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Why MARA CEO Fred Thiel is Bullish on Bitcoin

August 18, 2023

Marathon Digital Holdings' CEO, Fred Thiel, expresses optimism about Bitcoin's future. Thiel suggests that governments are recognizing Bitcoin's strategic significance due to its decentralized nature, which could lead to increased value and continued growth. He also discusses how decreasing liquidity and increasing Bitcoin holdings contribute positively to price dynamics. Thiel mentions Marathon's interest in expanding Bitcoin mining operations to Africa, using stranded energy to support local infrastructure. Currently, the company sells enough Bitcoin to cover operational costs but may reconsider if prices surge. Thiel also touches on Marathon's growth, its hash rate capacity, and the challenges of managing a publicly traded Bitcoin mining company.

00:00 Intro

01:02 Blockware Marketplace

01:47 Managing one of the largest public mining companies in the world

03:10 Enduring bear markets

06:01 Household wealth is falling, is the worst behind us?

08:36 Bitcoin ASICs as an asset, nation-states mining Bitcoin

13:16 Jason Lowrey: Softwar

16:48 How $MARA decides whether or not to HODL

22:33 Air Cooled vs Immersion Mining

24:55 Bitcoin Narratives Changing

31:49 Was the bear market actually good for Bitcoin?

35:16 2024 Bitcoin Halving

39:23 Long term plan for $MARA

41:34 JV in UAE

47:38 Why has Bitcoin not been volatile recently?

Transcripts are autogenerated. May contain typos.


you're going to start seeing more and more governments start viewing Bitcoin as a strategic asset because of the fact that it's decentralized and nobody controls it that's just going to drive more value in it and we're going to continue to see more Bitcoin just being held and liquidity getting tight which is just going to do a positive thing to the price but we're kind of open to all sorts of opportunities and looking at places as far afield as Africa even for opportunities to bring Bitcoin mining as


a way to take advantage of stranded energy while also helping develop infrastructure for communities and and cities we sell the Bitcoin that we produce enough to cover our operating expenses and then we poddled the rest if Bitcoin were to go on a tear upwards in price yeah we may reconsider and say you know what we're not going to sell any Bitcoin because it makes more sense to holiday so it's literally a discussion we as a management team have almost weekly introducing bids to the blockware marketplace select from dozens of


different Asic models the marketplace shows you the highest current bid the lowest asking price in the most recent sale price use this information to set a competitive bid once you're ready and put the amount of BTC or USD that you're willing to spend the quantity of machines you want to purchase and then hit big once a seller accepts your bid you'll receive an email notification click the link attached and send BTC to the prompted address after six on-chain confirmations the machine will be yours


and Mining rewards will instantly be directed to your Bitcoin wallet get started today at marketplace.blockwearsolutions.com back to the block where intelligence podcast this week I have on Fred teal Fred welcome thank you glad to be here yes glad to have you uh I want to start out uh strong what is it like managing one of the largest publicly traded Bitcoin miners in the world uh well it's an exciting challenge obviously uh two years ago a little over two years ago I guess April of 2021 when I took over as CEO I was employee number five


and today we're approaching 50 people um and go back to kind of middle of last year and we were at pretty much zero extra hash of hash rate capacity and here we are at well over 23 x a hash right now so it's been exciting um yeah it's doubly exciting um in that you know we've had to go through a pretty challenging time in 2022 um and you know the market has come back nicely this year which has been great and just the fact that marathon's a public company you know adds that much additional level of scrutiny has its


advantages obviously from a capital raising perspective but it also has its challenges so it's a lot of hard work but it's not my first rodeo um and you know I've been able to build a really good team so I'm very proud of the team that we have and they're doing a great job at executing our plan so it's been really exciting yeah I bet when you originally started did you expect 2022 or or periods like 2022 where the market specifically for Bitcoin was just really tough for miners well Marathon was kind of born you know


in as a mining company in 2017 which you know was pretty much winter um at that point so having been through lots of Cycles just in the tech industry I've been in tech for 40 years at this point so uh you see these Cycles come and go I lived through the whole internet boom bust cycle internet 1.0 um been through a lot of these kind of uh Cycles the PC cycle originally data networking you know there's an initial hype then there's a crash and then it's kind of things grow again then there's


another kind of Crash and then thing cycle yeah with Bitcoin it's been more of a uh you know people tied very much to the having Cycles uh you know I have a belief personally that Satoshi uh he they them uh uh or she when it was initially conceived uh the four-year having Cycles just happened to coincide interestingly with liquidity Cycles in the global economy and I think that bitcoin's price moves more in line with global liquidity today uh than it did in the past and you know when you think about it miners


