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The Bitcoin Breakout is Coming | Bitcoin News Now | Fred Thiel | Marathon Digital Holdings | MARA

December 1, 2023

Join us in this insightful interview with Fred Thiel, CEO of Marathon Digital Holdings, as we delve into the company's latest Q3 results, expansion strategies, and preparations for the upcoming Bitcoin halving event. Discover Marathon's unique approach to Bitcoin mining, including their technological integration and international joint ventures. Learn about the company's financial performance, investment strategy, and future growth plans in the dynamic world of Bitcoin mining.

00:00 Introduction to MCN Money Channel & Today's Guest

00:57 Interview with Fred Thiel: Marathon's Role in Bitcoin Mining

01:24 Overview of Marathon's Operations and International Presence

03:08 Growth Strategies and Operational Models

05:15 Marathon's Q3 Financial Highlights

06:17 Bitcoin Holding Strategy and Operational Funding

08:22 Plans for Expansion and Future Growth

11:15 Joint Venture Strategy and International Expansion

14:53 Financing Future Growth and Managing Shareholder Value

17:11 Balancing Bitcoin Holdings, Equity, and Debt

19:06 Institutional vs. Retail Investor Mix in Bitcoin Mining

21:52 Marathon's Investment Philosophy and Bitcoin's Market Dynamics

24:05 Preparing for the Next Bitcoin Halving and Global Hash Rate Trends

Transcripts are autogenerated. May contain typos.


hey guys welcome and welcome back to the channel MCN money home of all things stock investment and personal finance related now for today's video we're going to be welcoming back Fred theel who's the CEO of marathon digital Holdings this is one of the biggest players in the Bitcoin mining space there's a lot going on we're going to be discussing their Q3 results and their joint venture expansion strategy moving into next year's having event now before we get into all that please take a


second hit the like button you guys it's a big help to myself in the channel if you're not already subscribed MCN money feel free to join and let me know in the comments section below if you're currently holding shares of marathon what your thoughts are on their current operations and your price target for Bitcoin moving into next year's having event now with that being said let's get into today's [Music] video okay guys so that's right today's video we've got Fred theal he's the


chairman and CEO of marathon digital hold Holdings Fred's been on the channel before but we wanted to welcome him back to talk about the Q3 results and some of the activity we're seeing in the Bitcoin mining Community as a whole so Fred thanks so much for being with us today great to be here you're always welcome uh first things first for people who maybe missed our initial interview or some of the coverage I've done on Marathon can you give us just the elevator pitch here what the companies


about and uh your current operations sure so uh we're large publicly traded Bitcoin miner with operations in North America UAE um which is United Arab Emirates and Paraguay bulk of our operations today are in in North America Texas and um North Dakota the little bit in Nebraska uh long-term goal is to be about 5050 domestic International uh on our mining operations uh we have uh little over 22.


6 ex ahash energized operational and running making it one of the largest miners out there um very efficient Fleet typically uh cross our Fleet we're at about 24 jws a terahash which industry averages north of 30 somewhere it's only relevant as you look at the having because it impacts our cost to mine gotcha um we ALS we also have a part of the business which is focused on technology so we're the only minor who's vertically integrated on technology side everything from the pool software firmware down to um our investments in as6 uh and a company called orine who uh


is a us-based manufacturer mining equipment uh we're also very involved in developing Emer and cooling technology for digital infrastructure and um our whole UAE site is built using some of our uh early collaborations on that side with Partners uh and you know our model is to continue to grow and scale uh our business um interestingly for being one of the largest miners in the world we have under 60 employees so we're very shop uh have grown primarily through uh an acid light model where we partner with folks um and are now pivoting more


towards an owned and operated model but that's kind of high level that's great and I know we talked about the FTE or headcount on our pre previous video as well uh I wanted to talk about the UAA UAE site and some of the joint venture activity in a little bit here um I was joking with a friend before the call you seem to be represented at every single conference you're traveling all over the world I don't know how how much uh I guess a question for you how many how much time are you actually at home base


there Fred um I am on the road about three weeks a month gotcha yeah yeah it's busy and it it's uh becoming a global global Community really so before we get into the joint venture let's talk about Q3 because you just came out with some really impressive numbers there's a number of key points in there what were some of the the maybe the top three kind of financial operational highlights in your opinion uh well obviously being uh you know net income profitable is always a nice thing to be as a minor granted um


