Jul 5, 2024

Lots going on in public markets this week as Cleanspark announced the planned purchase of Bitcoin miner Griid, while a few private miners made public ambitions known.

Video transcript

Hey, welcome back to the mining pod. We got a news roundup for you. Charlie Matt will be back right in a second after word from our sponsors. Hey listeners, let's talk about revolutionizing your mining operation with Foreman. This isn't your average management tool. It's an all in one solution for reducing costs and significantly boosting your revenue. Foreman brings a cutting edge dashboard to your fingertips empowering you with automated energy strategies. This means not only curtailing around real time prices but also strategic enhancing your profit margins through demand response. It's about leveraging energy efficiency to its fullest potential. With Foreman, you get a system that scales with your business inventory management for assets, infrastructure integration and business intelligence. Foreman elevates the cash flow and production of your entire operation to see how Foreman can redefine your mining operation standards. Visit Foreman dot m with Foreman. 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We got mining news, who knows how many people listen to the show because it's coming out on like a Friday morning after the fourth. But we still have a duty and an obligation to our listeners to go through mining news. Uh We'll start first with our difficulty update and then we're gonna go through the Queens Park grid acquisition, move over to some of the IP O stuff with GD A and Northern data and finish up with a little Crime Watch Corner uh and maybe some ordinal stuff as well from Charlie. I don't know if we uh if we put that. Ok, Charlie confirms we have that. Well, there's more mills at the end for everyone who needs that kick uh Matt, I'm gonna kick it to you first for our difficulty update, difficulty set to go down 5%. Um I'm gonna call this probably a, a praise God moment. From the mining community as has price has taken an absolute beating this year. But I'd say particularly since the kind of ETF flows stalled out, maybe like beginning June time. Um But yeah, I think, I mean, if you're wondering like why I think there's probably quite a bit of minors that are really struggling at the margin right now. Um And maybe, maybe we see a little curtailment right now. Maybe we're getting a little ray seasonality where um some of the bigger miners are participating in those demand response programs in Texas. Um maybe a little lingering, you know, having effect. Um I, unfortunately, I'm interested to hear y'all take here. I think this is probably a little short lived. If you look at the announcements from the public listed miners, it just, it looks like an all out hash rate, arms race, um marathon riot. I mean, this kind of goes on and on if you're not getting into the A I play and you're a big miner, it looks like you're just deployed more and more hash rate. Um The S 20 ones are probably being delivered and, or delivered right around the corner. So while this looks like a temporary relief, um I would, if I was uh at the margin right now, I would be really hoping for some kind of miracle price rally because I think uh difficulty is gonna rebound. Um hash rates gonna keep coming online. I would agree. I think my other take is that uh yeah, we see what appears to be hash rate declining. But um this happens during a little, there's a bit of seasonality to this. Uh energy pricing for a lot of Bitcoin miners is more expensive during the summer. And then my general kind of narrative that I see happening in mining is that um there's not as many miners going out of business so much as just getting acquired. In fact, we will talk about that a little bit here. But uh it's, it's almost like the miners may not turn off as much as, as they have historically, but just rather get hot swapped out uh with new owners and rigs. Imagine if the ETF S hadn't been approved, where would we be at right now? Like 40 K Bitcoin and would have press different story. Mine. Well, I haven't heard the mining for death spiral as much this time. We might be hearing it more if that were not the case. They don't even say the word I don't want, I don't want to answer those questions like the eighth time. Yeah, it's bad. OK. Speaking of hashtag consolidation, let's move over to the Queen Spark News, which I think was probably one of the more interesting things that's happened in the month of June. Uh Yeah, it was just last week. So let's go through this completely beginning of the story to the end. Uh You can throw up that chart if you want or the, yeah, the coin desk image. So Bitcoin Minor cleans Park agrees to buy peer grid gr I ID at $155 million deal. Uh We're looking at a coin desk piece for this. Uh This was first leaked or maybe not leaked. I don't know what it is. Uh It was a, it was a speculation, a speculative scoop. Uh There's not quite a correct way of phrasing this but Mike Alfred, a noted investor in this space and also is a non executive director on the board of Iris Energy. Now, Irene said, quote, this is an un unconfirmed, a product of numerous discussions and inferences I've made in recent days, but it seems like highly likely that clean spark will acquire publicly traded grid as part of its push to obtain more than one gigawatt of secured power. So bullish spaces, fire, fire emoji right now, bullish emoji. What happened? What? Sorry, what happened after that? The market went nuts. Uh The volume on grid trade. I don't know if you can zoom in or quote that there, but like the price it pushed past a buck for, who knows the first time in quite a while. I think the price like tripled up to one what we got there. 