today produce 900 Bitcoin a day in the way of block subsidies and you know the 900 Bitcoin a day is not going to move the market a whole lot so that's stock to flow Supply you know Theory doesn't really fly at this point I don't think I think it's more now driven by liquidity cycles and institutions investing in Bitcoin and so as you look back at 22 what happened well there was a crash in liquidity and uh you know risk off became the Mantra and so people sold out of Bitcoin and here we are uh you know


in 23 and you've seen kind of risk on especially around tech stocks uh this year Bitcoins benefited from some of that but also Bitcoin is changing its correlation it's you know decoupling from gold it's decoupling from equities it's kind of living its own life and we've been in this very stable kind of low volatility environment with Bitcoin for the past you know a couple of months and I think it's going to be interesting to see as the FED eventually gets to pausing and you know eventually starting


to lower rates uh you know Global liquidity is just going to increase with what's going on in China uh definitely uh Bitcoin has a inverse correlation to the dollar and we're going to start seeing the dollar decline here as the U.S pauses and other countries keep increasing so I think you know a lot of positive um you know Tailwinds for Bitcoin hopefully and uh that'll be great coming into the having and then we'll have to see kind of what happens next yeah absolutely you had an interesting tweet that I I didn't realize until I


saw it I think it was this morning about how Global or at least U.S or Global household wealth fell last year and that was the first time that's happened since the 08 financial crisis so do you think I guess the worst is behind us and you know last year was actually historically an extremely bad year uh for financial markets well I think you have to look at a couple of things the average Americans net worth is tied up in their house you also have to realize that that's a baby boomer thing um as you move past Boomers into uh Gen


Y Gen X gen z uh home ownership decreases pretty substantially and so now where is that net worth going well they're spending the money on things like travel they're spending the money on experiences and they're investing that money and the markets were really down in 2022 so I think what you're seeing is uh you know between retirement plans Etc um home values you know that went backwards last year some of it's come back but it's been very sector specific I think the challenge is going to be


more for you know the younger Generations today how are they going to build net worth where my generation I'm a boomer um you know my generation built its net worth around saving money buying a house and seeing the equity value of your house grow well that's going to get much harder and especially now with mortgages at over seven percent it gets really hard I mean you know for my kids to buy a house it's really difficult so um I think it's going to be a challenge but it's really going to be


up to the younger generations to figure out how they're going to live in a world where you know interest rates are just going to be higher you know the past 10 15 years have been really attractive from an interest rate environment for people provided great opportunities to invest and now we're going to be in an environment where four to five percent is kind of where interest rates are going to sit and so what does that mean from a person's ability to invest and what sort of returns are they going to


be wanting so you know their benefits and and drawbacks to higher interest rates but it's just a different psychology that you have to approach the market with so yeah it's a really good point I can definitely relate to the housing topic I graduated from college in 2020 and I don't see how people my age can afford you know a half million dollar house which is basically like a normal house nowadays yep um let's let's talk a little bit about mining I I know marathon is obviously famous for historically doing the the


massive PRS of like hey we just bought 70 000 A6 and whatnot how do you think about Bitcoin Asics as like assets like why hold Asics themselves well if you kind of think back to you know last year and the year before when we made these big purchases it was a different environment it was a shortage of Basics available so Asics had value right if you think the peak of the market in 2021 and you know dollar per Tera hash pricing of miners was you know between 50 and 80 dollars at uh Terra hash depending on the model of minor you know


today we're looking at seven to twenty something like that um so then you know there are three constraints in our business when you think about mining it's access to power and hosting uh access to rigs A6 and then access to Capital to pay for both of those and in 2020 2021 it was access to Capital was pretty easy so people were growing so what was difficult well it was access to sites and built getting sites built and it was access to Rigs and so we figured if we could Corner the market on rigs then all we had to solve


for was access to sites and so that's why we bought a lot of Miners and um you know it took us a while to get all those miners placed but you know they're fully installed at this point today I think it's a very different Market you know today the the issue is access to Capital there's you know it's much harder to get access to Capital so it means it's much harder to grow you also have a different class of minor coming into the market today where before it was mostly private or public


miners now you have sovereigns coming into the mining business you have you know governments actively going in um and you know most of these you know look in the Middle East you look in uh other places in the world you're seeing governments actually you know going in and supporting mining uh which is going to be a different world because they have different pockets they have different Capital sources and they typically also control their own energy costs uh governments are looking at Bitcoin uh you know not to displace


