Fred Thiel Interview - Mining Bitcoin in the US - ESG, Elon Musk, El Salvador, BTC Mining Counsel

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[Music] this video is sponsored by ok coin crypto exchange why pay ridiculously high fees to coinbase cracking and binance when you can use ok coin which has the lowest fees guys so if you want to save money on buying and selling and trading crypto definitely have to use ok coin sign up link in the description hi everyone welcome back to the thinking crypto channel i have fred teal who's the ceo of marathon digital holdings fred it's great to be speaking with you today it's great to be here fred uh how was bitcoin how was the

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bitcoin conference in miami i believe you attended correct yeah it was uh pretty amazing as a conference after a year and a half of lockdown for covet having 12 000 people in one venue um pretty much all d masked uh it was a pretty awesome sight to see uh people from you know all walks of life all industries you know there were senators there were you know politicians there were business leaders bankers um you know bitcoin um maximalists uh some people who were skeptics uh tony hawk was there doing skateboard demonstrations it was a quite

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an amazing event and i really appreciated the opportunity to you know be on stage with kevin o'leary and the rest of my colleagues in the industry and uh it was a great event i came away from it feeling um more and more energized just about the industry and kind of what what the whole community is doing yeah absolutely and to your point there was a mixture of folks from different backgrounds which is amazing and how uh bitcoin and crypto has brought these different folks together um let's talk about your background

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where are you from uh where did you grow up uh so born in france parents are swedish grew up a short period of time in the states then high school in the and university in sweden and then lived in south america for a while and then came back to the states in the uh just before the 90s wow so you've lived kind of across the world different continents so tell us about what you did before you ended up at marathon sure yeah i've spent 40 years in the tech industry i started writing software for commercial banks when i was in high

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school in london so i was originally a software engineer and worked my way kind of went to the dark side of sales and marketing from engineering and uh worked my way up uh really been in kind of every segment of the technology industry software hardware you know big iron meaning you know super mini computers uh pcs embedded tiny computers uh i've had the good fortune of being able to as a ceo take companies public do a lot of m a work and then spent a period of time running a private equity fund focused on really technology companies and

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primarily software companies and the transition from perpetual license to sas and then spent a period of time advising some of the large global pe and vc firms and i got involved with marathon back in 2018 by joining the board the former ceo and now current executive chairman merrick okamoto is a friend of mine from many years back and uh we'd always talked extensively about kind of blockchain and crypto and when he stepped into the role as ceo uh you know he obviously wanted to have some people on the board who understood

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the business that he was taking marathon into and so i had the you know the honor to serve with him on that board and you know help work with him in support of executing the strategy that led marathon kind of to where it is today and so it was a very natural kind of uh change in roles for me to slide into the ceo role um and for merrick to kind of stay up at the executive chairman uh spot so it's it's been a great transition um obviously a big believer in the company and uh the crypto industry as a whole

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crypto is one of those unique um disruptive technologies and you know when i mean crypto i'm really talking about the blockchain all of the layers and then obviously the digital currencies um it is as disruptive as the internet um i think many people would say that we are in 1995 when you kind of look at where the internet was in 1995 that's about where we are with the crypto industry and i think you've got lots of new and exciting things that are going to happen and i think you're going to see a handful of the

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core networks kind of dominate you know bitcoin ethereum and you know we'll see who number three or four is and then you'll see lots of side chains and layer two businesses built on top of that like d5 smart contracts all those types of things so i think we're at the very beginning of what is going to become a massive industry and what was your first encounter with bitcoin and crypto um and what was your aha moment like wait there's something here and then and to your point how big this this will

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be sure um great question so um if you kind of think about what i've done in my life and kind of the world i i came out of i've spent a lot of time in the fintech space from a perspective of doing software development with banks providing systems for banks one of the companies the private equity fund that i managed owned was in the commercial lending automation space for major banks and you spend a lot of time in the industry you realize there's a lot of friction i also had the benefit that my stepmother was a senior economist for

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the oecd responsible for working on the entrance of russia and the east block states into the oecd and then into the eu specifically around banking and securities regulations and so i grew up in an environment where uh regulatory frameworks and the friction in the financial markets was kind of dinner table conversation wow and so on the one hand i had a big understanding of all the friction that was involved from my uh what i had done on the technology side and then kind of from the exposure to the family and when blockchain came out um the aha

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for me about blockchain less about bitcoin more about blockchain if you think about how the sas and cloud market works you've companies have moved from taking the technology that was in their glass house behind their firewalls and they've now effectively delegated the responsibility for security of their data and operating their applications to the cloud providers but that means the data is still behind somebody's firewall if you instead take data and move it to the blockchain and you tokenize it such that um

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people who shouldn't be able to can't read personally identifiable information it might be medical data it might be personal identity data it might be personal financial data but if you tokenize data that is on the blockchain by tokenizing i mean it's a way of encryption uh it's not about monetizing it but if your data is on a blockchain then you've taken power away from the cloud providers back into the consumer or the corporation's hands and now they can deploy all sorts of products applications services against their data

