Speaker 1: Well kind of trains. I'm Joel Weber and Alberic bel Tunis.
Speaker 1: Sometimes in your life you have friends who are like,
Speaker 1: I hit it, I made a ton of money on something,
Speaker 1: or even just a little bit of money, And it
Speaker 1: increasingly feels like that voice comes from crypto more than
Speaker 1: anywhere else. And I had a friend like that, and
Speaker 1: then I started telling you about this story and you're like, well,
Speaker 1: wait a second, we can we can do that in trillions. Yeah. No,
Speaker 1: we we like talking to the people. Um. So much
Speaker 1: of the financial media is analysts and industry people talking
Speaker 1: to each other, and so usually when we do those episodes,
Speaker 1: it resonates a lot with people because they can relate
Speaker 1: to an actual investor doing it themselves. Um. And because
Speaker 1: you're listening to this, you're probably a do it yourself
Speaker 1: investor or an advisor. So I think it's a really
Speaker 1: good type of guess to have. And I agree with
Speaker 1: you Crypto. I mean, what can you say. Everybody's very
Speaker 1: aware of what crypto is. But I will say I
Speaker 1: was at the kitty park the other day with my
Speaker 1: youngest and this one guy was like, oh, yeah, see
Speaker 1: that guy over there. He got into bitcoin or ether.
Speaker 1: I forget which coin it was, but you know, he
Speaker 1: was like, oh yeah, but back in like a you know,
Speaker 1: he's like, it's just like it's like a stuff of
Speaker 1: legends now if you got in early, and it's a
Speaker 1: whole thing. So clearly this is a major area and
Speaker 1: it's taking over a lot of the e t F
Speaker 1: markets in other parts of the country, and soon it
Speaker 1: will be a big deal in the US when they
Speaker 1: approve a spot et F. But there's other ways to
Speaker 1: get access, which will look at today. So my friend's
Speaker 1: name is Shar Burger. I've known her since junior high.
Speaker 1: We also went to high school, uh and college together.
Speaker 1: We're from Oregon originally she's in California and very specifically
Speaker 1: she's into bitcoin mining, which, um, there's a e t
Speaker 1: F that we also found that I also found out
Speaker 1: about through you and her, that we're also going to
Speaker 1: have the guy behind that eat e F, the co
Speaker 1: founder Ethan Vera at Pretty Funds, joined to talk about
Speaker 1: that side of the business. Look, this is going to
Speaker 1: be learning for both of us. We we know a
Speaker 1: lot less than Ethan and a lot less than Schar. Yeah,
Speaker 1: I mean Shar to be clear as fully disclosed that
Speaker 1: she spends upwards of like eight hours a day researching
Speaker 1: bitcoin miners. So in effect, we're gonna have you and
Speaker 1: me and then Shar, who's basically the voice of a
Speaker 1: retail investor, along with somebody who's brought not only an
Speaker 1: e t F to market for bitcoin mining, but also
Speaker 1: does a mining pool. So this will be an interesting
Speaker 1: one because we've never had a retail investor out of
Speaker 1: Mike with us doing some interviews. I'm going to learn
Speaker 1: a ton about bitpoint mining because I know almost nothing.
Speaker 1: I know I know Eric knows very little as well.
Speaker 1: It'll be a fun one this time on trillions bitcoin
Speaker 1: mining e t S Ethan Shar We can the trillions,
Speaker 1: thanks triving us on. Thank you, Ethan. I want to
Speaker 1: start with you because you've been into bitcoin mining longer
Speaker 1: than I knew it existed, I think. So, so what
Speaker 1: exactly do you do and talk to us about this
Speaker 1: transition into the CTF. Yeah, so I'm not as o
Speaker 1: g as Eric alluded to. I didn't join the class,
Speaker 1: but I did start a bitcoin mining company in seventeen.
Speaker 1: I was still going to college at the time and
Speaker 1: basically spent the weekends flying down in Kansas City that
Speaker 1: set up a mining farm. So coming from like a
Speaker 1: finance software background, I wanted to get hands on and
Speaker 1: actually learned that the process of what it takes to
Speaker 1: set up one of these horns end up going terribly wrong.
Speaker 1: I I often cite that there's two things you shouldn't
Speaker 1: do in this world. One is an attack Russia in
Speaker 1: the wintertime, and the second is launch of mining farm
Speaker 1: in Kansas City in the summer. And I happened to
Speaker 1: make that mistake. Um Shortly after that, I started focusing
Speaker 1: on mining pool software and along with some co founders,
Speaker 1: we we built lux Or mining Pool into one of
Speaker 1: the largest mining pools globally. It's currently number two. It's
Speaker 1: number ten in the world and number two in North America.
