particularly if you have like a a 10-year fund at at the very least, it makes a ton of sense to to allocate a portion of your raise to Bitcoin. I mean, it's something we advocate that any of the companies we invest in, they take a portion of the raise um from the proceeds that we give them, put it into Bitcoin.
(45:15) And we've seen just that simple practice of raising money, putting a portion into Bitcoin, depending on what your particular company is, where your revenue profile is, where your profit profile is. It's different for everybody, but I think even a small tow dip into a Bitcoin treasury has paid off massive benefits.
(45:35) We have a number of companies that their Bitcoin treasury is now worth more than all the money they've they've ever raised, which is which is insane to think. And they don't have to go back to market to raise again because they have have this treasury. That is great. And that will also allow the founders to keep more of their share distribution.
(45:55) You don't need to dilute yourself as a founder. Exactly. Exactly. Very founder friendly um way of way of thinking about managing your treasury in the long run. But beating on this topic of the intersection of real estate and the opportunity cost that exists between real estate and opportunity cost. You've mentioned it multiple times.
(46:15) You're a bit winner. You prefer to hold Bitcoin and cold storage. You get it and you are allocating as aggre aggressively as possible. I would uh put myself in the same bucket there. Obviously, there's a spectrum of people um and their comfortability with Bitcoin specifically, but for the market overall, what do you think is the best path forward or the best outcome moving forward with all these options on the table and all these strategies that we're discussing? Like to me, what we've been talking about, what we've been
(46:49) describing makes me incredibly optimistic because it paints a clear path towards a somewhat um a somewhat smooth transition to a Bitcoin standard where everybody's not going out and dumping the real estate all at once, crashing the real estate market, which collateralizes a lot of the global economy.
(47:12) um basically beginning to tow dip, whether it's doing a a juice return profile by having your typical real estate portfolio and adding something like strike or just a little bitcoin allocation. Um how how do you see the the optimal path forward? Is it everybody going to dump the real estate, allocate to Bitcoin, let things repric rather quickly, or would you prefer like a smooth transition where people just begin slowly but surely getting a little Bitcoin exposure at first but increasing that exposure over time? Yeah, most
(47:44) definitely. Um, I would also prefer a smooth transition. I really like the article that you wrote. So, for the listeners, um, I would highly recommend reading that. Marty wrote an article of the dual collateralization of of Bitcoin and real estate and the importance of that and that's also why I'm beating the drum on that because I do not want to see a state of the world of chaos.
(48:07) I I I often go back to what happened after Vimma. Um being a German I'm very aware of the negative effects of inflation and the information problem and the calculation problem that can result from it. People are not uh capable of of making once money loses value most things lose lose value including human lives right people don't value things or don't value themselves they make bad decisions they start to vote very weirdly why is it that during times of high inflation which is driven by central planners people tend to to vote
(48:41) for central planners it's there's a this contradictory paradox where people kind of dig their own graves so to Okay. And now if Bitcoin is being included as as a hard asset into the global financial infrastructure, it can create some resilience that we all benefit from. And generally speaking, I do take like the Austrian perspective where I try not to judge how things are.
(49:07) I kind of just try to look at it and understand it without necessarily judging it. And I think Bitcoin is near perfect money is being used wherever it's needed most. And in the less developed world, Bitcoin is being used as a medium of exchange predominantly because there are just very bad payment infrastructure.
(49:28) In the developed world, Bitcoin is also used as a medium of exchange, but it's it's predominantly used as a store of value and I believe the reason for that is currency does not represent the bulk of the world's money. Right? First of all, the money exists on screens in in in digits. And then also certain asset classes like real estate, bonds, art, and collectibles.
(49:50) They've taken on a monetary role due to decades of monetary inflation that has decimated people's purchasing power and they now sit on corporate balance sheets. So all all over the world, companies stored their productivity in asset classes like real estate and government bonds that are actually bad forms of um storing value and productivity.
(50:14) And now Bitcoin is kind of tapping into these pools of of capital and is demonetizing these forms of money. So I think it's a net positive and I don't think it's ex m like it's not mutually exclusive. In my opinion, Bitcoin can be both a medium of exchange and a store of value because it's just money. Bitcoin is money and money fulfills the these different roles.
(50:38) We just kind of forgot what money is because we were living on such a bad monetary standard for the past couple of decades that sometimes it's shocking what Bitcoin is being used for. But then when I think about it, I understand, wow, this is actually a monetary use case that I totally underestimated because I myself had a distorted view of what money is.
(50:59) Yeah, thank you for I'm I'm glad you're reading the newsletter and uh that you like that one in particular cuz no, it's again I'm similar. Y I try to pro prognosticate and and project forward, but always fall back to first principles of that's where I would like things to go, but let's just dissect things as they are and and make rational judgments based off of that.
