Bitcoin Miners, Is The Worst Over? | Will Clemente

Transcript

it is such a bad time to be mining and yet hash rate's mooning right now um so I have kind of like two two I guess theories on that either a but like super cynical take um would be like maybe someone's trying to squeeze out the other inefficient guys like Rockefeller style and you know maybe they have like a huge Capital base right and they're able to like temporarily operate like either at break even or like slightly underwater but at the same time they can squeeze out all the inefficient guys and then buy all the rigs cheap what's up everyone we've got another episode of zero X research here a show hosted by analysts for analysts where we bring on the top research Talent project Founders and thought leaders in the

space to ask the hard questions if you're deeply in the weeds of crypto then this one's for you I'm your co-host Dan Smith and I'm your co-host Sam Martin and this show is made possible thanks to our incredible sponsors channelysis and Flipside today we're joined by Xerox pibbles and Westy from the blockworks research team uh guys let's hop right into the hot seat cool Throne Westy we can start with you who you got for your hot seat yeah I can start us off here uh the hot seat I got some crypto tech stocks so I know last week the week before we had some pretty bad earnings when it came to tech stocks in general with a snap being the main culprit but this past week we had some pretty bad earnings calls for crypto

related stocks so the biggest one was coinbase basically we saw their revenue was definitely not up to par with what we were expecting although they did have an increase in subscription Revenue which is sort of where they're heading in the future so there was that caveat but um the main source of their revenue came from interest payments which was as a result of higher uh federal funds rate and so just a side of the times and so yeah the revenue numbers weren't good and it hasn't been trading very well uh since those earnings came out I think it's down um like 10 since and then we also saw meta which um I'm gonna lump in here because they're

investing pretty heavily in the metaverse but yeah their earnings are pretty abysmal as well um advertisers are just not paying as much on the platform and one of the interesting things is that it looks like they're gonna be shelling out uh 250 billion dollars over the next 10 years into this sort of metaverse platform which I think investors didn't really like because that's like the the biggest investment we've seen in anything since the Apollo Moon missions on like an inflation adjusted basis which is just absolutely wild um I know like I'm a Believer in the metaverse as a whole concept but in Facebook specific Vision like I don't know if it's gonna work out exactly as

planned and I think that's what a lot of people are thinking but I mean that's definitely the the hot seat for me and then cool Throne be Eric Voorhees um for those that didn't see the conversation between him and SBI phone bank lists I highly recommend you check that out basically they had a debate about crypto regulation like what is what does that look like what should that look like and Eric Vorhees very eloquently put sort of the ideologues case for crypto like why we're here why we're building and it was just beautiful to hear um and so like people within crypto definitely loved the message that he was spreading but at the same time what was super interesting is that people in DC

actually thought SPF won that debate whereas people in crypto thought it was Eric that won by a landslide so I thought that conversation was super interesting and I loved the way Eric Voorhees sort of put um like why we're building and why like we shouldn't be accepting bad regulation into the space just uh hit on your hot seat there definitely agree uh it's pretty brutal when you see I think like you know Facebook's our meta is now wiped uh wiped seven years worth of gains out um so yeah you know in the industry we get a lot of heat for for being an overly volatile especially on the downside then you look at things like this as you know like meta is held by plenty of uh institutional grade

investors that they clearly know what they're doing so it's it's interesting to see this and when you put things in perspective of Are We exploring which which uh New Frontier are you exploring uh space or the metaverse that's uh I actually hadn't heard that comparison before that's that's a wild uh wild analogy there I definitely am like fascinated by the metaverse and think game five has a real uh use case for crypto but wow that that's kind of astonishing do you think this is going to pay off for meta and that is the question I mean they pivoted their entire name to meta like this they're they're all in um and I guess it's gonna work out like I think so like I think like in general

they're they're building towards that future I think maybe they might be overpaying or over investing but at the same time I think it's gonna work out because of the major technology companies they're the first ones to really recognize that that's where the future is going so I I think it's going to work out and maybe um at a stock is a good buy but in general like no one really knows at this point on investors I mean according to the market don't think it's a good idea or don't think it's gonna work out but yeah I guess we'll see I'd take meta over Snapchat though I mean there's no way in hell I'm buying a Snapchat subscription like absolutely not so at least Med isn't working towards something a little bit bigger is is what my take would be there I've yet to listen to the uh bankless debate with

Eric and uh SPF but that's been on my to listen to list so I'll be sure to do that this week people you want to rock and roll what you got for Hot Seat cool Throne yeah for hot seat I have the art gobblers mint freedom in immediately priced everyone out because that floor instantly went to 10 eth the only way to get free mint was to hold hands with someone on paradigm for lack of a more obscene phrase so hand-holding with Paradigm um everyone got priced out immediately everyone was super mad and now you look at the floor and it is down 50 from launch

and you saw the goo token which was trading at three thousand dollars off the bat is now thirty dollars so definitely hot seat and then for cool Throne I have anyone who was holding art blocks of any type they got free friendship bracelets last week There's a 18 000 Supply and each art blocks holder can mint two for free and they're sitting at like a 0.2 floor right now so that's some nice free money for all the money anyone lost on artbox I know you're uh you're an nft guy were you dabbling in uh some of these friendship bracelets I claimed them and sold them too early

and uh now I'll just watch him no yeah going back to the gobblers that was definitely one of the most sought after white lists in a while I know like I was trying to basically add a draw tool and they were accepting anyone that Drew uh good art with their uh tool and I I tried my best I drew like a panda and a couple other things and just tried to get what you had to get the art gobbler the critics attention it was this like whole complicated thing I I spent way too much time trying to get on this white list and didn't get in uh yeah you definitely had to hold hands with some Paradigm folks to get that it's pretty

brutal and for the audience Westy is uh Westy's actually very impressively artistically talented a bit of a singer uh an instrumentalist himself so um you can imagine his his images were significantly better than myself and the rest of us out there trying to scribble with uh with a mouse and key yeah I know mine was a terrible attempt so I'll I'll move on to my hot seat and cool throne for the hot seat I've got Solana again I think I put them in there last week but TBR is below 900 million they're flipped by arbitrum and optimism to the leading ethyl twos you know the mango exploit was bad there's a lot of drama going on with royalties and nfts um and that's like a huge aspect of the

Solana ecosystem as nfts it's kind of like they're bread and butter and then it's also down about seven percent as of recording with the SPF CZ drama we've been seeing on Twitter uh I guess I will caveat with they had a big Google Cloud partnership and they also have intent to partner with Instagram as well as polygon on their nft sales so I guess that's kind of how you could rebuttal there but I still have Solana on my hot seat I'm not a huge fan in terms of cool Throne I would have to go with polygon they've got Partnerships with meta to enable the nft minting and trading that I just mentioned on Instagram although Apple still gets their 30 cut of course and then DraftKings runs uh the 12th largest validator last time I checked on

the proof of State commit chain and you got Starbucks and Reddit nfts the list really goes on JPMorgan executed their first D5 trade on polygon last week and mihalio or mihalia I might be botching that pronounce pronunciation but he said on Twitter that a tokenomics revamp is coming up pretty soon so I'm looking out for that uh yeah so I guess they're uh they're all my cool Throne yeah going back to the Solana stuff like I definitely get where you're coming from to but I heard like this week because that the their break point conference that there were a lot of like really cool builders in that like some people said it was like the most sold out conference that they've seen like the most crowded which is pretty surprising given like you said that their tvl has dropped off a cliff

um and so maybe there's more coming down the pipeline and I also know there's people raising for building like um c-level virtual machine execution environments and Roll-Ups on like other base layers um and so you know maybe it ends up living on but yeah things right now definitely look Bleak but there might be some inklings of a better future I mean I definitely hope so yeah I saw on Saturday the uh the Google cloud news they're running a validator and Solana went like 20 in a few hours while I was away from the desk and eating breakfast so it was cool and then also jump has something it's called like

