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The State of the Mining Industry - Pacific Bitcoin 2023

October 16, 2023

A panel discussion takes place during the Pacific Bitcoin 2023 event, featuring key figures from the Bitcoin mining industry, including Marathon's CFO, Salman Khan. The panelists represent companies such as Marathon, TeraWulf, Riot, and Iris Energy. Each panelist shares their background and experience in Bitcoin mining. The discussion covers topics like treasury management, emphasizing the need to manage counterparty risk and reduce debt to ensure profitability in the ever-changing Bitcoin mining landscape. The panel also touches upon the upcoming Bitcoin halving event in 2024 and its potential implications for the industry.

00:00 Introduction and Welcome

04:42 Marathon's Approach to Bitcoin Holding

07:24 Philosophy of Leverage in Treasury Management

09:34 SEC Approval of ETFs Impact

10:04 Marathon's HODL Strategy

16:05 Hedging Strategies

26:22 Debt Aversion

37:43 Advice for Investors

44:28 Balance Sheet and Efficiency

Transcripts are autogenerated. May contain typos.


let's do it please take a seat this will be a very interesting conversation we're kicking off Pacific Bitcoin mining track marathon is a key sponsor thank you so much let me invite to join me this morning first salmon can Marathon CFO please join us Patrick flury CFO at Tera wolf Phil mcperson VP of capital markets at Riot and Glenn Harrison thep of operations at Iris thank you so much a round of applause please thank you okay today's topic is mining treasury management which might sound a little bit dry for a morning


topic but believe me this would be a very interesting conversation we have folks who are actually shaping this industry the largest companies are on stage they're actually helping to build this mining industry which is a core element of the Bitcoin ecosystem and I'm going to be talking about a lot of very interesting topics of how this shaping up so before I kick it off let's go across the the panel here quick introduction tell me a little bit about yourself the company you work for give me your Bitcoin class when did you join


the ecosystem when did you buy it for the first time or when did you went down the rabbit row and tell me a little bit about the person who are you are the most proud of orange peeling or the person you are the most disappointed for not being able to Orange Peel yet let's just get it started a little bit with a uh fun topic so please maybe samon would you like to kick us off yeah thank you thank you for having us here it's uh look I'm probably the least experienced in this in this panel when it comes to


to Bitcoin mining uh my exposure to Bitcoin mining was a couple of years ago not knowing much about the industry and not knowing how mining works and going out and buying uh Bitcoin hoping that I'll become rich and along the way learned a lot of things and uh that was my exposure but my background is oil and gas which is uh which is U spent about 15 years uh with with large oil and gas companies like oxident petroleum um Learning How uh commodity price cycle exposed Industries operate and you know there's a down cycle there's a beer


there's a bull and how do we how do we prepare ourselves for the beer and how do we prepare for for for the bull markets and be prepared to to take the opportunity to grow from there so that's my background and experience very happy and humbled to be here and learn along the way great thank you welcome you're welcome hi Patrick flurry CFO at tar wolf we definitely uh is it hot enough in here for everybody feel like we got some miners running in the back here anyway uh I yeah does anyway I'm a 22y


year mainly Institutional Investor uh reluctant CFO been doing this job for about a year and a half um I sort of to answer your question on on bitcoin I read the Bitcoin standard a few years ago and that kind of got me hook line in Sinker um so that's that's just my quick background Phil can I check the mic here check check all right yeah Phil mcferson vice president of capital markets um for Riot platforms um I guess my intro to um Bitcoin mining I was a CFO of an oil and gas company and we had some stranded gas assets and


so I started going down the rabbit hole on how to mine Bitcoin what the cost would be trying to use natural gas and this was uh back in 2017 when it was around $3,000 a Bitcoin and I realized that it was about the same cost to mine then as what you could get for Bitcoin and I was oil and gas was hard enough so I didn't really want to do something even harder at that time and then it went to 21,000 and I was like oh maybe I missed something um so I went down the rabbit hole again in 201920 kind of into the coid when it


sold off uh and again went back to that macro picture of what it cost to mine Bitcoin and then I was introduced to Riot uh they were looking for a CFO and I wind up joining the company um in 2021 uh as the eighth employee and now we have over 500 people and um run one of the largest Bitcoin mining facilities in the world so that's my background awesome welcome Glenn hi my name is Glenn Harrison VP of operations for Iris energy I went down the Bitcoin Rabbit Hole in 2017 um bought at the top 15 20,000 um lost a bit of money um and then got back


