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The Bitcoin Breakout is Coming | Bitcoin News Now | Fred Thiel | Marathon Digital Holdings | MARA
Fred Thiel, the CEO of Marathon Digital Holdings, highlights the company's prominent role in the Bitcoin mining sector. Thiel discussed Marathon's history, growth trajectory, and its emphasis on diversification and technological innovation. The company, one of the largest players in Bitcoin mining, is strategically positioning itself by aiming for zero-cost energy for mining operations, prioritizing flexibility, and fortifying its balance sheet. Thiel also mentioned plans to continue diversifying sites, partnerships, and technologies to navigate the evolving dynamics of the Bitcoin mining industry effectively.
Transcripts are autogenerated. May contain typos.
hey guys welcome or welcome back to the channel McNally money home of all things stock investment and personal finance related now for today's video we've got a really interesting one for you we're going to be joined by the CEO of marathon digital Holdings Fred Thiel to talk about his organization and provide an update on this company now marathon is one we've covered on the channel previously actually a couple of times and this is one I'm really excited about as they're the biggest player or one of
the biggest players in the Bitcoin mining space now before we get into all that please take a second hit the like button you guys it's a big help to myself in the channel if you're not already subscribed McNally money feel free to join and let me know in the comments section below if you're currently holding shares of marathon how you think they stack up to some of the other miners we cover on the channel and what your outlook is for the price of Bitcoin in the back half of 2023.
now with that being said let's get into today's interview [Music] thank you okay guys so that's right today's video we've got a special guest for you Fred Thiel he's the chairman and CEO of marathon digital Holdings this is a big one in the Bitcoin mining space it's a company we've covered on the channel previously and we're excited to talk to Fred about their strategy moving into next year's having events so Fred thanks so much for being with us here today great to be here so to kick things off
uh maybe for people who are unfamiliar with yourself and Marathon can you give us a little bit of background in terms of your history and how you ended up at this organization sure I've been in the tech industry for 40 plus years at this point started writing software for a Bank in the city of London when I was in high school in London and uh worked as an intern then worked in kind of almost every sector of tech super mini computers the PC industry Datacom industry storage industry digital media digital games
networking uh semiconductors internet software enterprise software Etc um ran out fund for private Equity Firm investing in software started a venture firm and have sat on lots of boards and advised lots of investors PE firms and others in the technology space um I got involved with crypto back in 2015 2016 looking at building a trading platform uh in Europe uh first in Switzerland then in Liechtenstein to take advantage of kind of the Arbitrage opportunities that existed across markets back then um and almost at the same time a good
friend of mine was tasked with um you joined a company called Marathon patent group in 2017 and was tasked with kind of getting it into the mining business or trying to do something around crypto and so he asked me to join the board in 2018. and um you know we started really first having to restructure the balance sheet of the company it was a micro cap almost insolvent um had a great core patent which is the underlying patent for kind of Syrian Alexa Apple had paid a license and the company had then gone and sued Amazon uh
for similar reasons that they had settled a license with apple but uh that court case just dragged on and on and on and on still going on today and uh they ran out of money so they decided to shift and uh so my predecessor Marico Como had to figure out how to recapitalize the company and once he had done that we started very small uh started mining operation up in Quebec you know third party hosted a handful of minors um you know it was in an old industrial building and uh when they turned on all the miners uh all the loose paint flakes
that were on the walls got sucked into the mines so they had the major mess on their hands um so that was kind of the beginning and then uh fast forward to kind of 2019 and early 2020 and um uh we'd kind of restructured the balance sheet started raising money and uh started buying a lot of miners from bitmain primarily in those days and in 2020 placed a very large order for about 70 000 miners which was a huge order uh back in those days and then proceeded to get those miners deployed and then placed an even bigger order in 2021 so I
think between 2020 and 2021 raised almost a total of kind of almost two billion dollars in capital uh today we have um about 21x a hash of installed capacity um we're just on the cusp of kind of hitting the 23 exit hash uh goal that we had set out for ourselves and uh we have operations in Texas North Dakota Nebraska and the United Arab Emirates as well excellent so it's safe to say you've come a long way I guess both personally and since uh since sucking the paint chips Off the Wall I suppose hey Fred
excellent so I want to talk about that joint venture in Abu Dhabi and I wanted to get an update on the operations um what would you say currently differentiates Marathon from the others in this space so one big differentiation is where it Diversified minor and by that I mean we diversify across multiple sites in multiple regions of the world so if you look at for example Riot very concentrated in Texas they own and operate their own facilities you look at core they own and operate their own facilities across different locations we
use a combination of third-party hosting as well as owned and operated sites um around the world essentially and as we continue to grow we'll continue to diversify both regionally and globally as well as increase our owned and operated percentage of what we do until there's kind of a balance between third party hosted owned and operated U.