fire dancer but they're like they're doing something with Solana I don't know what it is but they're shoving like tens of millions of transactions through on their own runtime and it's supposedly pretty good Tech if you guys had to hold a bag of avax or sold for a year which one would you choose oh I'm going Solana I think there will be a use case for like high TPS chains um even if we don't know what that is today right like I like how they're building out in this like mobile stack no one else is even like thinking about that direction let alone building in it um and so yeah it's like you know you always hear the the comparisons like when the internet was built nobody ever

thought you'd be getting in a car uh driven by a stranger right like uber that was just not conceivable at the time and you know when we're building this new technology of blockchains like I don't we definitely don't know the end state of where this is going uh I just can't really conceive uh what this technology is capable of and there's a pretty good probability that you know High throughput chains will have a role in the future so I'm going Seoul I'm also a team soul I mean Avalanche has Steve Harvey bringing family game night to the blockchain Solana has the phone I mean they did Coachella tickets so there's I know you're playing that Steve Harvey game yeah that's my favorite game um no I I'm going Seoul as well I mean

these guys already said it they just have way more going on at the moment I mean they just announced what meta's using them as nfts the mobile stack as they said it seems like there's a lot of Builders whereas Avalanche I've heard basically nothing in terms of big Integrations Partnerships and whatnot and so yeah I mean at this moment I'm definitely going Seoul all right Sam you know what that means forces you into the corner of taking the bull case for avax what you got I literally can't do it I would take Seoul and I just had them on my hot seat so I yeah I'm not taking Harvey fair enough fair enough well my uh my hot seat cool throw and kind of centered around this weekend's drama um you know I think that I was writing

our newsletter today which you know Shameless plug if you're not subscribed to the blockworks research newsletter definitely do so we'll throw a link in the show notes for sure uh but I found this quote and it was you can't underestimate how traumatic divorce is for the children uh you know I think everyone's really losing with these this Finance versus FTX battle uh you know these are two massive figureheads in the industry that have the full capability of pushing this space forward so I'd really love to see them kind of like but maybe not necessarily working together but not like adversely spending their time uh attacking each other uh on Twitter or on chain either of those I just we just don't need and I need to kind of put some context around what all happened uh I think it was like last

week or maybe the week before there was uh some reporting that came to light that kind of was highlighting hey maybe Alameda is not as solvent as we thought but you know Caroline the CEO of Alameda quickly tweeted out like a correction was like Hey you know we have uh you know over 10 billion dollars of assets that weren't on this circulating report like we're you know everything is shored up we're good to go back when the liquidity crunch happened when during the 3ac collapse you know all these debt providers really like crunching it like with with uh calling back these loans and kind of tightening their books uh and you know Alameda did compliantly with no problems so you know it's hard to believe that FDX and or uh their like sister trading firm would actually be uh truly insolvent um you know just that

would be a real shock like 3ac was definitely surprising but I think a lot of that kind of we just got blinded by the the bull run more so than anything else and like thought these guys were Geniuses but you know they were just levered along everything in a bull market whereas FDX is like generating a ton of Revenue uh they they do have some like they're on the Alameda side they do have aggressive trading strategies that aren't necessarily the most uh Community friendly but um you know it's a little more complex in the operation they're running um but it got interesting when CZ of Finance kind of saw this uh this insolvency drama and was like openly stated he was willing to Market dump like 500 million dollars of ftt which is a highly illiquid token

right so if you're just going to Market dump this you're gonna you're gonna be causing serious externalities on market price uh and Caroline tweeted back at him pretty quickly it was like hey we'll buy all of this at 22 dollars which was pretty cool to see she's out here defending the line against a nine-figure dump so that kind of throws any insolvency risk out the window and this kind of led to SBF and CZ kind of going back and forth on Twitter but this morning I woke up to a pretty funny tweet that from SBF that said FTX is fine assets are fine um I've gotten in uh one too many disagreements with my girlfriend to know that when someone tells me I'm fine they are most certainly not fine so that was kind of this red flag for me but again

like I just really don't see a world where where FTX is actually insolvent so you know for a winner and loser of this debate I'm going hot seed SPF I feel like he's just been in the news for all the wrong reasons these days and more so the driving Factor here is CZ on the cool Throne because anytime you can Flex a nine figure Market dump on somebody that that's just badass there's no other way around it curious if I do you guys have any hot takes about this I mean the assets are fine tweet definitely gives me some like steady last deploying more Capital type Vibes um but no I I agree with you that like it doesn't like I don't think they're

even close to insolvency I think this was just kind of definitely a weekend entertainment as it was but um yeah I think funds are safe too things are fine um it is interesting what's sort of happening on chain in terms of Almeida dumping up on a bunch of random all coins um and sending funds back and forth it does seem like there's some sort of scrambling going on but specifically what's happening I don't know um but yeah overall I definitely think the insolvency rumors are just way overblown everyone loves fear porn in this uh bear market so yeah it is what it is yeah I'd say the only thing it confirmed for me was I'm willing to pay eight

dollars uh for Twitter every month I mean it's not often you get to watch billionaires just go back and forth in the open on the solvency of their company so I'm all for the Eight dollar sub hell yeah I'm heavy team CZ just because he's given multiple opportunities to anyone who's paid attention for like the past three years to just make like crazy wealth like he who complies with regulation when it's time to comply with regulation but until then it's like Lawless so he'll continue to just offer anything he can versus Alameda I mean if you're trading on FTX I know people who specifically don't trade on FTX because

Alameda will eat your lunch just Market making that like you will have a better chance winning some trades on finance yeah no kidding Sam I think you win the best take though eight bucks is a drop in the bucket for this kind of drama but uh yeah these are good segue to kind of move into our flip side Dash review so flip side is one of our great sponsors who's so willing to uh to work with us and make this episode possible and uh you know we're gonna do a little bit of a Dash review here so uh for those of you who are unfamiliar flip side is an open source data provider that Aggregates blockchain data and makes it available for anyone to query and build uh dashboards for review so we're going to take a look at one of

these dashboards here I'll throw this up on the screen we're gonna do a little bit of a deep dive uh and and kind of walk through what the art gobblers collection is uh and it's got some unique uh economic incentives here so you know Pebbles can you can you walk us through kind of what this uh Project's all about and some of the uniqueness to it yeah so to start art gobblers is Rick and Morty founder Justin Rollins foray into nfts he did this with Paradigm they've been working on it for a while they they hyped it up a lot so the biggest thing with our gobblers is it was a free mint if you could get on the white list by stroking paradigms ego so a lot of people were really

displeased like we talked about earlier with the mint process and how that was split up a couple cool things about art gobblers is that it's basically like a slow motion Olympus dial so you hold these gobblers and they generate goo which is an erc20 token so the more goo you have in your grobbler's tank the quicker you get goo and um the reason for goo or the use case for goo is to Mint more art gobblers so they only minted 2 000 at the start the Mac supplies 10 000 and by holding gobblers you can get a ton of goo and that's how you'll mint more

gobblers and then there are some legendary gobblers who will start at a Dutch auction of I think 69 gobblers to Mint a legendary gobbler so the the play here is for people to pull together their assets get as much goo and gobblers as they can and then hopefully mint the legendary another cool thing is you can use Goo to Mint pages and pages are what you can use to you can commission an artist or you can draw yourself you can draw different art on these pages that cost you and then a gobbler can eat pages and then once they eat that page they'll forever have that

piece of art in their stomach so there's a lot of fun mechanisms going on with art gobblers so good Tech but um terrible distribution so okay okay let me let me try to unpack this for a second so our gobblers is an nft collection um with these hilarious looking guys if you can like here like I mean what what are we looking at here I love it um definitely get the uh Rick and Morty vibes from these guys with it without a doubt and so I have my gobbler he is creating goo um and the Mork goo that he creates and his stores in his tank then the more the the quicker he produces more Goose

