Marathon Digital's Thiel on Bitcoin Halving, Mining Outlook

Summary

The transcript discusses the impact of Bitcoin ETFs on market capitalization and the anticipation of the Bitcoin halving event. It highlights Marathon's strategic shift towards asset ownership to reduce costs and improve margins. The conversation emphasizes the importance of energy efficiency in mining and explores potential future developments, including international expansion and innovative energy harvesting initiatives to achieve zero-cost energy for Bitcoin mining.

Takeaways

• 📈 The approval of Bitcoin ETFs has been a significant success, attracting capital and potentially accelerating price appreciation.
• 🚀 Four of the 11 ETFs have become the most successful launches on record, with capital surpassing 50% of gold ETF assets under management.
• 🤑 The Bitcoin halving event is expected to reduce the supply of Bitcoin by about 450 coins per day, impacting price dynamics.
• 🌐 Marathon, a major miner, has scaled quickly using an asset-light model, relying on third parties for infrastructure.
• 🛠️ Marathon is transitioning to owning over 53% of its facilities, reducing costs and improving margins for shareholders.
• 💡 The company's fleet is among the most energy-efficient in the industry, which is crucial for surviving in a competitive market.
• 🌍 Marathon aims to have 50% of its revenues from outside the U.S. by 2028, diversifying its operations globally.
• 🔄 The average cost to mine Bitcoin for Marathon is in the low $20,000 range, which may double after the halving due to increased energy requirements.
• 🌱 Marathon is exploring energy harvesting initiatives, such as using stranded methane gas from landfills, to offset energy costs for Bitcoin mining.
• 📊 The future of Bitcoin mining may involve smaller, more distributed sites that also contribute to heating various industrial and agricultural processes.

Q & A

How has the approval of Bitcoin ETFs impacted the market and price appreciation?

The approval of Bitcoin ETFs has been a significant success, attracting capital into the market and potentially bringing forward price appreciation that would typically be seen 3 to 6 months post-approval. This has resulted in a part of the expected future appreciation being realized now.

What is the significance of the success of the 11 Bitcoin ETFs in comparison to gold ETFs?

The success of the 11 Bitcoin ETFs is notable as four of them have become the most successful ETF launches on record. The total amount of capital in these ETFs has already surpassed 50% of the assets under management in gold ETFs, which is an impressive achievement in a much shorter time frame compared to gold's 20-year history.

How does the halving event affect the supply of Bitcoin and its potential impact on price?

The halving event reduces the supply of Bitcoin by approximately 450 coins per day. While the new emissions will have some impact on price movements, it is expected that the high efficiency of miners like Marathon will allow them to continue mining profitably even with the reduced rewards.

What measures is Marathon taking to optimize its mining operations ahead of the halving?

Marathon is optimizing its operations by transitioning from a reliance on third-party infrastructure to owning over 53% of its facilities. This allows them to eliminate the middleman and reduce costs, thereby improving margins and shareholder value.

How does the halving affect the daily Bitcoin production for Marathon, and what is the potential impact on global hash rate?

Marathon's average daily Bitcoin production of 28.7 as of February will be reduced to roughly 14 per day post-halving. The impact on the global hash rate will depend on how the halving affects all miners. The key is to be one of the most energy-efficient miners, which Marathon's fleet is, allowing them to remain competitive.

What is the average cost for Marathon to mine a Bitcoin, and how will this change after the halving?

Marathon's average cost to mine a Bitcoin is in the low $20,000 range, including energy costs and operating overhead. After the halving, the marginal cost of mining Bitcoin is expected to double to around $46,000, due to the increased effort and energy required to mine with reduced rewards.

How is Marathon expanding its business internationally, and what is the goal for non-U.S. revenue?

Marathon operates on three continents and aims to have 50% of its revenues from outside the U.S. by 2028, which is the next halving event. The company is focused on both organic and inorganic growth, expanding through owned and operated facilities globally.

What is Marathon's strategy for diversifying revenue streams and optimizing operations?

Marathon is focused on a vertically integrated technology stack, including pool software, firmware in miners, and investments in technology through companies like ORDAIN. They are also exploring immersion cooling technology and emerging solutions that could interest the AI industry, aiming to diversify revenue and optimize existing operations.

How is Marathon preparing for potential industry washouts due to reduced Bitcoin rewards?

Marathon believes in striving for zero-cost energy for Bitcoin mining, which involves offsetting energy costs by using stranded methane gas from landfills, biomass from various industries, and generating heat from mining operations. This innovative approach aims to subsidize the cost of mining Bitcoin and ensure long-term survival.

