Why are traditional financial institutions hesitant about Bitcoin? Saylor reveals the underlying credit market dilemma

Interview guest Natalie Brunell and MicroStrategy Executive Chairman Michael Saylor recently engaged in an in-depth discussion around a core topic: Can Bitcoin become a truly high-quality asset without cash flow commitments? This question strikes at the fundamental divide between traditional finance and digital assets.

The Underlying Logic Behind Market Calmness

Currently, Bitcoin’s price is in a consolidation phase, which many market participants interpret as a sign of weakness. But Saylor offers a completely different perspective—this is actually a sign of asset maturity.

He points out that Bitcoin has gained nearly 100% over the past year, which is already an impressive achievement. Price adjustments are not a bad thing; rather, they indicate the market is digesting the gradual exit of early holders, while institutional capital is waiting for volatility to further subside before entering en masse. This selling pressure mainly stems from an overlooked phenomenon: approximately $2.3 trillion worth of Bitcoin assets are in an “unbanked” state.

In other words, although holders have substantial paper wealth, they cannot use Bitcoin as collateral to obtain fiat loans. When digital assets are held but liquidity is lacking, many are forced to sell. It’s like employees of a startup being “wealthy” on paper through options but unable to mortgage those options to buy a house or send their children to college—ultimately, they have to sell options for cash.

Is “Lack of Cash Flow” Truly a Crime?

Natalie Brunell mentions that in conversations with traditional finance (TradFi) practitioners, she repeatedly hears the same reason: Bitcoin has no cash flow, so it’s not worth allocating. Saylor sharply counters this.

He points out that the most important asset classes in Western civilization—diamonds, gold, paintings, real estate—do not generate cash flow in essence. Even the most valuable things in life, such as marriage, children, property, or awards, do not produce cash income. This shows that “generating cash flow” is not the sole standard for measuring an asset’s value.

More importantly, from a monetary theory perspective, perfect money should actually have little to no strong cash flow. The essence of money is high liquidity and strong salability. If an asset is overly “use-value” oriented, it is less suitable as money—that’s why gold is more suitable as currency than copper: gold has fewer industrial uses and is less absorbed by industrial demand during economic cycles.

Why Are Traditional Ideas Difficult to Shake?

Saylor further traces the origins of the idea that “only assets with cash flow are good investments.” This mindset has developed over the past decades, especially since 1971.

The dominant global asset allocation paradigm has evolved into a 60/40 bond-stock portfolio: bonds provide coupons, stocks provide dividends or profits. The S&P 500 index has become the dominant benchmark, with about 85% of index funds allocated there. This is not coincidence; it’s the result of Vanguard commercializing index investing—successfully creating a fund based on the 500 component stocks—leading to the entire institutional system.

This creates a “path dependency”: once a large system is built on a certain way of thinking, even disruptive innovations that are superior are unlikely to be immediately embraced by traditional institutions. This is not a logical problem but a structural one.

Saylor uses a differential equation analogy: under specific boundary conditions, you get a “particular solution.” As long as these boundary conditions remain unchanged (USD valuation, US economic development, USD reserve currency status, no global war post-WWII), this solution holds. But if conditions change, the original formula becomes invalid, and you must revert to the “homogeneous solution” and re-derive from first principles.

However, most people operate their entire lives using the “particular solution” provided by others, never truly deriving anything from first principles. When the monetary system collapses—such as Lebanon freezing deposits, Venezuela’s bolívar devaluing, or Argentina’s peso collapsing—assets traditionally considered “safe” and cash-generating, when valued in local currency, often become worthless. Those who truly understand Bitcoin are often either caught in the chaos of currency collapse and forced to think independently or are inherently first-principles thinkers, like scientists questioning everything.

Ironically, Vanguard’s CEO states that Bitcoin is not investable due to lack of cash flow, yet the largest shareholder of Saylor’s company is Vanguard itself.

The Triple Dilemma of the Credit Market and Bitcoin’s Solution

Saylor then analyzes the structural issues facing the contemporary credit market.

The first layer is yield hunger. The yields on “risk-free assets” (backed by sustainable government money printing) are far below the pace of money expansion and below the appreciation rate of scarce assets. Specifically, Japan’s risk-free rate is around +50 basis points, Switzerland’s is about -50 basis points (negative), Europe’s is around +200 basis points, and the US is about +400 basis points. But actual inflation is often higher, leading major economies into “financial repression.”