their other uh Reserve Holdings but as one of many things they use for holding reserves and if you're a government and you've lived through the kind of weaponization of the US dollar one of the things you'd be very concerned about is if you're holding Bitcoin you want to make sure you also control some form of Bitcoin mining so the Bitcoin you hold can be transacted in the event that there's some form of prohibition uh against uh you know Bitcoin that you happen to hold being traded so that's


why you want to be a minor and most more importantly you want to most probably operate your own pool so that you can get access to the global markets that way so we see kind of the biggest competitors going forward are going to be sovereigns and you know nation states coming into the Bitcoin mining space but it's super exciting what's going on in the market today uh El Salvador's bonds um I tweeted something the other day that you know basically now these bonds are returning up to 70 percent yield for some of the investors and even


JP Morgan and large institutions are investing in what before were viewed to be you know who would ever want to buy Bitcoin bonds well now it happens to be a thing all of a sudden so I think we're going to start seeing a shift here uh in how mining kind of operates uh it's going to be really an industrial institutional business yes there'll still be some specialized minors doing specialized things smaller scale but I think it's really up to you know bigger High large-scale miners who have the


ability to do things at scale um that doesn't mean that a minor like marathon is only looking for large sites with hundreds of megawatts we're actively looking at lots of small sites also because we think that there are ways to mine Bitcoin using landfill gas methane gas which is really good for the environment that we can convert that methane into energy and and sequester that methane because it's 80 times more damaging to the environment than carbon dioxide is um so we're looking at small sites we're


also looking at you know large sites with Partners like we have in UAE uh where you know we're able to help balance and stabilize the grid there very effectively for the grid operator there so we're kind of open to all sorts of opportunities and looking at places as far afield as Africa even for opportunities to you know bring Bitcoin mining as a way to take advantage of stranded energy while also helping develop infrastructure for communities and and cities so yeah that's awesome on that note of of


governments and sovereigns getting into Bitcoin did you ever read or I guess hear about Jason Laurie's uh software thesis absolutely I have a copy of it sitting on on my desk at home and uh I understand it's become a rare thing now that it's been taken off the uh the Amazon bookstore so um but yeah now listen it's a uh when you think about the value of Bitcoin as an a strategic asset right um it's not controlled by government um which means that the only way for Bitcoin to truly be um let's just say restricted is if every


government in the world were to uh restrict it and that's not going to happen and so Bitcoin fulfills a very important role for different types of countries depending on their stage of development in the case of underdeveloped Nations or developing nations uh you know you can look at places like Africa turkey Nigeria where um Bitcoin plays a huge role in providing a safe haven for people to store uh their uh wealth if you would or even just their assets um if you look in more developed countries uh like in the U.S or in Europe


um you know it's a store of value it's an alternative investment it doesn't fulfill a um it doesn't give people necessarily Freedom uh because there already is freedom and how you can move assets around you don't have currency Capital controls today uh someday you may who knows but what it does give you is a very attractive return at least if you look at the numbers over the past two years ten years you know Bitcoin has been a great performer as an asset so it fulfills different roles for different


categories of people but if you think about software that's really about National Security and if the U.S were to push all Bitcoin mining offshore and really push Bitcoin offshore they have no way of controlling it like they can with the dollar right the US dollar has been fully weaponized with this Ukraine crisis and that in and of itself is a challenge for the us because now people are looking for Alternatives you're seeing the um large commodity producers like the oil producing nations are not buying U.S


treasury bills or holding Assets in dollars as much as they used to in the past countries like China India Russia the brics are looking to do trade in non-dollar denominated terms and it's not because they don't believe in the dollar as an asset it's of strategic importance for them not to be controllable by the US government and so they're looking for Alternatives Bitcoin is a great alternative as an asset for countries if they want to hold their wealth in something because nobody prints it it's limited to 21 million


we've already mined you know 19 and a half million more or less Bitcoin and it's totally decentralized and if you mine Bitcoin yourself and you operate a pool you're kind of into you're an independent operator and nobody can control you so I think you're going to start seeing more and more governments start viewing Bitcoin as a strategic asset because of the fact that it's decentralized and nobody controls it and I think that's just going to drive more value in it and we're going


to continue to see more Bitcoin just being held and liquidity getting tight which is just going to do a positive thing to the price yeah 100 completely agree on that note of you know mining and holding Bitcoin how do you guys at Mara think about what you do with the Bitcoin you mine obviously you have you know a ton of operating expenses um how do you and I know you have like also one of the largest Bitcoin treasuries for public miners how do you think about what you do with all the Bitcoin that you mine so we approach it from a perspective of