What is the future vision for Bitcoin mining according to Marathon's strategy?

Marathon envisions a future where Bitcoin mining moves away from large data centers to smaller sites integrated into various industrial processes and heating needs, such as in Finland, greenhouses, shrimp farms, and ethanol plants. This would allow for a more distributed and sustainable model of mining.

How does Marathon plan to utilize the heat generated by Bitcoin mining?

Marathon plans to utilize the heat generated by mining through energy harvesting initiatives. They aim to capture stranded energy forms like methane and biomass, convert them into energy, and then use the heat produced during mining to补贴 industrial processes, effectively reducing the cost of mining Bitcoin.

Outlines

00:00

📈 Bitcoin ETFs Success and Market Impact

This paragraph discusses the significant success of Bitcoin ETFs and their impact on the market. The approval of ETFs has led to an influx of capital, potentially accelerating the expected price appreciation that would normally occur 3 to 6 months later. The launch of 11 ETFs, four of which are record-breaking, has seen capital surpassing 50% of gold ETF assets under management. This has forward-shifted demand. The halving event is anticipated to reduce Bitcoin supply by about 450 per day, slightly affecting price movements. Miners are optimistic as the price has risen prior to the halving,不同于以往的价格下降趋势。The speaker highlights Marathon's strategy of optimizing costs by transitioning from a reliance on third-party infrastructure to owning over 53% of their facilities, resulting in cost savings for shareholders. The company aims to expand through owned and operated facilities both in the US and internationally.

05:00

🌍 Global Expansion and Energy Efficiency

The second paragraph focuses on Marathon's global expansion and efforts to maintain energy efficiency in the face of the Bitcoin halving. The halving will double the energy required for mining, affecting costs. Marathon operates across three continents and aims to derive 50% of revenues from outside the US by 2028. The company is also focused on a vertically integrated technology stack, including pool software and investments in ORDAIN, a U.S. manufacturer, as well as immersion cooling technology. The speaker discusses the potential for industry consolidation, with less efficient miners possibly being pushed out if Bitcoin's price drops significantly. The company's strategy includes energy harvesting initiatives, using stranded methane gas from landfills and other industries to offset energy costs, and envisions a future where Bitcoin mining is more decentralized and integrated into various industrial heating processes.

Keywords

💡Bitcoin

Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. In the video, Bitcoin is central to the discussion, with its price, mining, and the impact of ETFs on its market being key topics.

💡ETFs approval

ETFs, or Exchange-Traded Funds, are investment funds and exchange-traded products, traded and listed on stock exchanges like stocks. The approval of Bitcoin ETFs is significant as it allows traditional investors to gain exposure to Bitcoin without directly buying and holding the cryptocurrency. In the context of the video, the approval has been a huge success, attracting capital and potentially accelerating price appreciation.

💡Halving event

The halving event refers to the reduction of new Bitcoin emissions by 50%, which occurs approximately every four years and is a part of the Bitcoin protocol to control the supply of the cryptocurrency. This event impacts the mining rewards and can influence the price of Bitcoin. In the video, the halving is expected to reduce the daily supply of Bitcoin by about 450 coins.

💡Marathon

Marathon is a company in the video that operates as a Bitcoin miner, focusing on mining Bitcoin and scaling its operations efficiently. The company uses an asset-light model and has been expanding its infrastructure by owning more of its facilities, which helps to reduce costs and improve margins.

💡Energy efficiency

Energy efficiency in the context of Bitcoin mining refers to the amount of energy used to mine a single Bitcoin and the effectiveness with which that energy is utilized. A more energy-efficient miner can operate at a lower cost, making it more profitable and sustainable, especially during market fluctuations.

💡Cost of mining

The cost of mining Bitcoin includes the expenses related to energy consumption, operation of mining facilities, and other overheads. This cost is crucial for miners as it directly impacts profitability and the ability to sustain operations, especially during events like the Bitcoin halving.

💡International expansion

International expansion refers to a company's strategy to grow its business operations in multiple countries or regions. This can involve setting up new facilities, partnerships, or other business activities to increase market presence and revenue.

💡Vertical integration

Vertical integration is a business strategy where a company acquires or invests in other businesses to control more of its supply chain or production process. This can lead to cost savings, improved quality control, and increased efficiency.

💡Energy harvesting

Energy harvesting is the process of capturing and utilizing waste or stranded energy from various sources to generate electricity or heat. In the context of Bitcoin mining, this could involve using methane gas from landfills or biomass from industrial processes to offset energy costs.

