The Pomp Podcast - #1299 Fred Thiel | Largest Bitcoin Miner Explains Why Bitcoin Will Explode

Episode Date: January 24, 2024

Fred Thiel is the Chairman & CEO of Marathon Digital Holdings (NASDAQ:MARA), a digital asset company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets. In this conversation, we talk about energy harvesting, brand new bitcoin mining sites, bitcoin halving, hashrate, outlook for 2024, and more.  ======================= This episode is brought to you by Frec — Just as easy as investing in an ETF, Frec Direct Indexing can help you earn more by unlocking tax savings, no matter the market. Done for you, automatically. Check them out at ⁠⁠⁠⁠Frec.com⁠⁠ ======================= Base is making it their mission to bring a billion people onchain. But what exactly is Base? It's an Ethereum L2 offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the onchain world. Base is a canvas for everyone, with hundreds of apps in the Base ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the onchain space for the first time, Base is designed to bring your ideas to life. So, if you're looking for a platform where the future of onchain is being built daily, Base is your destination. Join in and make onchain the next online. Learn more at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠base.org⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and follow along on Twitter at @BuildOnBase to see cool things to do onchain, everyday. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Today's episode is with Fred Thiel, the chairman and chief executive officer of Marathon Digital Holdings. They're publicly traded on the NASDAQ under the ticker symbol MARA. In this conversation, we talk about energy

harvesting, his brand new Bitcoin mining sites, how they can make Bitcoin energy neutral, and then why hashrate continues to grow. On top of that, we get into inscriptions and the explosion of Bitcoin fees, what's going on in the public markets, how they're thinking about technology, the Bitcoin ETF, and global macro and liquidity concerns. I really enjoyed this conversation with Fred. I always learn something and this conversation was no different. Here is the episode with Fred Thiel. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular

investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. from selling the profitable assets later. But now FREC is bringing this incredible advantage to any investor. They'll literally lower your tax bill regardless of how much money you have. They use state-of-the-art technology

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and I even became an investor in the business. freck.com go check them out today today's episode is brought to you by base base is making it their mission to bring a billion people on chain what exactly is base it's a layer 2 offering a seamless experience for both builders and users with near zero gas fees and rapid transaction speeds basis shaping the future of the on-chain world base is a canvas for everyone with hundreds of apps in the ecosystem whether you're an emerging creator a seasoned developer or someone exploring the on-chain space for the first time base is designed to bring your ideas to life so if you're looking for a platform where the future of on-chain is being built daily base is your destination join

in and make on-chain the next online learn more at base.org or follow along on twitter at build on base again that's at build on base to see cool things to do on chain every single day all right guys bang bang i got fred here i thought a great place to start the conversation is all throughout Q4, miners were generating the Bitcoin block reward just like they normally do, but inscriptions and transaction fees were exploding. And it seems like maybe the public markets

don't understand this. A lot of investors in the private markets don't understand this. Even some Bitcoiners don't understand it. Can you help us understand from a miner's standpoint, the block subsidy, the transaction fees, and why it's such a tailwind for a business like yours when the transaction fees explode?

Sure. So the revenue that a miner gets for doing what they do, which is essentially processing transactions, assembling them into blocks, and then getting those blocks validated, consists of two things. The block subsidy, this is what the Bitcoin blockchain pays the miner, and this is the amount that gets halved every four years, which is all part of the grand plan that miners will eventually have to live off of transaction fees. And so over the years, every four years, the subsidy part has dropped and the transaction fee portion has grown slowly but surely. But with the advent of ordinals and inscriptions and specifically really the BRC20 tokens, what started happening is people started recording things on the Bitcoin blockchain that were not just transfers from one wallet to another. And that takes a certain amount of block space and you pay for that block space. And the way the Bitcoin blockchain operates is it's like a funnel. All the transactions go in the top and you as a transactor can decide, do I want to have a high priority on this transaction or do I just want to clear whenever it clears?

