#1299 Fred Thiel | Largest Bitcoin Miner Explains Why Bitcoin Will Explode

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/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  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 M A R A. In this conversation, we talk about energy harvesting, his brand new Bitcoin mining

• 0:45Anthony Pompliano?

  sites, how they can make Bitcoin energy neutral, and then why hash rate 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.

• 1:09Speaker 01

  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.

• 1:33Anthony Pompliano?

  This episode is brought to you by Freck. Historically, the wealthy had a hidden secret in investing. They would spend a lot of money and use very big teams to conduct tax loss harvesting. Tax loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax owed from selling the profitable assets later. But now Freck 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 through a product called direct indexing to allow investors to invest in the S and P 500 while getting all the benefits of tax loss harvesting without the big bill. If you want to learn more, go check them out at freck.com. That's F R E C dot com. I'm

• 2:15Anthony Pompliano?

  a big fan of the product 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 two 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 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.

• 2:59Anthony Pompliano?

  Learn more at base.org or follow along on Twitter at BuildOnBase. Again, that's at BuildOnBase 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. Can you help us understand from a miner's standpoint, the block subsidy, the transaction fees,

• 3:40Anthony Pompliano?

  and why it's such a tailwind for a business like yours when the transaction fees explode?

• 3:45Speaker 02

  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 BRC 20 tokens,

• 4:30Speaker 02

  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?

• 5:14Speaker 02

  You bid up a higher transaction fee and ordinals, inscriptions, BRC 20 tokens. 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 BRC token, BRC 20 tokens were first launched. Where at one point, we were earning more in transaction fees per block than the block subsidy. Alright, so we were getting paid six and a quarter Bitcoin in a block subsidy. And then we were getting paid seven Bitcoin in the transaction fee.

• 5:56Speaker 02

  Then there was a lull and at the end of sort of mid Q4, really November, it came rushing back and it was the same thing again. And so the ideal goal, I think, of Satoshi, when he wrote the white paper and designed the structure of the algorithm around the halving 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 in an environment today where Bitcoins at, you know, 42, 43, we're getting six and a quarter Bitcoin per block plus transaction fees.

• 6:39Speaker 02

  And lately, the transaction fees have been averaging anywhere from kind of point seven Bitcoin to two Bitcoin, sometimes three Bitcoin.

• 6:48Speaker 02

  Now, fast forward to the halving in April.

• 6:52Speaker 02

  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 point zero three Bitcoin. So think about that. And here we are with transaction fees around three Bitcoin. Right? It's a hundredfold increase in transaction fees. And that is not negatively impacted by

• 7:33Speaker 02

  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.

• 7:48Anthony Pompliano?

  What is that impact to the miners?

• 7:50Speaker 02

  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 know, 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

• 8:36Speaker 02

  the liquidity in the market will increase. And as you know, when you increase liquidity in a market, it actually becomes more stable, becomes more attractive to institutional investors, then 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. 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, we'll start seeing institutional money start coming in slowly but surely. And 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.

• 9:18Anthony Pompliano?

  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,

• 10:02Anthony Pompliano?

  but also on the downside. Like, there's less likelihood of a, you know, 80% drawdown moving forward as well.

• 10:08Speaker 02

  Absolutely. The one unique thing that Bitcoin has that equities don't have is that finite number of Bitcoin. All 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, and with the halving 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, 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

• 10:52Speaker 02

  is the proverbial inflation hedge, risk hedge. So I agree with you. I think it's going to, you know, you won't see these huge swings of 200, 300% up and, you know, 75% down. I think you'll see more moderated swings. And that's going to make it 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 two 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.

• 11:37Speaker 02

  But 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? 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 miners, you have MicroStrategy, 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.

• 12:21Speaker 02

  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 pushing on hitting 20 million here soon. And it's very exciting times for the industry. It's a time of major maturity, I think, which is the most important part.

• 12:57Anthony Pompliano?

