Speaker 1: And then we get a ha moment. Bitcoin. Now what's
Speaker 1: really important for your listeners, And I know this from
Speaker 1: my global investing Five years before bitcoin was released in
Speaker 1: January of two thousand and nine, before that came a
Speaker 1: technology called Empessa, and Empessa was a telecom wanting to
Speaker 1: find a way to bank the unbankables in Kenya and
Speaker 1: it exploded.
Speaker 2: This episode is brought to you by Propy, which is
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Speaker 2: about Propy, visit the link in the description. Welcome into
Speaker 2: the Thinking Crypto Podcast. I'm your host, Tony Edward, and
Speaker 2: my guest today is Frank Holmes, who's the co founder
Speaker 2: of Hive Blockchain Technologies and also the CEO and CIO
Speaker 2: of US Global Investors. Frank, great to have you.
Speaker 1: It's great to be with you, Tony.
Speaker 2: Frank. You have a plethora of experience in the markets,
Speaker 2: from gold to doing IPOs and tradfy and now of
Speaker 2: course building with bitcoin and crypto. And I have a
Speaker 2: lot of questions for you because I want to get
Speaker 2: your perspectives and you know your loads of experience. But
Speaker 2: let's start with your background. Where are you from, where'd
Speaker 2: you grow up? And what's your what made you want
Speaker 2: to get into finance?
Speaker 1: Well, I characterize myself as a text can a textan Canadian,
Speaker 1: and I've been living here for thirty five years in Texas,
Speaker 1: in San Antonio, and I'm known for the world of gold.
Speaker 1: I wrote a book on gold and that journey of
Speaker 1: understanding the dynamics of gold, what are the supplied to
Speaker 1: manufacturers globally gold mining? And you start to realize it
Speaker 1: takes you down other paths, and the gold space led
Speaker 1: me down to bitcoin, and in two thousand and fifteen,
Speaker 1: I launched the first thematic what they call smart baita
Speaker 1: two point zero it's jets etfrom the New York Stock
Speaker 1: Exchange to capture the global airline industry. Because I was
Speaker 1: traveling all over the world. I want something to so
Speaker 1: how do I get my money back? And all this
Speaker 1: money I'm spending traveling And so I recognized that something
Speaker 1: was happening in the bitcoin ecosystem. I went to Consensus
Speaker 1: in twenty seventeen and I remember vividly Abigail Johnson, the
Speaker 1: CEO of Fidelity, was speaking at the conference and was
Speaker 1: talking about bitcoin mining and blockchain why was so important
Speaker 1: for the backbone? So I'd done work prior to that
Speaker 1: and said, okay, well, let's see we can launch a
Speaker 1: bitcoin etf Because I launched the jets well, I realized quickly,
Speaker 1: at one thousand dollars an hour legal bill, it wasn't
Speaker 1: going to go anywhere. And I went to Canada and
Speaker 1: the same thing. They were basically anti bitcoin ETF, and
Speaker 1: fortunately it didn't really occurred last year that it finally
Speaker 1: got launched a bitcoin ETF. So I launched the first
Speaker 1: crypto mining company called Hive Blockchain Technology, and then subsequently
Speaker 1: changed the name to High Digital Technologies because you realize
Speaker 1: you're really in the data center business. And I'll give
Speaker 1: you more color on that, but it was the first
Speaker 1: crypto mining company, and when we went public, we had
Speaker 1: some basic value vision statements that we made and that
Speaker 1: mission was to be green only. So we launched in
Speaker 1: Iceland and then we went into Sweden, and then after
Speaker 1: the first halving, we came into Canada in Montreal, and
Speaker 1: then we built a big campus using eighty megawats on
Speaker 1: the border of Maine and New Brunswick, so we're only
Speaker 1: using hydro electricity. And now we've grown to Paraguay where
Speaker 1: we're going to increase our production profile from six exa
Speaker 1: hash to twenty five over the next nine months. So
Speaker 1: we function in nine time zones, five languages, and I'm
Speaker 1: so proud of the team, Tony. We keep showing up
Speaker 1: in anthipower as the most efficient bitcoin minor.
Speaker 2: That's amazing and what a journey, Frank And you know
Speaker 2: you were trying to get an ETF around bitcoin in
Speaker 2: the early days and certainly it's been an arduous journey
Speaker 2: for many folks to get to what happened last year
Speaker 2: with your final approval. You know, what are some similarities
Speaker 2: that you see with the gold market and bitcoin, because
Speaker 2: many folks categorize bitcoin as digital goal at store value
Speaker 2: has some better properties around it than gold itself. And
Speaker 2: was you know, maybe when you heard Abigail Johnson or
Speaker 2: what was your first encounter with bitcoin and when did
Speaker 2: it click for you? What was your aha moment?
Speaker 1: Well, the haha moment is that someone as one of
Speaker 1: the largest asset managers in the world, doesn't speak at
Speaker 1: investment conferences but speaks at consensus, and that was saying
Speaker 1: something big is happening outside of this realm, this world.
Speaker 1: There's another metaverse and and exploring and discovering the metaverse
Speaker 1: of crypto was so shocking to me, Like I feel
Speaker 1: like I was kept in a cave of how it
Speaker 1: was evolving and learning that there's thirty million kids around
Speaker 1: mining ethereum with their GPU chips and when they went
Speaker 1: to bed, so you had this incredible ecosystem before they
Speaker 1: went from proof of work to proof of steak, which
Speaker 1: was the disaster which but back then it was interested
Speaker 1: to see these kids were gamers go to bed mining ethereum.
