Massive Bitcoin Miner Predicts Big Bull Market!

Summary

The discussion revolves around the impact of ETFs on institutional investment in Bitcoin miners, highlighting the potential for a new bull cycle driven by institutional capital. Adam talks about the strategic implications of the upcoming Bitcoin halving, the profitability of mining operations, and the balance of selling versus holding Bitcoin. The conversation also touches on challenges like regulatory changes, competition, and market volatility. Adam shares insights on managing debt, operational efficiencies, and the importance of transparent reporting to attract institutional investors. The overall focus is on navigating the complexities of the crypto mining industry and leveraging opportunities for growth and innovation.

Takeaways

• 📈 Institutional investors are increasingly interested in Bitcoin miners as a leveraged way to invest in Bitcoin, especially with the advent of ETFs, which they view as a catalyst for the next bull cycle.
• 💡 Bitcoin miners benefit from higher Bitcoin prices, but the upcoming halving event could lead to a situation where many miners become only marginally profitable, potentially extending the industry's adjustment period.
• 💼 The company's transparency in posting daily Bitcoin mined and operational details appeals to institutional investors who seek a clear understanding of the business's performance.
• 💹 The company's strategy is focused on selling mined Bitcoin daily to operate profitably and fund growth, despite the potential for missing out on Bitcoin's upside.
• 🛠️ Core Scientific has a competitive advantage in hash rate utilization due to its experienced team and custom software, which contributes to higher efficiency and profitability.
• 💿 The company is strategically positioned with flexible infrastructure that can be converted to traditional compute as the market demands, presenting a significant opportunity post-halving.
• 💴 Capital allocation is a key focus, with the company maintaining a balance of debt and equity to manage leverage effectively and maximize growth opportunities.
• 🔄 The company is prepared for industry changes, such as the shift to more traditional compute and the potential for hardware refreshes post-halving, aiming to consolidate hash rate among top players.
• ⚡ The importance of power cost and infrastructure maintenance cannot be overstated, as they are critical to the long-term sustainability and profitability of mining operations.
• 🌐 The company is exploring site selection with a focus on low-cost power and the potential for intermittency, moving towards smaller, more modular, and lights-out facilities for better margins.
• 📉 Despite the challenges faced during bankruptcy, the company emerged stronger with a loyal investor base and a clear vision for growth, focusing on efficiency and capitalizing on market opportunities.

Q & A

What is the trend that started in December that is influencing institutional investors to look at Bitcoin miners?

The trend is the anticipation of the ETF launch. Institutional investors recognize the ETF was coming and are seeking alternative ways to capitalize on the ETF launch. Bitcoin miners offer a leveraged way to invest in Bitcoin, potentially providing a multiple on the U.S. dollars invested.

How does the Bitcoin ETF potentially impact the next Bull cycle for Bitcoin miners?

The Bitcoin ETF could act as a mechanism to allow more institutional and retail investors access to the Bitcoin market. If this happens, it might lead to a different and potentially higher Bull Run than what has been seen in the past.

What is the impact of the Bitcoin runup prior to the halving on the profitability of miners post-halving?

The Bitcoin runup prior to the halving creates a situation where many machines on the network will still be profitable post-halving. This is different from previous halvings (like in 2020 and 2016), where a more rapid process of mining company failures was observed.

What are the factors that could affect the future of Bitcoin mining businesses?

Factors include regulatory changes, approval of other ETFs that might draw institutional attention away from Bitcoin mining, and the potential influx of institutional capital into mining which could increase competition.

How does Core Scientific provide transparency to institutional investors?

Core Scientific posts its daily Bitcoin mined every single day, allowing investors to understand how the business is performing in real time. This transparency is beneficial for institutional investors who seek clarity on the company's operations and financials.

What is Core Scientific's current stance on holding or selling mined Bitcoin?

Core Scientific is currently selling its mined Bitcoin on a daily basis. The focus is on operating profitably and using the proceeds to drive additional growth into the company.

What is the strategy behind Core Scientific's decision to sell mined Bitcoin rather than holding onto it?

The strategy is driven by a focus on operational profitability and growth. Holding onto Bitcoin would mean forgoing the opportunity to invest in growth opportunities and infrastructure development, which could ultimately be more beneficial for shareholders.

What factors contribute to Core Scientific's better margins compared to competitors?

Factors include having one of the best hash rate utilizations in the industry, a team with significant operating experience, and a custom-built software stack that increases machine efficiency and longevity.

How did Core Scientific manage to grow so quickly before going into bankruptcy?

Core Scientific achieved aggressive growth by building the largest infrastructure footprint and the best designs in the industry. This was supported by raising capital in a market that rewarded such growth strategies.

What was the outcome of Core Scientific's bankruptcy process, and how did it affect the company's capital structure?

The bankruptcy process allowed Core Scientific to eliminate over $400 million in debt and extend the maturities of its debt, adding optionality to the capital structure. This made the structure more suitable for a Bitcoin mining business.

What is the long-term vision for Core Scientific in the next 5 to 10 years?

The long-term vision is to solidify Core Scientific's position as a digital infrastructure company that attacks new and emerging forms of compute. The company aims to have a mix of high-performance computing, Bitcoin mining, and other types of compute, preparing for the next Bitcoin halving in 2028.

