Bitcoin Adoption: From Retail to Institutions, Signs That Sovereigns Are Gearing Up – Fred Thiel

No. Think about it this way: there are likely somewhere between four and five million Bitcoin in liquid circulation today. The rest is held in cold storage, hasn't moved in multiple years, and arguably four or five million Bitcoin could be lost forever because back in the early days people didn't care and they've forgotten their keys or lost access to their wallets. So I think it would be very hard for BlackRock to accumulate a position of owning 20% of the Bitcoin that are out there. It would drive Bitcoin prices to such heights that the question would be what the benefit for them in having that would be. And by the way, BlackRock has through their other funds accumulated quite a lot of Bitcoin actually. They've been buying actively since last year, and that potentially will enable them — I don't know how the rules work — but they may be able to transfer from the other funds into the ETF once it's approved as a way to save from having to go and buy in the open market. We don't know. As regards investing in miners, BlackRock, as many other investment funds, have index funds where they have to buy, for example, Russell 2000 stocks, and they will invest in these stocks and they will hold up to 10%, for example. If you look at the large holders institutionally of the larger miners, they tend to be these index funds because we're part of the Russell 2000 Index, as are a number of our peers. So they have to buy our stock and they buy up to a certain position. For them to accumulate a position of 40 or 50% would drive our stock up through the roof, and I would be very happy if they took a big position in our stock. I don't think there would be any benefit in them controlling us because what could they do? If you think about it, we're a miner, the largest publicly traded miner in the world by production capacity, and we control 4% of all the Bitcoin made in the last quarter. That wouldn't give them a whole lot of control of anything if they owned us 100%. So while I love conspiracies, I think it's very entertaining to listen to, I'm a bigger believer in the fact that the US government is releasing UFO data on purpose to hide something else than I am that BlackRock has aspirations of locking up a corner of the Bitcoin market by owning the miners and controlling Bitcoin.

With all due respect to Arthur Hayes, he's been a long-term bitcoiner from the early days, big supporter, and an avid believer and supporter of Bitcoin. Bitcoin arguably today is just a financial instrument, it's a store of value. The amount of Bitcoin used for transacting is fairly low. In El Salvador and other places like that, you're seeing it used. Venezuela, countries with ultra-high inflation where there isn't really an alternative. And when you look closely in those countries, even people are using Tether and stablecoins because there's so much volatility in Bitcoin. You put your savings in Bitcoin, you transfer from Bitcoin to a stablecoin to transact. And to go back to the earlier comment you and I just had where I said about buying a bus ticket with Bitcoin, you said you wouldn't recommend anybody buy a bus ticket with Bitcoin. People don't want to use Bitcoin to transact because you have to pay taxes every time you buy something with Bitcoin because you're selling your Bitcoin. So it's not really used as a currency. I believe that the regulators have the view on Bitcoin that they do because they don't view it as a risk to the fiat currency of the US. They view it as an asset, a store of value. I think that while longer term, countries may choose to hold their reserve assets in Bitcoin as one of many instruments. China and many other countries have been buying huge amounts of gold instead of buying treasuries and other dollar-denominated assets. They may very well start buying more Bitcoin, which means more governments will want to go into the business of mining Bitcoin. Because as long as there are people outside of the US mining Bitcoin and operating pools, nothing the US government or any entity in the US can do can impact Bitcoin. It will continue to operate and it will continue to have value for the people in the ecosystem. So I'm a big believer that Bitcoin's decentralization is its single biggest asset, and that is why we're very focused as a company on diversifying our operations globally. We want to have 50% of our operations outside of the US and North America because we believe that Bitcoin's future is predominantly outside of the US. More Bitcoin is traded outside the US than in the US today, and we see more and more interest from sovereigns around the world to hold Bitcoin and hold reserve assets in Bitcoin, and use Bitcoin mining as a way to stabilize grids and for energy security and other use cases. Which is why we're so bullish on the international aspect of Bitcoin. So I personally don't have a fear that Bitcoin will be manipulated by BlackRock or any of the large financial institutions and banks, other than the same way they manipulate the gold market or any of these other markets. Look at how gold has operated for thousands of years. A lot of people would argue that the gold price has been suppressed because of the fact that there's more paper gold than real gold out there. We know that there's been spoofing of silver prices, JP Morgan has been accused of that as well as other funds and other big institutional players.