Speaker 1: I had a paper route. I slept papers in the
Speaker 1: snow in Canada in the seventies earning money. And these
Speaker 1: kids are all of a sudden mining ethereum and they
Speaker 1: found a way at the age of twelve years old
Speaker 1: to get cash for it to upgrade them by a
Speaker 1: new computer system. So they had the exchanges have been
Speaker 1: created outside of the normal regulative world and methodologies to
Speaker 1: crystallize in transform this transformation of something digital into cash
Speaker 1: to be able to upgrade a computer that was an
Speaker 1: odd to me, and I became so accelerated in learning
Speaker 1: what was going on.
Speaker 2: And you know, in regards to what you said about
Speaker 2: the kids mining, right, we're heading into a more digital world.
Speaker 2: I think we can all agree on that things are
Speaker 2: not going to get less digital, and the next generation
Speaker 2: is not going to necessarily want to have gold bars,
Speaker 2: so to speak, but they're going to deal with digital
Speaker 2: currencies and NFTs and these different things. Do you see
Speaker 2: bitcoin becoming a larger acid than gold itself having a
Speaker 2: larger market cap and so forth.
Speaker 1: It's a great question. I think you will probably find
Speaker 1: some way how the ordinal art world was able to
Speaker 1: take a one hundred millionth of a bitcoin and all
Speaker 1: of a sudden create value by attaching something to it.
Speaker 1: That's going to happen with gold. I know that I
Speaker 1: was a fun and was an early investor in the
Speaker 1: creation of where you make that attachment like an NFT,
Speaker 1: but you actually have a piece of art that's transferable
Speaker 1: into one gram of gold that can digitally be sent
Speaker 1: around and you can make a claim on it somewhere else.
Speaker 1: So that technology will evolve, and I think probably they're
Speaker 1: going to become where there's one on one is eleven.
Speaker 1: I think the whole idea that when people don't realize
Speaker 1: and all these people buying the bitcoin ETFs Ria is
Speaker 1: recommending them, they do not know often that one bitcoin
Speaker 1: is worth one hundred million satoshi's and if they go
Speaker 1: and buy a penny stock, they might as well just
Speaker 1: go and spend one thousand dollars and buy one thousand
Speaker 1: dollars of total h ODL, which is van x bitcoin
Speaker 1: ETF on Robinhood, and they've got a million satoshi's and
Speaker 1: when that satoshi hits a penny, that bitcoin is worth
Speaker 1: a million dollars. Well will that happen? We found from
Speaker 1: our bitcoin inventory that some of us A tootions were
Speaker 1: very valuable because of their number sequence at the time
Speaker 1: that they were mine, and they were worth ten dollars.
Speaker 1: So when someone said to me that bitcoin go to
Speaker 1: a million dollars, is it easy? Because it just has
Speaker 1: to be at a penny, it's worth a million dollars.
Speaker 1: So the math behind that is Metcalf's law, which basically
Speaker 1: says that if you have supply limited and demand grows,
Speaker 1: the price will grow exponentially. I know this from my
Speaker 1: resource expertise in the diamond world. Did you know that
Speaker 1: after World War Two only three percent of Americas used
Speaker 1: a diamond to validate a commitment for marriage. Only three
Speaker 1: percent is now eighty Because the beers influence, but they
Speaker 1: control the supply. It wasn't capped the twenty one million
Speaker 1: coins until the Russians that are flooding the world with diamonds.
Speaker 1: The de beers had such a monopoly that they grew
Speaker 1: eighty percent adoption. Then in the sixty five they went
Speaker 1: to Japan and did it all over again. So what
Speaker 1: happens is that scenarios shows up in the world of art.
Speaker 1: If you have one of Picasso's original prints of one hundred,
Speaker 1: or you had any warholse thousand prints of Mao that
Speaker 1: came out of one thousand dollars, they went up to
Speaker 1: fifty thousand dollars because the supply was limited. The adoption
Speaker 1: and the growth of China and the adoption of any
Speaker 1: who art it grew exponentially. Well, this makes it very
Speaker 1: easy and understandable why bitcoin using Metcalf's law will grow exponentially.
Speaker 1: What other important laws are there are like Moore's law
Speaker 1: that says the engineering and the cost of a chip
Speaker 1: is going to drop every couple of years, and therefore
Speaker 1: it's more affordable for more people and that's driving the
Speaker 1: technological evolution. Well, you have these laws that are very important,
Speaker 1: but never forget Murphy's law, because you just don't know
Speaker 1: when you would think that this year of bitcoins should
Speaker 1: be on a terran has gone through a correction, So
Speaker 1: Murphy always shows up.
Speaker 2: Yeah, great points, and I love the example of Metcalf's
Speaker 2: law and network adoption. Now you mentioned that in certain instances,
Speaker 2: certain stitutions were more valuable. Is talk to us about,
Speaker 2: you know, what you're encountering in the open market with
Speaker 2: folks looking to buy bitcoin, whether the institutions are they
Speaker 2: focused on where this bitcoin was mine and what type
Speaker 2: of energy was used to mine it.
Speaker 1: No, no, there is, there is for hive hive being
Speaker 1: green only. Intel approached us and we were the first.
Speaker 1: We have many first in this trajectory of hive evolving.
Speaker 1: We're the first to balance the grid before it became
Speaker 1: a big benefit for Riot coming into Texas. We were
Speaker 1: doing this in Sweden and first to recycle electron of
Speaker 1: energy from a data center into a manufacturer building and
Speaker 1: save that building as one hundred and seventy workers, saving
Speaker 1: them three hundred thousand dollars a year on their electrical bill.
