Hearing manymisconceptions about the $MSTR secured bond deal, what it means for $BTC, and many completely false narratives about "Will Saylor be forced to liquidate his BTC?"

Here's our interpretation of the bond covenants from the prospectus (h/t @MikeDershewitz )

Thread 👇
1) Collateral
Even though $MSTR says they intend to buy #Bitcoin, there is no promise or requirement to buy $BTC. This bond is a standard secured bond ($500MM) which is secured by all corp assets other than the first 92K BTC ($3.4bn @$37K) already purchased - that was carved out
The $500MM raised MAY be used to buy $BTC (which $MSTR said they will do), but the investing public should hold them to it if they don't. They are under no obligation to buy #Bitcoin.
There are loose covenants on the cash collateral if $MSTR doesn't buy #Bitcoin. Even if they do buy BTC, there is nothing requiring them to hold the $BTC besides public disclosure. They are moving the old 92k BTC to an unrestricted subsidiary which is excluded from collateral.
2) Bond Covenants
- No covenants -- no one can force a sale of $BTC
- $MSTR is allowed to raise more debt at the unrestricted BTC co which would be structurally senior to the $3.4B (so original convertible bond holders are potentially getting primed).
The definition of consolidated EBITDA includes any non-cash income. We assume this means that IF #Bitcoin rises, then $MSTR is allowed via covenants to:
a) Issue pari passu secured debt up to a 3:1 ratio. After the $500M raise, secured levg is currently 5:1. So if $MSTR generates just $70M of $BTC paper gains on their massive stockpile, they can then issue more pari passu debt. There is no equivalent test if BTC falls.
So basically, if $BTC goes up, $MSTR EBITDA goes up, which means their leverage ratio goes down, which means they can potentially issue more debt to buy more BTC -- if BTC goes down, nothing happens.

Good for MSTR, maybe good for $BTC, bad for bondholders
b) Restricted payments up to 2.75x on total leverage ratio. $MSTR has $2.2B of debt today and $100M of EBITDA. So this is less likely than the pari debt but worth noting (EBITDA would have to go up to like $800mm before they can pay themselves a dividend)
Will this be a blueprint for other companies?
- Probably not today. It's still a use of balance sheet cash and $BTC is volatile. In this case $MSTR is using this BTC for some balance sheet trickery and trying to lever up, but leverage isn't lacking for most companies these days.
Bottom line: This $MSTR secured bond is just a standard secured bond that has very little to do with $BTC.

Bondholders basically sold a call option (for 6.125% yield) and a put option... MSTR walks away with a ton of upside optionality, and it has a marginal impact on #Bitcoin
But any fears of $MSTR being a forced seller of $BTC, or being "liquidated" is a complete farce and a misunderstanding of how bond covenants work.

If you use this data point at all for $BTC analysis, you're basically just saying "I trust Saylor to buy more and to never sell"

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More from @jdorman81

8 Jun
Every sell-off ends when a catalyst emerges... easy to find catalysts for things like $ETH (EIP-1559), $DOT (parachain launch) but what will be the likely catalyst for $BTC?

Here are 2 possibilities:
1) People constantly confuse "institutional buyers" w/ "fast money traders"

Ruffer, Blackrock, Minerd, etc - traders. They entered (unemotionally) when $BTC was cheap & underlevered ahead of catalysts (4Q20) & exited when expensive, overlevered, & lost its catalysts (2Q21)
But these traders made a lot of money, & will return (with others) when $BTC gets cheap again... when
- leverage is flushed (✅)
- fear gets too high (✅)
- fiscal/monetary stimulus continues unabated

Nowhere else to go with rates heading back to 0% & the USD going down.
Read 5 tweets
6 Jun
This tweet followed a 40 min call Joe had w/ @DavidNage & me

We had a rational discussion; same as we have daily w/ smart, successful investors who deploy millions into our funds.

Joe is not dumber than them; he’s just committed to a successful antagonistic anti-crypto schtick
I said tokens turn customers into owners & incentivizes USAGE of a protocol & product, not that it incentivizes buyers of a token. Thus, not a get rich quick MLM. It is a way to attract & retain customers. MLMs favor the rich sellers; pass thru tokens favor the everyday customers
If a restaurant gave out free food for a month, it would attract customers, but be a failed biz model unless the food & service was so good that they came back after it was no longer free.

Tokens create step 1; step 2 is up to the project, & many are now succeeding at retention
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Lots of people asking for my opinion right now... here's a quick and dirty thread 👇
First, think about what caused the rally since October 2020:

1) Low rates / low dollar

-- still very much in tact even though there are taper talks and inflationary data, rates and the dollar still have not reacted, which is still very bullish for risk assets
2) Inst money coming into the market

-- Inst money doesn't come faster or slower based on price moves. Those trying to deploy will still deploy, and they are. Though $GBTC & $COIN may have been leading indicators, as downward px moves show inst money was already slowing
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We believe $SUSHI is now the most undervalued token in digital assets.

A thread on valuation, upcoming catalysts, and why the recent downward price action will be short-lived Down pointing backhand index 👇
2/ $SUSHI has underperformed both $UNI and the broader DEX market since the beginning of the year.

This is most apparent with the 50% peak-to-trough decline in March and April (still down ~30% from ATH’s)
3/ Why? 3 Overhangs:

1) rolling 6-mo vesting unlock from initial Sushi yield farming
2) PancakeSwap growth
3) Uniswap V3 hype

Let's break each of these down -- none of which have any actual impact on $SUSHI valuation and its core business.
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A thread on thought process for special investing in digital assets .... courtesy of $LEO
Step 1: Identify a new catalyst (news, a merger, something unnatural...)

Step 2: Analysis

The stolen funds probably not getting dumped that easily, how else could they monetize?

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Nexus Mutual ($WNXM) is the most undervalued token in digital assets & it's not even close. Trades at just a $23mm net market cap despite being one of the most utilized #DeFi projects.

A thread on valuation and upcoming catalysts 👇

(h/t @arca head of research @KatieTalati )
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Digital asset builders are trying to build the car while simultaneously driving it. Fine in theory, but in reality, not laying key pieces of infrastructure early on can stymie growth & innovation.

For #DeFi, insurance is infrastructure
Insurance is a sleepy, boring business, but insurance in the case of #DeFi is also crucial to an ecosystem that is still being built yet already holds a massive amount of assets and is still growing (current DeFi TVL: $43 Billion).
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