Transforming Bitcoin Volatility Into Institutional Grade Credit | Risk World 2026

Added: 2026-05-09

[00:00:00]All right. Hello everybody. Uh speaking to a crowded room here excited to be here to talk about transforming Bitcoin volatility into institutional credit.

[00:00:11]And uh you may be wondering why is this Bitcoin guy here wearing an orange tie and what are we doing here? It's this is an insurance conference. What's going on? So I'll give you a little bit of background about myself. So, my name is Jeff Walton, chief risk officer at Strive. And my background is I was a reinsurance broker for 10 years. And I worked for both Gallagher and Howen Ree.

[00:00:34]And I placed some of the hairiest reinsurance that was out in the market.

[00:00:38]I placed wildfire liability reinsurance.

[00:00:41]I placed uh liability reinsurance for the Kobe Bryant helicopter crash. I helped redefine the wildfire liability analytics that you still see today and I worked on some very challenging stuff.

[00:00:54]So what that did is it made me think uniquely about risk. I had to work through very challenging risk profiles that have never been challenged or worked through before. And I had to figure out a way how to quantify it and I had to figure out a way how to sell it. Uh because the market was there and the market was open and that was where my opportunity was. So I became super interested in Bitcoin uh identifying Bitcoin as digital capital and I was identifying companies that were putting digital capital on their balance sheet and watching them uh you know accelerate very quickly in the capital markets.

[00:01:30]Meanwhile the clients that I was working with were going the complete opposite direction 2021 2022. So I identified a ton of opportunity in the market and I decided you know what I've got to leave reinsurance and I've got to go work in the Bitcoin ecosystem. So, and that's why I'm here today and we're going to talk about it. So, I challenge you all to look at the screen. What does this screen look like to you? Red line going down and to the right. Your first thought might be memecoin, right? Maybe it's Trumpcoin. You know, it looks like a bad chart going down to the right.

[00:02:04]Well, actually, this is an insurance company balance sheet with the reinsurance removed. So, it's got no reinsurance included in it. So what does it look like when you include the reinsurance?

[00:02:15]Boom. Green line. So what would have been this red line going down and to the right, a reinsurance, an insurance company balance sheet. It's actually the balance sheet of the company is going up and to the right because the reinsurers took the volatility off of the insurance company balance sheet. This is an actual company. This is Mercury General. So the first line over here, this is the Thomas fire in 2017, Camp and Woolsey fire in 2018, and most recently the Palisades fire in 2025. So the challenge is very similar to what we see with Bitcoin.

[00:02:47]You've got volatility, and you're looking for an opportunity to identify and remove volatility on an insurance company balance sheet.

[00:02:57]So why Bitcoin, right? It's let's look at the performance and start to think about digital risk. And digital risk is the new frontier here.

[00:03:07]>> So thinking about Bitcoin, Bitcoin is among the best performing assets ever and among the most volatile. If you look at this chart here up and to the right, extremely volatile. You look on the left hand side, you're like, Bitcoin's great, it's dead. Bitcoin's great, it's dead.

[00:03:22]Bitcoin's great, it's dead. But if you zoom out, it's going up and to the right and since 2019, uh, is up 1,883%.

[00:03:33]So that's an interesting chart. That's interesting. I want to see can I reduce the volatility? Can I start to think about these assets a little bit differently? Just because it's volatile doesn't necessarily mean that the risk profile is aligned with the volatility profile. So let's think about why >> why because Bitcoin is better money.

[00:03:57]>> So I've got a few columns here. Bitcoin, gold, USD, and altcoins. Bitcoin is more scarce than gold and US dollars. It is more portable than gold, US dollars, and altcoins. It is more durable. It's scarce. There's a hard cap, 21 million only. It's more funible. It's more divisible. It outperforms every other asset class in terms of money characteristics. So, you think about risk profile. Okay, it's better money.

[00:04:23]And it's digital. I can move it anywhere quick.

[00:04:26]>> Yeah.

[00:04:27]>> So, how big is Bitcoin?

[00:04:29]>> Two ways. A lot of people don't really know this, but Bitcoin itself actually as of today is a $1.62 trillion asset.

[00:04:38]>> That's huge. That is enormous, right? It is the 11th largest asset on the planet.