Speaker 1: So with that what we found because we have hydro,
Speaker 1: Intel reached out to us to create the first AS
Speaker 1: chip with them and it became the buzz Minor. Then
Speaker 1: they got out of the business. They had other problems
Speaker 1: of our enough R and D to compete with Nvidia,
Speaker 1: but were they approached us and inn Vidia allowed us
Speaker 1: to buy GPU chips that were also used for AI
Speaker 1: other bitcoin miners that were only miners bought in Vidia chips.
Speaker 1: They could onwly mine ethereum. We had the ability and
Speaker 1: the skill set of mining ethereum, and when Ethereum went
Speaker 1: away from proof of work to proof of steak, we
Speaker 1: were able to repurpose and start using our GPA chips
Speaker 1: for AI adoption, and that business is growing slowly and nicely.
Speaker 1: We see many people coming out and raising a lot
Speaker 1: of money in the bitcoin mining get into the HPC realm.
Speaker 1: The million people that we see successfully have done it
Speaker 1: has been Core Scientific and that's part only because core
Speaker 1: Weave is funding it. It's very expensive for your listeners
Speaker 1: to understand one megawater of electricity for bitcoin mining is
Speaker 1: going to cost you about a million dollars of infrastructure spending.
Speaker 1: If you're going to go to high performance computing what
Speaker 1: they call Tier three, it's a minimum ten million dollars
Speaker 1: of infrastructure spending excluding the chips. So last week when
Speaker 1: I was at at the Blockchain Summit in Washington, Cambridge
Speaker 1: Analytics at the University of Cambridge had a study and
Speaker 1: they said the cost of transport going through the transformation
Speaker 1: of bitcoin mind to high performance computing for AI is
Speaker 1: thirty three to one, it's a much bigger spend. So
Speaker 1: what did we do that was unique. We put our
Speaker 1: chips on bare metals platforms and where coders could all
Speaker 1: of a sudden rent them by the hour. They don't
Speaker 1: have to be locked up and long like on demand supply,
Speaker 1: and that's what we've been able to provide, and we
Speaker 1: continue to buy more Nvidia chips and we're now we're
Speaker 1: going to start building our own data centers that are
Speaker 1: only high performance computing. But to get the same revenue
Speaker 1: for one hundred megawat bitcoin mining facility, you need only
Speaker 1: ten minute megawatts for high performance computing, So this ten
Speaker 1: to one ratio is important to recognize. But the chips
Speaker 1: are much more expensive. You're spending thirty five thousand dollars
Speaker 1: for an Nvidia chip, not three thousand, five hundred dollars,
Speaker 1: So it's for investors to recognize there are big differences.
Speaker 1: And then when you're tech technician mining bitcoin, the skill
Speaker 1: set is very different than GPU chips. It's like driving
Speaker 1: a Bronco truck versus driving a Ferrari. The engineering, the skills,
Speaker 1: the temperance like the Ferraris always have to be brought
Speaker 1: in for updates and checks et cetera. Are Broncos rugged
Speaker 1: and that's what ACE chips are like. They're rugged, and
Speaker 1: that's the big difference that you see. But for us,
Speaker 1: we're so excited about what we're doing, in particular in Paraguay,
Speaker 1: which I want to come back to, because we are
Speaker 1: balancing the grid in a different way Tony. In Sweden
Speaker 1: we are able to hedge and give back the energy
Speaker 1: whenever there's a spike in the energy, go from thirty
Speaker 1: megawats to three and fifteen seconds and back up. But
Speaker 1: in Paraguay they built the biggest dam with Brazil in
Speaker 1: the western hemisphere, and half of the electricity goes to
Speaker 1: Paraguay and the other goes to Brazil. If Paraguay doesn't
Speaker 1: use the energy, it all goes to Brazil. And so
Speaker 1: they were taking this energy and they were selling it
Speaker 1: to for a slight markup to Argentina, and Argentina was
Speaker 1: a disaster till Malay came in and it was no paid,
Speaker 1: so it had a huge fiscal strain on the government
Speaker 1: running their business. And so now we've seen Malay give
Speaker 1: back some of the money. So they went from no
Speaker 1: pay to slow pay. But bitcoin miners that get paid
Speaker 1: every month, so it allows them to get US dollars
Speaker 1: every month, and it's an embedded currency hedge that no
Speaker 1: bank has the capital base to do except for bitcoin miners.
Speaker 1: And when we come in we help build their infrastructure.
Speaker 1: We take this raw high voltage power which would blow
Speaker 1: out any normal hair dryer and toaster, down to low
Speaker 1: voltage that we need for these data centers. And that
Speaker 1: that's fifteen million dollars spend. You know, that's a big spend,
Speaker 1: but we help the economy, we help the country. We
Speaker 1: have now employing three hundred some odd people building our
Speaker 1: data centers out. We're already starting on turning on some
Speaker 1: of the machines and we'll have a material number next week.
Speaker 1: That's what we're hoping for as machines come in and
Speaker 1: the wires come in, but they're is sort of the
Speaker 1: exciting part is that we'll become the biggest user of
Speaker 1: electricity for the end. It's called a utility owned by
Speaker 1: the government, so we'll become an important balancing of the
Speaker 1: grid for them in a different way than we're balancing
Speaker 1: the grid in Sweden. Wow.
Speaker 2: And with how things have changed for bitcoin and crypto,
Speaker 2: I mean, the United States is looking to establish a
Speaker 2: bigcoin reserve. You have all of Wall Street here looking
Speaker 2: to launch different products around bitcoin. They've obviously launched a
Speaker 2: Bitcoin's body TFS, and we're seeing a lot of demand there.
Speaker 2: Are you on the mining side now getting a lot
Speaker 2: of demand from investors or customers who want to use
Speaker 2: your services because we're seeing some sort of game theory
Speaker 2: play out here.