into to it 2019 2020 main reason I got orange peeled was like I worked in a bank was in commodities for 14 years and I and regulation just kept the bureaucratic machine just kept getting um busier and busier um and the amount of regulation in the bank just didn't make sense to me I didn't feel like we're adding value to Society at large and I felt like a decentralized nature of a an algorithm um just made a lot of sense it just cut through a lot of that so that's that's where it hit for me um


orange peeled from our founder actually Will Roberts who I worked with at the time and um who are most proud to Orange peill is probably indirectly through family um put it in Cold Storage in the line so awesome great so let's kick it off let's get right into it so the topic as we mentioned we're talking about treasury management and we have very different views on how to manage your treasury when to hold Bitcoin when to sell Bitcoin so maybe we kick it off with that question and we go across the


panel again let's start from a philosophical perspective uh what is each one of your companies approach about Bitcoin do you hold it do you sell right away is that the shareholder decision whether or not to be long Bitcoin or short Bitcoin and the company just needs to generate that Capital back to the investors so I love to hear a little bit more about each one's perspective and how do you navigate that from a philosophical perspective and other key principles for treasury management that you're all


applying on day today maybe we start on the other back and it can yeah sure so we started mining Bitcoin in 2019 uh we've had a philosophy where we liquidate daily and we've kept to that we've had conviction right through a bull market and bare Market um through 2021 when the price ran up to 69,000 I think we from a publicly listed Miner perspective had the highest average sale price because we did liquidate on a daily basis um and there was a lot of public pressure to accumulate Bitcoin through that bull market uh but we stuck


to our guns we essentially we we view the um non- hodle philosophy um as a way to invest in further capex which we feel has a higher return on investment it's where we what we can control we can control our own capex that's what that's why we're a Bitcoin minor that's what where we're trying to attract um track Capital um and if we weren't selling the Bitcoin we'd have to borrow we'd have to leverage up or we wouldn't be able to build as much as what we're building so


we're we're stacking the scarce asset that we can control which is infrastructure uh 20 30 year infrastructure that we can use uh for multiple purposes potentially not just Bitcoin mining and that's what we think is uh the value ad there so yeah um yeah at Riot um we started mining in 2017 and for the first five years we stacked every coin that we mined um it was in 2022 that as we grew our hash rate you know you go from operating less than an xah hash to 567 xah hash your costes cost to mine increases exponentially


also the amount of energy you're using so it was in 2022 we made a strategic decision to start selling a percentage of our monthly mined Bitcoin and kind of match our sales with our operating costs and the model kind of works that the higher the Bitcoin price goes if we're able to manage our cost structure then we should in theory be able to stack more Bitcoin the higher the price Bitcoin goes so we hold about 73 7,400 Bitcoin um on the balance sheet all mined by ourselves and our goal is again as the price of Bitcoin goes up we


hopefully can sell less and stack more is this this working yeah so so our MC uh mag said that she wanted this panel to be spicy so I I'll spice it up here a little bit um again as a 22-year Institutional Investor I personally think like the Bitcoin hodal strategy is trash okay the reality is right you find one commodity company in the world right that we any Institutional Investor invests in Freeport macaran Exxon Mobile somebody that mines something that doesn't sell it because they think the price of it will be higher in the future


and look I want bitcoin price to be much higher just like everybody else here does right but we are a mining company similar to I think what iris said and what we are paid to do is mine Bitcoin the cheapest as possible and then return that value in either additional capex growth that's a creative or reduction of debt or shareholder returns but that is the model it's just like any other commodity business I've ever invested in as an inal investor and so I think what we're going to see very soon is when the