S and international uh that's one differentiation the other major differentiation is we are technology kind of different in that we have a fully vertically integrated technology stack we operate our own pool which is based on software we've created we have our own firmware in our miners that we run we have our own controller board technology we have worked with immersion vendors to customize immersion technology specifically to our needs and we're doing a lot of things in the world of dual phase immersion in other places
if you look at our UAE site this is a site that uh you know a lot of people have failed mining in UAE it's very hot it's over 45 degrees C most miners actually fail if their air cooled about 40 degrees C um and you have high humidity and so we did a pilot in the fall of last year where our pilot site ran for over 100 days without an engineer having to touch any miners so that told us that you know we had kind of cracked the mold on how to operate a site there with very little intervention from humans and very little
very low maintenance and so we were able to close the partnership with our partners who essentially are um backed by The Sovereign wealth fund of the country adq uh we signed that deal in q1 and the first miners went operational there this month and so that site will be fully operational or it's actually two sites a 50 megawatts site and a 200 megawatt site both of those sites will be fully operational uh you know by the end of this year and right now it's progressing really nicely and so we really like the
relationship there and it's an example of what happens when we bring our kind of design expertise technology expertise and work together with a partner who has great power pricing and the ability to deploy capital sure yeah and I imagine there's a number of reasons you wanted to go into the United Arab Emirates um it what are the main ones like is it a tax benefit is it access to the lower cost energy what was the main draw in getting involved over there so there are a number of reasons uh energy environment there if you would
they have an asymmetric need for energy and what I mean by that is in the summertime they consume about four gigawatts of power primarily around things like air conditioning Cooling in the winter time they only consume about a gigawatt of power that means there's this asymmetric opportunity for Waste power through with stranded energy the other thing is they use the heat off take from their energy generation to purify seawater which they use for all their potable water so they do desalination and so they need to keep
the energy generation running because that's part of what does the D cell and so that was another reason uh for them to need to find an off take for that energy and lastly they subsidize electricity to their population and so if there was a way that they could instead monetize this stranded energy so that the government wasn't having to pay out the subsidy but they would be able to maintain the low energy costs to the populace that would be a win so by part ring with us we were able to kind of tick all those boxes for them
essentially you know consume all the stranded energy allow them to not have to subsidize out of the government Treasury and at the same time keep the power running for the D cell without wasting anything sure so it was a win-win in that regard so we were able to get you know fixed price energy and uh really do a strike a great deal there um and for us it was kind of an opportunity to really test our technology stack in a very hostile you know climate environment so if we could do it in Abu Dhabi with the high heat
and high humidity then we could do it anywhere we can do it in Africa we can do it in Asia we could do it you know Texas obviously other places like that so we think we have a great technology solution and a very Diversified portfolio which makes us a little less susceptible to Geographic risks you know for example if you're if you have all your miners in Texas and you have issues with either the heat in Texas or you have issues with curtailment in Texas you know that's going to affect you pretty heavily so that's why we believe
that you need to be Diversified geographically you need to be Diversified based on the type of Technologies you're using and you need to be Diversified also based on your power sources agreed yeah I'm glad you you added some color there because a lot of people at surface level you think yeah bitcoin's very energy intensive it creates a lot of heat why on Earth would you want to go to the desert and I I appreciate the context there um and definitely if you can make it there you're you're pretty safe anywhere
I'd say Fred um now in terms of the diversification I definitely think that is a real Plus for your company you talked about some of the hosting compared to like owning and operating your own sites and being vertically integrated in that sense um there's definitely bulls and bears on both sides of the fence some people love the hosting uh the main benefit there I guess is capex expenditure some people really love the vertically integrated so why have you decided to do both so we started using third-party hosting
because we didn't have a lot of capital and we wanted to grow as fast as we could and so we had done a site in Hardin Montana back uh in 2020 which was attached to uh it was behind the meter at a coal-fired plant and there what we realized was we spent about 35 almost 40 percent of the capital on infrastructure uh and then the rest was on minors and when you think about the Cycles in this industry you have a technology cycle that's about five years meaning you're going to swap out your miners every five years