💡Future of Bitcoin mining

The future of Bitcoin mining refers to the anticipated changes and developments in the way Bitcoin is mined, including technological advancements, changes in market dynamics, and potential shifts in the geographic distribution of mining operations.

💡Potential wash out

A potential wash out in the context of Bitcoin mining refers to the scenario where some miners may no longer be profitable due to reduced mining rewards or changes in market conditions, leading them to cease operations or be acquired by more efficient competitors.

Highlights

Bitcoin ETFs approval has been a huge success, attracting capital into the market and potentially bringing forward price appreciation.

Four of the 11 ETFs are the most successful ETF launches on record, with the total capital surpassing 50% of the assets under management in gold ETF.

The Bitcoin halving event will reduce the supply of Bitcoin by about 450 per day, having a small impact on price moves.

Marathon, a publicly traded miner, has scaled quickly using an asset-light model, relying on third parties for infrastructure.

Marathon is transitioning to owning over 53% of its facilities, eliminating the middleman and reducing costs.

Marathon's fleet is among the most energy-efficient in the industry, which is crucial for surviving in a zero-sum Bitcoin mining game.

The Bitcoin halving will decrease the daily Bitcoin production from 28.8 to approximately 14 per day for Marathon.

Marathon's average cost to mine Bitcoin is in the low $20,000 range, with the marginal cost expected to double after the halving.

Marathon operates on three continents and aims to have 50% of its revenues from outside the U.S. by 2028.

The company is focused on a vertically integrated technology stack, including pool software and firmware in miners.

Marathon released emerging technology at the Empower Conference in Houston, which may interest the AI industry.

Bitcoin miners should strive for zero-cost energy, with an initiative called energy harvesting using stranded methane gas from landfills.

Bitcoin mining could transition to smaller sites, heating buildings, greenhouses, and industrial processes, selling generated heat.

Marathon is preparing for potential industry washouts by focusing on acquisitions and diversifying revenue streams.

The future of Bitcoin mining may involve smaller, more distributed sites rather than large data centers.

Marathon's strategic moves include international growth and investments in technology to maintain a competitive edge.

The impact of Bitcoin halving on global hash rate and miner profitability is uncertain, with less efficient miners potentially shutting down.

Transcripts

It's worthwhile to start with the prices here of Bitcoin and how you think it

might be impact into the having a lot of questions out there of whether a lot of

those rises have already been baked in. Well, I think the ETFs approval, which

has been a huge success, has attracted capital into the market and potentially

brought forward what could have been the price appreciation we typically would

have seen 3 to 6 months post having. So I think we're seeing part of that now

already. These ETFs 11 were approved.

Four of the 11 ETFs are the most successful ETF launches on record ever,

and the total amount of capital in the ETFs already has surpassed 50% of the

amount of assets under management in gold ETF.

So what has happened in three or four months compared to 20 years with gold is

pretty astounding. And so we think that has pulled forward

some of the demand. The having event will reduce the supply

of Bitcoin by about 450 a day. The new emissions of Bitcoin, which will

have some small impact on price moves probably.

But as miners, we're very excited to go into a having where for once price has

not declined prior to the having, but rather price has gone up.

So everybody is obviously maximizing and optimizing to that.

Right. Fred, I want to talk about exactly what

you're doing to optimize ahead of that having over at Marathon, you guys on

average mine about 28.7 Bitcoin each day.

What are you doing to decrease the cost since it's going to cost you more to

mine these bitcoin? What are you doing to save money and

ease your margins? Great question.

So we built the business and scaled very quickly using an asset light model where

we essentially relied on third parties to build the infrastructure, the

hosting, the data centers. If you want, then we would come in, plug

in our miners. So 100% of our CapEx was invested in

miners that allowed us to scale to become the largest miner, publicly

traded miner, arguably in the world. Then in December, we went and started

looking at those hosting relationships and we started moving to consolidate

them. And we now have gone from owning less

than 3% of our facilities to owning over 53% of our facilities in just a few

short months. The benefit there is it allows us to

essentially take out the middleman and take out the margin that we were paying

a third party to build infrastructure and manage it.

And we were able to do that at a cost less than the replacement cost for those

assets. So a net net great gain for our

shareholders in that regard. We'll continue to do that as we move

forward as well as continue to expand through owned and operated facilities

both in the US and abroad. Average daily Bitcoin produced you have

at 28.7 as of the end of February. When you think about the having, how is

it going to change your economics and what you see in terms of Bitcoin

rewards? You think

So the essentially, if you look at the number of 28 eight on average per day,

that would turn to be 14 roughly per day.