SEC does approve ETFs the hotal model is over why would you ever buy a company that's deluding you to hold Bitcoin on their balance sheet when you can go in the market and buy an ETF that charges you 10 or 20 bips to own it right so it just makes owning Bitcoin so much easier and that is coming soon and so right now the hurdle to owning Bitcoin outright which is why miners have pursued the hodal strategy is is you know if you have a Schwab account or an eade you can go online you can buy a minor that hotal


that's great but as soon as that ETF comes around which hopefully does Drive Bitcoin higher for all of us why would you ever do that just go buy the ETF and now you don't have to open up a coinbase wallet you don't have to open up a metam mass wallet you don't have to worry about cyber security you can write in your Schwab account and right in your E Trade account own a Bitcoin ETF that gives you direct exposure to bitcoin so then the question becomes why do you want to own a minor you want to own a


minor just for the same reason you want to own Exon mobile or Freeport macaran because they mine the cheapest of all of their peers in and out of Cycles that's where we're going I think as an industry again this my personal opinion as a 22-year investor don't get me wrong I want the price of Bitcoin to be a lot higher for all of us I also want you to buy you know all of our stocks that were sitting up here I just think the hotal strategy in my opinion is over as soon as the SEC approves the ETFs all right well we we have a very


different view on this well marathon is the uh largest U Bitcoin mining from an ex ahash perspective in a public company space and we also have the largest hudle position when it comes to public Bitcoin mining uh companies we we are we have about 14,000 approximately Bitcoin and and uh that's valued about almost half a billion doll in cash and Bitcoin combined so we we obviously have a different view on this and different strategy when it comes to holding reflecting back on um on uh on on how we go about and make this decision we look


this is a this is a management decision we revisit this every month and we look at how uh how what is the best value creation for the stockholders is it the hodle strategy is it the hodle plus monetization and where we've landed is that we monetize Bitcoin up to the extent that we want to pay for our day-to-day operating cost so keep the lights on and keep the operations going and then the rest we huddle that on our balance sheet and that has worked out well for us reflecting on um um coming back from from oil and gas industry days


um certainly agree with Patrick's views on on how Exon Mobile and other oil and gas companies they they monetize they don't keep it there are a couple of subtle differences there uh one is one is that we we are uh this is this is you don't need a physical space to store Bitcoin this is uh an intangible asset uh oil is a physical commodity gold is a physical commodity you need a you need the space and the tanks to store it and there's a physical limitation to that uh secondly you know coming from not


meaning to be too technical but most of the production here in Us in oil and gas is secondary and tertiary which means that it's through either water floods or or steam floods which which means that storing that oil is very difficult it's it's difficult to hold that in tanks you have to keep it keep heating that otherwise it becomes tar becomes difficult to transport through pipelines as well so some limitations there as well um the balance the answer is somewhere in there in the balance reflecting a little bit more on the ETF


if you allow me to do that um ETFs look ETF is very exciting for this industry in the sense that it brings in those big boys and girls into the Bitcoin mining and in investing space and allows other investors to allocate portion of their portfolio or assets into into Bitcoin um uh exposure if you like uh when it comes to the idea whether this is going to impact Bitcoin mining or not yes it does in my view uh from a positive standpoint um but the investors will still want to invest in mining companies uh I mean


ETFs do exist in all natural gas and and gold mining and other industries that doesn't that doesn't mean that investors don't hold individual company stocks and and that's where being efficient as an operator uh deploying Capital very efficiently uh what kind of Efficiency do you have from a machine standpoint the miners that you operate how what kind of your operating costs are and how how much value you can create all those things come into play Super interesting very different approaches and again uh just for


everyone who is here or at home this is a new industry that we're building every single day so those principles will be app applicable for the next decade and people be talking about different approaches and different strategies so it's very helpful to understand how each company is thinking about it let's talk a little bit about last year so this has been a very eventful year for the Bitcoin industry in general and for the mining industry in particular a lot of Leverage a lot of learnings about what


leverage can do for a company's balance sheet uh going back to principles and treasury management can we talk a little bit about what if anything has changed on each one of your's approach to treasury management the concept of Leverage has anything changed given what we've seen over the past 12 to 18 months any learnings that is important for someone who is starting important for people at home for invest to be aware that you have applied uh on your treasury strategy maybe we start now with Patrick you want to kick it off and


then we can go across across a room okay this topic isn't that spicy um but look I think everyone in this room if you've been around crypto for any period of time um and I by the way I like using Bitcoin crypto is a whole another matter but I you know we're in the Bitcoin business you're here but uh look counterparty risk I think for all of us up here it's like the number people ask me what keeps you up at night my operations team kicks butt I love them like our our companies you know finally


just got our our last um uh expansion up online so you know it's been a great quarter for us but the thing that keeps me up and I'm sure salon and everyone else on this stage is is counterparty risk right so as this business and I think interestingly like all of us up here have uh Energy power commodity backgrounds this business is a commodity business and the number one input is power that's it period so you got to go with the lowcost producer and um as we sort of navigate the space right the one


