Transcription
Publicly traded Bitcoin miners are dumping all their Bitcoin. Is there something they know that like the average Bitcoiner isn't getting?
Once you get rid of it, it's very hard to get it back. I think that's going to be a painful realization in a couple years.
You said there's only a million Bitcoin left to mine. It's not a lot. And that's going to be spread out over like the next hundred some years.
At a certain point, Sailor and everybody else buys the entire float. And then who are you going to buy Bitcoin from?
Is that a good thing for Bitcoin? And is it a good thing for Bitcoiners who would like to mine Bitcoin?
Personally and for our clients, I see mining as sort of like a guardrail against the worst aspects of investor psychology.
So then really it comes down to the future. What is the price of Bitcoin going to be? Number one, and number two, how many people will be mining Bitcoin?
So right now, um, publicly traded Bitcoin miners are dumping all their Bitcoin, a lot of their Bitcoin.
Isn't that wild? So, I mean, do you think that's like um capitulation? They're done. They're out. Or is there something they know that like the average Bitcoiner isn't getting?
I think they're just recognizing that they have a different base to please than just Bitcoiners. And so when you're accountable to your shareholders, you have to make decisions based on, you know, fiduciary requirements. And if they see I can make five times the amount that I'm making in Bitcoin mining doing this other thing and essentially pivoting my brand then you actually are kind of exposing yourself to liability if you don't make that pivot. It's part of why I love being a private company is we can make decisions that have nothing to do with you know a quarterto quarter shareholder base. I think in the long term some of them will be disappointed that they didn't at least hold back some of their capacity for mining and maybe it'll be a hybrid approach, but to me it's just that they're accountable to the waves of the market so much more than people who can make long-term decisions and not respond to a shareholders complaint. They'll be disappointed in the long run that they didn't keep their Bitcoin or they didn't keep the equipment mining Bitcoin.
I think both. I mean the the first thing that's going to be disappointed disappointing to them is not holding on to the Bitcoin. I mean some of these treasuries were I think Marathons was the second largest corporate treasury of any public company and that's a really hard thing to catch back up to if you lose that position. I mean
it's you know it's a finite asset. The float that you can get on the market seems to decrease over time pretty reliably. So they're not making any more of it. Once you get rid of it, it's very hard to get it back. I think that's going to be a painful realization in a couple years.
Yeah. Yeah. I mean, like Micro Strategy, if somebody wanted to catch up to Micro Strategy, it wouldn't cost them the book value of the Bitcoin today because as they tried to acquire the Bitcoin, the price is going to go up um at at some point. But they, you know, the publicly traded uh companies, they have a problem, right? So if they want to pivot to AI or high high power compute, then they need to raise the money. Maybe they were gunshy because they got really caught in a credit crunch by taking on a lot of debt to buy the Bitcoin miners in the first place. So was that what you see? You see them selling the Bitcoin to raise the money to buy the capex to get into HPC?
They're cleaning up their balance sheet to signal to investors, this is what we're doing now. and every lingering bit I mean you're seeing multiple companies like go as far as changing their names right just to to remove that association and you look at the brand you look at the balance sheet you look at what they're doing and that signals to investors what the future's going to look like for that company and every company that's made that pivot into AI if you compare uh you know the multiples on revenue of all the public Bitcoin miners the ones that have stayed true to their Bitcoin roots and are saying, "We're just going to hold out on this." They've been beaten up. I mean, they're they're trading at sometimes less than one times revenue, whereas the ones that have made a strong pivot to AI, 5, 10, 50 times revenue.
Yeah.
So, your shareholder base is going to be kind of mad at you if you don't recognize what is being shown to you, which is the market really wants you to show that you're making this pivot.
Yeah. Is that a good thing for Bitcoin? And is it a good thing for Bitcoiners who would like to mine Bitcoin? It makes it easier for the rest of us, for sure. And the nice thing is, you know, all these announcements have come out over recent months and years of of these pivots, but the reality is that it takes much longer than a press release for this to actually take shape. So, you know, let's say large public minor announces they're going to be making the pivot into HPC. stock goes up, their shareholders are happy, but there's still like a year plus that they've got to go through and do that retrofit and build and they're not taking their hash rate offline the day that they announce. I mean, this is a multimonth, maybe even multi-year process in some cases. It's going to be sort of like a gradual relief to all the miners who are left on the network. Um, you know, the announcement is one thing, but the actual hash rate falling off, that's going to be what's really fun for people who are still on the network mining. you're going to see huge blocks of hash rate come off over the next year.