you know part of that is driven by some one-time benefits from the um elimination of debt uh we were able to uh essentially reduce our outstanding debt by over $400 million at a100 million plus savings and so you have to take that as income So that obviously impacts our bottom line um and then you we have the usual impairment regarding infrastructure and and um amortization depreciation of things that uh counterbalances that a little bit but regardless it was a great quarter uh you know clearly the benefits of our


optimization strategy getting better uptime better efficiency out of our miners dropping our cost to mine all that clearly had an impact in the quarter so it was really a breakout quarter for us where um you could clearly see the profitability potential of the business longer term um so we're very excited about that um you know we're now essentially fully energized um to what our plan was uh for the year and so as we look into next year we're super excited about kind of further growth going down there and continuing to see


the benefits of our investments in um our joint venture Partnerships as well as now also some of the um Investments we're making in alternative fuel sources like methane landfill gas and other sources like that so very exciting year ahead most definitely I like the word to use breakout and we're really seeing a breakout in in bitcoin price itself the minor stock prices and a lot of the activity here the other thing that really caught my attention and and must have been welcome news for everyone there is you really received a big uh in


quarter benefit for for your huddle and your massive stack of Bitcoin uh proving that that that thesis of having Bitcoin on the balance sheet really does help uh companies out so what is your stance on that because we're really starting to see a convergence some companies are going to the mine and sell model very similar to maybe some other resource companies uh and then there's others like yourself and and Hut who are really holding on to that large Bitcoin Reserve so what's your take on that Fred so we view it as you know the


Bitcoin we hold on the balance sheet is an investment for us just we could be investing in uh buying miners for that money um but we believe that Bitcoin you goes through its cycles and um we acquire that Bitcoin at a somewhat fixed cost meaning you know the cost of energy and the cost of mine and uh when there is great margin or great um profit in that it's a resource we can use to either spend to cover our operating expenses which is something we've been doing um and then hodling the rest um and over time you know this hle


is going to continue to grow and we'll likely start using it um for making a certain Investments because depending on where the price of Bitcoin is at any given day we're constantly evaluating is it better for us to sell some Bitcoin to fund buying more miners or is it better to sell some Equity or is it better to take on debt those are the three things we're constantly juggling and generally speaking um the belief has been that it's better to um use equity for growth uh Investments and huddle the Bitcoin


but you know as we see Bitcoin do another run here potentially could be time for us to monze a little bit of our Bitcoin and use that for growth expenses uh as well so I think you know you're going to see a balanced approach to um using it as a treasury asset and we'll have to see you know if Bitcoin goes on a big run here then our balance Sheet's only going to get stronger today um you know as of the the last Public Announcement we had you know somewhere a little over half a billion dollars in cash and Bitcoin on the balance sheet


with you know $300 million of debt so you know very strong balance sheet you know now with the price of Bitcoin where it is today it's even better um so you know we feel very confident that we're going to be in a very strong position here as we get into the having to take advantage of consolidation opportunities growth opportunities other things like that great so I know you talked about the word growth in there a lot Fred and you've uh quoted I think 26 ex aash by year end it's just astonishing to see


these numbers continue to grow and grow and grow uh how how do you plan to get to that 26 and what can we expect looking out into next year so effectively um as the UAE site uh gets fully energized which we're in the process of doing right now that'll be uh up and running fully by the end of the year that gets us to the 26x aash at that point you know if you were look at at our pool stats today you'll see we're somewhere between 225 and 235 spends on the day um somewhere in there and uh you know there's some uh additional


optimization going on across the fleet today which will give us some additional increases but with the UAE fully online uh our portion of that gets us to 26 xahh um by year end so we're very excited about that then as we look at next year you know we've spoken previously about the fact we have about 5x a hash of uh machines on order which will be delivered um here towards the end of this year early next year and uh we'll begin deploying those here um quite quickly um in the first half of the Year through the the having and then


you know we're not going to stop growing we're going to keep growing beyond that yeah I've heard the analogy if you're not growing you're shrinking in this community and uh you talk about the the UAE and I wanted to talk about that joint venture strategy in a little bit more detail now you recently announced another one in Paraguay uh We've also seen some really historic election results coming out of Argentina and South America is really starting to kind of lead the charge there so how does how