2 42 30. Yeah, it quadrupled or quintupled. Yeah. So that tells you a few things, one tells you like how online and engaged in Twitter. This mining stock audiences. Um Mining stocks are interesting. Right? Because it's one of the only ways you can get like exposure to crypto through an equity solution. So we do see a lot of people in like the older crowd who are interested in crypto but not quite ready to open up a metamask wallet. They might buy into their portfolios and they go to Twitter for their engagement. So there's this whole mining mafia scene. Shout out to them. There's tons of different like players online, the Mara pigs, uh the sparky. Who else is out there? I think we've talked about this before. They're very engaged and they have the ability to move these markets quite drastically. Um This was stopped, I believe on the NASDAQ because of trade volatility. There was about a week pause and then the news from Clean Spark came out. So who knows what the investor relationship side of this looks like after that tweet uh and all the things along with that. But I will say from a clean spark perspective and great perspective. This is great for a few reasons. Let me give these and I'll give them to you guys for uh some follow up thought for Clean Spark. They are of the mindset of like ordering units and plugging in hash rate together, right? They're pretty conservative when it comes to um how they do their purchases and they made some large purchases this year. They are also making a lot of acquisitions, timely pieces. They have the Georgia sites, they purchase the Mississippi sites, they have Wyoming site and now they'll have the ability to grow out in Tennessee. And then just from an energy perspective, these are cheaper sites in the T VA area which is very friendly to Bitcoin mining. Uh Charlie's wearing a Bitcoin Park hat. We went there in January did some recordings and you could just kind of feel the energy there that like Tennessee is ready for Bitcoin mining to grow on the grid side. I think this made sense because like you look at their financials and you look at the situation with their hash rate, their average hash rate per you know, is like 20 tera hash. So we're looking at S nines and I just don't think like the capital was there to kind of get them into that next place to be able to compete with some larger players even though they had done really well on the energy side. And I think that's a thing to be paying attention to if you're in the M and a space. Like just because you don't have like the complete slate of tools or suite of tools for being a Bitcoin miner. If you have even just a few of these things, you're very, very valuable right now. They just had energy at grid, a really awesome team, but they, their assets, the books look like it had energy and now they get to be a part of clean spark uh after this board approval. Ok. To you guys for any follow up Thoughts Rackspace is King. This is like you can have old units, but if you've got power contracts and uh future power contracts locked in, that's it's still a huge acquisition target. Um My other point about the stock price is that yes, Mike Alfred tweeted speculation ran the stock up stock price up for grid five X. Then as soon as the news was confirmed, it dropped 50% same day, we're now at A I would say more reasonable 150% above where the original speculation started. Which to me for some of these kind of lower cap uh uh mining stocks would might make sense because that's optimistic for grid and their acquisition. So yeah, my first thought is that well, I appreciate when you do tweet reads that you sound out the emojis. I thought that was a great part of this story read anytime with uh with grid itself. I mean, it's, it's, I mean, the story is summed up very well already, I would say, I think really the catalyst that drove the stock price back down was the fact that the kind of enterprise value uh became very public. And so people were, I think after the Mike Alford peak tweet am speculating on the speculation that grid um was going to be this like absolute beast. Uh when the numbers actually came out. Um And so the price went up and up and up and up and then once the numbers actually came out, uh it fell a little bit back down to earth. Um It's interesting, right? We're seeing consolidation and we keep seeing consolidation as Charlie said earlier at the, at the beginning of the show, but it definitely seems like the big miners might want to lead and hash rate, right? And that seems to be part of the play here for Queen Spark. I mean, the, the big miners right now all have a path to one gigawatt or more of energy deployed. And at the same time, they're also making that energy more dense with a compute that they're thrown on top of it with these purchase orders. So, uh if you're not like a big player right now, it's, it is really hard to find that margin. Uh I think that's one of the lessons I'm pulling away from this for a company like grid which uh had some financial struggles to be able to get to that place where they're going to be able to refresh their fleet. This makes sense because you're able to join another team that's obviously been killing it for quite a while and you were able to get a good price for the energy contracts that you were smart enough to develop over the last few years. And I think it's going to happen more whether it be like because of an energy contract or something else, you're going to see consolidation the M and a space based on like the mutual interests. The other one of course would be like core scientific in core weave co we tried to buy cos I I don't think that that