Outlines

00:00

📈 Institutional Investment in Bitcoin Mining and ETF Impact

The paragraph discusses the increasing interest from institutional investors in Bitcoin miners, especially with the advent of the ETF. It highlights the trend where institutional investors see Bitcoin miners as a leveraged play on Bitcoin, offering a multiple return on investment compared to direct Bitcoin purchases. The conversation also touches on the potential for a new bull cycle for Bitcoin miners driven by institutional investments, as opposed to retail which has traditionally driven such cycles. The impact of high Bitcoin prices and the upcoming halving event on mining profitability is also explored, with insights into how these factors might affect the mining industry post-halving.

05:00

💹 Capital Structure and Strategy in Bitcoin Mining

This paragraph delves into the financial strategies of Bitcoin mining companies, particularly focusing on debt and equity. It outlines the various financial instruments used by miners, such as convertible notes, term loans, and warrants, and how these are appealing to institutional investors. The discussion also covers the ideal debt levels for miners in different market conditions and the risks associated with short-term debt in a volatile market. Additionally, the strategy around selling mined Bitcoin and the importance of operational efficiency and software innovation are highlighted, emphasizing the company's focus on profitability and growth.

10:03

🔄 Core Scientific's Journey Through Growth and Bankruptcy

The speaker recounts Core Scientific's rapid growth and subsequent bankruptcy, detailing the aggressive expansion strategy that led to the company's leadership position in the industry. It explains the factors that contributed to the bankruptcy, including increasing network hash rates, falling Bitcoin prices, and the impact of the war in Ukraine on power prices. The narrative continues with the company's restructuring process, which eliminated significant debt and improved the capital structure, positioning Core Scientific for a stronger future. The paragraph also addresses the challenges of maintaining talent and shifting the company's focus during bankruptcy and the successful outcome of the process.

15:04

🌐 Core Scientific's Services and Future Vision

This paragraph introduces Core Scientific as a leading public Bitcoin mining company and hosting solution provider in North America. It discusses the company's specialization in efficient, large-scale computation and its recent contract with Corweave, an AI Cloud compute leader. The company's activities include earning Bitcoin for their account and offering hosting services to other large-scale Bitcoin mining customers. The focus is on providing up to 16 megawatts of data center capacity with their own substantial fleet of miners. The paragraph also outlines the company's future vision, emphasizing the importance of nimble infrastructure and the ability to adapt to the highest-value compute opportunities leading up to and beyond 2028.

20:05

🚀 Post-Halving Opportunities and Hash Rate Consolidation

The paragraph discusses the opportunities that arise post-Bitcoin halving for companies like Core Scientific, which can capitalize on the challenges faced by smaller, less profitable miners. It explores the potential for acquiring newer, more efficient mining machines and the strategy behind selling mined Bitcoin daily to focus on company growth. The importance of hash rate utilization as a key differentiator for mining companies is highlighted, with Core Scientific boasting higher utilization rates than competitors. The discussion also touches on the future of mining infrastructure, emphasizing the move towards smaller, more modular sites with lower power costs and the 'lights out' approach to operations.

25:05

🔌 Power Costs and Site Selection in Mining Operations

This paragraph focuses on the critical factors of power costs and site selection for mining operations. It emphasizes the search for locations that offer lower power costs, even if it means accepting some level of intermittency. The concept of an efficient frontier in terms of uptime versus power cost is introduced, and the importance of maintaining infrastructure for long-term reliability is discussed. The speaker also talks about the company's experience post-bankruptcy, highlighting the loyalty and support from its investor base as a pleasant surprise. The paragraph concludes with contact information for the company and a positive note on the Bitcoin investor day event.

Keywords

💡Bitcoin Miners

Bitcoin miners are entities that contribute to the process of verifying transactions on the Bitcoin network and adding them to the blockchain. They do this by solving complex mathematical problems, which requires significant computational power. In the context of the video, Bitcoin miners are seen as a leveraged way for institutional investors to invest in Bitcoin, offering a multiple on the US dollars invested in the miner, as opposed to buying Bitcoin directly.

💡ETF (Exchange-Traded Fund)

An ETF is a type of investment fund and exchange-traded product, with shares that are tradeable on a stock exchange. ETFs are designed to track the performance of the underlying asset, such as stocks, bonds, or a commodity like gold. In the video, the anticipation of a Bitcoin ETF is mentioned as a catalyst for institutional investors to explore Bitcoin miners as an investment opportunity.

💡Leverage

Leverage in finance refers to the use of borrowed capital to increase the potential return of an investment. A leveraged investment amplifies both potential gains and losses. In the video, investing in Bitcoin miners is described as a leveraged way to play on Bitcoin, meaning that the investment can yield higher returns (or losses) relative to the investment made.

💡Hash Rate

Hash rate in the context of Bitcoin mining refers to the computing power used by miners to validate transactions on the blockchain. A higher hash rate means more transactions can be processed, and the miner has a better chance of adding a new block to the blockchain, thus earning rewards. The video discusses the importance of hash rate utilization, which is a measure of how efficiently a miner is using its hash rate to mine Bitcoin.