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to monetize their data and also to make their data more valuable and more insightful for themselves in ways that you can't do when the data is all locked up in salesforce or sap or one of these other big erp or cloud vendors so i'm very i was very excited about that opportunity in blockchain the financial markets was a key area where having uh this unalterable record of transactions property rights uh title ownership fractional share ownership royalty rights uh just the applications were endless that blockchain could really

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provide a great incentive for um and bitcoin is the most robust most secure and largest network and um my personal belief is that the largest network with the highest level of security is the one that will win because that is the network people will trust and uh you know if you look at the blockchain the bitcoin blockchain it is very hard to make changes in the blockchain uh you know in 2017 a group of miners who represented a the vast majority of the mining hash rate tried to make a change it didn't pass ethereum on the other hand

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is more of a centrally controlled model in that a smaller group of people focus on development and improvements to it and there have been numerous forks and continue to be forks as it moves towards proof of stake and so it's just it's a different model i'm a personal believer that the bitcoin blockchain is much more secure more robust and is a better platform especially now with taproot signaling for deploying smart contract-like applications and so i'm very excited about it so i have to ask it's usually a commonly

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asked question by the users what are you holding your crypto portfolio i'm assuming bitcoin for sure is there anything else that you have that you can disclose sure just bitcoin and ether um so let's talk about marathon digital holdings of course uh you guys do bitcoin mining um can you give us an overview of the history and maybe some of the services we may not know about sure so um marathon has had a couple of different um lives to it if you would um you know it was most recently called marathon patent

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group uh and it was really a patent troll that went and acquired patents and then monetized those patents one of those patents uh is a basically a voice assist patent that is a contributor to siri and alexa and uh i believe apple paid a license to marathon for uh the series side of it and um then marathon partnered with fortress uh on other sort of patent litigation issues um but with the alice decision in the supreme court back uh seven years ago at this point um the prosecution of software patents became uh not a viable business and

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uh or executive chairman got involved with the company um late 2017 early 2018 and had to find something to do with the business uh you know the going out and chasing people for patents wasn't a viable business anymore and so um we developed a strategy around going into the mining business at the time marathon was severely under capitalized had about a four million dollar market cap i think the stock was trading at 30 some odd cents um and it was really very difficult to figure out how to get in the mining

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business which is very capital intensive and again you know remember the peak of you know you know december of 2017 a peak price of bitcoin and then crashed down and so all of a sudden you know the mining profitability wasn't very high but you had access to a number of people who had bought machines on credit couldn't pay for it those machines came up for sale um marathon was able to secure a small number of miners and sort of get into the mining business and like most businesses iterated and learnt and figured out

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you know about hosting figured out about energy figured out about you know mining hardware and um sort of started progressing and then uh you know maricopa motor was able to execute a brilliant strategy to recapitalize the business that allowed the company to essentially raise close to 500 million dollars over the course of a year um eliminate all debt and then as a company made the decision quite the sort of ballsy move if you would back in uh back last year to um place a very large order with bit main for a huge amount of minor something that

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wasn't at all common at all and now everybody is kind of emulating this process as a way to kind of lock up a large percentage of the um perspective uh global hash rate and so if you look um the extent of that order you know we'll essentially be deploying over a hundred thousand miners over the course of uh the next uh nine months at this point we've already deployed about a third of them uh and we're continuing to deploy the rest uh and you saw our announcement regarding the energy deal we did with compute

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north so seventy thousand of our hundred thousand miners will be uh carbon neutral uh energy sources and um the facility we have in hardin montana which is a coal facility we'll move to offset the carbon impact there over the course of the next year and a half pretty much so we plan to be fully carbon neutral kind of by the end of next year that's that's amazing uh congrats on the growth there and you mentioned montana are there other parts of the u.

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s as well as north america that you have mining locations so we're currently mining in uh montana uh nebraska a small number of miners in nebraska and then the next big facility will be in texas wow it seems like a lot of mining operations are going to texas and i have to ask as maybe i'm a bit of a new newbie to to the mining aspect but is it because of the solar energy or is it any type of benefits i know texas the governor just signed a really great crypto regulation law into into place uh but what's the incentive to be in

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texas so any time you're doing project finance type deals so whether you're building out north sea oil or whether you're building solar farms or whether you're establishing you know crypto mining operations um the rules in regulatory environment in the state you're going to work in are critical as are what energy options you have texas has the benefit that it has great wind energy it has outstanding solar energy opportunities actually i think wind is a bigger opportunity for texas and i'll get into that in a minute um

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and then you also have other forms of renewable energy uh that they have uh aircop which is um the kind of texas power operator if you would uh is able to provide power purchase agreements um to companies uh where you can effectively decide the blend of power you're going to have so you can get it as carbon neutral as possible you have obviously large amounts of land in texas that make it an attractive place and you have a government state government that is very open to crypto and mining the state of new york for example which

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is where many miners have operated in the past right uh recently put forward a bill to effectively put a moratorium on mining that bill has now been modified and kind of de-fanged a little bit as it went into the assembly whereby they're going to effectively ban uh future mining that's fossil fuel-based so we'll see kind of where that ends up coming out but it's really important to be in states that have very supportive legislation and in states where power is not just inexpensive but is uh ample and in great supply if you look

