Author | Wu Says Blockchain

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This episode of the Wu Says Unencrypted podcast invites the guest Didier Zheng, a cutting-edge technology investor, to discuss the recent drop in Bitcoin prices, changes in MicroStrategy's financial strategies, the rise of AI-driven US stocks, the integration of cryptocurrency exchanges with US stocks, and the macro outlook.

Didier believes that the core of the recent decline in Bitcoin is not simply due to macroeconomic conditions or ETF redemptions, but rather the market's shift to repricing MicroStrategy's expected continuous small-scale sales to pay preferred stock dividends under the "Net Neutral Per Share" principle. Meanwhile, AI is reshaping the workforce structure, with tokens being seen as a new factor of production, driving the continuous rise of the AI industry chain in US stocks. The crypto industry may gradually transition from speculative native altcoin trading to real assets on-chain, on-chain machine economies, and a more mature industrialization phase.

The views expressed by the guest do not represent Wu Says' standpoint and do not constitute any investment advice. Please strictly follow local laws and regulations. The audio transcription and translation were completed by GPT and may contain errors. Please listen to the complete podcast:

Xiaoyuzhou:

https://www.xiaoyuzhoufm.com/episode/6a337dbb43a22a695585c365

MicroStrategy's Selling Experiment: Expectations of Continuous Pressure and Market Accommodation Game

Cat Brother: Recently, Bitcoin has dropped significantly, and there are many explanations in the market. Some say it’s due to MicroStrategy selling coins, others say it’s ETF redemptions, and some attribute it to macro changes or leveraged liquidation. Which factor do you think is crucial?

Didier: I believe the core reason is still MicroStrategy, but what really suppresses the market is not the actual selling of coins itself, but the market starting to expect that it will continue to sell coins.

MicroStrategy stated at its May earnings call that it aims to maintain net neutrality per share. With the continuous increase of preferred stocks and debt instruments like STRC, STRZ, STRD, STRF, Bitcoin is no longer just an asset for common shareholders but needs to prioritize covering the rights of creditors and preferred shareholders first. Thus, the cost of maintaining BPS neutrality has increased.

In the past, the market believed that it primarily paid preferred stock dividends through stock sales, which had little pressure on Bitcoin; but now, the threshold for raising funds by selling new shares has increased, and the pressure has started to shift towards Bitcoin. As long as MMV remains below the neutral threshold, it's more likely to cover cash flow through small, continuous coin sales. Especially if the interest payment frequency further increases, the market will naturally expect it not to be an occasional sale but to possibly sell a little bit from time to time.

So the key to this round of decline is not "how much has been sold," but rather "will it keep selling in the future?" Under this logic, ETF sell-offs seem more like a result than a cause. Because once the market judges that MicroStrategy will continue to sell, related funds will withdraw in advance.

Cat Brother: So you just said that Michael Saylor seems to be conducting a financial experiment; what is the purpose of this experiment?

Didier: Essentially, he is testing the market's capacity to accommodate continuous small coin sales.

From a financial perspective, when MMV is not highly priced, small coin sales cause less damage to net neutrality per share compared to selling stocks, which is a first-order optimal solution. The problem is that since the large-scale issuance of STRC in March, the interest and dividend payments for preferred stocks and perpetual instruments have significantly increased, and cash flow management has become a pressing issue. Therefore, the key is no longer whether to manage cash flow, but how to manage it.

If the market can accommodate this continuous, small coin sales shock, then this system can continue to be sustained; but if this practice in turn suppresses stock prices, lowers MMV, exacerbates decoupling, and further reinforces expectations of "continuous coin selling," it may have to soften its approach, such as reverting to more reliance on stock sales or mixing stock and coin sales. While this may sacrifice some net neutrality per share, it can mitigate the impact on coin and stock prices, representing a second-order optimal solution.

So essentially, it’s a game between Michael Saylor and the market. He is observing where the market will find strong enough funds to accommodate, while the market is waiting for lower, more certain prices to take action.

Cat Brother: Could this evolve into a "death spiral" for MicroStrategy and Bitcoin together?

Didier: I don't think this alone is enough to lead to that. To reach that point, usually new macro headwinds or larger systemic shocks would need to be layered on top.

As long as there is a soft turn ahead and coin sales are no longer enforced, bottom-fishing funds will likely return. The issue is not whether accommodation exists, but at what price it will appear. It could be at $62,000, or possibly lower; the market is currently waiting for this position.

So my judgment is still cautiously optimistic: this round of decline is more about structural pressure brought by changes in MicroStrategy's own financial structure, rather than purely caused by tight macro liquidity. In the absence of significant new negatives, it’s highly probable that the situation can still be reversed, and it is not likely to directly evolve into a true "death spiral."

Tokens are Seen as the Workforce of the New Era

Cat Brother: Although the crypto industry is currently quite sluggish, AI is booming, especially in the US stock market where optical modules, semiconductors, and data centers are rising strongly. What do you think is the core driver behind this?

Didier: The core is actually quite simple; tokens are essentially becoming the workforce of the new era.

