Weekly Roundup 06/05/26 (MSTR wobbles, Polymarket's MSTR market, Andrew Left convicted) (EP.723)

Strategy sold 32 Bitcoin for approximately 2.5 million dollars on a Monday, its first Bitcoin sale since 2022. Matt Walsh described the sale as an effort to inoculate the market but said it jolted prices and represented a notable reversal from Strategy's original commitment to never sell. More consequentially, Strategy retired approximately 1.5 billion dollars in convertible notes that had three years remaining, buying them back at a discount and shrinking its cash runway for servicing dividends on its STRK preferred security from roughly two years to approximately four months. The view expressed was that Saylor killed optionality by retiring notes when he had three years to figure out the problem.

The structural problem is that STRK is trading at 0.95 on the dollar, having come off par significantly, and the core engine of the strategy, MSTR trading far above one times NAV, is described as no longer firing. Every dollar of STRC issued is senior to MSTR common equity and acts as a perpetual liability, meaning each dollar of STRC subtracts more than a dollar from MSTR equity value. Bitcoin yields nothing, yet the preferred securities offer 10 to 12 percent yields, a gap that cannot be reconciled through financial engineering. Saylor's options were described as killing the STRC dividend, sacrificing MSTR common equity to keep STRC going, or selling Bitcoin, with selling Bitcoin characterized as reflexive and likely to puncture the entire story. The expectation expressed was that Saylor would try to protect STRC over the common equity, though he has historically found ways to resolve difficult situations despite expectations he would not.

Bitcoin ETF outflows were minus 483 million dollars, minus 519 million, and minus 396 million on three consecutive days. Bitcoin peaked at approximately 82,500 in early May and fell to a bottom of 61,000, sitting near 63,000 at the time of recording. The market had been front-running MicroStrategy's Bitcoin purchases, and that dynamic reversed when the company stopped buying and positioned itself as a potential net seller. Nick Carter noted the price drop may also partly reflect liquidity being pulled to pre-fund positions in the SpaceX, Anthropic, and OpenAI IPOs.

The Polymarket market on whether MicroStrategy sells Bitcoin by May 31st resolved to no despite the sale having occurred, because the SEC filing disclosing the sale was filed on June 1st after the market had closed. Polymarket initially treated the market as a currency market and then changed it to an announcement market, which many participants felt was deceptive, and the market had traded as high as 60 cents on the dollar before settling to no. The UMA decentralized oracle back end, which has a total market cap of approximately 35 million dollars, was originally chosen to allow Polymarket to claim decentralization and avoid regulatory scrutiny. With single-digit millions of dollars of UMA tokens it may be possible to swing markets with volumes in the hundreds of millions, creating a large asymmetry. Polymarket is now officially regulated by the CFTC, making the UMA outsourced resolution arrangement an anachronism. Competitors such as Kalshi, CME, and Interactive Brokers pre-specify an authoritative source and often add settlement latency to collect requisite data.

Andrew Left of Citron Research was convicted on multiple counts of securities fraud and faces up to 20 years. Left would publicly state he was long a stock as a long-term hold and then exit the position shortly thereafter, with the same alleged behavior occurring on the short side. The concern raised was that if Left's conduct is illegal, similar behavior commonly seen on crypto Twitter and fintwit would also be illegal. The view expressed was that short sellers serve a useful purpose for markets but must be truthful in their statements.

Coinbase and Kalshi began offering perpetual crypto futures to US investors for the first time through domestically regulated venues following CFTC approval, though the caveat offered was that onshore perp trading is unlikely to be as popular with retail as expected because the leverage available offshore is not available onshore. The SEC registered Paxos's settlement arm as a clearing agency, making it the first blockchain-native firm to receive that designation and placing it in the same category as the DTCC. Mastercard, Visa, and Stripe are reportedly among the backers of a soon-to-launch stablecoin platform, and the view expressed was that their backing of a common platform could drive standardization in stablecoins given the network effect these firms already possess.

Two university students used AI agents to nearly reverse engineer a Google quantum computing paper without being domain experts. The website ecdsa.fail shows the state of the art for breaking ECDSA is already lower and more efficient than the official Google quantum result. AI is described as accelerating quantum development by solving major unsolved math problems foundational to building quantum computers. Bitcoin being a decentralized project means it cannot coordinate a technical response to quantum threats the way a corporation could, while Ethereum is actively working on post-quantum cryptography updates. The prediction offered was that major firms and governments will revise their quantum threat deadlines closer to 2029 or 2030.