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,