Bitcoin-backed preferred equity offers sustainable yield
The guest argued that issuing perpetual preferred equity backed by Bitcoin allows companies to offer high, sustainable fiat-denominated yields by capturing Bitcoin's long-term compounding upside.
The argument
The guest explained that because Bitcoin's 200-week moving average historically compounds at approximately 30% annually, companies can comfortably cover fixed fiat dividend obligations (such as 13%) using their Bitcoin balance sheets. Even during severe market downturns, the underlying Bitcoin reserves provide multiple years of dividend coverage without requiring rehypothecation.
The thesis, stress-tested
✓ What validates it
- ✓Consistent dividend payments by issuers during prolonged Bitcoin bear markets
- ✓Bitcoin's 200-week moving average remaining structurally positive and compounding
▸ Risks discussed
- ▸Lack of hard-coded investor protections forcing the sale of Bitcoin to fund dividends
- ▸Long-tail risk of rising dividend obligations as the product scales
- ▸Potential dilution of common equity from at-the-market (ATM) offerings used to scale the balance sheet
Hear it yourself
"It's too radical. Reality is far more modest. Reality is somebody just needs to take that risk and offer 11 or 13% fiat denominated yields so they can capture Bitcoin's 30% year over year average upside. My guest today on the show has a background in insurance and structured finance, which are the exact industries that he thinks are perfect target customers for these financial products, high yield, collateral backed equities. In fact, according to him, these products are so devastatingly simple that they short circuit people's brains when they try to reason about them."
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