 Welcome everyone. I'm Ray, Head of Markets at Cointelegraph. Today, the reason why I wanted all of you here on this panel is it's pretty simple. Bitcoin is simple, but it's also complex. It's probably the easiest asset to acquire and succeed with if you dollar cost average. But for analysts, there's also all sorts of bells and whistles, metrics and indicators that can either provide insight or complicate the process of investment. And I'd say mining is included in that. And to me, Bitcoin mining has always been kind of an enigma. And the miners have been an enigma also, they're elusive. But in today's panel, some of the things that I hope that we can explore are the state of the mining industry, mining and renewables. Let's try and perhaps crush the myth that Bitcoin mining is destroying the planet, if that's true. Industry perspectives on the future of Bitcoin mining in the US and Canada over the next two to three years. I'm curious to hear your thoughts on whether or not there's a place at the table for home hobbyist level miners. And perhaps we can discuss the impact that the next halving will have on miners, capital expenses and operational expenses, electricity costs are going through the roof and there's rumors of a European Bitcoin migration, perhaps West. So these are some of the topics that I'd like for us to touch on briefly today, just to add a little bit more clarity to what's happening in the industry. I think there's a misconception that Bitcoin mining is bad for the economy and for the environment due to its power consumption. And we've seen a lot of countries and even US states take actions to kind of prevent mining from taking place. I've been to a mining farm before, it's really loud, they throw off a lot of heat, depending on the source, they can use quite a bit of electricity. So can any of you speak to how, quote unquote, how all this energy could be used for other things and how people might not be cognizant of how energy is misallocated, underused and wasted and how Bitcoin possibly could fix this? So I think one of the biggest challenges that we've had in this transition to a low carbon economy and reducing GHT emissions has been a underinvestment in technology and infrastructure by both the public and the private sectors. But what I think is really amazing about Bitcoin mining is that it's really presenting a completely novel way to fund or subsidize that development of energy or waste management infrastructure. And that's a way that is beyond those traditional taxpayer or electricity rate payer pathways, because this way is based on purely this elegant system of economic incentives. And we're already seeing that play out in a number of different sectors of the economy. Looking at grid and grid stability, miners are both helping renewables set up and grow because they provide a consistent revenue stream as the buyer of first and buyer of last resort. But they're also helping in other ways. For example, if you look at the city of Vancouver, there's a really cool company called Mint Green that is providing district heating because they have immersion asics. And that heat can better be transported through an immersion system to then heat the city of Vancouver. And that's actually leading to greenhouse gas emission reductions because they're displacing fossil fuel by taking from a 96 to 98% renewable powered grid. We have miners for the company that I advise for PRTI. There's 300 million tires and a billion tires thrown out each year around the world. And we're taking this waste resource and displacing both natural gas or an oil slash diesel type of fuel because that's generated in the process plus scrap steel that is offsetting emissions from steel production. And that's being used to provide my to to to mine Bitcoin. So there's a number of different kind of stories that we're seeing play out rather than those news headlines. I think Bitcoin mining is just not bad for the environment period. I think if anything it incentivizes more energy production, it improves grid reliability and resilience. And I think it likely will lower retail electricity rates in the long term. I think we've seen like with ERCOT the Texas grid how when the grid is strained and and people need power. Miners can you know be this demand response entity and turn off and redirect that power to to retail our commercial clients that that need need need the energy. But you know at the end of the day I think miners are basically incentivized to find the cheapest energy available. And a lot of times this is this is energy that would be wasted like flared gas, coal, tires, etc. So I think no Bitcoin mining is not bad for the environment. I think it's it's an abounding to produce cheap energy. And I think that's great for for all of humanity. So let's talk about real mining for miners then we've seen electricity prices soaring throughout the European Union and parts of the US. At the same time Bitcoin prices below its 2018 all time high. ASIC prices are down like 70% dollar per tear hash is less than optimal. But the cost of mining is outweighing profitability for some players, probably not for you industrial guys. But I mean, I do see large size miners selling their Bitcoin stacks to cover CAPEX and OPEX. We're seeing layoffs from compass mining and a few other places now. I'm thinking some of these these outlets maybe they'll go belly up. So speak to me about what are some of the CAPEX and OPEX considerations that industrial miners have in this current climate. I can touch on that one. We track this pretty closely. We also track a lot of the publicly listed companies. And so right now there's there's going to definitely be a capital crunch in publicly listed companies or at least not even not even just publicly listed companies. There's probably close to four billion dollars worth of new