Is Solana a Better Treasury Asset Than Bitcoin & Ethereum with Brian Rudick

You can review their transparency report. Uphold also offers an amazing rewards program where you can earn up the five point two five percent on stable coins. This rewards program also allows you to get twenty four hour early access to new tokens that they list, and to participate, you just simply have to open the app once per month, deposit fifty dollars once per month, and trade fifty dollars once per month. And the stable coins that they support

includes Ripples, r l USD. You can earn up the five percent on that stable coin and five point two five percent on USBC. So if you'd like to learn more about Uphold and all the great services they offer, visit the link in the description. Hey, folks, welcome into the Thinking Crypto podcast. I'm your host, Tony Edward and joining me is Brian Rudik, who is the chief strategy Officer at UPEXI. Ryan, great to have you.

your background. Tell us about where you're from and what's your professional background.

my career in traditional finance. I was managing a book of bank stocks, always in this long short construct for funds like Citadel, Ballyasne, Millennium, and it was really there where some of the banks that I covered that were the crypto fiat on off ramps like Signature and Silvergate kind of pushed me down the crypto rabbit hole. Decided that there are so many wonderful use cases and benefits that this technology can bring that it will take some time,

but it will be ubiquitous eventually. Want to be a part of it full time. So I moved in early twenty twenty one over to GSR, which is one of the largest firms a crypto been around for over a decade. They are the largest digital asset market maker, and I led their research function for four and a half years until I moved over to UPEXI to become their chief strategy officer.

TRADFI dealing with stocks and so forth and those type of assets, but now you have this convergence of crypto and publicly traded company and the crypto impacts as stock price. So it's kind of like the merging of these two worlds. What's that like for you? It's like you get to do your kind of your old job a bit, but also new things.

bitcoin treasury strategy. It's more than tripled the return of bitcoin and it's been barely leveraged, so there has to be some value creation there, and so really comes from what I would call capital Marcus arbitrage. When they are issuing equity at two times book or two times NAV, they're essentially selling a dollar for two or buying bitcoin half off. It's how they've created twenty six billion worth of free bitcoin over the last six quarters for shareholders.

And we can get into the math. I can give you an example. But the other way that I think about it is banks essentially borrow money from depositors, They pay an interest rate on that, and then they lend it to borrowers they pay, then they earn a higher yield on that, so they earn spread income, which is the difference between the yield on loans and their cost

to deposits. And then the market will essentially is a simplification, but present value all of that future spread income added to the current book value, and then banks will trade above book. And we're the exact same way. Actually, so we borrow funds or raise funds from the capital markets, we invest into Salana. We are in the spread between

the return on soul and our cost to capital. The market will then present value all that spread added to our NAV, and then that'll work out to something that is, you know, above one which we can then monetize for the benefit of shareholders.

that these digital acid treasury companies are banks. And it's fascinating you the way you broke it down, because you are operating like a bank, even though it's you know, it's not fiat per se. It's you're using crypto assets. And you know, I want to break design in Layman's terms because there's still a lot of people who this concept is still foreign to them, Like why does holding

a crypto asset increase the stock price? Is it simply that this asset continues to appreciate in value, and that's what's driving the volatility, is driving all this.

that'll cause you to trade at this premium. Another way you could think about it is like folks just want to access crypto in the form of a familiar equity security. You saw that with Gray Scales g sol closed end Salona Trust. It routinely traded at a five hundred percent plus premium, and that was simply because folks wanted to access Solana in their SWAB account. And then the last reason I'd say is folks want access to these different value ACRUL mechanisms that you can't get with owning the

tokens natively or in alternative instruments like an ETF. And these are things that dats can uniquely do. So you know, this is issuing equity above book, which is by definition a creative. This is things like staking or running validators to where you can earn additional commissions. And this is things like buying lock tokens at this discount for built in games for shareholders, and so add all that up

and folks are willing to pay a premium. I've got other examples that can kind of explain this numerically, but I know that was a lot, so I'll stop there.

tell us about you PEXI, the history of the company and why it decided to make this move to have Solana as a treasury asset.

and all of their wild success. And then sol Strategies, which is up in Canada's trading at five times it's nav and so having this background in equities is basically like, if micro Strategy is trading at two times, Soul Strategies is trading at five times, I've got reasons why a smaller company in one underpinned by a smaller token with these additional value accrul mechanisms should trade it a premium

to something like micro Strategy. There's no reason why if we figured out how to create one, then we shouldn't trade at this premium valuation as well. And so at GSR we contacted investment bankers. They introduced us to UPEXI. Upexy was already going down this route, as I mentioned, And then it just made sense while I was at GSR, for GSR and for me to lead that investment in that one hundred million dollar pipe, which was actually the first large scale pipe for an old coin treasury company.