so it's sort of like the more the merrier and so I guess I I guess the goal here would be to accumulate gobblers and Goo uh and it's sort of like you can see where the Ponzi is coming in here don't want to be the last one holding goo but you gotta time it right uh because as soon as you start you're dumping your goo you're making less goo is that kind of is that kind of how you see this that's correct and so like awesome well then I'd love to kind of walk through this dashboard here I want to give a quick shout out to the the author of this dashboard for Hadi Naveed again using the power of flipside's on-chain data he was able to throw this together um but yeah can you take us through this dashboard and you know there's a lot of

cool information on here I'd love to get your take on kind of how you see this playing out yeah so if you scroll down there's a chart that shows top collections by volume and because these were 10 8th out the gate you can see right there art gobblers volume compared to other collections in October it just about flipped crypto punks and it was running for all the Blue Chip collections so pretty crazy in the middle of a bear Market that they could just pump this volume like that and this is actually a really cool chart put together that visualizes that well yeah so it looks like we did about 15 and a half million dollars of volume in

the art gobblers where the crypto plunks were at 18.96 uh board Apes at 27 uh more loot at 61 almost 62 million and terraforms at 96. so they kind of ranked here in in fifth and yeah definitely overthrow or almost overthrowing or even being in the conversation with like crypto punks and board Apes is uh as somebody who is just not an nft Guy this is that's you know that is still pretty impressive to see the the adoption that this is getting the real issue with art gobblers is that there's like maybe less than 10 wallets I can't really see that but there's less than 10 wallets controlling most of the supply of gobblers because if you're trying to get

the most goo or if you want to get a legendary gobbler then you kind of have to pull your gobblers with like a different Dow or multi-sig or something to stand a fair chance at even trying to win this game so we have someone who has like a hundred gobblers being a number one wallet that's pretty insane to coordinate that much with so many moving parts to do the math of like who gets what yeah so is this just like you know groups of like telegram groups just sending all like all their gobblers to one wallet and just letting these multipliers play off each other and maximize the amount of Goo they're sure 100 and then they're trying to Mint more gobblers to hit that legendary gobbler

but then it's also there's so much Game Theory involved with like when do you empty your goo to start minting gobblers because the price to Mint gobblers goes down if no one mints but it also goes up if people start minting so it's just like a huge like I don't know it's a game of hot potato a chicken or something like you just have to see when the buy pressure comes and how you're going to Mint the most right that makes a ton of sense and you know I just want to give one more shout out to flip side here they have just have the most comprehensive data with bronchand data and crypto and it really gives you the the best insights you need to work smarter and you can instantly quick query all of this data for free

right so this this incredible author built this dashboard without having to pay for any of this this data which is just an incredible uh you know it's kind of the part of the ethos of crypto it's the one of the you know beautiful things about working in this industry uh and so yeah I just want to say we're going to be doing like a a weekly dashboard review where we break down a new dashboard built by a Community member and we're actually doing a 75 bounty in partnership with flip side so be sure to check out the link in the show notes uh check out that Bounty and maybe you know if the winner of that Bounty will actually be the dashboard we end up reviewing so uh you know we're always looking for cool dashboards on Hot Topics so feel free to hit us in the DMS on blockworks res at

Twitter um and uh yeah we always have to break down a new Dash and one more thing I want to check out here uh just before we go is the goo price chart so uh back so yeah so gobblers launched on October 31st late in the evening so on November 1st and leading into November 2nd Goose started trading and we see that it opened up around you know floating in that one to three thousand dollar range in his subsequent only down 99 98.7 percent to 27 bucks that is just a uh a wild collapse of asset price but um I bet you that uh one wall with 79 gobblers stashed away is still

collecting all this goo and it's probably half the reason uh well why we see this price chart looking the way it looks yeah I feel bad for anyone who uh tried to chase the goo chart that's just down horrendous poor guys but anyways before we head over to our interview with Will Clemente I want to take a second to thank our other wonderful sponsor chain analysis they're one of the leading crypto analytics providers that are helping legitimize our industry they enable investors to track on-chain uh wallet movements with relative ease they also offer some great research in the space which is available for free on their website and we can link to that in the show notes they also offer extremely in-depth courses on all things crypto and they're very much worth checking out chain analysis is building the tools our

industry needs to bring in the institutional Capital so be sure to check them out in the show notes all right we got will Clemente here uh thanks for joining us on the second episode of Xerox research will just launch the research firm called reflexivity research it's an Institutional grade research firm that focuses on helping Chad fi invest their trillions of dollars into Bitcoin and digital assets so thanks for coming on will hey thanks a lot for having me on guys it was nice uh beating you Sam in New York and I know back then we're like hey we'll have to do something together so it's nice to finally hop on a pod and jam yeah absolutely I was stoked when I ran into you because I've been following you on Twitter for a while so it's nice to finally uh get to talk with you face to

face but uh before we dive into the report that you uh that you wrote that's really solid on the state of uh Bitcoin mining I kind of wanted to get your take on the SPF CZ drama that we're seeing all over crypto Twitter yeah man I mean look I'm just I'm just here with the popcorn I I think it's like super entertaining I've just been following along don't really have you know a crazy amount of insight I did see earlier today though um it seems like potentially uh there was like an OTC settlement of the FDT that binance wanted to offload I saw some like posts about some like on-chain transactions from uh Larry over up the block and hasaka posted as well so it seems like potentially um that that's been settled which I think would be you know bullish for ftt short term and Solana because there's

been like a boatload of shorts that have piled in on both of those um so paying attention to that potentially from like a trading perspective my pump some of those things um if I can confirm that uh and then yeah I guess the other piece would be you know on chain it seems like uh there's been a bunch of stablecoin outflows from FTX um so you know there's definitely some people that have been kind of nervous about the whole thing I think rightfully so after uh you know everything earlier this year with like you know three AC blowing up um all these you know centralized lending uh you know lending entities that you know either blew up or took a massive hit so uh yeah I mean look I think it's just bear Market things right everyone's like super on edge with you know all the people blowing up left and

right and all you know this counterparty risk that we saw exposed earlier this year so yeah like I said I'm just kind of observing for now yeah I'm with you on that will um it's been interesting and agreed like the Sunday night drama who needs uh reality TV uh when you got things like this I'm a house of dragons fan so it was nice to have my first season or my first Sunday without House of dragons get replaced by some good drama uh two percent trading range right so at least we got some you know form of entertainment I guess it's kind of the silver line exactly yeah it's tough to imagine you know FTX to actually be in uh you know true financial trouble here but um yeah it'd be interesting to us to watch this play

out and I just am blown away like CZ being able to like make a flex on Twitter with with the nine figures a nine figure threat like that's that just never gets old to me um such a crazy industry that we are we work in but uh it's kind of how the system goes um so yeah I'd love to dive deeper into that report uh and kind of get get your take on kind of what the public Bitcoin mining landscape looks like uh you know you've wrote a great overview that kind of highlighted four core questions around this uh this industry and kind of like you know what are the current marketing conditions look like and why has that been such a difficult uh environment for these miners to succeed in as well as who these public miners are and which one's our best position to

survive the spare market and then kind of like what you expect to see the space moving uh the direction that we're moving in going forward uh so you know kind of like take those uh one one at a time and start with you know really just what the current state of the market is and kind of how this perfect storm of spot price hash rate and energy cost is kind of really working against these miners yeah sure no I appreciate the the segue there yeah I think look um this is something that has taken place during every single you know Bitcoin cycle and quote-unquote Bitcoin bear Market um so in terms of like the kind of dynamics that are going on it's not into anything entirely new but I think what's different this time is a you have people that took out these massive loans to

purchase Rigs and BTC in the bull market uh and on top of that just generally like you know we have these massive publicly traded companies now that they have to post their financials right so where historically you kind of knew from a first principle standpoint you know the kind of underlying you know dynamics that we're making the the conditions like unfavorable for miners now you can actually see you know on their balance sheets you know what's actually being you know taking place so I think that that's really interesting to like actually see it unfold I guess just to like preface before getting into like the actual like public bite uh landscape itself like just highlighting from like first principles standpoint like what's going on that's making the conditions so bad for minors