Speaker 1: For bitcoin, we are. I think that the first big
Speaker 1: wave of the US becoming a dominant player took place
Speaker 1: when China dumped all the machines and put people in
Speaker 1: jail and confiscated and destroyed all the ACIC miners that
Speaker 1: they could. The idea was important for the listeners of
Speaker 1: being decentralized, and I'm going to sorry we've back and forth,
Speaker 1: but in the world of gold, like bitcoin, there are similarities.
Speaker 1: They're decentralized, so no one government, no one country, no
Speaker 1: one central United Nations controls the price of gold, and
Speaker 1: so central banks use gold as a medium the same
Speaker 1: thing as with bitcoin. The big attraction with bitcoin is
Speaker 1: that there's one hundred and ninety five countries, one hundred
Speaker 1: and ninety five central banks, but there are now over
Speaker 1: twenty thousand notes around the world. And you've got to
Speaker 1: think of it like the old imagery from watching Star
Speaker 1: Trek or Star Wars where they have a force shield
Speaker 1: around them and missiles come in and the force shield
Speaker 1: sort of bends and then comes right back. It bens,
Speaker 1: it comes right back. That's the big point force shield
Speaker 1: around the world. And so China blows everything out and
Speaker 1: it bens. The prices come down and difficulty comes down,
Speaker 1: and that comes right back stronger than ever. And who
Speaker 1: it made it stronger was America, in particular the state
Speaker 1: of Texas. And so when you start going down the
Speaker 1: path of what is gold, what is paper money, when
Speaker 1: you start realizing it all started with the Magna cart
Speaker 1: in twelve fifteen of where private property rights led to
Speaker 1: human human humanitarian rights, and whenever in the past thirty
Speaker 1: years they've taken away private property rights like Venezuela, they've
Speaker 1: taken away human rights. So really they're connected. Private property
Speaker 1: and human rights are really so cemented together. And the
Speaker 1: evolution of private property rights really grew with common law,
Speaker 1: not with civil law. It grew with common law. Patent
Speaker 1: law was important. It came from common law and civil
Speaker 1: law copies which takes place in common law China built
Speaker 1: their stock exchanges based on common law rules. They the
Speaker 1: only way to attract capital if you go in downtown Dubai,
Speaker 1: which is civil law, sharia law all around it. They
Speaker 1: create a square mile which is common law, and that
Speaker 1: is the best property rights. So the idea of bitcoin
Speaker 1: really comes out of the concept of private property rights
Speaker 1: like gold. So I have cash in my wall, in
Speaker 1: my pocket here and this is my I have had property,
Speaker 1: this is mine. It's in my pocket. When I put
Speaker 1: it in the bank, all of a sudden, I don't
Speaker 1: have total control. I've lost my private property rights. If
Speaker 1: they want to shut down or make it difficult for
Speaker 1: me to get my ATM working, the card doesn't work.
Speaker 1: So recognizing what is private property in a lot of
Speaker 1: parts of the world, it's the gold Bengals. The women
Speaker 1: that got out of Syria the first just took off
Speaker 1: their twenty four carroc gold and they got out. That
Speaker 1: was their portable wealth. The same thing with Vietnase people,
Speaker 1: the boat people in the seventies ago. First they call
Speaker 1: it a gold tail, a grammar gold got them out.
Speaker 1: That new ticket out of an oppressed country will be
Speaker 1: bitcoin because you're able to protect it's more portable than gold.
Speaker 1: It's but it's not as pretty as gold unless you
Speaker 1: make the bitcoin design and logo. But gold can be
Speaker 1: made into so many beautiful jewelry and images, especially when
Speaker 1: you go throughout India. Every state in India has its
Speaker 1: own unique design, but it's all twenty four carat. And
Speaker 1: so I think that what we're seeing in the evolution
Speaker 1: of the digital world is that bitcoin, no doubt, is
Speaker 1: the critical element. And the blockchain with which I'm giving
Speaker 1: a speech next week in Paris on it how it
Speaker 1: was Looking back in time with ninety one is when
Speaker 1: two professors are basically Bell Labs. Bell Labs basically invented
Speaker 1: blockchain as digital timestamp. They went nowhere and along comes
Speaker 1: hashing power to try to stop spam by doctor beck As,
Speaker 1: a cryptologist, which is really fascinating to watch. And then
Speaker 1: we have a big gold by another cryptologist by Nick Sasbol,
Speaker 1: but they really they just are stepping stones. And then
Speaker 1: we have Napster, which shows the power appear to appear.
Speaker 1: And then we have the Defense Department the US on
Speaker 1: Lisha shaw to fifty six, which is the encryption that's
Speaker 1: used on your cell phone for facial recognition. And then
Speaker 1: we get a ha moment. Bitcoin. Now what's really important
Speaker 1: for your listeners? And I know this from my global
Speaker 1: investing five years before bitcoin was released in January of
Speaker 1: two thousand and nine. Before that came a technology called
Speaker 1: Mpessa and Impessa was the telecom wanting to find a
Speaker 1: way to bank the unbankables in Kenya and it exploded
Speaker 1: like it's more than ten percent of the GDP of
Speaker 1: Kenya today. I was with a driver in London six
Speaker 1: months ago and he was telling me how he uses
Speaker 1: it to send money to his family. He has paid
Speaker 1: him at being a uber driver in pounds and he's
Speaker 1: able to easily convert to send it down to Nigeria.
Speaker 1: Another drivers tell me in Ghana SOPs it technology, which
Speaker 1: shows you the idea of digital timestamp. You realize the
Speaker 1: real biggest centers of money in the world are telecom
Speaker 1: companies and banks need the telecom actually to make it work.