And what I'd say is when we did it like that one hundred million was eye popping and kind of gave everybody the blueprint and It was really difficult to get to that one hundred million because like it was untested, and then as folks saw that, hey, this actually works, there is a reason why these companies should trade above book value, and people became more educated. You've seen like

over one hundred of these now. But that was essentially how Upexy kind of pivoted into digital assets, and then from there it just made sense for me to join Upexy and continue to push on this with our management team.

this triparty arrangement, at this qualified custodian. So if at the end of the two years the investor hasn't converted to Upexy equity, they literally just get their soul backs, so they're basically in the same spot, but they have this essentrally free option to convert to upexy equity, which they would do if they were much better off.

is why crypto and not real estate. Why not gold? Is it because crypto has a much higher upside and because it's still a young asset class. Is that kind of the ethos of why crypto? Yeah, So, in my view, there's all these really wonderful use cases and benefits that you get with crypto that you don't get with other technologies. These are things like the removal of intermediaries that did like the democratization of value exchange, and new constructs around ownership,

governance and business models. And it's such an nascent technology that anytime that you're this early, there's going to be a lot of volatility and speculation around what this could become.

But actually, if you look at the underlying fundamentals, if you look at like crypto users or number of developers or number of transactions, like all this stuff is up into the right and so we're just looking at that and at the end of the day, like valuations and values will follow fundamentals, and just having this very strong belief in what crypto and blockchain technology will become and it will take a long time, but it will eventually

become ubiquitous. You know, for us, it was like the right choice and basically looking at it as like our best risk adjusted return opportunity out there, Oh for sure. And so what do you think the timeline might be?

This is a hard question for the lifespan of this strategy, because eventually there's going to be more liquidity. These assets are going to be less volatile. You mentioned, they'll become ubiquitous where they're everywhere and everybody can access it. So do I necessarily need to go buy upexy stock fifteen years from now, just as an example, I don't know this.

Once again, this is a very different asset class in a sense that many of it of the supply is hardcap, it's globally distributed to you have liquidity coming in from all parts of the world. So what is like your time span or timeline for the you know, for this strategy so to speak.

but also that it will do well. And so for one like we feel very fortunate to be underpinned by Solana, and that was an intentional choice on our part. The second thing is a big key piece that the business model is predicated on is trading at this premium to book.

And so in my mind when you ask like when will the part stop, it's like when these companies stop trading at a premium, I would actually argue that you can and should trade at a premium like we're talking about during times when folks like forward view of crypto is positive, and then when folks think that you're not going to out earn your cost to capital, you should

trade it a discount. And it just turned to micro strategy, and you know, you can, man, you can measure the efficacy of their treasury operations by looking at in their increase in bitcoin per share. And so twenty twenty four it increased seventy three percent, twenty twenty one it was something like fifty percent, and then then two bear markets

still increased but was more like mid single digits. So all that's to say is I would argue that the model can and likely will go on pause during the inevitable bear markets, but then you can really you know, will eventually return to this bull market and then you know, it's likely that what we've seen in the past with micro strategy is like the companies will then return to that premium multip which you can then monetize for shareholders.

in a Salona ETF, why should I go through you PEXI as a solo treasury company.

lose money by running our own validators. And I kind of think it keeps the story simple for traditional investors as well. Having been on the other side, I tend to think that people don't really invest in things they don't understand. You have to start to explain proof of state consensus mechanism. It's a lot simpler to tell folks like, hey, we can earn eight percent on this. You know, you don't see micro strategy out there, you know, running bitcoin

mine like bitcoin mining, or running rigs themselves. So we're staking it all and then we get that in kind, and.

NAVE we're at roughly eleven percent right now. We're dealing with an asset that's you know, much more volatile and Bitcoin number two we're not doing a lot of like on chain dgen trading. Like my personal view is like if we came out and you know, this is not guidance, but finger in the air, if we issued equity at our current multiple, you could see a fifty percent increase in our soul per share, and assuming that that multiple holds,

like our stock would move commensurately with that. And just this ability to intelligently issue equity and increase soule per share is just so powerful that in my mind, it doesn't make a lot of sense for us to start looping you know, LSTs and trying to earn an additional like two percent per year or something like that. And I think we would consider it when we get additional regulatory clarity, but I think like, we're not fully there yet.