so if you could you know think about miners positioning and like how they approach the market essentially um the way you can think of it is they're long Bitcoin uh spot price and their short hash rate and also short energy so obviously as bitcoin's hash rate increases there's more competition to mine Bitcoin and it makes it more difficult for uh you know a miner that hasn't increased their mining capacity to get the same block reward that they were getting before and so what happens traditionally uh in these kind of Bitcoin Cycles is miners serve as like a very Pro cyclical Force so in the bull market they tend to hold their VTC and then in the bear Market they become

forced dollars and the reasoning behind that is because as bitcoin's price is kind of ratcheting up you know going you know five five ten acts in in the Bull Run um you know you have all these people not only that are looking to buy you know BTC itself um but that are also looking at um you know the Returns on mining BTC over the you know prior year or two and say oh wow look if if this price trend continues you know this Bitcoin thing and you know it might be a great time to start mining it's like printing free money right and so all these people decide to get involved in Bitcoin mining and you have this massive increase of new machines that are ordered now the thing is there's kind of a lag between

when people order those machines and when they actually get plugged in and the reasoning behind that is first of all they have to get manufactured and historically you know there's been a very small number of people that have been able to manufacture these machines because it's such a specialized thing um you know these these machines are designed specifically to hash sha-256 and so you know there's a lag between when they're manufactured when they're delivered and then also there has to be you know shelf space that's built out to you know house the miners and infrastructure to house the binders so all of these things take you know several months um to to get from the point of saying hey look I want to get involved in money to actually you know being up and running and so historically the kind of

peak and hash rate has lagged that of the peak of of the Bitcoin market price so I think the the clearest example so we look at 2017 Bitcoin obviously peaked at you know twenty thousand uh hash rate peaked out I think it was two months after something around that and you know that's because of that kind of lag of when the machines are able to actually get up and running now what happens for for the miners on the network is um it compresses their margins so you know as we mentioned the more people that are mining uh the more competition there is at the same time the Bitcoin price is declining um so you can look at something called hash price which takes a price divided by a hash rate so essentially the you know the price per hash um this is like a good gauge for looking

at essentially like minor margins and so you see all that you know compressed heavily in the 2018 fair market as half continued to ratchet up but bitcoin's price continued to push down uh and so when you got to the back half of 2018 uh yeah and you got it on the screen there you could see that that hash price in the end of 2018 just you know absolutely nuking what happened at the end of 2018 was it kind of got to a peak of you know a lot of these miners just no longer could operate right at the beginning they saw their Bitcoin reserves they start to unplug machines and then at the end they have to just either fully you know um pause their operations because they're not profitable at all or liquidate the entire operations

depending on like their financial situation um and so at the end of 2018 what happened was you had a bunch of uh selling pressure for miners you could see that in the on-chain data you know looking at essentially like you know wallets that have you know BTC from coinbase transactions those are labeled as miners you could see that a lot of cell pressure was coming from from those um So based on monetary data you know it was it was pretty apparent that that major like down from six to three k at the end of 2018 was basically uh primarily like forced minor selling to to cover operational costs um and so similar to that Dynamic um you know we have the same thing going on right now so we have you know hash rate

again that's been ripping up uh and over the last month or so hash rate's been absolutely like mooning and uh you know not to kind of derail the conversation from discussing the market dynamics on on like you know why this is unfavorable for miners but I do wonder who exactly this entity or group of entities are that plugging in rigs right now because you know it is such a bad time to be mining and yet hash rate's mooning right now um so I have kind of like two two I guess theories on that either a but like super cynical take um would be like maybe someone's trying to squeeze out the other inefficient guys like Rockefeller style and you know maybe they have like a huge Capital base right and they're able to like

temporarily operate like either at break even or like slightly underwater but at the same time they can squeeze out all the inefficient guys and then buy all the rigs cheap so that's one Theory um not really any evidence backing that just kind of like trying to conceptualize what maybe is going on and the other thing I like that theory though I like that theory it's fun right it's a fun Theory yeah and the other one would be just you know maybe some very large energy producer that hasn't got involved in Bitcoin mining decided maybe they were going to do so over the last two years and they're finally getting up and running and they have like super cheap energy like maybe someone who would like otherwise be like flaring off excess gas that you know that you know that they have to flare off anyway and so like someone like that

maybe makes sense um but yeah I mean just from like someone to decide that hey look I'm gonna go ahead and just go start mining like you know someone like you or me to just go prop up an operation in their backyard it's just it's such a bad time to do so so it would in my opinion have to fall under like one of those two you know theories to to explain what that increase in hash rate is but nonetheless it's taking place and so as you can see uh hash price just hit a new all-time low which means that you know it's it's you could think of hash prices essentially like the difficulty not to be confused with actual difficulty of the network but the difficulty to you know be a profitable Miner right so that that in other words is like at an all-time high as hash

price it's an all-time love and then you throw on top of this not only are these like natural dynamics that you know have as we just described it historically taken place you have high energy costs right and because of you know all the inflation that's taking place supply chain issues you know the the geopolitical situation you know war in Ukraine um so all these things have also pushed up Energy prices so you really have like the perfect storm um for kind of this minor capitulation period um and so to kind of segue that into I guess the the public landscape now uh we finally started to see that translate into some like you know public Financial disclosures of you know these miners being in my

um in under immense stress sorry um if we go back to June um we entered kind of like an initial like mini capitulatory period and what I'm using to Define that is something called hash ribbons so this was created by a guy named Charles Edwards at capriol Investments which is like a Bitcoin prop Fund in Australia um what he what he did is he took two different moving averages of hash rate so he took the 30-day and 60-day moving average and what he found is that whenever the 30-day moving average of hash rate crosses below the 60-day moving average that signaled within a week time span an imminent minor capitulatory period um and so that flashed back in June

um and so we we were in that kind of capitulatory period meaning the you know the 30 day was below the 60 day for about a month or so and during that we saw miners you know kind of surface some issues including core scientific uh selling I think it was 7200 BTC for roughly 170 million dollars basically to shore up cash to to cover their debt financing costs and so um you know that that was kind of the I would say initial capitulatory period that we went through back in June um but now it seems like we're kind of slowly entering back into another one unless you see a material move up in bitcoin's price which would you know

ease off some of the pressure on these guys margins um but you know as we continue to you know hang out down here uh and you know the old German set 19 20K and I've been trading in you know a point zero zero zero five percent trading range for the last two to three months um you know we obviously haven't seen that material move up in price so their margins you know maintain super compressed and so with that you know someone like a Corps Who Sold off a lot of their BTC back in June uh to kind of temporarily you know keep themselves afloat now they've run out of that capital and they no longer have anything else to liquidate uh to cover their financing so you know last week we put out a report and basically said

hey look you know miners are you know in really bad shape here um you know they uh you know because of all the reasons we just described um you know we're probably going to see some material issues you know in terms of like public disclosure soon and I had no idea but two days later uh core announced that you know basically they're they're not going to be able to cover their their you know debt financing costs anymore and likely they're going to be filing for bankruptcy in the next month or so um here you just pulled up on the screen uh the Bitcoin miner total debt uh divided by assets you can also look at uh debt to equity ratio as well but as you can see core by far has the highest uh debt to asset debt to equity ratios

so that just illustrates you know they they really prioritized growth um but that's come to backfire on them in in the into their Market look I mean I never went through like 10ks and 10 cues but you know from my understanding like the the debt to equity and debt to asset ratios that core has aren't like insane but the thing is is just you know the Bitcoin uh Market in general is just so volatile and so cyclical that you know on one hand obviously like you know having some debt on the balance sheet is good because you're able to grow your business and so like in mining you know you want to have some degree of debt because you have to compete with the other miners right to to you know stay stay the same level of profitability and can you you know continue to scale up