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at the world's power supply today 28 of all electricity generated on earth is from renewable sources already so by the end of 2025 a short few years in the future it'll be over 33 percent that's on a global basis the us is moving very strongly in that direction as is europe um you know other areas of the world still rely much more on uh types of fossil fuel but you know i'm very optimistic about the fact that we'll be able to continue to drive renewable energy in the u.s to you know become a majority

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of the power that's generated and consumed and you know miners are a huge driver of that energy deployment because we're the buyer of last resort for all that excess power electrical energy produced from the sun really you have an optimal sweet spot of kind of 10 a.m you peak out around noon one o'clock and then it decreases over the course of the afternoon wind energy typically is in the afternoon and into early evening in west texas however you have the benefit that the wind blows almost 24 7. so wind energy in west

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texas is great uh i think you can read lots about all the offshore wind energy that's being planned and deployed off of martha's vineyard off of rhode island and other places on the east coast i think we're going to see some of that on the west coast as well so i'm very optimistic about energy being very available and looking forward to kind of seeing how we can help the energy industry really work on that sure and and you currently mind bitcoin is there plans to mine other cryptocurrencies or you know right

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now it's just bitcoin um given its uh brand recognition safest network or more secure more secure network um and as well as uh price or is there plans to maybe add other proof-of-work uh cryptocurrencies sure uh great question so i think many people um many people misunderstand what mining really is mining isn't a goal unto itself mining is actually the verification of transactions on the blockchain and for that we're paid a combination of rewards if we happen to be first to solve a block and first to guess a number

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and also transaction fees once we win that block and so our business is really about securing the blockchain and the viability of the blockchain and for that we're compensated by uh bitcoin so mining isn't this process where you're out digging holes to get bitcoin and then you sell them you're actually operating the blockchain without miners the blockchain doesn't exist in the world of ethereum they're moving to a model of proof of stake where if you think about it in the bitcoin mining world companies

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like marathon deploy huge amounts of capital and invest capital um to fund uh these miners that are continually calculating tren uh and verifying the blockchain in the world of proof-of-stake you're deploying capital kind of almost like a bond a surety that what you're going to validate is correct but because you don't have the huge capital cost related to mining equipment and this kind of very robust model where it's very hard for anybody to implement change the ethereum proof of stake model is

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potentially vulnerable to people who just can deploy large amounts of capital and then impact what types of transactions are validated or accepted so we believe that you know bitcoin is kind of the sweet spot for us uh also you know as you move to proof of stake mining is less of a a purpose if you would in the ethereum world so it's definitely not a marketplace we're going to go after at least today and you know we'll have to see i think there are a lot of opportunities um there'll be a lot of interesting side

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chains to the bitcoin blockchain especially now with taproot um i think you're going to see a lot of interesting applications deployed where the bitcoin blockchain becomes the settlement network for these transactions so i'm super excited about that but i think you know we have a lot of work still to be done in the bitcoin blockchain world and we prefer to be focused so uh tell us about the bitcoin that you you you mine and the volume that you're currently accruing as far as bitcoin daily as well as i'm sure you guys are huddling some

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and possibly selling some for the to fund the operations and are you selling to institutions and and what type of institutions are you seeing demand from um so what i'll share is the publicly available information that's you know the the nature of being a public companies we always have to be careful about what we say and how we say it where we say it um so that it's uh all done properly but what we have said recently is we cross the threshold where we're mining on average uh you know more than uh 10 we're

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essentially generating rewards uh of more than 10 btc a day um our deployment of miners is you know fully public and transparent so anybody who wants to can kind of calculate what our hash rate should be as we deploy these miners and see kind of where we should be in the overall scope of things um you know there have been some days where we've had you know considerably more than that and other days where it's less but it averages out to about uh you know 10 per day but it'll increase as we continue to deploy

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more miners in that regard we do not sell our bitcoin we hold 100 of it and we have even gone into the market in january and we bought 150 million dollars worth of bitcoin at an average price of around 31 000 in january and um you know we're holding that too as well so we have over 5 000 bitcoin uh on our books today and continue to add to it every day and uh we are not selling bitcoin um to pay for operating expenses uh if you were to look at our kind of balance sheet we have essentially uh close to half a billion

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dollars in liquid assets and no debt so we're doing quite well and able to fund operations out of largest cash holdings that's amazing um so i do want to talk about a big topic and it involves elon musk and that's esg do you see that as some knee-jerk reaction from maybe the traditional asset class a world and because bitcoin and crypto is now a competition to it and uh elon possibly being incentivized due to the green energy credit and things along those lines can you give us you know what's what's your

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perspective on this whole situation with esg and and elon musk's situation so so let's separate elon musk from esg for one thing um elon is a very influential person in social media a lot of people follow him what he says people react to and uh you know he has the power and as has been proven to move stock prices and cryptocurrency valuations um so that's one thing and you know obviously he runs a business that is in the renewable sector um both the solar city piece of tesla as well as the electric vehicle part of tesla so he has a a

