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Bitcoin Adoption: From Retail to Institutions, Signs That Sovereigns Are Gearing Up – Fred Thiel (Pt. 2/2)

November 13, 2023

In a conversation with Fred Thiel, the chairman and CEO of Marathon Digital Holdings, Thiel highlights the increasing interest in Bitcoin, ranging from retail investors to institutions and the possibility of sovereign nations considering Bitcoin as a reserve asset. Concerns were raised about BlackRock's involvement in the Bitcoin space, including its investments in miners and the potential centralization of Bitcoin custody through a spot Bitcoin ETF. Thiel argued that the limited liquid supply and potential lost coins make it unlikely for BlackRock to accumulate a significant portion of Bitcoin. Additionally, the conversation delves into the evolving role of Bitcoin, emphasizing its use as a store of value rather than a medium of exchange, with interest from governments in holding Bitcoin reserves. The discussion touches on the potential for Bitcoin mining to benefit countries with abundant energy sources, leading to global expansion and adoption.

00:00 Introduction and Gold vs. Bitcoin

05:00 Black Rock's Role in Bitcoin

10:00 Bitcoin's Decentralization and Sovereign Interest

12:30 Bitcoin as a Financial Instrument and Global Expansion

15:00 Bitcoin's Role in Grid Stability

17:00 Paraguay's Hydroelectric Bitcoin Mining

21:00 Sovereign Interest and Global Partnerships

22:00 Waste-to-Energy and Bitcoin Mining Cost Efficiency

23:00 Closing Thoughts on Shrimp Farming and Bitcoin

Transcripts are autogenerated. May contain typos.


China and many other countries have been buying huge amounts of gold um instead of buying treasuries and and other uh dollar denominated assets um they may very well start buying more [Music] Bitcoin on the spot with Michelle mcy is brought to you by Swan Bitcoin hello I'm Michelle mccy welcome back we are continuing our conversation with Fred Tel chairman and CEO of marathon digital Holdings one of the world's largest Bitcoin Miners and it's been exactly a year since the big FTX collapse which saw Bitcoin prices


tumbling to $116,000 bitcoin prices more than doubled since then and that rally has largely been fueled by speculation that the SEC approving a spot Bitcoin ETF is a matter of when not if and that when is looking increasingly sooner rather than later but black rock and other institutions getting into the Bitcoin space is Raising some red flags and one point of concern Fred is that black rock the world's largest asset manager will have centralized custody of a big chunk of Bitcoin because with a spot Bitcoin


ETF you need custody of the underlying asset for any spot ETF now black rock is also taken a stake in several miners Black Rock has invested in four of the five largest Bitcoin miners by market cap and this now makes the Black Rock funds advisers a major member of the Bitcoin mining Council which is a lobbying group for the Bitcoin mining industry and they may purchase even more Miners and one of the concerns is that between the miners and a spot Bitcoin ETF that black rock may be consolidating too much power across the Bitcoin


ecosystem and that this all takes away from the decentralized money mission of Bitcoin it brings it back into the the traditional Financial system that in a way Bitcoin was supposed to be an alternative to so do you see this institutional interest and particularly from Black Rock potentially jeopardizing bitcoin's decentralized ethos and problematic for the broad Bitcoin Mission uh no uh you know it's think about it this way there are likely somewhere between four and 5 million Bitcoin in liquid circulation


today um the rest of it is held offchain or not offchain but it's in cold storage hasn't moved in multiple years um and arguably four or five million Bitcoin could be lost uh forever um because back in the early days people didn't care and they've forgotten their keys or lost their access to their wallets um so I I think it would be very hard for Black Rock to accumulate a position of owning 20% % of Bitcoin uh that are out there so uh it would drive Bitcoin prices to such Heights that the question would be


what the benefit for them in having that would be uh and oh by the way Black Rock has through their other funds accumulated quite a lot of Bitcoin actually they've been buying actively since last year um and that potentially will enable them I don't know how the rules work but they may be able to uh transfer from the other funds into um the ETF one that's approved as a way to save from having to go and buy in the open market we don't know as regards investing in miners you know Black Rock uh as many other investment funds have


index funds where they have to buy for example a Russell 2000 stocks and they will invest in these stocks and they will hold up to 10% for example and if you look at the who are the holders the large holders institutionally of the larger miners they tend to be these index funds because we're part of the Russell 2000 Index as our number of our peers and so they have to buy our stock and they buy up to a certain position um you know for them to accumulate a position of 40 or 50% uh would drive our stock up through