does your strategy in terms of joint venture maybe differ now that we're we're starting to see that political support down there um well it doesn't change at all so we use joint ventures as a way to drisk large International projects um in the UAE we partnered with the Sovereign um essentially as a way to ensure that the person providing our power the person providing the utility grid connection the person uh providing the land all were involved in the transaction and so by partnering with who we did in UAE we essentially


got all of those things and so they have a vested interest in the success of the project which der risks it substantially um it also allowed us to for the first time uh do a fully buil and designed um immersion site in one of the most hostile environments there is you know you're talking over 115 120° and ambient Fahrenheit or 50° C um huge humidity and uh the pilot site that we built there last year ran flawlessly for a 100 days before an engineer had to open the door to the container to see if anything was the matter uh which was


great and uh that site has fabulous uptime the today uh well north of um 99% uh in the current environment right now uh and so we're super pleased with that site very stable no machine failures the immersion technolog is working really well um and anybody who's curious can go see it the videos on our uh any one of our social channels uh for the site um as you look at Paraguay here we're mining off of hydro energy off of dam uh we're partnering with a company that has the local connections has the


um had already done a lot of the ground workor if you would for us um where the uh partnership in UAE we're a minority partner but we're providing all kind of the intellectual property and the how-to skills in this case Paraguay were the majority partner um of the deal and um our model going forward will likely be some combination of uh in international sites either we partner with the site developer uh and uh you know essentially buy a portion of the site that we're going to own operate and build uh or um


we'll just do a JV for the whole site together with them uh where we can bring Capital our knowhow and expertise uh a bit similar to how we did in UAE so those are the international models that work really well because you drisk you have local presence and it allows you to scale very quickly you know again we're a small organization we're able to do these things because we have a lot of very smart people but we have really good partners that we work with and when you can partner with people you can


scale quickly um you don't have to do everything yourself and you know as you look at most minors we most probably the most Diversified of the miners out there most miners are either concentrated to um a state or a region you know Riot's very strong in Texas clean Sparks very strong in Georgia um you know we're in Texas we're in North Dakota uh we're in UAE we're now in Paraguay we're going to continue to grow internationally in different sites um you we're doing stuff with methane


landfill gas in Utah uh we're going to be doing some really exciting stuff with heat recapture um what we call Energy harvesting um around leveraging the heat from Bitcoin mining for different applications uh again all that goes to drive a much lower cost to m a Bitcoin um longer term and then we're going to do a lot more kind of stuff around um climate mitigation and leveraging Bitcoin mining uh to do some of that so we're super excited about what we're doing there and then we also have what


we're doing on the technology side um you know we're built in designed some very strong cooling technology for uh Bitcoin mining uh we're now very focused on taking that to its next Generation which is essentially a dual phase type of Technology um which will allow us to um deploy that type of Technology uh for people who are in the AI business people who are in telecoms Industry people who are in the mobile data center business so that's a business line which has a potential to be very exciting outside of


Bitcoin mining even gotcha yeah and that's why I love covering space it's it's rapidly evolving there's so many new components it's always changing I really do like the JV strategy overseas we're starting to see a lot of this I especially on Twitter or X right now I'm seeing uh people posting there's pockets of of power or energy that are going to waste and they're looking for opportunities there so really cool model um now the next couple questions here uh come from viewers or or investors in the


company so we talk about growth you said it's it's really managing your your hudle strategy uh the dword dilution which obviously a lot of investors are wary of taking on debt so the question is what is your strategy to finance growth out into 24 25 and uh will we see continued dilution but going forward you know it's essentially going to be a constant focus on what is the most creative thing for our shareholders right are we going to use Bitcoin if Bitcoin um you can think of it this way if we hold let's say $100 million worth


of bitcoin and we think that Bitcoin over the next um you know 20 months uh 24 months rather is uh going to double in price then um what do we think uh of spending that Bitcoin should we hold it because if we're going to get 100% return on that over 24 months let's say what do we think uh if we sell Equity instead what's the weighted cost average cost of that cap capital or what's the weighted average cost of using debt to grow and then you have to balance it and you want to make sure you have a balance


sheet where you're not over levered from a debt perspective and one of the reasons we did our debt buyback was specifically to take advantage of the huge discount that we got in buying back that that you know over 20% discount um and the ability to deliver the balance sheets so much stronger position which helps our stock price the while it was dilutive yes it takes an overhang off the stock price because you know come 2026 that's a large amount of capital that would have to be raised all of a sudden to pay off that debt at