And there's a standard kind of expression in the Bitcoin world where you're going to wait for six blocks before you validate that the transaction has gone through. Well, if the mempool, which is this funnel, gets backed up, it may take longer than that. and so what do you do you bid up a higher transaction fee and ordinals inscriptions brc20 tokens um they can take up more of this space and so therefore they're competing against financial transactions and what that does is bids up the transaction fees and at a period of time twice last year in the may area there was an initial surge when brc20 tokens were first launched where at one point we were earning more in transaction fees per block than the block

subsidy right so we were getting paid six and a quarter bitcoin in a block subsidy and then we were getting paid seven bitcoin in a transaction fee then there was a lull and at the end of um sort of mid q4 really november it came rushing back and it was the same thing again and so the ideal goal i think um satoshi when he wrote the white paper and designed the uh structure of the algorithm around the having was that miners would eventually earn more from transaction fees than the block subsidies and you combine that with appreciation in the price of bitcoin and you get this virtuous rising tide and so um in an environment today where bitcoin's at you know 42 43 um we're getting six and a quarter bitcoin per block plus transaction fees and lately the

transaction fees have been averaging anywhere from kind of 0.7 bitcoin to two bitcoin sometimes three bitcoin um now fast forward to the halving in april and we'll go from six and a quarter bitcoin in block subsidy to three and an eighth now the transaction fees aren't going to change So if we're still getting two, three Bitcoin in transaction fees, plus the three and an eighth Bitcoin we get in subsidies, it's almost like we were earning the same block subsidy we were getting before with much lower transaction fees. Because at the beginning of last year, the transaction fees were 0.03 Bitcoin. So think about that. And here we are with transaction fees around three Bitcoin. That's a hundredfold increase in transaction fees.

and that is not negatively impacted by the halving whereas the block subsidy for miners is you can argue from an investor's perspective in bitcoin does the halving really have an impact is there a supply shock etc it really impacts the miners more than anybody else what is that impact to the miners well essentially your revenue is halved when you think about it on a pure block subsidy perspective. Now, historically, every time there's a halving, price of Bitcoin runs up more than compensates the miner for the drop in revenues. I think that we are in a slightly different world today, institutional investors with Bitcoin ETFs. We're going to see a lot of derivative products on these ETFs. You've already seen people applying for short versions of the

ETF, leveraged versions of the ETF, all sorts of things like that. So you're going to have all these ways for people to play Bitcoin and spot Bitcoin will form a part of it. And I think what we'll start to see is less volatility in the price of Bitcoin because the liquidity in the market will increase. And as you know, when you increase liquidity in the market, it actually becomes more stable, becomes more attractive to institutional investors and more money comes in. It's a virtuous cycle. And so we're very positive about the outlook. Now, I'm not going to be the one calling for one million dollar bitcoin at the end of the year um you know i'm thinking it's going to be a much more modest number but what i do think is that we're going to after this initial kind of

excitement around the etf uh we'll start seeing institutional money start coming in slowly but surely and um not dissimilar to other etfs you know the volumes transaction volumes and inflows will grow over time which is all going to be good for bitcoin so when there's dampened volatility I think that there's a lot of folks who they've gotten deeper and deeper into the religion of Bitcoin, you know, hold Bitcoin's going to go to the moon. I actually think that there's a less likelihood of that today than there was pre ETF. Right. It sounds like, you know, very similarly, you're saying it. And I think that it's important to call out. That doesn't mean that capital is not going to flow in and the price is going to go up like that is going to happen. It's just not going to be thousands of percent very quickly.

It is much more likely to kind of trend over time closer to, you know, maybe the stock market times two or something where it is something that's more manageable. And so it'll still be an outperformer. It's just not going to be what we've seen in the past, but also on the downside. Like there's less likelihood of a, you know, 80% drawdown moving forward as well. Absolutely. The one unique thing that Bitcoin has that equities don't have is that finite number of Bitcoin. right in the equity markets companies can always issue more stock they can dilute and you know the bitcoin miners are famous for that right that's how we've grown most of us so because of the

finite number um and with the having happening in april the increase in the supply of bitcoin will now be less than the increase in the supply of gold in the gold market and so you could expect hopefully um and again this is not financial advice but you could expect that bitcoin should trend at a higher appreciation rate than gold does and be more stable in down markets than gold and gold is the proverbial inflation heads risk hedge so i agree with you i think it's gonna you know you won't see these huge swings of two three hundred percent up and you know 75 percent down i think you'll see more moderated swings and that's going to make an even more attractive to institutional investors. We've already seen liquidity in the market increase, right? So you