[00:04:44]This it's basically like uh the top 10 >> publicly traded equities. It's bigger than JP Morgan and Visa combined. JP Morgan, oldest bank in the United States. Visa, the payments company. It's bigger than both of those combined. We should pay attention to that. That is a signal that this asset is maturing. It's getting bigger and bigger. What can you do with it?

[00:05:10]>> Yes, it's volatile, but what can we do with it?

[00:05:13]>> Okay.

[00:05:14]>> So, and it's also early in global adoption. So, this this chart that you see here, this is all assets on the planet. So, you look at the real estate bucket, 370 trillion. You look at bonds, 318 trillion. Equities 135 trillion.

[00:05:28]money 129 trillion. Bitcoin as a $ 1.5 trillion asset is a fraction of the global assets that are out there on the planet.

[00:05:38]>> And you look at it relative to gold.

[00:05:40]Gold is $33 trillion asset. Yes, it's been around for 5,000 years, but we've got a new competitor coming in the door that's better in every single characteristic.

[00:05:49]>> So again, this is the same chart looking at Bitcoin volatility over time. On a linear scale, you can only see volatility. You look at this chart and you say, "Wow, this is super volatile."

[00:05:59]And in fact, most people here very emotional about Bitcoin. Very emotional about this chart. They buy up here, they sell down here. They're emotional. I got wrecked. I lost money. Their rationality of risk profile gone out the window.

[00:06:16]We've had people walk by us today or yes, yesterday calling us a scam, telling us that we shouldn't be here.

[00:06:23]Why are you at risk world? We're here talking about a $1.6 trillion asset and how we see digital risk and how we see this evolving.

[00:06:32]>> So on a logarithmic scale >> the uptrend unmistakable. It is going up and to the right. This is logarithmic trail. This is a logarithmic uh view of Bitcoin. It is going up and to the right. If you look at most other assets on the planet, you look at Apple, Google, Meta, uh any of those Nvidia, they follow a very similar logarithmic scale up and to the right. I can underwrite this. This is interesting. I want to know how to underwrite this into the future. And I think I could start to think about risk about it.

[00:07:05]>> So, how do we do this? We built credit to match Bitcoin. So, how do we do this?

[00:07:14]We turned Bitcoin's volatility into a credit instrument utilizing our balance sheet. So you've got Bitcoin here. This is uh since November of 20 2025 when we launched our credit instrument. It has gone down to the right very volatile.

[00:07:29]But we have created a credit instrument.

[00:07:31]This is the green line. This is SATA.

[00:07:34]And it is significantly less volatile.

[00:07:36]But it is also following some correlation to the underlying Bitcoin on the balance sheet. So it is a low volatility credit exposure. We are engineering the volatility out of the underlying Bitcoin held on our balance sheet.

[00:07:48]>> So you may say Jeff this is crazy. How does it work?

[00:07:52]>> We utilize our corporate balance sheet to create risk tranches right so we have a balance sheet $1.2 billion of bitcoin as of today 1.22 22 billion as of today and we have created two separate risk tranches. The senior risk is our perpetual preferred equity seda. We are we are committing to 13% annual yield payable monthly. It is a variable interest rate instrument and the excess volatility the excess risk and return of that instrument SATA goes directly to our common stock which is a high volatility instrument. So uh our balance sheet the assets that are held on our balance sheet are providing cushion and protection for the senior risk trunch the perpetual preferred equity that sits on the balance sheet. As of right now, we have about 20 years of dividend coverage on our currently on our balance sheet based on the assets that are sitting on our balance sheet. So, you can think about this instrument relative to any other credit instrument in the market. We already have the assets on our balance sheet. I'm not dependent on future cash flows of a company in an industry that's going to get absolutely obliterated by AI. So, we already have the assets on our balance sheet and we are underwriting it into the future.

[00:09:13]Sure. What the?

[00:09:16]>> So, how do we do it? We are refining volatility. So, this is very similar to insurance companies and reinsurance companies. And this is why I'm incredibly attracted to this industry.