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fiduciary obligation i think to being focused on renewable energy in green and i'm sure his investors hold his feet to the fire on that sure as regards to esg and um the mining industry uh you know again most people don't realize that the bitcoin mining industry has already made great progress towards carbon neutrality you know i've already talked about our numbers and our objective of being 100 carbon neutral uh the fact that we're rolling out our next uh you know 70 000 miners on fully carbon neutral

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um power most of the miners already doing that a number of the miners are already 100 renewable energy um so i think you'll see as the mining council which is an organization that's kind of in formation which is open to all miners across all industries uh you know our goal with the council is to really educate uh the marketplace and educate people on how bitcoin mining uses power what sources we use what our commitments are to um making uh our mining operations carbon neutral and then publishing data so the public

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can see what we're doing in that regard so i think transparency is going to be very critical esg is a story like any other story that becomes relevant in the press it's an important story but i think institutional investors um have big uh are very big believers in wanting to put their dollars um to work in ways that help the environment and enforce kind of proper social and governance issues that being said um you know if you were to go to an institutional investor today and say i have bitcoin a that is a vanilla bitcoin and

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i have bitcoin b that is 100 um sourced through uh green energy would you pay more for bitcoin b they will tell you no i won't pay more for bitcoin b but i prefer bitcoin b i'm just not going to pay for it so uh i think what you're going to see is that the industry is going to move towards uh you know more and more uh green energy sources and uh go to a sort of full carbon neutral model um and you know the plain vanilla bitcoin will effectively be green uh over time uh you know from a with the esg what i would consider foot because you

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know when you look at energy usage across what we do as a society and civilization there's a lot of waste out there and and i think to your point like the bitcoin mining council being more transparent putting out uh data and showing the comparison will help people to understand okay i get it what's being used by bitcoin miners renewable and so on and so forth compared to the massive amounts of energy that's being wasted in other aspects of society um do you see this esg narrative going away in like maybe six

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months or so is this something that's going to be around for a while what's your thoughts on that well i think as relates the bitcoin industry let's start there um you know the anti-bitcoin talk track before was oh well it's used as a form of uh as a way for criminals to and terrorists to fund their projects um you know it took a while but eventually people realized that there is less nefarious activity going on in the bitcoin world than there is in the us dollar there's much more nefarious activity

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done in u.s dollars than there are in any cryptocurrency so i think that story eventually died out um and there are constantly people looking to come up with the next story you know you will always find uh for example people who uh are very much gold uh enthusiasts saying that you know gold is a real store of value and bitcoin can't be a historical value you find people like former president trump saying bitcoin is a scam and you know these memes and these stories kind of uh get energy around them and the esg story it's an

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important story don't get me wrong but i think sometimes uh participants in marketplaces who want to move things certain ways will glom on to stories and leverage them um to their benefit and you know it certainly didn't help that the tweet that elon put out was talking primarily about coal energy and you know coal energy is something that's used in china predominantly for coal mining for bitcoin mining and much less so by miners uh in north america and europe uh so it was kind of i won't call it misrepresentation but it

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was you know you give somebody a general you make a generalized statement about anything and people interpret it in a broader sense and i think you know that's one of the challenges we have today around media and why it's so important for programs like yours where you really go into depth and analyze what's going on so people really get more than just the sound bite and the uh the kind of uh headline that can be taken out of context and misunderstood it also doesn't help that the crypto mining

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business is something that you know most people aren't really familiar with how it works and they couldn't really describe the process of what it is we do and how we do it and so it's easy to glom on to kind of stories like oh it's the you know the crypto industry is consuming more energy than a country well yeah but banks consume four times the energy of the whole crypto industry just to provide you know fiat money um and so it's it's not a fair kind of comparison yeah i think there was some statistics

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around at christmas time the amount of christmas lights that we all put up in our houses and the energy that uses yeah it's more than other smaller countries as well so it's just lining up all these different data points and doing comparison and you see oh well okay i you know it measures up accordingly and it's not as uh you know crazy as people might think it is like oh my god bitcoin is using so much energy well compared to what uh and making that comparison having those data points well certainly i mean just look at the simple

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fact that in the u.s we generate as a country and consume about four terawatts of energy per hour right it's a four terawatt hours that's the total power generation and it's the total power consumption because he can't store energy um effectively yet so of that um five to eight percent of that energy is lost in just transmission lines so think you know high voltage lines and power transmission lines that's 200 gigawatts if you only use 5 as the number that's 200 gigawatts of electricity is wasted

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just through loss you know a bitcoin miner like ourselves at full deployment when we're fully deployed with our mining fleet early next year we'll maybe consume 500 megawatts of power so you know just the amount of energy that's lost in transmission lines a day in this country uh is more than enough to run most of the bitcoin mining miners in north america so you know we really are using energy that otherwise would be wasted yeah absolutely um so i want to ask you something and this i'm not sure if