Speaker 1: But they've been trying to stop the evolution and the
Speaker 1: adoption of bitcoin. The bank lobbying groups in the US
Speaker 1: have had a major, significant political influence of harming the
Speaker 1: adoption of bitcoin. But I think we're going past it.
Speaker 1: We're still going to have this volatility. I agree with
Speaker 1: Abigail Johnson that blockchain, all stock settlements should be on
Speaker 1: the blockchain, all federal financial disclosure, et cetera, to be
Speaker 1: on the blockchain, that the confidentially between the two parties
Speaker 1: is there. But as all time stamped and an open ledger.
Speaker 1: I think these are all This adoption is in full speed,
Speaker 1: and Bitcoin proved it. All the other crypto coins is
Speaker 1: all because of Bitcoin.
Speaker 2: Yeah, oh, sorry, didn't mean to cut you out there, Frank.
Speaker 1: No, no you didn't. I just start talking about I
Speaker 1: get I need something to drink because I get so
Speaker 1: excited talking about it, this technology and how it's evolved,
Speaker 1: and I see the significance of the ordinal market. I
Speaker 1: see the significance of Bitcoin. What really surprised me is
Speaker 1: that hearing last year bitcoin is dead. Bitcoin is dead,
Speaker 1: and I'm scratching my head. If you stop bitcoin mining,
Speaker 1: then the whole bitcoin ecosystem actually dies. You need to
Speaker 1: have these nodes everywhere in the world validating. You need
Speaker 1: to have this decentralized mechanism. And I think what's going
Speaker 1: to happen is that Paraguay will become the most dominant
Speaker 1: place in South America and robob you're going to see
Speaker 1: in East Africa. Ethiopia is doing everything to be part
Speaker 1: of the cryptal mining ecosystem, and I think this is
Speaker 1: really important that America and Europe is going to be,
Speaker 1: Germany and Sweden and Norway are going to be part
Speaker 1: really key for this ecosystem to continue to evolve and
Speaker 1: new technology will come along with it.
Speaker 2: Question on you know, you mentioned that the mining needs
Speaker 2: to happen or a network fails, right, eventually all biquin
Speaker 2: will be mine. What do you think happens after that?
Speaker 2: Will miners keep going to handle transactions and fees?
Speaker 1: Absolutely, and there'll be new technology, new breakthroughs like ordinals
Speaker 1: of how you attach a piece of art. And what
Speaker 1: a lot of people didn't understand was that having a
Speaker 1: picture of my nine year old daughter walking down down
Speaker 1: the beach in Miami holding her hand on her birthday
Speaker 1: and there's a photograph, and all of a sudden, the
Speaker 1: value I want that ordinal. I want to just get
Speaker 1: that ordinal, attach that photograph and digitize this moment in time,
Speaker 1: and that I can go and get that exact hour.
Speaker 1: I mean, that's incredible. So the value of that number
Speaker 1: goes from point zero zero zero sixth sense to all
Speaker 1: of a sudden worth ten dollars because I'm emotionally attached
Speaker 1: to that photo. Well, someone else is in Prague, and
Speaker 1: another person is in Buenos aias another person is in Singapore.
Speaker 1: They're all having these emotional moments, and those emotional moments
Speaker 1: all of a sudden can be locked in time and
Speaker 1: digitized at a specific number sixty four digits. I think
Speaker 1: is very exciting and only makes the network more valuable,
Speaker 1: especially when you think of moving grams of gold.
Speaker 2: Yeah, tell us a bit about your strategy as far
Speaker 2: as when you mind bitcoin, are you selling it, are
Speaker 2: you holding it? Or is it like a fifty to
Speaker 2: fifty split on how you handle the actual token.
Speaker 1: We were the first to do hotaling and we were
Speaker 1: holding our THEEUM and it was a big win for us,
Speaker 1: and we sold lovery theory and we did not get
Speaker 1: into the staking game, and so we then started increasing
Speaker 1: our bitcoin. We've used it because one of the nice
Speaker 1: parts there's third party analysts will it will share with
Speaker 1: you that we have the highest returns on invested capital.
Speaker 1: So we are if you look at our bitcoin operations,
Speaker 1: besides being the most efficient mining facilities of how we function.
Speaker 1: We have the lowest GNA to minor bitcoin. We have
Speaker 1: the highest revenue per employee mining bitcoin, and we're very
Speaker 1: frugal of how we manage the operations, and that sort
Speaker 1: of lends itself into the bitcoin mining and putting it
Speaker 1: on your balance sheet, because there's a time when you
Speaker 1: have it. So we had in our balance sheet and
Speaker 1: it grew. It was sixty percent year over year. Each month,
Speaker 1: it was growing, growing, growing, and we're expanding into for
Speaker 1: one hundred megawats into Paraguay, and all of a sudden
Speaker 1: bitfarms opportunity came in that not only are we going
Speaker 1: to go one hundred megawats, we're going to attack on
Speaker 1: two hundred faster. So we would use and souls for
Speaker 1: a bitcoin at one hundred and one thousand ninety some
Speaker 1: one thousand to be able to lock up and get
Speaker 1: that transaction, and it worked out well. You know, we
Speaker 1: all of a sudden now have a growth plan. I'm
Speaker 1: not going from six to fifteen mega exa hash, We're
Speaker 1: going to twenty five and we have the strongest growth
Speaker 1: profile and it's different than these other cryptal mining companies
Speaker 1: have been doing all these convertible notes to buy bitcoint
Speaker 1: that's for me. That is the brilliance of Michael sailor
Speaker 1: for micro strategy of Michael Senter is done. But all
Speaker 1: of a sudden, all the other mining companies getting into
Speaker 1: that realm. Only've done for me is create shorting on
Speaker 1: their stock. They do these financings and now you say, well,
Speaker 1: we did Severn fifty million dollars, so if they had
Speaker 1: to go buy back stock because people are shorting against
Speaker 1: the position, and most of these guys are offside now
Speaker 1: that they were buying the bitcoin. And so every time
Speaker 1: there's sort of been binge buying going in of a debt.