um our weighted cost of capital so uh what is it when you think about if we're gonna raise cash we can raise Equity we can get debt uh or we can sell our Bitcoin those are kind of our three basic things um and so when we look at it we say okay if we sell a Bitcoin um what does that do to our the value of our company what are we doing relative to creating or destroying shareholder value so if we hold a Bitcoin and instead use debt or Equity what does that mean from a dilutionary perspective to our shareholders and what does that


do to the value of each share compared to selling Bitcoin now in an ideal world most of those scenarios say that you should not sell your Bitcoin you should either dilute your shareholders or use debt um you know we learned definitely in the last cycle that that most probably isn't the best way to go about it that it's really more to approach it as a minor and this is you know as a company who produces Bitcoin it's more like in the oil industry oil producers right um think of it that we sell the Bitcoin


that we produce enough to cover our operating expenses and then we hoddle the rest and so we're creating shareholder value with the hodl but we're not deluding or destroying shareholder value by necessarily using debt or raising Equity to cover our operating expenses you know we've gotten to that place where we now generate more Bitcoin than it costs for us to operate where if you look last year you know we weren't producing a whole lot of Bitcoin and we still had operating expenses so we had to uh you know use uh Equity to


cover operating expenses but today we're past that point so now we're you know able to operate more like an oral company we produce Bitcoin we sell enough Bitcoin cover operating expenses we Haul the rest now if Bitcoin were to go on a tear upwards in price yeah we may reconsider and say you know what we're not going to sell any Bitcoin um because it makes more sense to huddle so it's literally a discussion we as a management team have almost weekly that's what do we think Bitcoin is going


to do what should we do and we make a decision and you know we uh hopefully are making good decisions in that regard yeah no that's awesome to hear do you guys I guess think about it in terms of trying to outperform spot Bitcoin itself um well it depends on how you want to view that all right um so when we sell Bitcoin you know we're trying we our Benchmark is kind of a v-wap of um the price of Bitcoin over the course of the month and uh you know how could one have done better so we're constantly tweaking how we do things


granted there are um some strategies that you can do things that that help you do a better job with that and you know we are we now have uh an individual on board who's responsible for all of our digital Asset Management who does nothing but manage our Bitcoin uh that's generated and when we sell Bitcoin um because again like you said we have a pretty large amount of Bitcoin on our balance sheet and we're trying to optimize that at all times um but I think it's really a question of you have to kind of look at


um you know mining is always a great way to generate value uh in Bitcoin as you know um Warren Buffett famously uh was reported to have said that you know I'll never buy gold but I'll invest in gold miners um the same thing kind of applies in the Bitcoin world uh you know if you want real beta then you invest in Bitcoin Miners and you can just look at it this way you know how much is Bitcoin appreciated this year how much of Bitcoin miner stocks appreciated this year and you know Bitcoin miners have outperformed Bitcoin yet they're in the


same business well why is it well Bitcoin miners generate um you know margin in what they're doing and their cost to acquire a Bitcoin if you would is less than that of just buying a spot now when the market goes the other way yeah the volatility hits you on the downside too so um you know I think you tend to find that when the market is on the way up you have a lot of people who are you know they invest in Bitcoin by buying equities and publicly traded mining stocks and you know we're blessed with that we have a


lot of vol share volume that trades every day you know tens of millions of shares a day so it's a very liquid stock so it's very easy for people to get in and out and therefore we have a lot of shareholders who basically invest in Marathon instead of buying spot Bitcoin sometimes it's funds because they can invest in equities but they can't invest in spot Bitcoin and sometimes it's just individuals you know like you or myself um who you know if they want to hold Bitcoin uh how do they want to hold it


you know because we hold so much Bitcoin on our balance sheet uh we're a really good proxy for Bitcoin more so than many other miners who just sell whatever they produce right so you can look at our valuation as being the amount of Bitcoin we have plus the amount of cash that we have plus our underlying assets where another minor would be just their underlying assets their cash and that's it so that Bitcoin that we hold um you know ads kind of uh juice if you would to the valuation of the company so


it's something that we're really very protective of yeah that definitely makes a lot of sense I'm curious to your thoughts on this what's your view on air cooled mining versus immersion mining so I think it's very dependent on um the environment you're mining in right so for example in UAE you know average temperatures are well above 90 up into 100 degrees Fahrenheit so you know 50 degrees C you can't run air-cooled miners um effectively in those temperatures uh so you have to use immersion


um immersion has other benefits it makes the miner operate more reliably because the temperature is fairly constant it's not constantly going up and down in temperature as air cooled miners do the miners aren't getting dirty and full of dust like they do when they're air cooled because you're pulling all that dust through them so we believe the total cost of ownership using immersion is better than that of air cooled but there is an additional Capital expense to invest in the immersion technology