thing that can go really wrong is if you know somebody hacks in and and and you lose your Bitcoin right so we've done everything right and so I think for us um and something we've all talked about you know as a panel you know this as this industry matures there's going to be a lot more hedging strategies that you know salon and I and Phil are are familiar with in oil and gas right I mean oil and gas companies you know hedge out production multiple years right so we're going to get to that point that market is actually very deep


but right now the issue for all of us up here is counterparty risk so that the you know I can't go buy derivatives through Goldman Sachs right I can't do it through BFA right I've got to as when that market matures and it is it's maturing at light speed then this sector I think gets um significantly deris from a counterparty perspective but my number one Focus as a CFO like in and day out is minimizing counterparty risk great yeah I would Echo that I mean when when I first started at Riot um


every smart hedge fund manager was telling us to put our Bitcoin at Celsius and you know it was that there was the counterparty risk we we didn't know who to trust right and so we were smart being conservative and I think even today we've just now started thinking about hedging because we have a big capex plan for next year to double our hash rate R and so we want to find ways where we can protect our cash flow and um I think similar to oil and gas it's going to get more liquid you're going to get more long-term duration


it's not going to cost as much we recently looked at like a Costless collar position where you could basically lock in $25,000 Bitcoin as your your price so you don't have any downside and then you could sell the call on the top side maybe as high as 35 or 40,000 because I think everybody's bullish about Bitcoin so the call premiums tend to be a lot higher than the put premiums so you can actually create a pretty neat Financial hedge there where you can lock in if I if we know we're going to sell 80% of our


Bitcoin over the next six months that we mine then we can lock in that price right now lock in that cash flow make sure that we can continue growing and pay our bills without having to go out and take on debt um or sell more equity and so I think it's getting better what I'm really always excited about in in the Bitcoin world is the amount of people that are leaving high-paying High you know uh you know class jobs like from Goldman Sachs from Morgan Stanley and they're coming into the Bitcoin world and developing these programs


these exchanges and I find one almost every week I can't believe how many people are out there trading Bitcoin it's uh it must be a pretty good business because these guys always have a lot of money so um I think it's going to get better and that's something that we will I think eventually start working towards to minimize some of our downside yeah on the hedging front um probably can get a bit spicy uh I mean over medium and longterm who wins out a hedg in it's it's the financial institutions that offer the hedging


products right they're not going to offer those products unless they're getting a good return on investment return on Capital return on counterparty risk so there's a lot of agency risk associated with hedging Executives like to hedge because they can guarantee their um profit margin for the year and their bonuses um so I think the the dynamic around hedging um you need to be very careful when you're going to hedge you need to make sure it's at the right price on the power side or on the on the


asset side itself on the Bitcoin side um and I think you need to watch companies that hedge a lot because they're paying a lot away to the intermediaries um yeah yeah just to piggy back on that um hate to give oil and gas industry perspective here but we are in a in a in a product cycle where prices go up and down so as corporations we have to be prepared for to take the advantage of the price when goes up and uh as the price goes goes down we have to protect ourselves so hedging is is part and parcel of the risk management U just


like the rest of the guys are talking about about here um if you think about it from a number standpoint oil industry us production is about if I'm not mistaken 40% hedged at any given point in time versus Bitcoin is about 5% so so when you think about the industry the industry has to catch up to get to that get that commodity risk management and uh as as more mature player players come into play uh from a hedging perspective then the counterparty risk is addressed at that point in time as well uh Marathon has uh looks at it from a risk


management standpoint obviously we are long on the on the Bitcoin price for a long-term perspective uh yet at the same time we do realize that there is a there's a short to midterm uh down cycle risk that we need to manage and some of the some of the products that Phil mentioned we we've explored those things and uh entered into several transactions like those in the past and we'll continue to evaluate those things while still keeping our eyes on the upside and keeping uh keeping the protected protection on the


upside great bare markets are for Builders as many say building in the Bitcoin space espcially in the mining space requires a lot of capital all of our companies have made big announce announcements this year a lot of new Pro projects a lot of new expansions I love to learn more a little bit about what each of of your companies are building and working on and how are thinking about those projects from a financing perspective how are you raising the capital is this that is that Equity just tell us a little bit more about large


