The Last Trade E080: Corporate Catalysts & 2025 Outlook with Tim Kotzman

Jackson Mikalic (00:01.662) All right, welcome back to The Last Trade. Happy New Year to everyone. We are now in 2025. For this week's episode, I'm joined by my co-hosts, Michael Tanguma and Brian Cabellus at OnRamp, and our special guest, Tim Cotsman. Gentlemen, how are we doing? Michael Tanguma (00:18.242) Very good. Brian Cubellis (00:18.258) Doing well. Happy New Year, boys. It's been little while since we've ripped, so feels good to be back. Michael Tanguma (00:24.11) It feels very good to be back and we've upleveled. have suits on the podcast now. Tim has showed us up. So I think next step is we have to start these boxes. Everyone has to put on a suit for the last trade. Tim Kotzman (00:37.087) Yeah, happy new year. I've had at least one person I've had on my pod say that they would put on a tie once we hit 100,000. So I need to take him up on that here pretty soon. Jackson Mikalic (00:46.954) And I need to order some orange ties so I can can fit the bill here. But Tim, it's good to have you on excited for this episode. Really appreciate the work that you're doing in the space for people who aren't familiar with your background. Just give a quick blurb. You're the host of the Bitcoin Treasuries podcast and the founder of multiple energy focused private equity firms, including Jubilee Royalty, where you're the founder and CEO. Tim Kotzman (01:29.035) Yeah, absolutely. It's been a wild ride because to start with the podcast, we really started it kind of accidentally in the beginning of October. And once we saw that, you know, someone actually wanted to watch it, we just kept going. To really see one company adopt a Bitcoin treasury strategy, to see not just one company but one company a year, one company a quarter, maybe one company a month now, publicly announcing that they are looking to adopt a Bitcoin treasury strategy. Yeah, probably just good timing to have a show called the Bitcoin Treasuries podcast. My background is on the land acquisition side of oil and natural gas. Started Jubilee in order to raise private capital, buy, let the deals cash flow and sell those deals. And then along the way, specifically in January 2021, one of my investors introduced me to Bitcoin. So four of our five closed-ended funds now are oil and gas related. One is a long term buy and hold Bitcoin fund. Michael Tanguma (06:12.542) Yeah, I think that's super fascinating. And something we've seen for years now is individuals with backgrounds in the real world, whether you're building a business, you're an athlete, or you're in a commodity-based business, you have to deal with inputs and outputs and see inflation or see what assets come out of the earth and can be transferred into dollars. Tim Kotzman (07:48.447) Yeah, I'm not sure if it's because Bitcoin doesn't have cash flow, but I've never been in an employee seat in corporate America, which I think is a huge advantage. So I can only assume that in the same way that most people still think in a 60-40 portfolio sort of way, it might be another 12 to 24 months before regular people realize that BlackRock is now saying you should have one or 2% of your portfolio in Bitcoin. Brian Cubellis (08:33.873) And it takes a while to permeate. BlackRock came out and said that, however many weeks ago, but the average person is probably not even picking up on that. Bitcoin is a mind virus. Each new node or person on that playing field tells friends, tells close confidants, colleagues, and then it just spreads. Tim Kotzman (10:04.893) Absolutely. The social proof could take some time depending on where in the cycle someone came in. If you buy quote unquote the top, maybe you're waiting two or three or four years. But that should actually be positive in so far as this is not something to get in and out of, it's something to hold. Michael Tanguma (10:58.934) Which is amazing for the opportunity because it's still non-consensus. And this kind of ties in - MicroStrategy is still like on the edges. When we see larger firms step in, it starts to become de-risked. Tim Kotzman (11:48.407) Do you guys think it will take kind of a united front from the institutions saying one to two percent? Not just BlackRock at end of 2024 saying one to two percent, but everyone. Right now it's not consistent and it's not everyone. Jackson Mikalic (12:18.707) I think a big piece of that is getting Bitcoin into indexing. Once active managers have to compete against an index that has Bitcoin as part of that portfolio composition, and if they're actively not allocating to Bitcoin or they're under allocating relative to the index and that's causing underperformance, that'll be a very tough conversation for fund managers to have. That'll be a flywheel effect where they'll effectively have to allocate to Bitcoin to at least maintain target allocation. Tim Kotzman (14:00.631) Yeah, I think an