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you'll be able to speak to this because it's just not as clear yet but and i don't like to go down the route of conspiracy theories or rumors but it seems that despite the us government still trying to provide clear crypto regulations they are allowing mining in the states and we've heard that china you know with the bitcoin mining there they have a large amount of the mining pools there do you see kind of a geo macroeconomic battle for the control of bitcoin's hash rate given bitcoin's prominence given the

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news we heard from el salvador that the us is not going to let china uh have the majority or control the majority hash rate there and i could be wrong in you know my phrasing of that but i want to get your thoughts yeah i yeah i'm not gonna comment on on the conversations that the white house is having with the department of energy on the one hand and with dod and the nsa and the you know department of homeland security but um there has been a concern in the community as a whole the bitcoin community as a whole

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that too much concentration of hash rate in a country would enable the country potentially to enact laws and regulations where something could potentially happen to jeopardize the safety and stability of the blockchain the fact that china has begun to outlaw mining in china based on a combination of things one is obviously coal and the fact that most chinese miners use coal for at least a good portion of the year and then and some portion of the year they're able to use hydro on a seasonal basis but the bigger issue in china is not so

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much the compliance with the paris accord and climate accords it's really more about the fact they've just launched a central bank digital currency e1 which they want everybody to adopt and use uh bitcoin is uh transparent but it's also borderless it's also decentralized and having the ability for the populace to move capital uh electronically the touch of a button without any on and off ramp that they're able to control is something any centrally controlled organization uh dislikes and so i think china's moves to

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uh really ban crypto mining and trading are really more around uh you know currency control things the u.s government i think um is most probably feels good about the fact that a lot more mining capacity is moving towards the us and north america canada has a lot of mining going on the u.

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s will have it i think we're going to start seeing uh like in el salvador as countries open up and make bitcoin legal tender which was a huge event um but you know el salvador has very uh good geothermal energy 100 green 100 renewable and uh you know ideal for mining bitcoin so i i think you're going to start seeing countries that have very inexpensive forms of energy that don't have an ability to monetize that energy by building large transmission lines and selling it to consumers wanting to invite bitcoin miners to come and mine and take advantage of that very

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inexpensive renewable energy you know bitcoin is the single best way for converting energy into money and what i mean by that is think about an airline how much money do they spend on energy yeah and how much profit goes to their shareholders for that it's very little in the bitcoin mining world um you know if you think about uh our financial models you know we transfer a huge amount of the value from the cost of energy into something much more valuable which is bitcoin and you know significantly more valuable you just look at what our

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cost of energy is versus what the value of our rewards are and you'll see we are the best battery actually for energy that there is we're an economic battery for energy so we're seeing a trend of companies corporates adding bitcoin to your balance sheet we see a lot of uh hedge funds wall street firms you have your paul tudor joneses or stanley druckenmiller now turning bullish on bitcoin adding it to their portfolio and el salvador making bitcoin a legal tender do you see central banks and just even

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regular banks adding bitcoin to your balance sheet as in if this trend continues well absolutely i think you're going to see two things with banks uh you may have seen the announcement a few weeks back that fis which is a large provider of core banking systems for banks has announced a partnership with naidig which is a financial institution in new york that has a whole um crypto trading uh custody and set of services um to provide 300 million bank accounts with access to bitcoin custody buying and selling so think about what

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paypal venmo are doing now all of a sudden 300 million bank accounts will have that capability uh when the banks turn that on so that's a huge opportunity for consumers to be able to in their normal course of business not have to open an account on coinbase or gemini or kraken or binance but literally just be able to in their app on their phone their mobile banking app buy sell and hold uh crypto which is going to be huge i think for the industry i think the u.

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s federal reserve will issue a form of digital dollar which will primarily be used for payments and settlement as a way to replace the swift network which is very antiquated it's a system from the 70s that is kind of like a telex system that just happens to work over the internet these days um but it's very old and needs to be replaced businesses and consumers want to be able to settle transactions instantaneously as opposed to over the course of three days you know even with ach today in the u.s um it's still um difficult to

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get things settled the same day so i foresee you know the central bank issuing uh you know some form of digital dollar uh on some platform uh you know the us uh needs to do it also to uh defend its position uh of the dollar as a reserve currency um you know a lot of nations today are moving away from dollar holdings russia has announced that they're liquidating their u.

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s uh dollar reserves you know china has been doing some of that i think you're going to see more and more countries who don't want to operate in a dollar denominated world do that now there are two reasons for that you know one is that if you hold reserves in the us dollars and the us dollar is losing its financial buying power by 15 a year because of government spending that's a financial decision it's not a strategic decision um and you know if you look at what michael saylor has been advocating and

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you know we're obviously very close to michael saylor and big supporters of what he's doing you know by taking a portion of the treasury assets of a corporation uh or a life insurance company etc and allocating it to bitcoin it makes sense because it's an asset class um that over time is going to be more and more impervious to inflation and is a great store of value for holding assets to make sure that they maintain their value you know if you look at the inflation we're seeing in the u.s today

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it is asset inflation we're now starting to see price inflation on consumer goods more driven by supply chain constraints than anything else but if you look at acid inflation you know look at the price of homes look at the price of land you know look at the corporate assets and you know mergers and acquisition valuations you know the valuations are huge and they continue to grow and that speaks to the fact that the actual buying power of the dollars that are used to acquire those assets is decreasing and so if you want to hold the value of