typically would see on an average day, somewhere around one and a half to 2 million Bitcoin will actually trade. Now you're starting to see that number grow because of the ETF. And you're also starting to see trading around the ETFs, right? So what does that mean? Well, you're seeing people exiting Grayscale and then putting money into Invesco or one of the other ones that has lower fees well when that happens bitcoin actually has to change hands it causes transactions it causes liquidity in the marketplace and so all of that is very virtuous for the industry because more liquidity you have more ability for larger investors to come in there's less risk you know it's the whole reason why people like to invest in stocks or indexes that have a lot of liquidity

there's less risk you can get in and out guaranteed right um and so i think that's the biggest benefit to bitcoin is this increased liquidity that's going to happen and then the options you have of investing you know you miners you have micro strategy you have you can hold your own spot bitcoin now you have etfs then you're going to have the futures market continues to grow and then you're going to have all these other options to be able to short long leverage etc using other etf products and you're going to start seeing baskets of etfs where you may have exposure to bitcoin you may have exposure to gold you may have exposure to other things in this basket etf and you know all of this starts soaking up bitcoin and again limited supply 21 million we're you know

pushing on hitting 20 million here soon and um it's very exciting times for the industry it's a time of major maturity i think which is the most important part speaking of maturity a lot of the miners as you said they've grown very quickly they've been able to build out tons of infrastructure uh but now they are all optimizing for different things everyone kind of has a different strategy one of the things that you all are doing at marathon is this energy harvesting uh effort talk a little bit about what is energy harvesting and kind of what's the ultimate goal sure so um you know most miners are constantly chasing what we call utility scale mining you go you get 100 megawatts of power locked up you're either behind the meter or in front of the meter

and you're doing energy arbitrage um that is viewed somewhat parasitically right because you're some people think you're taking power away from others in reality you're helping stabilize the grid if you work well with your grid operator but it's still viewed kind of in a less positive light energy harvesting is really focused on trying to harness energy that otherwise is completely stranded so think methane from oil fields think methane from landfills think methane from agricultural waste. So not just cow manure, but all of the agricultural products that are harvested and processed in some way for the food we eat or what we drink. So think of corn, think of sugar. Sugar cane is burnt normally after it's been processed, right? Causes huge

amounts of pollution. You could take that sugar cane, put it in a biodigester, turn it into methane, use methane to generate electricity the other thing we do it's not just generating electricity from these products or these biomaterials it's also then taking the heat we produce bitcoin mining is an ideal way of creating heat because about 95 of the energy that goes into a miner comes out as heat and if you use immersion technology you can capture that heat at about 50 degrees centigrade which is very hot water it's enough to heat a building it's enough to you know launder clothes it's enough to shower etc and so you can sell that heat back into an industrial process so food processing you could take the food waste coming out of a food processing plant

turn that into methane turn it into energy mine bitcoin and then pump hot water back into the process that lowers their energy costs because now they don't have to pay to heat whatever it their heating we're talking to people in scandinavia where they use centralized um high heat systems which spread steam around the city to heat it about taking our dual phase immersion technology which are kind of think of them as micro miners almost um which you could deploy to heat a building it's a self-contained box um you plug it in you pay for power and they pay you for heat, and it's about a wash on the cost. And what happens is you get Bitcoin for free that way. So we view a marketplace down the road where Bitcoin mining really becomes more like

microgrids compared to utilities. Lots of miners in small sites spread all over the place, taking advantage of all this wasted, truly stranded energy, and then have the ability to potentially sell that energy into the grid when it's needed. So you're a net generator versus a net consumer. And I think that that's really the future where this goes, because that gets you to zero cost Bitcoin mining. And if you're a zero cost Bitcoin miner, you'll always be able to mine no matter what the price of Bitcoin is.

And at the end of the day, one of the biggest debates happening amongst the maxis and the core developers is this concept of, oh, do we want to alter the Bitcoin blockchain to provide for the security budget of the Bitcoin blockchain, because eventually Bitcoin, there'll be so many Bitcoin miners that it won't be profitable to mine. Well, that's the whole point. You have to get to a place where it doesn't cost you anything to mine Bitcoin. And at that point, Bitcoin will be the absolutely most secure network in the world

because there is no way to attack it. How far out are we from getting there? so i think um what you're going to see is over the next four year period between this having in the next uh at least from marathon's perspective this becomes a larger and larger part of our business these projects take longer to execute but what's exciting about this is it opens the opportunities to work with partners right the for example we can build and deploy a building heating system we don't have to go sell it building to building we can go to people who sell HVAC systems and say, hey, here's this system, right? You plug it in, you're going to get monthly recurring revenues for deploying this, and your customer is going to get heat.