The second layer is liquidity shortage. Traditional fixed-income instruments (especially corporate bonds) are difficult to trade, lack collateral, and some bonds have no trading records for long periods.

The third layer is that no one is willing to offer long-term high yields. In a survey at a 500-person speech, Saylor asked: who has a bank account? Almost everyone. Who has a savings account with over 4.5% annual yield? Very few. If banks could offer 8-10%, would you accept? Hands go up. But who actually offers such rates? No one.

Why is no one offering 10% long-term yields? Because no company can reliably generate over 10% annual returns; mortgage borrowers can’t afford such costs; governments are unwilling to pay such high rates. Weaker governments, though forced to offer higher yields, tend toward collapse in their monetary and political systems, making them unreliable borrowers. Companies prefer to leverage less and buy back shares.

The Breakthrough of Digital Capital and Digital Credit

This is where Bitcoin’s opportunity lies. Saylor believes that Bitcoin is digital capital—an asset that appreciates faster than traditional capital market benchmarks.

His hypothesis is that Bitcoin’s compound annual growth rate over the next 21 years will be about 29%, far exceeding the long-term average return of the S&P 500. Recognizing this, Bitcoin can be used as collateral to create credit—this is “digital credit.”

The key principle in traditional credit markets is: Debt-denominated currency should be weaker than the “currency” of the collateral. If the opposite occurs—using a strong currency to denominate debt while holding a weaker currency as collateral—borrowers will eventually go bankrupt. This is common in many emerging markets, where residents borrow in USD but repay in local currency, which devalues and causes trouble.

Therefore, debt can be issued using relatively weaker currencies like JPY, CHF, EUR, or USD, collateralized by Bitcoin. This involves currency risk but offers extremely high yields (similar to distressed debt levels), with collateral multiples far exceeding traditional companies—not 2-3x, but 5x or even 10x.

The result: creating lower-risk, longer-duration, higher-yield credit instruments, designed as perpetual structures for listing and trading. This combines the advantages of ETFs while avoiding their passive “raise capital then buy assets” approach. MicroStrategy’s issuance of various credit instruments exemplifies this approach.

The Design Logic of Four Innovative Securities Tools

Saylor introduces four types of preferred stock securities issued by MicroStrategy, each targeting different investor needs.

STRIKE is based on: a face value of $100, an 8% annual interest, with the holder granted the right to convert 1/10 of a share into common stock. If MicroStrategy’s stock price is around $350, this embeds about $35 of equity value. Investors get downside protection while having upside potential, plus cash flow during the waiting period.

STRIFE is a senior long-term debt instrument: face value $100, annual interest 10%, with a commitment not to issue any senior securities higher than this. This is crucial for risk-averse credit investors. After issuance, STRIFE trades above par, with an effective yield of about 9%.

STRIDE is built on STRIFE but removes penalties and cumulative dividend clauses, changing from senior long-term debt to subordinated long-term debt—higher risk but also higher yield, with an effective yield of about 12.7%, 370 basis points above STRIFE. Interestingly, the issuance volume of STRIDE is twice that of STRIFE and more popular. The reason is simple: investors believe in the company and Bitcoin, craving high returns.

The dual benefit of STRIDE is: trusting that the company’s investors can earn 12.7% annualized; meanwhile, the success of STRIDE supports the credit ratings of STRIFE and STRIKE—this is a credit-positive. Even better, it provides the company with a scalable, leveraged way to buy Bitcoin, which itself has no counterparty credit risk. In theory, if the market can absorb $100 billion in STRIDE, the company could issue $100 billion, leverage up to 90%, and buy Bitcoin with it. This would increase the company’s Bitcoin holdings, with STRIFE’s collateral multiple reaching 50x, creating a perfect flywheel effect.

STRETCH addresses another investor need: those seeking fixed income, wanting to raise bank interest from 5% to 10%, but unwilling to bear market price volatility. Traditional preferred stocks have long durations (around 120 months), and a 1% interest rate change can cause a 20% fluctuation in principal value for a 20-year duration asset.

