Should you invest in bitcoin treasury/mining companies like American Bitcoin announced this week? No

00:00 Should you invest in Bitcoin mining
00:03 companies such as the new Bitcoin
00:06 company American Bitcoin that launched
00:09 like this week maybe? I don’t know. But
00:11 anyway, it’s got um Eric Trump and
00:15 Donald Trump Jr. as I think strategic
00:18 adviserss. I don’t know what their role
00:19 is. The answer for all of this Bitcoin
00:22 treasury companies and Bitcoin miners is
00:25 no. And I’m going to tell you why I
00:27 think that. Okay. First of all, Bitcoin
00:30 miners, Bitcoin mining is a brutal,
00:33 brutal, brutal business to be in. Um,
00:36 the number one input that matters is the
00:39 cost of electricity. And so, it’s
00:41 essentially a race to find the cheapest
00:43 electricity anywhere in the world. And
00:45 anybody who’s got cheaper electricity
00:47 than you do and can still get Bitcoin
00:49 mining equipment uh and run, you know,
00:51 run on an operation is going to undercut
00:54 you on price and they’re going to end up
00:56 mining more Bitcoin than when than you
00:58 do, which pushes you into a loss, which
01:01 is the way any industry works. You know,
01:02 the grocery store business is a brutally
01:05 competitive business. So there’s nothing
01:07 magical about the Bitcoin uh mining
01:09 business other than of course like any
01:11 commodity, gold, silver, you know,
01:14 copper, uh soybean, wheat, corn, rice,
01:19 you know, there’s always a buyer. Like
01:20 if you have a a commodity product,
01:22 there’s always a buyer at the market
01:24 rate. The problem is it’s very hard to
01:25 produce at below the market rate, which
01:28 is why any commodity business is, you
01:30 know, hard to be in. So, Bitcoin mining
01:33 is an especially difficult business
01:35 because you’re in a basically a global
01:38 race. So, you’re competing with
01:39 literally everyone on the planet to try
01:42 to get cheaper electricity than you. And
01:44 as soon as you think you’ve got some
01:45 amazing deal for 4 cents per kilowatt
01:48 hour off some, you know, nuclear power
01:51 plant, somebody’s mining off of flare
01:53 flare glasses at an oil rig and getting
01:56 paid to do it to take the methane out of
01:58 the air. It’s just a brutal, brutal
02:00 business. So, I do not recommend
02:02 investing in any Bitcoin mining
02:04 companies for anybody. That is not to
02:06 say that one or two of them, I mean,
02:09 it’s certainly hypothetically possible
02:10 that one or two of them outperforms
02:12 Bitcoin on some short time frame, just
02:14 like it’s hypothetically possible that
02:17 any random company that’s a Silicon
02:19 Valley technology startup could
02:21 outperform Bitcoin in the near term. But
02:24 picking the winners and losers is almost
02:26 impossible. and the Bitcoin mining
02:28 industry in general is a brutally
02:30 brutally competitive business. Uh so I
02:33 do not recommend it. It doesn’t matter
02:34 if the company has two sons of a sitting
02:38 president on their board or employees or
02:40 I don’t know what role they play, but I
02:42 would not invest in a Bitcoin mining
02:44 company at all. Okay, so let’s talk
02:46 about Bitcoin treasury companies. The
02:49 largest Bitcoin treasury company in the
02:50 world is the company called Micro
02:52 Strategy that uh had changed his ru uh
02:55 name recently to just strategy just the
02:57 word strategy. It is uh founded and
03:00 headed by Michael Sailor. Michael Sailor
03:03 is a genius. He has probably read more
03:06 about everything that involved Bitcoin
03:08 than anyone else on the planet. He is an
03:11 engineer. He went to MIT. The guy’s a
03:13 freaking genius. Like I’m a huge fan of
03:15 Michael Sailor. Basically, everybody in
03:17 the world of Bitcoin is a huge fan of
03:18 Michael Sailor. So, what did he figure
03:20 out how to do? Well, he figured out that
03:23 you can borrow money. One second.