Speaker 1: We also do things like basic brokerage, so we help
Speaker 1: investors get access to buy machines. We launch other software products,
Speaker 1: and then most recently in March of last year, we
Speaker 1: launched a new company called Greedy Funds, which is as
Speaker 1: a manager specifically focused on bitcoin miners, and launched the
Speaker 1: first bitcoin mining e f from the New York Stock Exchange. Okay,
Speaker 1: so let's just dig into mining for a minute. I
Speaker 1: would when someone says bitcoin mining. This is what I mean.
Speaker 1: This is I did learn a little more about it.
Speaker 1: But when before I did, I just pictured a big
Speaker 1: like a bunch of computers, and I, you know, I
Speaker 1: actually thought that it was spitting out some kind of
Speaker 1: equation that you had to solve, like the chalkboard and
Speaker 1: goodwill hunting or something that like only a computer could do.
Speaker 1: And then I found out it's not really that. UM.
Speaker 1: And I know I'm probably get a lot of crap
Speaker 1: for saying that, but that's the truth. That's what I thought,
Speaker 1: And my colleague James educated me to a degree. But
Speaker 1: can you just explain what are these computers doing and
Speaker 1: how do they get bitcoin for doing it? Yeah, So
Speaker 1: before I jump into the technology behind it and the calculation, um,
Speaker 1: bitcoin mining is the backbone and bitcoin. It serves as
Speaker 1: the consensus mechanism that allows for new transactions to be
Speaker 1: added to the network and blocks to be secured. And
Speaker 1: so there is no bitcoin without the mining process. It's
Speaker 1: really pivotal to it in terms of what these machines
Speaker 1: are doing. So the machines that are securing the network
Speaker 1: are purpose built for one purpose only, which is mining
Speaker 1: bitcoin and other shot to five six variants, and so
Speaker 1: they're they're built what's called an application specific integrated circuit
Speaker 1: and a stick for short, and they can only solve
Speaker 1: this one type of equation. What the machines are doing
Speaker 1: is they're running through a trapdoor function known as the
Speaker 1: hashing algorithm and guests and checking brute force guests and
Speaker 1: checking UH inputs in order to achieve an output that
Speaker 1: would result in a valid block. And so a new
Speaker 1: generation hardware can do a hundred and ten trillion guesses
Speaker 1: per second you plug it in. It puts in a
Speaker 1: hundred and ten trillion inputs and shoots out a trillion outputs,
Speaker 1: and the goal is for one of those outputs to
Speaker 1: be a valid block and add a new block to
Speaker 1: the blockchain and older to add the new transactions and secure. Again,
Speaker 1: it's more about guessing. And that's where I Joe, I,
Speaker 1: I really didn't realize that. I thought I kept hearing
Speaker 1: equation and solving, but it's really just guessing and just
Speaker 1: how many numbers can you different order of the numbers,
Speaker 1: and and I guess characters until you hit the exact match.
Speaker 1: It almost seems like like again code breaking or something
Speaker 1: out of a like trying to basically break upen a
Speaker 1: safe or something correct. Yeah, and that's why the application
Speaker 1: specific integrated circuitsy A six are so much more powerful
Speaker 1: than GPUs or CPUs or any supercomputers for that matter,
Speaker 1: because they're so specific to this one task. Um that
Speaker 1: the hashing algorithm is a trapdoor function. So you know
Speaker 1: what you want to receive on the output, but you
Speaker 1: don't know which input would result in that, and so
Speaker 1: you're the only way to get through it is to
Speaker 1: root force. Okay, sure, I want to bring you in.
Speaker 1: I've talked to you enough about this to know that
Speaker 1: you haven't gone full crypto. But what was it about
Speaker 1: bitcoin mining that made you go? You know, I can
Speaker 1: do stocks, I can do whatever I want, but like,
Speaker 1: I'm gonna I'm gonna double down on this bitcoin mining space.
Speaker 1: What what drew you in as a as a retail investor.
Speaker 1: So I was at the point in my portfolio where
Speaker 1: I was looking for a little bit more risk. Um.
Speaker 1: I was actually just looking for emerging markets, and I
Speaker 1: went down, you know, the rabbit hole with genomics and
Speaker 1: you know, electric cars, um, and I ultimately landed on
Speaker 1: bitcoin mining and bitcoin At first, I you know, started
Speaker 1: stacking stats if you will. And then I just became
Speaker 1: completely fascinated with the economics and the emerging industry. There's
Speaker 1: literally never a dull moment. Something new happens every day.