the roof and I would be very happy if they took a big position in our stock um I don't think there would be any benefit in them controlling us because what could they do if you think about it okay we're a minor the largest publicly traded minor in the world by produ uction capacity and we control 4% of all the Bitcoin made in the last quarter that wouldn't give them a whole lot of control of anything if they owned us 100% so uh while I love conspiracies I think it's very entertaining to listen


to uh I'm a bigger believer in the fact that the US government is releasing UFO data on purpose to hide something else than I am that black rock has aspirations of locking up a corner of the Bitcoin Market by owning the minors and controlling Bitcoin all right well there is another point to consider here and that is that Bitcoin loses its medium of exchange role and that's a concern vocalized by billionaire author Hayes uh he's a an entrepreneur and Wharton School graduate he co-founded bitmex one of the largest crypto


exchanges globally just so for those that aren't familiar with author Hayes and he recently said that if uh they were to get into this institutional place he's calling them agents of the state that they often operate like that and they could act according to government directives potentially manipulating Bitcoin to keep citizens within the fiat currency system for easier taxation through inflation one of the exact quotes on a podcast that he was on if the Black Rock ETF gets too big it could actually kill Bitcoin


because it's just a bunch of immovable Bitcoin that's just sitting there you can't actually use the Bitcoin it's a financial asset it's not the actual Bitcoin itself so concerned that will'll be relegated to a mere financial asset not a currency actively in use locked away in ETFs owned indirectly by investors and controlled by asset managers that was one of his concerns there and again echoing this idea that these big institutions are what he calls essentially arms of traditional Finance


ecosystem and agents of government to a degree uh and saying that the fundamentals of what Bitcoin is could be altered do you share that sentiment do you think that has any Merit so um there are uh and all due respect to Arthur Hayes um he's been a long-term bitcoiner from the early days big supporter um and you know an an avid um believer and supporter of Bitcoin um Bitcoin arguably today is just a financial instrument it's a store of value um the amount of Bitcoin used for transacting um is fairly low in El


Salvador other places like that you're seeing it used Venezuela countries with ultra high inflation where there isn't really an alternative and when you look closely in those countries even people are using tether and stable coins because there's so much volatility in Bitcoin you put your savings in Bitcoin you transfer from Bitcoin to a stable coin to transact and uh go back to the earlier comment you and I just had where I said about buying a bus ticket with Bitcoin you said you wouldn't recommend


anybody buy a bus ticket with Bitcoin people don't want to use Bitcoin to transact because you have to pay taxes every time you buy something with Bitcoin because you're selling your Bitcoin and so it's not really used as a currency and I believe that the Regulators have the view on bitcoin that they do because they don't view it as a risk to the fiat currency of the US us they view it as an asset a store of value and I think that while longer term countries may choose to hold their res their assets their Reserve Assets in


Bitcoin as one of many instruments China and many other countries have been buying huge amounts of gold um instead of buying treasuries and and other uh dollar denominated assets um they may very well start buying more Bitcoin which means more governments will want to go into the business of mining Bitcoin because as long as there are people outside of the US mining Bitcoin and operating pools nothing the US government or any entity in the US can do can impact Bitcoin it will continue to operate and it will continue to have


value for the people in the ecosystem and so I'm a big believer that bitcoin's decentralization is its single biggest asset and that is why we're very focused as a company on diversifying our operations globally we we want to have 50% of our operations outside of the US and North America because we believe that bitcoin's future is predominantly outside of the US um more Bitcoin is traded outside the US than in the US today and we see more and more interest from sovereigns around the world to hold


Bitcoin and um hold Reserve Assets in Bitcoin and use Bitcoin mining as a way to stabilize grids and for energy security uh and other ass other use cases and uh which is why we're so bullish on the international aspect of Bitcoin so I personally don't have a fear that um Bitcoin will be manipulated by Black Rock uh or any of the large financial institutions and Banks other than the same way they manipulate the gold market or any of these other markets and uh you know look at how gold has operated for thousands of years well


look a lot of people would argue that the gold price has been suppressed because of the fact that there's more paper gold than real gold out there and I mean we know that there's been spoofing of silver prices JP Morgan has been accused of that as well as other funds and other big institutional players um but I want to touch on this point where you said you see Sovereign interest what do you mean by that I mean when you say sovereigns as looking at it as a reserve asset let's expand on that idea so again think of you know you're a


commodity producing country uh you are generating Reven coming in in foreign currency into your country you need to hold those profits somewhere for many years the US dollar has been the primary Reserve currency and the home because of its stability safety rule of law etc for a lot of these assets they have invested in treasuries they have invested in US equities real estate in the US look at all the money that came from China into the US market all the money that comes from the Middle East into the US market