  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. 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 effort. Talk a little bit about what is energy harvesting and kind of what's the ultimate goal?

• 13:15Speaker 02

  Sure. So, 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. 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 wastes.

• 13:59Speaker 02

  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.

• 14:43Speaker 02

  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 is they're heating. We're talking to people in Scandinavia where they use centralized high heat systems which spread steam around the city to heat it,

• 15:26Speaker 02

  about taking our dual-phase immersion technology, which are kind of, think of them as micro miners, almost.

• 15:33Speaker 02

  Which you could deploy to heat a building. It's a self-contained box. 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

• 16:17Speaker 02

  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 Maxies 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 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.

• 16:56Anthony Pompliano?

  How far out are we from getting there?

• 16:59Speaker 02

  So I think what you're going to see is over the next four-year period between this having and the next, 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's going to get heat. And so, you know, we believe there's a channel play on all this, which is why we're very

• 17:41Speaker 02

  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, you know, multi-megawatt sized systems that can.

• 18:00Speaker 02

  You know, 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.

• 18:38Anthony Pompliano?

  So. Can you talk a little bit more about this new mine that you acquired?

• 18:44Speaker 02

  Yeah, so um, Generate Capital was a financial investor who had financed for Compute North a couple of years ago, um, to build out of two sites. Uh, one is um, in Texas and one is in Nebraska, a total of about 390 megawatts. And Compute North went bankrupt, Generate Capital took possession of the sites 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.

• 19:24Speaker 02

  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. Um, this will also increase our owned and operated capacity to about 44% of our total global capacity. And so, um, as you may remember.

• 20:05Speaker 02

  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 what we're doing. And so we found that to be a great model for growth, and we're going to continue to iterate on it.

• 20:30Anthony Pompliano?

  Now, one other aspect of this power conversation is how much is coming from renewables? And I think that the renewable energy percentage just hit another all-time high. It's like 58, 59% now. There's no other industry in America, for sure, probably nowhere, that has anywhere near, you know, 2/3 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?

• 21:00Speaker 02

  Absolutely. 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 100 years compared to coal 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 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. And if you have cloudy weather, you don't get as much sun. Geothermal is an area

• 21:39Speaker 02

  that we are very excited about. Why? Well, geothermal 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

• 22:26Speaker 02

  Electrical use is less than 3 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, you know, 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

• 23:07Speaker 02

  energy sources and get ourselves as close to that 100% goal that, you know, all miners are looking to get to.

• 23:13Anthony Pompliano?

  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?

• 23:28Speaker 02

  Yeah, great question. So the, 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 know, you can only hold so much gold in your treasury. And so these countries are starting to look at Bitcoin.

• 24:12Speaker 02

  The problem is, they look at Bitcoin, 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.

• 24:52Speaker 02

  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, because of the resurgence of the price of Bitcoin in the back half

• 25:34Speaker 02

  of last year, all of a sudden miners were able to have access to capital. 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.

• 26:17Speaker 02

  We luckily haven't been suffering from the capital constraints. We have over a billion dollars of cash and Bitcoin in our balance sheet today. We paid down 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, we paid around $470,000 a megawatt for that capacity. And it's online today, usable today. And so 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.

• 26:58Anthony Pompliano?

  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? Maybe what are you not excited about when it comes to the actual hardware that you're installing in these facilities?

• 27:19Speaker 02

  Sure. So we're excited about kind of two things. One is the shift to very economically viable immersion technologies. 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. You know, in the summertime, the temperature there is 115, 120 degrees with 95% humidity. And these sites run with perfect uptime, you know, 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.

• 28:04Speaker 02

  So when you can run sites with low headcount, it means you can run smaller sites in more

• 28:11Speaker 02

  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 MicroBT 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.