In the past, the core production factor for enterprises was people; whether physical labor or intellectual labor, it relied on humans. But now, many execution tasks originally borne by people are being replaced by AI and tokens. In the future, what may truly be scarce are the few individuals capable of completing a closed loop: setting goals, designing plans, driving execution, and ultimately solving problems. Such people, together with a large number of tokens, form a new labor system.

This will directly change the organizational structure of businesses. Historically, the reason enterprises had many layers was that information had to be passed through people at various levels; but in the AI era, many middle-level, assistant, IT, and execution jobs will be compressed. What truly holds value will no longer solely be execution ability but rather influence, decision-making, and imagination.

So essentially, in the past, enterprises paid money to employees; in the future, they will increasingly direct budgets towards tokens, to models, and to computational power. Model companies will then reinvest these funds upstream, purchasing chips, energy, optical modules, and data centers. Given the limited upstream expansion and inadequate supply to meet demand, these will become the most consistently benefiting segments of the AI industry chain, which is also the fundamental reason behind the continuous rise of related US stocks.

The service industry will be the first to be impacted because knowledge-based services, such as accounting, law, consulting, and data analysis, are the easiest to be replaced by AI. In the future, internal automation within enterprises will increase, and there may even be a formation of on-chain machine economics between enterprises. At that time, many transactions, collaborations, and even payments will be completed by machines.

Cat Brother: Are you saying that this round of uptrend is not just short-term speculation, but has medium to long-term sustainability, and we might still be in the early stages?

Didier: Yes, I believe the machine economy era has just begun.

Many people's understanding of "one-person companies" also has deviations. It is not an individual working alone but rather a person operating with a dozen or dozens of intelligent agents, with these agents collectively achieving the efficiency equivalent to hundreds of people in the past. Thus, the so-called one-person company actually requires a large number of intelligent agents providing labor support behind it.

This is why I have always emphasized that tokens are the new workforce. In the past, enterprises spent money hiring people, but now they are increasingly turning budget towards tokens. As long as tokens can continuously amplify revenue, corporate profit margins will significantly improve, which is precisely the core logic behind the market's optimism about the AI industry chain.

Thus, the expectation reflected in the US stock market at present is essentially: more and more companies will evolve into AI-native companies, replacing labor with tokens and enhancing automation levels, thereby significantly raising profit margins. This is also the most fundamental and reasonable driving force behind this round of uptrend.

Exchanges Turning to US Stocks, Users Do Not Need to Rewrite Trading Logic

Cat Brother: As US stocks continue to rise, many cryptocurrency exchanges have also opened US stock channels. What do you think about this? Is it because the crypto industry itself lacks highlights and exchanges can only actively create demand, or is there a deeper reason? Additionally, will this further lead to capital outflow from the crypto industry?

Didier: I actually said long ago that offshore CEXs ultimately have only two paths.

The first path is to create prediction markets, but this path is very difficult. The current leading structure has basically been established, and most existing CEXs will find it hard to genuinely transform into the next-generation "Universal Trading Exchange."

The second path is to become distribution channels for real-world assets, with US stocks, US bonds, and gold being the most significant real-world assets at present.

The more fundamental reason is that, over the years, there have been very few genuinely valuable native crypto assets. Bitcoin counts as one, and a few DeFi infrastructure and public chains also qualify, but beyond that, most native assets lack sustained intrinsic value and cash flow support. Consequently, the trading infrastructure built around these assets will inevitably seek new and valuable targets.

Therefore, it is quite natural for CEXs to turn to US stocks. I don’t think this compresses crypto assets but rather represents the industry returning to reality: there have never been many genuinely valuable assets, and exchanges are simply turning towards things that can better support liquidity.

However, from a long-term perspective, this may not be a bad thing. The core value of blockchain has never just been issuing native assets, but rather providing decentralized choices and more efficient, lower-cost settlement and trading methods. On-chain representation of real-world assets is inherently a meaningful direction.

Moreover, looking further into the future, blockchain is actually more like a technology designed for machines. In the next five to ten years, a more likely scenario is that humans interact with agents, and agents conduct payments, transactions, and collaborations on-chain. Thus, the on-chain infrastructure built today can be directly utilized by machines.

From a long-term perspective, I actually feel this is favorable for Bitcoin. Because whether it’s more people or more machines, they will ultimately come into contact with on-chain assets.

Cat Brother: For ordinary users, who previously mainly traded altcoins, Bitcoin, or public chain assets in the crypto market, now switching to US stocks, the logic is actually quite different. Whether it's earnings reports cycles, valuation systems, or regulatory rules, there are significant differences. If you were to give a critical piece of advice to these users or traders who have long remained in the crypto world, what would you say?

Didier: Actually, I don't think they need to change too much intentionally.

Because US stocks and on-chain assets are essentially quite alike. In US stocks, there are value stocks, growth stocks, and many meme attributes assets. The reason this round of meme market on-chain has weakened is chiefly that the most compelling meme assets have actually transferred to US stocks.

The stories these assets tell essentially still revolve around "changing the world." In the past, this narrative belonged to blockchain, but now a stronger version appears in US stocks, such as quantum computing, nuclear fusion, and SMR. Often, these things are also hard to explain solely through earnings reports, cash flows, or DCF, and intrinsically carry a strong meme attribute.