your operations as hash rate you know continues to perpetually Trend up into the right over you know over you know multi-year time frame um but at the same time you know when we get into situations like this um you know someone who's been like you know more conservative for example like a riot blockchain like on the chart you just had up you'll you'll see on uh both the Dead uh debt to asset and debt to equity ratios Riot by far has the lowest debt ratios so on a relative basis they have the lowest amount of debt um you know much lower than even the the closest um to which are clean spark and fit digital so um you know someone like a riot is is chilling right now right because they very looked at uh ride also has fixed uh

energy contracts I think they have the 10-year contract for fixed energy uh so you know they're not stressing also about the um you know the higher energy costs um but you know someone like a core who kind of prioritized growth in the bull market is now seeing that backfire uh as you know we continue to be in this back half of the bear market and that that's something I wanted I want to dive a little deeper on right so you know if we go back to like the you know what you laid out is the perfect storm right so a decreasing spot price of BTC uh an increasing hash rate and increasing energy costs you know the first two of those uh obviously the Bitcoin price and hash rate those are like these natural free market values that we see you know a lot factors play into like how these

go or how these uh how these values move and there's a lot of market dynamics playing out with the latter energy costs of course that's a free market as well but you have the ability to hedge off Energy prices and just as you mentioned Riot has done so so is this like a very popular tactic um amongst these public miners or are more like I'm just really curious if there's like this element of greed you know we see like you know like all the whole industry right like we love to DJ in long we love leverage like is that something we're seeing with these miners as well uh they kind of like trying to roll the dice and you know avoid any hedging costs on energy or are they kind of you know being proactive and taking some risk management strategies here no that's a

good question I haven't looked into like the individual energy contracts that each Miner has I tried to look into that um but I didn't see anything aside from Riot who that's the only one I know for fact has fixed Energy prices um so yeah I just I don't have a great answer on that but I will say you know like in terms of like the greed aspect you know several of these miners took out loans to you know purchase both Riggs and BTC including you know core and Marathon um marathons like the state of like their financing is a bit better than than Coors in terms of like the you know interest rate on it is lower so like they're good now in terms of like they can service it um but you know core obviously is you know not been able to yeah I was surprised too that you didn't

see any like Bitcoin miners hedging their Bitcoin spot exposure like because that's what you see in agricultural Commodities right like you sell your Futures Contract before you even have your your Commodities in the ground to grow them like I'm surprised Bitcoin miners weren't doing the same thing and you know maybe going short Bitcoin uh in order to hedge their future production like is that something you expect to see a little bit more of in the future maybe yeah I think so I think the thing is too A lot of these guys are just also like super long-term bullish BTC and they see this as just a way to accumulate like a massive Bitcoin treasury but I do think like moving forward especially after like all this is unfolded publicly when we get to the back half of this and you know I'm assuming there'll likely be

some like M A and financial restructuring for a lot of these guys um I think you'll I think you'll see more of that kind of sophisticated obviously like you're capping your upside of it by hedging that out but yeah I think you'll see more of that moving forward yeah absolutely I agree with you and I think it's important I like this chart that you included in the report but to like kind of put into perspective how to centralize bitcoin actually is like yes core scientific is a big player with five percent of the global hash rate but at the end of the day like it's only five percent right like what would you say about the decentralization of Bitcoin yeah totally you know like all of these guys combined have I think it's roughly 17 of the global hash rate you know these are like massive you know at the

peak of you know the Bull Run we had you know several billion dollar uh you know public mining companies and they still you know total less than 20 of the total hash rate so yeah exactly what you just said I think you know to some degree this just really illustrates the decentralization of the network um yeah the other the other thing you know to kind of note on this chart is like you know if those rigs get unplugged and I you know again I'm not like a uh distressed debt expert or anything of the sort but like you know assuming um you know core is probably gonna announce if they're filing for bankruptcy within the next few weeks exact uh you know restructuring I don't know how it'll take place you know I'm assuming though that the rigs probably won't come offline but if they did

um it's actually like a net good thing for the other miners because you're taking off some of the competition that's on the network therefore like on you know on the margin easing off some of the pressure on their margins but yeah I mean I would assume again like not a distressed dead expert but I would assume that like the rigs will probably stay online and someone else would just take over their operations um I just just one other thing to hit on that that's interesting and kind of like curtailing off that point when we look at the amount of BTC that these guys hold it's really not that significant you know like again like core sold off uh it was roughly 170 mil of BTC back in June they now only have 24 BTC so like if core goes under like yeah it's like you know you don't want to see any you

know any individual actor fail in the space but in terms of like the impact on the on the you know Bitcoin you know spot Market itself it's not that major and like when you add up all of the top 10 largest miners they have about 675 mil of BTC at a 20 000 price so you know obviously that's not you know we're not talking like chump change here but like you know that's not going to materially move the market because you know that's also assuming you're you're getting every single public Miner selling their entire treasury at the same time you know even even if that was the case you know it'd be done OTC and you know that could be you know done over like a multi-day period and have very minimal impact on the market so you know from from the from the Public's you know

mining standpoint I don't think the amount of BTC that they have is material enough to you know Gap BTC down you know another like to like 14k now what you know the question that's kind of like up in the air I I think there's I guess two questions that are up in the air um first of all like how much BTC do private miners have and like you can look at on-chain data to look at you know say like uh wallets that have like received coinbase transactions and then you know a say okay like you know that's a minor and then total up the amount of some that those wallets have but you also don't know like how much of that is you know people who just have we're mining PTC back in the day and then just like

lost their keys you know or whatever so like it's hard to estimate like how much of that is potential cell pressure but I know I assume it's you know larger than the amount that that the public miners have so that's the kind of biggest unknown you know at least with these public guys we can see kind of generally like okay how much you know how much Supply would you know overhang on the market you know what's the exact kind of you know you know stance of all these guys but like in the private Market we don't have any of that um so I would say that's that's one of the biggest questions in terms of like how this will resolve the other thing is what's the effect on all the lenders that lent these guys money right so a lot of these loans are collateralized with Asics and so you've

had uh several miners that have actually had to deliver um because they have been able to you know service their debt so they've had to actually deliver the rigs uh let me see I think it was uh straw yeah stronghold recently closed uh debt restructuring deal with nydig so they delivered 26 200 rigs in exchange for 67 mil um and then you also had uh Iris who stated that they're not able to you know Service uh you know their interest payments as well they're generating about you know 2 million for mining uh their debt obligations are about seven mil uh so they're going to be um they're going to be selling their or giving their rigs back uh to naidig to

close out that that that debt deal as well um so you know the question the question I kind of have is you know what's what's the effect on like the Asic prices if all these guys are liquidating and if all these lending firms are all liquidating the miners you know at one time these mining rigs you know the prices of them are already down 80 and then you add on top of that the fact that the Market's pretty liquid right now you know if all these guys are all dumping rigs at once um you know if I'm a buyer I'm gonna say all right I'm going to let you know wait for these guys to dump all that inventory and then I'll kind of scoop it up on the cheap so that's one other thing I would say I'm watching out for and you know like let's say some of

these lenders aren't able to you know get the full you know dollar amount that they would look to you know want to get out of these Asics you know what does that put a hole in their balance sheet and you know when you're talking about for example you know core scientific borrowed from both blocked by and Genesis who already you know took a massive hit from you know three hours capital in the Fallout of that so like you know does that cause some material issues for those guys I don't know uh but that's one other thing thing I would I would say to watch out for if you can't tell we love data here at block reach research and chain analysis the leading blockchain analytics company shares this passion with us we use data to extract Alpha and find the next thing coming in D5 but chain houses is doing