[00:09:25]You've got a very volatile situation here. And you think about in the reinsurance industry, the reinsurers want the volatility. They're going to eat the volatility. But the insurance company wants stable results. The investors of the insurance company and the regulators want stable results. We want you to pay out claims into the future and the investors want the yield into the future. And so you can think about this as a risk profile. Well, this is exactly the same as our corporate balance sheet, right? We've got Bitcoin, very volatile. Our common equity, incredibly volatile. We've got a 1.6 beta relative to Bitcoin. And our preferred stock is less volatile.

[00:10:03]>> Yeah. I think we'll just And so this is what it looks like. You can you can see here excess risk return. So you got two little green lines. What we're trying to do is engineer SATA into a low volatility instrument and that excess risk over and above the volatile instrument is going to our common.

[00:10:21]>> So the volatility is energy, right? It it doesn't go away. Very similar to catastrophe risk, right? When an insurance company is reinsuring catastrophe risk off their balance sheet, it doesn't disappear.

[00:10:33]>> It just gets transferred to somebody else. There's another balance sheet that's taking that risk. And that's effectively what we're doing. So you can think about low you we've got this raw commodity coming out of the ground effectively. You can think of it Bitcoin raw commodity and you think of that as crude oil. Now the low volatility instrument is kerosene. This is your space heater. I need to light some oil in my house and keep my house warm. Now the the complete opposite side of that is jet fuel. You've got this raw commodity oil and you're refining it into two components. We're doing the exact same thing with Bitcoin. We are refining it into two components and there are very different investor classes that are interested in both components. We've got we've got people that are interested in we've got credit markets that are interested in the low volatility high yield and we've got equity traders that are interested in high volatility Bitcoin that they're hedging and trading in the market. So there's significant investor demand for both products and the clarity of them is is very pure. Our balance sheet is very clean. You understand the risk profile for both of the instruments. this construction.

[00:11:38]>> So why are we doing this? Why have we issued perpetual preferred equity? Well, we needed to match the liability profile with the underlying duration of the asset that we own. And so we believe that Bitcoin is the longest duration asset you should hold because it's going up and to the right at 50 kagger, but also with 60% volatility. So how do you how do you match a longduration liability with a long duration asset?

[00:12:02]Enter perpetual preferred equity. So you can think what we got here is a table outlining equipment, you know, it's got a 10-year duration. We want an equipment loan for seven years. A real estate investment got a 35 year duration. You may want a mortgage for 30 years. And Bitcoin, we want to hold this forever.

[00:12:19]We think this is a structural change in society, how society interacts with money. And so we want a liability profile that is aligned and matched with the underlying Bitcoin. So again, we're here at risk world. Why am I here? Why are we talking about risk? What's going on? We're using the same tools that everybody else here is using. And we're using it to manage the digital risk profile, not the physical risk profile.

[00:12:45]We're using it to manage the digital risk profile of these instruments, our balance sheet, and these instruments in the future.

[00:12:54]>> So, what's interesting about Bitcoin is it's smart to market 24/7, 365. We have significant data every single day. It is incredibly visible. It is the most observable asset on the planet.

[00:13:09]>> Just because it's observable and it's more observable than other assets doesn't mean it's more or less volatile or risky than other assets.

[00:13:17]Additionally, what this is showing is you have because you have onchain data of every single transaction in the Bitcoin ledger and you can identify wallets, you can see every holder's cost basis on a single chart.

[00:13:30]So you know where the cost basis of the entire industry is. You have significantly more data than any other instrument or asset you can ever look at and it's marked to market very quickly.

[00:13:44]>> So what do we do from there? We can look at experience rating. So what does history tell us? We look at our balance sheet. We look at the underlying exposure. We look at okay we've got uh 40% amplification on our underlying balance sheet. means you know effectively financial leverage. What would our balance sheet look like if we would have uh had this business model looking back over time in history. So this is what we call an experience rating. If you've worked in insurance or reinsurance, you've seen experience rating. You can go look on as if every single loss over history, what would it look like at this point in time, this point in time, this point in time. And that's what we're doing. We're looking at all of the aggregation of all of this data over time back through history. So that means >> we can also look at historical draw downs. What would our balance sheet look like in a historical draw down? How would it perform coming out of the historical draw down and that informs how we manage our risk profile and how we think about the future and the underlying asset. So Jeff, that's one view. We're looking backwards experience rating.