Yeah. So, we understand that from the corporate side. Uh I want to understand sort of why people would want to mine Bitcoin. The obvious is I want Bitcoin or the maybe less obvious is I want to make money because I should be able to mine a Bitcoin for less than what a Bitcoin is worth. But before we do that, contrast like because it seems like it's still profitable to do it on a personal level, but if I look at the publicly traded companies, they don't seem to be profitable. Yeah, that's the the irony of people looking at Bitcoin mining and saying it's not profitable is they look at the public companies and compare themselves to the public companies and say, "Well, if they can't do it profitably, then I probably can't do it profitably."
and
which doesn't seem like a wrong conclusion to
no it's like perfectly logical and reasonable but the truth is that you know those CEOs are very highly paid there's a lot of overhead there's a lot of additional expenses that come with running those companies even if they can get you know incredible deals on power which is your main input cost there's so much additional overhead that goes into whether that business is profitable or not and on the mining side you know you have at least a relatively controlled set of costs. You essentially have your fixed fees of hosting and the cost of the equipment and that's about it. I mean, you've got a little bit of compliance and entity setup, but that's pretty negligible. And if you remove all of the overhead and the bloat from publicly traded company, you actually have a more efficient vehicle where you've got direct exposure. So, why we love Bitcoin so much? It's a bare asset. it doesn't have all this counterparty risk that having somebody else's equity has. Hosted mining is much more like holding Bitcoin than holding a company's equity. And so you've got direct exposure to the asset. You're actually mining yourself. You get the Bitcoin. Uh the KYC is a whole other part of it that we don't have to go into. But when you own the equipment, you also get in the US at least the tax benefits. So you get 100% bonus depreciation, which is a huge deal for business owners and higher earners to get something that offsets their tax liability. And so put those two things together that you're actually more exposed to the asset and you've got that offset and it's a much more compelling vehicle than owning a public company's equity where you've got exposure to their upside and what they can do at scale. Uh but you lose the direct connection to what you're doing. Yeah.
So, what what is the cost basis that you're seeing over the last six, eight months or currently right now for people if they wanted to do it? I mean, is it profitable? Can they make money doing it?
It is still profitable. I mean, mining really shines in a bull market because the difference between the cost of production and the market price is so profound. I mean, when you're in a raging bull market, your operating margins might be 80% or more if you're doing things right. In an environment like this, it's closer to 20 or 30%. Which is still meaningful. I mean, getting Bitcoin at a discount in any way is cool, right? It's not as exciting, but you're also getting a better deal on the equipment, you know,
meaning that if Bitcoin right now is at 68,000, then I can mine a Bitcoin for 50 or 55.
Yeah, exactly. And so, you still got that arbitrage. It's still cash flow positive. It's a profitable venture. It's not nearly as exciting as when you're in the middle of a bull market and everybody's piling in. But because it's not as exciting and people aren't really paying attention to it, I mean, equipment prices right now in this environment are like half or some cases less than half of what they were 6 months ago. So, if you've got a long-term view, and that's part of why I think mining is so beneficial is it encourages that long-term view in people in an otherwise very fastmoving market where we've got to try to hold people down and let them know like this is this is the long-term bet. Just because it's moving fast doesn't mean you need to move fast,
right?
So, personally and for our clients, I see mining as sort of like a guardrail against the worst aspects of investor psychology. And over the long run, yeah, you've got the opportunity to outperform Bitcoin. You've got cash flow. You have a physical asset. I find that it's much easier to get people who aren't already super familiar with Bitcoin to buy into it because they're comfortable with having something physical. I came from the real estate space and so h being able to touch your property and actually lay your hands on it, you know, it's just a psychological comfort, but it's a very real one when you're investing your own money. And a lot of people have an aversion to Bitcoin because it is non-physical and they're not comfortable with it. Even though they're comfortable with plenty of other forms of of digital assets, they just don't think of them that way.
So when you introduce mining, someone comes to a site visit, they can actually put their hands on their machine.