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market with all the spot BTC they held they really wouldn't move the market in a massive way because we hear you know minor capitulation really touted as is huge Market risk so yeah really really appreciative of the Insight you can shed on that uh yeah and around the the private point you know uh it is kind of interesting that we have these multi-billion dollar corporations um that are mining all this Bitcoin and yet you know private miners are still uh even larger than some of these public miners um and so I kind of posed this question to you you know like what's the landscape of how things are today and like so let's say you just stumbled upon you know a 300 300 million dollars in a in a cold wallet that you had from back in you know 20 2013 era how would you

kind of out think about allocating this Capital out would you be interested in buying some of these uh distressed minors or do you think the better play is just to kind of buy Spot Bitcoin it's a great question you know I think um when you think about like you know when you want to be buying something it's typically like when there's four sellers in the same way that like you know when do you want to sell something it's typically like divorced buyers AKA like shorts that are covering or like people that are short on the sideline and therefore like finally capitulating because price keeps ripping in their face so they're like technically you know Forest buyers that's you know when you usually want to sell things and so like you know where we are now I would say in terms of like Bitcoin itself a

lot of the force selling uh outside of potentially you know the private miners depending on how much BTC they have has been done you know over the last few months um you know from a lot of you know just in the crypto Market broadly like with the Fallout of everything that took place back in June but obviously you know there's like an overhang of that uh on on the actual Asic market and so you know I would say you know if you do get that like final capitulatory like leg down and Asic prices that could actually you know potentially be a really interesting you know time to to go ahead and you know purchase those Rigs and start Mining and you are seeing several funds that are being raised that do exactly this um so for example uh dcg just announced the fund uh I think it's like a

collaboration between uh structured as like a collaboration between grayscale and Foundry uh bitmain also launched a fund uh and then oh on finance also launched a 500 million dollar fund so you know and the bit main one I think was 250 mil and I'm assuming grayscales probably isn't that small either so I mean you're looking at somewhere around like a billion dollars of capital uh and then you know not to mention potentially like you know these other like alternative you know distressed asset investing funds that are probably looking at these Dynamics as well so I mean you're looking at like you know somewhere around a billion dollars of capital at least that's like publicly been announced that I that I found um you know that that's looking to

purchase these assets on the cheap so like I I do think there there is a buyer it's just a question of like okay like you know if these lenders are gonna have to all sell these these rigs at once you know is that gonna you know potentially cost some like a final leg down in Asic prices that you know these guys are you know kind of salivating over and like sharks swimming in the water waiting for um but in terms of like you know like the long-term viability of the space you know I've started to see the you know Bitcoin minor death spiral fud that you know is taking place several times before bitcoin's existence I don't buy into anything also like the Bitcoin price trades in tandem like with the value of Asics you know so like if you're able to scoop up a bunch of these

it's a productive asset and then as soon as you know you can try and turn them and flip them kind of near the top of their you so I know I'd be buying some of them if I had 300 million dollars yeah yeah exactly and I would say like the way to frame Asics is like it's an asset that trades at higher beta to BTC and also gives you a dividend through like the rewards that you're that you're getting from mining so you know if you can time the purchase of the Asics right like absolutely I think you know it would be very advantageous like if you could you know purchase on the back half of some you know potential for selling of yeah absolutely so I've long been like a Bitcoin Bowl but the one thing that I'm personally skeptical about is

transitioning to a fee based model as the blog subsy you know keeps declining in half every four years how do you feel about that do you think that it's possible to make this transition in the state that bitcoin's at today um and and if so like how no it's a great question right it's something like people talk about for a long time I don't really think I have like any super interesting take on this I'm with you I think it's something that needs to be solved but like I'm an optimist in the sense of like I think people will figure it out because they'll have to figure it out um so I mean look I don't have a you know a specific solution that like I've come up with that no one else has thought of but I I do remain on like the optimistic

side that people will figure it out as we get you know towards them but you know and then like by then I'll be dead anyway so it doesn't really affect me yeah yeah absolutely yeah no it's just like kind of interesting to see like the cosmos Hub uh you know they're moving away from exponential inflation uh kind of like replacing the security subsidy with revenues from their interchange security model you know we've seen each B deflation area um even in uh even despite the bear market demand for Block space so yeah it's definitely interesting to kind of think about how this was going to affect Bitcoin and you know it tends to be a little bit slower in development than some of these other chains so um yeah I'm with you like it's definitely something we need to work on subway what about the lightning network will

are you bullish on Lightning Network adoption or do you view that as kind of a nothing Burger um I mean I think it has the potential to be something really important you know like it's obviously very small now I think it's like right around 100 Mil in terms of like public lightning network capacity um but you know I think people like you know Jack mahlers who recently raised like 75 mil to build out his company strike which in the bear Market is like not a small sum um there's definitely a lot of people that are working on you know turning Bitcoin kind of into that that Medium of exchange I do just think you kind of get into this like uh I guess Paradox of like on one hand you've got you know

people holding BTC right as like kind of this like long-term store of value but then at the same time incentivizing people to spend it I think is difficult at least in this stage of where Bitcoin is and potentially that's capping off some of the lightning Network growth that you would see from like Bitcoin native users now on the other hand I do think you have the argument and you know I think you can make this for eighth as well that you know you've got got this like kind of Bedrock Foundation of you know Bitcoin security um which I would say is like the most secure of of all crypto um you know you've got this like Bedrock Foundation of security for payments to be made on top uh on top of so like you know very similar to you know like the

use case for stable coins where you know people are not not only do you have like people using you know stable coins and Market making and just like Capital efficiency reasons but like also people overseas who don't have any access to Dollars uh and are utilizing stable coins just to be able to you know they could just open up a digital wallet and instantly get access to dollars I think similarly you know you have some like potential use case for lightning in that sense of permissionless you know transactions for people that otherwise maybe you know aren't able to do so um so I think like it's just a question of like well that use case continue to grow because like personally I'm not spending my Bitcoin right because I view it as a store of value you know and hedge

against you know uh Global like monetary debasement right so you know I'm not personally going to be spending it um I'll just spend my Fiat you know so therefore like I you know I've I've you know never used lightning in terms of you know actually using it for transaction I mean I've played around with it right to just like you know see how it works um but you know I'm not gonna you know go to the store and open up the lightning Channel and and try to transact with my BTC because I think the opportunity cost of not holding it is much greater so I do think that's kind of like a dilemma of like you know what is BTC very similar to kind of you know like the eat the one that I would say between you know eth being like this you know ultrasound money and then also

being um you know gas that you you know have some like money velocity aspect to it of giving each value so yeah I mean look I think it's just kind of a question of like what it what do people view the use case of BTC as well I do think like over the long term like as as BTC matures right like as we're on like this quote-unquote like S curve of adoption like as we kind of get to the you know plateaued you know back half of that then I think absolutely like people will spend their BTC because you won't have some like rapid you know monetary appreciation I think that's a good take I pretty much agree with with everything you said um in terms of back to kind of like steering back to the report where you were talking about Bitcoin mining like

we saw you know the Exodus from China and the hash rate decline by 30 back you know maybe a year ago I can't remember when it was so do you think like hash rate because of how secure the Bitcoin network is is kind of just more noise or do you view like actual trading signals in on-chain like metrics as it relates to Hash rate like you mentioned the hash urbans yeah sure so do you wanna do you want to talk about on-chain analytics because that's like a whole nother I guess specifically even if you want to touch on analytics you can okay okay yeah we could get it today I guess after two um sure yeah I I don't really think it's necessarily like a trading signal I'm

kind of of the belief that hash follows price um obviously it's like kind of been like a you know chicken or egg question but like I think when we think of back you know the framework we talked about earlier right like the lap the the lag in terms of like the peak of hash rate is after price that's because people are plugging in rigs because price is going up right price isn't going up because people are plugging in rigs um so I I'm I'm kind of in the camp of hash tends to to follow price but in terms of like actual material trading signals I haven't found much value out of it except for looking at the hash ribbons which you kind of touched on which is that you know the 30 and 60 day moving average because whenever you get that kind of bearish cross what what