Think of a commodity-producing country. You are generating revenue coming in in foreign currency into your country. You need to hold those profits somewhere. For many years, the US dollar has been the primary reserve currency and the home because of its stability, safety, rule of law, etc. For a lot of these assets, they have invested in treasuries, they have invested in US equities, real estate in the US. Look at all the money that came from China into the US market, all the money that comes from the Middle East into the US market. If they want to have more diversification, or if the US currency were to start losing its attractiveness because its value started to drop in relation to other currencies because of what the federal government does relative to spending and deficits, then you need to find alternatives. Where else would you put your money? You can only hold so much gold before it becomes too concentrated, you have too much of it in your portfolio. You need to look for alternative assets. Bitcoin on a risk-adjusted basis has been proven to be a very good asset. And best of all, it is an asset that cannot be weaponized. The US government cannot weaponize Bitcoin. It can weaponize dollars, it can weaponize gold potentially if it wanted to. A lot of the world's gold reserves are actually held in the US. Look at what the US did to Russia's gold reserves. So I think there are a lot of reasons why sovereigns are and should be looking at Bitcoin as a reserve asset. You have the country of Bhutan, for example, that's mining Bitcoin now, and they've just decided to more than double the capacity of mining in their country. You have other sovereigns around the world looking at this as a way to not just hold Bitcoin, but if you're mining Bitcoin and you operate your own pool, then all of a sudden you now have independence from the rest of the market. As long as somebody is mining Bitcoin somewhere in the world, Bitcoin transactions can happen. Being independent of control of large nations is very important to certain commodity-producing sovereigns.

We are seeing interest in the technology we produce regarding our pool software. You have to, if you're mining Bitcoin, you want to operate a pool if you have enough substance in your mining because that gives you ultimate control over transactions. So we are seeing inbound interest from outside of the US. I'm not going to necessarily disclose where, from various people who are very interested in starting to do this. We see more and more countries very interested in leveraging their stranded energy for Bitcoin mining, not just for energy security but also for the opportunity to earn and hold Bitcoin. So I think you're going to start seeing this become more common. The other thing is, as I said earlier, on a risk-adjusted basis, Bitcoin is a good asset to hold. Listen, if major corporations are going to start putting Bitcoin on their balance sheet, if sovereign wealth funds are going to put Bitcoin on their balance sheet, and they have been, then it makes all the sense in the world to own more of that ecosystem and that infrastructure. There are many countries today who have very inexpensive energy where they can go into the business of mining Bitcoin and generating quite attractive returns for that energy which otherwise would be wasted, and in doing so can start building reserves and additionally buying the market as they deem fit. But I don't see a sovereign going out and announcing, 'Hey, we're buying Bitcoin,' because the price of Bitcoin will just go up, so it would be a little bit counterintuitive. Well, maybe not at this point. Maybe after they have the infrastructure and have accumulated it on the sly or in a discreet manner, maybe at that point it becomes public.