maret if they want to have more diversification or if the US currency were to start losing its attractiveness because its value started to drop in relation to other currencies because of what the federal government does relative to spending and deficits then you need to find Alternatives and where else would you put your money you can only hold so much gold before it becomes too concentrated you have too much of it in your portfolio you need to look for alternative assets and bit coin on a risk adjusted basis uh has been proven


to be a very good asset and best of all it is an asset that cannot be weaponized the US government cannot weaponize Bitcoin it can weaponize dollars it can weaponize um gold potentially if it wanted to a lot of the world's gold reserves are actually held in the US look at what the US did to Russia's gold reserves so I think there are a lot of reasons why sovereigns um are and should be looking at Bitcoin as a reserve asset you have the country of Bhutan for example that's mining Bitcoin now and they've just decided to more than double


the capacity of mining in their country you have other sovereigns around the world looking at this as a way to not just hold Bitcoin but if you're mining Bitcoin and you operate your own pool then all of a sudden you now have independence from the rest of the market as long as somebody is mining Bitcoin somebody somewhere in the world Bitcoin transactions can happen and being independent of control of you know large Nations is very important to certain commodity producing Sovereign no we we've certainly seen that dollarization


Trend as you mentioned with the what many have called the weaponization of the US dollar following Russia's invasion of Ukraine the sanctions imposed against Russia taking Russia off the Swift system that has caused many countries to go maybe we shouldn't be holding dollars we know that China has dramatically reduced its Holdings of of dollars and us treasuries um and we know as you just pointed out that central banks around the world have been buying gold at record levels both last year and this year so you see


Bitcoin then potentially benefiting from the broader dollarization Trend do you see countries officially saying we're buying Bitcoin as a Reserve at some point and and I guess which one I mean other than El Salvador we know El Salvador has made a move there but where where do you see this happening at what rate over what timeline so we are seeing interest in the technology we produce regarding our uh pool software you have to if you're mining Bitcoin you want to operate a pool um if you have enough substance in your mining because that


gives you ultimate control over transactions um so we are seeing inbound interests from the outside of the US I'm not going to necessarily disclose where uh from various people who are very interested in starting to do this uh we see more and more countries very interested in leveraging their stranded energy for Bitcoin mining not just for energy security but also for the opportunity to earn and hold Bitcoin so I think you're going to start seeing this become more common the other thing is as I said earlier on a risk adjusted


basis Bitcoin is a good asset to hold listen if major corporations are going to start putting Bitcoin on their balance sheet if Sovereign wealth funds are going to put Bitcoin on their balance sheet and they have been then it makes all the sense in the world to own more of that ecosystem and that infrastructure and there are many countries today who have very inexpensive energy where they can go in the business of mining Bitcoin and generating um quite attractive returns for that energy which otherwise would be


wasted and in doing so can start building reserves and additionally buying the market um as they deem fit but I don't see a sovereign going out and announcing hey we're buying Bitcoin because the price of Bitcoin will just go up so it would be a little bit counterintuitive well maybe not at this point maybe after they have the infrastructure and have accumulated it you know on the sly or not in a discreet manner maybe at that point it becomes public I know you don't I know you don't want to reveal which countries but we do


have to point out that Marathon has interests in the United Arab Emirates and you guys have been um expanding globally as well so why don't you elaborate on marathon's International expansion and maybe you can highlight which countries you're seeing interest from in that context sure so um obviously the Gulf region is very attractive because their energy producing their commodity producers that produce energy and have a lot of excess energy uh you know the motivation in the UAE was uh for grid stability uh and the


fact that in the summertime you know they consume uh you know from energy production perspective uh they need four gwatt hours of energy being produced four gwatt per hour being produced and in the winter time only one yet they need to run this energy infrastructure all of the time because they also use it for water desalination purposes and so a lot of energy was being wasted so by leveraging that inexpensive energy for Bitcoin uh mining you get two benefits one is you're able to sell the energy as opposed to giving it away and more


importantly uh it helps stabilize your grid meaning that when you get demand shifts in the grid you can just tell the Bitcoin miners hey shut down um and then all of a sudden you get increased capacity uh without having to go tell a gas fired plant or a fossil fuel plant to turn up their percentage of production and in UAE they recently brought online a nuclear reactor which is sustainable green energy um so they had excess energy Paraguay for example uh we mining there uh behind the typu dam which is one of the