And then the last thing that we're doing is we're using like risk and operational best practices, so as I mentioned, using only qualified custodians and top validators, and we're diversifying amongst them. And we think that this positions us really well to whether any market environment and is a strategy that will resid not only with like crypto investors, but also traditional investors as well.

risk not being over levered and so forth. How are you preparing for market downturns and bear markets right as we've seen the cyclical pattern of even as stock market right, things go up and down over time depending on what the Fed's doing, global liquidity and all that stuff. How are you preparing for that? And you know there's a lot of companies doing this. There's talks of some of these companies might blow up, and not necessarily because of

the crypto assets, but maybe mismanagement. But I think you address some of that right with the things that you guys are doing to avoid situations like.

out to like low teens leverage. It's tempting because we have more on that line that we could draw and we obviously have this very positive view of Solana, but we don't want to do anything to where we'd ever be forced to sell, and particularly where we'd be forced to sell at the wrong time. And so for us, it's just about being very disciplined in the good times so you can not only make sure you can survive but also thrive in the tougher times as well.

this continuing to grow and more companies that are publicly traded, whether they're in the NASDAK Top one hundred or S and P five hundred, starting to look at this strategy or would it then get too saturated where maybe they wouldn't be the same incentive or volatility that would be needed to get the benefits, If that makes sense, I think.

percent over five years. There's only a handful that I think I can be confident on that will perform really well over a five year period, and then within that, I actually think they'll only be like two to three winners within each And the reason why I say that is you need to kind of get to this breakout size and volume to really employ the full capital markets

flywheel or micro strategy model. For instance, we're trading it roughly two times on this like fully loaded m NAV, like when you make adjustments for things that kind of obfuscate the real or true underlying value that the market's ascribing to us. And so the way that micro strategy actually sells stock at two times is through like an ETM or in equity line. And in that instance, you're actually a bit limited by your volume because you can typically only sell like one to three percent of your

volumes without pushing down your stock price. And so an ATM or an equity line is essentially a way to just the company to sell equity right out into the market. You really need to get to sufficient size to where you can get liquidity in the common, to where you can actually sell you know, hundreds of millions of worth of you know, your equity into the market each week, and then you can use that to buy digital assets. And you're seeing that with bitmind Immersion, you're seeing that

with sharp Link. We are working really hard to get there as well. We're hoping and feel confident that we can, you know, maintain our lead and continue to be the canonical Salona Treasury company. But yeah, so for that reason, I think that there's likely to be two to three winners in roughly three to five tokens, and then the rest I think can make short term gains. But you know, I wouldn't you know, want to be an investor for five years and a lot of the other ones.

doing a basket of these assets, like maybe you hold Bitcoin with Solana or maybe Bitcoin, ETHERM and Solona, right, or is it better to just stick to one asset? You know? What are some of the considerations.

are some out there employing that. But for us, kind of keeping it simple and just being able to tell folks like, hey, like we really believe Solana is essentially NASDAC on chain enabling Internet capital markets, and you know, Upexy could be the best way to invest in Solana and to play that eventually you know, continuing to grow. Then for us, like that was the right choice now.

founder of course has his own fund. I had him on the pod not too long ago, as part of your advisory committee. Tell us about why Arthur and how he's going to be helping you guys.

pretty close relationship with each of them. They're adding a ton of different value in many different ways, and then we wanted to formalize that relationship a little closer with you know, some folks like Arthur who obviously like he's

a legend in crypto. He knows so many people. We met with him earlier this week, and I mean he was providing all sorts of great advice and then obviously like he's got this really great visibility and half of adat the game for DATS is like increasing your visibility as well.

I guess intelligent equity issue inside. Like the business model of these companies is to raise capital as much capital as possible in this risk prudent and accretive fashion, and so we're hoping to be successful there as well, and continuing to raise capital to invest in Hoddle as much Solana as possible.

start to see that with other tokens. But X that in my mind, anytime you talk about like just the coming months, it'll probably ebb and flow with the macro, with traditional equity markets, with what's happening with like employment, inflation, and monetary policy. But what I'd say is, if you ask me over three years, I'm supremely bullish. Reason for that is because I do think we'll get market structure legislation,

as you mentioned, likely next year. I think this has been the biggest thing always holding crypto back in the US. I think that all of these big tech companies and big finance companies haven't really wanted to disanger media themselves, and certainly so if it would bring on additional regulatory and legal risk. And now once we get market structured legislation. They're going to have to because if they don't, they'll be disintermediated by those who do.

once the clarity there, it's it's game on. Awesome, Brian, I love what you guys are doing, and it sounds like you got a great setup and you guys are taking the right approach to this. I got some wrap

up questions here for you. First, if you could create your own metaverse, what would the theme be?