Speaker 1: In addition to yes, it being a lucrative investment for me, um,
Speaker 1: it's better than any stocker mom soap opera. You could
Speaker 1: be sitting on the couch and ping laundry. I've made
Speaker 1: so many good friends, and I've learned so much about bitcoin. Uh,
Speaker 1: I just I don't even I can't even explain the
Speaker 1: adventure I've been on in the last two and a
Speaker 1: half years. And as that pertains to eat, Yes, there
Speaker 1: really weren't any back that. You know. I had to
Speaker 1: dig deep and figure out what miners were more efficient,
Speaker 1: which ones had better management, which ones had lower electricity costs,
Speaker 1: which one had newer miners. You know. Um, I have
Speaker 1: like a million questions for Ethan because he's kind of
Speaker 1: low key one of the probably most informed people on
Speaker 1: bitcoin mining economics. Let's do this then, So you've invested
Speaker 1: in one company in particular, HUT eight, right, and I
Speaker 1: liken this to like the dilemma that in any investor
Speaker 1: faces is like, Okay, do you do you go long
Speaker 1: on on one company that you're especially fond of, or
Speaker 1: do you diverse find an instrument that you can diversify with.
Speaker 1: So you've got a ton of research on individual companies.
Speaker 1: What do you want to know about an et F
Speaker 1: for for Ethan? What kind of questions do you have
Speaker 1: for him? I think for me is how well how
Speaker 1: do you weight your basket? Right? So there's certainly some
Speaker 1: economic factors you can look at when you're comparing these miners.
Speaker 1: What we've seen so far is that Twitter has loved
Speaker 1: the Halsh rate based metrics, So determining how much compute
Speaker 1: power these each of them own, or their revenue or
Speaker 1: the megawats deployed. What else is that you really want
Speaker 1: to start looking at a little bit further down the
Speaker 1: p m L, mostly because that really showcases two things. One,
Speaker 1: the operational efficiency of the hardware that they're running. Miners
Speaker 1: that are running latest gen equipment released in you know,
Speaker 1: are are better suited than ones that are running twenty
Speaker 1: seen hardware. And second, it shows their their cost of power,
Speaker 1: which is a very important factor for these miners. And
Speaker 1: so looking at kind of metrics that are further down
Speaker 1: the p m L is quite important and not only
Speaker 1: looking at pure compute power or revenue numbers. Um. There's
Speaker 1: there's certainly other economic decisions that we look at when
Speaker 1: when looking at determining the valuation of a miner and
Speaker 1: which miners are good to allocate to. But there's also
Speaker 1: a lot of qualitative factors. Right now, there is a
Speaker 1: two different real school of thoughts between miners. One is
Speaker 1: I want to own the entire stack and be vertically
Speaker 1: integrated from the energy production, the infrastructure to the mining.
Speaker 1: And then the other school of thought is my best
Speaker 1: use of capital is deploying it only into miners. And
Speaker 1: to give tangible examples, maybe a Marathon Digital is in
Speaker 1: that camp where they allocate of their capital into basic machines,
Speaker 1: where somebody like bid farms are Riot owns their own
Speaker 1: farms and so they're investing capital into both infrastructure and
Speaker 1: a six And so depending on your views in the
Speaker 1: market and how it's going to play out, that will
Speaker 1: determine whether you think strategy or shrg B is going
Speaker 1: to be the better long suit to play. I don't
Speaker 1: know if there is like a clear you know winner
Speaker 1: here in the long run. I would say that if
Speaker 1: you are allocating more capital to machines. You're going to
Speaker 1: do very well in a bowl market, but you're going
Speaker 1: to be less resilient when that bitcoin price fall. So
Speaker 1: what are your thoughts on Iris and Iron and how
Speaker 1: they are basically just you know, selling all of their
Speaker 1: bitcoin to build infrastructure and so how that kind of
Speaker 1: they have a completely different strategy than you know, where
Speaker 1: Mara doesn't own the infrastructure, they just own the machines
Speaker 1: and then they hoddle. And then you know, then there's
Speaker 1: HUT eight and bit farms where they they own some
Speaker 1: of the infrastructure and not all of it, and then
Speaker 1: you know, they own their machines and then they hoddle
Speaker 1: their bitcoin. What are your thoughts on those three different strategies.
Speaker 1: And I feel the same, I don't really think there's
Speaker 1: going to be a clear winner. Maybe there will be,
Speaker 1: I don't know, um, but but I'm also seeing that
Speaker 1: with the e t s where like you know, you
Speaker 1: guys have the semi conductors as as the adjacent another
Speaker 1: what is it the Valkyrie one is uh green energy,
Speaker 1: and then the future of finance at gray scale is
Speaker 1: the one that is more sort of like financial payment plans.