largest hydroelectric dams in the world and Paraguay has a problem where they generate uh 32 terawatt hours of energy in excess of what they need so they have no place to sell it other than potentially Brazil and their neighbors and they have to sell it at a loss and so by bringing in Bitcoin miners they're able to now monetize that energy that otherwise would be wasted and that generates tax uh taxes for them and and other incomes jobs Etc um Africa we're seeing a lot of interest in countries like Kenya where they've added solar


energy in addition to their existing hydroelectric infrastructure and they now have grid stability issues so they want Bitcoin miners to come in and help stabilize the grid um you're seeing that in other countries around the world Bhutan uh started with 200 megawatts of Bitcoin mining and has recently announced I think that they're going to grow to 500 megawatts this is a very small small country with a lot of hydroelectricity they can all of a sudden now be a commodity producer because the problem with electricity is


you can't bundle it up in a barrel load it on a ship and send it somewhere electricity can only travel maximally a thousand kilometers before the losses due to transmission become so high that it's not worth it but you can convert electricity into Bitcoin and Bitcoin is transportable anywhere in the world in an instant and holds its value uh very nicely so that's why you're starting to see energy producers look into Bitcoin and produce that so Fred it sounds to me as though the adoption path for Bitcoin


is moving now from retail to institutions and from what you're seeing sovereigns would be the next step after institutional investors absolutely I think the you're seeing uh large number of Partnerships with energy companies uh you know you have energy companies were involved with Bitcoin mining from an interest perspective initially around methane gas flaring uh where you have oil fields where you have to flare the gas you're burning this methane gas because if you vent it in the air it's very damaging um


they now want to capture that methane use it for generating energy to drive Bitcoin mines and monetize that methane um you're also seeing uh you know Just Energy producers hydroelectric producers utilities Etc want a better monetize their energy so energy companies and Bitcoin miners are starting to partner uh you know we're mining Bitcoin with landfill gas off of trash heaps um capturing that methane turning it into Bitcoin um for example and you're going to see agricultural bowte you're going


to see all sorts of waste being turned into Bitcoin uh as opposed to using Load Off the Grid and so now more and more countries and industries are going to get involved in this and I think Bitcoin is going to be one of these uh Commodities if you would that is produced through the uh virtuous cycle of converting waste energy into heat and using that heat for things and Bitcoin will be a byproduct of that and an exhaust that will generate profits for people all over the world so literally turning trash into treasure Fred


absolutely as as we wrap up here you mentioned that there is an interesting connection between marathon and shrimp farming so why don't we close off with you telling us about that yeah so um as I just said you take stranded energy turn it into heat what can you do with that heat well you can heat buildings you can heat green houses uh which is something we're starting to do and we recently decided to do a test regarding shrimp farming because you can use this heat off take to um facilitate the farming of shrimp uh why shrimp well


shrimp actually creates a very lowcost protein that can be done anywhere that you can run Bitcoin miners now you don't have to only do it in places where you have lowcost energy where you're buying electricity to heat this process and and um facilitate this process so we've recently gotten a permit in the state of Washington to start shrimp farming uh you know we're not doing it in the ocean we're not doing it in ponds we're doing it in industrial facilities uh as an experiment to see and you know it gets


very interesting if you can take wasted energy and then you can convert that energy into heat and sell that heat for something like shrimp farming or um so aquaculture or agriculture with green houses or heating buildings Bitcoin mining then costs you nothing to do it's a function of the heat generation and if you're getting paid for generating the heat in excess of what it costs you to mine then essentially you can mine Bitcoin at zero cost right and uh uh with other edible benefits we were just in New Orleans


team Kito was there for a conference lots of shrimp on the menu Fred what's your favorite shrimp type of dish oh gosh uh I I love shrimp on the grill uh with a little bit of garlic some fresh lemon juice and uh little bit of Basil on it can't argue with that Fred thank you so much really appreciate uh your time and your insights from Marathon to bitcoin to shrimp thank you so much for joining us thank you okay and thank you for watching a special thank you to our sponsor Swan Bitcoin we do want to tell our viewers


that there is a swan Ira product that actually allows you to invest in Bitcoin with your IRA and you can set it up to buy Bitcoin essentially on autopilot and take advantage of dollar cost averaging the setup is free and there is a link in the description of this video for Kito viewers that are interested in looking at that until next time for me Michelle M and the rest of the KidCo team thanks for watching and we'll see you soon on the spot with Michelle mcy is brought to you by Swan Bitcoin Swan Bitcoin Ira


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