And so, you know, we believe there's a channel play on all this, which is why we're very focused on our technology business, where we've developed these very unique dual-phase immersion systems that can scale from a one cubic yard box that can heat a building or a greenhouse or a shrimp farm all the way up to multi-megawatt size systems that can heat major factories and factory processes. And so we're super excited about kind of the future there. And we're really morphing more from just a Bitcoin miner to a company that leverages energy to do things.

And I think that's something that very much differentiates us. Plus, I think also our global footprint. You know, we're of the miners out there. We're one of the few people that mine not just in North America, but also in places like the Middle East, places like South America. And we're continuing to grow that because there are lots of opportunities, both in the utility scale mining and the energy harvesting side part of the world all over. Can you talk a little bit more about this new mine that you acquired? yeah so um generate capital was a financial investor who had uh financed for compute north a couple of years ago um the build out of two sites uh one is um in texas and one is in nebraska

a total of about 390 megawatts and um compute north went bankrupt to generate capital to possession of the sites um and has operated the sites and we have a small number of miners operating at one of the sites today already and they had decided that they wanted to exit those sites and so we entered into negotiations with them to acquire the sites um it's 290 megawatts in texas 100 megawatts in nebraska with the ability to expand it considerably the benefit to us is it's predominantly additional capacity uh we're very focused on achieving 50x hash of hash rate by the end of 2025 and this brings us you know almost all the way there um with the capacity that we'll be able to gain as the people who are being hosted

there as their contracts burn off and as the exit this will also increase our owned and operated capacity to about 44% of our total global capacity. And so as you may remember, we started in this business with an asset light model. We're going to grow as fast as we can using third-party hosting. And now we have a portfolio approach. We have some third-party hosting, some self-owned and operated. And then we also do JVs, especially outside of the US to kind of lower the risk in we're doing and so we found that to be a great model for growth and we're going to continue to iterate on now one other aspect of this power conversation is how much is coming from renewables and i think that the renewable energy percentage uh just hit another all-time high it's like 58 59

now um there's no other industry in america for sure probably nowhere that has anywhere near you know two-thirds of the energy consumption coming from renewables is that going to just continue to go up over time as you see the energy harvesting and a number of other kind of initiatives that people are going after absolutely um yeah there's a chart that i looked at the other day that somebody had put out which showed the exponential growth of solar and wind energy over the past hundred years compared to coal um and other sources and you know solar and wind have now surpassed coal as a source of energy generation and you know the big challenge with solar and wind is they're they're intermittent right you know in texas the big issue right now

with the cold is if you have wind and you have rain then you get ice on the windmills and so the windmills don't operate um and if you have cloudy weather you don't get as much sun um geothermal is an area that we are very excited about uh why well geothermal uh can be used in old oil sites so you can leverage these wells that essentially are think of them as dry wells and use them for geothermal energy production that is a 24 7 365 energy source that is totally clean there is also geothermal energy available in places like wyoming where you have a lot of volcanic activity all around the world and then there is great hydro resources available in the third world. Look at why we're in Paraguay. You have a dam that was built 40,

50 years ago. It produces 14 gigawatts of power split equally between Brazil and Paraguay. Paraguay's total electrical use is less than three gigawatts. And this dam only supplies them a portion of that. So they have to sell the rest of the electricity at a loss back to Brazil. And so by bringing in Bitcoin miners now, all this hydro energy, which runs 24 hours a day, 365, can be used for Bitcoin mining. And the state of the utility in Paraguay now has an ability to generate a profit on the electricity it makes. So it could continue to invest in and build out the infrastructure in the country, as opposed to having to finance and subsidize this power generation. So we're seeing similar things like that in Kenya. We're seeing similar things like that in other places where we can leverage renewable energy sources and get ourselves as close to that 100 percent goal that, you know, all miners are looking to get to.