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your hard earned money you can choose to put it in dollar denominated things you can choose to hold it in assets like real estate art gold stocks whatever it might be or you can choose to hold it in cryptocurrencies like bitcoin it's a financial decision and you'll see that more and more insurance companies are starting to allocate one to two percent uh of their holdings to bitcoin and as stability starts entering the market um you'll see more and more financial products based on bitcoin or including bitcoin that will be used

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by investors so that they don't have to hold crypto directly if you look at financial institutions many of them can't buy crypto today they're prohibited from doing it directly but they can buy shares in etfs they can buy stocks in public companies that are in the bitcoin space for example like marathon and others but it's this desire to have a set of financial products that are traditional and regulated like etfs if you would that most institutions are really looking at is the way the on-ramp they're going to use for

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going into holding assets that are crypto-based uh so if you look at the etfs one of the reasons and you and i were talking about this kind of before we started recording um in the world of etfs you know the sec hasn't approved etfs because of their concern of you know how will an etf deal with the volatility in the price of bitcoin and the need for redemptions and issuance you know in a traditional world where an etf's nav is moving up or down one or two percent a day the volume of um transactions in that are manageable but

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if you have bitcoin moving up and down 10 in a day or 30 in a week you have massive movements in and out of an etf and so i think part of the sec's concerns around approving an etf is just how will the etf mechanically handle that what safeguards does the sec need to implement in regarding etfs if that were to happen and i think it's just it's a lot of kind of foundational groundwork i think sometimes it's better to take a little bit more time and study and figure out what you need to do than to just jump in

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and do something and then have it break have it harm a bunch of consumers and now nobody wants to do it anymore so i applaud the sec for taking their time but i think that um you know time is running and and uh there's a lot of interest for these products and you know i'm hopeful that they'll release uh approve some of the first etfs uh you know during this year yeah i i think everybody's uh hoping it happens this year and it seems it might be a high probability of that and we're seeing etfs get approved in canada

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and other countries as well um i wanted to ask about you know you were on the twitter space with the uh president of el salvador and the announcement of the bitcoin becoming legal tender um for those who may still be struggling to understand well what does this mean if bitcoin's a legal tender there um can you give us your perspective on that and the significance of this event so um the law specifically states that any participant in the commerce market so i think every store every taxi driver everybody has to be willing

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to accept bitcoin as legal tender so not just the currency that el salvador uses which happens to be the us dollar but also uh bitcoin and so people will be able to hold bitcoin go to the store pay for things in bitcoin there'll be investment instruments available that are bitcoin denominated and it's a way to hedge against inflation if you look in latin america today [Music] bitcoin has been very attractive as a store of value because many countries have very high inflation rates look at venezuela with an inflation rate of over

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a million percent a year in some cases the ability for people to take their earnings convert them right away to bitcoin kind of gives them the inflation hedge and then when they transact with um stores and other people they can either pay in bitcoin or pay in dollars which otherwise are very hard to get in venezuela because of the way the government controls that but once you have bitcoin it's easy to acquire dollars so i think that's an area where you're going to see a lot of countries that have a lot of pressure inflationary issues

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with their currencies you're going to see bitcoin as a kind of side channel for commerce um be adopted more and more i think also the thing to realize is that uh el salvador as a country depends to a large extent i think it's over 20 percent for international remittances from citizens who are outside of el salvador sending money home and if you think about how most of these money transfer businesses work they charge huge fees to transfer money from say the us or other places back to the home country it could be as

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much as 50 percent and you know the typical remittance is 150 200 maybe enough to send back to the family so that you know the grandparents can take care of the grandkids whatever it might be um but by being able to reduce the fees that are charged by doing this via bitcoin having bitcoin is legal tender um they effectively now enable more of the value of those remittances to achieve uh the goal of getting to the grandparents and the children that they're sending the money home to and this is a big social issue which i

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think is very important because there are a lot of charities there's a lot of money that's sent all over the world for a variety of good purposes that just gets hammered by fees so i think bitcoin and digital currencies are a great way of solving that problem the other thing they're doing in el salvador which i think was very smart is they partnered with technology companies in this case um it's uh stripe not stripe but it's i forget the name of the company again to basically deploy the infrastructure

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so there would be an app anybody can use for buying and selling so it's not that you have to now build that infrastructure they're effectively partnering with technology companies to do that out of the get-go so i think that's going to be a very exciting part of this i know some critics might say well hey sometimes the fees get very high for bitcoin at certain points in the network when the network's busy do you see um like the lightning network or other side chains being a solution layer two solutions uh to help

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improve the the cost when when the network gets busy you know what are your thoughts on that well absolutely i think what you're going to see is bitcoin is going to be the settlement network um that uh funds being transferred from one side chain to another one bank to another that type of settlement or clearing will happen on the bitcoin blockchain and then there'll be side chains where the high highly intensive transaction processing of smaller denominated transactions will occur so lightning is one you're going to see more and more things

