« Back

Flight to Safety Driving Bitcoin: Marathon Digital CEO

April 11, 2023

Marathon Digital CEO Fred Thiel discusses what's behind Bitcoin's gains with Matt Miller and Kailey Leinz on "Bloomberg Crypto." The surge in Bitcoin's value is being attributed to a flight to safety amid a banking crisis, with Marathon Digital's CEO noting the shift in Bitcoin's correlation from traditional stock indices to Gold. This trend is evident through concentrated buying during Asian and European trading hours, followed by selling during North American trading. While the US maintains a relatively uncertain regulatory stance on cryptocurrencies, international markets are adopting more favorable regulations, prompting Marathon Digital to expand its operations overseas. Benefiting from a debt-free status and substantial capital reserves, the company is poised to triple its Hash capacity while emphasizing energy efficiency. This growth strategy positions Marathon Digital favorably in the upcoming Bitcoin halving cycle and provides acquisition opportunities in a changing mining landscape, where modern infrastructure gains prominence over older fleets.

00:00 Discussion on the reasons behind Bitcoin's gains and the role of thin liquidity.

00:25 Fred Thiel explains the steep rise in Bitcoin as a flight to safety and its decoupling from traditional markets.

01:04 Analysis of Bitcoin trading concentrations and the influence of different regions.

03:02 Concerns about US regulatory hurdles and Marathon Digital's international expansion.

04:11 Financing Marathon Digital's expansion through existing capital and Bitcoin holdings.

06:12 Potential opportunities for expansion and acquisitions in the mining industry.

06:20 The importance of modernizing mining equipment and the challenges faced by miners with older fleets.

Transcripts are autogenerated. May contain typos.


Fred you had a spectacular year fueled by this rally what do you think is behind the gains I mean trading must be incredibly thin I look at the market cap it's about 580 billion but almost 400 billion dollars of Bitcoin has been dormant for years meaning that only about 180 billion actually trades is the thin liquidity behind this deep rise that we've seen oh I think what's driving the uh the Steep rise is a flight to safety if you look at the correlation of Bitcoin it's traditionally in the past few years been


very correlated to the NASDAQ and to the s p we're now seeing it decorate from the NASDAQ and s p and correlate much more to Gold so I think with that place too is more of a thesis of flight to safety with the banking crisis many people realize that this is really what Bitcoin was born to do it was born to be an asset where you control the keys you hold your money and nobody else does and I think that's why we saw this big jump from 21 to 28 right in the middle of that banking crisis where do you think


that is held when you look at the concentrations is the trading happening mostly here is a lot of it happening in China I mean surely it's Global but there are Pockets where traditionally it's been necessary to hedge against inflation like Argentina and parts of Africa is it still there uh yes I think what you see if you divide the data up into kind of three phases Europe North America Asia uh you lately have seen that uh the price of Bitcoin tends to rise mostly during Asian trading hours um and then uh it sustains that with


European hours and then when the U.S North America comes online you tend to see some selling so I think a lot of the buying has been uh family office and institutional buying out of Asia as well as Europe I know um we certainly get contacted quite often from buyers who want to try and buy directly from miners which we don't sell to um but you know there's a lot of interest uh in uh acquiring Bitcoin as you said it's fairly thinly traded I think right now the market volume is about half of what it was uh during the kind of rush


time in 22. so about 10 billion dollars a day versus typically 20 or 20 billion dollars a day um but I think what you're seeing is really uh the offshore markets primarily buying uh you know in the US we have a lot of regulatory hurdles yeah we saw a major shift in Washington's attitude towards crypto uh come this spring and I think you're seeing some people reposition themselves meanwhile in Europe they have put together very good regulation Asia's developing very good regulation Dubai has positioned itself


very strongly for crypto market so I think you're seeing the international markets adopting a set of fair and good rules for digital assets where in the U.S they're just trying to kill it well but Marathon digital is based here in the U.S spread so what outcome on the regular regulatory front do you fear most and will that cause you to change the way you do business maybe do it elsewhere well we've already started doing it elsewhere we announced earlier the Sierra joint venture uh with the Sovereign wealth fund of UAE for what


will be a 250 megawatt facility uh in Abu Dhabi uh we're Beginning to Look extensively internationally we think there's a lot of pressure on mining in the U.S we have at the same time some states who have declared themselves uh states that are minor friendly Arkansas for example their state legislature just voted on a right to mind bill and the state of Montana also has a right to mind Bill and other states are trying to do that but at the end of the day The Regulators in Washington with what they've done with the banks and what


we're starting to see noise about regarding energy and things like that we we believe that there's a concerted effort uh really against crypto in the U.S and so we're further diversifying our efforts internationally well you brought up two points there Fred one on the subject of what has happened with the U.


S banking system and crypto Bank specifically over the course of the last month and change the other being you know joint ventures you're pursuing uh the idea of an expansion in some sense I gather so how are you financing that expansion are you able to took out take out new loans and from whom well at this point we have no debt other than our convertible bond which expires in 2026 and has a one percent coupon so we paid off all our loans to all banks uh late last year and the beginning of this year so we sit on a lot of cash and a lot of Bitcoin we


don't sell all our Bitcoin we hold our Bitcoin I think today we have a little over 11 000 Bitcoin on our balance sheet and as public companies go in the US I think we're the second largest holder of Bitcoin um so we have ample Capital uh to finance our growth we've already paid for the majority of the growth we're seeing this year we're growing from 7x to Hash at the end of last year to 23x Hash this year that's over a tripling in capacity um and that's already mostly been paid for so at this point any further


expansion we have ample capital in the balance sheet to fund that and uh we're very excited about the opportunities to continue to grow we have one of the most modern and most energy efficient fleets in the world um our average energy consumption on a per Terra hash basis is somewhere around 24 joules per Terra hash where the General Industry today is somewhere in the mid 40s so we feel very bullish going into the having cycle which will happen uh in May of next year which will put a lot of pressure on other minors


you know if the price of Bitcoin doesn't move up substantially north of 40 closer to 50K by May of next year they're going to be a lot of miners whose costs to minor Bitcoin will essentially double it'll take twice the effort meanwhile the global hash rate has continued to grow we're at record levels almost today and it'll continue to grow through this year making it even harder does that give you an opportunity Fred to buy either competitors or their gear are you interested so great question uh the funny thing


with Bitcoin mining is that when the market price goes down and people are in trouble buying new stuff goes down too so it's a build versus buy decision and if people have infrastructure that is good infrastructure meaning good data centers with good power pricing those can be very attractive in a down Market whereas machines that may be two years old are not because um they're near the end of their economic life and their Energy Efficiency is not as attractive technology moves very quickly in this industry and so it's very important to


continually modernize your Fleet and I think what you're going to see now is the kind of growth of companies that have very modern fleets Marathon clean spark others like that whereas uh miners that have older fleets uh are now caught in this pickle of a situation where they can't borrow money they can't tap the equity markets so how are they going to refresh their fleets