(51:23) Market can stay irrational far far longer than you can stay solvent and every other um sort of disclaimer trope that you have there. But it is and I've been talking about it for multiple years now and uh after having had many conversations with yourself, Andrew Hones, Kelly Lannon, others, it it just makes sense to me that if you want a smooth transition, the best way to do that is this dual collateralized credit structure that allows the borrower to participate in the upside of the Bitcoin. cuz I think if god forbid uh
(52:01) this train doesn't stop, nothing stops this train and you do have some sort of uh high inflationary to hyperinflationary event at some point down the line. Hopefully, it's later rather than sooner and a sufficient amount of the market is engaged in these types of dual collateralized products like that creates somewhat of a safety net for people exposed to those products which allows you to reorient and restructure the economy in a more uh in a more uh what's the word I'm looking for? Uh regimented and sort of less chaotic way. Exactly. Yeah.
(52:44) That would be the greatest outcome for the greatest amount of people, I guess, done through Bitcoin and that would be good. Yeah. So, what do you think? Is this cycle different than last? I had a long very tense discussion with a very good friend of mine yesterday. He's anonymous, but he's been in Bitcoin for over a decade as well.
(53:05) And he's he's been he said, "Leon, you're misjudging it." Now that's the point where we are going into some form of he didn't call it super cycle but he said that the volatility can't be bigger than 60% because large institutions and bitcoin treasury companies are buying so much bitcoin and they're hodddling it they're not willing to sell it that even if uh let's say the leverage is being washed out at some point you can't see a draw down more than 40%.
(53:32) And I personally sort of have the opinion that Bitcoin is doing what Bitcoin did and does every single cycle and it's a net positive because it builds resilience. So I wouldn't be able to pinpoint my finger into let's say it's going to happen November, December or in the first quarter of 2026.
(53:54) But just judging by my intuition, I think that Bitcoin at some point needs to wash out leverage and that creates like resilience because in the fiat system, we've got these boom and bust cycles. Whereas over time, once the market experiences a downturn, new money is being created. It's being funneled into the market to stop the downturn from happening.
(54:15) But over time there's a there's a bust like in '08 or you had one in you know we had one in 29 that's also very known of course and you had various boom and bust cycles throughout the years and throughout the last century and with Bitcoin because Bitcoin naturally washes out leverage it builds resilience and we don't throw through these crazy boom and bust cycles we go through bull and bare markets and I think that's a net positive also for the mentality of the stack hackers and the hodlers it wouldn't be good if Bitcoin would just
(54:46) now go on an upward trajectory but judging by also the last two years things are changing where for example in about a year and a half ago we had a bull market in miners so if you talk about cleanbox for example clean sparks I think in December of 2023 please check the timeline here but clean sparks peaked around 23 24 $25 and now it hoovers around $10 and some of the other miners like Riot and Marathon they went through a small bull market at that time shortly before in the summer we had an ordinance bull market. So what is
(55:20) interesting is that in specific asset classes that are tied to Bitcoin like um collectibles on Bitcoin or miners we have bull markets that are not in line with the general price directory of Bitcoin. So that's something that I personally haven't seen before and I am paying attention to that because what it tells me is that the Bitcoin bull market is extended in a way.
(55:46) Bitcoin is not crashing from let's say 90,000 to 10,000, right? But it it still has volatility and it went from 100 to 30 uh to 82 just a couple of weeks ago. And I do expect we'll have a 60% draw down at the end of this bull cycle as well just to wash out some leverage. I'm sure bad players will enter the market like like always.
(56:10) So I don't believe in some sort of super cycle or the liquidity squeeze or supply squeeze happening like immediately. But I do believe that there's there's a change that we can see. The asset is maturing. The understanding of the asset from large pools of capital is maturing. like Sailor is not going to sell his stack, right? And he's holding over 2% I think of the total stack at this point.
(56:33) And as these companies are stacking, volatility will dampen, but I don't think it will go away. And that's a beautiful thing. It really is. And I would agree. I think there's definitely going to be a correction at some point. Is it going to be the magnitude of the 2017 correction or the 2013 correction, 2014 correction? Probably not.
(56:57) But as you mentioned, uh, humans are incredibly social beings. The her mentality does take over. People make bad decisions and leverage has to get wiped out. But one thing I mentioned in that piece that you brought up and was actually tweeting about yesterday, one of one of the things I'm looking at, whether it's these dual collateralized credit structures with longer durations or now bit bonds are becoming more of a topic of discussion.
(57:24) You had uh mayor, the mayor of New York City announced that he would like to launch a municipal bit bond in New York. And yesterday you had Russia's largest bank, Spurbank, uh launched a structured bond tied to Bitcoin. And that's one thing I'm trying to wrap my head around, get a better understanding of is if you have these structured credit products and bond products, bit bond products come to market and they reach a critical scale, they reach scale, like that has to do something for volatility because you have this forward-looking duration curve
(58:00) that you can point at and say, "Okay, I know that X amount of Bitcoin are locked up for Y amount of time. So that supply is unlikely outside of bankruptcy to come to the market to be sold. And that has to give institutional investors some piece of mind from a volatility perspective saying, "All right, at least I know this portion of the Bitcoin supply is going to be locked up for for this amount of time.