Sure. Obviously the Gulf region is very attractive because they're energy producing, they're commodity producers that produce energy and have a lot of excess energy. The motivation in the UAE was for grid stability and the fact that in the summertime they consume, from an energy production perspective, they need four gigawatt hours of energy being produced per hour, and in the wintertime only one. Yet they need to run this energy infrastructure all of the time because they also use it for water desalination purposes. So a lot of energy was being wasted. By leveraging that inexpensive energy for Bitcoin mining, you get two benefits: one is you're able to sell the energy as opposed to giving it away, and more importantly, it helps stabilize your grid. Meaning that when you get demand shifts in the grid, you can just tell the Bitcoin miners to shut down, and then all of a sudden you get increased capacity without having to go tell a gas-fired plant or a fossil fuel plant to turn up their percentage of production. In UAE, they recently brought online a nuclear reactor which is sustainable green energy, so they had excess energy. Paraguay, for example, we're mining there behind the Itaipu Dam, which is one of the largest hydroelectric dams in the world. Paraguay has a problem where they generate 32 terawatt hours of energy in excess of what they need, so they have no place to sell it other than potentially Brazil and their neighbors, and they have to sell it at a loss. By bringing in Bitcoin miners, they're able to now monetize that energy that otherwise would be wasted, and that generates taxes for them and other incomes, jobs, etc. In Africa, we're seeing a lot of interest in countries like Kenya where they've added solar energy in addition to their existing hydroelectric infrastructure, and they now have grid stability issues, so they want Bitcoin miners to come in and help stabilize the grid. You're seeing that in other countries around the world. Bhutan started with 200 megawatts of Bitcoin mining and has recently announced that they're going to grow to 500 megawatts. This is a very small country with a lot of hydroelectricity. They can all of a sudden now be a commodity producer because the problem with electricity is you can't bundle it up in a barrel, load it on a ship, and send it somewhere. Electricity can only travel maximally a thousand kilometers before the losses due to transmission become so high that it's not worth it. But you can convert electricity into Bitcoin, and Bitcoin is transportable anywhere in the world in an instant and holds its value very nicely. So that's why you're starting to see energy producers look into Bitcoin and produce that.

Absolutely. I think you're seeing a large number of partnerships with energy companies. You have energy companies that were involved with Bitcoin mining from an interest perspective initially around methane gas flaring, where you have oil fields where you have to flare the gas, you're burning this methane gas because if you vent it in the air it's very damaging. They now want to capture that methane, use it for generating energy to drive Bitcoin mines, and monetize that methane. You're also seeing just energy producers, hydroelectric producers, utilities, etc., want to better monetize their energy. So energy companies and Bitcoin miners are starting to partner. We're mining Bitcoin with landfill gas off of trash heaps, capturing that methane, turning it into Bitcoin, for example. You're going to see agricultural waste, you're going to see all sorts of waste being turned into Bitcoin as opposed to using load off the grid. So now more and more countries and industries are going to get involved in this, and I think Bitcoin is going to be one of these commodities, if you will, that is produced through the virtuous cycle of converting waste energy into heat and using that heat for things, and Bitcoin will be a byproduct of that and an exhaust that will generate profits for people all over the world.

Absolutely.

Yeah, so as I just said, you take stranded energy, turn it into heat. What can you do with that heat? Well, you can heat buildings, you can heat greenhouses, which is something we're starting to do. We recently decided to do a test regarding shrimp farming because you can use this heat off-take to facilitate the farming of shrimp. Why shrimp? Well, shrimp actually creates a very low-cost protein that can be done anywhere that you can run Bitcoin miners. Now you don't have to only do it in places where you have low-cost energy where you're buying electricity to heat this process and facilitate this process. So we've recently gotten a permit in the state of Washington to start shrimp farming. We're not doing it in the ocean, we're not doing it in ponds, we're doing it in industrial facilities as an experiment to see. It gets very interesting if you can take wasted energy and then you can convert that energy into heat and sell that heat for something like shrimp farming or aquaculture or agriculture with greenhouses or heating buildings. Bitcoin mining then costs you nothing to do. It's a function of the heat generation, and if you're getting paid for generating the heat in excess of what it costs you to mine, then essentially you can mine Bitcoin at zero cost, with other edible benefits.

Oh gosh, I love shrimp on the grill with a little bit of garlic, some fresh lemon juice, and a little bit of basil on it.

Thank you.