It's worthwhile to start with the prices here of Bitcoin and how you think it
might be impact into the having a lot of questions out there of whether a lot of
those rises have already been baked in. Well, I think the ETFs approval, which
has been a huge success, has attracted capital into the market and potentially
brought forward what could have been the price appreciation we typically would
have seen 3 to 6 months post having. So I think we're seeing part of that now
already. These ETFs 11 were approved.
Four of the 11 ETFs are the most successful ETF launches on record ever,
and the total amount of capital in the ETFs already has surpassed 50% of the
amount of assets under management in gold ETF.
So what has happened in three or four months compared to 20 years with gold is
pretty astounding. And so we think that has pulled forward
some of the demand. The having event will reduce the supply
of Bitcoin by about 450 a day. The new emissions of Bitcoin, which will
have some small impact on price moves probably.
But as miners, we're very excited to go into a having where for once price has
not declined prior to the having, but rather price has gone up.
So everybody is obviously maximizing and optimizing to that.
Right. Fred, I want to talk about exactly what
you're doing to optimize ahead of that having over at Marathon, you guys on
average mine about 28.7 Bitcoin each day.
What are you doing to decrease the cost since it's going to cost you more to
mine these bitcoin? What are you doing to save money and
ease your margins? Great question.
So we built the business and scaled very quickly using an asset light model where
we essentially relied on third parties to build the infrastructure, the
hosting, the data centers. If you want, then we would come in, plug
in our miners. So 100% of our CapEx was invested in
miners that allowed us to scale to become the largest miner, publicly
traded miner, arguably in the world. Then in December, we went and started
looking at those hosting relationships and we started moving to consolidate
them. And we now have gone from owning less
than 3% of our facilities to owning over 53% of our facilities in just a few
short months. The benefit there is it allows us to
essentially take out the middleman and take out the margin that we were paying
a third party to build infrastructure and manage it.
And we were able to do that at a cost less than the replacement cost for those
assets. So a net net great gain for our
shareholders in that regard. We'll continue to do that as we move
forward as well as continue to expand through owned and operated facilities
both in the US and abroad. Average daily Bitcoin produced you have
at 28.7 as of the end of February. When you think about the having, how is
it going to change your economics and what you see in terms of Bitcoin
rewards? You think
So the essentially, if you look at the number of 28 eight on average per day,
that would turn to be 14 roughly per day.
We'll have to see the impact, if any, on the global hash rate.
Remembering that bitcoin mining to zero sum game today.
There are 900 bitcoin made today or admitted today post having it'll be 450
and all the people mining or buying for that.
So all our computers competing for that. So the key is to be one of the most
energy efficient miners. Marathon's fleet is amongst the most
energy efficient in the industry. Those miners that have less efficient
machines may have to shut off, but the high price of Bitcoin right now
essentially has made it profitable for even marginal miners to mine post having
what we'll have to see is really what happens to the dynamic if the price of
Bitcoin were to drop ten $20,000 per bitcoin, that could potentially push
some of the more marginal miners over the edge and they would have to stop
mining and they could become acquisition targets potentially.
You also have a fairly large number of rigs, the computers, if you will, that
miners use that are not very energy efficient, that will be marginalized by
this having. So it'll be very interesting to see what
happens. But we're very focused on both organic
and inorganic growth. And we believe that the industry
globally is going to continue to grow in that hash rate, to continue to mine and
secure the Bitcoin blockchain. Fred, on average, how much does it cost
you to to mine a Bitcoin and like what's the cost of extraction?
And then I'm wondering also about potentially moving more outside of the
U.S. perhaps to find cheaper energy.
Sure. So our average cost to mine Bitcoin
across all the facilities is in the low $20,000 range today.
And by that we include the energy cost as well as the operating overhead.
I mean the people on the ground that run the facilities, any cost to run the
facilities, etc.. So the marginal cost of mining bitcoin,
if you would, that will now go to about 46,000.
On average, obviously the people cost doesn't increase.
It's just the amount of effort, the amount of energy that the miners have to
do that will double. So domestically, we're still going to be
in a great position. We operate today on three continents,
North America, the Gulf region and Africa, as well as
Latin America and Paraguay. We're going to continue to grow our
business internationally. And one of our goals is to have 50% of
our revenues from outside the U.S. by 2028, which is the next having in
line after the one we're going to have here in a couple of weeks.
The other thing we're doing, we're very focused on a vertically integrated
technology stack. So everything from our pool software,
which is the orchestration layer that kind of controls what our miners do all
the way down to the firmware in the miners and also investments in
technology through a company called ORDAIN, which is the only U.S.
manufacturer in the space located in Silicon Valley.
And then also immersion or cooling tech knowledge.
And we just released some very interesting emerging technology at the
Empower Conference in Houston a few weeks ago.
And so we think that even the A.I. industry will have interest in that.
So diversifying revenue streams, optimizing existing operations.
So you continue to expand very quickly here.
How do you feel about the future when it comes to your industry?
You kind of alluded to this idea that players could be washed out.
When we think about the dynamics and the pressure that it puts on the Bitcoin
having rewards being less this cycle and of course in future cycles, how are you
preparing for that potential wash out? You mentioned acquisitions.
What do you do today to prepare for that opportunity and how big do you think
that will be? Yeah, great question.
So we are believers that Bitcoin miners have to try to strive to get to zero
cost energy. What do I mean by that?
It means that basically the only way we'll survive long term is that our cost
of energy is offset by something else. So we have started an initiative that we
call energy harvesting. This is where we are going to landfills
and using stranded methane gas from landfills.
It could be oilfields, it could be biomass from beer brewing, ethanol
manufacturing, methanol manufacturing, where you take that biomass, convert it
into energy and then feed back into whatever that industrial process was.
Heat industry pays about 50% of the energy cost for industry is spent on
heating things. And so Bitcoin miners are great at
generating heat. When they mined Bitcoin, about 95% of
the energy that goes into a chip that mines Bitcoin comes out as heat.
So we believe that Bitcoin miners will be able to essentially take stranded
energy in the form of methane, biomass, what have you generate electricity,
generate heat, sell the heat back into an industrial process.
All of that subsidises the cost of mining Bitcoin because Bitcoin is simply
how we generate the heat that we sell back.
And I think longer term bitcoin mining will move from being these large data
center sites with hundreds of megawatts to being hundreds of thousands of much
smaller sites that are doing everything from heating buildings in Finland to
mining to heating greenhouses, shrimp farms, industrial processes, ethanol
plants, processing corn waste, cow manure, a dairies, etc.
That's the future for Bitcoin mining long term.