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Why Bitcoin ETFs will bring a 'flood of liquidity' to the market

February 14, 2024

Fred Thiel, CEO of Bitcoin mining company Marathon Digital, discusses why he thinks Bitcoin ETFs are a good thing for the cryptocurrency's market and says he expects it to behave in a similar manner to gold's as it matures.

Transcripts are autogenerated. May contain typos.


with I suppose the volatility that we do see in Bitcoin how how do you how do you mitigate the the potential for downside because again you mentioned the harving and you mentioned what's happening in April I would imagine because you are a listed entity obviously your shareholders the people that like investing in you obviously would have these concerns that is is there any way to mitigate even further much like a number of commodity players do in terms of hedging or the like in order to offset any kind of downturn Bitcoin or


you just have to live and die by the price well you kind of have to live and die by the price yes you can hedge but hedging is an imperfect science so for example um one way to hedge that Bitcoin miners will do is they'll uh sell covered calls on the Bitcoin that they hold well if you had done that um a month ago you likely would have been called out because Bitcoin has gone on this run here the last few weeks um that would have you know caused those options uh call options to get called out you can also put puts uh to protect you from


the downside but um you know typically those are priced so far below where Bitcoin is actively trading uh for them to be attractive that you're going to lose 30% of the value of your Bitcoin before the put comes into effect so miners tend to be a little bit more like Wildcats in the old oil business um you know Marathon has a huge balance sheet you know we're the second largest public company uh with Bitcoin in our balance sheet um now the ETFs have actually surpassed even Michael sailor and micro strategy uh which just goes to show the


success that the ETFs have had uh even with the outflows from grayscale you've seen um you know Black Rock and Fidelity really scoop home the majority of uh of these ETF sales so which all bodess very positively for Bitcoin because now you have institutions actively coming in and in conversations we've had with some very traditional investment funds they're basically saying you know for our initial exposure to bitcoin we're very happy investing in ETFs and maybe a little bit with the miners for a little


bit of added beta um but uh you know the good thing with um the ETFs is it's made Bitcoin approachable for a lot of people now you don't have risk concerned you don't have concerns about security and who's going to hold it and how am I going to hold it and how am I going to buy it do I have to sign up on a crypto exchange no now you can just go to whatever broker you use for all your trading for your fund and you can just Say Hey I want you know this many shares of this ETF and now you have exposure to


bitcoin so uh it's very attractive see I wanted to take this in a different direction I wanted to talk about energy prices with you you know and I've seen just today you're Ming Africa expansion but because you mentioned the ETF are you not concerned about the fact that once you do have these ETFs and we're not talking about you know the the Bitcoin trading as its own Standalone asset that you're just going to get a lot of these derivative products that are going to be jumped on the the back


of it whether it be you know inverse or inverse leverage ETFs or levered ETFs and then it it sort of puts you in a a poorer position as a minor because you're going to have to deal with the the zero DTE crowd coming in and just all of the nonsense and shenanigans and especially a highly volatile asset like Bitcoin does that does that concern you or worry you at all that it just opens the door for even more of that you know I I think Bitcoin has always been a market where you've had uh you know few people have been able to uh


Drive price you know because at the end of the day there are really fewer than 3 million Bitcoin sitting on exchanges at any given time so it's a fairly thinly traded Market the ETFs are bringing actually more liquidity to the market so it's a very good thing and if you look at Bitcoin volatility over the past 10 years it's steadily decreased uh and so I think that this will eventually behave a bit like gold does you don't see the gold miners you know Fring all the time uh you know you see all of these derivatives on gold


that exist and I think you're going to see all of those plus some things that we haven't even conceptualized yet happen with Bitcoin and and other cryptos uh which will only bring again more liquidity um and over time I think what you're going to see is because there's a finite amount of Bitcoin and we've already mined 20 roughly almost 20 million of the 21 million Bitcoin you're in a situation where it's not like many other Commodities or equities where people can just issue more stock or you can mine


more gold or pump more oil there's only a finite amount of Bitcoin and so as more people want to hold it what ends up happening is it just drives the price up and so people trying to manipulate the market you know when you start getting the bulk of Bitcoin being locked up in ETFs and long-term holders you know historically over the past year over 60 to 70% of Bitcoin has been in long-term holders hands uh as opposed to Traders so what that does is that limited amount of liquidity on exchanges has been able


to be used used and drive volatility but over time what's going to happen is there's going to be a flood of liquidity in this market and I think it'll be a very mature market and it'll behave very much uh like gold does but uh with uh still a bit more beta to it