projects especially for those at home who are listening to us and and uh don't know that much about what you're building and how you're going about uh financing those projects Maybe start with fuel field this time sure Shar thanks um so in 2021 Riot bought um a facility that was called Windstone at the time in Rockdale Texas um that had three buildings about 300 megawatts and we immediately expanded that to 700 megawatts four additional buildings and so that was kind of our first entry into being an owner operator prior to that we


had outsourced it and we we really felt like where the trend was going is that you can control your operations control your costs and what's unique about we're in Texas is the deregulated energy market and so part of that was another way to hedge is to go out and buy long-term uh Power contracts ppas and so that's worked really great we've been able to um you know kind of play the energy game a little bit we were able to monetize some of those Hedges at times when power prices are high and that's


helped us uh be a lowcost producer which is where we all want to be as a as a commodity business so we then you know knew we wanted to expand we bought a second property um in Texas a a Brownfield um where we went out and bought 275 acres and we are fully approved for a gigawatt so we'll have 10 buildings out there when it's done we're building the first four buildings right now and those uh first buildings will start coming online in the first quarter so as we go into the having our hash rate will double which will offset the


having effect of of less Bitcoin and the way we financed everything so far is through equity and so um you you know the the beauty of the the Bitcoin sector is liquidity um even in my best days at $100 oil I've never seen stocks trade the way they do in this space it's a a phenomenon I think it's worldwide I get calls from people from all over the country that that trade our stock I I could be at a a restaurant and somebody hears me I work at ride I trade your stock now a lot of the times they don't


even know what we do um I've gotten those calls where they're like why is your stock down and I'm like well bitcoin's down and they're like What's Bitcoin so it's a little bit of the yin and the Yang uh you take what you can get but we we felt that the equity markets and the valuations at times that we get it's worth it's it's a creative almost from a book value standpoint for us to raise Equity uh we've been debt averse leverage averse and that allowed US during 2022 when Bitcoin was going


down to continue building this next facility these facilities take 18 to 24 months from the time you start to the time you turn them on and so it's it's um you have to keep building and and be ready and so what's nice now is we have a a clear you know path of growth really till 20127 with this facility so there's not a lot of businesses let alone Bitcoin mining businesses that can give you visibility for 3 four years and that's what we were able to accomplish during the downturn and then as we're


bullish on bitcoin and we go into the having and if Bitcoin goes to $100,000 we'll be able to lean in buy more machines and accelerate that hash rate growth yeah from IRS Energy's perspective um it's again about the scarce assets so it take I mean 18 to 24 months to maybe build the facility and get permissions and that but to actually find the facility get the grid connection deal with the utility can take three four five years so um we got a strategy of building a portfolio of properties uh with large grid connections um and then


using Equity to build out the infrastructure um and then once the infrastructure is built um potentially tapping um tapping public markets to actually fill that infrastructure with miners um or something else so again it's really demonstrating to the market that we've got best-in-class infrastructure first and foremost that we control that where we're vertically integrated um and then and then buying the miners at the latter end of that as opposed to just getting hash rate up front forward deliveries um and hoping


that you can you know plug them in and the the infrastructure is ready um so yeah no leverage after 22 I don't think any minor really wants leverage um so that we we're there for the upside we're there for the um parabolic bull market Yeah in our case Marathon um is probably the only one who has debt on the balance sheet and we we uh we raised debt a couple of years ago and uh very attractive rates and we're we've been able to deploy that Capital very efficiently and we're uh the reason why


we have grown so quickly is because of that Capital that we were able to deploy so very happy and proud out of that now the question comes up um how how do we see things going forward from here from my perspective having coming up uh in the next couple of months and the macroeconomic conditions where they are we have to we have to look at all the Cycles down cycle and up cycle and from a down down cycle perspective we went out and reduced our de debt by more than 55% at a very a creative and attractive transaction uh thereby reducing our


deleveraging our balance sheet and uh when it comes to operations uh we we operate not only domestically but also internationally so we're kind of in a unique position that we are not only in Texas and North Dakota but we have uh very successfully entered into Partnerships in Abu Dhabi for example uh with Sovereign wealth funds and and uh and uh brought to life Bitcoin mining very very quickly at a rapid Pace without any hiccups so we we're certainly very happy with that and we see uh growth and we've publicly talked