didn't go through is rejected, but maybe in the future, something like that does happen and the rationale of course is core scientific is coming out of bankruptcy. The books are looking really healthy. They have about 550 megawatts under development or already online and they have the ability to plug in some of these like NVIDIA H BC things. So there is some really good opportunities for joint venture work slash M and A in space right now. Let's leave that and go over to the IP O space. It's pretty like heavy day on terms of public minors, but that's ok in the competitive world of Bitcoin mining, one name stands out Clean Spark, America's Bitcoin miner at clean spark efficiency isn't just a goal. It's our standard. Our sophisticated facilities are built and led by expert teams who care about Bitcoin and the communities we work in scale. We've mastered it. Our large scale operations have set us apart in the industry as examples of community oriented building. Our track record speaks for itself. We navigate the complexities of the new economy with precision and with skill, continuously achieving operational milestones. Curious about how we do it. We invite you to discover the story behind Queen Spark Success at Clean spark.com. Um Let's talk about GD A and Northern data with their IP O announcements. I'll throw it over to you. Met. Yeah. Northern data. I would, I mean background on northern data, right? They were one of the biggest ethereum miners really preer. Um And now I would say they're one of the largest European A I firms. Um And so, I mean, the numbers here I think are the thing that stand out to me, that's the most staggering, right? The valuation for Northern data going public uh for their um H BC and cloud business, right? Looks uh is, is reported to be at the 16 billion mark and I just to like put that in perspective, right? The biggest uh like pure play miners, Bitcoin miners, right are like marathon and clean spark which combined have a market cap of about 10 billion. And so it just shows you like the demand for A I is huge right now. I mean, just look at it like in the video where it is now compared to a year ago, it has tripled, right? We're talking several trillion dollar market cap. Um These numbers are are really staggering and you hear them and you're probably like, oh OK, maybe that, maybe that makes sense. But if I think if you look at them in, in context and really think about what it means. Um They're, they're staggering and it's, it's uh it's interesting to see um it being reported. What do you guys think? I agree with you. It's, it is uh the main, I think I saw something like that. The main super narrative right now is A I and A I compute. So you see that reflected here in the Northern data uh IP O consideration, I will note that in my own experience, I I only have one kind of uh story that I measured this against which is where northern data announced a 200 megawatt um mine here in Oklahoma uh which never actually had any legs. So I, I want to say there is a, you know, uh the title and the narrative here is Northern Data weighs A I unit us IP O does not necessarily mean they are going to IP O. We will have to see that I understand in the part this particular type of European public company, they have a little bit different communication style. So we'll see, we shall see uh just for listeners, mining pod is considering an IP O at $17 billion. So if you'd like to get a, we are taking uh early payments for investments if you'd like to do that as well. Uh The Northern data stuff is interesting in terms of like the structure for the company. So they did recently get a tether investment. I believe that was in the fall. I cannot remember the dollar value for that off the top of my head, but it was into the hundreds of millions, if I'm not mistaken, it was, uh, there was a major debt facility, I think at about 500 million. Ok. Ok. So it's a credit line. Yeah, Tether. Tether keeps winning, I think. Yeah, Tether keeps winning and Tether is going public through other people going public. So, you know, when Swan goes public with Swan mining or something else, you know, smart tether, you know, you, you probably can't go public in the US, but you can go public through your investments. Uh That is one thing notable. The other is that northern data does have a very large site they're building out outside Galveston right now. I think it's like 300 megawatts of mi mining and another 300 for like batteries. It can make an immersion site and that site I could very easily see like swapping to like H BC style stuff maybe has even happened. Um somewhat paid attention to that seeing because I know some people who have been working on that deal, it's been kind of all over the place. So the information is likely stale. That being said they're like they're growing the US, they're looking for mega more megawatts. Um This piece itself talks about how they have, was it 800 megawatts in the pipeline? You can scroll down there 707 100 million. Gotcha. So, I mean, it's like last, the last stories we were talking about everyone's trying to get their energy pipeline up to one gigawatt and Bitcoin miners have an edge because they've been sourcing cheap energy for a decade for a decade. Now. I have my question, I guess the add of this for you guys is, is the, is the A I demand sustainable, right? And I feel like that's maybe like a theme of the year. Is it gonna keep going or is all this preparation and building out energy infrastructure and assets? Like gonna have a, this is weird. I I guess if I could have one take, it's that this feels a lot like the internet boom of the late nineties, early two thousands where we know the internet is going to be