Now, speaking of kind of going parabolic or continuing to grow, hash rate seems to be doing the exact same thing and can't be slowed down. I'm assuming that you expect that to continue. But what are some of the nuances there and what potentially could reverse or slow down the growth of hash rate? Yeah, great question. So you have a handful of things driving the growth in global hash rate. One thing that most people don't talk about is sovereign miners. Why are sovereign miners important? Well, countries who do not want to be on the wrong side of the US in a financial conflict. So think, for example, if you're an oil producing country, and you don't want to hold dollars because the US could, if you're in a conflict with them, restrict your use of access to those dollars. You can only hold so much gold in your treasury. And so these countries are

starting to look at Bitcoin. The problem is they look at Bitcoin and they say, you know, it's great, but if the US through their OFAC process essentially prohibits our wallets from trading, our Bitcoin gets locked up. So how do we avoid that from happening? Well, we do our own mining because if we're doing our own mining, we can process our own transactions. And if we operate our own pool, we can process our own transactions. And so you're starting to see sovereigns who are interested in getting into the mining of Bitcoin, initially for monetary reasons, but really for cash reserve and treasury reasons. And those are people who are willing to mine at potentially lower profits

than businesses whose focus is generating a profit from Bitcoin mining. So that is a large portion of global hash rate growth that we've been seeing recently. Certainly, our partners in the Middle East are very focused on doing this. That's why they're in the business with us. You have the Kingdom of Bhutan who is doing this now. You have other parts of the world. Russia is the second largest country by mining capacity and growing very rapidly because they have tons of nuclear energy that's not used. They built a lot of nuclear power plants for factories that were never built.

And they view the positive aspects of this. And then you have, you know, because of the resurgence of the price of Bitcoin in the back half of last year, all of a sudden miners were able to have access to capital. You know, miners suffer from three constraints. One is access to capital. One is access to capacity to plug miners in. And one is miners. most of our colleagues in the industry have been focused on buying miners i think that's great but they have to have places to plug those in and the longest lead time item in the mining

industry is capacity and so we're very focused on consolidating capacity in the industry even if it's more than we need because we'll eventually use it and meanwhile there are other people who are going to want to use it and pay us for it and so while we don't want to be a hosting company this is a way for us to dramatically grow our capacity and then we can be very opportunistic about buying miners at the right time we luckily haven't been suffering from the capital constraints you know we have over a billion dollars of cash and bitcoin in our balance sheet today we paid down um the majority of our debt last year so we're in a very strong position to be a consolidator and if you look at this transaction we did for buying these last sites you know we

paid around 470 000 a megawatt for that capacity and it's online today usable today and so um We think that consolidating existing sites is a great use of our capital, and it'll allow us to lower our costs substantially in operating our operations. And so we're very excited about that. When you think about this industry in general, it seems like there is tons of focus on energy and on what I'll call kind of the strategy. But there's also a lot of innovation that's happening with the hardware as well. What are you guys excited about there? And maybe what are you not excited about when it comes to the actual hardware that you're installing in these facilities?

Sure. So we're excited about kind of two things. One is the shift to very economically viable immersion technology. So if you look at the technology we put into our UAE site in Abu Dhabi, it's state-of-the-art single-phase immersion. The pilot ran for 100 days before an engineer had to open the container to look inside to see if there was a problem. So it's highly reliable, runs in extreme temperatures.

In the summertime, the temperature there is 115, 120 degrees with 95% humidity. And these sites run with perfect uptime, 99 point something percent uptime. Very few machine failures also because it's immersion. And that also means you have to have fewer operators on site. So when you can run sites with low headcount, it means you can run smaller sites in more stranded and isolated places so it opens up power options to you the other thing we're very excited about is these new generations of machines coming not from bitmain not necessarily from micro bt and canaan but from people like oradine and you know full disclosure marathon was very involved in the

founding of oradine you know i have a seat on the board of oradine and we're an investor in the company. But we were able to get some of the top semiconductor designers in Silicon Valley who came from Palo Alto Networks and backing from high-end VCs like Mayfield Fund and Celestica to build a team that was going to build the next generation Bitcoin mining ASIC. In nine months from concept to first-gen product, they were able to build a four-nanometer part. They have since announced their three-nanometer part, which will have an energy efficiency of stated 15 joules per terahash, which is industry-leading. That will be available later this year. Most importantly, though, they designed a miner for miners, right?