about about certain near-term targets more to come on that um and uh and very excited about the growth uh irres of the bull or bearish Price Cycles yeah look I I would say I mean as all of us up here you can tell I mean this is a commodity business commodity businesses are all about economies of scale right you want big sites that allow you to drive down unit economic costs so you look at all of us up here right I mean we have two sites we have one that's the first of its kind and the World which is behind the meter at one


of the largest nuclear facilities in the United States so that's our first site and then we have another site that's 30 miles east of Niagara Falls right and so both of those sites uh we can expand significantly we've got 160 megawatts online right now it's about um 50,000 miners we have an expansion ongoing right now at our site in Upstate New York by about another 50 megawatts but everything that we are working towards is driving unit economic cost down down prehab so that we can best compete and


maximize profit on the other side we also sawm similar to you we do have some debt um notably like we put out a press release this week we we've started paying down that debt uh which I'm really excited about because like you've heard from all of us up here big sites low you know power cost maximized profitability into the having and then I think you know all of us have been growing I think ACC creatively organically my view again coming from oil gas patch Energy power patch over the last 22 years right in economic


Cycles macroeconomic Cycles there's consolidation and so we have a natural economic cycle in this business every four years which is a little odd right it's not driven by recessions so every four years all of our costs up here double and so right now you I look at the public mining space there's 25 miners right when I covered oil and gas companies when I was at Blackstone there were like 50 oil and gas companies well oil and gas went to 25 bucks a barrel and $2 in mcf and all of a sudden 50 companies went to 20 right and so that's


kind of where I think this sector should go the reality is all of us as public companies we have public company costs that we can't avoid but I can get a lot bigger and those public company costs aren't going to change and so I think that's what you're seeing all of us here grow organically and ACC creatively but to me the next round is coming you know post having is there's got to be consolidation among among the public companies okay let's get into the having topic IC everyone mentioned a little bit


it's a very interesting topic uh for miners but before getting into each one's strategy how you're thinking about it how you're planning to navigate maybe one of you uh could just give a quick overview especially for those at home who are learning about Bitcoin for the first time few just mentioned people trading your stock and don't even know what is bitcoin I'm pretty sure a lot of people don't know what's they having what is happening the next one and why might impact minor so maybe if you want


to do a quick very high level overview about what is they having and then I love to hear about each one of your perspectives about how to navigate and what you're doing uh in light of 2024 please go Glen you want to give a quick overvie yeah so the harving happens every every four years um so the block reward every 10 minutes essentially gives a 6.


25 Bitcoin at the moment and that'll that'll drop to half of that 3.125 um essentially that means that the rewards for miners are hared so your Revenue stream is hared in one go and if the Bitcoin price doesn't Rally or double um that essentially places a huge um burden I suppose on a Bitcoin minor um in terms of the theory behind it uh the theory is that over time the network the the blockchain itself will be utilized more for instant settlement or or final settlement similar to a swift Network and that the fees will offset that over


5 10 20 years we're not sure exactly when and we've seen spikes in fees previously which demonstrates that that can be the case and it can happen very quickly um it it's not happening at the moment um it hasn't grown yet uh we believe it will have the next 10 20 years um final settlement's very important um and and we were talking about counterparty risk before and reducing that counterparty risk is is extremely important as well how Iris energy prepares for the harving it's all about efficiency of your mining Fleet um


low Opex costs um we have very few Min we have very good infrastructure so very few miners go down need repairing um we do a lot of preventive maintenance on our Transformers and our switch gears on our substation so that things don't go down and we have near perfect up time as a result so all those little things mean that we're not spending out of pocket um and we can and guarantee um best-in-class margins within the industry but it's always looking three four five years out it's not trying to


maximize bank for buck over the next 6 months by overclocking your machines 30 40% and have them diet two years rather than four years um so yeah a sustainable business model that's around throughout the whole cycle yeah um I would add on the having what what I find really interesting and a lot of times people only want to talk about Riot we try to bring it back to bitcoin and just think how crazy Satoshi was when he created this that every four years you're going to get half as much is it kind of coincidental that it's


also only happens on leap years right it's every four years and it's a presidential election cycle every year I don't know if he meant to do that or not but it's still kind of wild and then something I learned about six months ago which I just still find really interesting 6.