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around smart contracts now the taproot has been essentially i think taproot will now pass um now that over 90 of the people are signaling it i think you're also going to see other platforms like stacks and others who are bringing the ability to build really interesting d5 type solutions on the bitcoin blockchain uh to bear and so you'll just really see bitcoin the bitcoin blockchain being a settlement network for these sidechains got it now i want to ask and and it's okay if you can't get to speak to this do you have a price

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prediction for this year do you see the uh bull run continuing obviously we've had a correction which is normal healthy and they even in a bull market and um you know yeah any year end price predictions or anything like that i'm not going to give you a firm price what i will say is um there have been a number of large influences on the price of bitcoin most recently one and the most important one has been a combination of when the price runs up very aggressively all of a sudden and this is just like the real estate crisis of 2008

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people who don't really know what they're doing buy in and think oh wow you know everybody i talk to is making tons of money in bitcoin i've got to do it it's at 50 000 and it's going to 250 000 and then a few weeks later it drops to 30 000 and they've lost all the money they put into it and in some cases it's their life savings and it's a horrible thing to have happen but you know when you have huge volatility in a marketplace it's you know investor beware unfortunately so

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had bitcoin been climbing at a more um sedate rate i think you wouldn't have seen this type of correction it's just whenever something jumps up in value very quickly you're always going to have some form of reaction on the other side and if you look at most of the selling that happened during the initial drop it was wallets that had only recently been opened and people who had only recently come into the marketplace if you look at the whales in the industry and again this is the great thing with the bitcoin blockchain it's

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all available you can use glassnode to look at this or any variety of free tools but whales were still accumulating and financial institutions uh you know they're very smart and savvy traders and they have their price points where they accumulate and that price point seems to be around 30 000 today so as that volatility has gotten kind of flushed out and there was a huge amount of leverage that was uh being used to buy bitcoin as it was going up because it was cheap and easy to do so i think that's been washed out of it

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now at the same time you've had a large number of miners in china liquidating not just their machine fleets but also liquidating bitcoin holdings to in order to buy new machines and relocate outside of china so that has also had selling pressure and you can kind of look at the pricing curves uh over you know a week period and you'll tend to see there's some seems to be a bit of i'll call it temporal seasonality uh depending on time of day and day of the week which really indicates that there's been a lot of selling in asia

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and most of the buying has been in europe and north america so i think we're going to see that flush out here over the next month or so and then my expectation is with news like what's happening in el salvador and as more and more corporates start getting uh to use bitcoin um as a way to protect some assets um you'll see the price start moving up again you know the great thing about bitcoin is there are only 900 bitcoin made per day and uh anybody who wants to establish a position you know a company a large you know global

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company wanted to put a billion dollars into bitcoin it would have a hard time collecting that bitcoin without moving the price up and they wouldn't do it on exchanges it would be done through otc desks right i think the tendency will be for the price to go up how fast it will go up that's up to interpretation i think there are things that could accelerate it more countries adopting bitcoin as a form of legal tender will obviously accelerate at the fed coming out with a digital dollar uh and clear guidance

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regarding how they're going to um not just deal with taxation of crypto but also how they're going to deal with the regulatory environment around exchanges and consumer protections for d5 you know i don't see a lot of regulation around bitcoin per se there may be you know some edge cases um but i think predominantly the regulatory environment is going to be around things that touch consumers and you know brokers dealers exchanges uh d5 platforms where you're lending it's all about protecting the consumer i

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think from a regulatory perspective yeah absolutely um now i want to ask and it's a bit of a prediction question as to maybe the next big public company to add bitcoin to their balance sheet michael saylor has hinted to apple facebook google you know what what does your gut say as far as what may who might come out next maybe facebook and we might see google amazon sometime this year so i think it wouldn't be surprising to see that many of these companies actually have some small portion of their assets being

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held in bitcoin it just makes sense if it's an immaterial amount based on the overall assets of the company it's not something they would necessarily have to report other than in an annual report possibly um you know that's kind of uh something you have to look at uh you know there's a big piece of news i think that came out today that um berkshire hathaway just invested 500 million dollars in a digital bank uh you know charlie munger and warren buffett both are kind of uh not big believers in the

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world of crypto um charlie munger had stronger words than that but you know you go back to when before berkshire hathaway invested in apple stock right you know they did not like technology they liked brands that were consumer brands well guess what they took a big position in apple and uh have made out very well with that and i think you're going to start seeing berkshire hathaway start edging more and more you know into this marketplace over time because everybody's going to have to come into the marketplace

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yeah absolutely i i think uh there's a i remember seeing a video at one point they weren't fans of gold either and then they added and until your point of tech stocks they were late to the game there but then they got into apple uh so maybe eventually we will see some capitulation on their front uh i want to get your take on where do you see bitcoin and the crypto market in about three years and maybe some of you know your thoughts as far as adoption um people using bitcoin in an everyday basis you know