💡Debt Financing

Debt financing involves raising funds by taking on debt, which must be repaid with interest. In the video, the company's use of debt financing is discussed, including various instruments such as convertible notes, term loans, and warrants. The company's approach to managing debt is highlighted as a key strategy for navigating market volatility and growing the business.

💡Chapter 11

Chapter 11 is a section of the United States Bankruptcy Code that allows a business to restructure its debts while continuing to operate. In the video, the company's CEO discusses going through a Chapter 11 process, which involved eliminating debt and restructuring the capital structure to emerge stronger and better positioned for growth.

💡Hedging

Hedging is a risk management strategy that involves taking an investment position to offset potential losses in a different investment. In the context of the video, hedging could refer to strategies used by Bitcoin miners to protect against the volatility of Bitcoin's price. The company's strategy involves selling mined Bitcoin daily to focus on profitability and growth.

💡Power Costs

Power costs refer to the expenses incurred for the electricity needed to power Bitcoin mining operations. Since mining requires significant computational power, the cost of electricity is a major factor in the profitability of mining. The video emphasizes the importance of securing low-cost power as a competitive advantage for Bitcoin miners.

💡Transparency

Transparency in a business context means being open and clear about operations, performance, and financials. In the video, the company's commitment to transparency is highlighted as a way to build trust with institutional investors. This includes posting daily Bitcoin mining figures and providing insights into operational efficiencies.

💡Capital Allocation

Capital allocation refers to how a company distributes its financial resources, such as investment in infrastructure, debt repayment, or acquisitions. The video discusses the importance of strategic capital allocation for Bitcoin miners, focusing on areas like power cost management, infrastructure maintenance, and leveraging software for operational efficiency.

💡Lights Out Facilities

Lights out facilities are highly automated data centers or industrial sites that require minimal human intervention to operate. In the video, the company's future focus on lights out facilities is mentioned as a way to improve operational efficiency, uptime, and margins by reducing the need for on-site staff and leveraging software for maintenance and repairs.

Highlights

Institutional investors are increasingly interested in Bitcoin miners as a leveraged way to invest in Bitcoin, especially with the introduction of the ETF.

Bitcoin miners represent an alternative investment opportunity for institutional investors looking to gain exposure to Bitcoin beyond direct purchase.

The launch of the ETF is seen as a catalyst that could potentially initiate the next bull cycle for Bitcoin miners.

The Bitcoin price run-up prior to the ETF launch is creating a situation where many mining machines will remain profitable post-launch, unlike previous scenarios in 2020 and 2016.

Core Scientific, a leading Bitcoin mining company, is focusing on operational efficiency and transparency to attract institutional investors.

Core Scientific posts daily Bitcoin mining updates, providing real-time insights into the company's performance.

The company has a diverse range of publicly traded instruments, including debt and equity, appealing to various institutional investment strategies.

Core Scientific's capital structure includes long-term debt, which is considered optimal for the industry's volatility.

The company is strategically selling mined Bitcoin daily to focus on profitability and growth, despite market volatility.

Core Scientific has better margins than competitors due to high hash rate utilization and efficient operations.

The company went through bankruptcy in 2022 but emerged stronger, eliminating over $400 million in debt and restructuring its capital.

Core Scientific is shifting its focus from aggressive growth to efficiency and operational excellence post-bankruptcy.

The company is looking to convert existing facilities into traditional compute infrastructure, capitalizing on the next wave of technology.

Core Scientific is well-positioned to take advantage of market opportunities post the Bitcoin halving event in 2024.

The company is anticipating a more drawn-out process post-halving, with many miners remaining online for an extended period due to marginal profitability.

Regulatory changes and the approval of additional ETFs could significantly impact the Bitcoin mining industry and investment strategies.

Core Scientific's long-term vision includes a diversified approach to compute services, including Bitcoin mining, AI, and high-performance computing.

The company emphasizes the importance of hash rate utilization as a key performance metric, which is higher for Core Scientific than its competitors.

Site selection for new mining facilities is prioritized based on low power costs and the potential for operational efficiency.

Transcripts

more institutional investors are looking

at Bitcoin miners because of the ETF

that's a trend that we've seen really

since starting in December where more

institutional investors recognize the

ETF was coming and we're trying to find

other ways to play the ETF launch you

know Bitcoin miners represent a

leveraged way to play on bitcoin because

you're investing in a Bitcoin minor in

order to get a multiple on the US

dollars that you're investing in a minor

versus just buying Bitcoin and so that's

really one catalst is I think

institutional investors actually could

present kind of the next Bull cycle for

Bitcoin miners whereas retail is

generally driven that in the

[Music]