03:27 Actually, figured out two things. One,
03:29 you can issue more stock of your own
03:31 publicly traded company because it’s a
03:33 publicly traded company. you can issue
03:35 more stock of your own company and
03:38 Bitcoin with it and that will make the
03:40 your price uh your stock price go up
03:42 because Bitcoin is outperforming the
03:44 price of your stock and then you can use
03:47 the newly higher stock price to issue
03:49 even more shares to buy Bitcoin. So he
03:51 basically started what’s called an
03:53 infinite money glitch which is the
03:55 ability to issue stock and borrow money
03:59 below the value of what you can acquire.
04:02 So whether he’s issuing his own stock at
04:04 a price that is above uh the the value
04:07 of the Bitcoin that they’re sitting on.
04:09 So for example, right now they’re
04:10 sitting on 70 I’m using round numbers
04:13 here. 70 billion 70 $70 billion of
04:15 Bitcoin and their stock is trading at
04:18 hundred billion. So it’s let’s call it
04:20 it’s trading 40% higher than their
04:22 Bitcoin holdings. Well, that means any
04:25 additional shares you issue and you buy
04:27 Bitcoin with them, you’re making the
04:29 company more valuable because the
04:30 company is the the stock price is
04:32 trading higher than the than the the the
04:36 Bitcoin you own. And therefore, if you
04:38 buy if you sell a share for $100 or $400
04:42 and then you turn around and buy $500
04:44 worth of bit or $400 worth of Bitcoin
04:46 with it, but it only dilutes your
04:47 ownership $300, it’s sort of an infinite
04:50 money glitch. Now, there’s a problem
04:52 with this. uh which is that it works
04:54 great until it doesn’t, which is the
04:56 same with every great investment that
04:58 ends up ends up losing a ton of people
04:60 money, which is that they work great
05:02 until they don’t. So, in the case of
05:03 Michael Sailor, he can only issue more
05:05 stock to buy back his that doesn’t work
05:09 anymore because you’re basically doing
05:12 it in reverse and it’s not working.
05:14 Additionally,
05:15 Michael Sailor is borrowing huge amounts
05:18 of money. I think he’s borrowed like $9
05:19 billion, really cheap interest rates to
05:22 buy more Bitcoin. And the logic of
05:24 course is, hey, if I pay a really low
05:26 interest rate to borrow fiat currency,
05:28 US dollars from the economy. So if
05:32 Michael Sailor borrows, you know, cheap
05:34 money with cheap debt from the economy
05:37 and turns around and buys Bitcoin and
05:38 then the Bitcoin grows faster than the
05:41 interest payments on the debt, then he’s
05:43 basically making his shareholders richer
05:45 and which is great. The problem again is
05:48 that works great until it doesn’t. That
05:51 is dependent on people willing to give
05:53 him money to buy Bitcoin instead of
05:55 people buying Bitcoin themselves. Well,
05:58 in my opinion, the smart money is buying
06:00 Bitcoin directly instead of buying stock
06:02 in a company, thus buying Bitcoin
06:05 indirectly. So, why wouldn’t you just
06:07 own the Bitcoin and hold it yourself
06:09 instead of this roundabout way of
06:11 holding it through another company? Now,
06:14 hypothetically, he can borrow money so
06:16 cheaply and he can issue so much of its
06:19 stock that it results in the amount of
06:22 Bitcoin owned per share going up over
06:24 time, which in the last two 2 and 1/2
06:27 years has worked really well. For 2023,
06:30 2024, and half of 2025, that strategy
06:33 has been working great for him. But for
06:35 a period of time in 2022, the company’s
06:38 value was trading below INAV, which
06:40 means it was super hard to borrow money
06:42 and it was super hard uh to issue more
06:46 stock. So, and in the long term, as
06:49 James Czech often talks about, the
06:51 gravitational pull on any of these
06:53 treasury companies is toward an MNAV of
06:55 one. So, right now, you know, I don’t
06:57 know what the MNAV on Micro Strategy is.
06:59 Uh the the picker symbol on the stock
07:01 market is MSTR. Let’s assume it’s 1.5.