now with our UAE installation um we kind of went all the way and said okay how do we make this really efficient from an operating perspective and lower the total cost of ownership and so um you know total cost of ownership is includes things like how many Engineers do you have to have on a site how often are you touching miners what's their uptime and so with our UAE installation we did a pilot late last year there where our site ran for over 100 days before an engineer had to touch anything and so uh as we look going forward here


one of the reasons we operate our own pool um which we've now developed uh from the ground up our own firmware for our miners our own controller boards our own immersion technology is kind of similar to Apple we control the whole ecosystem and we can tweak it and dial it in perfectly so going forward you should expect us to use a lot more immersion technology just because it's better but yeah there's some places you know if we were to operate in you know the northern Europe or uh you know the southern tip


of South America um you know would we need immersion no so we would most probably run air cool but there are ways to run air cooled in those cooler climates where you can mitigate for some of the Dust Etc things um but you know it's really very site dependent yeah very interesting um this is more of a question around regulatory stuff and I guess like the ongoing Narrative of Bitcoin and Bitcoin mining to people that may not be in the space do you think we've seen a narrative change or we're starting to


see a narrative change around Bitcoin mining we saw like the ESG report put out by KPMG basically saying like hey Bitcoin is actually an ESG asset do you think the narrative is changing or what are your thoughts there hey everyone this week I want to talk about stamp seed this is very cool metal plate where you can literally stamp your Bitcoin seed phrase with this Hammer that they sell you into this metal plate this is a must-have for all Bitcoin holders if you have taken self-custody of your Bitcoin you want to make sure you've recorded


your seed phrase on something that is fireproof waterproof and time resistant this is a great product for bitcoiners who have taken self-custody and want that extra level of security and resiliency to store their Bitcoin so if you are interested in this product definitely check out stampseed.com use code blockware 15 for 15 off the entire website well uh we live in a world where anybody can put out a piece of news and if people click on it it gains traction right thanks to Twitter or X or whatever we call it nowadays


um and certainly you know the internet has been a great fomentor of the ability for anybody to be a news source and just look at how fast rumors go around and especially in the crypto World um Twitter or X is kind of you know the hot new spot to go and if somebody puts something out there it spreads pretty quickly before somebody can finally squash it and say no no that's not true it's a rumors spread very quickly um now the media has obviously uh in 2022 you know when the markets were headed down crypto was kind of on its


back feet and then you had these the Celsius issue the three arrows Capital FTX Etc it was easy to bash Bitcoin and crypto I think the narrative has changed now for a couple of reasons one is you know when an asset starts going back up in value as much as Bitcoin has it's kind of hard to argue that it has no value because obviously people are investing in it right so you start getting some people sitting on the fence saying well maybe it is something we should be looking at in a more positive light and so people start writing about


that you also see the bifurcation uh of Bitcoin and crypto right the narratives are changing crypto is D5 it's alt coins it's you know um all about staking bridging things like that and you can quasi say things that are built on ethereum uh when you look at Bitcoin Bitcoin it's kind of like digital gold it's this store of value you invest in it it helps people in underdeveloped Nations hold their wealth and carry their wealth with them uh in ways that are pretty unique because it's the only


fully decentralized cryptocurrency out there I mean you can't argue you can't say today with a straight face that ethereum is fully decentralized um if anything it's gotten much more centralized and so I think this is bifurcation between Bitcoin and the rest of crypto and um you're also seeing stable coins kind of being carved out so now as opposed to just talking about everything as crypto you have Bitcoin you have stable coins and then you have other things right D5 Etc and so you're seeing in Congress people


now finally having been educated and sort of studied this they're seeing staff members and members of Congress uh taking a position that's not just oh crypto is bad we go to squash uh meanwhile I think you still have in the executive branch of the current Administration um maybe because they were the single biggest recipients of money from FTX or for whatever reason uh that you know they need to kind of take this hard stand on crypto and the sec's position on crypto um you know has been most people would


argue pretty overreaching and I think you're starting to see that kind of becoming to dial back even the media is starting to have a more even-handed approach to to bitcoin and crypto now and you know clearly listen when people like Larry Fink and BlackRock start saying they're gonna do uh an ETF for Bitcoin now you're talking about some Wall Street heavyweights that um you know carry a lot of gravitops with what they're saying and you know institutions continue to build out infrastructure for