announcement or an analyst note about allocation isn't getting it done. It's got to be something that everybody can see on the screen that they're falling behind - there has to be a consequence. And that's why I do think that you will see 10% of public companies adopt Bitcoin as a Treasury Reserve asset. Tim Kotzman (14:53.995) That could happen in the next 12 to 24 months, which might sound radical, but it's gradually, gradually that all of a sudden. Jackson Mikalic (16:39.648) There's that idea of Bitcoin being de-risked. What you just mentioned really ties into 2025 and going forward - yes, Bitcoin is at all time highs. It feels expensive if you're backward looking at the price chart. But if you're not actually digging into the fundamentals, you're really missing the bigger picture. There's a lot more regulatory clarity. The incoming administration will not be adversarial to the industry. So Bitcoin feels inexpensive if you weigh the risks and uncertainties that exist today compared to five or ten years ago. Michael Tanguma (18:04.114) It is worth calling out the custodial risk though. Until this notion of multiple institutions holding the underlying, you've always had a single point of failure, whether it's self custody or third party custodian. Tim Kotzman (19:20.021) Yeah, absolutely. I think sooner than anyone can imagine, you'll be able to walk to the bank on the corner, go to Chase, and buy Bitcoin. And you want multiple institutions that are too big to fail holding one of the keys to the most important asset that you're ever going to own. Brian Cubellis (20:02.128) Yeah, that's exactly right. There's this notion that once the banks get turned on, they're going to want a piece of this. The question is do they just outsource it like BlackRock did and use Coinbase as a subcustodian? Or do they build something themselves? Or do they see a third vision where they get involved in a quorum of institutions, only responsible for holding one key? There's actually an elegant way where these banks get involved sooner rather than later in a way that isn't just outsourcing it to Coinbase. Jackson Mikalic (24:36.288) And from a consumer side, there's going to be more demand for Bitcoin going forward as people need a vehicle or savings technology to preserve their wealth. Naturally people, especially millennials and Gen Z, if they're thinking about saving for the long term, they're looking for opportunities to actually preserve and grow that wealth. Brian Cubellis (25:50.587) One other correlated point is it's not just people waking up to the monetary realities of Bitcoin and why it makes sense as a long-term savings tool, but it's also the degradation or erosion of what has worked for the past 20 years. Whether that's piling into SPY or other index funds and fixed income. Contribution of returns in the S&P is like five to seven companies. And if we're thinking about a traditional 60-40, that may not work going forward. Tim Kotzman (28:54.935) So the interesting thing is that putting Bitcoin on your balance sheet, especially now that we're in 2025 with fair value accounting, it's not that complicated for a public or private company. MicroStrategy has open sourced how to do it. The opportunity is just for those companies to be able to communicate what they're doing effectively in the market. Michael Tanguma (30:43.866) I think the thing that has historically been a problem is when somebody has an individual thesis, it's one thing, but when they have to drive consensus at a board level organization is when you run into the buzzsaw. Then ultimately it's status quo, status quo, because you're not going to ape into a position. Tim Kotzman (32:24.643) Even just to the True North live streams we've done, the MSTR True North live streams, there's so much noise of people talking about getting wrecked. But when I have private conversations, especially one older gentleman that I've had on the show, he said he's just never selling his MicroStrategy in the same way that a lot of people are never going to sell their Bitcoin. Brian Cubellis (33:59.709) You think there's an element of MSTR or even the levered versions of it being somewhat of a gateway drug to actually understanding the underlying? That's my sort of gut instinct - there are a bunch of people in TradFi who maybe played around with stocks in a brokerage account who have come to MSTR without a real understanding of the underlying, and then they learn more about Bitcoin and its fundamentals. Tim Kotzman (35:12.789) Yeah, I think it's almost certain that it's in both directions with Bitcoiners. The guys that I've been on live streams with say almost every single time we get together - we own Bitcoin and we're not touching our Bitcoin. And then we own MicroStrategy. I was at the post office on the Upper West Side and two guys in the mail truck were talking about MicroStrategy. They said it's probably over now. As I