07:04 It’s like, okay, but if you buy it at a
07:06 1.5 mnav and it goes up to two, well
07:09 then you’re outperforming Bitcoin
07:11 because the value of the company is
07:12 increasing faster than the price of
07:14 Bitcoin. But if the gravitational pull
07:17 is toward one, you end up losing money
07:20 because even though Bitcoin increases in
07:21 value over time, the value of Micro
07:23 Strategy is losing value faster than the
07:26 Bitcoin is gaining value. Therefore, you
07:28 would have been better off in in
07:29 Bitcoin. Uh Michael Sailor is pretty
07:32 upfront and he’s like look buying Micro
07:34 Strategy stock is like a 2x leverage on
07:37 Bitcoin which means in the good times
07:39 it’ll probably go up twice as much as
07:41 Bitcoin but in the bad times it’ll
07:43 probably go down twice as fast. So in
07:45 the problem with that, of course, I
07:48 mean, it’s not going to go to absolute
07:50 zero, but the the the way that things
07:52 tend to work that are leveraged is
07:55 is when the price goes up 50%, the price
07:58 of the double thing goes up 100%. But if
07:60 it goes down 50%, the price of the other
08:02 thing goes to zero. And obviously, if
08:04 something goes to zero, it doesn’t
08:05 matter what multiple of percentages you
08:08 apply to it, it’s never coming back.
08:10 Now, Micro Strategy doesn’t exactly work
08:12 that way because they’re not going to go
08:13 to zero unless they can’t pay, you know,
08:15 their debt payments, but they are, you
08:17 know, $9 billion in debt. Now, they own
08:19 70 billion dollars of Bitcoin, so they
08:21 should be fine because they have a huge
08:23 amount of Bitcoin as compared to their
08:24 debt, but they do have a bunch of debt
08:26 that they do have to pay off or they go
08:27 bankrupt. So, it’s just a much riskier
08:29 bet. So, I think the upside of Bitcoin
08:32 is big enough already that there’s no
08:34 reason to massively amplify your risk to
08:37 try to get more upside. And I think
08:40 Bitcoin uh mining companies, including
08:42 American Bitcoin, are generally just a
08:44 horrible investment that the average
08:46 person should not even entertain. And of
08:49 any of the Bitcoin treasury companies,
08:51 the only one I would even consider
08:52 touching would be Micro Strategy because
08:54 they’re huge and because the amount of
08:56 Bitcoin they own as compared to their
08:58 debt is massive and because Michael
09:00 Sailor’s a genius. Um but you know, who
09:03 knows? Michael Sailor could get hit by a
09:05 bus and, you know, someone else could
09:07 take over control of the company and
09:09 decide to dump all the Bitcoin and screw
09:11 the whole thing up. There’s just risk.
09:12 It’s called key man risk uh or key woman
09:15 risk when you’re, you know, you’ve got a
09:17 lot of your eggs in the basket of one
09:19 person. And with Bitcoin, you don’t have
09:20 to worry about that because there’s
09:22 nobody in charge of Bitcoin. It’s, you
09:24 know, governed by everybody and nobody
09:25 simultaneously just like the internet.
09:27 And you’re not dependent on one person
09:29 getting hit by a bus or something like
09:31 that. So, my recommendation is buy
09:33 Bitcoin, keep it on a bit key, which is
09:36 the cold storage device that keeps the
09:38 hackers and the um hackers and the
09:40 scammers from getting it. And just buy
09:42 as much Bitcoin as you can, hold on to
09:43 it for as long as conceivably possible,
09:45 and just ignore the Bitcoin treasury
09:47 companies. Ignore the Bitcoin miners.
09:49 Just buy as much Bitcoin as you can.
09:50 Especially right now, prices are cheap.
09:52 The high was 124,000. We’re trading at
09:55 108,000 right now. That’s a pretty big
09:57 discount. Um, I would just buy as much
09:59 Bitcoin as I could, sit on it for long
10:01 as conceivably possible, and you’re not
10:03 opening up yourself to all the insane
10:04 risks of a Bitcoin treasury company or a
10:07 Bitcoin miner or hybrid blends of the
10:10 two, which there’s some of those
10:11 floating around as well. Thanks,