[00:14:46]>> We can also look at this on a forward-looking analysis. So this is what you can see here. This is an exposure analysis looking pricing the risk forward on the left hand side. This is a busy slide. You don't need to understand everything going on here. But what I want to show is on the left hand side is we can run Monte Carlo simulations taking every single data point throughout all of Bitcoin's history and understand what the relative risk profile. If the future looks similar to the past, what does that risk profile look like? What if I took some uncertainty variables on top of that historical risk profile? I could start to create probabilistic distributions. I can start to think about uh downside risk of my balance sheet. Maybe I can start to think about risk transfer on my underlying balance sheet. That's interesting. And we can use all of these tools and metrics to manage how we see the Bitcoin price path moving into the future. So we are underlying, we are underwriting the entire globe of the Bitcoin ecosystem. And we're doing that so our investors that are buying our products don't necessarily have to do that, right? the folks that are interested in the credit products, they don't have to go through this math. We are going through this math.

[00:15:58]>> No.

[00:15:59]>> So, >> what I what I also want to point out here is the short-term volatility versus the long-term trend. And so, this is a really important chart because, you know, a lot of people say, you know, Jeff, it's super volatile. I can't hold it. It's, you know, I don't want to touch it. Now, if you look at the percentile distribution of Bitcoin returns over history, you see a very compelling chart. So, if you held Bitcoin for a year, you could see there's years where uh there's return periods where you would have had a negative return. There's return periods where you would have had a very positive return. If you look at two years, it starts to dwindle. You look at three years, it dwindles even more. And on the four-year basis, every single four-year return period in Bitcoin's history is positive. That's every single one.

[00:16:45]There's been about 4,000 return periods over the last uh since Bitcoin's history. Every single four-year return period is positive. Every single one. I can underwrite that. That's interesting.

[00:16:56]Every single 5year return period also positive. I could underwrite that.

[00:16:59]That's interesting.

[00:17:01]>> Sure.

[00:17:01]>> So, you start to think about Bitcoin as a duration asset. If I could hold it for four years, if I could hold it for six years, if I could hold it for eight years, that starts to look like a bond.

[00:17:09]That starts to look like a credit profile. that starts to look like an emerging asset class. I want to be uh I want to be exposed to this underlying asset.

[00:17:21]>> Okay. So, let's talk about uh monetary debasement, which I think is an important topic when you're thinking about Bitcoin. Why does Bitcoin have value? Well, our Bitcoin has value because the monetary supply is being debased at 6.7% annually for the last 50 years in a row.

[00:17:38]So your dollar is losing 6.7% of its value every single year for the last 50 years in a row. In order for us to pay our dividends into perpetuity forever, the price of Bitcoin needs to go up 5.7%.

[00:17:51]A year forever, which is less than the US dollar supply, it's dollar supply compound annual growth rate over the last 50 years in a row.

[00:18:00]>> So that's an interesting statistic. We think about okay, our balance sheet, that's one risk metric. We've got experience, we've got exposure, we've got structural identification of what what does the dollar exposure look like?

[00:18:13]>> So again, we are underwriting the entire viewpoint. We are underwriting the market. We are underwriting dollar debasement. We are underwriting regulation. We are underwriting historical experience etc. >> So a couple things make digital credit interesting. these uh this this SATA product that we've created which is a credit instrument sitting sitting on our balance sheet compared to traditional credit traditional credit you get a quarterly report you have a 90-day lag let's say you buy Boeing traditional credit bond you do not know the risk profile of that bond until you get the quarterly financials every single quarter and at that point the quarterly financials are already a month late from when the books were closed and you have no idea idea what the risk profile of the finances look like into the future. Now s look at digital credit you actually have real time understanding of the Bitcoin held on balance sheet. We have a dashboard on our website. You can go to our website right now and you can see the risk profile of our balance sheet 24/7 365.

[00:19:17]You can wake up on Sunday morning, have a sip of coffee and go, "Hey, let's go look at the risk profile of this digital credit instrument." And guess what? You can do it. You can do it. and we are frequently filing AK reports and we are reporting to the SEC. This is not FTX, right? We are incredibly transparent and we want to be incredibly transparent and we want to take an institutional lens in how we are managing this exposure.

[00:19:41]>> So again, traditional credit opaque assets. You don't even know what's on there. You look at the asset uh on the balance sheet and it's intangibles. It's goodwill. You don't really have a great understanding of what the assets are.