past all right guys bang bang I've got

Adam here with me Adam I thought a great

place to start this conversation is the

Bitcoin miners obviously like when

bitcoin's price goes up we've seen

Bitcoin go very high it hit new all-time

high but it happened before the having

and the Bitcoin having I think a lot of

people question is this good or bad for

the minor so how do you think about

these two kind of inputs into you know

the next C six month or so we have a

high bitcoin price before the having and

then we have the having coming and so

how are you guys thinking about your

business today yeah I think one of the

big questions is is the ETF the the

mechanism for Bitcoin to go even more uh

parabolic posst having in a way where

it's allowing more institutional

investors more retail investors access

to the market if that's the case then we

might see a much different Bull Run than

we've even seen in the past where we

actually see it go higher than we

expected but the Bitcoin runup prior to

the having is actually creating a very

interesting situation post having where

a lot of the machines on the network

today are still going to be profitable

post having that's much different than

2020 it's much different than 2016 and

so as we look forward post having you

know we're looking at a POS we're

looking at a point where a lot of miners

are going to be marginally profitable

and they're going to stay online for

kind of three to six months so I think

we're going to see a much more drawn out

process and instead of seeing what we

saw in 2022 where we saw a much more

sped up process in terms of crypto

mining or Bitcoin mining companies and

and having failures you know that's

going to take a little bit longer and we

might not actually see it until

2025 and are there things that would

affect how you view this whether it is

regulatory like kind of external shock

uh could there be um other ETFs that are

approved that like draw institutional

attention away does the ETF open up the

floodgates for institutional Capital uh

to kind of plow into Mining and so you

have more competition like how are you

just thinking about like other things

that could happen in the industry

outside of just this having moment yeah

I think right now really what we're

seeing is just the fact that more

institutional investors are looking at

Bitcoin miners because of the ETF that's

a trend that we've seen really since

starting in December where more

institutional investors recognized the

ETF was coming and we're trying to find

other ways to play the ETF launch you

know Bitcoin miners represent a

leveraged way to play on bitcoin because

you're investing in a Bitcoin minor in

order to get a a multiple on the US

dollars that you're investing in a minor

versus just buying Bitcoin and so that's

really one catalyst is I think

institutional investors actually could

present kind of the next Bull cycle for

Bitcoin miners whereas retail has

generally driven that in the past and

the only institutional leadership you

see really amongst Bitcoin miners today

is mostly passive funds I think you're

going to see a lot more large active

funds taking positions especially as

these institutions get a lot smarter on

our economics really for the first time

those are the questions we're getting

from institutional investors explain

your economics explain your power costs

explain your minor Fleet explain your

facilities explain your advantage we

never heard that before how does the

evaluation change in conversations as

they're having it with you like if they

know where your wallets are they should

be able to see how many Bitcoin that

you're actually mining uh if they know

how you're treating that if you're

selling it all if you're keeping it all

um do they have like more insight into

what the revenue in a quarter is going

to be for a Bitcoin minor that maybe

they would say you know in a Facebook or

Amazon or or anywhere else well we're

incredibly transparent on this point so

we actually post our daily bitcoin's

mind every single day um you know we we

like the fact that people can understand

how our business performing and they can

judge us in real time uh they can also

see the effects of weather events and

when we have to curtail and so all of

those factors I think are really good

for institutional investors who are

seeking greater transparency you know

initially this was driven towards giving

the masses you know access to more

information information about the

company but now it's institutional

investors that are saying yeah if you're

not doing that it's a problem because we

want to know how you're doing other

companies have similar uh type I would

say information out in the market

whether because they're running their

own pool but it's very difficult to know

what some of the other miners are mining

on any given day and as you're talking

to these institutions what are they

looking to do are are they interested in

investing with debt are they interested

uh at just buying the stock and kind of

equity capital

um and then how do you guys on the flip

side of that think about equity and debt

to help fuel the business yeah so today

um we have about $600 million in debt

and we have a number of different

instruments uh that are all publicly

traded and so we have a a wider range of

institutional conversations and I would

say most minors in this Spas have you

know we have convertible notes we have

term loans um and we have also we have

warrants on the equity side as well as

our common equity and so we have about

six publicly traded instruments and so

institutional investors find that

fascinating they love the fact that they

can be trading different instruments in

a Bitcoin mining company you know as

we're thinking about going forward I

would say over the long term having

about one turn of debt in this type of

industry is probably the right thing in

a nonvolatile environment because then

if you get into a downside scenario you

know let's say you're two turns or two

and a half turns in in a deeply down in

a deep downturn but then in a bull case

you're you're at a half turn um I think

there is a place for leverage in in this

industry you know the industry is

historically been funded through Equity

we've seen some players take on debt uh

minor equipment debt was the uh was

definitely a uh a pretty dangerous uh

instrument for companies to take on I

would say short-term advertising debt in

this industry is you know that's a

dangerous place to be because you have

very short-dated fixed US dollar

payments and you're sitting you're

you're mining a volatile uh commodity

and so it can create flow scenarios uh

that are very tight and so for us you

know we're in a very good situation our

debts mostly four and fiveyear debt uh

and we have a lot of optionality in the

capital structure I think that's really

key you know convertible notes are

really interesting for miners um you

know you're seeing it being used heavily

by micro strategy obviously if Bitcoin