Bitcoin hold in custody and trading you know companies like Fidelity and others and so I think you're going to continue to see Bitcoin march on and uh it's going to be a long march um and because it's so decentralized you don't have this one kind of galvanizing person or entity that's driving things and so that's why you see this more organic advancement uh in the world of Bitcoin but I personally foresee that you know in the not too distant future we'll see a lot of really interesting


applications and use cases developed on top of the Bitcoin Network because it's the most secure network and it's fully decentralized you'll see it as a truth of source and especially with the development of all these llms in the AI World um that are biased um and you know they've been research done by universities that show that you know the different llms out there have different biases um they need a truth of source which is verifiable and you know storing data uh at uh Layer Two or as a side chain


that's secured using the Bitcoin blockchain has a huge opportunity for people to be able to say well you know truth of source source of Truth this data is valid right because it's been validated it sits on a blockchain that we can validate against the Bitcoin blockchain so we know it hasn't been altered because llms you can actually bias them from the outside without them knowing because think about they're scanning they're ingesting data from the internet well if you on a particular Topic start posting a lot of content


um you know these llms will start ingesting that content which could create a bias for them and uh you know I don't believe any of these llms today have the moderating tools um that allow for moderation in a way that most people would prefer because they move so quickly and you know they are at the end of the day black boxes all right the only way to reset the bias is to unplug it and reboot it start it again so it learns from scratch again huh yeah it's quite fascinating um looking back on 2022 you know we saw


FD FTX collabs Celsius collapse in a weird or in a way do you think that was healthy for the market like I'm thinking if Bitcoin had gone on to a hundred thousand two hundred thousand back in 2021 and FTX became a you know massive organization it's almost better that we had that extreme volatility to you know eliminate a lot of the the frauds and the weak hands and then now we can finally move higher what are your thoughts on that so I mean this is why um the so-called Gartner hype cycle kind of uh is called that


um in the early days of any industry there is a lot of optimism and it's all about doing and building uh with very little you know reflection on uh protection and making sure that um things are stable because it's a race to be the biggest it's the race to be first and just go back to web 1.


0 and you know the early 2000s you know a web van web grocer you know uh pets.com all these things uh you know they built out right idea too early uh executed maybe inappropriately and then you had this crash and then look today you know how to get people get their food well they'd instacart doordash right pretty much the same thing as webvan was uh just different right it was good Amazon right look at um Petco you know all these companies doing things that crashed 20 years ago but today they're well established stable businesses because they went


through that kind of ringer of grow grow and then oops here's all the downsides so like with anything you have to learn right um it's uh one of the reasons we don't just develop a new drug and let people start using it we have to go through trials well in the commercial World it doesn't work that way with technology it's oh wow there's this cool widget let's put it out in the wild and see how it grows because we're so passionate about it and anybody who says well maybe we should slow down maybe we should see


how this works uh is viewed as a naysayer and that's why especially in financial markets it takes so long for Innovation to happen is because the ramifications of releasing something um potentially risky in the environment um are very high and you know you look at the three arrows capital and FTX crash and you look at the connectedness and the interrelatedness of these companies and these assets and you know nobody was raising a red flag saying hey guys you know maybe we should restrict how interrelated these things are going


because nobody had yet seen the problem and so you have to always go through this first wave of kind of it's a rush and we know it's going to crash on the beach and then let's kind of figure it out and sort it out so the next step that comes in we can grab and do a better job at and I think we're in that second uh inning if you would of uh the game here and I think we're going to see a lot of really great companies get built over the next five to ten years as this industry basically goes through a


similar pattern to the internet you know web 1.0 Web 2.0 and eventually we'll get to web3 whatever that ends up looking like yeah fully agree with there so I know we're about 250 days or so until the 2024 having where the block subsy is going to get cut in half as a minor and a Bitcoin holder how are you thinking about that well I looked at it in two different ways right so as a minor um or let me start on the other side as a Bitcoin holder uh the having doesn't impact you as a Bitcoin holder because


it doesn't do anything to the value of Bitcoin other than um psychological scarcity because oh there's you're going to have the number of Bitcoin being produced from 900 to 450 a day um as I said earlier you know 900 or 450 Bitcoin a day isn't going to move the market a whole lot right miners could sell every Bitcoin they mine and they've been doing it uh for the most part in parts of 2022 and the first part of 2023 um and it doesn't really impact the price of Bitcoin uh and if miners were to stop


that extra 900 Bitcoin a day uh isn't going to do much to put the price up as miners however the having does have an impact because it means all of a sudden that your revenues are halved or your expenses are doubled you can look at it two ways um because you have to exert use twice as much uh Power to generate the same number of Bitcoin that you did before so it really comes down to uh you know your scale your cost to operate and uh you know what's happening with the price of Bitcoin now if the price of Bitcoin