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i'm seeing just in the states around me uh bitcoin atms popping up in different stores and it's it's pretty amazing to see that happening yeah so a great question i think most bitcoin atms are actually used for remitting money to other places uh because if you think about how they work it's not about taking money out it's about you put cash in uh you then get a wallet uh with the bitcoin in it and then you can remit that bitcoin back home so a lot of the users of bitcoin atms are unbanked uh people who are taking their money and

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sending it back home because it's an easy way to do it and you're not losing and paying huge fees by going to moneygram or one of these other transfer agents to transfer the money but fact of the matter is that people want to hold assets in bitcoin and bitcoin atms are just one kind of uh example of that i think you're gonna see tons of other products um the fact that el salvador is uh allowing bitcoin as an actual form of legal tender means you're gonna see more transactions happening with bitcoin there the great thing with

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bitcoin is it's totally fungible you know you can go all the way down to uh a satoshi which is an infinitesimal small piece of a bitcoin so bitcoin can scale as its price goes up it can scale in that regard and i think you're going to find a lot of uh businesses being established as side chains that are going to enable some of this uh traditional commerce with bitcoin but think about if uh fis rolls out this solution for banks where 300 million u.

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s bank accounts can hold buy and sell crypto then there's no reason why you couldn't go into a store pay with apple pay google pay or whatever your banking app is and the merchant doesn't have to accept it as bitcoin they can accept it as fiat dollars but it'll be deducted from your bitcoin holdings you know one of the key things i think that is going to or that needs to be kind of resolved for uh people to really start uh doing commerce with bitcoin is the way bitcoin is taxed one of the challenges today is when you

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spend your bitcoin that is a capital gain from where you bought your bitcoin or a capital loss if you are on the wrong side of the pricing um as opposed to legal tender which you buy hold and just spend you're not having to worry about the tax implications every time you buy a pack of gum or fill the car gas tank with bitcoin so i think there needs to be some resolution around that uh it might come in the form of just um a connection between uh bitcoin and digital dollars and the ability to uh essentially have the back end uh kind of

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fund out of your bitcoin holdings your dollar holdings but i think there needs to be some clarity on that because today um that's certainly an issue that keeps people from using bitcoin to spend they prefer to just hold their bitcoin let it appreciate in price and then do yield farming and other things and use the proceeds of the yield farming as a way to fund their day-to-day expenses yeah absolutely and i remember i forgot who put out the bill it was uh i had a congressman warren davidson or darren soto so some of these folks who

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are uh trying to push for crypto regulations trying to get a law in place where transactions below 600 would not be a taxable event um so maybe something like that can happen in the united states but uh we'll have to wait and see what would they roll out and eventually get to yeah i think the if you put a limit like that um you know okay so i'm going to go buy a new tesla for eighty thousand dollars i will do it in a series of ten thousand transactions right i i just think you know doing things like that are

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make it too easy to game um maybe it's uh you know having a background in the uh the video game industry is how i think but it's uh i i think there has to be more clarity around really uh what is bitcoin and if it is a currency because you know think about it if you were to go around buying stuff with gold which you can't do today um you know the you would have the exact same issue so you know is bitcoin a currency and should it be used for commerce um or should it be a store of value um you know i think the regular

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regulators have to figure this out and i'm sure they will absolutely well fred i want to wrap it up here with some rapid fire questions as we uh get to time here such as what is your favorite food fresh fish or dessert favorite musician or band that's tough uh come coming from a bygone era on the one hand i love yo yo ma um but i also love stevie ray vaughan eric clapton neil young uh and you know there's a lot of new and modern music i like uh as well so it's um there's a the best thing about the you know the in

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the music industry today is you have almost infinite options which you could listen to sure i'm a big uh stevie ray vaughan and clapton fan i saw clapton and live here in new york uh before the pandemic so that was pretty cool uh favorite movie um the matrix um one strange rock which is not a movie so much as a series that was on apple plus narrated by will smith which is this really looking at our planet from space and how astronauts who've spent a lot of time in space how their appreciation for earth has

1:00:02

changed and it's a great story of the environment and the climate and i recommend everybody watch it and it's fabulously beautifully filmed and the story is great i have to check that out uh favorite book oh that's tough um i i love historical biographies and winston churchill is kind of uh one of the people i'd love to read about i also um this maybe is comes from being educated in the uk uh just the wellington and the british empire that period i think is just very interesting uh history in general i think we can learn

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a lot about what's happening today by just reading history um absolutely yeah sorry just because it's a thought i've been thinking about uh recently too with politics and things history often repeats itself and if you could learn a lot from how things have played out historically and not repeat the same mistake so um but i get off i'll get off my soapbox and finally when you're not working a marathon what are you doing as far as a hobby and for fun um you know it's a lot of sort of sporting activity love

1:01:13

diet scuba diving uh sailing uh i love helicopter skiing but also i'm a huge uh you know fan of photography so i spend a lot of time taking both stills and doing video and just really enjoy it fred uh just an absolute pleasure talking to you i've learned so much uh thank you so much for joining us today and uh we'd love to have you back on as things progress on your end and uh once again thank you so much thank you very much for having me it was a pleasure and i look forward to coming back anytime you want uh you know

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it's uh hard to shut me up sometimes [Music] you

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