outperforms you have a chance to Del and

that's that's a great place to be and

when you think about the strategy around

do you hold the Bitcoin or do you sell

the Bitcoin you're mentioning like

you're mining Bitcoin you're telling

everyone here's how much Bitcoin that

we've mined uh but then you've got this

like volatile commodity as you call it

um you have fixed cash payments both in

debt and expenses and so what is the

strategy like do you try to time the

market do you hedge do you sell

immediately what are you

thinking yeah I mean for us right now we

are currently selling our Bitcoin uh on

a daily basis you know what we're really

focused on is operating extraordinarily

profitably you know we're the best

Bitcoin miner out there from uh a number

of different angles and we're one of the

largest Bitcoin miners as well uh we've

actually LED number of Bitcoins mined

since 2021 we're leading again in 2024

so you know for us we're really focused

on driving additional growth into the

company other companies have really

focused on diluting shareholders to pay

for cost of Revenue to pay for their

Opex so they can put Bitcoin on balance

sheet essentially that's shareholders

buying Bitcoin at a massive premium um

you know you could say that's a similar

situation with people buying micro

strategy but that you're buying into a

leverage portfolio of bitco

in the micro strategy situation for

miners you're just funding operating

expenses so that the minor can hold

Bitcoin you know for us if we're going

to continue to grow this business we

have a massive growth portfolio of

facilities ahead of us of partially

developed infrastructure and we have a

lot of Ambitions and if we want to

achieve those Ambitions uh we just can't

be sitting on a significant amount of

Bitcoin because there's an opportunity

cost to that and it's going to come at

the expensive our

shareholders now what is the counter

argument that you like most with you is

it just like hey if Bitcoin goes up then

we're giving up upside but really as a

public company as a fiduciary you're

trying to manage the downside and and

kind of the Bitcoin volatility

absolutely managing the downside this

business is about time and Market you

know as a mining company you're playing

for the three months of year four months

a year where bitcoin price outpaces hash

rate rowth so that's when mining

economics expand rapidly and you have to

be alive for those types of bull market

Cycles because that's when you're making

significant outside returns uh um so

really that's you know that's our Focus

right now and the other part is we have

better margins than all of our

competitors uh at scale and many of our

and many of the companies that are

operating smaller as well so for us

we're experiencing a much larger upside

going forward as bitcoin price expands

than our competitors are so from our

perspective we don't need to put Bitcoin

on balance sheet to experience the

upside of a Bitcoin bull market what

what drives the kind of better margins

for you guys

lower power costs and better operation

so you know for us it's having the best

hash rate utilization or one of the best

hash rate utilizations in the industry

so that requires significant operating

experience our team's run by mostly X

traditional data center folks so they

know what it means actually have very

high uptime uh the other part is

software you know we had to build our

own software stack we were the First

Institutional minor in North America

first one to 100 first one to 500 first

one to 700 megawatts we to solve a lot

of problems before people knew that they

were problems and so for us it was build

software that makes our machines more

efficient build software that allows our

machines to run longer all of those

things contribute to a much higher hash

rate utilization than others and then

talk a little bit about uh core um grew

very quickly went to bankruptcy has that

emerged and it's a public company again

and I think a lot of folks uh not only

one part of the story either they know

the fast growth they don't even know

about the bankruptcy uh they know about

the bankruptcy but they don't know about

the before and after so like just kind

of like walk us through how did the

company grow so quickly uh and then why

did it go into bankruptcy and is that

actually a risk for some of the other

miners that they need to try to avoid

yeah let's go back to 2021 B you know

every public mining company was raising

a specific amount of capital and the

market was rewarding aggressive growth

we achieved the most aggressive growth

strategy in the industry we built the

largest infrastructure footprint uh and

really the best designs in the industry

which are allowing us to achieve these

high hash rate utilizations now we went

public in January of 2022 uh we already

had a significant debt load on on the

company and so as we went through 2022

Network cash rate was increasing bitcoin

price was decreasing and we had the war

in Ukraine which jacked up power prices

due to the Natural Gas Spike and so all

of those things contributed to negative

lever free cash flow which is

essentially your free cash flow after

you pay for debt and so we went we filed

for chapter 11 in December of

2022 um in 2023 we went through a

13-month process starting in December

ending in January of 2024 uh I joined

the company actually in the middle of

the chapter 11 process so in April of

2023 um and we are able to eliminate

over $400 million in debt the main part

of it was we were actually able to

extend the maturities and include

optionality in the capital structure so

I talked about that earlier optionality

in a capital structure is incredibly

important so for us we have if our stock

performs well we have a we have a

warrant that is a cash exercise warrant

that brings in $670 million into the

business which more than covers double

covers our non-convertible debt then our

convertible debt has a mandatory

conversion feature so between those two

instruments we can be debt free and so

that's really a highlight of going

through that process was just actually

making the structure of our debt proper

for a Bitcoin mining business because

there is a structure that works and it

includes long maturity and it includes

optionality in the capital

structure and talk a little bit as to

like you're coming in how much of the

team turns over in that situation both

executive team and then also kind of U

you know the employee base and like how

do you change the business is it all

just literally like Financial

engineering and and balance sheet and

debt and kind of the things people would

assume are happening at bankruptcy or

are there also things that uh either

culturally or or kind of with the

employee base that you've got to do to

to Really make sure you're in a good

position to come out of

bankruptcy yeah bankruptcies can be

extraordinarily challenging for

companies um I would say when I joined