It's a different psychological involvement with the process. And as much as we can give people all the data and help them make the right decision, ultimately investing is a very emotional journey. And that emotional connection I find helps people make better decisions over the long run.
Yeah, it does. And and to your point, they're sort of locked in. Let's talk about the long run though. So I mean we have a couple variables. So as you said, you have the cost of the equipment, you have the power, and those are pretty much fixed and everything else is sort of negligible. So then really it comes down to the future, two things. One, what is the price of Bitcoin going to be number one? And number two, how many people will be mining Bitcoin?
Right? So, let's talk about the how many people will be mining Bitcoin because we talked about a lot of these publicly traded companies are starting to turn their miners off.
So, for the audience, explain why that's important and how that works and sort of then like how that forecasts out. All right, stop what you're doing right now and book your travel to come join me in Las Vegas for the Bitcoin Conference. It's the biggest event of the year, the one I look forward to the most every single year. Literally, my entire year calendar is set around it. It's the biggest event, the most culturally relevant event happening in the world. The top politicians, the top bankers, the top investors, the top entertainers, everybody's going to be there. So, come check it out April 27th through the 29th. Use my code, Mark Moss, to save 10%. And if you use my code to save 10%, send me a message on social media or email, and I'll invite you to a private party I'm having at the event, and I'll see you there. So, we're all going after a fixed supply asset, right? There's there's never going to be more than 21 million Bitcoin, 20 million of which have already been mined. So, we're all going after the same million Bitcoin left if you're mining. And everybody else who is on the network contributing computing power to the network is in a sense competing with you for that last million bitcoin. So when the largest individual players in that market decide to go do something else, one, it's a signal to pay attention and see why are they doing that? But as long as you're comfortable with why you're in it and staying in, that's a boon for you that the largest players are deciding to get out because it means that there's more proportionally for you. And to the question of like who who should mine Bitcoin or or who is going to keep mining Bitcoin, I think it's going to be well to back up to like the previous mining cycles. It was very much a speculative upside driven type of business. I think people saw mining as I can get, you know, a huge amount more Bitcoin if I take the risk of going into mining and doing it well. I think that shifts and has already shifted to a much more conservative play where it's not thought of as this sort of 10x speculative upside. It's more like the utility play within Bitcoin. It's a cash flowing asset that's fairly predictable. Um, and so that naturally attracts a different capital provider, attracts a different kind of investor. And so it's becoming a much more conservative play. It's attracting much more conservative capital. It's the people who prioritize access, sovereign access to Bitcoin over, you know, massive upside. And I say that because at a certain point, Sailor and everybody else buys the entire float. And then who are you going to buy Bitcoin from? Direct from the network is one of the only ways you can get it unless people are paying you in Bitcoin for what you provide to them,
right? So to put this in the terms most people can understand, if the price of gold hit $10,000 an ounce tomorrow, more people would mine gold and more gold would come out of the ground at a faster rate. The inflation rate would go up.
If Bitcoin hit $10 million tomorrow, more people would go mine Bitcoin
and it'd be more profitable,
but no more Bitcoin would come out.
Exactly. So what you have is you have the same amount of Bitcoin coming out of the network every day and it's being split by the participants that are mining.
Yes.
So going back to the forecast. So if I'm going to jump in and be a long-term player in this game, as you said, that's what it's attracting. I'm trying to sort of set some long-term forecast of what I should expect. And as I said, or as you said, that the costs are sort of fixed. So the guess then is what will the price be and the difficulty rating be?
Mhm.
The price of course we don't know. The consensus seems to be that we might see a million dollar Bitcoin between 2028 to 2035 whatever. So the price is going up and to the right. Um the question is then uh how many people will be mining Bitcoin? And what we've seen is that the hash power the amount of people mining Bitcoin has also been making new high after new high after new high right along with the price. But I want to go back to what we started talking about which is the publicly traded miners who have the majority of that are are spending a lot of money to switch over. So how do you think that affects the amount of people mining Bitcoin and the profitability of mining Bitcoin into this next cycle? In the next cycle, let's let's call this short term like one to three years. I think it will be another boom for the people who stayed on the network, who kept mining because this takes time, right? It's not it's not like trading Bitcoin where you can add hundreds of billions of market cap over a very short period of time. It's physical infrastructure. Once you make a decision with that infrastructure, you don't get to take that decision back overnight. I mean, it as the same way it takes a year plus to pivot that infrastructure for one use case trying to bring it back it's going to take time and more capital and most of those players even if they regret it are probably not going to do that so
meaning the public traders uh public miners who have switched over to HBC.