doesn't move much from where it is today um a lot of miners are going to be uh in trouble and you just can look at some of the recent research that's been done around the efficiency of different miners fleets and uh you know the average Miner out there uh the average efficiency of a minor out there is in the 33-ish jewels per Terra hash uh you know our Fleet operates today at under 25 Julesburg just about 25 joules per terahash um and as we continue to grow it'll continue to drop uh ever so slowly as


our Fleet becomes uh all XPS are equivalent type machines um so we'll get down to about 20 joules per terahash eventually most probably until the next generation of machine comes and then it'll drop uh additionally but the guys operating at 33 joules per terahash or higher they're not going to be able to operate profitably from the having if Bitcoin is priced where it is today and so what does that mean well it means that basically you'll see 20 or 30 percent of the global hash rate fall off and so what'll that do well it lowers


the difficulty for the existing miners that are left and so there's this continual um uh search for symbiosis right or or homeostasis rather sorry that exist in this market that you know it's the beauty of the the algorithm that runs the underlying Network which is it's constantly searching for homeostasis and so uh we're looking for that balance between difficulty uh compute power uh and Bitcoin and I think that um you know we'll likely go into the the having with Bitcoin you know being somewhere between 30 and 45


000 a Bitcoin and uh then if it follows traditional Cycles it will move up uh towards December or early part of the following year um if it follows liquidity Cycles which is more my belief then uh you know I think you'll see a similar trend uh there uh and uh you know I think we'll we'll have to kind of see but uh we're certainly excited about the having we think it'll uh clean out the industry a little bit we think there'll be some opportunities for consolidation in the industry um which is one of the reasons why we're


so focused on having a very clean balance sheet and a lot of cash and Bitcoin in our balance sheet so we're able to take advantage of things yeah it's definitely going to be interesting to see you know what happens at the having um from a long-term perspective where do you see Mara in 10 years wow that is a long term um you know we kind of are planning Horizon right now is through 2028 so it's basically a five-year Horizon um I think you'll see Mara continue to kind of go down a very technology focused path which will lead


us towards some diversification um I think uh over time uh the key thing for Bitcoin what's most important for Bitcoin and Bitcoin miners is that the transaction fees and the transaction volumes on the Bitcoin blockchain go up and so we're certainly going to be very focused on doing things and bringing Technologies to bear that will enable that um such that people will want to do things using Bitcoin and on the Bitcoin blockchain and it layers above the base layer uh or parallel to it such that transaction volumes increase


because uh we're getting to a point after 2028 where the block subsidies um need to be uh you know passed by transaction fees uh you know ordinals gave us a taste for it you know the the big bump we had kind of in May and June um where all of a sudden you know transaction fees were greater than block subsidies for a day or two but I think that the future for minors if they're going to be Pure Play miners they're going to have to do things that really make transaction fees uh surpass block subsidies and you're gonna have to be


able to live off your transaction fees so there are two ways to do that one is uh have either zero cost energy which is a way to do it uh the other is to be doing things other than Bitcoin mining to generate revenues such that your Bitcoin mining has very little operating overhead associated with it um so I think you're going to see a lot of different models come out of this but we're very focused on the long-term game of being long-term uh you know a technology company that's focused on growth and we're going to continue to


focus on leveraging our technology assets and building more of them yeah absolutely you touched on this a little bit earlier but can you tell us a little bit more about uh the JV with UAE or nuae sure so um you know before when you go International you always have what's called country risk um where you have to deal with potential risk uh of you know you have a government that controls things and you know they can nationalize things and especially in the Middle East there's always this risk of nationalization uh


or regime shift and so um we believe that uh you know the Gulf region has a very unique energy profile relative to their use of electricity which is very asymmetric you know very uh high demand and some are very low demand in Winter and they have to keep generating all this electricity because for a lot of them they use that the off take from the energy generation is a way to desalinize seawater so that you have potable water so they have reasons to keep their energy generation running even though they're not consuming the


energy and so the question was if we're going to go into a place like UAE who's the best partner well partnering with the Sovereign is the best idea you could possibly do and so um you know we had a long period of kind of conversations and Pilots that we ran um and they decided that we were the most viable partner for them to work with uh on this deal and so we put together a structure where they would obviously be very incentivized to making it successful uh and so we designed um the sites we designed the equipment