ASICs that need to be paid for as they come out. And though that capital is no longer available. They're behind the scenes you're going to hear of both public and private miners that had funding deals to finance their new new mining machines ready to go. But those that funding has gone away since you know, since the market has changed so drastically. And I think we're going to continue to see that. So but we've also seen a good example would be Marathon actually was somewhat the beneficiary of these decreased ASIC prices because they got a big repricing on their latest batch of machines. So there are some winners and there are some losers. But we're definitely going to see a big cash crunch. And so the thing to watch out for now is who can pay for their new batches who can pay for the batches that they've already prepaid for. So there are a lot of public companies that have public filings about and they claim that or they have already purchased. You know, some number of miners, let's just say 100,000 machines, they purchase 100,000 machines, but they preorder that. So what that means is you pay 60% of that machine order upfront. But if they don't have the other 40% when it comes time to get those machines delivered, they either have to sell some of those machines off. In a secondary meaning they go and sell it to somebody that's willing to pay for it. And the problem there is that they could potentially end up taking a big loss if they don't get a machine repricing the way the marathon did. So there's a lot of capital that has dried up and so these miners are going to be in a bit of a crunch here over the next three to six months. The thing about hedge funds, they blow up really quickly. I think miners are going to take three to six months to blow up. So we'll see who's got good operations and who's able to survive this low margin environment. What's that due to the network? What is that due to the hash rate? What machines are profitable right now? Most industrial miners are running what type of machine? S9s or S19JPros or is it the S19 XP? The XP is supposed to land next week on the 16th. The first ones should land on the 16th. We'll see if they do. Have heard that they may be delayed, but we'll find out. Most miners are running either the S19. Most of them are probably running the JPros series and those are the ones that are landed. And now whether they're profitable or not really depends on your operation. That S9 that I have right there, if I go and plug it in somewhere where I get free power, it's profitable. But the plug it in somewhere in my house where I have 12 cent power, it's not profitable anymore. So it really depends on where you plug it in and how efficient your operation is. The kinds of miners that have an advantage would be those that are integrated but have power at a very cheap or negative cost. So there's certain operations where you get paid to take in power, for example, waste management, tires. So the cost of your feedstock is negative cost. Ones that get paid an alternative revenue stream, for example, if they're selling heat offtake, those can have an advantage. So it's one of those things where you have a trade off between OPEX and CAPEX, right? You have to maybe build additional infrastructure that's power generation infrastructure, but you have certainty around your power price or perhaps you're getting cheaper negative cost power that can give you a little bit of an extra boost to get through the bear market. If I can add something as well that I feel pretty strongly about, I believe that most of the mining down the road will be held in the Middle East and North America and to some extent Asia, depending upon how much they are eventually able to cut off. And that really speaks to the availability of natural resources and the cost of power. I know you may have fringe pockets like Iceland or places where there's opportunity to mine at scale, but those were the natural resources that are competitive or net exporters natural resources, the ones that are going to have an advantage in my opinion. It's the most efficient inputs provide the greatest yield at the end. And that can be expressed through an equity company or just the vehicle for investors to find the investment capital to come in and mine rather than miners mine for themselves. Meaning, I think that hosting belongs in a data center environment if you will and mining belongs within an investor, whether it be institutional retail have access to that. And that's expressed first and foremost today by largely the public mining company, but I think is more stable capital comes to it where to next point, those dollar commitments for miners, if institutional investors came in and made the commitments, they written checks yesterday, right? They wouldn't create, leverage wouldn't be part of the component. If the leverage was that component to their decision process, that leverage would be on their balance sheet and they wouldn't express that through basically taking risk on finding that capital at the end of the day, taking a bet on hash rate or a bet on, you know, their opportunities. Right. I get what you're saying. So combining what you've said and what Nick and Max have said, correct me if I'm wrong, but it sounds like it's going to take some time to see which companies are solvent, which are insolvent. We're going to see a lot of repositioning over the next year. But it also sounds like hosting space will become kind of like a premium product with a premium price because there's insufficient infrastructure right now. We're about to have a market that's completely flooded with low cost ASICs, right? Over supply of those, I'm assuming. But then you can buy them up at discount, sure. We will have a surplus of equipment. You know, right now equipment trading for spot current brand new equipment