was walking away, I said I think we're just getting started. Michael Tanguma (37:12.033) Yeah, I think that's the right take. These convertible bond ETFs are effectively giving clients that may not be interested in Bitcoin, but interested in downside protection with a conversion into something that has some proxy for the appreciation of the asset. Tim Kotzman (38:51.671) Yeah, absolutely. My mind is stuck on this. I feel very blessed that I met one person who had been in Bitcoin since May of 2017, meeting him in January of 2021. But what if that volatility of MicroStrategy and that social proof happens every couple of weeks, not just once every four years? Jackson Mikalic (40:59.114) Tim, what are your thoughts on your prediction that 10% of the publicly traded companies will adopt Bitcoin on their balance sheet in the next one to two years? And do you see other companies using a similar playbook to MicroStrategy with at-the-market equity issuances and convertible bonds, or more of a pure vanilla treasury strategy? Tim Kotzman (41:47.895) Yeah, I mean my opinion is that as MicroStrategy and Semmler and MetaPlanet and others continue to have this track record of success, a notable larger company making even just an announcement is going to be as much of a warning shot to the market as anything else. So in the same way that if we're at 1% Bitcoin adoption and we have nation states putting it as part of their reserves, that 1 to 10% move could be a lot quicker than you might initially think. Jackson Mikalic (45:39.2) Yeah, we'd love to talk about the Strategic Bitcoin Reserve, because I think that will really solidify the case for more corporate adoption. If you see at the highest political level in the United States that there is going to be a Strategic Bitcoin Reserve, and there are states that have legislation introduced as well. Tim Kotzman (46:15.093) Yeah, great question. Topical. I just get kind of exasperated when I'm on social media and they're like, the SBR is not going to happen. You have Samson Mao focused on nation state adoption, Cantor Fitzgerald saying they'll allow borrowing against Bitcoin, Ross Stevens at NIDIG saying they'll loan against Bitcoin. You have Donald Trump himself saying don't sell your Bitcoin and that we're gonna do something like the strategic oil reserve. Anthony Scaramucci interviews saying we have the votes for the SBR. Brian Cubellis (49:02.65) It could just be PTSD. People are just inherently negative and want to assume the worst. Tim Kotzman (51:18.215) Absolutely. What does he have left at this point besides legacy? Whether you like the guy or not, you would think that's what he's playing for. He's literally saying in private conversations Bitcoin is the new oil and he wants the S&P to go up. Jackson Mikalic (52:39.763) If you actually look back to the California gold rush in the mid 1800s, there was a lot of initial skepticism. But widespread disbelief of the American public changed with President Polk's State of the Union statement. It's almost like a similar moment here where now that you have the incoming president of the United States posturing and signaling that there's going to be a Bitcoin strategic reserve - that's kind of like a President Polk moment. Tim Kotzman (54:38.74) Absolutely. Michael Tanguma (54:39.966) Yeah, I think somebody brought up the gold rush recently. The banks and everyone stepping in - the lending of the asset isn't just de facto going to work. What we've historically seen in Bitcoin when you lend against the asset, the individuals building those businesses come from traditional finance backgrounds and have never seen that level of volatility before. So I do think that while institutions are going to come in, there's going to be a lot of tears and blood with that volatility. Tim Kotzman (56:46.837) I couldn't have said it better. I have nothing to add. Jackson Mikalic (56:51.266) Tim, I'm curious about your thesis of a million dollar plus Bitcoin in 2025. I'll come out and say, naturally, I'm skeptical, not because I don't think you've done the work. How do you arrive at that number? And is it mainly around the strategic Bitcoin reserve, sovereign game theory, corporations? Tim Kotzman (58:00.28) Yeah, I think it's a combination of everything we've discussed. The primary drivers in my mind are one, sovereign adoption, and two, the ability to borrow against your asset and not having to sell your asset. When you have sovereigns buying the asset in a defensive manner, I think that could be explosive. A lot of people are calling for somewhere between 200,000 and a million dollar Bitcoin this year. I don't believe in the diminishing returns theory. Brian Cubellis (01:00:23.666) I like to reiterate Jesse's work around global asset value landscape and the 900 trillion of assets that exists. At a $2 trillion market cap, Bitcoin is 0.2% of all assets on earth. If we just take that and say 10X is