Exactly right. So for the people who are left on the network, you know, it's sort of like taking a high conviction bet and being proven right and then that arbitrage gap not being able to be closed because whether it's the public miners or other people that see the opportunity, this takes time to deploy. It's why you want to be deployed with your mining capacity before there's a bull run because at a certain point there's no more AS6 or there's no more rack space or there's no more energy that's available at a good price. there's all these structural things that are not as easy to procure as a digital product and so not everybody's going to be able to participate in the opportunity. So I I mean I'm personally positioned as if this is going to be a very high upside bet over the next few years and that it's going to be hard for that margin to get compressed. So if I'm trying to interpret what you're saying, your position for a high upside bet. So, you think that going into this next cycle, if Bitcoin gets back above all-time highs, while the price of Bitcoin is going up, you think the trend, at least the next couple years, is that the mining hash power will be trending down. So, the price trends up while the the competition trends down.
It may trend down in the short term and then, you know, it'll probably trend up, but the price is going to trend up faster. So, I'm betting that the gap between
because if you have these big publicly traded miners who are moving huge chunks of their power over to HPC and to the point that you're making, they can't just pivot back,
right?
Isn't that going to more than offset any of the individual miners that decide to come on board?
Maybe, but it's it's hard to estimate how much mining is just sort of sitting on the sidelines and waiting for better days. You know, there's still a huge portion of the network.
What does that mean? Do you think there's like people that are like literally have capex and equipment and facilities set up they haven't turned on cuz it's not profitable enough?
People don't realize, you know, we're on like the S21 XP, the S23s are getting released, like very efficient miners. I mean, wild pieces of equipment, but most of the network is still miners from 5 years ago that are pretty inefficient compared like half as efficient or they use twice the amount of power to get the same hash rate as what is topof the line today. And those miners are not just gone forever. Many of them are sitting on the sidelines right now and waiting for a better environment. They've got the power. You know, the facilities might be off. Uh the machines might be deracked, but those blocks of capacity are they've been falling off over the last few months, but there's a certain break even threshold where they'll all start to turn back on.
So, you're saying like large scale industrial miners have old equipment they're not currently running. But if the price was attractive enough, they could turn all that back on. Hey, look, you've you've worked hard to build your Bitcoin stack. But if it's still sitting on an exchange, it's not really yours. You see, the exchange holds the keys to your Bitcoin. Now, if they freeze withdraws, if they get hacked, they go under your Bitcoin. It could disappear overnight. Even if you've moved it into a single cold wallet, you're still exposed. Now, that would be one device, one point of failure. If anything bad were to happen, you could lose your Bitcoin. Now, that's why I use Unchained. Their collaborative custody vault gives me the best of both worlds. I hold my keys, but my security doesn't depend on just one of them. Now, this is where security and sovereignty actually meet. You see, Unchain's collaborative custody Bitcoin vaults use a two of three multi-IG model, which means that you hold two keys and Unchained holds one. That means that you own your Bitcoin, but if you ever need help, like their team is there to assist you without ever having control over your funds. And here's what I really like. Unchained isn't some offshore exchange or anonymous company. They're based in Austin, Texas. And when you call, you're not stuck with bots or scripts. You talk to a real Bitcoiner who genuinely cares about helping you get it right. Now, they've been at it since 2016 and now secure over 12 billion in Bitcoin for people just like you and I. Now, that kind of trust doesn't happen overnight. So, if you're serious about long-term security and ownership, head over to unchained.com/mark moss and use code moss10 to get 10% off of your first vault. Because if you don't hold your keys, you don't hold your future.
Yes. And that's not maybe necessarily as much as what the public companies are taking off, but what I don't want to portray is that, you know, public companies are shifting their capacity and network difficulty goes down by half and everybody's making twice as much Bitcoin. Well, they are shifting their capacity.
They are
right. So, the question is by how much?
And how much do the other miners anticipate that and compensate for it and plan to come back on?