or if not sooner um you have this Con this transition from Air cool to immersion and who knows what the next step uh in this is going to be we believe it's dual phase immersion from single phase immersion um so you have a pretty heavy Capital spend every five years in that you're replacing minors and you're having to redo infrastructure so if you're building sites and you're going to spend 30 or 40 percent of your capex on building sites that's 30 or 40 percent Capital less to spend on minors and we
wanted to grow quickly because you know this is a a business of diminishing returns relative to counting in Bitcoin right because every four years we have a having the faster we could grow hash rate the faster we could get online the faster we could Harvest Bitcoin and in a market where the price of Bitcoin is going up your cost of Hosting becomes less and less critical it's only in a down Market or a Winter Market where that cost of Hosting is critical but what a lot of people don't realize when they look at
minors who are vertically integrated you know if you look at Riot for example and you look at how they treat um their cost of mining their hosting business is basically a break-even business but their own mining is profitable now you could say that they may be allocating incorrectly between the businesses SG a and things like that but when you look at a vertically integrated Miner what you have to realize is the depreciation of the cost of building that site is being done over typically a longer period of time than just the
miners right the miners you're depreciating three to five years the site you may be depreciating over 20 years well you know the site doesn't really last 20 years you're going to have to redo your technology so if you spend 30 of your capex on immersion technology and five years later you have to change that out well that's now another piece of of capital so we viewed it to be agile and move quickly grow quickly let's use third-party hosting as a way to do that because the you know and if you think
about it you know let's just say your cost of energy is you know three four cents a kilowatt hour and then your cost to host for the third party is two cents maybe two and a half cents well if you look at what your cost to build a site is and then depreciate it over time you know it may very well be two cents anyway so we kind of thought okay let's do this let's focus on growing faster um initially and then once we have critical mass and we're up there uh as one of the biggest miners then let's
look at really deploying uh and building our own sites a because we'll have more time to do it because building your sites takes 12 to 18 months versus finding a hosting partner which may be six months plus uh we'll have learned a lot more and we'll be smarter and so that's why you're now seeing us kind of expanding what we do to include own and operated and as you look further down the road what becomes really interesting is becoming much more focused on energy generation how do you generate energy so
you get to zero cost energy for your mining right that's the Holy Grail in this business if you can get your energy cost to zero and you know you can do that by owning renewable and selling renewable energy credits and offsets Etc if you can get your energy cost to zero then having Cycles have very little impact on you and the price of Bitcoin has less impact on you so that's kind of where we're looking yeah no great context there Fred and uh I think it makes sense and speaking of scale and critical mass I know you guys you
mentioned a little bit earlier actually I think you hit 21.8 x hash installed last month what does that mean to you and and do you feel you're close to that critical mass now yeah I mean at this point um you know of the publicly traded minors uh you know we're on the cusp of kind of eclipsing I think core for self-mining production um you know if it doesn't happen this month it'll happen next month that's probably what um and so at that point we become the biggest uh self-minor of the publicly
traded miners granted there are privately held minors like Genesis Digital assets and others who are you know potentially bigger nobody knows because they don't report numbers um but at least the public who traded miners uh you know will be the one producing the most Bitcoin so um at the same time we have a very lean SG a you know even with you know over 21x a hash installed we're still under 50 employees we are a very lean operation when you look at it from a head count perspective you know Riot has hundreds and hundreds
of employees core has hundreds and hundreds of employees we don't have that overhead what that means is that we also have a lot of flexibility so if the market has a sudden downturn we have a lot of different flexibility than what some of those large fully vertically integrated um miners have and so again it gets to this how do you remain agile but how do you have resilience and this is one of the reasons why we've been also building our balance sheet you know we got rid of all of our short-term debt last year
um we've built up you know obviously a horde of Bitcoin over 12 000 Bitcoin on the balance sheet um we have a lot of cash on the balance sheet today and um you know we don't have if you look at our convertible Bond it doesn't expire until the end of 2026 and it has one percent interest so it doesn't cost us a lot to maintain and so you know we're in a position where we have the ability to take advantage of a lot of opportunities and we can move very quickly um where for other miners that's not the
case it's not easy to raise money today unless you're big like rioter ourselves right it's not easy to um you know necessarily fund your growth uh strategies so you know I think what we're going to see is a consolidation post having here um of minors around the bigger guys um and uh you know it'll be a very interesting Marketplace depending on what Bitcoin does you know Bitcoin is it 60 70 000 at the having then you know everybody's just going to keep trying to grow if Bitcoin at thirty thousand or