Speaker 1: So what are your thoughts on that and how that
Speaker 1: is going to evolve the different strategies. Yeah, so I
Speaker 1: think each trategy has its own validity talking to the
Speaker 1: first question, which is I was selling the bitcoin in
Speaker 1: which they mind every day. If you if you look
Speaker 1: at other commodity of producers, for example, gold producers, they
Speaker 1: don't hold gold on their balance sheet. Their exposure to
Speaker 1: gold is their ongoing revenue and then they sell that
Speaker 1: to USD or Canadian every day. Um. And so there
Speaker 1: there is an approach from some of the bitcoin miners
Speaker 1: and bid farms was the early one where our exposure
Speaker 1: to bitcoin is in our future revue new and the
Speaker 1: machines on our balance sheet. We don't need to take
Speaker 1: a third risk, which is also our treasury. And so
Speaker 1: that tragedy is very useful in bear markets where the
Speaker 1: bitcoin prices going down. But in bold markets like we
Speaker 1: saw over the past, the companies that held more bitcoin
Speaker 1: on their balance sheet ended up performing better because they
Speaker 1: you know, uh, were benefited from that you know, accumulating
Speaker 1: bitcoin and the appreciation of that asset. And so I
Speaker 1: think each strategy has its own merits, but they will
Speaker 1: perform differently in different markets. UM. One thing that people
Speaker 1: don't really look at is the value of the machines
Speaker 1: on the balance sheet. One the value of a machine
Speaker 1: was forty dollars a tear hash. By the end of
Speaker 1: the year's ninety it actually outperformed the price of bitcoin itself.
Speaker 1: So here these miners are sitting with millions of dollars,
Speaker 1: if not hundreds of millions in hardware that is very
Speaker 1: closely tied to the price of bitcoin, and so that
Speaker 1: does represent significant exposure as well there. UM. So that
Speaker 1: kind of talks to like the points of like Marathon
Speaker 1: and holding bitcoin and miners on their balance sheet. UM
Speaker 1: in terms of the semiconductor exposure and riggs, E t
Speaker 1: F so r R A t F invest in both
Speaker 1: bitcoin miners as well as adjacent markets like the semiconductors. UM.
Speaker 1: We did this for for two main reasons. One, ets
Speaker 1: have very strict diversification rules. The amount of bitcoin miners
Speaker 1: in the universe last year was not large enough to
Speaker 1: launch a specific bitcoin mining e t F, and so
Speaker 1: we had to include some bigger names in there for
Speaker 1: the purpose of the e t F structure. But more
Speaker 1: than anything, we think it does represent a big part
Speaker 1: of the overall industry. Bitcoin mining is so fascinating because
Speaker 1: it sits in what I see is like the two
Speaker 1: most impactful and interesting markets of the next decade. On
Speaker 1: one hand, you have semiconductor manufacturers, which has all these
Speaker 1: like geopolitical implications with China and Taiwan. And then the
Speaker 1: other side you have energy infrastructure build out with renewable energy,
Speaker 1: pushed battery storage, everything and kind of proof of work.
Speaker 1: Bitcoin mining sits like smack dab right in the middle
Speaker 1: of those two. UM. So it's a it's a really
Speaker 1: fascinating place for for bitcoin mind be a part of it.
Speaker 1: That's kind of why we allocated a bit to semiconductors there.
Speaker 1: I love it. I guess that kind of leads into
Speaker 1: my another question I have UM in regards to supporting
Speaker 1: bitcoin mining and support reporting the grid energy grid UM
Speaker 1: like like we're seeing with your AIRCT in Texas. I
Speaker 1: was telling Joel the other day, I think it's a
Speaker 1: really going to be interesting like test example on how
Speaker 1: how that can be done efficiently, And uh, I'm curious
Speaker 1: to hear what your thoughts are, like what you see
Speaker 1: moving forward with that maybe across the country in North
Speaker 1: American general, Almost every miner that we work with in
Speaker 1: North America is trying to participate in what we call
Speaker 1: demand response, where they're not acting as a stable load
Speaker 1: on the grid. They're acting instead as an optional load
Speaker 1: on the grid. And so that means that when the
Speaker 1: grid has excess energy, um, they can sell that to
Speaker 1: the crypto minor. But when they have a lack of
Speaker 1: supply and over over demand, then they can take away
Speaker 1: from it. Um. Let me step in here. I want
Speaker 1: to go back to just sort of day in the life.
Speaker 1: If you're a minor and you have I mean, I
Speaker 1: guess there's all kinds of miners. But let's just say
Speaker 1: the company you have, what are you doing all day?
Speaker 1: Obviously these computers are doing this as you call blunt
Speaker 1: force guesswork. Um, are you just making sure they stay on?
Speaker 1: Are you looking at the actual results? And what's it
Speaker 1: like when there's a hit, Like does everybody cheers like
Speaker 1: a siren that goes off? It's one of those red
Speaker 1: flashing lights like you're in a hockey, yeah, or like
Speaker 1: a Ghostbusters when they found a ghost or something, and
Speaker 1: like or I guess a fire a firehouse. Yeah. No,
Speaker 1: it's a really good question. So the companies that don't
Speaker 1: own their own infrastructure run relatively lean teams. There's companies
Speaker 1: out there with a few billion dollar market caps with
Speaker 1: less than ten people and their entire staff. What those
Speaker 1: people mostly were where they're raising money in capital markets,
Speaker 1: talking to investors, legal work, making allocation decisions of which
Speaker 1: machines to buy. So it's a very low input business.