All miners that Bitmain and these guys typically make are shoeboxes that go on shelves. You plug a bunch of them into a network. You connect them to a pool. Every miner can operate as a standalone miner. You know, one shoebox fits all, right? But what Auradine has built are miners designed for industrial use. The air-cooled miners have a similar form factor to the air-cooled miners. But as you get to the immersion miners, they're designed for high-density immersion.

In the dual-phase immersion version of the miner, that is kind of specific to us today because we focused a lot on building dual-phase immersion tanks. And I'll go into what the difference between single-phase and dual-phase is in a second. we can pack four times as much hash rate into the same size box as you can with single phase immersion and that means you get a lot more miners and a lot less space with very very high power density dual phase immersion is essentially where the phase of the liquid changes from liquid to gas and then condenses again and becomes a liquid when a physical material changes state it either has to give up a lot of heat or absorb a lot of heat and to go from liquid to gas think of boiling water

when it goes from water to steam there's no intermittent state right it's water and then all of a sudden it becomes steam when it becomes steam it sucks lots of heat out of the water i think that's how a hurricane works hurricane comes over the warm water it sucks up all that heat becomes this big engine right you then cool that vapor just enough to get it to the point where it changes state back to liquid and now it cools the liquid in a single phase immersion it's more like a car radiator right you know liquid is pumped around and then it goes into a radiator that cools it so dual phase immersion lets you operate with um much higher temperatures for one thing, and high density of miners.

And so we're super excited about that. And we'll be announcing products later this year for the data center world where we're essentially taking this dual-phase immersion technology and launching it for AI, HPC, all these other applications. When we see this innovation, we see kind of how aggressive you all are being on the expansion and kind of the big 2025 target. It's very insulated from global macro, global liquidity, interest rates, quantitative easing. Many of the things that people, I think, in Bitcoin think about, do those have an impact?

Or is it just those impact Bitcoin's price and Bitcoin's price that impacts your business? How attached or maybe susceptible are you to moves in the macro environment? So not dissimilar to people in the gold or oil industry. uh yeah we're a commodity producer we don't have a customer uh our customers really are investors we're looking to generate the maximum return for investors so when you think of bitcoin mining the price of bitcoin and global hash rate are the two uncontrollables that you worry about the most right because they impact your ability to get capital they impact the price of machines they in price impact all sorts of things um and then to a lesser extent the price of energy right

And that's all about, you can hedge around that. You can do things to kind of solve for that. But what drives the price of Bitcoin? Yeah, global liquidity, the dollar. You know, the US dollar has a huge correlation to the price of Bitcoin because most of us think of the price of Bitcoin in dollar denominated terms, right? If you're living in Turkey, you're living in Argentina, you're living in Venezuela, you're living in other places like that with high inflation, you're not thinking about

Bitcoin in dollar terms. thinking about bitcoin in your local currency terms right um but we as you know u.s miners think about bitcoin in dollar terms and so what impacts the price of bitcoin well high interest rates generate a high return for people that is very safe right so your risk-free rate of return in a high interest rate environment is very high which means higher risk high growth investment options are less attractive so that impacts potentially the price of our stock which impacts our ability to raise capital it impacts the attractiveness of bitcoin because you know risk adjusted bitcoin is the best investment going back 10 15 years that anybody could have but the

question is are you willing to put up with the risk that you may have these huge drawdowns um and so in a high risk-free return environment you know people go risk off and they move to um things like bonds etc as interest rates drop all of a sudden now you need to capture that yield that you want it again so where are you going to get it you have to then go up the risk curve and so you're going to go back into equities you're going to go back into growth stocks and you're going to go into bitcoin and so we believe that bitcoin unlike gold is not just a safe haven asset but it's an asset that generates a very positive return uh independent of the market conditions and again look at bitcoin's performance over its life look at bitcoin over any kind of

period um greater than two or three years and it's done very well and so i think that um the things that impact us liquidity dollar um global conflict you know risk impacts us you know today we are in in a multipolar world, geopolitically, there's a lot of stuff going on that impacts the dollar. It impacts inflation, right? And what's going to control interest rates? Well, it's this combination of inflation and the economy. And the Fed is caught right now in a position where inflation has been tamed, but it's not fully tamed. There are sectors of the economy that the Fed can't control. Energy is one of them, right? Global trade is another one. And with what's going on in the Red Sea, global trade is being impacted, shipping costs are going up, energy prices are