Park um so going forward um you know we'll use equity Bitcoin cash combination of all three maybe some debt um to do things and it's all going to be based on what do we think is the best use of the asset we're using to fund that growth right um if we think that Bitcoin is nearing a peak for a period of time and that we're not not going to see north of you know 25% annual return on our Bitcoin Holdings then maybe we start using some of our Bitcoin if we think that um you know the equity markets are going to be at a certain


level going forward then you know we may decide not to use equity instead and use Bitcoin because we feel uh the delution would be too big so it's a constant analysis we're doing every time we make a decision but at the end of the day it's all about shareholder value and growing the value of the Enterprise um you know the thing about this business as you kind of said earlier it's you have to constantly be growing uh you know Global hash rate has doubled essentially this year if we hadn't been growing we would have been


going backwards you can look at core scientific you know they're stuck in this bankruptcy they haven't been able to grow their production numbers are decreasing every month um and it gets harder and harder to catch up if you've been going backwards in this business so um it is a business where you have to keep growing and you know it's like many Tech businesses and you know I'm not going to say that we're like Amazon necessarily but it took Amazon many years before they stopped diluting their shareholders


um to grow and today they're this huge massively profitable company so yeah I appreciate you you taking that question and the explanation and and I really encourage people to think about that you've got various different levers or levers at your disposal and it's just determining which one to pull at which time and and a lot of people especially retail I feel really beat up on companies for dilution but if you're effectively using that that money or that as an investment I think there's no


problem there um I will say Fred you've got a a very passionate uh following from the retail Community Marathon investors are are beating the drum about Marathon everywhere I look on the all the on the bullboards um now the next question again from a subscriber here talks about retail investors actually as well and this is more of kind of a sector-wide question I suppose but do you have any concerns about the relatively low percent institutional ownership in the Bitcoin Bitcoin mining Community compared to the retail


investor um and I know this is timely as we're seeing the ETF evolve and and more institutions look at this space but any concerns there um no I mean our the latest 13 F filings we looked at uh we were just over 50% institutional so um we've been hovering around 40% so um you know 50% % is a a good healthy number 60% would be ideal um you got to realize a lot of the institutional holders tend to be index funds so it's not that they're specifically it's not managed institutional it's you know um Russell


2000 Index things like that companies investment funds that invest using the Russell 2000 have to buy whatever's in the index and we happen to be in the index um but regardless that tends to be longer term money than retail um but you know we we have a an equity that is very attractive in the capital markets we have a lot of liquidity we could trade 20 to 50 million shares in a day we are an optional uh optionable security people can write options on our security um we have this big pile of Bitcoin and we act with we have this great beta to


bitcoin price you know Bitcoin moves up one or two% we move up two or 3% Bitcoin moves Down 2 or 3% we move down 5 or 6% you know it there's this great beta and so the Traders love it so there's a retail trading um that goes on uh all the time around our stock uh you have institutional hedge funds that are in and out of the stock on a regular basis who are who are trading so there's added volatility and the Bitcoin mining stocks are all traded that way the big four or five people trade Riot Marathon clean


spark Etc uh all kind of against each other and um so there's a lot of uh trading going on in the marketplace or around our equity in that sense but being so liquid it's very attractive for that and that's why it attracts a lot of shorts so you tend to find a lot of short interest in the stock um because uh there's good volatility there's good movement it's great from a trading day trading perspective um and I I think you know that's just the nature of the be so over time we'll see more and more


institutional come into it with the ETF um what's interesting with the ETF is you know you're essentially investing in spot Bitcoin and uh while you could say okay I have three choices I can invest in an ETF which is spot Bitcoin and then I'm only going to get the volatility of Bitcoin I could invest in micro strategy and I can get a leveraged balance sheet approach to an ETF right and you know Michael sailor just announced uh again or micro strategy just announced again that they bought even more Bitcoin um at these