that fundamentally indicates is not that like hash rate itself going down all of a sudden people think the network is worth less but the fact that you likely have some type of you know like force selling from from miners case because you know machines are obviously being unplugged because Hatchery stuff that makes a lot of sense now we've seen a couple attempts at making Bitcoin kind of like an on-chain Reserve asset like we saw it with lfg with Tara and Luna we hear the cosmos folks talking about doing that with I think it's called Babylon Dan you can correct me if I'm wrong but uh do you see that being a narrative going forward uh I don't know man I I just think Bitcoin and the you know USD exchange

rate is just way too volatile to have BTC as like a reserve asset at this point unless you know you you're in a situation like someone like a sailor right where like you know the debt that he took out to buy BTC is at a very low interest rate and he doesn't have to pay that back I think until 2025 like late 2025 so like you know in terms of using it as a reserve asset I think it also you know comes down to that in addition to like what what's the size of like the allocation that you're giving to BTC obviously like if it's like one or three or five percent of your overall balance sheet like it's not a big deal if it declines you know 50 or something like that but like um you know should we be using it as like a short-term Reserve asset in the

way that like lfg yeah I'm with you on that it's fine you know kind of winding down now I know we're kind of running close on time so I just want to get some insights uh kind of from the boots underground Trader right I know you've been tweeting a little bit about how you've been trading uh dabbling more and trading some of these all coins uh senior takes on Sushi and they kind of love the insights you've provided so kind of want to get your take on what you think will be uh kind of catalyzing some of these token runs in the next full run uh you know we see this narrative around real yield that's becoming super popular over the last couple of months I never you know is protocol Revenue a meme you know well fundamentals actually matter in the next Bull Run or we'll just continually be

about who has the best narrative at the on a given day and who can get the most eyeballs yeah it's a good question um I guess you could start with like what I find useful trading is like first of all price action looking at the derivatives uh and then also narratives and then like with the Confluence of those like if the narrative that's developing is reflected in price action and that's confirming the thesis you have about the narrative and then also like watching derivatives to like catch people offsides like sushi for example as you said I've you know been tweeting about a bit you know that's been trading super clean in the sense of like you can see you know a bunch of um you know open interest piling in uh you look at things like liquidity heat

naps to see that like a bunch of logs are piling in uh and then you know once price goes below where all the songs piled in okay obviously those guys are offsides and uh you've seen Sushi basically like flush people out on both sides like four or five times now and that's been trading I think partially because it's such a PVP Market it's been trading very clean on things like these liquidity heat Maps um but like I guess longer term like thematic type of like what you're asking um yeah I mean look I think the way you gotta kind of think about it is like who are the market participants right so like in 2020 2021 who were the market participants they were all retail people with like stimulus checks right and so like I think uh I think this is why like

a lot of the people that expected TV to outperform and like I did as well heading into 2021 we're wrong you know compared to things like Dogecoin or come rocket um they were they were wrong because like you know the the amount of capital that was that was coming into the market in the outsized way was from retail you know who again like had you know stimulus checks and excess Capital to kind of gamble on um you know heading into the next Bull Run you know who's likely to have you know who's likely to be the primary like you know uh where inflows are coming from it's probably going to be more of these like traditional funds I would say like especially in these marketing conditions like you're not getting a lot of retail inflows like retail is like struggling to even pay for food that's like rapidly

and you know increasing relative to uh you know their income so you know they're not gambling on our coins but um you know heading into the next Bull Run I think you know who who are the basket of Market participants that are most likely to be like the outsized capital influence it's probably like some of these traditional funds that like checked out crypto over the last few years um and like been building out infrastructure I mean look we've seen like crazy announcements this year that like no one's talked about you know things from like Google announcing like a node Service uh BlackRock offering you know crypto to their clients Citadel building out a crypto exchange you know we had JP Morgan using a D5 protocol last week we had our weave collaborating with meta like all you know all these guys are like coming in and building out

infrastructure um so I would say those are the most likely best ask you to Mark participants to be around and so to to your point um yeah I think like things like real world assets make sense because they're likely to make sense to a lot of the you know those type of Market participants that are going to be driving the outsize inflows I just think in general like these Financial infrastructure type of products I think we'll see a lot more of the capital inflows on a relative basis to something like a Dogecoin or you know a rocket or these other like you know completely you know speculative Vehicles come rocket the reserve asset of the entire world of course uh yeah no that makes a ton of sense and yeah I think it kind of sounds like um you know in this upcoming full run uh

the you know there's always a debate between you know will the base layer crew value or the apps built on top uh go through the value right so the original thesis was like the fat protocol thesis and with these base layers would accrue a ton of value but then we saw a lot of these all l1s come out and really just not gain a huge traction or really never feel I kind of failed to find product Market fit you know like these high throughput high TPS changed like Solana and Aptos have really like they seem you know to me it seems like there will be an application for that I just don't know if we've come across it yet um and so like you know there's always the promise of an order booking our order books coming on chain and you know we've really failed to see that come to

life you know there's still new new attempts at doing this like uh say in the cosmos ecosystem and they're using uh their Nitro technology kind of bringing this svm from Solana over into the cosmos ecosystem um but yeah like do you have any opinions on whether it'll be the apps themselves or the base layers that are created I personally don't have any strong opinions on it but I would love to have our D5 analyst know her people might know him from Twitter he's got a fairly like large account it's called nowhere of markets he's brilliant man now he he tends to he tends to kind of stand in the camp of like eth is going to be the winner takes all of the entire space um but to answer your question like I

just don't want to give you like a half-assed answer if I don't have a good one so I would say like maybe we'll get him on in a few weeks for sure I guess we can close it out here with uh one last question um do you buy into the flipping narrative between Ethan Bitcoin or do you think Bitcoin remains King for the very long future ahead um yeah sure I think you could see eth like temporarily flip BTC but like in terms of like do I think eats market cap will be larger than Bitcoins in like 20 years I would say no and the reason is because like I view BTC as like the underlying monetary premium of the world and I do

think like there's a world where BTC and youth can co-exist where you have BTS we have BTC is kind of that like you know monetary asset um but you also have you know eth as kind of this like underlying like you know digital infrastructure for like the entire world and you know the the digital decentralized um you know Financial Plumbing I guess you could say um so like I think I think they'll co-exist to answer your question though like over the long term I think BTC just because of the total addressable Market of like the monetary premium of the world it's just larger than eth but in the short term like I definitely think like in this next Bull Run um you could temporarily see eth like flip BTC I don't think that's like a controversial opinion I think primarily

like you'll really see the effects of kind of these Supply dynamics that have obviously shifted since you've transitioned to proof of stake that really haven't materialized to price action yet um I think the thing with each that you have to keep in mind is like as you build out like more verticals or like subsets of of you know like network activity now we've got you know uh game Phi nfts D5 or we went like Etc like as as that continues to game five you know as it continues to grow out right you have more potential inflows of network activity to catalyze the supply Dynamics and you know I think this the cynical take is that the network activity Falls

price right so like as crypto goes through like just this natural you know bear market and you come out of that and price bottoms out solely for the fact that like this is a speculative Market um you know you'll see the network activity in my opinion follow the price and once you kind of get that feedback loop between network activity price and on top of that The Narrative of you know the supply Dynamics and like the you know eco-friendly aspect of eth on a relative basis to BTC like once you get whether I agree with it or not right like obviously like I'm a I'm more in like the Bitcoin ideological camp but like I do acknowledge that like other people care about that right so like I think you have to be objective about it and like I I do think there's a very you

know outsized likelihood that that translates to some type of you know like reflexive feedback loop between all of those factors and that could definitely like temporarily push eth's price higher than you know you perhaps expect what you did there with reflexive there but that's a perfect segue to uh yeah where can people find you will uh I'd love to hear you give a little shout out to your new uh your new research uh shop and uh yeah give yourself a little personal plug here yeah sure not appreciate you guys and uh it's awesome you guys are doing the podcast I ran a podcast for about a year I know it's I know it's fun it's it's a grind though for sure so uh all the best to you guys hopefully I'll come back on soon and we'll get someone else from the team on um yeah you can find me on Twitter at uh