the company you know we we had the best

operations team in the industry

obviously you need to have the best

construction operation software team to

actually build all of that

infrastructure at scale and build it

that quickly so I came in to a I would

say the most Talent talented team in our

industry and so it was really about

Shifting the focus of that team really

from hyper aggressive growth so let's

focus on drilling into efficiency and

making our operations the best they can

possibly be because we knew we were

going to be on the plane field at some

point in the near future uh it ended up

taking you know another seven months to

get back on the playe field to being a

public company again but it was really

about that shift in Focus but you know

absolutely there's challenges going

through a chapter 11 process you know

it's a challenges with uh managing

Talent challenges with uh I would say

retaining top performers you know

luckily everyone understood where we

were taking this company and when you

have a vision for the business and

you're executing on it people want to be

there people want to be a part of you

know a huge success story and we we

offer that of course scientific you know

we are a huge success story here having

the most successful chapter 11 process

in terms of equ recovery um and then

also we we maintained the largest

Bitcoin mining company in 2023 from

bitcoin's mind perspective at a time

when we had both hands tied behind our

back and everyone thought we were a

punching bag turns out you we came out

we're fighting even harder in 2024 we're

still minding more Bitcoins than

everyone else and what are some of the

challenges that you all look moving

forward in terms of um you have this

having event uh there's obviously like

always the capital markets but it almost

feels like maybe the last two years were

head wins and now you guys are starting

to get some Tailwinds um what are the

obstacles left or what are the friction

points that you you know you guys walk

into the Ops every day say hey we got to

solve these things or put ourselves in a

good position today's episode has

brought to you to you by core scientific

they are one of the largest public

Bitcoin mining companies and hosting

Solutions in North America they

specialize in transforming energy into

high value compute with exceptional

efficiency at scale and recently

announced a contract with cor wee a

leader in AI Cloud compute to provide up

to 16 megawatt of Data Center capacity

with a substantial Fleet of their own

miners core scientific not only earns

Bitcoin for their own account but also

provides hosting services for

large-scale Bitcoin mining customers

operating out of seven data centers in

Georgia Kentucky North Carolina North

Dakota and Texas you can learn more

about core scientific by visiting cor

scientific.com that's cor scientific.com

go check them out

today yeah so we announced a a deal with

cor weave actually on or on an HPC deal

you know that's something that we're

trying to solve over the course of 2024

so we've identified over 300 megawatts

in our existing portfolio that could be

converted

so you talk about the next big challenge

you know that's the next big challenge

in in our in our company right now and

it's not a challenge as much as it's a

massive opportunity and everyone's

really excited about executing on it and

so I would say having is definitely a

challenge from the Bitcoin mining side I

think that presents an opportunity for

us to buy a lot of machines post having

you know there's going to be a lot of

challenged mining companies out there

you know going back to an earlier Point

2024 is going to be a challenging year

for a number of minors who are only

marginally profitable and they're going

to have to find ways to raise Capital

the smaller they are the more challenges

they're going to have in raising capital

and so for us it's the opportunity to

refresh more machines post having that's

an huge upside for us as a business and

then part two is the opportunity to go

execute on over 300 megawatts of

conversion of existing facilities into

more traditional

compute and

when those pieces of Hardware are coming

to Market it seems like every like two

years maybe you know 3 years

um I think miners have gotten their

heads around you know how often they

need to uh kind of update the hardware

but now there's companies like uh

aradine and a few others that uh allow

for you either more granular controls or

you know different types of um clocking

and like all these like very intricate

things how much of the focus here is

like we got to get cheap power we got to

be good at operating we got to have the

latest version of the hardware versus

there's like a technical component of if

we really optimize software we can eek

out extra profit and it's almost like a

tech company that's building

infrastructure versus it's an

infrastructure company that has some

technology how do you view it yeah I

mean for us we had to solve a lot of

issues that other folks didn't know they

had to solve and so we built software to

manage that not only keeping the

machines up longer and more efficiently

but also figuring out ways to overclock

machines during the night time or

underclock machines when mining

economics demand that to generate

greater profitability we built all that

stuff ourselves and so when we evaluate

new machines we always come at it from

the eye of are we paying for the value

that we've already

created I think what's interesting is

2025 is the year of democratizing hash

rate and what I mean by that is there

are a number of Manufacturers coming to

Market they're going to start Mass

producing at the end of 2024 in 2025

they'll start hitting their stride in

terms of being able to build a large

number of machines and they're going to

change their pricing model from we've

seen in the past and so what we've seen

in the past is Roi pricing essentially

pricing machines on a return on

investment from about 12 to 14 months

depending on what your economics are and

that's what we saw in 2021 we saw

pricing go up to $80 a terahash now

going forward that's going to be much

more challenging to raise prices that

high when there are a number of

Manufacturers who are going to price it

on a Cost Plus model essentially a cost

or a cost of added to the manufacturing

cost

and so that's really going to change the

Outlook in 2025 for capex for mining

companies and also who we're going to be

buying from and where the machines are

going to be sourced from and so I think

that's a huge you know I would call it

the the major theme of 2025 versus how

much hash rate is going to be in the

network because all of that's going to

be determined by market economics the

Bitcoin network is selfhealing and it

always has been and that's never going

to go away um so that's going to make

2025 really interesting

year and as we're watching Core built

what is like the long-term Vision here I

I see a lot of miners now talking about