forty thousands different story that's like Bitcoin at fifteen thousand today so it'll be very interesting you uh mentioned your stack there in excess of 12 000 Bitcoin I think 12 500 and change what is your guys uh huddle strategy moving into the having then so no different than what we've done all this year which is we essentially sell Bitcoin to cover operating expenses so to pay for Energy pay for hosting pay for salaries Etc um and then hoddle the rest and again you kind of can see whatever we're
hodling that's essentially profit right uh a way to look at it um and so you know we have the benefit right now that bitcoin's been moving in the right direction as our Bitcoin Holdings have been growing so it has this kind of compounding effect which has been great um and you know we look forward to being in a really good position as we go into the having to whether you know whatever storms or great weather and momentum you know whether it's rising Tides or Sinking Tides we're very well positioned
for you great yeah I'm hoping the uh the storm is behind us and we're moving into the rising tide scenario personally and I'm sure you are as well now I know we've covered a lot of ground in today's discussion Fred we've talked about the joint ventures the operations of the company the uh capacity what would you say in your opinion is the number one focus of the organization uh moving into having so it's a couple of things you know we had two goals this year which were energized and optimized meaning energize
all the capacity we had contracted get that lit up and then the other was optimize our existing sites to get to the place where we're producing Bitcoin at you know as lower cost as possible by maximizing up time and leveraging our technology stacked um what we're now starting to focus on is also diversifying so how do we diverse continue to diversify our sites our partners uh our locations and also the Technologies we're using because we believe that there's another technology shift that's going to happen here over
the next three or four years which is this move away from your traditional shoebox Miner to more of a blade-based minor that's fully immersion or fully liquid cooled and so we're beginning to experiment with a lot of those Technologies so I think what you're going to see from our side is not just expansion within the mining technology space but also technologies that are adjacent to mining that we think are going to be very complementary over time gotcha and that's the HPC and the AI stuff that we've we've started to see
come out more and more in this community hey yeah you know I don't think you're gonna see us do what uh you know HUD ate and applied or doing relative to hosting HPC um when you look at that business uh you know there's this initial demand for oh I got a capacity up so I mean my llm's going well you know the hosting business will always move towards the marginal cost of operating and so the profits will start decreasing it's hugely Capital intensive um you have a similar Dynamic to Bitcoin
mining which is you have only one or two people that make the core CPUs or gpus that you're using and so you've got this restrictive thing and um you know being old like I am you know I remember the PC industry when it was still exploding and it used to be when the Clone Technologies first came out people that were copying the IBM PC and building their own PCS if you could get Intel processors yeah you could make a lot of money but what ended up happening is the large oems the Dells Etc they started doing deals with Intel so that
they would get the latest technology and the third-party guys would get the former generation technology and so so you know we're big Believers in the fact that in the AI Market you're going to see the big boys dominate this um it just makes sense uh you just got to give them six to 12 months and if your Capital cycle to pay back Break Even is two or three years Ah that's a lot of risk right so we think there are more interesting plays in the HPC AI space that don't have to do with operating hosting sites but rather have to do with
providing them with technology and all kind of leave it like that as a teaser but more importantly because we haven't talked about it publicly so um just think about it that you know it's like Levi Strauss right sell picks and shovels to gold miners you know don't go out and mine gold um so we think that you know infrastructure and technology for that space is going to be much more interesting than uh operating hosting sites because we think that's going to commoditize over time yeah I love that
analogy okay well then we'll leave that as a teaser Fred for next time that gives you a good reason to come back uh thanks so much for your time today I really appreciate it uh guys if you're still watching the video at this point make sure you hit the like button subscribe to the channel if you're not already and if we didn't touch on any of the points or questions that maybe you have for uh Fred and the team make sure you leave them in the comments and we'll get them answered next time uh we have
Fred on so um I guess last question where can people get more information what's the best way to reach you and kind of stay updated with the company sure so our website is mara.com m-a-r-a.com easy to find us lots of great information on the website uh I'm on Twitter f-g-t-h-i-e-l uh and otherwise um you know just reach out to us on our website and be happy to answer any questions amazing okay thanks so much for the discussion today Fred we'll talk to you soon and have a great rest your day
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