W Clementi III uh you could find our research offering at reflexivityresearch.com uh we cover everything from BTC eth D5 and Global macro uh I covered the the Bitcoin section and then we have some other guys that are way smarter than me that cover the other sections so if you're interested in that you can that's awesome thanks a lot for coming on well this was a great discussion kind of recapping you know the state of the market for Bitcoin miners uh super informative really appreciate you coming on and dropping this knowledge for us uh and best of luck to you you know it's uh you're right you're definitely right about the podcast being a guy no kidding but uh research in itself is no joke either so you know best of luck and cheers thanks man thanks guys appreciate it all right that was a great interview

with uh will Clemente he's always super knowledgeable and everything Bitcoin you guys should all go check out his research at reflexivityresearch.com but uh Dan how did you feel what do you think about the struggling Bitcoin mining landscape is that bearish or bullish yeah uh it's super interesting I think we're probably the biggest overall takeaway I had from our conversation was really that you know if the public minor and group as a whole were to sell all the big one on its balance sheets in one fail swoop it'd be a you know 600 600 or so million dollars Bitcoin and it you know looking at Market structure that they could probably get otc'd over a couple days and really not have like a massive uh impact to BTC price I thought that was probably the biggest takeaway just because my personal perception of

going into this conversation was you know we always hear about Minor capitulation and the impact that that could have on Market structure so I will say that that's bullish but for you know for the sake of argument I'll try to kind of take the uh the bearish side of all these things um and you know public miners do have 17 percent of uh of the hash rate and while that's not a controlling portion it is still a significant amount of hash rate that needs to flow to a different portion of the network if they do go out and if they start to consolidate then now you go from 17 being spread out across you know 10 or 12 entities to 17 being Consolidated amongst you know a handful so it is interesting but I I do

think it is something to watch for some of these larger miners that do go under yeah I'm just not too concerned about it I mentioned in the interview briefly that there was 30 plus of the hash power went out when the the China mining ban took place about a year ago so I just don't really think hash rate's super important in like terms of price structure so I kind of agree with Will on that front but I will say it's an important metric to look look at over the long term in order to ensure that the the health of the network is continuing continuing to grow uh how what do you think about uh the companies being bought out or maybe some mergers and Acquisitions do you think that's you know bullish or bearish do you think it maybe centralizes the network what are

your thoughts on that yeah I think your last Point's the the takeaway from uh some of this m a activity that could potentially go on you know if some of the larger miners do go bankrupt in our to facilitate the debt that they've taken on uh you're likely to see some consolidation here in my opinion you know there's still like the industry as a whole is still so young there's going to be people willing to take bets on it you know I know blackrocks had their eye on uh miners for quite some time now uh so it'll be interesting to see if they really make a push in getting more involved if if some of these larger names do go under um yeah I think that the centralization risk is probably I think most important to keep an eye on uh just given that you

know if one entity had 17 control that would be a bit concerning uh but you know if that's spread out around multiple entities then it immediately becomes like less of a risk in my opinion but um definitely definitely keep it worth keeping an eye on some of these larger names yeah I would just go back to how cheap it is to run and operate a Bitcoin node like it's only like 130 bucks you can do it on a Raspberry Pi with an internet connection and minimal power sources and at the end of the day the nodes are kind of the the end-all be-all of which chain we're following so I'm really not too concerned about centralization as it relates to bitcoin right yeah so if you think about kind of like the fee based model to me this is the biggest issue with Bitcoin but you

know how do you how do you see a transition away from this security subsidy as a couple happenings from now and this it won't be as large right you know today a block reward is 6.25 Bitcoin um but after you know in 2028 we'll see we'll go through two more uh having Cycles from now uh and that 6.25 would fall to 1.56 Bitcoin uh so if you know if price were to stay the exact same that's a change from 121 20 125 000 per block uh to around 31 000 per block so how do you think the network can kind of adapt to this um and make a transition yeah this has long been my biggest question in my head around Bitcoin because I've long been a Bitcoin bull I guess it comes down to two things can lightning Network become

successful if so then there's more transaction uh activity occurring at the end of the day on the Bitcoin base layer so that's one route and then two is you could potentially lower the block height so that way less transactions fit in a block and then the basically you'd be intentionally congesting the network so that fees would make up a greater portion of mine Revenue but yeah I would just tend to agree with will like I'd bet on human Ingenuity I don't think you know Bitcoin bulls and devs are going to just watch this thing fold I think that changes will be made as necessary how about you yeah um I think that's a great point I I do think will hit the nail on the head uh with his comments around the lightning Network though right like if Bitcoins is pristine asset and I I don't

want to spend it I want to accumulate as much as I possibly can and this is where I think stable coins have a huge uh role in the ecosystem right um you know if I'm a Bitcoin maximalist I love Bitcoin then I want to spend as many dollars as I can and accumulate as much BTC as I can and so stable coins facilitate this perfectly like using a smart contract Network right I can hoard and accumulate all these assets of my choosing uh while also having the ability to spend um stable points so I think like if you look at ethereum right like I can hold rap Bitcoin on ethereum of course that creates a new custody risk but you just putting that aside for now if I'm accumulating Bitcoin on ethereum and

then spending uh spending my stable coins then I'm like able to accumulate while still spending and so it's like why like I I feel like there would need to be some sort of stable coin or some other currency that I'd want to spend on the lightning Network before I could really see a true product Market fit for for that yeah and that kind of leads well into the last point I wanted to ask you about Dan and like I was surprised with Will's reaction and you know Bitcoin maybe not being as much of a reserve asset as it was initially meant to be I asked it in the context of like other smart contract platforms so like Cosmos Tara tried it um and he maybe seen bearish on that but then he also said that you know one three five percent of the company's balance sheet should be uh Bitcoin

potentially but he doesn't see it ever being a fully reserved asset given the volatility in relation to the US dollar pair so how do you feel about that do you think Bitcoin will ever be a reserve asset or do you think there's just not enough utility around it to support that use case you know the volatility standpoint like it you know we're still it's been over a decade since uh bitcoin's Inception right but it's still so young and it's a utility in the space that I I do see the potential world where you know 20 years from now bitcoin's so established and there's just such a smaller amount of volatility around it and that probably does have a lot to do with uh shrinking block subsidy like there's less cell pressure one of the biggest distinctions I think you can like visualize is going

to Ultrasound money and playing with that proof of way proof of work proof of stake toggle uh for how ethereum would look if it was still on the proof of work Network or how it looks today being that it transition to proof of stake and was able to kind of reimagine its tokenomics and it's pulled it's removed over like maybe not over but very close to a billion dollars in cell pressure right like without these uh incentives flowing into the validators and or the miners in in the case of proof of work the tokenomics do start to feel a little bit more sustainable um so yeah I don't know it's tough to say uh but personally I kind of like Sunny agrawal the osmosis Founders take that you know bitcoin's an app chain it serves a very specific purpose and where

that app chain gets plugged in is like yet to be seen but it makes a lot of sense like I I like The Narrative of Bitcoin as this pristine collateral uh that's super simple and only serves like one function uh and that is to have a structural monetary policy that does not change through time I think that's a very attractive quality uh it's just a question of like where can I use that and to me it does look like on-chain resources make more sense um you know I think we need better ways to hold Bitcoin on different chains in a decentralized and secure manner but yeah as a whole I do kind of like that that thesis that it is hard money yeah I would agree I I really don't have much to add there like I think Bitcoin is just so beautiful because of its

Simplicity and because of the fact that it moves so slowly and it's not trying to do so many things you know it hasn't tried to do that that experiment eth is kind of trying to be a monetary asset it's trying to be used for payments it's trying to be a smart contract entire platform so I love eath but I do love Bitcoin and its Simplicity and I think there's a spot for that in the world like no other chain is as easy to to run a note on than than Bitcoin and I don't see that changing anywhere in the near future so bullish Bitcoin I strongly agree there I think it's probably a good place to wrap it so you know appreciate everyone tuning in and uh we'll see you next week on next week's episode of Xerox thanks everyone