But even if they did, they would still be capped at a certain level, right? Because it's an opport opportunistic. So, only if the price dropped to a certain level would they turn back on. And so, um, if it went above that, they would turn back off again. So there's there's a bigger bigger window potential bigger window of opportunity than there may have been in the past.
I think so
because even if that old equipment comes back on, it's still going to be only coming back on to a certain level. So if you have newer equipment, you can sort of sit in that in that margin.
Yes. Exactly.
Right.
Yeah. It could be a good opportunity for people and and as you said, the machines are are cheap right now.
They're really cheap right now. This is, you know, just like people say back up the truck in environments like this and we're talking about smash buying Bitcoin. If you're already looking at mining, I mean, this is the time to start deploying hash rate in my opinion. Yeah. Is
it's much harder psychologically to get into something when it's unattractive, but that's when you get the best deals.
Yeah. It's crazy how like you'll see, you know, Black Friday, which is a big deal here in America obviously, right? And like people will literally camp out all night at Walmart to save whatever 100 bucks on a TV. But financial assets go on sale, they don't want to touch them. Or um assets, equipment that can make you money, they wouldn't want to touch it. Like real estate goes on sale. You said you were from real estate. I started my career in real estate as well. Real estate drops. They don't want to touch it, right? Um I did see I was actually working on a video talking about this, how the volatility we talk about is not a is not just a it's not a bug, right? It's a feature and the volatility allows people with conviction to like build their positions. And what we've seen recently in recent weeks is while the price of Bitcoin is still sitting sort of down in these in these low these lows right now in the 60 range, the ETFs are having inflows again right now. Massive well buying is going going on again right now. Sailor continues to buy more and more with the with stretch using that. Um and so it does look like the smart money has switched into accumulation mode. So, while we're still at the bottom, you can start to see that accumulation piling up. And so, if you're thinking long term, maybe it makes sense to also accumulate the Bitcoin miners. If Bitcoin's cheap, Bitcoin miners are cheap and you're trying to sort of position before it rebounds.
We were talking before this about uh what's required to have the sort of creativity to really make great output. totally different context, but I think it's the same in markets is you need an aspect of boredom for the biggest things to happen. There's there's got to be some level of just people losing interest completely.
Yeah.
Before big actions get taken. And
if you're already if you've done your homework, this is the kind of environment where you make very high conviction bets that you expect to pay off in the relatively near term, like a couple years. When when might I want to consider doing home mining and when would I want to consider going to like a hosted mining platform?
Depends on what your goals are. I mean, home mining, I think, is the best as a learning tool or heat reuse and that's about it. Unless you've got a solar panel or some kind of micro grid at your house, most of the time it doesn't make sense. And people
because of the price of power you're paying.
Most people's residential electricity rates are two, three, five times what you can get when you have a hosted minor. So power cost is your most important input. Just economically doesn't usually make sense unless you're using that byproduct of heat or you've got some other situation. Hosted mining exists and is helpful to people because it takes off the operational burden of mining. uh it's often, you know, a fraction of the cost to try to do it yourself and honestly is smoother. Most
is there a break even like if my energy is under 10 cents a kilowatt or 8 cents or 5 cents or
most hosted mining is going to be somewhere in like the 7 to 8 cent range. Um so unless you have power pricing that's lower than that, I I wouldn't see it as a winning bet unless you're just trying to learn or you're trying to stay completely private. um you know do everything self- sovereign economically I would say that cut off is probably in the six cent range because then you've got to also manage things your time is worth something right
you know people compare
just the price of electricity but you've got to also factor in that we're doing repairs for you, we're doing all of the uptime management. We've got a fleet that's essentially sitting as like hash rate insurance. So if something goes down, you actually are still getting hash rate that doesn't happen if you're doing it at home and you're fixing everything yourself.
Not to mention the space it's going to take up in your house, your bedroom, your garage, and the noise and the heat that it's going to create as well.
The if you have a wife and you can mine at home, you have an amazing wife. The wife acceptance factor for mining at home is very low.
Yeah. Yeah. What about um you know, you said there's only a million Bitcoin left to mine. It's not a lot. We've gone through 20. There's a million left. And that's going to be spread out over like the next hundred and some years.
Yep.
And then every every four years that gets cut in half and half and half and half and half. What do you think about the miner's ability to stay profitable as that reward continues to drop? Because you talked about this being like a long-term play.