Speaker 1: And you've seen this when they're all going to Celsius
Speaker 1: to borrow and other groups at fourteen percent, it dismantled argo.
Speaker 1: It really hurt many of these crypto mining companies. I've
Speaker 1: never done that. Every crisis that happened from Celsius to
Speaker 1: Ethereum going away to sambankment and FTX blowing up the industry,
Speaker 1: they're that six month period. We still have operating income
Speaker 1: because we run this operation what we think, so we're
Speaker 1: being contrarian. We turned down doing a convertible note to
Speaker 1: go buy more bitcoin we said no, we believe in bitcoin.
Speaker 1: That's why we're going to buy more machines from all
Speaker 1: the providers, and that's why I've been able to We're
Speaker 1: not going to do these convertible notes to buy more bitcoin.
Speaker 1: We would sell some to research footprint, and then we
Speaker 1: can replace it very quickly at our balance sheet. So
Speaker 1: that drives the highest cash, low returnal and investor capital
Speaker 1: model of all the crypto miners.
Speaker 2: Frank, what are your thoughts? And I have a bit
Speaker 2: of a concern on this. We saw game Stop just
Speaker 2: enter the game. They're going to raise one point five
Speaker 2: billion to buy bitcoin. I am a bit concern about
Speaker 2: what Michael Sailor and Strategy is doing because of the
Speaker 2: amount of leverage. Not that if they use their cash
Speaker 2: on their balance sheet to buy bitcoin, no problem with that,
Speaker 2: but the excessive leverage. Are you concerned at all about that?
Speaker 1: I'm not so much concerned about him because what we
Speaker 1: have found with Hive is that these funds are shorting
Speaker 1: Hive and we're not doing the transaction. Because the size
Speaker 1: of some of these other crypto mining companies are the
Speaker 1: funds they're raising, they can't get short the stock. Here's
Speaker 1: you have to understand capital markets, these convertible notes are
Speaker 1: often leverage eight to one, so they're going to go
Speaker 1: and short the heck out of your stock so that
Speaker 1: they're not going to have this risk and they want
Speaker 1: a torque on the upside. That's roughly what that model is,
Speaker 1: Michael Sailor being the first to do this on a scale.
Speaker 1: And then all of a sudden you see an ETF
Speaker 1: created with Tesla, a single purposed ETF with Tesla, And
Speaker 1: what does that single purpose ETF do? And just covered writing?
Speaker 1: Because Tesla is so volatile, money comes in. They merely
Speaker 1: sell twenty day calls. Twenty day calls, so the income
Speaker 1: coming back to that investor is two percent a month,
Speaker 1: twenty four percent a year, sometimes higher. So Tesla goes down,
Speaker 1: but they're still getting this return capital and they put
Speaker 1: that in their four to one K or their IRA
Speaker 1: and they're getting this this income coming back basically tax free.
Speaker 1: Micro strategy does it too? Well, what does this really mean? Well,
Speaker 1: it means that when a market maker has to go
Speaker 1: and and go short because he's going long the calls,
Speaker 1: he's forced to do the cover writing. It creates more
Speaker 1: trading and then they go borrow from the ETF, So
Speaker 1: a lot of these atfs will lend out their stock
Speaker 1: that money's gone into, so it's all a borrow game
Speaker 1: and it's all trading off of basis points. Well, Michael's
Speaker 1: strategy has so much more liquidity, just like Tesla has
Speaker 1: so much more liquidity. I think the only company now
Speaker 1: has been Marathon has been able to get some time
Speaker 1: of a product, whether money's going in to do the
Speaker 1: cover writing program. All these traders are trading between various
Speaker 1: pools of capital they call the dark pool, they call
Speaker 1: the list of NASDAC pool, and they're trading for basis
Speaker 1: points in between all these markets as arbitrage that's going on,
Speaker 1: And so what investors have to realize is they're often
Speaker 1: leveraged eight to one. Well, some of these funds that
Speaker 1: are leverage eight to one, they can only handle volatility
Speaker 1: a three to five percent and they're out. They unwind
Speaker 1: their position, so Bitcoin starts to sell off of it.
Speaker 1: They sell eight times, and so you get this greater downfall.
Speaker 1: And for me, it is frustrating because we're falling with
Speaker 1: bitcoin prices and but we're growing our revenue, we're growing
Speaker 1: our peti hash and so we're funded so I'm very
Speaker 1: happy where we're positioned for that growth. But we do
Speaker 1: see that the that we're being used as a case.
Speaker 1: So some of these funds say, let's take ten crypto
Speaker 1: mining companies and we'll short the whole basket to buy
Speaker 1: this convertible note. That's what's going on, and it's very
Speaker 1: different than micro strategy, which has a big and dollar
Speaker 1: ETF that has much more liquidity around it for him
Speaker 1: to go do his funding.
Speaker 2: God, I appreciate that clarity.
Speaker 1: I'm sorry it sounds confusing.
Speaker 2: No, it's great insight and I'm definitely learning here. It's
Speaker 2: I appreciate that knowledge. I want to get your thoughts
Speaker 2: on the bitcoin reserve and what we're seeing globally. We
Speaker 2: have Bhutan that has been mining and buying bitcoin as
Speaker 2: well Al Salvador. Well, the United States just put up
Speaker 2: a big flag that we want to establish as bigcoin reserve. Frank,
Speaker 2: do you see central banks in the coming years holding
Speaker 2: bitcoin like they do gold.