going up. That's not something the Fed can control, right? So all of those things roll into things that make Bitcoin more or less attractive. As Bitcoin price moves up and down, global hash moves up and down right so what are you looking forward to in 2024 maybe in the industry in general right we've got the halving coming we just had the etfs approved people think that there's going to be some uh quantitative easing that's going to occur what are you excited about or what milestones are you looking for um so i may be a little contrarian in my belief um but uh uh you been accused of that many times before so i actually look forward to bitcoin chewing along sideways at this level for a period of time beyond the having why because the amount of capital that

miners have been throwing at expansion based on today's economics which will change markedly come to having is going to create a lot of wasted capital. And I think that everybody's trying to grow now while they can raise capital because people are still looking at the current price of Bitcoin and the current revenues of these companies based on the current subsidy rate that they're getting. And they won't have that same opportunity come April. And you can just see how mining stocks have come down since December today. So people have gone out and made huge commitments for machines they don't necessarily have places to plug them in and i think that what's going to happen is you're going to see a little bit of a repeat of 22

post the having where people have expanded a lot um now they don't have the capital to actually operate you know one of the reasons we have so much cash and bitcoin on our balance sheet is because we want to be sure that if there are three years of winter we can still operate one the great things about the site we acquired in texas and nebraska is the way the power purchases work on those sites we don't have to take power we could just shut them down other miners don't have that type of optionality right so our whole business model is driven around resilience optionality and agility and so we are actually looking forward to potentially tough times because it'll allow us to consolidate the industry and it'll allow us to really focus on optimizing

into business if bitcoin runs to 60 70 000 after the halving then people are going to operate nonsensically and they're going to keep just pumping in more capital global hash rate's going to grow and there's going to be a comeuppance at some point more than likely you know after the new year um when you know typically if you follow historical cycles there'll be a peak six months after the halving and then there'll be a drop and then you'll have this double peak um about a year after the prior peak. So, you know, I'm optimistic long-term for the price of Bitcoin. I'm super optimistic about the industry and what's going on. I think that caution is important, that people don't just grow. I mean, the amount of miners who have less than 10x a hash who are now saying

they're going to be at 25 or 30 or 40x a hash sounds crazy. And granted, those were numbers we were stating last year and the year before. We went ahead and did it and executed on it. I think it's going to be a lot harder for other people to execute on it. What is your price prediction for the end of this year? And you're perfectly able to tell me to kick rocks and say you don't have one, but do you have one? My personal one, so not the company one, if you would. My personal one is I think we're going to be somewhere we will hit the all-time high sometime in late q3 early q4 and then we'll see a sell-off and it may come down to the mid 40s it may come down to the low 50s and then it's

going to chug along there into early 2025 and then by the end of 25 you may see a new all-time high somewhere in the 120 range. That's my personal belief. I think there are a lot of things that are going to impact it. One thing may be all of these derivative instruments around Bitcoin don't require Bitcoin to be bought or sold. So does the majority of the market move to paper trading as opposed to actually trading Bitcoin? And what does that do to the price of Bitcoin? does bitcoin just become like gold where it appreciates in a good year 10 still a good return but it's not 30 40 50 right so um i think as the asset matures the industry is going to have to mature and it's not unlike the oil industry where you have wildcatters and then you have the big

oil companies you're going to have big bitcoin miners who are very diversified that have really tight operations own their technology vertically integrated and then you can have wildcatters who out there oh god let's go add 50 megawatts here and do this and you know they'll do well in the bull portion of the market um and then you know as the market tightens it'll get harder but over time global hash rate will continue to grow it'll consolidate around bigger players and sovereigns the us will have a lesser and lesser portion of the global hash rate uh you know you can already see the public miners percentage of the global hash rate is decreasing um just because the hash rate's growing so much outside the us and it becomes a very global market with global

competitive pressures and um you know they'll likely be three or four large u.s miners um and then a handful of the chief miners and then you'll have a number of large sovereign private and possibly public miners outside the us that um that doesn't sound crazy to me i think you uh you may be on to something there and i do agree that may be contrarian to some folks uh where can we send send people to find you on the internet or find out more about marathon so marathon is mara.com mara.com you can find me uh at twitter um at f g t h i e l uh same place on telegram and uh really appreciate the opportunity to be here thanks so much we'll do it again