Yeah, like I said, it it goes from being a highly speculative upside driven investment to just a stable income stream in Bitcoin. And it's you can think of the network as sort of a thermostat. You've got all these these inputs that determine whether it's economic for people to come on the network or if people are going to fall off the network. So you'll see tons of churn over the next 10 years. But I also think that specifically the next 10 years are kind of like the golden opportunity for people.
Not the next 10 or the 10 after. No, these these coming 10 years, you know, we've got a million coins left to mine, about 5% of the supply. Four of that will be over the next 10 years,
and then after that, you know, we're all competing over scraps comparatively. But this is to me, if you've already got conviction in the asset, this is the decade where if you just focus, most of the people already have the opinion that it's too competitive. There's no way I'm going to be profitable. And so that keeps a lot of people on the sidelines. And I often say miners are the the most bullish, the structurally most bullish participants in the Bitcoin network because we operate under the belief that price is going to go up much faster than difficulty goes up uh and that our margins are going to be protected. And if you have that belief in your position that way, then the next 10 years are really your opportunity to get ahead. I mean, this is,
as some would say, separation season for people that are are still interested in Bitcoin and looking at mining. I would say the best opportunity is this next decade.
Okay, so I got to tell you what I've been doing with my money lately. I moved my cash over to River. And before you ask, yes, I still pay all my bills and dollars. Everything works the same. But here's the real difference. You see, River pays me 3.3% on my cash and they pay it in Bitcoin. So my money that was just sitting there doing nothing at all in the bank, it's now stacking Bitcoin while I sleep. And I started thinking like my bank takes my deposits, they loan those deposits out, they make 12, 17, 24%. And they pay me 0.04%. I mean, honestly, that's kind of a shakeddown when you think about it. Now, River's FDIC insured. They use full reserve. They charge no fees. So, I don't know why I didn't do this sooner. So, click the link down below and get $100 in Bitcoin just for getting started. And why Abundant Minds? Why not any of the other people that are out there? I could rant at you for a long time. I will just say my wife and I lost half a million dollars hosting with other providers and we built our company purely to solve that painoint. And if nothing else, I think people can trust that someone who's been burned in the past has learned a very valuable lesson, paid for a very valuable lesson. And we've made it our mission to make sure that nobody experiences anything like that and that they get the best side of Bitcoin mining. And there's so many different ways that we do that from hash rate redirect which is that sort of hash insurance program I was talking about to uh you know mining in places like Oregon where we've got an incredible climate lots of renewable energy machines last longer they perform better um the whole spectrum of the service we designed to cater to people who are smart otherwise and interested in the asset but probably have never built a data center probably have never picked up a Bitcoin miner and are not looking to I mean we were real estate investors before this and we got out of real estate in a sense because it didn't turn into this you know passive vehicle that we were hoping that it would be. It really was kind of a lot of headache and we saw the opportunity in mining as exactly what we were looking for. It's like I can plug in computers get paid in this asset that I believe is better than anything else in the world and peace off to a beach and everything's going to work out. And that dream didn't materialize for us. That there was no real reason for it not to. It was just that we worked with the wrong person and had an awful experience. But that experience was so valuable because it wasn't just like bad person, things didn't work out. Like there were so many different failures along the way that each taught us something different about environment, about accountability, about visibility. um so many different things that made us reinvent how people experience the service. And I think it's hard to wrap into a you know concise statement, but suffice it to say I want investors to understand how great of a vehicle this is and a lot of that depends on what their experience is like on the front end.
Yeah. Cool. Well, uh let's wrap it up with that. Obviously, I believe in Bitcoin. I believe in long-term ability. I agree with you. I think this is a unique opportunity where you have massive amounts of uh hash power coming off as we're going back hopefully back into a new all-time high here at some point. Um so it's worth checking out. Um where can people go learn more?
Easiest way to find us website is abundantminds.com. You can follow us on all our socials as well. We do have a YouTube channel where we try to do as much education as we possibly can to help people even if they never work with us to understand why this asset's so important, why mining is cool, what kind of impact it's having. There's a whole humanitarian aspect to this that I think doesn't get talked about enough. But mining to me is the coolest vehicle that we all have to participate in and has the ability to teach people so much.
Cool. All right, thanks so much. Thanks, Mark.