STRETCH solves this by completely removing duration risk: not 120 months, but 1 month. This involves paying dividends monthly, with a floating monthly dividend rate. Saylor calls it “Treasury Preferred”—the first time in modern capital markets that a company issues preferred stock with monthly floating dividends, designed based on AI. While STRETCH cannot reach zero volatility like a checking account, it’s very close: investors can put funds for a year, earning near 10% with minimal volatility, and sell in the secondary market if needed. It’s essentially a Bitcoin-backed quasi-money market instrument competing on the short end of the interest rate curve under Bitcoin support.

How to Pay Dividends Without Selling Bitcoin

A natural question is: since MicroStrategy commits not to sell Bitcoin, where does the dividend payment come from?

The answer lies in continuous equity financing. The company currently has about $6 billion in preferred stock, paying roughly $600 million annually in dividends. Its enterprise value is about $120 billion, with annual equity issuance of about $20 billion. Simple math shows that $600 million in dividend payments are covered by issuing $20 billion in new common stock, with the remaining $19.4 billion used to buy more Bitcoin. In other words, 97% of equity fundraising is used to increase Bitcoin holdings, only 3% to pay dividends.

If circumstances prevent further stock sales, the company can also use Bitcoin derivatives—selling Bitcoin futures for hedging, selling out-of-the-money call options, or engaging in “basis trading” (using spot as collateral to sell futures and profit from basis). Additionally, the credit market is open to the company.

The goal is to have these tools rated by mainstream credit agencies, making it the first Bitcoin asset treasury company to achieve investment-grade credit ratings.

Why Is It Not Yet Included in the S&P 500?

Although MicroStrategy has met the criteria for S&P 500 inclusion—first achieved this quarter—Saylor does not expect immediate inclusion. Tesla also was not included upon first qualifying.

He believes that Bitcoin Treasury companies are a new species with revolutionary significance. Traditional committees will be more cautious, likely requiring 2-5 quarters of performance data. In fact, S&P has already included Coinbase and Robinhood, and does not exclude crypto assets. The difference is that exchanges have been around for over a century and are easier to understand; Treasury companies are emerging new species.

The industry’s starting point can be marked as November 5, 2024. After three quarters, it’s clear this is a new, legitimate, compliant company type. Within 12 months, the number of industry companies has grown from 60 to 185—an obvious sign of market maturation.

The Market Is Still in the Learning Stage

When asked about outside market reactions, Saylor points out that traditional financial markets are still in a catch-up phase. Most investors need to first understand Bitcoin itself, its legality, the entire crypto industry, and the design logic of various credit tools before they can evaluate these companies.

He uses the oil industry of 1870 as an analogy: at that time, people were just starting to refine crude oil, debating “how big can kerosene business be in 180 countries.” Initially used for lighting, kerosene later became engine fuel, heating oil, jet fuel, and even rocket fuel.

Today’s Bitcoin Treasury industry is similarly very early. Companies are still learning how to clearly articulate their business models, investors are trying to understand these models, and regulators are dynamically adjusting rules—all happening in real time. This is a true “digital gold rush.”

Bitcoin as a Peaceful Coordination Mechanism

When discussing social division, Saylor conveys an optimistic message: people’s consensus exceeds what mainstream media propagates.

He observes that inflammatory content spreads more easily, rumors travel faster than truth, and extreme positions proliferate online. Even during the most successful company performances, online hate messages tend to be the most numerous. But upon investigation, many accounts posting hate are not real users—no interaction history, few followers—bots.

Much toxic online content is guerrilla marketing: short sellers hire digital marketing firms to generate大量的机器人账户，制造“有大量抗议”的假象。政治领域也一样：一些“情绪动员”实际上是付费水军。然后主流媒体将镜头对准这些有偿抗议者或虚假机器人，营造社会失序的表象，不断放大虚假抗议，最终导致极少数人实施暴力，虚假变成现实。

Saylor 呼吁人们警惕“分裂的扩音器”，学会辨别虚实。只要关闭这些有害的扩音器，人们完全可以重新走到一起。

比特幣代表著一種更和平、公平且能化解分歧的方式。隨著採用度增加，和平會擴散，公平會擴散，真實會擴散，毒性會消退。這不是激進的願景，而是一個基於信念的現實觀察。