Speaker 1: If you're purely running your machines on somebody else's infrastructure,
Speaker 1: you'll make the decision, Okay, I want to buy ten
Speaker 1: thousand machines from bit Maine. I'm going to send them
Speaker 1: to this farm in Texas. These guys are going to
Speaker 1: run them for me. Whereas if you own your own infrastructure,
Speaker 1: now you have this other layer of complexity where you
Speaker 1: need construction teams, you need on the ground operations teams
Speaker 1: that are monitoring the machines UM and and and of
Speaker 1: course the capital markets and legal side as well, and
Speaker 1: so those types of companies will employ more people. UM.
Speaker 1: The machines, UH, the new generation machines are relatively stable.
Speaker 1: So if you plug in top of the line bit
Speaker 1: Maine machine and a good facility, you're not expecting that
Speaker 1: to go down immediately, but you can expect like a
Speaker 1: one percent failure rate across the year on these machines
Speaker 1: in which you need to start an r M A process,
Speaker 1: send it back to the manufacturer for warranty, replace the fans,
Speaker 1: whatever it may be. Um, so there is some amount
Speaker 1: of babysitting to do it. Our our company isn't a
Speaker 1: minor per se because we run the software. But we
Speaker 1: do own six machines right now and we have one
Speaker 1: person that monitors all six d So, um, it doesn't
Speaker 1: require a ton of human capital, but it does require
Speaker 1: you know, a little bit. And then just back to
Speaker 1: the question, Um, if there is a hit and how
Speaker 1: often does it hit and how excited do people get?
Speaker 1: Like we just can you just take us into that moment? Yeah,
Speaker 1: this is a rabbit hole for us to go down. Uh,
Speaker 1: well we want do we want to talk about the
Speaker 1: mining pool or do we want to go down that direction? Well,
Speaker 1: here we go, so go halfway down, halfway down. We
Speaker 1: don't want to go all the way. My my company, Luxur,
Speaker 1: runs what's called the mining pool. What we do is
Speaker 1: we aggregate hash rate from multiple miners across the world
Speaker 1: so that the chances of a hitting block increases the
Speaker 1: chance of anyone singularly hitting a block by themselves is
Speaker 1: very low because there's only add four blocks per day,
Speaker 1: and so the four of us would pull together are
Speaker 1: each of our computers, and the chances we hit a
Speaker 1: block improves, and then we we dish out the reward
Speaker 1: equally between us um Now, to add one step of
Speaker 1: complexity on top of that, what Luxury does as a
Speaker 1: minding pools we stabilize those earnings. So what we do
Speaker 1: is we pay you out based on the expected earnings
Speaker 1: rather than the actual. The simplest analogy I can do
Speaker 1: is a lottery. Imagine that you have one lottery ticket
Speaker 1: out of ten lottery tickets, and the total lotteries worth
Speaker 1: ten dollars. The expected value of your ticket is one dollar. Right,
Speaker 1: in reality, it'll be where's zero dollars nine times out
Speaker 1: of ten, and then ten one time out of ten? Likely,
Speaker 1: But what Luxura will do is we'll buy that ticket
Speaker 1: from you right off the bat. We'll say, hey, we'll
Speaker 1: come to you. We'll buy that for ninety eight cents.
Speaker 1: So we take that two cents expected value and you
Speaker 1: get paid out regardless. That diminishes the excitement. Yeah, I
Speaker 1: wanted something. I wanted people jumping up and down, hugging
Speaker 1: each other. I guess you've ruined it with this system,
Speaker 1: but it makes sense. I guess, well, now we're going
Speaker 1: to do that all internally, so we just we stole
Speaker 1: all the fun or or when the China. So this happened,
Speaker 1: all of our North American miners had a better statistical
Speaker 1: chance of winning the block, and so all of them
Speaker 1: made a lot of money. And now we're seeing all
Speaker 1: that hash come back on. It's kind of like wall wall,
Speaker 1: But yeah, that was exciting. Yeah, mining economics still improved, Ethan,
Speaker 1: I want I want to just ask, like, when you
Speaker 1: talk to somebody who's not got exposure to to bitcoin
Speaker 1: or even bitcoin mining, how do you explain it to
Speaker 1: them that this is something that they should be maybe
Speaker 1: more aware of. How do you how do you how
Speaker 1: do you speak to the non crypto universe. Yeah, so
Speaker 1: when it comes to like talking to people about bitcoin,
Speaker 1: I get very philosophical. Um, you know, I'm talking to
Speaker 1: them about independence when it comes to the financial system inclusion, Uh,
Speaker 1: it's really like the Internet but for the financial system.