We'll have to see the impact, if any, on the global hash rate.

Remembering that bitcoin mining to zero sum game today.

There are 900 bitcoin made today or admitted today post having it'll be 450

and all the people mining or buying for that.

So all our computers competing for that. So the key is to be one of the most

energy efficient miners. Marathon's fleet is amongst the most

energy efficient in the industry. Those miners that have less efficient

machines may have to shut off, but the high price of Bitcoin right now

essentially has made it profitable for even marginal miners to mine post having

what we'll have to see is really what happens to the dynamic if the price of

Bitcoin were to drop ten $20,000 per bitcoin, that could potentially push

some of the more marginal miners over the edge and they would have to stop

mining and they could become acquisition targets potentially.

You also have a fairly large number of rigs, the computers, if you will, that

miners use that are not very energy efficient, that will be marginalized by

this having. So it'll be very interesting to see what

happens. But we're very focused on both organic

and inorganic growth. And we believe that the industry

globally is going to continue to grow in that hash rate, to continue to mine and

secure the Bitcoin blockchain. Fred, on average, how much does it cost

you to to mine a Bitcoin and like what's the cost of extraction?

And then I'm wondering also about potentially moving more outside of the

U.S. perhaps to find cheaper energy.

Sure. So our average cost to mine Bitcoin

across all the facilities is in the low $20,000 range today.

And by that we include the energy cost as well as the operating overhead.

I mean the people on the ground that run the facilities, any cost to run the

facilities, etc.. So the marginal cost of mining bitcoin,

if you would, that will now go to about 46,000.

On average, obviously the people cost doesn't increase.

It's just the amount of effort, the amount of energy that the miners have to

do that will double. So domestically, we're still going to be

in a great position. We operate today on three continents,

North America, the Gulf region and Africa, as well as

Latin America and Paraguay. We're going to continue to grow our

business internationally. And one of our goals is to have 50% of

our revenues from outside the U.S. by 2028, which is the next having in

line after the one we're going to have here in a couple of weeks.

The other thing we're doing, we're very focused on a vertically integrated

technology stack. So everything from our pool software,

which is the orchestration layer that kind of controls what our miners do all

the way down to the firmware in the miners and also investments in

technology through a company called ORDAIN, which is the only U.S.

manufacturer in the space located in Silicon Valley.

And then also immersion or cooling tech knowledge.

And we just released some very interesting emerging technology at the

Empower Conference in Houston a few weeks ago.

And so we think that even the A.I. industry will have interest in that.

So diversifying revenue streams, optimizing existing operations.

So you continue to expand very quickly here.

How do you feel about the future when it comes to your industry?

You kind of alluded to this idea that players could be washed out.

When we think about the dynamics and the pressure that it puts on the Bitcoin

having rewards being less this cycle and of course in future cycles, how are you

preparing for that potential wash out? You mentioned acquisitions.

What do you do today to prepare for that opportunity and how big do you think

that will be? Yeah, great question.

So we are believers that Bitcoin miners have to try to strive to get to zero

cost energy. What do I mean by that?

It means that basically the only way we'll survive long term is that our cost

of energy is offset by something else. So we have started an initiative that we

call energy harvesting. This is where we are going to landfills

and using stranded methane gas from landfills.

It could be oilfields, it could be biomass from beer brewing, ethanol

manufacturing, methanol manufacturing, where you take that biomass, convert it

into energy and then feed back into whatever that industrial process was.

Heat industry pays about 50% of the energy cost for industry is spent on

heating things. And so Bitcoin miners are great at

generating heat. When they mined Bitcoin, about 95% of

the energy that goes into a chip that mines Bitcoin comes out as heat.

So we believe that Bitcoin miners will be able to essentially take stranded

energy in the form of methane, biomass, what have you generate electricity,

generate heat, sell the heat back into an industrial process.

All of that subsidises the cost of mining Bitcoin because Bitcoin is simply

how we generate the heat that we sell back.

And I think longer term bitcoin mining will move from being these large data

center sites with hundreds of megawatts to being hundreds of thousands of much

smaller sites that are doing everything from heating buildings in Finland to

mining to heating greenhouses, shrimp farms, industrial processes, ethanol

plants, processing corn waste, cow manure, a dairies, etc.

That's the future for Bitcoin mining long term.