About This Episode
The crew is back covering Strategy’s credit rating, how this could impact the insurance industry, interest coverage ration and industry credit ratings, what it will take for Bitcoin Treasury Company credit ratings to go higher, Mike Alfred, big volumes, and more.
In This Episode
- 00:01:00 — Strategy Gets a Credit Rating
- 00:13:13 — How This Will Impact the Insurance Industry
- 00:22:20 — Interest Coverage Ratio and Industry Credit Ratings
- 00:27:53 — What Will It Take for Bitcoin Treasury Companies Credit Ratings to Go Higher?
- 00:44:38 — Mike Alfred, Big Volumes, and What It All Means
- 00:51:48 — US China Trade Deal and Other Macro Tailwinds
Episode Summary
Key Themes: Credit ratings, institutional access to Bitcoin credit, convertible debt vs. perpetual preferreds, and long-term conviction in Bitcoin treasury strategy.
Strategy’s S&P Credit Rating
Strategy’s new B– issuer credit rating from S&P understates the firm’s actual credit strength but is a pivotal moment for digital capital. Jeff noted that Strategy is the “largest company with a B– rating in the world.” Matt explained that though he views Strategy as actually AAA-rated risk, this opens critical doors for pensions, insurers and institutional capital that simply require any rating. Ben agreed, calling it a “huge step” that a Bitcoin treasury company has a rating at all.
Bitcoin Still Isn’t Treated as Capital
Ben and Jeff noted that S&P’s rating methodology effectively ignored Bitcoin as capital, highlighting how early we are in Bitcoin’s institutional acceptance. Matt suggested that rating agencies are not incentivized to take a contrarian position. Matt suggested that S&P may have chosen a B– rating to fit consensus expectations and framed its analysis to justify a “junk” rating rather than take a contrarian stance.
Issuer vs. Security Ratings
Per Tim’s question, Jeff reiterated that the B– rating is on Strategy as a whole, not on any of its preferred securities, and that institutions evaluate both the instrument and issuer ratings when purchasing securities. He added that the next step is likely Security ratings depending on their place in Strategy’s capital stack. Matt argued that though both matter, security-level ratings will likely carry more weight in the market.
Institutional Doors Opening
Jeff explained that the rating removes massive friction for insurers since unrated instruments require costly third-party reviews to hold on their balance sheets, and that this applies to other large capital markets as well. Matt noted that these institutions—insurers, pensions, 401(k)s—are long-term holders, and that ratings enable new, large pools of “slow money” to enter Bitcoin for the first time.
How Convertible Debt vs. Perpetual Preferreds Impact Ratings
Ben highlighted that S&P’s rating report underscored the difference between convertible debt (which carries maturity risk) and perpetual preferreds (which don’t) and emphasized the implications that has for Bitcoin treasury companies seeking good ratings. Jeff added that S&P even hinted that future upgrades could come as companies reduce convertible debt, reinforcing the preferred-only model Strive has championed since inception.
Interest Coverage and the Case for AAA Credit
Matt explained that even modest Bitcoin returns justify a far higher rating than a B–. At a 20% CAGR, Strategy’s interest coverage exceeds 10x—AAA level—and even a 10% CAGR keeps it investment grade. Jeff added that the company could cover 100 years of dividends with existing Bitcoin alone, proving that Bitcoin balance sheets are far more robust than traditional credit models suggest.
Insurance Logic and the Path to Upgrades
Jeff compared Bitcoin treasury companies to insurers—taking on fixed obligations while managing Bitcoin’s volatility to generate steady returns. The team agreed that ratings upgrades will come with proven track records, liquidity and institutional demand. Matt noted that starting at a B– and gradually getting upgraded may actually help legitimacy. Ben added that mainstream banks underwriting Bitcoin risk will lead to broader acceptance and higher ratings.
A Spark for Strive’s Momentum
Mike Alfred’s high-profile stake in Strive drove record volume. Matt likened the phenomenon to a match lighting a buildup of firewood, which was the result of Strive making a series of good decisions, executing and focusing on long-term fundamentals. Ben added that Alfred’s long-term mindset mirrors Strive’s own approach, and that Bitcoin treasury companies generally pair well with long-duration investors.
Main Takeaway: Credit ratings can unlock a wave of institutional capital into digital credit—and Strive’s perpetual preferred-only model positions it to be a leader in this emerging market.