Speaker 1: And are starting to see that play out across like
Speaker 1: various events like the go fund me and the truckers
Speaker 1: and Canada and whatnot. So people are starting to really
Speaker 1: get it, even in the West where historically we haven't
Speaker 1: had a large distress for our government like they do
Speaker 1: in places like South America and some other parts of
Speaker 1: the world. Um So, I think that's the part that
Speaker 1: I really hit on with with investors into bitcoin is
Speaker 1: this is an entirely new financial system that isn't governed
Speaker 1: by any single individual or corporation, and that is extremely
Speaker 1: powerful to have as a backup to our existing system.
Speaker 1: Maybe our existing system works, maybe it doesn't, but having
Speaker 1: a backup is valuable, um in case it fails. And
Speaker 1: what do you get with the mining exposure? Like what
Speaker 1: why why double down on rigs instead of something else
Speaker 1: that's crypto adjacent. So there's a few different ways to
Speaker 1: get exposure to bitcoin mining. There's buying a machine yourself,
Speaker 1: plugging it in, there's buying hash rate contracts, hash rate tokens,
Speaker 1: and then there's investing in the publicly listed minors. The
Speaker 1: first three are more like dividend plays. So you buy
Speaker 1: a machine and you're earning bitcoin on day one that's
Speaker 1: flowing into your wallet, and so it's a very different
Speaker 1: investment profile than investing in the equity of a company,
Speaker 1: specifically on the equity of a company. I think it's
Speaker 1: valuable for a few reasons. One, it can be tax efficient,
Speaker 1: so you can put it in your four one K
Speaker 1: and these tax free savings accounts, and then to its
Speaker 1: access is actually a high leveled play on bitcoin itself.
Speaker 1: What we've seen over the past a few years is
Speaker 1: that the public equities have some torque on the underlying commodity,
Speaker 1: much like senior gold producers do on gold um. And
Speaker 1: so if if bitcoin goes up, you know, two percent,
Speaker 1: we'll see the miners go up some multiple time, which
Speaker 1: is also true on the way down, by the way too,
Speaker 1: So it can be quite painful. And to that end,
Speaker 1: like I just want to talk about, you know, the
Speaker 1: past few weeks have been I'm sure your stomach, you know,
Speaker 1: the roller coaster has gone down. You know, your your
Speaker 1: price in November was up close to fifty five it's
Speaker 1: now about you know, less than half that, And I'm
Speaker 1: just curious, like what's it like to take that, right?
Speaker 1: I mean, you've had this etf for for less than
Speaker 1: a year even, right, and you've you've sperience to high
Speaker 1: and now you're down to the low, Like, what's that like,
Speaker 1: It's tough. We've done it over the past four and
Speaker 1: a half years. I remember in March bitcoin hit three
Speaker 1: and a half k I was in the gym just
Speaker 1: like looking at my phone. I called my co founder.
Speaker 1: I was like, is this all over? Like the past
Speaker 1: two and a half years, Like it's coming to an
Speaker 1: end here. So it's definitely not for the faint of heart.
Speaker 1: There's a lot of volatility now. The asset class is
Speaker 1: still very nascent. It's a small market cap, So I
Speaker 1: would just caution investors that there's going to be a
Speaker 1: lot of volatility and sometimes it doesn't work out in
Speaker 1: your favor. But if you're a long term believer in
Speaker 1: the in this space, then you should start allocating it.
Speaker 1: So this is fascinating, this volatility. You know, we we
Speaker 1: would consider a bitcoin mining et f hot sauce, and
Speaker 1: typically it is applied on top of the very boring
Speaker 1: vanilla buy and hold portfolio in small portions. Therefore, you
Speaker 1: can stomach the heat because it's not your main thing.
Speaker 1: And I guess I'll go back to shar on this.
Speaker 1: Obviously very into this, but this isn't your whole, like
Speaker 1: retirement savings, right, or is this a is this hot
Speaker 1: sauce for you? Or like what, I guess how much
Speaker 1: are you applying here? It's definitely UM my high risk portfolio,
Speaker 1: which is a very small percentage of my networth. That
Speaker 1: being said, I really do believe in in the industry,
Speaker 1: and I think that is it's more bitcoin. Is there
Speaker 1: more mass adoption of bitcoin that it will become less volatile.
Speaker 1: I was listening I can't remember what podcast. I think
Speaker 1: it might have been the Fidelity one with Urine, and
Speaker 1: he said that the that it was just as uh
Speaker 1: was the sharp ratio was the same as a sixty
Speaker 1: forty because of the increase in value of bitcoin over
Speaker 1: time versus the volatility, it's actually the same, which I
Speaker 1: found fascinating. UM. And so I think like for me
Speaker 1: with the miners, I started buying them two and a
Speaker 1: half years ago, so I've argo for less than a
Speaker 1: dollar that had like a huge like up ticket brought
Speaker 1: my net worth up a ton, and then I rebalanced. UM.
Speaker 1: There are times when it's very frustrating because you're like, oh,
Speaker 1: my portfolio was this and now it's that. UM. But
Speaker 1: over time that it inevitably just continues to go up.