25 equals the percentage of Bitcoin that will be issued during that 4-year period so when it goes to 3.125 the next Epoch the next four years 3% of the remaining Bitcoin to mine will be issued during that four years so you just think about the mathematics behind this and yeah your head starts to spin and you're like wow and one of the questions we I always get from people's well what's a miner going to do when there's no more Bitcoin to mine and a lot of people don't know that it's going to take to 2140 to get that last Bitcoin


and then you know to your to your comment about transaction fees you know our director of research uh our court vice president research for Bitcoin mining um talks about transaction fees and adoption and I always make a comment when I'm out on the road to investors and it's very similar to this crowd is that we're actually the wrong crowd to talk about adoption because we all have PayPal venmo three credit cards four bank accounts two brokerage accounts we're the most over banked people in the


world but if you go International it's way way different and that's what gets me excited is the adoption phase of of Bitcoin we're all holding it as a as an asset class but there's people that rely on it for their livelihood now in other countries to send remittances to you know do do Commerce to you know alleviate themselves from poverty and so that kind the altruism of it is what also Al get you exciting and I think it's it's one of the great parts of being in the Bitcoin industry yeah yeah


look I I would just add if I'm any you anybody sitting in the audience right now I would ask all of us one question and that is what is your unit economic cost to produce one Bitcoin today I'll tell you sitting up here ours you can go look at our results it's roughly depending on where the network hash rate which is the total capacity online our is is 20 to 22,000 right now okay price of Bitcoin at 27 I'm making literally you know somewhere between a 5 and seven per Bitcoin profit 5 to 7,000 per


Bitcoin on every single Bitcoin I mind so you should go down the line up here and ask all of us what's your what's your total fully loaded cost to Wi mine one Bitcoin today because as my colleague down at Iris pointed out um or friend excuse me the this is all about efficiency so we're trying to get our Fleet to be the most efficient because when we go through the having right my cost if I if my fleet didn't get any more efficient my cost goes overnight from 20,000 to 40,000 that's just how it


works and so what you need to understand as investors is all of us up here what's it cost you to produce one Bitcoin today and what's it going to cost you to produce one Bitcoin after the having event in April that's it it's as simple as that then you can figure out who you want to own just to summarize that having is a major event happens every four years and uh we all have a ample amount of time and opportunity to think about it and be prepared for that and uh uh look historically prices have caught up very


quickly uh we don't know if that's going to happen this time we hope it will in the long run we we hope that the prices are going to be great but hope is never a great strategy and uh and and the way to think about this is to be prepared for that uh the global hash rate is likely going to be impacted as a result of miners probably going out of business uh for the reasons that Patrick alluded to uh cost cost for Bitcoin is important not only that but also how efficient the machines are because uh you know the


technology has improved over a period of time so more to come lots of excitement as a result of that down Cycles bring a lot of excitement and learning from gold and oil and gas Industries uh you know companies who are resilient they survive and they when they survive they do extremely well uh so the only people who survive are who know and how to go through these down cycles and be prepared for the Up Cycle yeah so we're getting close to the finish of uh our panel here and we have about five minutes Patrick you gave some


good advice on folks who are listening to us planning to invest or get involved in the business what is the one single question you should be asking yourselves and potential uh miners uh before investing so love to go into that topic a little bit and just get from all of you if someone is at home or here in the audience thinking about maybe I want to mine myself how can I do that or I'm I want to invest in a mining company what is the one single piece of advice you have for someone getting to the space as


an investor as a participant uh and trying to get involved so a little bit of advice before we wrap up this panel want me just start okay so the way I see this is this is a this is another asset class as an investor uh if you're investing in different categories uh you got to think about Bitcoin as an investment category and uh and just like you would have or our parents or grandparents may have invested in oil gas Mining and uh probably coal at some point in time uh the same way you know you have to allocate based on your risk


appetite and portfolio uh look this is a newer technology and uh the use case of this industry is uh more to come there's there's a lot to come and it's being a nent and uh a newer technology think about it from the perspective of uh internet in the 80s or the '90s when I grew up in the '90s and you know I just had MRC or a few chat a and things like that and that's a about it and now look at how that industry has evolved with the period of time the regulations have gone out matured and uh and now it feels


normal and people who had invested early investors in this in those Industries they they've they've created value for themselves obviously this is not an investment advice use your own judgment but from my person personal perspective this is an infancy stage and and there's there's a huge upside from here and depending on how much appetite you have have uh towards uh towards allocating your assets it could create significant value like it has for other products and and other Technologies in the past great thank you yeah look I I