(58:28) " And so then you try to calculate what the free float is beyond that and what effect that could have on price. And I don't know if there's a question there, but just something I'm paying attention to. Does this forward-looking duration curve begin to affect the psychology of people and their comfortability with Bitcoin? Yeah, I think that is in line with Bitcoin being part of this greater monetary reset where as near-perfect money, it's it finds its way into every capital structure basically.
(58:58) Yeah, it's exciting times. And then it's something and I've been jokingly tongue and cheek saying Super Cycle for a year just to trigger people on Rabbit Hole Recap, but we've been saying it on that show for years too. It's like once Wall Street comes like if you thought DGEN's on BitMX and Binance trading at 100x leverage where we're where uh degenerate just wait till Tradfi gets in and tries to create products around this.
(59:28) And I think we're at the very early days, but I don't think I don't think people should discount the the degeneracy uh the levels of degeneracy to which Wall Street and high finance can can engage in as well. That is true. It's a very good point because sometimes people make the argument saying treadfire is not coming to Bitcoin and then I will say whether it's not a good thing necessarily.
(59:52) It's definitely a good thing that you have companies, Bitcoin treasury companies that are buying Bitcoin in large bouts and they're holding it. Sure, there's also custo like custo custodian risk to that. That's another topic that uh that is worth discussion. But Trefy coming to Bitcoin, I think Bitcoin will give Trefy a big slap in the face and that is being done through washing out leverage and that means downside volatility.
(1:00:22) Yeah. And you had, sorry, there's somebody mowing the lawn outside, so I want to make sure I'm on mute when you're talking, but you had uh you had a pretty long tweet. Um, and I won't read the whole thing, but I think probably a good point to end on. Uh, it's your tweet. The truth stings at first. I've been on building sites since my teens and have spent my early career turning dirt into concrete cash flow.
(1:00:47) And as I told myself, lasting wealth, it took years as a bruised ego to accept that no asset, not even prime real estate can compete with Bitcoin's long-term performance and absolute scarcity. Markets don't care about our feelings and math won't bend to sentiment. The sooner we face the reality, the sooner we can position ourselves to benefit from Bitcoin.
(1:01:06) Then you explain how you see it. But to any of the real estate developers who are listening or watching this interview cuz they're interested on your perspective as uh somebody in real estate who has gone allin on Bitcoin um or incorporated Bitcoin into your strategy, what would you say to the skeptics out there? How do they get off zero or what question should they be asking themselves? I think the question you should ask yourself is start measuring your your wealth in Bitcoin.
(1:01:38) Take the value of the properties you own year by year, month by month from any time that you would like to choose four years in the past until today. And I can guarantee you, you'll be shocked by how rapidly um the properties that you own are losing value. And I think that's what you should do. You heard it here first. Um, should we tease the book at all or are you keeping that close to the chest? Not at all. Not at all.
(1:02:06) I I'd be happy to. Um, yeah. So, I'm writing a book by the working title Digital Real Estate. Uh, hopefully it'll be released by the end of this year. I've been working on it for around 3 years. It's just it's taking a lot of time. I'm spending a lot of time on it, thinking about it a lot. And it's going to be released with with Bitcoin magazine.
(1:02:27) And um the idea is I have three chapters in the book that I also have smaller paragraphs of course. The first chapter is explaining Bitcoin as digital real estate, the investment thesis behind real estate and Bitcoin being very similar. And in the second chapter, I take you deep into very practical strategies for using Bitcoin in the real estate uh industry, for real estate development, for protecting cash flow, using meat to using uh mining to generate heat and also offsetting increased energy cost and uh also eventually if you want to going into the
(1:03:03) public markets tapping into that and the effect of corporate adoption on Bitcoin. And in the final chapter, I go into the socioeconomic effects of Bitcoin replacing real estate and then becoming the bedrock of the global financial system and becoming hopefully the new hurdle rate. Well, thank you for your time.
(1:03:23) Thank you for writing this book. I can't wait to read it. It's always great catching up with you. I think uh you're on the cutting edge of this intersection of of real estate Bitcoin and then just beyond that thinking of Bitcoin generally more broadly and thinking of ways to dip your toe in get more exposure in a in a somewhat u somewhat smooth transition.
(1:03:49) So, thank you for coming on having this conversation. Uh I hope to see you in person at some point soon. I know you're over in Germany, but hopefully next time I'm not running out of a conference when I see you in person. Yes, I hope so, too. Thank you for having me on. I appreciate it. All right, peace and love, Freaks. Freaks.
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