artificial intelligence I see you know

all these different kind of uh shiny

things that people could go do how do

you all think about the business over

the next you know called five to 10

years maybe two to three Bitcoin uh

having Cycles yeah I mean right now

we're hyperfocused on 2028 you know the

good part is we have the most Nimble

infrastructure in the industry we built

it our facilities like a traditional

Data Center and so we have an much

easier time actually making conversions

we also looked at a lot of our

facilities from the perspective of being

data centers when they are initially

purchased and so for us it's about

having Nimble infrastructure the ability

to execute on the highest opportunity

the highest value of compute we possibly

can and do that over the next three

years so that we're prepared for 2028

and so that we can solidify how much or

I should say we want to solidify that

each of our facilities for Bitcoin

mining are going to be profitable at the

next having which is something that a

lot of folks can't say today you know

we're seing a lot of deals get done from

for facilities that have very high power

prices so that companies that have

overcommitted on machines can just bring

machines online you know that's not our

game you know we're at our core we are a

digital infrastructure company that

attacks new and emerging forms of

compute so that's what we're targeting

in 2028 have a healthy mix

of HPC Bitcoin mining and whatever other

types of compute are going to emerge

over the course of the next few years

which we have an outstanding design team

we we have an outstanding construction

team we have an outstanding operations

team so from our perspectively kind of

tick all the boxes for the major uh the

major companies whether it's GPU as a

service whether it's traditional AI

companies all of those companies know

that they can rely on us to provide them

the best infrastructure they can

possibly access now

I've seen you comment about picking up

cheap Hardware from other companies that

uh struggle post having is this a

industry where even with you focus on

2028 like the big guys get bigger as

mining gets harder and the

machines going forward they haven't

really started that flywheel of just

being able to constantly refresh

machines in infrastructure that they've

already built you know we're at that

point today and so if you take our

existing facility you can essentially

think about all right if we're operating

you know about 18.9 x Ash today if we

convert all of our machines to the

newest generation machine you know we

could almost double that number and so

that's what we're starting to see is

really just that exponential growth of

hash rate

and that's okay because as efficiency

gets better for each of the machine that

means the break even hash price lowers

for each new generation of machine which

means you can generate the same amount

of gross profit even at a lower hash

price on a newer and more efficient

machine and so you're absolutely right

we're going to see a lot of I would call

it hashrate consolidation amongst a few

of the top players but we represent such

a small portion of the overall Network

all public Bitcoin miners today are only

about 20% of the network so there's

still a massive amount of

decentralization going on all over the

world one of the data points that I saw

online uh when I was kind of looking at

a bunch of the minors that I found

really interesting is um there was a

chart and you all had more hash rate

than

Marathon or I'm sorry they uh Marathon

had more hash rate than you but you all

had more Bitcoin produced in February

than them and it comes down to this idea

of minor utilization and I'm not picking

on Marathon or or you know anything but

just like explain minor utilization and

like how that ends up impacting the

business and like how volatile is that

number for each company over

time yeah so we actually post a good

chart in our earnings deck so it's hash

rate utilization is the metric that a

lot of people have become focused on so

that means for every ex aash we have

running for core scientific we're

generating about 10 more Bitcoin per

energized ex ahash than our competitors

now some of our competitors have

actually I would say gamed their numbers

a little bit by not actually telling the

market how many machines they have

running so they have a lot of machines

on the ground they hot swap them for us

we tell the market exactly how many

machines we own and our hatch rate

utilization still beats out all of our

scaled competitors and so from our

perspective it's a you know it's a huge

metric that we we really hang our hat on

because we don't have to have as much

xash online as some of our competitors

and we can still mine more Bitcoin than

them goes down to a really talented

operations team really talented software

team and so that's definitely a metric

that is in Focus right now you see it on

Twitter constantly right I don't know if

you've seen it but I would say the

retail crowd is really sted to focus on

this metric because it it's about

long-term longevity of our business like

if you can actually get better hash rate

utilization than a competitor that means

you're generating a better return on

your

machines and as we start to watch you

guys expand site selection obviously

becomes a pretty important uh detail

what goes into

that you know right now we're we have

372 megawatts of partially developed

infrastructure at two of our sites so

that I would say is less of a Focus

right now but we are continuously

running searches for new sites really on

the cost uh cost of power side that's

probably the biggest focus and finding

areas that can provide lower power cost

in exchange for intermittency so what I

mean by that is essentially exchanging

uptime for a lower power cost there's an

efficient Frontier of where you want to

fall on that curve but you can you're

generally willing to accept lower

downtime or lower uptime in certain

situations for lower power cost and so

we're constantly valuing those both

domestically and internationally right

now because you know the next generation

of our facilities are going to be more

focused on lights out facilities a lot

of people don't talk about those but

essentially run them like you know where

the data center industry is moving which

is have less people involved have less

people touching them because usually you

get better uh you get better uptime out

of your machines and we can solve a lot

of the issues through through our

software stack so that's what we're

focused on in the future it's building

out facilities in very lowcost power

centers that are essentially lights out

they need people to only go to those

facilities you know once or twice a week

to maybe exchange out some machines um

but we already have those processes

nailed centralized repair centers um we

have an amazing parts inventory or

centralized parts inventory Warehouse we