Speaker 1: I think all the terror for right now is creating
Speaker 1: a distraction from central banks sitting down around a table
Speaker 1: to say we better own some, or government politicians to
Speaker 1: own some. And we've seen the unsettling of what's taking
Speaker 1: place right now. And when you look at governments, as
Speaker 1: I do this as a money manager and I write
Speaker 1: this at all my prospectuses, we believe that government policies
Speaker 1: are a precursor to change. Thus we monitor and track
Speaker 1: basically the g If you look at the G ten
Speaker 1: countries based on GDP or population, they will move markets
Speaker 1: around the world. So you have to look at either
Speaker 1: fiscal or monetary policies. When we see there's a trade
Speaker 1: war with tariffs, that's a fiscal policy. Historically, when this
Speaker 1: starts to take place globally with the G ten countries,
Speaker 1: then the global world starts to shrink in trade and
Speaker 1: it's trying to find a balancing until all of a
Speaker 1: sudden it changes. This cycle under President Trump is driven
Speaker 1: differently than in the thirties. In the thirties it was
Speaker 1: driven by farmers. Farmers had a big say in politicians
Speaker 1: and voting, and they came when the Hootsmaal teriffs and
Speaker 1: it creates this tariff war, and everyone in the world
Speaker 1: hated America for a couple of years. Then they had
Speaker 1: to redo it all and they start getting back, but
Speaker 1: it takes long to rebuild those relationships, and so We
Speaker 1: are just in the vortices of this sort of downdraft
Speaker 1: of people trying to figure out what will it. Trade
Speaker 1: warfs mean, is a legitimacy to it. Who's behind this
Speaker 1: in a big way are unionized manufacturers. You saw when
Speaker 1: President Trump spoke this week, he brings on the union
Speaker 1: bosses to talk about what's happening in manufacturing. So this
Speaker 1: is political, there's a rational reason behind it. How it's
Speaker 1: delivered is not for me. I think that how you
Speaker 1: treat Canada versus how you treat China as the same
Speaker 1: blood hammer is just not good. But it is what
Speaker 1: it is, and it creates this sort of unwinding in
Speaker 1: the capital markets, which has impacted bitcoin prices. Because bitcoin
Speaker 1: has now gone mainstream with ETFs its recognizing that transition
Speaker 1: of coming into this ecosystem. So I think the adoption
Speaker 1: will continue. I think when we get stability on the
Speaker 1: teriff dilemma of where things are, that all of a sudden,
Speaker 1: other governments will start to acknowledge that. In the interim
Speaker 1: they continue to buy gold and the financial calamity, we'll
Speaker 1: continue to see central banks buying more gold and gold
Speaker 1: is far ow performed this century. The s and P
Speaker 1: five hundred and gold has been accepted since they create
Speaker 1: the GLD. The bitcoin ETFs are unprecedent how fast they
Speaker 1: grew in the acceptance of them as an asset class.
Speaker 1: But I still think it's just we're going to have
Speaker 1: to get stability on the tariff dilemma before we get
Speaker 1: stability on bitcoin pricing mechanism. Then we'll get govern So
Speaker 1: I believe it will happen. I believe that we'll start
Speaker 1: to see other jurisdictions. You're seeing now Europe raising almost
Speaker 1: a trillion dollars to create their own military manufacturing regime
Speaker 1: because of the statements made by President Trump. What we've
Speaker 1: also seen, in a very quiet way, index owners in
Speaker 1: Europe have changed the index holdings of the Magnificent Seven
Speaker 1: because of market cap. They grew so big they automatically
Speaker 1: signal they can't grow more than eight percent. There can't
Speaker 1: be fifteen percent of their indexes for all their pincher funds.
Speaker 1: So there's been selling. So we're now feeling that selling
Speaker 1: pressure in the stock market, and so it's just a
Speaker 1: reset button we're going to go through. I don't think
Speaker 1: it slows down the retail the coders and the big
Speaker 1: point eCos. I don't think that that gets stented. I
Speaker 1: think the use of AI, of how they can make
Speaker 1: data centers better, how they can do the nodes better.
Speaker 1: I think we're going to see that become more granular.
Speaker 1: It's estimated the next five years that we're going to
Speaker 1: go from which opened up the concept of AI for
Speaker 1: everyone from these open generative use the Internet, so they
Speaker 1: thinking all the data just from the Internet. What's happening
Speaker 1: is they're going to do nothing but law, nothing but
Speaker 1: medical research. There's nine hundred types of cancer. They're going
Speaker 1: to become focused and you have become a data engineer
Speaker 1: on an expert medicine for one of those cancers using AI,
Speaker 1: and you will take all the research papers, et cetera,
Speaker 1: start building that database. So we're going to see a
Speaker 1: huge growth in data engineers. Besides data scientists making a
Speaker 1: lot of money today is going to be the builders,
Speaker 1: just like bitcoin datability these days, we're builders. And what
Speaker 1: I share with your readers, you got to think about
Speaker 1: there's no one central government, but we the people investors
Speaker 1: putting money into Hive have built these data centers for
Speaker 1: this decentralized mechanize in the world Hive has been the
Speaker 1: leader in being all over the world. We're not just
Speaker 1: in one state or country. We will now look to
Speaker 1: go into America because the government's policy under President Trump
Speaker 1: are not vilifying anyone in this in the crypto ecosystem
Speaker 1: unless you're a bad actor. The laughter you and I
Speaker 1: think that's great, But overall they want to attract. Texas
Speaker 1: wants to attract, So we'll look for opportunities in America.