trading for under $30 a tera hash. Okay. And I think it'll probably get much lower than that. I think there's a potential for equipment to trade within facility. So equipment that's already installed in hosted facilities, I think we'll could trade hands as well. You know, as people try and raise capital and, and, and that, you know, I think that that's certainly, but there's potential there, in my opinion. I think it depends. I would say it is between 300 and 400,000 J pro pre-orders that are not going to be paid for right now. And so most likely those machine orders will hit the market and people will be able to buy them. It comes down to what did the original purchaser buy them for? Are they willing to take that loss? Because most likely, well, not most likely, they definitely paid a higher price than they did today because those machines were selling for 60, 70, 80. I mean, the top was over $100 a tera hash. And now we're looking at probably, like you said, probably close to 30. Depending on the, on the series and location, it may be a little over 30, like probably low 30s would be the, like the landed rate for the landed rate, meaning machines that are located in the U.S. The high 20s, if there are, if they're still in China and maybe not, you know, maybe like a later series, an older gen. But those machines are going to come at a pretty big discount and it depends on how many machines hit the, hit the street, like hit the market. Do they hit the market? That's the question. And then there's also this pending new machine coming out, the XP. So it becomes a very, like the J pro, anybody that's holding a J pro futures order right now is probably feeling some major pressure and they're trying to decide, do I want to get rid of this thing now? Or do I try to hold it and ROI that thing in the future? So that's all I got to say about that. I'd like to hear your thoughts on how relevant is Bitcoin's halving cycle and the modeling for your OPEX and CAPEX. And with the halving cycle coming up in like 665 days, will miners like the SJ pro S 19 J pro, which I think is 110 tear hash, or the S 19 XP, or the what's minor M 30 S plus plus, will they become less profitable or obsolete? It's what it is. It is that simple. So how cheap are you producing that hash on a per dollar basis? If your benchmark is network profitability or dollar per tear hash per day, what is your margin in that? And that's what it all boils down to, which is your inputs are energy and the hash rate that you're getting out of that energy. Is your equipment the most efficient out there? And then you have the most competitive power contract. It's no different than a bear market, right? If your marginal cost of production are exceeding the price of Bitcoin for an extended period and in the happening it will be an extended period, you know, you shut down until conditions improve, but they won't improve in a bear market. You know, maybe we turn around into a bull, but not with the happening you're getting your reward was cut in half effectively, right? And so either you wait for a bull market where it's competitive for you to begin mining again or you shut down your operation. To me, I think mining is all about survival, right? So if you can survive the bear markets when, you know, margins are really being compressed and you have access to this, this cheap electricity, then I think, you know, you're going to be around when the good times are there and Bitcoin's price is going on another one of its parabolic bull runs. You'll be able to capture that. There's larger margins. But yeah, it's all about, you know, cost of production. And if you can out-survive the weaker miners when difficulty drops and miners capitulate, that's what's going to give you the advantage, you know, for surviving and then capitalizing on the bull market. What about miners? Do any of you use, say like commodity price risk management tools, futures, puts, calls, costless caller strategies, three-way structures? You know, I think that having the ability to hedge your dollar per tear hash per day, your profitability will be key for producers. So this industry is just like, you know, oil and gas upstream, right? You have a resource and you're producing an output, okay? And if you could hedge that output, which is your profitability, I think there'll be great demand for that. The other side is though, coming upon, you know, us, Nick and the industry, who's the natural buyer of that hash rate at the end of the day? You know, who wants to own that, you know, say, bearish risk, if you will? One of the questions that, you know, Todd is referencing here is like, who wants to buy hash rate? Hash rate trends towards zero. The value of hash rate over time, very similar to the VIX and other, you know, and other indices trend towards zero over time. It's called trading and backwardation. It's very hard to find a natural buyer for an asset that trades in backwardation because why would I buy something that I know is going to go to zero? Well, really what you want is you want some exposure to that asset class and you want to make a bet on how fast it goes to zero. And that's really like what volatility traders, like that's what they're trading. And that's what hash rate traders are going to trade. I think I can make a bet on how quickly it's going to trend towards zero. You know, we've seen that, you know, over the last several years, it's actually been not, you know, there's definitely been some big bumps away from that trend. And so you could have profitably made a lot of money by trading long there. And miners most likely would have been very happy to sell at those different levels because they're going to be able to lock in real revenue and reduce the uncertainty of the future. So I think right now it comes down to who can, what is the clearing price for hash rate