• 28:54Speaker 02

  In nine months, from concept to first-gen product, they were able to build a 4-nanometer part. They have since announced their 3-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, we connect them to a pool. Every miner can operate as a standalone miner. You know, one shoebox fits all, right? What Oridine has built are miners designed for industrial use. The air-cooled miners have a similar form factor to the air-cooled miners,

• 29:39Speaker 02

  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-sized 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.

• 30:23Speaker 02

  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. 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?

• 31:06Speaker 02

  You know, liquid is pumped around, and then it goes into a radiator that cools it. So dual-phase immersion lets you operate with 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.

• 31:33Anthony Pompliano?

  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, you know, 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? Like, how attached or maybe susceptible are you to moves in the macro environment?

• 32:04Speaker 02

  So, not dissimilar to people in the gold or oil industry. We're a commodity producer. We don't have a customer. 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 impact all sorts of things. 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.

• 32:47Speaker 02

  You know, the US dollar is a, 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, you're thinking about Bitcoin in your local currency terms, right? But we as, you know, US 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

• 33:29Speaker 02

  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?

• 33:55Speaker 02

  And so in a high risk free return environment, you know, people go risk off and they move to

• 34:03Speaker 02

  things like bonds, et cetera. As interest rates drop, all of a sudden, now you need to capture that yield that you wanted 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, independent of the market conditions. And again, look at Bitcoin's performance over its life. Look at Bitcoin over any kind of period greater than two or three years, and it's done very well. And so I think that the things that impact us, liquidity, dollar, global conflict, you know, risk

• 34:48Speaker 02

  impacts us, you know. Today, we are 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?

• 35:33Speaker 02

  So all of those things roll into things that make Bitcoin more or less attractive. As Bitcoin price moves up and down, global hash rate moves up and down, right?

• 35:43Anthony Pompliano?

  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 quantitative easing that's going to occur. What are you excited about or what milestones are you looking for?

• 35:59Speaker 02

  So I may be a little contrarian in my belief, but you know, I've 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 halving. Why? Because the amount of capital that miners have been throwing at expansion, based on today's economics, which will change markedly come the halving, 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

• 36:41Speaker 02

  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 halving where people have expanded a lot. Now they don't have the capital to actually operate. And one of the reasons we have so much cash in 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 of

• 37:24Speaker 02

  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 the 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.

• 38:07Speaker 02

  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. Um, I think that, um, caution, um, is important, uh, that people don't just grow. I mean, in now, 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, um, sounds crazy. Uh, and granted, that was, those were numbers we were stating last year and the

• 38:50Speaker 02

  year before. We went ahead and did it, um, and executed on it. I think it's going to be a lot harder for other people to execute on it.

• 38:58Anthony Pompliano?

  What is your price prediction for the end of this year? And you're, you're, uh, perfectly able to tell me to kick rocks and say you don't have one, but do you have one?

• 39:08Speaker 02

  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. Um, you know, I think there are a lot of things that are going to impact it. Uh, you know, one thing may be, all of these derivative instruments around Bitcoin

• 39:51Speaker 02

  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 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 are out there. Oh God, let's go add 50 megawatts here and do this.

• 40:34Speaker 02

  And they'll do well in the bull portion of the market. And then 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. You can already see the public miners percentage of the global hash rate is decreasing. Just because the hash rate is growing so much outside the US. And it becomes a very global market with global competitive pressures. And they'll likely be three or four large US miners. And then a handful of boutique miners.

• 41:14Speaker 02

  And then you'll have a number of large sovereign, private, and possibly public miners outside the US.

• 41:21Anthony Pompliano?

  That doesn't sound crazy to me. I think you may be on to something there. And I do agree that may be contrarian to some folks. Where can we send people to find you on the internet or find out more about Marathon?

• 41:31Speaker 02

  So Marathon is Mara.com. M A R A dot com. You can find me at Twitter. At F G T H I E L. Same place on Telegram. And really appreciate the opportunity to be here.

• 41:47Anthony Pompliano?

  Thanks so much. We'll do it again.