Speaker 1: It's kind of like the same experience you have if
Speaker 1: you've been invested in bitcoin for many years. It's like
Speaker 1: you just get used to it and you don't really think.
Speaker 1: I don't think in terms of what the share prices.
Speaker 1: I think in terms of how many shares I have,
Speaker 1: and then I've just disciplined myself to buy more on
Speaker 1: red days versus buy into the momentum, and then I
Speaker 1: just hold and if if something gets really overweighted. At
Speaker 1: one point I had a lot of hut eight um,
Speaker 1: I have trimmed those positions and opened a position and
Speaker 1: core scientific Um, a position in Iris, a position in Marrow,
Speaker 1: which I never did because when I started investing, Morrow
Speaker 1: was a patentrol and they were involved in a lawsuit
Speaker 1: and I just was not quite sure where they were
Speaker 1: going or who their management was. And so well, so
Speaker 1: this is a This is an interesting thing because you
Speaker 1: effectively spread capital before an et F was available. You
Speaker 1: were spreading your assets around a little bit right on
Speaker 1: things that you could research. So what what would keep
Speaker 1: you from from an e T F like Riggs as
Speaker 1: a retail incestor well, I actually do own some rigs,
Speaker 1: and as these e T s E T s has
Speaker 1: UH started to emerge, I'll probably contribute more to RIGGS
Speaker 1: and then as well. I really like the Great Scale
Speaker 1: Future of Finance UM. And they both offer exposure to
Speaker 1: different areas in the market. UM, because it's nice someone
Speaker 1: else is doing the work for me. Finally I don't
Speaker 1: have to do it myself UM. And then I couldn't
Speaker 1: just learn more on Twitter. Sometimes, especially on financial Twitter,
Speaker 1: there's people who just seem to get a lot out
Speaker 1: of studying the markets, and some of the passive investors
Speaker 1: are like, why would you do that? You're like, you
Speaker 1: can have all this free time now that there is
Speaker 1: an e t F for you found these ETFs that
Speaker 1: satisfy you know, what you think are good and providing
Speaker 1: a basket and obviously the diversification is good because some
Speaker 1: will win, some will lose, and this way your your
Speaker 1: volatility goes down and your risk goes down. Do you
Speaker 1: enjoy it enough where you actually I would like to
Speaker 1: keep doing it or does the eat or is the
Speaker 1: e t F gonna make like I guess free up
Speaker 1: your time and you're happy about that? Yeah, you get
Speaker 1: eight hours a day back share. Yeah, that's a lot
Speaker 1: of time. I think I'm going to do with yourself.
Speaker 1: I have. I've managed our families finances and our in
Speaker 1: our in our portfolio for fourteen years, and I've come
Speaker 1: to the realization that I'm actually actively interviewing a family
Speaker 1: office right now because I don't want to do all
Speaker 1: the other stuff, um and because I actually just love
Speaker 1: the bitcoin, bitcoin and bitcoin mining, and I spend so
Speaker 1: much time learning about it that I find myself less
Speaker 1: interested in like the day to day boring like money management.
Speaker 1: So I'm going to take the majority of my net
Speaker 1: worth and just take it off my shoulders, which is
Speaker 1: really nice. And then as far as uh an e
Speaker 1: t F, it'll just be nice to have in the
Speaker 1: small amount of money that I my high risk portfolio
Speaker 1: I want to keep under my management, and I want
Speaker 1: to put chunks of that into the E t S
Speaker 1: but continue to research because it's changing every day so fast,
Speaker 1: so I think it will always be a mix for me,
Speaker 1: and it's constantly evolving. And I think for me, like
Speaker 1: for me to buy Mara with a huge deal, because
Speaker 1: for so long I was like, no way, and then
Speaker 1: I they've really proved themselves to to have their sort
Speaker 1: of their strategy work for them and so I guess
Speaker 1: I've kind of trusted them a little bit more over
Speaker 1: time with my money. Um, so yeah, I know. Moving forward,
Speaker 1: I just I think it gives me more time to
Speaker 1: research the things that I want to research. Like I
Speaker 1: have barely scratched the surface with mining pools because I've
Speaker 1: just been wrapping my head around mining in general and
Speaker 1: the economics behind you know, publicly traded companies. I feel
Speaker 1: like I could I'm going to spend the next year
Speaker 1: learning about that. Ethan real quick speaking of time, at
Speaker 1: some point that all the bitcoin will be mined, correct,
Speaker 1: and then what happens to these miners? Yeah, so there
Speaker 1: will be no new block issuance, and so until then,
Speaker 1: the mining revenue is subsidized by the network in the
Speaker 1: form of newly minted coins. So that's in a hundred
Speaker 1: and eighteen years, but it every four years it decreases significantly,
Speaker 1: So in the next ten years it will be very small.