big, but perhaps the market is a way over zealous and I just cannot imagine that A I out prices like other real cash flow industries right now. This the civic I would say like maybe there's other industries which are undervalued relative to A I right now. Who knows? We'll see Matt, you can't just ask us to become industry experts on A I It's unfair need Asic help check out Vam mind one of bit mean certified repair shops located in Washington State with satellite offices in Colorado, Oklahoma and Texas psuu hash boards, immersion setups in and out of warranty repair. Vam mine has you covered want to train your technicians, bring Vam mind to your site for hands on training in the art of Asic repair. Complete with Bitman AM TC Certification Contact Vine today at Dan at VM asic.com. Again, that's Dan at VM asic.com. When you think of Asic repair, think vitamine, let's go to the, the other one. So it was GD A uh quick color on this and then we'll go to the, the last two stories. So GD A is also looking at possibly going public. They're one of the largest private Bitcoin miners on. We've had Philip from GD A on the show with Taylor and Mark back in the late winter. I think it was in December. So like early winter. Uh that was a really interesting show. So if you're interested in GD A go check that one out GD A Genesis digital assets, they're known for a few things. One, like I said, one of the largest private Bitcoin miners, I think it said they like 20 sites in North America and then also famous for the FTX investment. I think that was Matt has more details on that. So I hand it over to you the FTX investment. This is like technically through Alameda, which is like the associated hedge fund. Um But yeah, I mean, we basically back when the bankruptcy filings were coming out. Uh and SPF was, you know, basically imprisoned. John Ray took over to handle uh all the proceedings. It came out how much uh Genesis was actually mining. It was a pretty big player. There was a lot of I I recall talks back then and someone might correct me on this uh in the comments or on Twitter that there was discussions of, should we basically roll up and sell all of Genesis assets to prepare to give money back to creditors now or should we basically let them keep mining and hope um that it's a cash flow productive vehicle that will pay creditors back more later. Um I'm not sure what ended up being the conclusion of that story, but it seems to me uh at least that they kept mining, right? Uh There's potential IP O coming out here. I'm not sure how they'll actually stack up. I mean, I I'm pretty sure they have active hundreds of megawatts. So they're, they're no small shop. Um But who knows what uh machines they actually have deployed, right? Um And how cost efficient they are. Uh What do you guys think really quick on the numbers? So they invested 1.15 billion into GD A at a $5 billion valuation at the time in 2022. Obviously, we went to bear cycle after that. So like values change, who knows what this IP O could look like? Uh Got to be up there though. If it's in 2022 they're at 5 billion and they have been growing doesn't seem like there's been any setbacks. I don't know what happened with the clawbacks for that investment GD A. Uh, we've seen a lot of different situations with those clawbacks. So anthropic would be one of them where Alameda invested in that A I company. I think they elected to keep it for a while and they recently sold a large portions of it. So, not quite sure what's happened with that, Charlie. Any thoughts on that before we go to our last segment? Um I believe the it was confirmed, Genesis had a total power capacity exceeding 500 megawatts. That makes them one of the largest miners in the world. If not, if it's all prop mining then is that number one, I have trouble keeping track of 500 megawatts. Yeah, of actual mining. Yeah. So it depends on like, no, I don't think so because marathons now at hash. But depends like all these metrics are basically how you want to boil them down, right? Because like, yeah, 50% of marathons fleet isn't hosted so they don't own it, like apply digital or others own it. And so maybe take, would you take that 50% or you could take like the Rockdale numbers. Rockdale VR is like 750 but they don't always have it online all the time because of demand response and then they have large sections of it just like, you know, even energize, of course I can, it is going online. But yeah, I feel like if you're getting over five, like 300 plus, you're getting really big clean sparks at like what 200 megawatts of like deployed hash rate right now and they have 20 X has. So, so I'd like to see how much of that is prop mining that they fully own. That is theirs. And what models because that puts them up there as a contender marathon is reporting 30 X has, I believe Riot is the reporting 22 exit hatch. I mean, it's so we don't have to, I don't know if this is cut or not, but what's was wild about these numbers is if you put them in context like a year ago, the whole network was like 350 X has like one of these miners is near 10% of what it was a year ago. That's how much hash rate, that's how much energy has come online and like a post having world like it is, it's, it's wild. Um It's pretty wild. Uh The public mind are getting big. I'm interesting. It would be interesting to see maybe a month from now or so. We'll uh have more public numbers and we can uh do a dive into this. Well, what percentage of the network is public listed in states? I know what it used to be like 20% increasing right now. You know, some of the older machines, some of the older miners, maybe the ones turning off right now is like these big largely debt and equity