exactly how it's going to operate uh and then formed kind of a joint venture in the joint venture is responsible for operating the sites building developing and operating the sites and our partners and ourselves have contributed Capital to do that and then we share in the um you know the Bitcoin that's produced by it pro rata to our investments and so it's pretty straight up very simple model but it allows us to really prove out the model in the region with one of the best Partners you could possibly have because


the partner the same shareholders that own our partner control the power distribution control Power Generation uh in the country and so um they're kind of partnered with the best partner you could possibly have um and what it does is it gives us kind of a great reference for doing similar deals in other nations in the region because uh you know hey if you can do it in UAE and do stuff with the Sovereign there then why can't you do it in Oman or Qatar or somewhere else so um that's why we kind of want to do it this


way uh it's also just a great way to kind of do the first International deal and see how it works so now we're very focused on longer term diversifying our our operation so we're about 50 domestic 50 offshore because we think there are you know very attractive parts of the world where um Bitcoin mining could play a very beneficial role from a societal and sort of ESG perspective um and we think uh there's great stranded power in lots of parts of the world and we think over time in the U.


S uh you know we're going to go through a big transition in the U.S where as we Electrify you know Vehicles Etc uh there'll be a need for more and more energy uh on a more constant basis today we have this unique uh thing called a duck curve where you know we use very little energy from the morning to the mid-afternoon and then we have spikes either early in the morning or evening and late afternoon as you Electrify more and more things that demand curve starts flattening and when the demand curve starts flattening uh grid balancing


using Bitcoin mining becomes less attractive and batteries become more of a relevant technology the problem is um when we partner with a power company on the grid we're making the investment in our infrastructure if they use batteries they have to invest in the batteries and the biggest issue facing this country is actually not how much renewable energy can we build it's transmission lines the U.


S is so behind in transmission capacity that the wait list uh to get a new solar or wind site uh connected to the grid is huge which means not a lot of these sites can get approved from a capital raising perspective and so there's lots of stranded energy and that will remain an issue until we build out more transmission capacity and you may have seen a month ago uh you know ferc changed the rules regarding getting transmission projects approved the problem is getting them built we have a deficit of transmission capacity


which would require an investment in the nearly trillion dollar size and the problem is the government's not going to make that investment because transmission is privatized so utilities are going to have to do that how are utilities going to raise the money to do that um without raising energy rates to Consumers greatly so I think the US is in a bit of a pickle when it comes to how they're going to continue to Electrify without having access to transmission and what that will drive is more energy generation at the edge


where it's actually consumed so you'll see more commonly in places where it's practical communities building their own solar energy generation having their own batteries at Community scale which is much more realistic and economical than at utility scale and then a small amount of Bitcoin mining uh alongside of that to monetize their excess energy and then they can essentially share energy with the grid when the grid needs it because their communities are already connected to transmission right so I


think we're going to start seeing more of those models and less of this Hub and spoke big solar farm big wind farm nice yeah I feel like that's probably better for the world kind of decentralizing energy production just like we're decentralizing money very cool last question then I think we can probably wrap it up um you know bitcoin's just been pretty not very volatile which is very unlike Bitcoin you know over the last couple months you know I guess what do you think about this weird period that we've


been in and do you think it's going to end you know soon so there's a lot of Bitcoin sitting in uh strong hands right um and bitcoin's not moving because people when Bitcoin is stable and you have high inflation um it's a good place to keep your assets right and so people aren't trading it if you would because there's no volatility Traders love volatility um so as you see adoption grow you're going to see more Demand on liquidity which is going to drive price action and you're going to see more people wanting


to invest in Bitcoin and eventually we're going to get to a point where you know very few people hold a Bitcoin they hold satoshi's um because Bitcoin is going to be you know at a if you think about it today there are roughly um a million wallets that hold at least one Bitcoin in them right that means somebody holds thirty thousand dollars in Bitcoin forget about their other savings or assets right that's a million people hold uh at least thirty thousand dollars of value uh that's a pretty big amount when you


consider the average American Savings Account is less than four thousand dollars right so as that continues to happen you're just going to see more scarcity which is just going to drive more demand for price so I think what you're basically seeing is a lot of people have a lot of confidence in the price of Bitcoin is going to go up they believe we're in a period of rising Tides the historical Trends if you believe that they're going to happen uh as they have in the past would indicate that the price of Bitcoin would


go up if you believe in global liquidity Trends then you would believe that the price of Bitcoin is going to go up and with people like Larry Fink at BlackRock and others are starting ETFs it's because they think people are going to want to invest in Bitcoin which basically means that the Bitcoin price is going to go up and so therefore you have people buying Bitcoin and just sitting on it waiting for it to move yep I like it Fred thanks so much for coming on this was an awesome conversation

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