kind of said my piece on cost but I would just say I think this industry right needs more transparency you you look at what has plagued this industry in my view right it's been you know Bad actors you know name FTX is obviously the easy one to point at but you know all of us up on this stage as Phil pointed out you know I mean I've spent 22 years as an Institutional Investor right and now I'm in a cfoc SE like the number one most important thing that we can provide people with is transparency so that when you go look at what stock


you want to buy what Bitcoin miner just like any other commodity business you can figure out who's the lowest marginal cost producer among all of us and so then you can also decide hey you know what I think bitcoin's going to 100,000 I want to be in the highest marginal producer because that stock is going to be whipper than buying the lowest marginal marginal cost producer but again for you to be able to do that all of us on the stage have to give you full transparency into what it costs us to m a Bitcoin and that's what we do at Tera


wolf I encourage you to look at all of our investor um presentations we give you every single cost in our company and what it costs us to mine a Bitcoin and we try to do that actually on a monthly basis as well and so I think until this sector gets that level of transparency you know my former colleagues at Blackstone Fidelity Black Rock they're not going to pull the trigger and come into these companies until they can look at them just like they look at every other commodity business in the world um I kind of have a little bit of


a different take just to make it a little spicier but please um I think the world has changed and what I mean by that is when I was got in the business as a broker you didn't have a cell phone in your pocket you couldn't trade you couldn't access information on a second byc basis and we for for lack of a better term we've turned into a group of ADHD traders in the United States States and around the world and so I think the the the Buy and Hold mentality that our parents grew up with or other people


it's not really apparent in this sector and so let's just be honest it's the Tail Wag and the dog if Bitcoin goes up Riot could cure cancer and our or I'm sorry if Bitcoin goes down and Riot cures cancer our Stock's going down right so you have to realize that you're if you when you make an investment a mentor of mine said you got to have an entry point and you but immediately you should know when you want to get out that investment a lot of people buy Investments without a strategy without


what when am I going to take some money off the table and then on the other side when you do take that money off the table you now have to think about where am I going to put that money at so I I'm pretty open with our investors and I I basically say we're not in this business for $25,000 Bitcoin and you shouldn't be either either you believe in the long-term value proposition the scarcity proposition you believe that it's going to be a six-figure you know Bitcoin at some point and then you want to go then


to the fundamental side and look for those miners that are the best at what they do and so for the first half of this year our cost uh from an operation standpoint was about $99,000 per Bitcoin if you add in GNA it was just under 15,000 so we're one of we're in the top tier as far as costs but quite honestly if Bitcoin is up tomorrow all the stocks move in unison you'll start to see a little bit of difference in the multiples and and we've seen that with people that maybe have leverage have debt have higher cost and you're


starting to see some correlation but it takes a lot more work and I just met with Fidelity and they're looking at Bitcoin miners but everybody is still kind of waiting I think for this aha moment but in my opinion when that moment happens you might already be too late so go bye Riot so yeah from my perspective like you don't invest in Bitcoin if you got high time preference that's how you lose money um it's the same with miners they in the insanity for management is to have high time preference to grow your


hash rate very very quickly at all costs um so when looking at a company you should be looking at management that obviously have low time Preference they may grow a little bit slower they may invest in real world infrastructure that can last a very long time and that's not going to be uh depreciated on over a short-term ba uh basis I would the panel before us were talking about Miners and Moors law like every two year I mean the S21 the new miners are almost twice as efficient as the previous model in 2


years so like you got to look at the balance sheet of the minor what is on their balance sheet if it's 90% Miners and they're getting double as efficient every two years that balance Sheet's worth Jack so you I think these are the type of things you need to if you if you put in um hard-earned money down you need to be looking at what you're investing in um and it's not always just the hash rate and it's not always the last monthly report as well I think transparency is very key looking at the


monthly reports you can quickly see who has good transparency and who doesn't they're two page reports very easy to read um you don't need to go through a you know 100 page f2f or whatever else um so yeah that's they're my recommendation thank you so much please a round of applause doesn't get much better than this sammon Patrick feel and Glenn on behalf of swan in Pacific Bitcoin thank you so much for joining us oh hi do you have your ticket to the next Pacific Bitcoin Festival join us as


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