funded like can just continue hashing ones grow and expand. And I think the, the other crazy thing is, you know, we intuitive for us. It's, we're always surprised to see this much hash rate and power come online. Uh But, you know, we're not surprised that it does double every year or so. Um But it's crazy to me that how understudied this industry is. There's not a lot of I'd say industry experts who do deep dive analysis compared to like another commodity production business like oil and gas, which is well understood and studied. But we're approaching in some regions of the world where mining now approaches like major energy production in terms of like gross revenue to the to that part of the world. And it's, it's grown so rapidly and shown up so quickly that it's almost not even even understood by industry experts within that sector. So it, you know, for us to have to gut check exactly where a lot of these publicos are. Pubs like hash rate is, is um because it's like hard to keep up. That's just surprising and indicative of where the industry currently sits, man arrested with nearly 600,000 worth of stolen Bitcoin mining computers. Police say I got sent this story about like three or four different Bitcoin miners. So I thought we just include it in today's show quote according to KTL A five a canyon country man was arrested on Thursday after police say possess hundreds of thousands of dollars worth of stolen computers are being used to mine. Cryptocurrency. Brian Thola, 26 possessed computers worth 600,000 in a cargo van in a public storage unit. Public, the Los Angeles police department said in a news release, those computers were used for mining Bitcoin. This made into norm, this made into Normie narrative. Um I don't know who's out there buying rigs from the back of a van anymore in the US. But apparently this guy thought someone would, I mean, these days, if you have that many rigs, you typically have serial numbers tracked, you're watching these and uh it's hard not to get caught. So if you're out there, if you're some kind of rig hand out at one of these mining operations, don't do this because this will be you, you're not above the law. No, I the other point I do like about this is how it does make into press releases. I think in like Norman media eyes, this is kinda like a cocaine bust even though obviously like this guy is kind of doing his own thing with. Can you imagine the police photos where they're all standing and they have like a single rig, they're all like their arms crossed. All I'm saying is they're not stealing uh like counterfeit check or counterfeit dollar machines. They're stealing minors. So what is that it's true. Not your Asic uh Last story. I don't even know what Charlie's got for us. So 11 minute of ordinals is all you get. So basically these are big are down big. They're fluctuating between the single digits and double digits right now. Um But you would think that's because ordinals and runs are dead, which is true. They are dead. But right now, depending on the day, they're about half of of the transactions on Bitcoin by number of transaction and they are about 30 to 50% of the fee revenue towards miners. So what I hear is my, my takeaway is that right now transaction activity overall is down in the secondary markets. These uh the ruins and ordinal market caps have been in a two month gradual grind downwards, but we've seen some life back into uh these digital assets. I think this could be the next couple weeks to be one of those where like, oh the market's returning um my node monks, my omb s, they're going back up. We'll see historically. People who said that this is that this market is totally dead have regretted saying that um I'm not gonna tell you what you should buy, but maybe you should like take a look at it again. Charlie making a short call on the market. This is the bottom folks, Charlie, you made a great point there. And um I don't know why will didn't include this in a show. He must not want to share it with the listeners that the transaction fee environment is down big time. Right now. It is hearing that the ordinal community is about 30% of it. That's very significant when it's I think we're at like 6 to 8 sets per EBY basically. Um which is, I mean time to open your lighting channels, consolidate your UTX OS folks. Uh Let this be your, your friendly mind pod. Reminder your PS A. Yeah, I guess. Will the men pool clear this weekend? I think that's the big question. We only have about a day's worth of blocks to chew through. So we're headed towards a US holiday. We're headed towards people not being online as much in the West for a few days with the M is dangerously low and thin. I think the mental is not gonna clear. There's enough people who have latent demand for transactions right now. I think you have the fear of God put into some of these utxo proliferated wallets. I so I think there's going to be uh some, there's gonna be a hard line, a buyer of last resort around the 2 to 3 sat for V byte uh fee rate range. But um yeah, we're gonna, we're gonna get close. Love it. Ok. Gents uh Fourth of July. Happy fourth. Both of you. Hope you enjoy it if you're listening to this, we just had the fourth because we're putting this out on Friday. Uh But yeah, we'll see you guys next week. We have a great podcast with Liu Jian on Akemia, which is actually talking about transaction fees. So we'll get into that and then more to come Charlie, anything on Bitcoin season two that we should plug. No, subscribe to Bitcoin season two. All the hottest conversations happened there. Also, the Gore Show, Gore Show is pretty good too. Ok. See you later. Peace.

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