Speaker 1: But until the stability was here, which is now, we
Speaker 1: have gone all over the world and we are part
Speaker 1: of decentralized bitcoint mining and I'm proud of that.
Speaker 2: I love it, Frank, I love what Hive was doing.
Speaker 2: And you're taking a different approach than the other minor
Speaker 2: out there. I know we're coming up on time, so
Speaker 2: I have some wrap up questions here for you. First,
Speaker 2: if you could create your own metaverse, what would theme be?
Speaker 1: What was the question? Sorry? Metaverse?
Speaker 2: Yeah, if you could create your own metaverse, put your
Speaker 2: Oculus or Apple pro on, you know, what would the
Speaker 2: world be?
Speaker 1: What would the world be? It'd be just what it
Speaker 1: is today and hopefully the process of technology and digital
Speaker 1: will take more people out of poverty. The electrifying. What
Speaker 1: you're seeing in Ethiopia, the building out the infrastructure, what
Speaker 1: we're doing in Paraguay. We're building out the infrastructure, will
Speaker 1: put more electricity, more air conditioning in all the kids' schools.
Speaker 1: We're already doing that right now. We're putting air conditioning
Speaker 1: in a school near our data centers ninety degrees fahrenheit
Speaker 1: and there's no air conditioning, so that's one of the
Speaker 1: first things. So that helps overall educate people, so that
Speaker 1: more people are educated, more people are having a GDP
Speaker 1: per capita that allows them to feel they can enjoy
Speaker 1: the freedom that bitcoin provides them with. The last thing
Speaker 1: I want to share you my journey was realizing in Argentina,
Speaker 1: which is so close to Paraguay, is that Argentina in
Speaker 1: two thousand and two confiscated all your bank accounts at
Speaker 1: US dollars and they still haven't given them back. And
Speaker 1: that allowed for tether to grow in many countries. So
Speaker 1: when you went there, there's no foreign currency exchange. Banks
Speaker 1: will not they will give you paesels at a very
Speaker 1: terrible rate, but you have to go in the street
Speaker 1: and they'll give you much more. That whole economy has
Speaker 1: stayed alive because of twenty five big dollars of cash
Speaker 1: and pillows. And it's recognizing that. And the last part
Speaker 1: in that the idea that it's going to evolve with
Speaker 1: Malay in a very positive way. But coming back to
Speaker 1: Paraguay for your listeners, Paraguayans love Americans. I'm going to
Speaker 1: repeat this. Paraguayans are not Morduro from Venezuela, They're not
Speaker 1: Pedro from Colombia. They love America. And why is that
Speaker 1: because there was basically ninety percent of the men were
Speaker 1: wiped out in eighteen seventy when Brazil and Argentina and
Speaker 1: Uruguy were trying to take over their rich land of soil,
Speaker 1: and President Hayes in America solved that problem and Paraguay
Speaker 1: to this day celebrates as a national holiday of November twelfth,
Speaker 1: and one of the richest state in the country is Hayes.
Speaker 1: So they are there today because of America.
Speaker 2: Interesting, I didn't know that bit of history. I appreciate
Speaker 2: that context, so I'll have to research that. After some
Speaker 2: rapid fire questions. Favorite food.
Speaker 1: Part of me.
Speaker 2: Oh, I have some rapid fire questions for you, such
Speaker 2: as what's your favorite food?
Speaker 1: Favorite food probably bread, different tastes and different flavors of bread.
Speaker 1: Favorite musician or band, whatever reason. Let me see if
Speaker 1: I turned up my volume here, I didn't you. I apologize, Oh,
Speaker 1: no worries.
Speaker 2: Well we'll add it according to you. But a favorite
Speaker 2: musician or band.
Speaker 1: My favorite musician Earth Wind and Fire.
Speaker 2: Favorite movie, favorite movie, Chariots of Fire, favorite book, favorite book.
Speaker 1: Well, I'm such a big reader. Oh you have to
Speaker 1: fiction non fiction, Tom Clancy. If it's fiction, if it's
Speaker 1: a biographies and autobiographies, I would say probably in the sciences,
Speaker 1: there's so many of them. But one of the books
Speaker 1: is a money Manager. Is a book called Misbehavior of Markets.
Speaker 1: The mathematician behind fractals and how it rates to the
Speaker 1: stock market, and it comes back from Einstein, so it's
Speaker 1: called Misbehavior of Markets. I love books by Malcolm Gladwell
Speaker 1: about his simple books. It's easy to read. I find
Speaker 1: he does a great job of making a look at
Speaker 1: the world differently. And I quote a book that's called
Speaker 1: The Wisdom of Crowds. John Sirwaki wrote, it's a wonderful
Speaker 1: book about one or crowds. Wise, I'm one or crowds foolish.
Speaker 2: Interesting, I'll have to check that one out. It sounds
Speaker 2: fascinating because I often talk about herd mentality when it
Speaker 2: comes to markets, so I'll definitely check that out. And
Speaker 2: when you are not working at high what are you
Speaker 2: doing for fun?
Speaker 1: I have. I'm blessed with a nine year old daughter
Speaker 1: and I love to travel, travel the world and with
Speaker 1: her and my wife and I run. I'm a runner.
Speaker 1: I just turned seventy and I went out and run
Speaker 1: seven miles and I thank God every mile that my
Speaker 1: knees are still good.
Speaker 2: Wow, that's amazing, Frank, that's inspirational right there. Frank, absolute pleasure.
Speaker 2: Love what hive is doing, and I would love to
Speaker 2: have you back on in the future. Thank you so
Speaker 2: much for joining me.
Speaker 1: Thank you