high at this new high price range um and he'll continue to accumulate a lot of Bitcoin because because of that um but the benefit you have in investing in a minor is the miner's cost to produce a Bitcoin is essentially relatively fixed meaning if um it's energy and Global hash rate kind of drive it and um you know if bitcoin price zooms up to 60,000 you know miners margins all of a sudden go through the roof well that profitability will be instantly reflected likely in stock price appreciation and so when that happens


the beta to bitcoin price becomes huge and so that's where the miners are a more attractive investment for certain institutional investors is because of that data right if bitcoin price goes for a tear the miners like Risk on assets generally in a risk on environment will tend to go up you know tech stocks typically tend to their multiples go from you know low teens to high 30s as the risk profile shifts and and it's not that their business model changed at all it's simply risk appetite changes and people


go more into growth mode so I think if we go into an environment where the markets are more focused on growth um and Bitcoin goes for a tear I think you're going to see the whole mining sector do very well um and institutions will continue to invest in that because of that you know you could double your money in Bitcoin but you could potentially do better than that with mining stocks well let's hope that thesis comes true and what's nice is we really did like you see uh say Bitcoin miners are kind of a levered play on bitcoin there


was definitely correlation for a long time and then it started to kind of see some Divergence over the last few months and it seems the miners have kind of caught up now over the last couple weeks um Bitcoin has kind of hovered flat but the miners are are catching up a bit which is really nice now um the last question I had for you Fred has to do with having specifically uh Global hash rate so we've seen global hash rate continue to hit all-time highs I think as people are just trying to squeeze all the juice out of these machines they can


um come having obviously efficiency becomes critically important a lot of these old machines likely will be unplugged I've heard estimates anywhere 20 30% in global hash rate um what are your thoughts there and do you feel like your Fleet is ready for having and will be ready post having um so in reverse order I think we're definitely prepared for post having you know the energy effic efficiency of our Fleet is 24 Jews of terahash where the average is north of 30 so in this business you want you want


to be in the lowest 25% from a cost perspective if you your cost of mining is in the lowest 25% you'll always be mining um it's just the way it'll go if you look at um some different scenarios of what could happen here it's really going to be driven by the price of Bitcoin right if we go into the having um in late April and bit Bitcoin is somewhere between 40 to 50 which is where a lot of analysts seem to think the number is um then you're talking about uh essentially um a global hash rate going


into that that's going to be approaching um 550 almost 600 x aash which is you know well over double what it was at the beginning of this year so there going to be a lot of miners who are going to be questionable in their profitability at that Point um who don't have very efficient pleads so that's going to be critical now the next question is then how long does it take before Bitcoin goes from 45 to 60 because when it hits 60 all this all of a sudden those people are mining profitably again so some people may just


say you know what Damn the Torpedoes I'll take the loss for a while uh you know some people have power purchase agreements where you know they have to either pay for the energy they can't just unplug miners right they're they're on the hook for the money anyway so it comes down to a decision of do I go out of business or do I take a loss and that's why you have to start looking at people's balance sheets you know um again you know we're in a position going into the having here where we have a ton


of cash and and Bitcoin on the balance sheet we're in a very strong position uh you know it doesn't cost us it the Minimus would it cost us to service our debt at this point we only pay 1% interest on the balance there's no amortization so we're in a very good position um most of our capex is already paid for we're you know ready to go we can be in Harvest mode if that's what the market wants us to do um but we can also be in consolidate and aggressively accumulate mode and drive growth if the


opportunities arise so I think we're very well positioned I think other miners aren't as well positioned they either have large capex um commitments ahead of them or they have had difficulty raising money and you know they're trying to raise money now while they can before the economics of the business make it harder for them to raise money uh post having so we think it's going to be a very interesting Marketplace next year um and you know as typical for Marathon we're agile we're ready to go in


whatever Direction the marketplace provides opportunities for sure yeah Mar marathon is one I personally hold and and your scale and size is really beneficial I think going into this having so Fred as always super insightful conversation I appreciate appreciate your time I know you're a busy guy I'm glad I caught you in one of the in-office days uh thanks so much for stopping by and uh I'll kick it back to you for any closing thoughts great thank you really appreciate it and appreciate the support of you know all your uh


viewers and listeners uh you know we love being able to talk with members of the community and people like you do a great job of you know spreading the story and helping people understand what mining is all about so thank you appreciate it we'll talk soon