to a million, that would be 2%. One to 2% of global assets feels reasonable if governments around the world are buying it. Tim Kotzman (01:03:35.371) People think I'm being extreme or maybe not doing my research, but I think I'm being reasonable and conservative in the million dollar Bitcoin. Michael Tanguma (01:03:44.684) Yeah, I maybe this is a good Jackson Institute or Thunder in the new year. Have a few segments. One that we'll do on this podcast is a single point of failure of the week, just calling out where assets were lost or something was not aligned from like a market structure, whether it's an exchange, custodian, or individual foot gunning themselves. Michael Tanguma (01:05:59.222) Ledger is one of the worst, if not worst devices to use. But a disproportionate amount of the Bitcoin that's in self-custody is in a ledger simply because of how long they've been around and their brand and market penetration. The fundamental problem where this individual ran into it is he thought he had a seed phrase but did not know where it was. The pin on a ledger has three tries. He forgot his pin, wiped the device, and didn't have the seed phrase - loses all of his Bitcoin. Brian Cubellis (01:07:14.29) Yeah, just some more context - this is a segment we've been talking about for some time, single point of failure of the week. Bitcoin as an asset is very different. It has these unique custodial properties, which means if you're securing it yourself, that is not only your responsibility to continue to make sure that setup is done right, but also protected in perpetuity. As criminal networks and adversaries become more attuned that Bitcoin is held on people's devices in their homes, these attacks are only going to increase. Everything we're doing at OnRamp is attempting to solve for a lot of this by taking the responsibility of key management away from the individual for at least a portion of their Bitcoin holdings. Michael Tanguma (01:10:10.516) Yeah. Well, just to add one other piece - there's a broken part of the market structure in Bitcoin because the only thing you ever hear people talk about is you have to hold all of your wealth in 12 or 24 words on a plastic device, or you have to leave it on a custodial ETF. And there's effectively a better way now. Brian Cubellis (01:12:20.146) And said another way - we'll look back and say it was insane that we allowed a single point of failure to exist in our Bitcoin setup for our material amount of wealth. Whether it's self custody with risk of being attacked in the real world, or holding it on a single entity where something happens there and you end up with a zero. In both scenarios, you have a single point of failure. Tim Kotzman (01:14:08.183) Yeah, I think we could probably have an entire pod just dedicated to this aspect of it. I've attempted to buy Bitcoin on as many platforms as humanly possible since 2021. I was walking on the beach in Miami just a couple days ago and I'm declining a call and they're leaving a voicemail pretending to be Coinbase trying to steal my Bitcoin. I want to have most of it in a solution where it can grow by 10x and 100x and 1000x and I feel very confident in the solution and I think that's where the multi-signature multiple custodians really comes into play. Jackson Mikalic (01:16:31.795) Yeah, no, it's very true. And the idea - if we're right that we're early for Bitcoin, at 0.2% of the global asset landscape, then we're also early for Bitcoin infrastructure, custody and solutions in the market. There will be a need for more resilient solutions to protect the asset as it moves from six figures to seven figures to eight figures. Michael Tanguma (01:18:39.549) Yeah, and Tim, the exciting part about our relationship - we talked about the stick version of why folks use us, but there's also the carrot: this is a financial instrument, this is money, this is an asset, and individuals are gonna wanna treat it as such. You just need a private bank to be able to do that, that you can trust and that understands this space. Tim Kotzman (01:20:38.271) Yeah, I really invite people to learn more about these sorts of solutions. The fact that there is the ability for someone to have as part of their plan that it would require in-person verification in order to move the asset is huge. Once you're educated on it and understand it, you can appreciate it. Really excited to be working with you guys. Jackson Mikalic (01:22:02.377) Well, Tim, appreciate the generosity with your time today. I know we went a bit over, so thank you for carving out the time to speak with us and really excited about the partnership we have with you. Tim Kotzman (01:22:19.415) I'm on X, formerly known as Twitter, just under Tim Cotsman. And yeah, appreciate the time and look forward to 2025. Jackson Mikalic (01:22:29.449) Thanks, Tim. Michael Tanguma (01:22:30.073) Awesome. Thanks, Tim. Brian Cubellis (01:22:31.123) Thanks, boys.