[00:19:52]Our assets, you can see them. You can see our assets.

[00:19:56]you can continuously monitor them at 24/7 365. So, it's an incredibly compelling risk profile.

[00:20:03]>> Okay, so let's let's bring it back to the reinsurance market a little bit.

[00:20:06]Let's compare it to CAD bonds. So, our digital credit instrument over on the lefth hand side, this is the digital credit market. There's actually another company doing this. We have $1.2 billion of Bitcoin on our balance sheet. We have about 495 million of our perpetual preferred equity outstanding. There's another car. There's another company out there called Strategy. If you haven't heard of them, they have about $65 billion of Bitcoin on their balance sheet and they have about $10 billion of perpetual preferred equity on the balance sheet. This instrument is 9 months old. It is 9 months old and they have $10 billion of this instrument outstanding. We have about 500 million.

[00:20:41]So let's compare it the growth profile of digital credit versus cat bonds. So digital credit on the lefth hand side first introduced Q4 2024 Q1 2025. So they've been around about 18 months and they're about $14 billion outstanding of the entire digital credit ecosystem and the average daily secondary volume is about $233 million. So these are incredibly liquid instruments. They're trading every single day. You can go look at them on on the stock market right now both on the NASDAQ.

[00:21:10]>> And the 30-day secondary volume is about $7 billion. So again, incredibly liquid compared to caps first issued in 1997.

[00:21:19]It took 10 years to get to $14 billion outstanding versus 18 months. The secondary volume is about $15 million.

[00:21:26]Incredibly illquid. And the annual secondary turnover is about $4 billion.

[00:21:30]So comparing annual to 30-day, they just are completely different instruments.

[00:21:34]>> Great.

[00:21:36]>> Now, digital credit is only 18 months old. This is what it looks like on a chart. Straight vertical, green line, straight vertical, 18 months old, $14 billion. took cat bonds 12 years.

[00:21:45]>> That's it.

[00:21:46]>> Uh more than that. 10 years. 10 years to get to $14 billion.

[00:21:52]>> So perpetual preferred equity. That's interesting. Uh what other perpetual preferred equity instruments are out there in the market. And over on the left hand side, this is strategy. They are the leader. They've got $8.5 billion of perpetual preferred equity outstanding. It's called STRC. The next closest perpetual preferred equity in the market, Wells Fargo, 4.7 billion.

[00:22:12]This is the largest perpetual preferred equity outstanding ever. This is the largest perpetual preferred equity ever.

[00:22:19]It is the most most liquid, highest volume perpetual preferred equity ever.

[00:22:24]It's larger than every other bank preferred on earth. This market is growing incredibly rapidly. And this is this is the way that the the Bitcoin ecosystem is moving into the future.

[00:22:38]>> So what's the big idea? big idea is credit rebuilt on Bitcoin. Anyone with Bitcoin balance, you can do this. You could think about issuing uh you could think about issuing credit insurance to the market. You do need a little bit of scale in order to issue a perpetual preferred equity, but the concept of taking out credit on a on a strong balance sheet is not new. Anybody can do that. We know how to underwrite it. We have the tools. I I came from the reinsurance industry. I I now have the most advanced artificial intelligence analytics possible. I built analytic profiles that took my old company a decade to make. I did it in a half an hour at home on my own computer and I was able to build on top of it and move faster. And now I've got a couple teammates that are working with me. We are building the most advanced statistical analytics on top of the most transparent asset with the most data points and the most observable on the planet ever. No physical risk. I don't have to take on risk of my house burning down. I don't have to take on the risk of an airplane falling out of the sky. I don't have to take on liability of uh you know burning down a forest because I've got physical infrastructure. It doesn't exist. And the collateral is super transparent.

[00:23:57]>> Okay, so last side here. This is measurable, transparent, real time.

[00:24:00]We've got traditional insurance over on the lefth hand side. Loss events are rare, lumpy, unpredictable, and digital credit price is observable 24/7, 365, and the volatility is computed in real time. Effectively summarizing everything, hit >> the asset is new, the risk is digital, the analytics and the math are not.

[00:24:22]Thank you for your time. Appreciate you being here. I will now take questions for Mgotam.