Speaker 1: After the only amount of revenue going to the miners
Speaker 1: will be through a transaction piece. If I send you
Speaker 1: bitcoin right now, we'll include a little bit of bitcoin,
Speaker 1: then it that will go to the miners. And so
Speaker 1: in order for the network to continue the growth, that
Speaker 1: it has in security of compute power. We need to
Speaker 1: see an uptick in bitcoin price for for that to
Speaker 1: continuously be secured at the level it is today. So
Speaker 1: I want to bring it back to Riggs. Then, you know,
Speaker 1: if if we had been talking to you a couple
Speaker 1: of years ago, and you know, you could have forecast
Speaker 1: what where you've where you've gone now, right, just you know,
Speaker 1: imagine fast forwarding into the future. What what do you
Speaker 1: think RIGGS is going to look like in you know,
Speaker 1: give it three years. What's the space going to look like?
Speaker 1: What are you gonna be investing in? So one of
Speaker 1: the reasons we chose to go active management was for
Speaker 1: that reason. We want a mandate to really react to
Speaker 1: market cycles. And we hired West Fulford, who is the
Speaker 1: old CEO of bit Farms, knows the mining industry like
Speaker 1: pretty much no other and he is the portfolio manager
Speaker 1: of the fund um so it really allows him flexive
Speaker 1: ability to kind of attack some of these opportunities that
Speaker 1: we see in the market moving forward. I guess three
Speaker 1: years is hard to determine, but I think over the
Speaker 1: next year you'll start to see a lot of new
Speaker 1: entrants come in. There's a lot of SPACs and i
Speaker 1: pos on their way um, as well as a lot
Speaker 1: of the Chinese mining giants moving over to the US.
Speaker 1: I think those represent really good opportunities because they typically
Speaker 1: traded a discount to their American peers, mostly because of
Speaker 1: their communication and another uh perceived notation of them. But
Speaker 1: they're massive companies with a lot of access to capital
Speaker 1: and expertise in building over the past five years. So
Speaker 1: I think there's gonna be a lot of opportunity in
Speaker 1: the next year or so to invest in the Chinese
Speaker 1: names versus some of the American names are the ones
Speaker 1: that we all know today as the Marathons and the
Speaker 1: Core Size and the Riots of the world. Okay, I
Speaker 1: have one last one though, Joel completely off topic, but
Speaker 1: we got someone who went to high school with you,
Speaker 1: so I gotta I can't let this go. Sure, um,
Speaker 1: you know what was Joel like? Like, what group was
Speaker 1: he in? And how much has he changed since high school?
Speaker 1: You know, Joel can really get along with any of
Speaker 1: the groups. He was definitely uh, the smart, the smart kid,
Speaker 1: but he also played sports and you know he didn't
Speaker 1: He was pretty straightlaced, but he in college could definitely rage.
Speaker 1: We had some good time. So he like in other words,
Speaker 1: he was he was one of those kids that was
Speaker 1: like kind of pent up, and he hit college and
Speaker 1: he went wild. Well from well from my point of view,
Speaker 1: because I did my part. I did some partying in
Speaker 1: high school and I remember seeing and at at it
Speaker 1: he was in a fraternity. I remember seeing Metakager at
Speaker 1: his fraternity and he was having a good time, and
Speaker 1: I thought, wow, I got it. Okay, I've known guys
Speaker 1: like that. I started like junior of high school, so
Speaker 1: I kind of had a little head start into college,
Speaker 1: but definitely colleges where I think most people start to
Speaker 1: go a little wild. It was completely healthy though for
Speaker 1: him he has always uh main pained h balance yeahs,
Speaker 1: which is why I co host a podcast called Trillions
Speaker 1: about E t F s. Okay, I want to I
Speaker 1: want to eatan. I want to give you m the
Speaker 1: final question. It's a question we often ask guests on
Speaker 1: on Trillions, what's your favorite E t F ticker other
Speaker 1: than your own favorite E t F ticker? UM, Maybe
Speaker 1: not to give one of our competitors to shadow, but
Speaker 1: w g M I is a is a nice one.
Speaker 1: They got there and I love the like meme factor ones,
Speaker 1: which really speaks to like how the market is is
Speaker 1: looking these days. Um it's really easy for traditional investors
Speaker 1: to like overlook how impactful memes can be, and that's
Speaker 1: why we went with Riggs to um. So yeah, anyone
Speaker 1: with the meme I'm a fan of Alright, sre Ethan,
Speaker 1: thanks so much for joining us on Trillions. Thanks for
Speaker 1: listening to Trillions until next time. You can find us
Speaker 1: on the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify,
Speaker 1: and wherever else you like to listen. We'd love to
Speaker 1: hear from you. We're on Twitter, I'm at Joel Webber Show.
Speaker 1: He's at Eric Baltunas. This episode of Trillions was produced
Speaker 1: by Magnus Hendrickson. Frincesca Levy is the head of Bloomberg Podcast.
Speaker 1: Bye o