at what discount? So, you know, today the price of hash rate is about 10 cents a tear hash per second per day. So what that means is that machine there does about 13 tear hash. So that means it probably makes about a dollar, you know, $1.30 a day. If I sell you that hash rate for six months, what are you going to pay for it? What will you be willing to pay for it? Most likely people will probably be looking for a 20 to 30% discount on that hash rate if they're going to buy it. Yeah, and I get that you want to capture that volatility and get yield off of it or profit off of that. Is it possible that hash rate derivatives, is there a way for them to eventually impact Bitcoin's spot price? I think hash rate derivatives will be, you know, fantastic for the industry. But I think ironically last year we kind of saw the opposite of hedging, you know, public and private miners getting as much debt as they possibly can, leveraging up and, you know, trying to, like we saw, buy as many ASICs at the top. And hopefully, you know, the industry and players that, you know, get eliminated from the industry due to, you know, decreasing Bitcoin price, increasing difficulty. Hopefully next cycle we'll learn and we'll have these hedging products available so, you know, more players can survive and thrive. So you all are on the inside, you have greater insights into how the sector works in the average retail investor or just Bitcoin investor. What would you say is the most important thing that retail investors, Bitcoin lovers, hobbyist miners should know about the US and North American mining industry? I think if you're mining Bitcoin as a home miner, like myself, you just have to know that as a retail consumer, you're usually buying electricity at a retail price, which is significantly higher than industrial rate or rates negotiated between an industrial miner and a power producer. So knowing that you're going to be paying significantly more, it's just, it's a choice for you. Why am I mining? If you don't really care that you maybe aren't even making money at the time, but it's kind of like a call option on a future price of Bitcoin, you're thinking, you know what, maybe I'm underwater by, you know, a couple dollars today, but I think Bitcoin's going 10x, then it's worth it for me. Others mind because they want, you know, KYC free Bitcoin as in it didn't touch an exchange, they didn't have to do know your customer. So it's, that's kind of why they're mining. And then other people are actually mining just to heat their own house, heat their pool, they're hobbyists, they're trying to have fun and making Bitcoin in return. So I think there's many different reasons that and that price isn't always, you know, the main factor there. So keeping that in mind, but do know if you're a retail miner, you're probably you're underwater for the most part now on an S9 and potentially on some of the other rigs. Do you think that industrial mining will be the catalyst of mass adoption of Bitcoin as, you know, a currency and a very liquid commodity that Treadfy kind of adds to their portfolio or to their baskets. Is mining going to be the thing that makes Bitcoin a part of every person's daily life? No, but it is going to be certainly not, but it is going to be the thing that transforms everybody's life, whether they know it or not by by being that buyer and seller buyer of last resort and buyer of first resort for energy. It's going to transform the energy and the way energy is energy markets the way energy is produced and consumed here in the US. And overall it should improve the human condition significantly over time. That's a strong statement. I thought that each of you would say yes, that mining will be because I see, you know, the synergies between legacy, big energy and Bitcoin now that gas can be captured renewables can be used flaring all this. You know, everyone can kind of increase their balance sheet by mining Bitcoin if you're in big energy. So that seems like it would be the catalyst that makes it this big giant thing that has validity that every Fortune 500 company is into now. So that that answer surprises me. You have to have a use for it, right? And there's not a common, there's not a wide widely accepted use and acceptance of it, you know, yet. So I think Nick's right. But just because you mine it on industrial scale doesn't mean it will become ubiquitous with use. In my opinion. I mean, I can plant some weird obscure flower and just keep growing it. But if nobody wants to buy it, I'm still stuck. But if there's an economic incentive for me to do that, like oil and gas, which is implementing miners for flare gas capture and actually earning a revenue stream of something that's typically wasted. Then that's another story, right? The economics incentives of the system of the Bitcoin network will make it so that it's being adopted throughout, you know, things like I was mentioning landfill gas capture, which I expect to see soon. You know, it's a way to fund that infrastructure for a policy that, you know, governments put in for GHG emissions just as an example, right? And so you'll have some sort of incentive, whether it's economic or economic, because the policies have made it economic to mine, then I think we'll see that shift and greater integration across different parts of the economy. I really want to thank you for taking the time to chat with me for sharing your wealth of knowledge and your expertise. I think it's something that's going to be really useful to our viewers. Bitcoin mining is still an enigma. It's still very scientific and a lot of people don't really get into the weeds about, you know, its importance and the role that it's going to play going forward with the industrialization of mining. Thank you for having us today. Thank you very much for inviting us to the conversation.