have all these systems already in place

to manage this and so for us you know

that's the future right it's smaller

sites that are focused on lights out

grabbing better margins because if you

have lower power costs you have lower

facility level operating costs you're

going to have better margin profile and

we can already manage a large number of

facilities we have seven facilities

today easily blow that number out to 25

50 facilities when you have no problem

managing it but that's really where the

industry is going to start moving to

it's going to start moving away from

some of these Mega sites and start

moving towards some of these smaller

more modular sites that provide a lot

more optionality but you need to have

the right operations team you need to

have the right software stack otherwise

you're going to really struggle to

manage that

infrastructure and as you kind of um

view bitcoin's price going up what would

change your guys mind on not selling the

Bitcoin

yeah so right now we're contractually

obligated according to our debt

covenants to or certain debt covenants

to sell our Bitcoin now if Bitcoin

really begins to perform well and we're

able to start paying down some of that

debt you know that will provide an

opportunity for us to be much more

opportunistic I would say holding

Bitcoin on balance sheet will require a

I would say a more liquid hedging market

for Bitcoin and Bitcoin mining more

directly once that occurs Bitcoin is

going to a much more viable commodity to

hold in your balance sheet or on your

balance sheet because soon you're going

to be running this very similar to a

trading desk where you're going to be

trading like a traditional Commodities

company would and so that's definitely a

place where you're actually going to

start having cash on balance or Bitcoin

on balance sheet against some of your

hedge positions but right now it's like

we walked into 2023 expecting to mine

between 13 and 14,000 Bitcoin that's a

massive amount of Bitcoin exposure to

have and really I would say the the

accounting change that we've seen for if

bitcoin price increases you can take put

that on your income statement you know

some of that is just noise and a lot of

investors already recognize that so I

would say our Focus continue to execute

on growth continue to have the right mix

of cash on balance sheet versus paying

down debt and continue to grow the

company and so Bitcoin on balance sheet

is great for some companies who have who

have large huddles and I would say we

would start holding coin on balance

sheet after we uh start to clear some of

that debt and utilize it for hedging

purposes and what are the things that

maybe the average investor who's looking

at these mining companies um what are

the things that they usually don't ask

you or uh the things that they don't

care about that you're like as a person

who thinks about Capital allocation

these are the things when I look at a

minor that I really really pay attention

to that maybe should be more

important yeah I mean we talked about

utilization but that's kind of coming in

Vogue now um I would say it's really all

in cost of power and what's the

flexibility and the power rates you know

everyone puts their headline number in

their deck well what's the what's the

power rate that you were charged that's

not standardized today I think in the

future companies are going to have to

present a standardized metric for

presenting price of Bitcoin and then I I

think the next part is really related to

what does your infrastructure look like

because a lot of people who have built

infrastructure in the past haven't been

performing proper maintenance on their

facilities it's been a big focus of us

is actually ensuring that these

facilities can operate for tens of years

and so we've been performing significant

maintenance over time so we never incur

these major outages that's a huge risk

you're seeing it today with some of the

other large mining companies who have

facilities go out and their Bitcoin

production is low for sometimes months

at a time because they can't get the

facility operational again you know

that's a place a lot of ERS haven't

focused on in the past but they

absolutely need to because

infrastructure is a high capex item and

so if you're not maintaining that

infrastructure it can present massive

risks just a few years down the road

after you've completed it got it um and

then lastly like you joined during the

bankruptcy you're out of the bankruptcy

what's been the biggest surprise as CEO

of a company that's kind of gone through

this uh this wild ride and now has the

Tailwind rather than the

headwind I would say it's the uh it's

the investor base you know people stuck

with us through the chapter 11 process

you know obviously a lot of people were

upset by it um but we came out a

stronger company I think a lot of people

recognize that we got the best Equity

recovery for Equity investors in history

in terms of percent of the company

received and so I would say we have a

lot of loyal fans out there and you know

I'm very thankful for all of them

because they supported us in our darkest

times and now they're supporting us as

we've uh We've reemerged and we've

continued to absolutely pound the table

uh with all of our competitors and being

the biggest mining company even as we

weren't able to grow through our chapter

11 process so I think a lot of people

recognize that and they've stayed loyal

to us and I think you know that's been

the biggest surprise for me a lot of uh

a lot of friendly notes from a lot of

investors out there which I really

appreciate that's okay they eventually

all come around right no they are

friendly that's what I'm saying yeah

yeah yeah they'll be just fine um

awesome where can we send people find

you on the internet or find out more

about core yeah uh on Twitter adamore

sullivan1 uh core uncore scientific um

you know those are probably the the two

best places to find us on is on uh on

Twitter it's where we're the most active

awesome Adam thank you so much for doing

this and I also appreciate you coming uh

to our our recent Bitcoin investor day

people really really enjoyed your

comments and uh I think that the having

specifically has uh some folks

questioning is this positive or negative

and and to hear your enthusiasm uh is I

think somewhat calming to them so I

appreciate your insights I think people

really learn a lot from this we

definitely do it again in the future

yeah and I I'll give a quick pitch for

your the Bitcoin investor day amazing

conference um the the enthusiasm was

flowing out of the facility um it's an

absolutely amazing event there's a lot

of people there A lot of really

important people there too uh so it was

great to be able just to rub shoulders

to some of those folks uh walking

throughout the conference so a great

event I I I uh I did not compensate you

to say that but I appreciate it very

much all right we'll do it again in the

future sounds great appreciate it