So those who liked chasing altcoins and meme coins in the past, when they go to US stocks to chase these long-term concepts, the logic is essentially still the same and they might not feel out of place. Another group that focuses on cash flow, fundamentals, and value support will also find corresponding value stocks and growth stocks in US stocks.

Thus, what I mean is that the various styles from the crypto world actually have corresponding positions in the US stock market. Most people do not need to forcefully change their trading methodologies to find asset types they are familiar with.

If I had to give one piece of advice, it would be not to drastically change your methods just to shift markets. Those who have survived to this point typically have a validated survival strategy, and persisting with what is effective is more important.

1011 Incident Heavily Damages Crypto Liquidity, Altcoin Rally Hard to Restore

Cat Brother: Listening to your analysis just now, the image that comes to my mind is quite dramatic. It feels like the altcoin speculation of the past is effectively over because those once speculative targets can now almost all be found in US stocks, and their real-world significance is even stronger. Can this be understood this way?

Didier: Yes, it can be understood this way.

The core reason the altcoin market has essentially ended is that the liquidity in the crypto sphere has been severely destroyed. The 1011 incident has dealt a heavy blow to the industry’s vitality. The reported figure indicates $19 billion in liquidation, but the actual number is likely much higher. It is rumored to be around $40 to $50 billion, which I think is closer to the truth.

Moreover, note that what is lost here is not the book market value but actual cash. The total market value of the crypto industry has never been very large, and there is a significant portion that is locked up and inflated; the genuinely liquid chips are actually much fewer than they appear. In such a scenario, evaporating hundreds of billions of dollars in cash in a single day is a heavy blow to the industry's popularity and liquidity.

So I consider the 1011 incident to be the last straw that broke the altcoin market.

Regarding why "meme assets" in US stocks can continue to be speculated upon, the reason is also very simple: because the US stock market is currently the most liquid market globally. If your own liquidity is inadequate, you will naturally shift to a market with stronger liquidity.

From the perspective of the US, it supports Bitcoin and blockchain, also with its own strategic considerations. The US logic version is to turn blockchain, on-chain markets, and CEX into a means for US assets to attract funds and hot money globally. Therefore, pushing the American financial system onto the blockchain is fundamentally expanding the financing and distribution capabilities of US assets on a global scale.

Of course, this is merely the understanding and application from the US government. Whether blockchain and the crypto world will ultimately be completely shaped by this national will remains to be seen. The more realistic situation may be that in the future there will exist a long-term complex relationship of both cooperation and utilization, as well as mutual gaming, between the on-chain world and sovereign nations.

But at least so far, the US's thought process is indeed gradually becoming a reality.

More Cautious on the Macro Front for the Second Half of the Year, but Still Optimistic About AI and Web3 in the Long Run

Cat Brother: What is your macro judgment for the next six months and the end of this year? What policies might the newly appointed Federal Reserve Chairman Waller implement, and how will they affect the overall market?

Didier: I think the uncertainty in the market is rising.

On one hand, the market has risen quite a bit; on the other hand, there might be several giant companies going public soon, like SpaceX, OpenAI, and Anthropic. The real pressure does not just come from funding withdrawal, but if these trillion-dollar companies quickly enter the index, institutions may be forced to sell other weighted stocks for rebalancing in a context of limited liquidity, which would create pressure on the market. Therefore, after entering June, I will be more cautious.

Another key variable is the midterm elections. If the Democrats win both houses, it might lean towards being negative for Web3 and AI, as they emphasize labor rights, regulation, and oversight, rather than allowing cutting-edge technologies to continue to expand at high speed.

However, from a fundamental perspective, I believe the market may be underestimating AI's real contribution to the economy. AI has already penetrated many segments, but the existing statistical methods may not fully reflect this, so in the long run, its improvement of production efficiency is still very strong.

The real issue lies not just with growth but also with distribution. If the distribution mechanism is not well adjusted, there may arise a situation of extreme polarization in the future: the few who can manage AI reap most of the benefits while a large segment of the middle class gets squeezed or even faces unemployment. In that case, while productivity may increase, the overall consumption ability of society could decline, which is why I tend to favor long-term deflation rather than long-term inflation.

So, distribution mechanisms will be critical in the coming years. Things like the AI tax, I think, will likely be implemented within three to five years, as without new tax sources, many future social arrangements will lack financial foundations.

If just focusing on the second half of this year and into next year, I don't want to make particularly absolute conclusions. There is indeed increasing pressure for short-term adjustments, especially around the time of the SpaceX listing, but I think it feels more like an adjustment, not a definitive peak. As long as the capital expenditures of major firms can continue, the overall market hasn’t ended yet.

From a longer-term perspective, I still hold a positive outlook on AI and its combination with blockchain. Businesses will increasingly become automated internally, and there may even be the emergence of on-chain machine economics between enterprises; this major direction hasn’t changed.

Therefore, I still believe that blockchain and Web3 are very promising, but the way of playing will become more mature. The era of mindless speculative trading may have passed, moving towards an era of industrialization and institutionalization.

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