Specialist
Former executive at Bitfury Holding BV
Agenda
- Crypto mining industry and implications of Bitcoin and Ethereum's volatile pricing, as well as supply chain issues with ASICs (application-specific integrated circuits) hardware
- Impact of China’s crackdown on cryptocurrency transactions and mining
- Assessment of key players – Riot (NASDAQ: RIOT), Marathon Digital (NASDAQ: MARA), Bitfarms (CVE: BITF) and others
- Outlook and trajectory of profitability in the crypto mining industry and impact of Ethereum transitioning to PoS (Proof-of-Stake)
Questions
1.
How do you assess the relationship between the two main cost inputs of bitcoin mining – power and equipment cost – and the price of bitcoin? How do these influence bitcoin mining’s broader economics? How do you think about those economics when considering bitcoin at, say, USD 60,000 vs USD 30,000 or USD 90,000?
2.
You mentioned the difficulty, which might be quantified as the hash rate, tends to lag behind the price of bitcoin. How long is that lag?
3.
What are the implications of the lag time to reach equilibrium potentially being considerably longer than the 8-10 months it was last time? How might miners’ profitability be affected by that greater lag time?
4.
You mentioned the lag to equilibrium we were discussing could be greater this time than the 8-10 months it was last time. How much of an impact does China’s crackdown on cryptocurrency transactions and mining have on this lag?
5.
What do you think about the broader China crackdown on cryptocurrency mining? How might it impact the geographic mining split between the US and eastern Europe as a major hub?
6.
I understand the US has certainly benefited from the China crackdown, but what are your thoughts on eastern European countries such as Kazakhstan as a welcoming environment for bitcoin mining compared to the US?
7.
Hash rates fell roughly 38% from May to July 2021. Do you have anything to add on how this impacts players? What are your expectations for the hash rate trajectory? You suggested they couldn’t go much further than 300 exahashes.
8.
How do the shifts in hash rate impact the pricings for ASICs [application-specific integrated circuits], considering the current environment as well as the dramatic fall throughout spring and summer 2021?
9.
What’s the state of the hardware supply chain, including or accounting for the crackdown in China? Could there be any positive impacts from the crackdown? Presumably some hardware may be sitting in warehouses, falling apart due to humidity, but presumably some will be exported to other regions. I know that there has historically been a major backlog with the S19s, even before the supply chain issues with chips.
10.
Could we discuss the relationships across the miners, those that provide the hosting and the power companies? Traditionally, miners were deploying the hardware, the hosting providers managed that for them and the power companies provided the energy. How do you expect this traditional relationship to change? Marathon CEO Fred Thiel was claiming that power companies want to push more into owning infrastructure and eventually become miners themselves. What do you think about that? What are the incentives for the traditional relationships to change?
11.
How do you think PPA [power purchase agreement] terms might change as power companies are more incentivised to push more into owning infrastructure and eventually do the mining themselves?
12.
What are your thoughts on the key players such as Riot, Marathon, Bitfarms, CleanSpark, Cipher Mining and even Stronghold Digital Mining, considering their relative strengths, weaknesses and differentiators?
13.
Some players are pure play, only focused on the mining aspect and ranking the infrastructure such as Marathon. How do you assess players when we contextualise that with the threat of longer-term profitability due to hash rate growth as well as the next halvening that’s upcoming? Who may be better-positioned than others in the face of that profitability in jeopardy, from their strategies in being a pure play or trying to own the infrastructure as well?
14.
Players such as Riot and Bitfarms have around eight exahash per second, while Marathon has roughly 13. What do you think causes this difference in hash rate? How do you expect Riot and Bitfarms to adjust to increase their hash rates to be up to par with Marathon?
15.
When we consider the arms race you mentioned, and I think Fred Thiel also alluded to this, might we reach a point where there’s only room for the 800-pound gorillas and none for smaller market entrants, given the efficiency and economies of scale of these larger players? Do you think this could be where we’re heading, where there will be a handful of winners and plenty of losers?
16.
What do you think will be the impact of Ethereum moving to PoS [proof of stake] on the Ethereum mining market, specifically considering the equipment used on the Ethereum side?
